STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated December 1, 1999,
between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Xxxx X.
Xxxxxxx, Xxxx X. Xxxxxxx and Xxxxxx Xxxxxxx Xxxxxx, individuals residing in the
state of Texas (individually a "Seller" and collectively the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires to
purchase from the Sellers, all of the issued and outstanding shares of capital
stock of Magna Wall, Inc. (the "Company"), a Texas corporation.
The authorized capital stock of the Company is referred to herein as the
"Purchased Stock."
Unless otherwise defined in this Agreement, the capitalized terms used in
this Agreement have the meanings given in Article VIII below.
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 set forth herein.
ARTICLE I
1. SALE OF PURCHASED STOCK; CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and conditions set forth in
this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase
from the Sellers, the Purchased Stock.
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the Purchased Stock is one
million five hundred thousand dollars ($1,500,000.00) in cash, subject to
adjustment as set forth in Section 1.2.2 below.
1.2.2 The Purchase Price will increase or decrease, on a dollar for dollar
basis, based on changes in the Company's net asset value (the "Net Asset Value")
(defined as total assets less liabilities) during the period September 30, 1999
to the Closing Date. To determine whether an adjustment is appropriate, Sellers
shall (within thirty days of the Closing Date) provide the Purchaser with
financial statements of the Company indicating the Net Asset Value as of the
Closing Date (the "Sellers' Calculation"). If Purchaser (within thirty days of
receiving the Sellers' Calculation) disagrees with the Sellers' Calculation,
then Purchaser will promptly engage an independent accounting firm to review the
financial condition of the Company as of the Closing on a basis consistent with
the Financial Statements as described in Article 2.8 below. Within forty-five
(45) days after the matter is referred to the accounting firm, the accounting
firm will prepare and deliver a report to all parties which will detail whether
a Purchase Price adjustment is necessary. The report will be final and binding
on both parties, absent fraud or clear error.
1.3 Closing. The Closing (the "Closing") of the purchase and sale of the
Purchased Stock will take place at the offices of Xxxxxx X. Cuba, Xxxxx Fargo
Bank Building, 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxx 00000 at
11:00 A.M. on December 1, 1999, or at such other place as Purchaser and the
Sellers shall mutually agree.
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the Purchase
Price to the Sellers by wire transfer to such account as the Sellers may direct
by written notice delivered to Purchaser by the Sellers at least three (3)
Business Days before the Closing Date. Simultaneously, the Sellers will sell and
convey to Purchaser the Purchased Stock free and clear of all Liens, by
delivering to Purchaser a stock certificate, registered in the name of
Purchaser, representing the Purchased Stock. At the Closing, the parties shall
also deliver the opinions, certificates, contracts, documents and instruments to
be delivered pursuant to this Agreement.
1.5 Post Closing Payment.
1.5.1 If the Purchaser agrees with the Sellers' Calculation, then within twenty
(20) days after delivery of the Sellers' Calculation, the Purchaser will deliver
to the Sellers cash in the amount of the adjustment specified therein.
1.5.2 If the Purchaser disagrees with the Sellers' Calculation then, within
twenty (20) days after delivery of the report by the independent accounting firm
referred to in Section 1.2.2: (i) if the report indicates that an upward
adjustment is appropriate, the Purchaser will deliver to the Sellers cash in the
amount of the adjustment specified in the report, absent fraud or clear error;
or (ii) if the report indicates that an downward adjustment is appropriate, the
Sellers will deliver to the Purchaser cash in the amount of the adjustment
specified in the report, absent fraud or clear error
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, to their best actual knowledge, hereby represent and warrant
to Purchaser as follows:
2.1 Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas 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. The 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 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 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 Sellers or the Company to perform their obligations
hereunder or thereunder. The Sellers have delivered to Purchaser true and
complete copies of the certificate or articles of incorporation and by-laws (or
other comparable corporate charter documents) of the Company, including all
amendments thereto effected through the Closing Date.
2.2 Capital Stock. The Purchased Stock consists of 1,000 shares of common stock,
par value $1.00 per share. The Purchased Stock constitutes all of the issued and
outstanding shares of capital stock of the Company. The shares of Purchased
Stock 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 the Company or agreements, arrangements or understandings to issue
Options with respect to the 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 the Company. The Sellers
are the record and beneficial owners of all of the shares of Purchased Stock,
free and clear of all Liens. The delivery to Purchaser of the certificates
representing the Purchased Stock will transfer to Purchaser good and valid title
to all shares of the Purchased Stock, free and clear of all Liens, and
restrictions 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 after the Closing, no 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 the Company.
2.3 Authority Relative to This Agreement. The Sellers have full authority to
enter into this Agreement, to perform their obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Sellers and constitutes the legal,
valid and binding obligations of the Sellers, enforceable against them in
accordance with its terms.
2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure Schedule
lists all lines of business in which the Company is participating or engaged or
has participated or engaged in the preceding three years. The name of each
director and officer of the Company, and the position with the Company held by
each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds no
equity, partnership, joint venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Sellers of this Agreement
does not, and the consummation of the transactions contemplated hereby will not:
2.5.1 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 the Company;
2.5.2 subject to obtaining the consents, approvals and actions, making the
filings and giving the notices referred to in Section 2.6 below or disclosed in
Section 2.6 of the Disclosure Schedule, if any, conflict with or result in a
violation or breach of any term or provision of any Laws or Order (to the extent
such conflict would result in a claim of more than $10,000.00 against the
Company) applicable to any of the Sellers or to the Company, or any of their
Assets; or
2.5.3 except as disclosed in Section 2.5 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 any of
the Sellers or the Company 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 the Company or any of its Assets under, any Contract
or License to which any of the Sellers or the Company 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 the Company, 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 any of the Sellers or the Company to perform its
obligations hereunder.
2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6 of
the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of the Sellers or
the Company is required in connection with the execution, delivery and
performance of this Agreement or the consummation of transactions contemplated
herein.
2.7 Books and Records. The minute books and other similar records of the Company
to be provided to Purchaser upon execution of this Agreement contain a true and
complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the boards of directors
(or other similar governing entities) of the Company.
2.8 Financial Statements. Set forth in Section 2.8 of the Disclosure Statement
are (a) the unaudited statements of income, of the Company for the period ended
Septempber 30, 1999 and (b) an unaudited balance sheet of the Company as at
September 30, 1999 (the "Balance Sheet")(collectively referred to herein as the
"the Financial Statements"). The Financial Statements fairly present the
financial condition of the Company as of the dates thereof and the earnings for
the periods indicated, all in accordance sound accounting principles,
consistently applied, and are consistent with the books and records of the
Company.
2.9 Absence of Changes. Since September 30, 1999, 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 the Company. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.9 of the Disclosure Schedule, there has not occurred since September
30, 1999:
2.9.1 any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of the Company or any direct or indirect redemption, purchase or other
acquisition by the Company of any such capital stock (or other equity interests)
of the Company;
2.9.2 any authorization, issuance, sale or other disposition by
the Company 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 the Company;
2.9.3 (i) any increase in salary, rate of commissions or rate of
consulting fees of any employee or consultant of the Company; (ii) any payment
of consideration of any nature whatsoever (other than salary, commissions or
consulting fees paid to any employee or consultant of the Company) to any
officer, director, stockholder, employee or consultant of the 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;
2.9.4 (i) incurrences by the 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
the Company under, any Indebtedness of or owing to the Company;
2.9.5 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets of the Company
in an aggregate amount exceeding $10,000;
2.9.6 any write-off or write-down of or any determination to write
off or write down any of the Assets of the Company;
2.9.7 any purchase of any Assets of any Person or disposition of,
or incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
2.9.8 other than in the ordinary course of business, 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 2.18.1, (ii) any
License held by the Company, or (iii) any intellectual property rights owned by
the Company;
2.9.9 any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
2.9.10 any commencement, termination or change by the Company of
any line of business;
2.9.11 any transaction by the Company with any of its officers,
directors, stockholders or Affiliates, other than pursuant to a Contract or
arrangement in effect on September 30, 1999 and disclosed to Purchaser pursuant
to Section 2.18.1.8 or other than pursuant to any Contract of employment and
listed pursuant to Section 2.18.1 of the Disclosure Schedule;
2.9.12 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
2.9.13 any change in the accounting methods or procedures of the
Company or any other transaction involving or development affecting the Company
outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against in
the September 30, 1999 balance sheet included in the Financial Statements or as
disclosed in Section 2.10 of the Disclosure Schedule, and subject to the
limitation contained in 7.1.1 with respect to claims having insurance coverage,
the Company has no Liabilities, nor are there any Liabilities relating to or
affecting the Company or any of its Assets.
2.11 Taxes.
2.11.1 Except as disclosed in Section 2.11 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company 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. The Company
is not and has never been a member of any affiliated, combined, consolidated,
unitary or similar group with respect to the filing of tax returns or otherwise
with respect to any Taxing Authority. All Taxes owed by the Company (whether or
not shown on any Tax Return) have been paid. All monies required to be withheld
by the 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. The Company has no liability for Taxes for
any Person other than the Company (i) solely as a present or former member of a
consolidated group, (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
2.11.2 The provisions for current Taxes in the Financial
Statements 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 the Company.
2.11.3 The Company is not 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. The Company has not
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.
2.11.4 No Taxing Authority is now asserting or threatening to
assert against the 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 any of the Sellers or the Company is or reasonably should be
aware. No issues have been raised in any examination by any Taxing Authority
with respect to the 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 the Company disclose
(in accordance with Section 6662(d)(2)(B) 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 the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Section 2.11 of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after December 31, 1998, indicates those Tax
Returns, if any, that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have 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 agreed to by, the Company since
January 1, 1996. There are no Liens for Taxes upon the Assets of the Company.
2.11.5 Except as disclosed in Section 2.11 of the Disclosure
Schedule, the Company is not (i) a party to or bound by any obligations under
any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject
to any election under sections 338(e) or 341(f) of the Code or the regulations
thereunder, (iii) 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, (iv) subject to 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, (v) and at no time has ever
been, a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, (vi) 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, (vii) a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes, or (viii) nor has it ever been, a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.12 Legal Proceedings.
2.12.1 Except as disclosed in Section 2.12 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
2.12.1.1 there are no actions or proceedings pending or,
to the knowledge of the Sellers or the Company, threatened against, relating to
or affecting the Company, or any of its 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
the Company, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company, or (y) Losses by the Company,
individually or in the aggregate with Losses in respect of other such actions or
proceedings, exceeding $10,000;
2.12.1.2 there are no facts or circumstances known to the
Sellers or to the Company that could reasonably be expected to give rise to any
action or proceeding that would be required to be disclosed pursuant to clause
2.12.1.1 above;
2.12.1.3 neither the Sellers nor the Company has received
notice, or is aware of any Orders or lawsuits outstanding against the Company;
and
2.12.1.4 neither the Sellers nor the Company has received
notice or is aware of any defects, dangerous or substandard conditions in the
products or materials manufactured, sold, distributed, or to be manufactured,
sold or distributed by the 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.
2.12.2 Prior to the execution of this Agreement, the Sellers and
the Company have delivered all responses of counsel for the Company to auditors'
requests for information regarding actions or proceedings pending or threatened
against, relating to or affecting the Company during the period commencing
January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth all
actions or proceedings relating to or affecting the Company or its Assets during
the period commencing January 1, 1996 prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13
of the Disclosure Schedule, neither the Sellers nor the Company has received at
any time since January 1, 1996 any notice that the Company is or has been at any
time since such date, in violation of or in default under, any Law or Order
applicable to the Company or any of its Assets. In furtherance and not
limitation of the foregoing, neither the Sellers nor the 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. The Company has in existence a defined
benefit plan (the "Plan") and copies of all documentation relating to the Plan
have been delivered or made available to Purchaser (including copies of the
Plan, summary plan descriptions, trust agreements, the three most recent annual
returns, employee communications, and IRS determination letters); The Plan
terminates on December 31,1999; there are no other benefit plans of any nature.
2.14.1 The 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 the 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;
2.14.2 all "accumulated funding deficiency" within the meaning
of section 302 of ERISA or section 412 of the Code shall be eliminated prior to
termination of the Company's defined benefit plan;
2.14.3 no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the 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;
2.14.4 the "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not or will not upon termination of
the Plan exceed zero with respect to any Benefit Plan subject to Title IV of
ERISA;
2.14.5 other than termnimation of the Plan effective December
31, 1999 no other "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; proper notice
of termination has been given to all employees;
2.14.6 the Plan is not a multiemployer plan within the meaning
of section 3(37) of ERISA;
2.14.7 Neither the 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;
2.14.8 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;
2.14.9 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);
2.14.10 the Plan does not 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;
2.14.11 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 any Seller or the Company, threatened against or
with respect to the Plan and there are not facts or circumstances known to any
the Sellers or the Company that could reasonably be expected to give rise to any
such suit, action or other litigation; and
2.14.12 all contributions to the Plans that were required to
be made under the Plan have been or will be made prior to termination, and all
benefits accrued (including any unfunded contributions) under the Plan have been
or will be paid, accrued or otherwise adequately reserved in accordance with
GAAP, and the Company has performed all material obligations required to be
performed under all Benefit Plans.
2.15 Real Property. The Company owns no real property.
2.16 Tangible Personal Property. The 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 September 30,
1999 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, as of the Closing
Date, is adequate and suitable for the conduct by the 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 Company has interests in or uses
only the intellectual property described in Section 2.17 of the Disclosure
Schedule. The 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 the Company.
All registrations, pending applications, registered rights and executed
agreements related to intellectual property are listed in Section 2.17 of the
Disclosure Schedule. Except as disclosed therein, (i) the Company has the right
to use the intellectual property described therein, (ii) all registrations on
behalf of the 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 the Company to maintain their validity or
effectiveness, (iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no restrictions on
the direct or indirect transfer of any License, or any interest therein, held by
the Company in respect of such intellectual property, (v) the Sellers has
delivered, or has caused the 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
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets, (vii) neither the
Sellers nor the 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) neither the Sellers nor
the Company has any knowledge that such intellectual property is being infringed
by any other Person. To the knowledge of the Sellers and the Company, the
Company is not infringing any intellectual property of any Person, and no
litigation is pending and no claim has been made or, to the knowledge of any the
Sellers or of the Company, has been threatened to such effect.
2.18 Contracts.
2.18.1 Section 2.18.1 of the Disclosure Schedule contains a true
and complete list of every Contract 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, of which have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company is a party, a guarantor or by
which any of its Assets is bound.
2.18.2 Each Contract disclosed in Section 2.18.1 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 2.18.2 of the Disclosure Schedule, neither the
Company nor, to the knowledge of any the Sellers, 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 violation or breach of or default under any such Contract).
2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure
Schedule, the Company is not 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
Company.
2.18.4 To the extent any of the guaranties for the benefit of the
Company or any of its Assets are not integrated with Contracts disclosed in
Section 2.18.1 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, or each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Sellers or the Company or any other
party to such guaranty is, or has received notice that it is, in violation or
breach of or default under any such guaranty (or with notice or lapse of time or
both, would be in violation or breach of 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 Company, setting forth the owner, the function and the expiration and
renewal date of each. Prior to the execution of this Agreement, the Sellers or
the Company have delivered to Purchaser true and complete copies of all such
Licenses. Except as disclosed in Section 2.19 of the Disclosure Schedule:
2.19.1 the Company owns or validly holds all Licenses that are
material to its respective business or operations;
2.19.2 each license listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect;
2.19.3 neither the Sellers nor the 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
2.19.4 the transactions contemplated in this Agreement will not
violate any such License or give any 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 the Company or
affect or relate to the ownership, use or operation of any of the Assets of the
Company and that (i) have been issued to the Company, or (ii) have been issued
to any Person (other than the Company) for the benefit of the 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 neither the Sellers nor the 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 the Company does not
know of any 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 the 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 the Company is a
party. Section 2.20 of the Disclosure Schedule contains a list of all claims
made under any insurance policies covering the Company since January 1, 1996.
Neither the Sellers nor the Company have 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, 1996, the Company has maintained, in light of its business, location,
operations and Assets, at all times, without interruption appropriate insurance,
in scope and amount of coverages.
2.21 Affiliate Transactions. There are no Liabilities between the Company
and any current or former officer, director, stockholder, Affiliate of the
Company or any Affiliate of any such officer, director, stockholder or
Affiliate, and the Company does not provide or cause to be provided any assets,
services or facilities to any such current or former officer, director,
stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any unfair
labor practice. There is (i) no unfair labor practice complaint pending or, to
the knowledge of the Sellers or the Company, threatened against the Company
before the National Labor Relations Board or comparable or similar state agency,
and no grievance or arbitration proceeding arising out of under collective
bargaining agreements is so pending or, to the knowledge of the Sellers or of
the Company, threatened against the Company, (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the knowledge of the Sellers or the Company,
threatened against the Company, and (iii) no union representation question
exists with respect to the employees of the Company or, to the knowledge of the
Sellers or the Company, no union organization activities are taking place.
2.23 Environmental Matters. The Company operates no facilities. The Company
has conducted its business and its operations in full compliance with all
Environmental Laws; and, is not in violation of or liable under any
Environmental Law.
2.24 Substantial Customers and Suppliers. Section 2.24.1 of the Disclosure
Schedule lists the ten (10) largest customers of the Company on the basis of
revenues for goods sold or services provided for the twelve month period ending
September 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the ten (10)
largest suppliers of the Company on the basis of cost of goods or services
purchased during the twelve month period ending September 30, 1999. Except as
disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of the
Sellers and the Company, 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 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Financial Statements for the period ended
September 30, 1999, 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 the Company. Section 2.25 of the
Disclosure Schedule sets forth (x) a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company and (y) all jurisdictions in which the records relating to accounts
and notes receivable are located.
2.26 Other Negotiations; Brokers. Neither the Sellers, nor the 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 the Sellers or the Company or any such Affiliate) have entered into
any agreement or had any discussions with any third party regarding any
transaction involving the Company which could result in the 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. No agent, broker, finder, investment banker,
financial advisor or other Person will be entitled to any fee, commission or
other compensation in connection with the transactions contemplated by this
Agreement on the basis of any act or statement made by the Sellers, the Company
or any of their respective Affiliates, or any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers, the Company, or any such Affiliate.
2.27 Holding Company Act and Investment Company Act Status. The Company is
not a "holding company" or a "public utility company" as such terms are defined
in the Public Utility Company Act of 1935, as amended. The Company is not 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 of the Disclosure Schedule
sets forth (a) a list of the names and locations of all banks, securities
brokers and other financial institutions at which the Company has an account or
safe deposit box or maintains a banking, custodial, trading or other similar
relationship; and (b) 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. Neither any the Sellers, nor the 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 the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
the Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best actual knowledge, represents and warrants to the
Sellers as follows:
3.1 Organization and Qualification. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the state of Utah.
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.
3.2 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 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.
3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement does
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:
3.3.1 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;
3.3.2 subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 3.4 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
3.3.3 except as disclosed in Section 3.3.3 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.
3.4 Governmental Approvals and Filings. Except as disclosed in Section 3.4 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 to which it is a party or the consummation of the transactions
contemplated herein.
3.5 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.
3.6 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. 3.7 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.
3.8 Survival of Representations, Warranties, Covenants and Agreements. Even
though the Sellers may investigate the affairs of the Purchaser and confirm the
accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, 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.
ARTICLE IV
4 COVENANTS BY THE SELLERS
4.1 Noncompetition; Non Solicitation.
4.1.1 For a period of five (5) years from the Closing Date, each of the Sellers,
alone or in conjunction with any other Person, or directly or indirectly through
their present or future Affiliates, will not directly or indirectly own, manage,
operate, join, be employed by, 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 any business or enterprise engaged in the design, development,
manufacture, distribution or sale of any products, or the provision of any
services related to those which the Company was designing, developing,
manufacturing, distributing, selling or providing at any time prior to and up to
and including the Closing Date anywhere in the United States of America,
provided that with respect to Xxxx X. Xxxxxxx the foregoing restriction shall
only apply to businesses or enterprises engaged in manufacturing, distributing
and/or selling one-coat stucco, and not to businesses or enterprises engaged in
the use of said product provided that the foregoing restriction shall not be
construed to prohibit the ownership, in the aggregate, of not more than two
percent (2%) of any class of securities of any corporation which is engaged in
any of the businesses or enterprises described 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. Furthermore, this Covenant
shall not apply to Xxxxxx Xxxxxxx Xxxxxx.
4.1.1 For a period of five (5) years from the Closing Date, the Sellers shall
not directly or indirectly, or through an Affiliate, (i) influence any
individual who was an employee or consultant of the Company at any time, to
terminate his or her employment or consulting relationship with the Company,
(ii) interfere in any other way with the employment, or other relationship, of
any employee or consultant of the 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 the Company or (y) any prospective client,
customer or supplier of the Company from engaging in business with the Company.
4.1.2 The Sellers agree that Purchaser's remedies at law for any breach or
threat of breach by it of any of the provisions of this Section 4.1 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 orders or orders to
prevent breaches of the provisions of this Section 4.1 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 it 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.
4.1.3 The parties hereto consider the restrictions contained in this Section 4.1
hereof to be reasonable for the purpose of preserving the goodwill, proprietary
rights and going concern value of the Company, 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 4.1 is an unenforceable
restriction on the Sellers' activities, the provisions of this Section 4.1 shall
not be 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 4.1 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 4.1 shall in no
respect limit or otherwise affect the Sellers's obligations under other
agreements with the Company.
4.2 Regulatory and Other Approvals. The Sellers shall, and shall cause the
Company to, (a) take all necessary or desirable steps and proceed diligently and
in good faith and use diligent 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
to consummate the transactions contemplated hereby and those described in
Sections 2.5 and 2.6 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. The Sellers 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 Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement.
4.3 Investigation by Purchaser.
4.3.1 From the date of this Agreement until the date on which either Party
provides the other Party with written notice that this Agreement is terminated
(the "Termination Date"), or until the Closing, whichever is earlier, the
Sellers will afford Purchaser its employees, agents, accountants and other
representatives access to the Books and Records of the Company, as well as
employee files and records, not including product formulas, customer lists, etc.
4.3.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's
investigation proceeds. To the extent that any such product formulas, customer
lists, etc. are not furnished to Purchaser immediately, the same shall
nevertheless be furnished to Purchaser immediately prior to the Closing. In any
event, if any of this information is disclosed to Purchaser prior to or at the
Closing, Purchaser shall have the option to terminate this Agreement, at its
sole discretion, if the information discloses any matter which leads Purchaser
to the conclusion that it should not close the transaction contemplated herein.
4.4 Investigation by Purchaser.
4.4.1 From the date of this Agreement until the date on which either Party
provides the other Party with written notice that this Agreement is terminated
(the "Termination Date"), or until the Closing, whichever is earlier, the
Sellers will afford Purchaser its employees, agents, accountants and other
representatives access to the Books and Records of the Company, as well as
employee files and records, not including product formulas, customer lists, etc.
4.4.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's
investigation proceeds. To the extent that any such product formulas, customer
lists, etc. are not furnished to Purchaser immediately, the same shall
nevertheless be furnished to Purchaser immediately prior to the Closing. In any
event, if any of this information is disclosed to Purchaser prior to or at the
Closing, Purchaser shall have the option to terminate this Agreement, at its
sole discretion, if the information discloses any matter which leads Purchaser
to the conclusion that it should not close the transaction contemplated herein.
ARTICLE V
5 CLOSING CONDITIONS
5.1 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):
5.1.1 Representations and Warranties. Each of the representations and warranties
made by the Sellers in this Agreement shall, unless waived, 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.
5.1.2 Performance. The Sellers shall have performed and complied with, unless
waived, each agreement, covenant and obligation required by this Agreement to be
so performed or complied with by them at or before the Closing.
5.1.3 Orders and Laws. There shall not be pending, threatened or 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.
5.1.4 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 the Sellers 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.
5.1.5 Third Party Consents. Any consents (or waivers) identified in Section 2.5
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 for 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 the 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.
5.1.6 Purchaser's Investigation. Purchaser shall not have discovered, as a
result of its investigation and review pursuant to Section 4.3 hereof, any
condition (financial, legal or otherwise) relating in any way to the Company,
its Assets, business or prospects, that convinces Purchaser, in its sole
discretion, that it is not advisable to complete the Closing.
5.1.7 Sellers' Certificates. The Sellers shall have delivered to Purchaser (i)
certificates, dated the Closing Date and executed by an executive officer of the
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 the Company, substantially in the form of Exhibit C hereto.
5.1.8 Resignations of Officers and Directors. The Sellers shall have delivered
to Purchaser the resignations of all current officers and directors of the
Company, effective as of the Closing Date.
5.1.9 Opinion of Counsel. Purchaser shall have received the opinion of Xxxxxx X.
Cuba, Esquire, counsel to the Company in connection with this Agreement, dated
the Closing Date, substantially in the form and to the effect as Purchaser may
reasonably request.
5.1.10 Disclosure Schedule. The Sellers shall have delivered to Purchaser a copy
of the Disclosure Schedule, updated and current through the Closing Date.
5.1.11 Good Standing Certificates. The Sellers 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 the Company
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 the Company is in good
standing in such jurisdiction, listing all charter documents of the Company 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 the Company is qualified or admitted to do business to the
effect that the Company is duly qualified or admitted in good standing in such
jurisdiction.
5.1.12 Receipt of Purchased Stock. Certificates representing the Purchased Stock
shall have been transferred to Purchaser in accordance with the terms of this
Agreement.
5.1.13 No Adverse Change. There shall have occurred no material adverse change
in the business or financial condition of the Company between September 30, 1999
and the Closing Date.
5.1.14 Employment Agreements. Purchaser shall have received Employment
Agreements satisfactory to Purchaser, between the Company and any key employees
of the Company that Purchaser deems necessary.
5.2 Conditions to the Obligations of the Sellers. The obligations of the Sellers
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 Sellers in theirs
sole discretion):
5.2.1 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.
5.2.2 Performance. Purchaser shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
5.2.3 Orders and Laws. There shall not be pending, threatened or 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.
5.2.4 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 the Sellers 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 not be subject to the satisfaction
or any condition that has not been satisfied or waived, and (iii) 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.
5.2.5 Officers' Certificates. Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date and executed by the president or
vice-president or other officer of Purchaser, substantially in the form and to
the effect of Exhibit "D" hereto.
5.2.6 Employment Agreements. Purchaser shall have delivered to Sellers an
Employment Agreement satisfactory to Sellers, between the Company and Xxxx
Xxxxxxx.
ARTICLE VI
6 TERMINATION
6.1 Termination Events. This Agreement may, by notice given prior to or at the
Closing, be terminated:
6.1.1 by Purchaser or by the Sellers if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived;
6.1.2 (i) by Purchaser if any of the conditions in Section 5.1 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 the Sellers, if any of the
conditions in Section 5.2 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 the Sellers to comply with his obligations under this Agreement)
and the Sellers has not waived such condition on or before the Closing Date;
6.1.3 by Purchaser for its convenience at any time prior to Closing;
6.1.4 by mutual consent of Purchaser and the Sellers; or
6.1.5 by Purchaser or by the Sellers 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 December 1, 1999,
or such later date as the parties may agree upon.
6.2 Effect of Termination. Each party's right of termination under Section 6.1
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 pursuant to Section 6.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article X will
survive; provided, however, that if this Agreement is terminated by a party
because of a breach of the Agreement by the other party or because one or more
of the conditions to the terminating party's obligations under this Agreement is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies (including specific performance) will survive such termination
unimpaired.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Company, the Purchaser and
their respective stockholders and the officers, directors, employees, agents and
Affiliates of each of them 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 Sellers contained in
this Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith). Notwithstanding anything contained in this
agreement to the contrary, claims for indemnity arising or resulting from the
sale or manufacture of products, including product failure or failure of
performance, unknown and undisclosed by Sellers shall only be made, to the
extent and only to the extent that such claim or occurrence is covered by
insurance and Sellers in no way shall be personally liable for any claim,
judgment, amount, award, or liability whatsoever for any amount of such claim
which may exceed the amount of said insurance coverage. The limitation set forth
in the immediately preceding sentence shall not limit the liability of the
Sellers for claims made pursuant to any other representation or warranty set
forth in this Agreement or for any claims known to the Sellers or any of them as
of the date of this Agreement and not disclosed in the Disclosure Schedules.
7.1.2 Purchaser will indemnify the Sellers in respect of, and hold
them harmless from and against, any and all Losses suffered, incurred or
sustained by them or to which they become 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).
7.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.1 will be asserted and resolved as follows:
7.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.1 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 (a "Third Party Claim"), the Indemnified Party
shall 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.
7.2.2 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 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.
7.2.3 In the event any Indemnified Party should have a claim under
Section 7.1 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 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 specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 7.1 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.
7.2.4 Notwithstanding anything to the contrary in this agreement
Sellers will indemnify and hold harmless Purchaser under this Article 7 without
limitation dollar for dollar against any Loss suffered, incurred or sustained by
it or which it becomes subject to resulting from, arising out of or relating to
the lawsuit referred to in Disclosure Schedule 2.12.1.1, and/or the matters
referred to in Disclosure Schedule 2.10.
7.3 Allocation of Tax Liability.
7.3.1 In the case of Taxes with respect to or payable by the Company
with respect to a period that 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 of the
Company 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 situation
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 Company Asset 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.
7.3.2 Except to the extent a reserve for Taxes is reflected on the
Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the 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 the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers'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 the 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 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.
7.3.3 From and after the Closing Date, Purchaser shall cause the
Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.4 Tax Contests.
7.4.1 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 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.
7.4.2 If, within 30 calendar days after any the Sellers receives or
delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the
Purchaser an Election Notice, then subject to the provisions of this Section
7.4, the Sellers shall defend or prosecute, at their sole cost, expense and
risk, such Tax Claim by all appropriate proceedings, which proceedings shall
defended or prosecuted diligently by the Sellers to a Final Determination;
provided, that the Sellers shall not, without the prior written consent of the
Company, enter into any compromise or settlement of such Tax Claim that would
result in any Tax detriment to the Company. So long as the Sellers are defending
or prosecuting a Tax Claim, with respect to the Company, the Company shall
provide or cause to be provided to the Sellers any information reasonably
requested by the Sellers relating to such Tax Claim, and shall otherwise
cooperate with the Sellers and their representatives in good faith in order to
contest effectively such Tax Claim. The Sellers shall inform the Company of all
developments and events relating to such Tax Claim (including, without
limitation, providing to the Company copies of all written materials relating to
such Tax Claim) and the Company or its authorized representatives shall be
entitled, at the expense of the Company, to attend, but not to participate in or
control, all conferences, meetings and proceedings relating to such Tax Claim.
7.4.3 If, with respect to any Tax Claim, the Sellers fails to deliver
an Election Notice to the Company within the period provided in Section 7.4.2
or, after delivery of such Election Notice to the Company, the Sellers fail
diligently to defend or prosecute such Tax Claim to a Final Determination, then
the 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 the Sellers, such
Tax Claim. The Company shall have full control of such defense or prosecution
and such proceedings, including any settlement or compromise thereof. If
requested by the Company, the Sellers shall cooperate in good faith with the
Company and its authorized representatives in order to contest effectively such
Tax Claim. The Sellers may attend, but not participate in or control, any
defense, prosecution, settlement or compromise of any Tax Claim controlled by
the Company pursuant to this Section 7.4.3, and shall bear their own costs and
expenses with respect thereto. In the case of any Tax Claim that is defended or
prosecuted by the Company pursuant to this Section 7.4.3, the Company shall,
from time to time, be entitled to receive current payments from the Sellers with
respect to costs and expenses incurred by the 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 the Company as a result of receiving a
payment from the Sellers pursuant to this Section 7.4) (collectively "Associated
Costs").
7.4.4 In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by the Sellers pursuant to this Section 7.4, the Sellers
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 Company pursuant to
the terms of this Section 7.4, the Sellers 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 the Sellers to the Company, within five Business
Days after such Final Determination. In the case of any Tax Claim not covered by
the two preceding sentences, the Sellers shall pay to the 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 the Sellers to the Company, at
least five Business Days before the date payment of such Tax is due from any Tax
Indemnitee.
7.4.5 Notwithstanding anything contained in this Article VII to the
contrary, the rights of the Sellers under this Section 7.4 to defend or
prosecute, or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.4.6 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company 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, workpapers and 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.
7.6 Payment of Transfer Taxes and Fees. The Sellers 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 Company and their
Affiliates with respect to such Taxes. The Sellers shall file all necessary
documentation and Tax Returns with respect to such Taxes and provide to
Purchaser copies of all such Tax Returns.
7.7 Other Tax Covenants.
7.7.1 Without the prior written consent of Purchaser, neither the
Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect
or relate to the 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 the Company or
any Affiliate of Purchaser.
7.7.2 Without the prior written consent of the Sellers, neither the
Purchaser nor the Company shall, to the extent it may affect or relate to the
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.
7.7.3 So long as any books, records and files retained by the Sellers
or and his Affiliates relating to the business of the 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 the Company prior to
the Closing Date, remain in existence and are 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 time during business hours for any proper purpose. The Purchaser
and the Sellers 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.
7.8 Conflict. In the event of a conflict between the provisions of
Sections 7.3 through 7.7 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
8 DEFINITIONS
8.1 Definitions. As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"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 owning, owned by, controlling, controlled by or under
common control with, that Person, (b) 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.
"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 tangibles,
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
7.4.3.
"Financial Statements" has the meaning ascribed to it in Section
2.8.
"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 the Company or under which any employee, former employee or director of the
Company or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
attorneys, 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, legal files,
retrieval programs, operating data and plans and environmental studies and
plans.
"Claim Notice" means written notification pursuant to Section
7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought
by an Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them in
Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital of
this Agreement (and shall include all predecessors and subsidiaries of the
Company).
"Contract" means any written or oral agreement, lease, guaranty,
evidence of indebtedness, mortgage, indenture, security agreement or other
contract of any nature whatsoever.
"Disclosure Schedule" means the schedules delivered to Purchaser
by or on behalf of the Company and the Sellers, 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.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the Sellers
in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their
indemnity obligation under this Agreement with respect to such Tax Claim and
(ii) the Sellers elect to contest, and to control the defense or prosecution of,
such Tax Claim at their sole risk and sole cost and expense.
"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 Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended (CERCLA).
"Environmental Law" means all federal, state, local and foreign
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, local,
provincial, or foreign 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 the Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by the Company.
"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" has the meaning ascribed to it in Section
2.8.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"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, (v) long term debt and (vi) in the nature of
guarantees of the obligations described in clauses (i) through (v) 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
7.2.3 of a claim for indemnity under Article VII by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Knowledge" on the part of any person or company means actual
knowledge of the person or a director of the Company of the event or notice to
be attributed to the person or Company.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign 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 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.
"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 1.2.
"Purchased Stock" has the meaning ascribed to it on the first page
of this Agreement.
"Purchaser" has the meaning ascribed to it in the first paragraph
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.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them on
the first page 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. Unless the context otherwise
requires a different interpretation, references to a "Subsidiary" mean a
Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign 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, the Company and other
Indemnified Parties specified in Section 7.1 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"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 or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2.
8.2 Interpretation of Agreement.
8.2.1 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; (v) the word "including" does not imply
any limitation to the item or matter mentioned; and (vi) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company.
8.2.2 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, (ii) with
respect to any other Person, the actual knowledge of the directors, officers,
managers, and other similar Persons in a similar position or 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
9 MISCELLANEOUS
9.1 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
or mailed by prepaid first class certified mail, return receipt requested, or
sent by prepaid courier, to the parties at the following addresses:
If to Purchaser, to:
ISG Resources, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx Xxxxxx Xxxxxxx Xxxxxx
29521 No Le Hace 00000 Xxxxxxxx Xx. 10951 Laureate, #0000
Xxxx Xxxx Xxxxx, Xxxxx 00000 Xxx Xxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxxx, Xx 00000
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 mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 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.
9.3 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, the Sellers will pay all
expenses relating to the closing hereof of the Company incurred in respect of
the period prior to the Closing.
9.4 Confidentiality. Purchaser and the Sellers 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.
9.5 Further Assurances; Post-Closing Cooperation. At any time or from time to
time after the Closing, the Purchaser or the Sellers shall execute and deliver
to the other party such other documents and instruments, provide such materials
and information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to causethe Purchaser or the Sellers to fulfill their obligations
under this Agreement.
9.6 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.
9.7 Amendment. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of the parties hereto.
9.8 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.
9.9 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 party without the prior written consent of the other
party(ies) and any attempt to do so will be void. 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.
9.10 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.11 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.
9.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas, 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 jurisdiction other than the State of Texas.
9.14 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.
9.15 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
10 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 in any court of competent jurisdiction to
resolve the dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
_________________
By: _____________
Its: ____________
SELLERS
XXXX X. XXXXXXX XXXX X. XXXXXXX
________________ _____________________
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx
XXXXXXX X. XXXXXX
_____________________
Xxxxxxx X. Xxxxxx
