EXHIBIT 10.39
PURCHASE AGREEMENT
by and among
Kronos, Inc.,
as the Purchaser,
and
Big Bend Holdings LLC
and
Contran Insurance Holdings, Inc.,
as Sellers
January 4, 2002
TABLE OF CONTENTS
Section 1. Defined Terms......................................................1
Section 2. Agreement to Sell and Purchase.....................................4
Section 3. Purchase Price.....................................................4
Section 4. The Closing........................................................4
(a) Time and Place.........................................................4
(b) Obligations of Sellers at the Closing..................................5
(c) Obligation of the Purchaser at the Closing.............................5
Section 5. Representations and Warranties of the Sellers......................5
(a) Status.................................................................5
(b) Authorization..........................................................6
(c) No Violation...........................................................6
(d) Ownership..............................................................6
(e) Brokers' Fees..........................................................6
Section 6. Representations and Warranties of the Purchaser....................6
(a) Status.................................................................6
(b) Authorization..........................................................6
(c) No Violation...........................................................7
(d) Brokers' Fees..........................................................7
(e) Company Review.........................................................7
Section 7. Representations and Warranties Concerning the Companies............8
(a) Status.................................................................8
(b) No Violation...........................................................8
(c) Brokers' Fees..........................................................8
(d) Capitalization.........................................................8
(e) Records................................................................9
(f) Company Subsidiaries...................................................9
(g) Financial Statements...................................................9
(h) Subsequent Events......................................................9
(i) Legal Compliance......................................................10
(j) Tax Matters...........................................................11
(k) Title to and Condition of Assets......................................11
(l) Real Property.........................................................12
(m) Contracts.............................................................12
(n) Insurance.............................................................13
(o) Litigation............................................................13
(p) Labor; Employees......................................................14
(q) Employee Benefits.....................................................14
(r) Environmental, Health, and Safety Matters.............................14
(s) Customers.............................................................14
i
(t) Permits...............................................................14
(u) Foreign Corrupt Practices Act Compliance..............................15
Section 8. Indemnification...................................................15
(a) Indemnification Provisions for the Purchaser's Benefit................15
(b) Indemnification Provisions for the Sellers' Benefit...................16
(c) Indemnification Claim Procedures......................................16
(d) Notice of Claim.......................................................16
(e) Limitations on Indemnification Liability..............................17
(f) Other Indemnification Provisions......................................17
Section 9. Miscellaneous.....................................................17
(a) Transfer Taxes........................................................17
(b) Binding Effect, Benefits..............................................17
(c) Notices...............................................................18
(d) Entire Agreement; Amendment...........................................18
(e) Headings..............................................................18
(f) Attorneys' Fees.......................................................18
(g) Governing Law.........................................................18
(h) Severability..........................................................18
(i) Further Assurances....................................................18
(j) Counterparts..........................................................18
(k) Assignments...........................................................18
(l) Expenses..............................................................19
(m) Construction..........................................................19
(n) Remedies............................................................19
ii
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is entered into as of January
4, 2002, among Big Bend Holdings LLC, a Delaware limited liability company ("Big
Bend"), Contran Insurance Holdings, Inc., a Delaware corporation ("Contran
Insurance," and collectively with Big Bend, the "Sellers"), and Kronos, Inc., a
Delaware corporation ("Purchaser").
Recitals
A. EWI RE, Inc., a New York corporation ("EWI Inc."), has issued and
outstanding 900 shares of common stock, par value $1.00 per share (the "Common
Stock").
B. Big Bend is the record owner of 520 shares of Common Stock and a
57.8% membership interest (a "Membership Interest") in EWI RE, Ltd., a Nevada
limited liability company ("EWI Ltd." and collectively with EWI Inc., the
"Companies").
C. Contran Insurance is the record owner of 380 shares of Common Stock
and a 42.2% Membership Interest.
D. The Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to the Purchaser, all of the outstanding shares of Common Stock
and Membership Interests.
E. This Agreement is intended to further define the terms and conditions
of such purchases and sales of all of the outstanding shares of Common Stock and
the Membership Interests.
Agreement
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants below, the parties agree as follows:
Section 1. Defined Terms. The following terms will have the definitions
set forth below:
"Action" means any action, appeal, petition, plea, charge, complaint,
claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry, or
proceeding.
"Affiliate" or "Affiliated" with respect to any specified Person, means
a Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. For this definition, "control" (and its derivatives) means the
possession, directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting Equity Interests, as trustee or executor, by
contract or credit arrangements or otherwise.
"Agreement" is defined in the preamble to this Agreement.
"Balance Sheet Date" is defined in Section 7(g)(ii).
1
"Big Bend" is defined in the preamble to this Agreement.
"Big Bend Equity Interests" is defined in Section 2.
"Claim Notice" is defined in Section 8(e).
"Closing" is defined in Section 4(a).
"Closing Date" is defined in Section 4(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other contracts that could require a Person to issue any of its
Equity Interests or to sell any Equity Interests it owns in another Person; (b)
any other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
"Common Stock" is defined in the recitals to this Agreement.
"Companies" is defined in the recitals to this Agreement.
"Companies' Financial Statements" is defined in Section 7(g).
"Contran Insurance" is defined in the preamble to this Agreement.
"Contran Insurance Equity Interests" is defined in Section 2.
"Damages" is defined in Section 8(a).
"Environmental, Health, and Safety Requirements" means all orders and
laws enacted by any Governmental Body concerning or relating to public health
and safety, worker/occupational health and safety, and pollution or protection
of the environment, including those relating to the presence, use, production,
generation, handling, transportation, treatment, recycling, transfer, storage,
disposal, processing, discharge, release, control, or other action or failure to
act involving cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now in effect.
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock, (b) with respect to a partnership, limited liability
company, trust or similar Person, any and all units, interests or other
partnership/limited liability company interests, and (c) any other direct equity
ownership or participation in a Person.
2
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with either Company within the meaning of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with either Company under Section
414(o) of the Code, or is under "common control" with either Company, within the
meaning of Section 4001(a)(14) of ERISA.
"EWI Inc." is defined in the recitals to this Agreement.
"EWI Ltd." is defined in the recitals to this Agreement.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Body" means any legislature, agency, bureau, branch,
department, division, commission, court, tribunal, magistrate, justice,
multi-national organization, quasi-governmental body, or other similar
recognized organization or body of any federal, state, county, municipal, local,
or foreign government or other similar recognized organization or body
exercising similar powers or authority.
"Indemnification Claim" is defined in Section 8(d)(i).
"Indemnified Parties" means, individually and as a group, the Purchaser
Indemnified Parties and the Seller Indemnified Parties.
"Indemnitor" means any party having any liability to any Indemnified
Party under this Agreement.
"Interim Financial Statements" is defined in Section 7(g)(ii).
"Knowledge" means with respect to (a) the Sellers, the actual conscious
knowledge of the following individuals with no investigation other than
performing their duties in the Ordinary Course of Business: Xxxx X. Xxxxxxx and
officers of Contran Insurance and (b) the Purchaser, the actual conscious
knowledge of its executive officers.
"Material Adverse Change (or Effect)" means a change (or effect) in the
condition (financial or otherwise), in the properties, assets, liabilities,
rights, obligations, operations, business, or prospects of the Companies on a
combined basis which change (or effect), individually or in the aggregate, could
reasonably be expected to be materially adverse to such condition, properties,
assets, liabilities, rights, obligations, operations, or business of the
Companies on a combined basis.
"Membership Interest" is defined in the recitals to this Agreement.
"Most Recent Year End" is defined in Section 7(g)(i).
3
"Operating Agreement" means the First Amended and Restated Operating
Agreement effective April 6, 1998 among EWI Ltd.'s members and EWI Ltd.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency) of the relevant Person and its subsidiaries.
"Organizational Documents" means, as applicable, the articles of
incorporation, certificate of incorporation, charter, bylaws, articles of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Purchase Price" is defined in Section 3.
"Purchaser" is defined in the preamble to this Agreement.
"Purchaser Indemnified Parties" is defined in Section 8(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" is defined in the preamble to this Agreement.
"Shareholders' Agreement" means the Second Amended and Restated
Shareholders' Agreement effective April 6, 1998 among EWI Inc.'s shareholders
and EWI Inc.
"Seller Indemnified Parties" is defined in Section 8(b).
"Threshold Amount" is defined in Section 8(f)(ii).
Section 2. Agreement to Sell and Purchase. Subject to the terms and
conditions of this Agreement, the Purchaser agrees to purchase concurrently 520
shares of Common Stock and a 57.8% Membership Interest from Big Bend
(collectively, the "Big Bend Equity Interests") and 380 shares of Common Stock
and a 42.2% Membership Interest from Contran Insurance (collectively, the
"Contran Insurance Equity Interests").
Section 3. Purchase Price. The Purchaser shall purchase the Big Bend
Equity Interests for an aggregate cash purchase price of $5,202,000.00 and the
Contran Insurance Equity Interests for an aggregate cash purchase price of
$3,798,000.00, respectively (collectively, the "Purchase Price"). In each
instance the Purchaser shall pay the Purchase Price by wire transfer to an
account designated in writing by the respective Seller.
Section 4. The Closing.
(a) Time and Place. The closing for the sale and purchase of the
Big Bend Equity Interests and the Contran Insurance Equity Interests
(the "Closing") shall take place on January 4, 2002, at Three Lincoln
Centre, 0000 XXX Xxxxxxx Xxxxx 0000, Xxxxxx, Xxxxx 00000-0000 or such
other date or place as the parties may mutually determine (the "Closing
Date").
4
(b) Obligations of Sellers at the Closing. At the Closing, each
of the Sellers shall deliver or cause to be delivered the following:
(i) a validly issued stock certificate registered in the
name of the Seller and representing the shares of Common Stock
to be sold by the Seller pursuant to this Agreement accompanied
by an assignment separate from certificate duly endorsing such
shares over to the Purchaser;
(ii) a validly issued membership certificate registered
in the name of the Seller and representing the Membership
Interest to be sold by the Seller pursuant to this Agreement
accompanied by an assignment separate from certificate duly
endorsing the such Membership Interests over to the Purchaser;
and
(iii) certified resolutions of the shareholders or
members, as applicable, authorizing such Seller to enter into
this Agreement, to consummate the transactions contemplated by
this Agreement, and to perform its obligations at the Closing.
(c) Obligation of the Purchaser at the Closing. At the Closing,
the Purchaser shall deliver or cause to be delivered the following:
(i) by wire transfer on behalf of Big Bend as follows:
(A) $466,906.06 to EWI Ltd. representing payment
in full of principal and interest on
outstanding loans by EWI Ltd. to Big Bend,
plus interest at a rate of $51.64 per day
subsequent to January 4, 2002;
(B) An amount equal to $5,202,000 less the
amount required to repay the loan by EWI
Ltd. to Big Bend as set forth above, to be
wired to the account of Big Bend;
(ii) by wire transfer, $3,798,000.00 to Contran
Insurance's designated account; and
(iii) certified resolutions of the board of directors,
authorizing the Purchaser to enter into this Agreement, to
consummate the transactions contemplated by this Agreement, and
to perform its obligations at the Closing.
Section 5. Representations and Warranties of the Sellers. Each Seller
represents and warrants as of the Closing Date as follows.
(a) Status. Such Seller is an entity duly created, formed or
organized, validly existing and in good standing under the laws of the
state of its incorporation or formation. There is no pending or
threatened Action (or basis therefor) for the dissolution, liquidation
or rehabilitation of such Seller.
5
(b) Authorization. Such Seller has all necessary power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All actions required to be taken by or
on behalf of it to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly
and properly taken. This Agreement, when duly executed and delivered by
such Seller, constitutes such Seller's lawful, valid and binding
obligation, enforceable against such Seller in accordance with their
terms.
(c) No Violation. The execution and delivery of this Agreement
and the consummation by such Seller of the transactions contemplated
hereby, are not prohibited by, do not violate or conflict with any
provision of, and do not result in a default under (i) such Seller's
Organizational Documents, (ii) any material contract, agreement or other
instrument to which it is a party or by which it is bound, (iii) any
order, writ, injunction, decree or judgment of any court or Governmental
Body applicable to it, or (iv) any law, rule or regulation applicable to
it; except in each case for such prohibitions, violations, conflicts or
defaults of or with respect to any item described in clauses (ii), (iii)
or (iv) that would not have a Material Adverse Effect.
(d) Ownership. Such Seller holds of record and owns the number
of shares of Common Stock and the Membership Interests set forth in the
recitals to this Agreement, free and clear of any encumbrances (other
than restrictions under the Securities Act and state securities laws).
Such Seller is not a party to any contract that could require it to
sell, transfer, or otherwise dispose of any of its Common Stock or its
Membership Interests (other than this Agreement, the Shareholders'
Agreement and the Operating Agreement), or any other contract with
respect to any capital stock of or other interest in either Company.
Such Seller's delivery of its shares of Common Stock and its Membership
Interests at the Closing will transfer to the Purchaser good and
marketable title to such shares and Membership Interest free and clear
of all liens, claims and encumbrances whatsoever.
(e) Brokers' Fees. Such Seller has no liability to pay any
compensation to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser
could become liable.
Section 6. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to each of the Sellers as of the Closing Date
as follows.
(a) Status. The Purchaser is an entity duly created, formed or
organized, validly existing and in good standing under the laws of the
state of its incorporation or formation. There is no pending or
threatened Action (or basis therefor) for the dissolution, liquidation
or rehabilitation of the Purchaser.
(b) Authorization. The Purchaser has all necessary power and
authority to execute and deliver this Agreement and to consummate the
transactions
6
contemplated hereby. All actions required to be taken by or on behalf of
it to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated thereby have been duly and
properly taken. This Agreement, when duly executed and delivered by the
Purchaser, constitutes the Purchaser's lawful, valid and binding
obligations, enforceable against the Purchaser in accordance with their
terms.
(c) No Violation. The execution and delivery of this Agreement
and the consummation by the Purchaser of the transactions contemplated
hereby, are not prohibited by, do not violate or conflict with any
provision of, and do not result in a default under (i) the Purchaser's
Organizational Documents, (ii) any material contract, agreement or other
instrument to which the Purchaser is a party or by which the Purchaser
is bound, (iii) any order, writ, injunction, decree or judgment of any
court or Governmental Body applicable to the Purchaser, or (iv) any law,
rule or regulation applicable to the Purchaser; except in each case for
such prohibitions, violations, conflicts or defaults of or with respect
to any item described in clauses (ii), (iii) or (iv) that would not have
a material adverse effect on the Purchaser's ability to perform its
obligations under this Agreement.
(d) Brokers' Fees. The Purchaser has no liability to pay any
compensation to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which either Seller
could become liable.
(e) Company Review. The Purchaser:
(i) has such experience in financial and business
matters that it is capable of evaluating the merits and risks of
its investment in the Big Bend Equity Interests and Contran
Insurance Equity Interests contemplated hereby, and that the
Purchaser is able to bear the economic risk of such investment
indefinitely.
(ii) has (A) had the opportunity to meet with
representative officers and other representatives of each
Company to discuss its business, assets, liabilities, financial
condition, cash flow, and operations, and (B) received all
materials, documents and other information that it deems
necessary or advisable to evaluate the Big Bend Equity Interests
and Contran Insurance Equity Interests and the transactions
contemplated hereby.
(iii) has made its own independent examination,
investigation, analysis and evaluation of the Big Bend Equity
Interests and Contran Insurance Equity Interests, including its
own estimate of their value.
(iv) has undertaken such due diligence (including a
review of the Companies' assets, properties, liabilities, books,
records and contracts) as it deems adequate, including that
described above.
Nothing in this Section 6(e) will preclude the Purchaser
from relying on the representations, warranties, covenants, and
agreements of the Sellers herein or from pursuing their remedies
with respect to a breach thereof.
7
Section 7. Representations and Warranties Concerning the Companies. Each
Seller represents and warrants as of the Closing Date as follows:
(a) Status. Each Company is an entity duly created, formed or
organized, validly existing and in good standing under the laws of the
state of its incorporation or formation. There is no pending or
threatened Action (or basis therefor) for the dissolution, liquidation
or rehabilitation of such Company.
(b) No Violation. The execution and delivery of this Agreement
are not prohibited by, do not violate or conflict with any provision of,
and do not result in a default under (i) the Company's Organizational
Documents, (ii) any material contract, agreement or other instrument to
which such Company is a party or by which it is bound, (iii) any order,
writ, injunction, decree or judgment of any court or Governmental Body
applicable to such Company, or (iv) any law, rule or regulation
applicable to it; except in each case for such prohibitions, violations,
conflicts or defaults of or with respect to any item described in
clauses (ii), (iii) or (iv) that would not have a Material Adverse
Effect.
(c) Brokers' Fees. Neither Company has any liability to pay any
compensation to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which such Company could
become liable.
(d) Capitalization.
(i) EWI Inc.'s authorized Equity Interests consist of
20,000 shares of Common Stock, of which 900 shares are issued
and outstanding and 100 shares are held in treasury. All of the
EWI Inc.'s issued and outstanding shares: (A) have been duly
authorized and are validly issued, fully paid, and
nonassessable, (B) were issued in compliance with all applicable
New York and federal securities laws, (C) were not issued in
breach of any Commitments, and (D) are held of record and owned
beneficially by the Sellers. EWI Inc. has no Commitments
outstanding and has no obligation to issue any Commitments. No
additional Commitments will arise in connection with the
transactions contemplated by this Agreement. Other than as
provided in the Shareholders' Agreement, there are no contracts
with respect to the voting or transfer of the EWI Inc.'s Equity
Interests. EWI Inc. is not obligated to redeem or otherwise
acquire any of its outstanding Equity Interests.
(ii) All of the EWI Ltd.'s issued and outstanding
Membership Interests: (A) have been duly authorized and are
validly issued, fully paid, and nonassessable, (B) were issued
in compliance with all applicable Nevada and federal securities
laws, (C) were not issued in breach of any Commitments, and (D)
are held of record and owned beneficially by the Sellers. EWI
Ltd. has no Commitments outstanding and has no obligation to
issue any Commitments. No additional Commitments will arise in
connection with the transactions contemplated by this Agreement.
Other than as provided in the Operating Agreement, there are no
contracts with respect to the voting or transfer of the EWI
Ltd.'s Membership Interests. EWI Ltd. is not obligated to redeem
or otherwise acquire any of its outstanding Membership
Interests.
8
(e) Records. The copies of the Companies' Organizational
Documents that were made available to the Purchaser are accurate and
complete and reflect all amendments made through the date hereof. The
Companies' minute books and other records made available to the
Purchaser for review were correct and complete as of the date of such
review, no further entries have been made through the date of this
Agreement, such minute books and records contain the true signatures of
the persons purporting to have signed them, and such minute books and
records contain an accurate record of all actions of the stockholders,
directors, members, managers, or other such representatives of the
Companies taken by written consent, at a meeting, or otherwise since
formation.
(f) Company Subsidiaries. Neither Company owns or has ever owned
any Equity Interests in any Person.
(g) Financial Statements. Set forth on Schedule 7(g) are the
following financial statements (collectively the "Companies' Financial
Statements"):
(i) audited combined balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and
for the fiscal year ended December 31, 2000 (the "Most Recent
Year End") for the Companies; and
(ii) unaudited combined statements of income for the ten
months ended October 31, 2001 (the "Interim Financial
Statements") and the respective balance sheets of EWI Inc. and
EWI Ltd. as of and for the ten months ended October 31, 2001
(the "Balance Sheet Date") for the Companies.
The Financial Statements have been prepared on the income tax
basis of accounting applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Companies
as of such dates and the results of operations of the Companies for such
periods on the income tax basis of accounting, are correct and complete,
and are consistent with the books and records of the Companies;
provided, however, that the Interim Financial Statements are subject to
normal year-end adjustments (which will not be material individually or
in the aggregate) and lack footnotes and other presentation items. Since
the Balance Sheet Date neither Company has effected any change in any
method of accounting or accounting practice.
(h) Subsequent Events. Since the Balance Sheet Date the
Companies have operated in the Ordinary Course of Business and, as of
the date hereof, there have been no events, series of events or the lack
of occurrence thereof, which singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Without
limiting the foregoing, since that date, none of the following has
occurred:
(i) Neither Company has sold, leased, transferred, or
assigned any assets other than for a fair consideration in the
Ordinary Course of Business and sales of assets have not
exceeded $25,000 singularly or $50,000 in the aggregate.
9
(ii) Neither Company has entered into any contract (or
series of related contracts) either involving more than $50,000
or outside the Ordinary Course of Business.
(iii) Neither Company has made any capital expenditure
(or series of related capital expenditures) involving more than
$25,000 individually, $50,000 in the aggregate or outside the
Ordinary Course of Business.
(iv) Neither Company has made any capital investment in,
any loan to, or any acquisition of the securities or assets of,
any other Person involving more than $25,000 singularly, $50,000
in the aggregate or outside the Ordinary Course of Business.
(v) Neither Company has issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
liability for borrowed money or capitalized lease contract
either involving more than $25,000 individually or $50,000 in
the aggregate.
(vi) Neither Company has canceled, compromised, waived,
or released any Action (or series of related Actions) either
involving more than $50,000 or outside the Ordinary Course of
Business.
(vii) There has been no change made or authorized to be
made to the Organizational Documents of either Company.
(viii) Neither Company has issued, sold, or otherwise
disposed of any of its Equity Interests.
(ix) Neither Company has made any loan to, or entered
into any other transaction with, any of its directors, officers,
employees, shareholders, managers or members, as applicable.
(x) Neither Company has paid any dividend or made any
distribution, whether in cash, evidence of indebtedness, Equity
Interests or other securities or property.
(xi) There has not been any other occurrence, event,
incident, action, failure to act, or transaction with respect to
the Companies outside the Ordinary Course of Business.
(i) Legal Compliance. The Companies and their respective
predecessors and Affiliates have complied with all applicable laws and
no Action is pending or, to the Knowledge of the Sellers, threatened
(and there is no basis therefor) against it alleging any failure to so
comply, in each case that would have a Material Adverse Effect. No
material expenditures are, or based on applicable law, will be required
of either Company for it and its business and operations to remain in
compliance with applicable law.
10
(j) Tax Matters.
(i) Each Company has filed all tax returns that it was
required to file. All such tax returns were accurate, correct
and complete in all respects and accurately reflect the facts
regarding the income, business, assets, operations, activities,
status, or other matters of each Company or any other
information required to be shown thereon. All taxes each Company
owes (whether or not shown on any tax return) have been paid or
are being legally contested and any such contest has been
expressly disclosed in writing to the Purchaser. Neither Company
currently is the beneficiary of any extension of time within
which to file any tax return. No Action has ever been initiated
or, to the Knowledge of the Sellers, threatened by a
Governmental Body in a jurisdiction where a Company does not
file tax returns that it is or may be subject to taxation by
that jurisdiction. There are no encumbrances on any of the
assets of either Company that arose in connection with any
failure (or alleged failure) to pay any tax.
(ii) Each Company has withheld and paid all taxes
required to have been withheld and paid in connection with
amounts paid or owed to any employee, independent contractor,
creditor, holder of its Equity Interests, or other third party.
(iii) To the Knowledge of the Sellers, there is no
threatened assessment of, or any basis for, any additional taxes
for any period for which tax returns have been filed. There is
no Action concerning any tax liability of a Company either (A)
claimed or raised in writing or (B) as to which either Seller
has Knowledge.
(iv) Neither Company has waived any statute of
limitations in respect of taxes or agreed to any extension of
time with respect to a tax assessment or deficiency.
(v) Each Company has disclosed on its tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Code
Section 6662.
(vi) Neither Company is a party to any tax allocation or
sharing contract.
(k) Title to and Condition of Assets. The Companies have good
and indefeasible title to, or a valid leasehold interest in, all
buildings, machinery, equipment, and other tangible assets (i) located
on their premises, shown on the Interim Financial Statements, or
acquired after the Balance Sheet Date and (ii) necessary for the conduct
of their business as currently conducted, in each case free and clear of
all encumbrances, except for properties and assets disposed of in the
Ordinary Course of Business since the Balance Sheet Date. Each such
tangible asset is free from material defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition (subject to normal wear and tear), and is suitable
for the purposes for which it is currently used.
11
(l) Real Property.
(i) Neither Company owns or has ever owned any real
property.
(ii) With respect to each lease and sublease contract
for all real property leased or subleased to each Company:
(A) the contract is enforceable;
(B) the contract will continue to be enforceable
on identical terms following the
consummation of the transactions
contemplated by this Agreement;
(C) neither Company is in material breach of
such contract, and no event has occurred
which, with notice or lapse of time, would
constitute a material breach thereunder;
(D) no party to the contract has repudiated any
provision thereof;
(E) there are no actions, orders, or
forbearances in effect as to the contract;
(F) neither Company has granted or suffered to
exist any encumbrance in the leasehold or
subleasehold contract that is filed of
record;
(G) to the Knowledge of the Sellers, all
facilities leased or subleased under the
contract have received all permits required
in connection with the operation thereof and
have been operated and maintained in
accordance with applicable laws in all
material respects; and
(H) all facilities leased or subleased under the
contract are supplied with utilities and
other services necessary for the operation
of such facilities.
(m) Contracts. Neither Company is a party to :
(i) Any contract (or group of related contracts) for the
lease of personal property to or from any Person providing for
lease payments in excess of $50,000 per annum other than as
specifically disclosed in the Companies' Financial Statements.
(ii) Any contract (or group of related contracts) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services (other than pursuant to reinsurance
contracts and brokerage sharing agreements), the performance of
which will extend over a period of more than one year, result in
a Material Adverse Effect, or involve consideration in excess of
$100,000.
12
(iii) Any contract concerning a limited liability
company, partnership, joint venture or similar arrangement,
other than Organizational Documents of such Company.
(iv) Any contract (or group of related contracts) under
which it has created, incurred, assumed, or guaranteed any
liability for borrowed money or any capitalized lease in excess
of $150,000, or under which it has imposed or suffered to exist
an encumbrance on any of its assets other than purchase money
liens, unrecorded inchoate liens, or as specifically disclosed
in the Companies' Financial Statements.
(v) Any contract concerning confidentiality or
noncompetition other than with respect to present or past
employees of the Companies.
(vi) Except as specifically disclosed in the Companies'
Financial Statements, any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance,
or other similar contract for the benefit of its current or
former directors, officers, and employees.
(vii) Any contract for the employment of any individual
on a full-time, part-time, consulting, or other basis providing
annual compensation (excluding any health and welfare benefits
and discretionary performance bonuses) in excess of $170,000 per
annum or any contract(s), plan(s) or commitment(s) providing
severance benefits in the aggregate for any employee of $150,000
or $250,000 in the aggregate for all employees.
(viii) Any contract under which it has advanced or
loaned any amount to any of its directors or officers or either
Seller or Affiliate of either Seller or, outside the Ordinary
Course of Business, to its employees that are not Sellers or
Affiliates of either Seller, other than as specifically
disclosed in the Companies' Financial Statements.
(ix) Any other contract the performance of which
involves receipt or payment of consideration in excess of
$250,000 per annum.
(n) Insurance. Each Company has been covered during the past
five years by insurance in scope and amount customary and reasonable for
the businesses in which it has engaged during the aforementioned period.
(o) Litigation. Neither of the Companies (i) is subject to any
outstanding order or (ii) is a party, the subject of, or to the
Knowledge of the Sellers is threatened to be made a party to or the
subject of any Action. No Action questions the enforceability of this
Agreement or the transactions contemplated hereby, or could result in
any Material Adverse Effect, and the Sellers have no Knowledge that any
such Action may be brought or threatened against either Company.
13
(p) Labor; Employees. To each Seller's Knowledge, no executive,
key employee, or group of employees has any plans to terminate
employment with either Company. Neither Company is a party to or bound
by any collective bargaining contract, nor has either of them
experienced any strikes, grievances, claims of unfair labor practices,
or other collective bargaining disputes. Neither Company has committed
any unfair labor practice (as determined under any law). Neither Seller
has any Knowledge of any organizational effort currently being made or
threatened by or on behalf of any labor union with respect to either
Company's employees.
(q) Employee Benefits. With respect to any employee benefit
plan, within the meaning of Section 3(3) of ERISA, which is subject to
ERISA and which is sponsored, maintained or contributed to, or has been
sponsored, maintained or contributed to, within six years prior to the
Closing Date, by either Company or any ERISA Affiliate, (i) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has
been incurred, which withdrawal liability has not been satisfied, (ii)
no liability to the PBGC has been incurred by either Company or any
ERISA Affiliate, which liability has not been satisfied, (iii) no
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (iv) all contributions (including installments) to such
plan required by Section 302 of ERISA and Section 412 of the Code have
been timely made. With respect to any kind of employee benefit plan,
such plan has been funded and maintained in material compliance with all
laws applicable thereto and the requirements of such plan's governing
documents.
(r) Environmental, Health, and Safety Matters. To the Knowledge
of the Sellers, (i) each Company is in material compliance with all
Environmental, Health and Safety Requirements in connection with owning,
using, maintaining, or operating its business or assets; (ii) each
location at which either Company operates, or has operated, its business
is in compliance with all Environmental, Health and Safety Requirements;
and (iii) there are no pending, or any threatened allegations by any
Person that either Company's properties or assets is not, or that its
business has not been conducted, in compliance with all Environmental,
Health and Safety Requirements.
(s) Customers. The Companies have not received any notice of
termination of the broker of record designation or brokerage sharing
arrangements or an intention to terminate such relationships with the
Companies from any customer, the effect of which would be to cause the
Companies to achieve combined revenues below $3.4 million for the
calendar year 2001 as reflected in the Companies' combined budget
previously provided to Purchaser.
(t) Permits. The Companies possess all material permits required
for their businesses and operations. With respect to each such permit:
(i) it is valid, subsisting and in full force and
effect;
(ii) there are no material violations of such permit
that would result in a termination of such permit;
14
(iii) neither Company has received written notice that
such permit will not be renewed; and
(iv) the transactions contemplated by this Agreement
will not adversely affect the validity of such permit or cause a
cancellation of or otherwise adversely affect such permit.
(u) Foreign Corrupt Practices Act Compliance. Neither Seller nor
either Company has, directly or indirectly, in connection with the
Companies' businesses, made or agreed to make any payment to any Person
connected with or related to any Governmental Body, except payments or
contributions required or allowed by applicable law. The internal
accounting controls and procedures of the Companies are sufficient to
cause the Companies to comply with the Foreign Corrupt Practices Act.
Section 8. Indemnification.
(a) Survival of Representations and Warranties. Each
representation and warranty contained in this Agreement and any
certificate related to such representations and warranties will survive
the Closing and continue in full force and effect for a period of one
year thereafter, except with respect to representations and warranties
contained in Section 7 (j), which Section 7(j) representations and
warranties shall survive the closing and continue in full force and
effect for the applicable statute of limitations. The Purchaser on the
one hand, and the Sellers jointly and severally on the other, will be
liable for all damages, losses, liabilities, payments, amounts paid in
settlement, obligations, fines, penalties, and other costs (including
reasonable and necessary fees and expenses of outside attorneys,
accountants and other professional advisors and of expert witnesses) and
other costs of litigation in connection with any Action (collectively
"Damages") resulting from any breaches thereof.
(b) Indemnification Provisions for the Purchaser's Benefit. The
Sellers will, on a joint and several basis, indemnify and hold the
Purchaser and its officers, directors, managers, employees, agents,
representatives, controlling Persons, and stockholders (collectively,
the "Seller Indemnified Parties"), harmless from and pay any and all
Damages, directly or indirectly, resulting from, relating to, arising
out of, or attributable to any one of the following:
(i) Any breach of any representation or warranty either
Seller has made in this Agreement as if such representation or
warranty were made on and as of the Closing Date.
(ii) Any breach by either Seller of any obligation of
either Seller in this Agreement.
(iii) Any and all taxes that may be imposed on or
assessed on either of the Companies or the assets thereof with
respect to all taxable periods ending on or prior to the closing
date.
15
(c) Indemnification Provisions for the Sellers' Benefit. The
Purchaser will indemnify and hold the Sellers and their officers,
directors, managers, employees, agents, representatives, controlling
Persons, stockholders, members and Affiliates (other than Purchaser and
its subsidiaries), as applicable (collectively, the "Purchaser
Indemnified Parties"), harmless from and pay any and all Damages,
directly or indirectly, resulting from, relating to, arising out of, or
attributable to any of the following:
(i) Any breach of any representation or warranty the
Purchaser has made in this Agreement as if such representation
or warranty were made on and as of the Closing Date without
giving effect to any supplement to the Schedules.
(ii) Any breach by the Purchaser of any covenant or
obligation of the Purchaser in this Agreement.
(d) Indemnification Claim Procedures.
(i) If any third party notifies any Indemnified Party
with respect to the commencement of any Action that may give
rise to a claim for indemnification against any Indemnitor under
this Section 8 (an "Indemnification Claim"), then the
Indemnified Party will promptly give notice to the Indemnitor
pursuant to Section 8(e).
(ii) An Indemnitor will have the right at any time to
assume and thereafter conduct the defense of the Indemnification
Claim with counsel of the Indemnitor's choice reasonably
satisfactory to the Indemnified Party; provided, however, the
Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Indemnification
Claim without the prior written consent of the Indemnitor (not
to be withheld unreasonably).
(iii) Unless and until an Indemnitor assumes the defense
of the Indemnification Claim as provided in Section 8(d)(ii),
the Indemnitor may defend against the Indemnification Claim in
any manner the Indemnitor reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to
the entry of any judgment or enter into any settlement with
respect to the Indemnification Claim without the prior written
consent of the Indemnitor (not to be withheld unreasonably).
(e) Notice of Claim. A party having Knowledge of an event or
condition that may cause such party to be Damaged, which event or
condition gives or could give rise to a claim for indemnification under
this Section 8, shall promptly notify each other party thereof in
writing (a "Claim Notice"). The Claim Notice shall contain a brief
description of the nature of the Damages suffered and, if practicable,
an aggregate dollar value estimate of the Damages suffered. Failure to
provide a Claim Notice with respect to such an event or condition within
the applicable survival period in Section 8(a) will constitute a waiver
of any such claim.
16
(f) Limitations on Indemnification Liability. Any claims made by
any Indemnified Party under this Section 8 will be limited as follows:
(i) Sellers' aggregate liability for Damages under this
Agreement related to breaches of the representations,
warranties, and covenants herein will not exceed an amount equal
to $1,000,000, except with respect to breaches of
representations and warranties contained in Section 7(j) and
except with respect to Section 8(b)(iii) herein where Seller's
aggregate liability for Damages under this Agreement shall be
without limit.
(ii) No party will have any liability for Damages
related to breaches of the representations, warranties, and
covenants in this Agreement unless and until the aggregate
Damages claimed under Section 8(e) exceeds $50,000 (the
"Threshold Amount"); provided, however, once such amount exceeds
the Threshold Amount, the Indemnified Party will be entitled to
recover all amounts to which it is entitled relating back to the
first dollar of Damages, without regard to the Threshold Amount.
(iii) The amount required to be paid for Damages will be
reduced to the extent of (A) any amounts an Indemnified Party
actually receives pursuant to the terms of the insurance
policies (if any) covering such Indemnification Claim (and the
Indemnified Party shall use all reasonable efforts to effect any
such recovery) and (B) any income tax benefit actually realized
by the Indemnified Party related to such Indemnification Claim.
(iv) All indemnification obligations under this Section
8 will be limited to actual Damages and will exclude incidental,
consequential, lost profits, indirect, punitive, or exemplary
Damages.
(g) Other Indemnification Provisions.
(i) This Section 8 contains the sole and exclusive
remedy for any claim against the Purchaser or either Seller with
respect to claims under this Agreement after the Closing.
(ii) A claim for any matter not involving a third party
may be asserted by notice to the party from whom indemnification
is sought.
Section 9. Miscellaneous.
(a) Transfer Taxes. Each Seller and Purchaser agrees to each pay
one-third of any transfer tax applicable to the transfer of its
respective shares of Common Stock and Membership Interests hereunder.
(b) Binding Effect, Benefits. This Agreement shall inure to the
benefit of the parties and shall be binding upon the parties and their
respective heirs, successors and permitted assigns.
17
(c) Notices. All notices and other communications that are
required to be or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given when delivered in person or
transmitted by confirmed telecopy or upon receipt after dispatch by
overnight courier or by certified or registered mail, postage prepaid,
to the party to whom the notice is given. Notices shall be given to the
addresses appearing below such party's signature to this Agreement or to
such other address as such party may designate by giving notice to the
other parties to this Agreement.
(d) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings,
oral and written, among the parties with respect to its subject matter
and may not be amended, modified or terminated unless done so in a
written instrument executed by the party or parties sought to be bound.
(e) Headings. The captions used in this Agreement are for the
convenience of the parties and shall not affect the interpretation of
this Agreement.
(f) Attorneys' Fees. If any suit or action is instituted
relating to this Agreement, the prevailing party (the finality of which
is not reasonably contested) shall be awarded all reasonable attorney
fees incurred at trial and on any appeal.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Texas without
giving effect to any choice of law or conflict of law provision or rule
(whether of the state of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
state of Texas.
(h) Severability. The invalidity of all or any part of any
section if this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such section. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
(i) Further Assurances. In addition to the acts and deeds
recited herein and contemplated to be performed, executed and delivered
by the parties hereto, the parties hereto shall perform, execute and
deliver or cause to be performed, executed and delivered at the Closing
or thereafter any and all further acts, deeds and assurances as may
reasonably be required to consummate or evidence the consummation of the
transactions contemplated herein.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(k) Assignments. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of each other party; provided, however, that the
Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the Purchaser nonetheless will remain responsible for
the performance of all of its obligations hereunder).
18
(l) Expenses. Except as otherwise expressly provided in this
Agreement, each party will bear its own costs and expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees
and expenses of agents, representatives, financial advisors, legal
counsel and accountants. The Sellers agree that neither Company has
borne or will bear any costs and expenses (including any legal fees and
expenses of either Seller) in connection with this Agreement or any of
the transactions contemplated hereby.
(m) Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question
of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof
will arise favoring or disfavoring any party because of the authorship
of any provision of this Agreement. Any reference to any federal, state,
local, or foreign law will be deemed also to refer to law as amended and
all rules and regulations promulgated thereunder, unless the context
requires otherwise, words "include," "includes," and "including" will be
deemed to be followed by "without limitation." Pronouns in masculine,
feminine, and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to include the
plural and vice versa, unless the context otherwise requires. The words
"this Agreement," "herein," "hereof," "hereby," "hereunder," and words
of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The parties intend
that each representation, warranty, and covenant contained herein will
have independent significance. If any party has breached any
representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from
or mitigate the fact that the party is in breach of the first
representation, warranty, or covenant.
(n) Remedies. Except as expressly provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations, or remedies otherwise
available at law or in equity. Except as expressly provided herein,
nothing herein will be considered an election of remedies.
[Remainder of page intentionally left blank]
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PURCHASER: KRONOS, INC.
By:/s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President & Assistant Treasurer
By: THE SPECIAL COMMITTEE OF THE BOARD OF
DIRECTORS OF NL INDUSTRIES, INC.
ESTABLISHED BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS AS OF AUGUST 2,
2001 TO APPROVE, IF APPROPRIATE, THE
ACQUISITION OF THE EQUITY INTERESTS OF EWI
RE, INC. AND EWI RE, LTD.
By:/s/ Xxxxxxx X. Peak
-------------------
Xxxxxxx X. Peak, Chairman
Address: Two Greenspoint Plaza
Suite 1200
00000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
FAX: 000.000.0000
BIG BEND HOLDINGS LLC
By:/s/ Xxxx X. Xxxxxxx
Xxxx Xxxxxxx Xxxxxxx, Sole Member
Address: Three Lincoln Centre
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
FAX: 000.000.0000
CONTRAN INSURANCE HOLDINGS, INC.
By:/s/ Xxxxx X. X'Xxxxx
--------------------
Xxxxx X. X'Xxxxx, Vice President
Address: Three Lincoln Centre
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
FAX: 000.000.0000
