NORDIC LITES
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement (the "Agreement"), effective December
1, 1996, among Dynatec International, Inc., a Utah corporation ("Dynatec"),
its wholly owned subsidiary, Nordic Technologies, Inc., a Utah corporation
("Buyer"), Nordic Lights, Inc., a Texas corporation ("Seller") doing business
as Nordic-Lites, Inc., Nordic Industries, Inc., a Texas corporation, and
Cornerstone Venture Capital, LC aka Cornerstone Capital Group, LLC. Nordic
Industries, Inc. and Cornerstone Capital Group, LLC are the sole shareholders
of the Seller and are hereafter collectively referred to as the
"Shareholders". Seller and Shareholders are sometimes collectively referred
to in this Agreement as "Selling Parties."
WITNESSETH:
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer, on the terms and subject to the conditions of this Agreement,
substantially all of the assets, properties and business of Seller;
THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree
as follows:
ARTICLE 1. TRANSFER OF ASSETS
Subject to the terms and conditions set forth in this Agreement,
Seller agrees to sell, convey, transfer, assign and deliver to Buyer, and
Buyer agrees to purchase from Seller at the Closing described in Article 3
hereof, all of the assets, properties and business of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, and wherever located (but excluding any assets specifically excluded
in the following Sections of this Article 1), all of which are sometimes
collectively referred to in this Agreement as the "Assets," including, but
without limitation to, the following:
1.1 REAL PROPERTY LEASE. The lease of the real property located at
0000 Xxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx pursuant to a lease dated the 14th day
of April, 1994, together with all rights and privileges under such lease
(hereinafter referred to as
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the "Real Property Lease") to the Real Property subject to such lease
(hereinafter referred to as the "Real Property");
1.2 EQUIPMENT. All the machinery, tools, dyes, appliances,
furniture, equipment (including essential replacement parts) and other
tangible personal property of every kind and description wherever they may be
located that are owned or leased by Seller, and are utilized in connection
with Seller's operations, a current list of which is attached hereto as
SCHEDULE 1.2A (hereinafter referred to collectively as the "Equipment"). All
excluded items of equipment or tangible personal property are listed in
SCHEDULE 1.2B attached hereto. On or before December 2, 1996, Seller shall
deliver to Buyer the equipment as set forth in Schedule 1.2C. Good and
marketable title to all such equipment shall be transferred on delivery, free
and clear of any encumbrances;
1.3 INVENTORIES. All of Seller's finished goods and raw materials
(whether expensed or not), including work in process, consumable
manufacturing supplies, spare parts and repair materials that are actually on
hand as of the Closing Date, whether on or within the Real Property or
enroute thereto or elsewhere, an approximate summary of which items currently
on hand is attached hereto as SCHEDULE 1.3A (hereinafter referred to
collectively as the "Inventories"). On or before December 2, 1996, Seller
shall deliver to Buyer the Post Closing Inventory as set forth in Schedule
1.2C. Good and marketable title to all such Post Closing Inventory shall be
transferred on delivery, free and clear of any encumbrances;
1.4 INTANGIBLES. All trade names (including "Nordic Lites",
"Norflex", "Nite-Sight-Lite", "Nordic Strobe", "Nordic Smoke Cutter",
"Vari-probe", "Nordic Jr-1", "Nordic Jr-2", and "ZOOM Switch"), trademarks,
service marks, copyrights, patents, patent rights, trade secrets, technical
know-how, goodwill and other intangibles (including (i) tort or insurance
proceeds arising out of any damage or destruction of any of the Assets
between the date of this Agreement and the Closing Date (as hereinafter
defined); (ii) all contracts to be assumed by Buyer pursuant to Article (4)
used by Seller in (or owned by Seller and useful in) the operation of the
business, but excluding accounts receivable, accounts payable, contracts not
assumed by Buyer pursuant to Article 4, bank accounts, and tax deposits; and
(iii) all rights to the NSN numbers now used for contracts or sales to the
federal government by the Seller, or any of the predecessors or assignors of
the Seller, and all contract rights or applications for novation arising
thereunder;
1.5 BOOKS AND RECORDS. All papers and records in Seller's care,
custody or control relating to any or all of the above-described Assets and
the operation thereof, including, but not limited to, all blueprints and
specifications, personnel and labor
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relations records, environmental control records, sales records, accounting
and financial records, maintenance and production records; and
1.6 OTHER ASSETS. All product rights in the Nordic Lites
flashlight products, all improvements thereon. All prepaid expenses relating
to any of the Assets and the operation of Seller's business.
ARTICLE 2. PURCHASE PRICE
2.1 PAYMENT OF PURCHASE PRICE. In consideration for the transfer
and assignment by Seller of the Assets, and in consideration of the
representations, warranties and covenants of the Selling Parties set forth
herein, Dynatec and Buyer on the conditions set forth herein and subject to
the provisions in Article 15 state that:
(a) Dynatec shall issue 550,000 shares of Dynatec's restricted common
stock at the time of Closing. Of this number of shares, 255,000 shares
shall be issued in the name of Nordic Industries, Inc., 245,000 shares
shall be issued in the name of Cornerstone Capital Group, LLC; and 50,000
shares shall be issued in the name of Nordic Industries, Inc.
(b) Dynatec will issue additional restricted common stock warrants in
the form of Schedule 2.1 on the following basis:
(i) upon Buyer achieving Five Million Dollars in gross sales on
or before December 31, 1999, a warrant for an additional 50,000 shares
to be purchased at $1.00 per share will be earned;
(ii) upon Buyer achieving Seven Million Five Hundred Thousand
Dollars in gross sales on or before December 31, 2000, a warrant for
an additional 50,000 shares to be purchased at $1.00 per share will be
earned;
(iii) upon reaching Ten Million Dollars in gross sales on or
before December 31, 2001, a warrant for an additional 50,000 shares to
be purchased at $1.00 per share will be earned;
(iv) upon reaching Fifteen Million Dollars in gross sales on or
before December 31, 2002, a warrant for an additional 50,000 shares to
be purchased at $1.00 per share will be earned.
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(v) upon reaching Twenty Million Dollars in gross sales on or
before December 31, 2003, a warrant for an additional 50,000 shares to
be purchased at $1.00 per share will be earned.
(c) In addition to the warrants outlined in subsection (b) above,
Buyer will set aside 250,000 shares for options to be issued to employees
of the Buyer who are key contributors to the success of the Buyer as
determined by Buyer's Board of Directors. Options for as many as 100,000
shares a year may be granted hereunder in any fiscal year that the Buyer
shall experience not less than Two Million Five Hundred Thousand Dollars in
gross sales. Such options shall be exercisable at $.50 per share. The
determination as to who will receive the options and the number of shares
granted in each option shall be made by the decision of not less than sixty
(60%) percent of the directors of the Buyer (e.g. 3 of the 5 initial board
members).
(d) Dynatec will immediately proceed to register 325,000 shares of
the initial shares referred to in paragraph 2.1(a). Such shares shall
include the separate 50,000 shares referred to in paragraph 2.1(a) and
which are subject to the provisions of the agreement referred to in
paragraph 3.2(d). Within 30 days after closing, Dynatec shall file with
the Securities and Exchange Commission and all applicable state securities
commissioners a shelf registration statement covering the shares referenced
above (150,000 shares of the common stock issued to Nordic Industries, Inc.
and 125,000 shares of the Dynatec common stock issued to Cornerstone), and
shall use its best efforts to have the registration statement declared
effective as soon as possible. Dynatec shall maintain the effectiveness of
the registration statement for at least two years or until all shares
covered thereby have been resold, if sooner. Dynatec shall pay the costs
and expenses of such registration statement other than brokers' commissions
and discounts in connection with sales of securities thereunder.
(e) Buyer shall assume and discharge, and shall indemnify Seller
against, liabilities and obligations of the Seller under the leases or
other agreements, if any as specified on SCHEDULE 4, but only to the extent
that such liabilities or obligations accrue on or after the Closing Date.
2.2 ALLOCATION OF PURCHASE PRICE. The parties agree that the
Purchase Price shall be allocated as set forth in Schedule 2.2. Such
allocations will be used by the parties in reporting the transaction
contemplated by this Agreement for Federal and State tax purposes.
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ARTICLE 3. THE CLOSING
The closing of the purchase and sale of the Assets by Seller to
Buyer (the "Closing") shall take place at the offices of Xxxxx X. Xxxx,
attorney at law, which are located at 3ll Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxx
Xxxx Xxxx, Xxxx, at 10:00 a.m. local time, on Monday, December 2, 1996, or at
such other place and/or time as the parties may agree in writing (the
"Closing Date"). In the event that the conditions specified in this
Agreement have not been fulfilled by such date, Buyer may extend the Closing
Date for a period or periods not exceeding an aggregate of 15 days by giving
written notice to the Selling Parties. If on the original or any postponed
Closing Date, Selling Parties shall have been unable to obtain all waivers
and consents of private parties and governmental agencies required by this
Agreement, then Buyer, on written notice, may postpone the Closing to a time
not later than 10:00 a.m. local time, on December 10, 1996.
3.1 SELLING PARTIES' OBLIGATIONS AT THE CLOSING. At the Closing,
Selling Parties shall deliver or cause to be delivered to Buyer:
(a) finished inventory as outlined in Schedule 1.3B;
(b) assignments in recordable form of the Real Property Lease,
properly executed and acknowledged by Seller, and accompanied by all
consents of lessors required by this Agreement and the lease being
assigned;
(c) instruments of assignment and transfer of all of the other Assets
of Seller to be transferred hereunder, in form and substance satisfactory
to Buyer's counsel;
(d) executed proprietary information and nondisclosure agreements in
the form of SCHEDULE 6.10B by each of the individuals listed in SCHEDULE
6.10C;
(e) the UCC search reports referred to in paragraph 10.2 hereof;
(f) the certificate of the President or Secretary of the Seller
confirming that proper minutes and resolutions of the Seller's Board of
Directors and Shareholders have been secured prior to the Closing whereby
the sale of the Assets has been approved;
(g) executed Forms Schedule 13D and Form 3 for the Selling Parties;
and
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(h) a letter of account status from the Comptroller of Public
Accounts of the State of Texas dated within three days of closing as described
in paragraph 10.7.
Simultaneously with the consummation of the transfer, Seller,
through its officers, agents, and employees, shall put Buyer into full
possession and enjoyment of all the Assets to be conveyed and transferred by
this Agreement.
Selling Parties, at any time before or after the closing Date, shall
execute, acknowledge, and deliver any further assignments, conveyances and
other assurances, documents and instruments of transfer, reasonably requested
by Buyer and shall take any other action consistent with the terms of this
Agreement that may reasonably be requested by Buyer for the purpose of
assigning, transferring, granting, conveying and confirming to Buyer, or
reducing to possession, any or all property and assets to be conveyed and
transferred by this Agreement. If requested by Buyer, Selling Parties
further agree to prosecute or otherwise enforce in their own names for the
benefit of Buyer any claims, rights, or benefits that are transferred to
Buyer by this Agreement and that require prosecution or enforcement in either
of the Selling Parties' name. Any prosecution or enforcement of claims,
rights, or benefits under this Section shall be solely at Buyer's expense,
unless the prosecution or enforcement is made necessary by a breach of this
Agreement by Selling Parties.
3.2 BUYER'S OBLIGATIONS AT CLOSING. Subject to the provision of
Article 15, at the Closing, Buyer shall deliver to Seller the following
instruments and documents against delivery of the items specified in Section
3.1:
(a) A Dynatec stock certificate in the name of Nordic Industries,
Inc. for 255,000 shares of restricted common stock, a Dynatec stock
certificate in the name of Cornerstone Capital Group, LLC for 245,000
shares of restricted common stock; and a Dynatec stock certificate in the
name of Nordic Industries, Inc. for 50,000 shares of restricted common
stock (such certificates are to be issued as if subsequent to the December
12, 1996 forward split of the Dynatec shares and are to be held by legal
counsel for Seller for delivery on December 16, 1996, to accommodate the
NASDAQ listing requirements);
(b) Warrants in the form of SCHEDULE 2.1 attached hereto issued in
the name of the holder, with the performance dates and for the amounts
indicated below:
Name of Holder Performance Date Number of Shares
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Nordic Industries, Inc. 12/31/99 25,500
Cornerstone Capital Group, LLC 12/31/99 24,500
Nordic Industries, Inc. 12/31/2000 25,500
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Cornerstone Capital Group, LLC 12/31/2000 24,500
Nordic Industries, Inc. 12/31/2001 25,500
Cornerstone Capital Group, LLC 12/31/2001 24,500
Nordic Industries, Inc. 12/31/2002 25,500
Cornerstone Capital Group, LLC 12/31/2002 24,500
Nordic Industries, Inc. 12/31/2003 25,500
Cornerstone Capital Group, LLC 12/31/2003 24,500
(c) A Repurchase and Guarantee Agreement in the form of Schedule 3.2C
providing Nordic Industries, Inc. with certain assurances as to the amount
of proceeds that Nordic Industries, Inc. will receive from the sale of
certain shares of Dynatec stock issued to it pursuant to Section 2.1(a) of
this Agreement
3.3 INVENTORIES. On or before the Closing Date, the parties shall
make a joint physical count and determination of the value of the Inventories
for the purpose of determining the value thereof, utilizing the procedures
and the inventory prices set forth in SCHEDULE 1.3A hereto. Upon the final
determination of such amounts, Seller shall submit a reasonable detailed list
of the items covered thereby.
ARTICLE 4. ASSUMPTION OF LIABILITIES
Buyer is not assuming any debt, liability or obligation of Seller,
whether known or unknown, fixed or contingent, except as herein specifically
otherwise provided. Selling Parties agree to indemnify and hold Buyer
harmless against all debts, claims, liabilities and obligations of Seller not
expressly assumed by Buyer hereunder, and to pay any and all attorneys' fees
and legal costs incurred by Buyer, its successors and assigns in connection
therewith. Buyer shall have the benefit of and shall perform all contracts
and commitments, if any, specifically disclosed on SCHEDULE 4, in accordance
with the terms and conditions thereof, except to the extent modifications are
specifically disclosed on such SCHEDULE 4.
ARTICLE 5. EXCISE AND PROPERTY TAXES
Seller shall pay all sales, use and transfer taxes arising out of
the transfer of the Assets and shall pay its portion, prorated as of the
Closing Date, of state and local personal property taxes of the business.
Buyer shall not be responsible for any business, occupation, withholding or
similar tax, or for any taxes of any kind related to any period before the
Closing Date.
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties, jointly and severally, hereby represent and warrant
to Buyer that the following facts and circumstances are, and except as
contemplated hereby, at all times up to the Closing Date will be true and
correct, and hereby acknowledge that such facts and circumstances constitute
the basis upon which Buyer is induced to enter into and perform this
Agreement. Each warranty set forth in this Article 6 shall survive the
Closing and any investigation made by or on behalf of Buyer.
6.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of Texas, has all necessary corporate powers to own its properties and
to carry on its business as now owned and operated by it, and is duly
qualified to transact interstate business and is in good standing in all
jurisdictions in which the nature of its business or of its properties makes
such qualification necessary.
6.2 CAPITAL STRUCTURE. The authorized number of shares of Seller
is 1,000,000, all of one class, of which 595,100 shares (the "Shares") are
issued and outstanding, all of which are owned of record and beneficially by
the Shareholders. All the Shares are validly issued, fully paid, and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating Seller to issue or to transfer from treasury any additional shares.
6.3 FINANCIAL STATEMENTS. SCHEDULE 6.3-1 to this Agreement set
forth the unaudited balance sheets of Seller as of October 31, 1996, and the
related statement of income and accumulated deficit for the period from
inception until such date, as compiled by Seller, and certified by the
treasurer of Seller. The financial statements in SCHEDULE 6.3-1 are referred
to as the "Financial Statements." The Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently followed by Seller throughout the periods indicated, and fairly
present the financial position of Seller as of the respective dates of the
balance sheets included in the Financial Statements, and the results of their
operations for the respective periods indicated.
6.4 ABSENCE OF SPECIFIED CHANGES. Since the October 31, 1996 date
of the Financial Statements, there has not been any:
(a) transaction by Seller except in the ordinary course of business
as conducted on that date;
(b) capital expenditure by Seller exceeding $10,000.00;
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(c) material adverse change in the financial condition, liabilities,
assets, business or prospects of Seller;
(d) destruction, damage to, or loss of any assets of Seller (whether
or not covered by insurance) that materially and adversely affects the
financial condition, business or prospects of Seller;
(e) labor trouble or other event or condition of any character
materially and adversely affecting the financial condition, business,
assets or prospects of Seller;
(f) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates)
by Seller;
(g) revaluation by Seller of any of its assets;
(h) increase in the salary or other compensation payable or to become
payable by Seller to any of its officers, directors or employees, or the
declaration, payment, or commitment or obligation of any kind for the
payment by Seller of a bonus or other additional salary or compensation to
any such person;
(i) sale or transfer of any asset of Seller, except in the ordinary
course of business;
(j) execution, creation, amendment or termination of any contract,
agreement or license to which Seller is a party, except in the ordinary
course of business;
(k) loan by Seller to any person or entity, or guaranty by Seller of
any loan;
(l) waiver or release of any right or claim of Seller, except in the
ordinary course of business;
(m) mortgage, pledge or other encumbrance of any asset of Seller;
(n) other event or condition of any character that has or might
reasonably have a material and adverse effect on the financial condition,
business, assets or prospects of Seller; or
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(o) agreement by Seller to do any of the things described in the
preceding clauses (a) through (n).
6.5 TAX RETURNS AND AUDITS. Within the times and in the manner
prescribed by law, Seller has filed all domestic and foreign, federal, state
and local tax returns required by law and has paid all taxes, assessments and
penalties due and payable. There are no present disputes as to taxes of any
nature payable by Seller.
6.6 INVENTORIES. Buyer has conducted a physical count of Seller's
inventories and has had full access to review all items included in such
inventory. No items included in the inventories have been pledged as
collateral or are held by the Seller on consignment from others. Buyer is
satisfied with the condition of Seller's inventories and the records with
respect thereto.
6.7 OTHER TANGIBLE PERSONAL PROPERTY. The Equipment described in
Section 1.3 and SCHEDULE 1.3A of this Agreement constitutes all the items of
tangible personal property owned by, in the possession of, or used by Seller
in connection with its business, except the Inventories. The Equipment listed
in SCHEDULE 1.3 plus the Inventories constitute all tangible personal
property necessary for the conduct by Seller of its business as now conducted.
Except as stated in SCHEDULE 1.3A, no Equipment used by Seller in
connection with its business is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement,
or is located other than in the possession of Seller.
6.8 TRADE NAMES, TRADEMARKS AND COPYRIGHTS. Except as set forth in
SCHEDULE 6.8, Seller does not use any trademark, service xxxx, trade name or
copyright in its business, or own any trademarks, trademark registrations or
applications, trade names, service marks, copyrights, or copyright
registrations or applications. No person (other than Seller) owns any
trademark, trademark registration or application, service xxxx, trade name,
copyright, or copyright registration or application, the use of which is
necessary or contemplated in connection with the performance of any contract
to which Seller is a party.
6.9 PATENTS AND PATENT RIGHTS. SCHEDULE 6.9 to this Agreement is a
complete schedule of all patents, inventions, industrial models, processes,
designs, formulas and applications for patents ("Intellectual Properties")
owned by Seller or in which Seller has any rights, licenses or immunities.
The patents and applications for patents listed in SCHEDULE 6.9 are valid and
in full force and effect and are not subject to any taxes, maintenance fees
or actions falling due within 90 days after the Closing
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Date. Except as set forth in SCHEDULES 6.9 or 6.18, there have not been any
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the Intellectual Properties listed in SCHEDULE 6.9.
The Selling Parties have no knowledge or reason to believe that the
manufacture, use or sale of the inventions, models, designs and systems
covered by the Intellectual Properties listed in SCHEDULE 6.9 violate or
infringe on any patent or any proprietary or personal right of any person,
firm or corporation, or have infringed or are now infringing on any
patent or other right belonging to any person, firm or corporation. Except
as set forth in SCHEDULE 6.9, Seller is not a party to any license, agreement
or arrangement, whether as licensee, licensor or otherwise, with respect to
any patent, application for patent, invention, design, model, process, trade
secret or formula. Seller has the right and authority to use such
inventions, trade secrets, processes, models, designs and formulas as are
necessary to enable it to conduct and to continue to conduct all phases of
its business in the manner presently conducted, and such use does not and
will not conflict with, infringe or violate any patent or other rights of
others.
6.10 TRADE SECRETS. SCHEDULE 6.10A to this Agreement is a true
and complete list, without extensive or revealing descriptions, of trade
secrets used by Seller in (or owned by Seller and useful in) the operation of
its business, including all customer lists, processes, know-how and other
technical data. Specific location of each trade secret's documentation,
including its complete description, specifications, charts, procedures and
other material relating to it, is also set forth with it in such SCHEDULE.
Each trade secret's documentation is current, accurate and sufficient in
detail and content to identify and explain it, and to allow its full and
proper use by Buyer without reliance on the special knowledge or memory of
others.
Seller is the sole owner of each of these trade secrets, free and
clear of any liens, encumbrances, restrictions, or legal or equitable claims
of others, except as specifically stated in SCHEDULE 6.10A. Seller has taken
all reasonable security measures to protect the secrecy, confidentiality and
value of these trade secrets; any of its employees and any other persons who,
either alone or in concert with others, developed, invented, discovered,
derived, programmed or designed these secrets, or who have knowledge or
access to information relating to them, have been put on notice and, if
appropriate, have entered into agreements that these secrets are proprietary
to Seller and not to be divulged or misused. Seller represents to the Buyer
that all of Seller's employees named in SCHEDULE 6.10B have executed a
proprietary information and nondisclosure agreement, a copy of the form of
which is attached hereto as SCHEDULE 6.10C.
All these trade secrets are presently valid and protestable, and are
not part of the public knowledge or literature, nor to Seller's knowledge,
have they been used,
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divulged or appropriated for the benefit of any past or present employees or
other persons, or to the detriment of Seller.
6.11 OTHER INTANGIBLE PROPERTY. SCHEDULE 6.11 to this Agreement is
a true and complete list of all intangible assets, other than those
specifically referred to elsewhere in this Agreement, and the location of
evidences of title to such assets.
6.12 TITLE TO ASSETS. Seller has good and marketable title to all
its Assets and interests in Assets, whether personal, tangible, and
intangible, which constitute all the Assets and interests in assets that are
used in the business of Seller. All the Assets are free and clear of
mortgages, liens, pledges, charges, encumbrances, equities, claims,
easements, rights of way, covenants, conditions, or restrictions, except for
(i) those disclosed in Seller's balance sheet included in the Financial
Statements, or in the Schedules to this Agreement; (ii) the lien of current
taxes not yet due and payable; and (iii) possible minor matters that, in the
aggregate, are not substantial in amount and do not materially detract from
or interfere with the present or intended use of any of these assets, nor
materially impair business operations. All tangible personal property of
Seller is in good operating condition and repair, ordinary wear and tear
excepted. Seller is in possession of all premises leased to it from others.
Except as set forth on the appropriate SCHEDULE listing such Assets, neither
any officer, nor any director or employee of Seller, nor any spouse, child or
other relative of any of these persons, owns, or has any interest, directly
or indirectly, in any of the personal property owned by or leased to Seller
or any copyrights, patents, trademarks, trade names or trade secrets licensed
by Seller. Seller does not occupy any real property in violation of any law,
regulation or decree.
6.13 CUSTOMERS AND SALES. SCHEDULE 6.13 to this Agreement is a
correct and current list of all customers of Seller, together with summaries
of the sales made to each customer during the most recent fiscal year.
Except as indicated in SCHEDULE 6.13, Seller has no information and is not
aware of any facts indicating that any of these customers intend to cease
doing business with Seller or materially alter the amount of the business
that they are presently doing with Seller.
6.14 EXISTING EMPLOYMENT CONTRACTS. SCHEDULE 6.14 to this
Agreement is a list of all employment contracts and collective bargaining
agreements, all pension, bonus, profit-sharing, stock option, or other
agreements or arrangements providing for employee remuneration or benefits to
which Seller is a party or by which Seller is bound. All these contracts and
arrangements are in full force and effect, and neither Seller nor any other
party is in default under them. There have been no claims of defaults and,
to the best knowledge of Selling Parties, there are no facts or conditions
which if continued, or on notice, will result in a default under these
contracts or arrangements. There is no
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pending nor, to the best knowledge of Selling Parties, threatened labor
dispute, strike or work stoppage affecting Seller's business.
6.15 INSURANCE POLICIES. SCHEDULE 6.15 to this Agreement is a
description of all insurance policies held by Seller concerning the Assets.
All these policies are in the respective principal amounts set forth in
SCHEDULE 6.15, Seller has maintained and now maintains (i) insurance on all
the Assets of a type customarily insured, covering property damage and loss
of income by fire or other casualty, and (ii) adequate insurance protection
against all liabilities, claims, and risks against which it is customary to
insure.
6.16 OTHER CONTRACTS. Except as set forth in SCHEDULE 4, Seller is
not a party to, nor are the Assets bound by, any distributor's or
manufacturer's representative or agency agreement, any output or requirements
agreement, any agreement not entered into in the ordinary course of business,
any indenture, mortgage, deed of trust, lease or any agreement that is
unusual in nature, duration or amount (including, without limitation, any
agreement requiring the performance by Seller of any obligation for a period
of time extending beyond one year from Closing Date or calling for
consideration of more than $10,000.00, or requiring purchases at prices in
excess of, or sales at prices lower than, prevailing market prices). The
performance by Buyer of any of the agreements described on SCHEDULE 4 will
not result in Buyer becoming bound or liable under any distributor's or
manufacturer's representative or agency agreement. All contracts which will
be assigned to or assumed by Buyer under this Agreement are valid and binding
upon the parties thereto. There is no default or event that with notice or
lapse of time, or both, would constitute a default by any party to any of the
agreements listed in SCHEDULE 4. Seller has not received notice that any
party to any of the agreements listed in SCHEDULE 4 intends to cancel or
terminate any of these agreements or to exercise or not exercise any options
under any of these agreements. Seller is not a party to, nor is Seller or
the Assets bound by, any agreement that is materially adverse to the
business, property, or financial condition of Seller.
6.17 COMPLIANCE WITH LAWS. Seller has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable environmental,
health, building, zoning or other law, ordinance or regulation) affecting its
properties (including the Real Property) or the operation of its business.
6.18 LITIGATION. Except as set forth in SCHEDULE 6.18, there is no
suit, action, arbitration or legal, administrative or other proceeding, or
governmental investigation pending, or to the best knowledge of Selling
Parties, threatened, against or affecting Seller, or any of its business,
assets or financial condition. Selling Parties have
Page 18-54
furnished or made available to Buyer copies of all relevant court papers and
other documents relating to the matters set forth in SCHEDULE 6.18. Seller
is not in default with respect to any order, writ, injunction or decree of
any federal, state, local or foreign court, department, agency or
instrumentality. Except as set forth in SCHEDULE 6.18, Seller is not
presently engaged in any legal action to recover moneys due to it or damages
sustained by it.
6.19 ASSETS SUFFICIENT FOR CONDUCT OF BUSINESS. The Assets
constitute all of the assets required for Buyer to conduct the business of
Seller as it is presently conducted.
6.20 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
entry into this Agreement nor the consummation of the transactions
contemplated hereby will result in or constitute any of the following: (i)
a breach of any term or provision of this Agreement; (ii) a default or an
event that, with notice or lapse of time, or both, would be a default, breach
or violation of the Articles of Incorporation or Bylaws of Seller or any
lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust or other agreement, instrument or
arrangement to which Seller is a party or by which Seller or the Assets are
bound; (iii) an event that would permit any party to terminate any agreement
or to accelerate the maturity of any indebtedness or other obligation of one
or more of Selling Parties; (iv) the creation or imposition of any lien,
charge or encumbrance on any of the Assets; or (v) the violation of any law,
regulation, ordinance, judgment, order or decree applicable to or affecting
Seller or the Assets.
6.21 AUTHORITY AND CONSENTS. Except as set forth in SCHEDULE 6.21,
Seller has the right, power, legal capacity and authority to enter into, and
perform its obligations under this Agreement, and no approvals or consents of
any persons other than Selling Parties are necessary in connection with it.
The execution and delivery of this Agreement by Seller have been duly
authorized by all necessary corporate action of Seller (including any
necessary action by Seller's security holders), and this Agreement
constitutes a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
6.22 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
set forth in SCHEDULE 6.22, neither the Selling Parties, nor any officer,
director or employee of any of the Selling Parties, nor any spouse or child
of any of them has any direct or indirect interest in any competitor,
supplier or customer of Seller or in any person with whom Seller is doing
business.
Page 19-54
6.23 CORPORATE DOCUMENTS. Seller has furnished to Buyer for its
examination (i) copies of the Articles of Incorporation and Bylaws of Seller and
(ii) the minute books of Seller containing all records required to be set forth
of all proceedings, consents, actions and meetings of the shareholders and board
of directors of Seller.
6.24 DOCUMENTS DELIVERED. Each copy or original of any agreement,
contract or other instrument which is identified in any exhibit delivered by
Selling Parties or their counsel to Buyer (or its counsel or representatives),
whether before or after the execution hereof, is in fact what it is purported to
be by Selling Parties and has not been amended, cancelled or otherwise modified.
6.25 FULL DISCLOSURE. None of the representations and warranties
made by Selling Parties or made in any letter, certificate or memorandum
furnished or to be furnished by Selling Parties, or on their behalf, contains or
will contain any untrue statement of a material fact, or omits any material fact
the omission of which would make the statements made misleading. There is no
fact known to Selling Parties which materially adversely affects, or in the
future may (so far as Seller can now reasonably foresee) materially adversely
affect the condition, Assets, liabilities, business operations or prospects of
Seller that has not been set forth herein or heretofore communicated to Buyer in
writing pursuant hereto.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.
Dynatec and Buyer jointly and severally represent and warrant to the Seller
and the Shareholders as follows:
SECTION 7.1 ORGANIZATION AND QUALIFICATION. Each of Dynatec and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. All Subsidiaries of Dynatec are legal entities that are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of Dynatec and Buyer has all
requisite power and authority to own or operate its properties and conduct its
business as it is now being conducted. Dynatec and Buyer are duly qualified and
in good standing as a foreign corporation or entity authorized to do business in
each of the jurisdictions in which the character of the properties owned or held
under lease by it or the nature of the business transacted by it makes such
qualification necessary.
SECTION 7.2 CAPITALIZATION; SUBSIDIARIES. The authorized capital stock
of Dynatec consists of 50,000,000 shares of Dynatec's Common Stock. As of
October 1, 1996, 947,529 shares of Dynatec's Common Stock were issued and
outstanding.
Page 20-54
Immediately prior to the closing, not more than 1,422,000 shares of Dynatec's
Common Stock will be issued and outstanding. Since October 1, 1996, and except
for shares which will be issued pursuant to the 1996 forward split of the Common
Stock of Dynatec, Dynatec has not issued any shares of capital stock, and has
not repurchased or redeemed any shares of its capital stock. Except for shares
reserved under the 1996 incentive stock option plan ("ISOP") of Dynatec, neither
Dynatec nor Buyer has any shares of its capital stock reserved for issuance.
Except as provided in this paragraph or the 2,102 shares which are to be issued
pursuant to a written agreement with Xxxx Xxxxxxxx, no other options, warrants
or other securities convertible into Common Stock are outstanding. All issued
and outstanding shares of capital stock of Dynatec are validly issued, fully
paid, non-assessable and free of preemptive rights.
SECTION 7.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Dynatec and Buyer have
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Boards of
Directors of Dynatec and Buyer, and no other corporate proceedings on the part
of Dynatec and Buyer are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Dynatec and Buyer and, assuming this Agreement
constitutes a valid and binding obligation of the Seller, this Agreement
constitutes a valid and binding agreement of Dynatec and Buyer, enforceable
against Dynatec and Buyer in accordance with its terms.
SECTION 7.4 SEC REPORTS. Since January 1, 1993, to the best of its
knowledge Dynatec has filed all required forms, reports and documents ("Dynatec
SEC Reports") with the Securities and Exchange Commission (the "SEC") required
to be filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which have complied in all material respects with
all applicable requirements of the Securities Act of 1933 (the "Securities Act")
and the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
interpretive releases promulgated thereunder. None of such Dynatec SEC Reports,
including without limitation any financial statements, notes, or schedules
included therein, at the time filed, contained any untrue statement of a
material fact, or omitted, omit or will omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets in or incorporated by reference
into the Dynatec SEC Reports fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the related consolidated statements of operations and retained
earnings and cash flows or equivalent statements in
Page 21-54
the Dynatec SEC Reports (including any related notes and schedules) fairly
presents or will fairly present the results of operations, retained earnings
and cash flows, as the case may be, of the entity or entities to which it
relates for the period set forth therein (subject in the case of unaudited
interim statements, to normal year-end audit adjustments) in each case in
accordance with generally-accepted accounting principles applicable to the
particular entity consistently applied throughout the periods involved,
except as may be noted therein; and independent certified public accountants
for Dynatec have rendered or Will render an unqualified opinion with respect
to each audited financial statement included in the Dynatec SEC Reports. The
consolidated financial statements included in the Dynatec SEC Reports are
hereinafter sometimes collectively referred to as the "Dynatec Financial
Statements."
SECTION 7.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Dynatec or Buyer nor the consummation of the
transactions contemplated hereby nor compliance by Dynatec or Buyer with any of
the provisions hereof will conflict with or result in any breach of any
provision of the Articles of Incorporation or By-laws of Dynatec or Buyer or any
Subsidiary, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except pursuant to the
Securities Act and the Exchange Act, such filings and approvals as may be
required under the "blue sky", takeover or securities laws of various states, or
result in a default (with or without due notice or lapse of time or both) (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, license, agreement or other instrument or obligation to which Dynatec
or Buyer is a party or by which Dynatec or Buyer , any of its Subsidiaries or
any of their respective assets may be bound, result in the creation or
imposition of any lien, charge or other encumbrance on the assets of Dynatec or
Buyer or violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Dynatec or Buyer or any of their respective assets.
SECTION 7.6 LITIGATION, ETC. There is no action, claim, or proceeding
pending or, to the knowledge of Dynatec or Buyer, threatened, to which Dynatec
or Buyer is or would be a party before any court or Governmental Authority
acting in an adjudicative capacity or any arbitrator or arbitration tribunal
with respect to which there is a reasonable likelihood of a determination
having, or which, insofar as reasonably can be foreseen in the future would
have, a material adverse effect on Dynatec or Buyer and since December 31, 1995,
there have been no claims made or actions or proceedings brought against any
officer or director of Dynatec or Buyer arising out of or pertaining to any
action or omission within the scope of his employment or position with Dynatec
or Buyer, which claim, action or proceeding would involve a material adverse
effect on Dynatec or Buyer taken as a whole. All litigation and other
administrative, judicial or quasi-judicial proceedings to which Dynatec or Buyer
is a party or to which it has been
Page 22-54
threatened to the Parent's knowledge to be made a party, are described in the
Disclosure Schedule.
SECTION 7.7 COMPLIANCE WITH LAW AND PERMITS. Dynatec and Buyer have owned
and operated their properties and assets in substantial compliance with the
provisions and requirements of all laws, orders, regulations, rules and
ordinances issued or promulgated by all Governmental Authorities having
jurisdiction with respect thereto. All necessary governmental certificates,
consents, permits, licenses or other authorizations with regard to the ownership
or operation by Dynatec and Buyer of their respective properties and assets have
been obtained and no violation exists in respect of such licenses, permits or
authorizations. None of the documents and materials filed with or furnished to
any Governmental Authority with respect to the properties, assets or businesses
of Dynatec and Buyer contains any untrue statement of a material fact or fails
to state a material fact necessary to make the statements therein not
misleading.
SECTION 7.8 DYNATEC COMMON STOCK. The shares to be issued by Dynatec
pursuant to this Agreement have been duly authorized and, when issued in
accordance with the terms of the this Agreement, will be validly authorized and
issued and fully paid and nonassessable, and no shareholder of Dynatec will have
any preemptive rights or dissenter's right with respect thereto.
ARTICLE 8. SELLING PARTIES' OBLIGATIONS BEFORE CLOSING.
Selling Parties covenant that, except as otherwise agreed in writing
by Buyer, from the date of this Agreement until the Closing:
8.1 BUYER'S ACCESS TO PREMISES AND INFORMATION. Buyer and its
counsel, accountants and other representatives shall be entitled to have full
access during normal business hours to all Seller's properties, books, accounts,
records, contracts and documents of or relating to the assets. Selling Parties
shall furnish or cause to be furnished to Buyer and its representatives all data
and information concerning the business, finances and properties of Seller that
may reasonably be requested.
8.2 CONDUCT OF BUSINESS IN NORMAL COURSE. Seller shall carry on its
business and activities diligently and in substantially the same manner as it
previously has been carried on, and shall not make or institute any unusual or
novel methods of manufacture, purchase, sale, lease, management, accounting or
operation that will vary materially from the methods used by Seller as of the
date of this Agreement. Without limiting the foregoing, Seller shall not enter
into any agreements for the purchase of supplies, raw materials, equipment,
spare parts or the like at prices higher than generally
Page 23-54
prevailing in the industry or enter into any agreements for the sale of goods
at prices lower than generally prevailing in the industry.
8.3 PRESERVATION OF BUSINESS RELATIONSHIPS. Seller shall use its
best efforts, without making any commitments on behalf of Buyer, to preserve its
business organization intact, to keep available to Seller its present employees,
and to preserve its present relationships with suppliers, customers and others
having business relationships with it.
8.4 MAINTENANCE OF INSURANCE. Seller shall continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of its business. At the request of Buyer and at Buyer's sole
expense, the amount of insurance against fire and other casualties which, at the
date of this Agreement, Seller carries on any of the Assets or in respect of its
operations shall be increased by such amount or amounts as Buyer shall specify.
Seller shall cause Buyer to be named as an additional insured on each existing
insurance policy carried by Seller.
8.5 EMPLOYEES AND COMPENSATION. Seller shall not do, or agree to do,
any of the following acts: (i) grant any increase in salaries payable or to
become payable to any officer, employee, sales agent or representative, (ii)
increase benefits payable to any officer, employee, sales agent or
representative under any bonus or pension plan or other contract or commitment
or (iii) modify any collective bargaining agreement to which it is a party or
by which it may be bound. Seller shall permit buyer to contact Seller's
employees at all reasonable times for the purpose of discussing with such
employees prospective employment by Buyer on or after the Closing Date, and
Selling Parties shall use their best efforts to encourage all employees of
Seller to accept any employment offered by Buyer.
8.6 NEW TRANSACTIONS. Seller shall not do, or agree to do without
the prior written consent of the Buyer, any of the following acts:
(a) enter into any contract, commitment or transaction not in the
usual and ordinary course of its business; or
(b) enter into any contract, commitment or transaction in the usual
and ordinary course of business involving an amount exceeding $10,000.00,
individually, or $10,000.00 in the aggregate; or
(c) make any capital expenditures in excess of $5,000.00 for any
single item or $10,000.00 in the aggregate, or enter into any leases of
capital equipment or property under which the annual lease charge is in
excess of $5,000.00; or
Page 24-54
(d) sell or dispose of any capital assets with a net book value in
excess of $5,000.00 individually, or $10,000.00 in the aggregate.
8.7 EXISTING AGREEMENTS. Seller shall not modify, amend, cancel or
terminate any of its existing contracts or agreements, or agree to do any of
those acts.
8.8 CONSENT OF OTHERS. As soon as reasonably practical after the
execution and delivery of this Agreement, and in any event on or before the
Closing Date, Seller shall obtain the written consent of the persons described
in SCHEDULE 6.21 to this Agreement and will furnish to Buyer executed copies of
these consents.
8.9 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Selling Parties
shall use their best efforts to assure that all representations and warranties
of Selling Parties set forth in this Agreement and in any written statements
delivered to Buyer by Selling Parties under this Agreement will also be true and
correct as of the Closing Date as if made on that date and that all conditions
precedent to Closing shall have been met.
8.10 SALES AND USE TAX ON PRIOR SALES. Seller agrees to furnish to
Buyer a clearance certificate from the appropriate agency and any related
certificates that Buyer may reasonably request as evidence that all sales and
use and other tax liabilities of Seller (other than income tax liabilities)
accruing before the Closing Date have been fully satisfied or provided for.
8.11 STATUTORY FILINGS. Seller shall cooperate fully with Buyer in
preparing and filing all information and documents deemed necessary or desirable
by Buyer under any statutes or governmental rules or regulations pertaining to
the transactions contemplated by this Agreement.
8.12 MAINTENANCE OF SUPPLIES. Seller shall maintain normal
quantities of consumable manufacturing supplies, spare parts and repair
materials.
ARTICLE 9. BUYER'S OBLIGATIONS BEFORE CLOSING
Dynatec and Buyer represent that, prior to Closing, they shall do the
following:
9.1 BOARD OF DIRECTORS OF DYNATEC. Make arrangements with Dynatec to
add two additional Board seats to allow Xxxx X. Xxxxx and Xxxxx Xxxxxxx to be
appointed to the Board of Directors of Dynatec. For the next two annual
shareholder meetings after the Closing, Dynatec management agrees to nominate
Xxxx X. Xxxxx and
Page 25-54
Xxxxx Xxxxxxx, or their separately designated nominees to serve on the Board
of Directors of Dynatec.
9.2 BOARD OF DIRECTORS OF BUYER. The Buyer will form a Board of
Directors containing at least five members which will include Xxxx X. Xxxxx,
Xxxxx Xxxxxxx, Xxx Xxxx, Xxxxx Xxxx, Xxxxxxxxx Xxxxxxxxx and others as
determined by these five initial proposed directors.
ARTICLE 10. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer to purchase the Assets under this Agreement
are subject to the satisfaction, at or before the Closing, of all the conditions
set out below in this Article 10. Buyer may waive any or all of these
conditions in accordance with Section 15.2 hereof; provided however, that no
such waiver of a condition shall constitute a waiver by Buyer of any of its
other rights or remedies, at law or in equity, if Selling Parties shall be in
default of any of its representations, warranties or covenants under this
Agreement.
10.1 ACCURACY OF SELLING PARTIES' REPRESENTATIONS AND WARRANTIES.
All representations and warranties by Selling Parties in this Agreement or in
any written statement that shall be delivered to Buyer by Selling Parties under
this Agreement shall be true on and as of the Closing Date as though made at
that time.
10.2 ABSENCE OF LIENS. At or prior to the Closing, Buyer shall have
received UCC search reports dated as of a date not more than five days before
the Closing Date issued by the Texas Secretary of State indicating that there
are no filings under the Uniform Commercial Code on file with such Secretary of
State which name any of the Selling Parties or Kel-Lite Industries, Inc. as
debtor or otherwise indicating any lien on the Assets, except for the liens
otherwise disclosed in the Schedules hereto.
10.3 SELLING PARTIES' PERFORMANCE. Selling Parties shall have
performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
Selling Parties on or before the Closing Date.
10.4 CERTIFICATION BY SELLER. Buyer shall have received a
certificate, dated the Closing Date, signed and verified by Seller's president
or vice president and its treasurer or assistant treasurer, certifying, in such
detail as Buyer and its counsel may reasonably request, that the conditions
specified in Sections 10.1 and 10.3 have been fulfilled.
Page 26-54
10.5 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
10.6 CORPORATE APPROVAL. The execution and delivery of this
Agreement by Seller, and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and Buyer
shall have received copies of all resolutions pertaining to that authorization,
certified by the secretary of Seller.
10.7 CORPORATION TAX CLEARANCE. Buyer shall have received a
Certificate of Good Standing for Seller as of a date not more than 3 days before
the Closing Date and a Letter of Account Status for Seller as of a date not more
than 3 days before the Closing Date certifying that all sales taxes of the
Seller have been paid. Such documents are to be issued by the Texas Comptroller
of Public Accounts.
10.8 CERTIFICATE REGARDING EMPLOYMENT TAX OBLIGATIONS. Buyer shall
have received a Certificate of the President and Secretary of the Seller stating
that, as of the Closing Date, no contributions, interest, or penalties are
unpaid by Seller with regard to any payroll taxes, or unemployment or workers'
compensation contributions for periods prior to October 1, 1996.
10.9 CONSENTS. All necessary agreements and consents of any parties
to the consummation of the transaction contemplated by this Agreement, or
otherwise pertaining to the matters covered by it, shall have been obtained by
Seller and delivered to Buyer.
10.10 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered to Buyer under this
Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
10.11 EMPLOYMENT AGREEMENT. Buyer and Xxxx X. Xxxxx shall have
entered into an employment agreement substantially in the form of SCHEDULE 10.11
hereto.
10.12 PATENT MATTERS. Buyer shall have received a report,
satisfactory to Buyer, from Buyer's patent counsel concerning the matters set
forth in Section 6.10.
10.13 CONDITION OF ASSETS. The Assets shall not have been materially
or adversely affected in any way as a result of any fire, accident, storm, or
other casualty or labor or civil disturbance or act of God or the public enemy.
Page 27-54
10.14 RESALE CERTIFICATE. Buyer shall have received from Seller a
sales tax resale certificate, reasonably satisfactory to Buyer, with respect to
the Assets being purchased by Seller for resale.
10.15 VALUATION OF ASSETS. Buyer shall have accepted the valuation
of the Inventories, and Assets, as set forth on the schedules attached hereto
(as adjusted as of the Closing Date).
ARTICLE 11. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller to sell and transfer the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
following conditions:
11.1 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Buyer contained in this Agreement or in any
written statement delivered by Buyer under this Agreement shall be true on and
as of the Closing as though such representations and warranties were made on and
as of that date.
11.2 BUYER'S PERFORMANCE. Buyer shall have performed and complied
with all covenants and agreements, and satisfied all conditions that it is
required by this Agreement to perform, comply with, or satisfy, before or at the
Closing.
11.3 BUYER'S CORPORATE APPROVAL. Buyer shall have received corporate
authorization and approval for the execution and delivery of this Agreement and
all corporate action necessary or proper to fulfill the obligations of Buyer to
be performed under this Agreement on or before the Closing Date.
ARTICLE 12. EMPLOYEE PLANS
Buyer is not assuming any obligations of Seller relating to any Employee
Plan as defined herein, and Selling Parties represent that the Seller has no
Employee plan in effect or to which the Seller is subject. For purposes of this
Agreement, the term "Employee Plan" includes all pension, retirement,
disability, medical, dental or other health insurance plans, life insurance or
other death benefit plans, profit sharing, deferred compensation, stock option,
bonus or other incentive plans, vacation benefit plans, severance plans, or
other employee benefit plans or arrangements including, without limitation, any
pension plan as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and any welfare plan as defined in Section 3(1)
of ERISA, whether or not funded, covering any employee or to which Seller is a
party or bound or makes or has made any contribution or by which Seller may have
any
Page 28-54
liability to any employee (including any such plan formerly maintained by or
in connection with which Seller may have any liability to any employee, and
any such plan which is a multiemployer plan as defined in Section 3(37) (A)
of ERISA).
ARTICLE 13. SELLING PARTIES' OBLIGATIONS AFTER THE CLOSING
13.1 PRESERVATION OF GOODWILL. Following the Closing, Selling Parties
will restrict their activities so that Buyer's reasonable expectations with
respect to the goodwill, business reputation, employee relations and
prospects connected with the Assets will not be materially impaired. In
furtherance, but not in limitation of, this general obligation, Selling
Parties agree that, for a period of the longer of (a) three (3) years
following the Closing Date; (b) as long as any of the Warrants referred to in
paragraph 2.1 are outstanding; or (c) as long as Buyer or its heirs, assigns
or successors in interest carry on a like business in the countries or areas
specified:
(a) Selling Parties will not compete with the Buyer or engage in any
activity which is substantially the same as, or represents an outgrowth of, any
business or activity presently conducted by Seller if such business or activity
extends to the United States and/or any other country in which Seller has
heretofore engaged in business or otherwise established its goodwill, business
reputation, or any customer relations. For the purposes of this Agreement, the
term "compete" shall mean (i) calling on, soliciting or taking away, as a client
or customer, or attempting to call on, solicit or take away as a client or
customer any individual, partnership, corporation or association that was a
client or customer of the Seller; or (ii) entering into or attempting to enter
into any business or substantially similar business to or competing in any way
with the business of the Buyer, either alone or with any individual,
partnership, corporation or association; or (iii) acting as an agent,
representative, consultant, officer, director, independent contractor, or
employee of an entity or enterprise which is competing with the business of the
Buyer; or (iv) participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, creditor or stockholder.
The parties intend that the covenant contained in the preceding
portion of this Section shall be construed as a series of separate covenants,
one for each state of the United States, Provinces of Canada, or any countries
of the world. Each separate covenant shall be deemed identical in terms to the
covenant contained in this Section. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants deemed included in this
Section, then this unenforceable covenant shall be deemed eliminated from these
provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
Page 29-54
(b) Selling Parties will not disclose to any person or use for their
own benefit any price lists, pricing data, supplier lists, or similar matters
possessed by them relating to the Assets or the business transferred to Buyer
unless they first clearly demonstrate to Buyer that such matters are at, the
time of the proposed disclosure or use, of common knowledge within the trade.
13.2 CHANGE OF NAME. Selling Parties agree that after the Closing
Date they shall not use or employ in any manner directly or indirectly the name
"Nordic Lites," or any variation thereof.
13.3 SELLING PARTIES' INDEMNITIES. Selling Parties shall indemnify,
defend and hold harmless Buyer, Dynatec and their officers, directors, and
agents against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that Buyer,
Dynatec or their officers, directors, or agents shall incur or suffer, which
arise, result from or relate to any breach of, or failure by Selling Parties to
perform, any of their representations, warranties, covenants or agreements in
this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or to be furnished by Selling Parties under this Agreement; or which
arise, result from or relate to any claim of KLS Enviro Resources, Inc. (KLS) or
its successors, officers, directors or shareholders to any of the Assets or with
regard to the Stock Purchase Agreement, the Royalty Agreement or any other
agreement between any of the Selling Parties and KLS. Notwithstanding any other
provision of this Agreement, Selling Parties shall not be liable to Buyer,
Dynatec or their officers, directors, or agents on any warranty, representation
or covenant made by Selling Parties in this Agreement, regarding any single
claim, loss, expense, obligation or other liability that does not exceed $5,000;
provided, however, that when the aggregate amount of all such claims, losses,
expenses, obligations and liabilities not exceeding $5,000 each reaches $10,000,
Selling Parties shall thereafter be liable in full for all such breaches and
indemnities and regarding all those claims, losses, expenses, obligations, and
liabilities.
13.4 ACCESS TO RECORDS. From and after the Closing, Selling Parties
shall allow Buyer, and its counsel, accountants and other representatives, such
access to records which after the Closing are in the custody or control of
Selling Parties as Buyer reasonably requires in order to comply with its
obligations under the law or under contracts assumed by Buyer pursuant to this
Agreement.
13.5 NONSOLICITATION OF EMPLOYEES. None of the Selling Parties
shall, prior to the fifth anniversary of the Closing solicit any employee of
Buyer to leave such employment if such employee was at any time between the date
hereof and the Closing an employee of Seller.
Page 30-54
ARTICLE 14. COSTS
14.1 FINDER'S OR BROKER'S FEES. Each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of
the transactions contemplated by this Agreement, and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
14.2 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
ARTICLE 15 SECURITIES ASPECTS OF AGREEMENT
15.1 All parties to this Agreement mutually understand, agree and
covenant that any referenced sale or other disposition of any security under
this Agreement shall be controlled and governed by this section. Specifically
should there arise any conflict of application or interpretation under this
section and any other provision or section of this Agreement, this section shall
be given primary definition and control. The term "securities" for the purposes
of this Agreement shall mean and include all shares of Dynatec, and any warrants
to acquire those shares as well as any other instrument or obligation customary
or commonly described as a security. Each of the following terms and conditions
of the issuance and distribution of the securities shall be fully applicable
unless otherwise specifically waved or treated in the following paragraphs.
15.2 Each security issued pursuant to the terms of this Agreement
shall be a "restricted" security unless otherwise specifically referenced as
being issued pursuant to a registration or offering.
15.3 Each Selling Party understands and agrees that a restricted
security for the purposes of this Agreement is one which is issued without
meeting registration requirements under both federal and state law within the
United States. Each party to this Agreement further agrees and acknowledges
that the nature of restricted security is that it is not freely tradeable. That
is, the holder of such security can not immediately market or further distribute
such security in the open market, or through private transactions without the
express written consent of the issuer, primarily Dynatec under the terms of this
Agreement.
15.4 Each Selling Party fully acknowledges and understands that the
resale of a restricted security will normally require substantial holding
periods unless
Page 31-54
subsequently subject to an intervening registration under applicable federal
and state securities laws. Each Selling Party acquiring restricted stock
under this Agreement further acknowledges and agrees that the principal,
though not exclusive, means by which restricted securities are resold under
United States law and conforming state laws and regulations is Securities and
Exchange Commission ("SEC") Rule 144, which essentially requires a holding
period of two years before the stock can be resold or any interest therein
further sold or assigned. In general terms, Rule 144 would require that
there be current public information about the Company before the provisions
of the Rule could be relied upon for subsequent resales, that the
aforementioned holding period had been met, that the sales occurred through
independent arms-length and unsolicited brokerage transactions, that certain
volume limitations on the number of shares sold in each three month period be
observed, and that a report of sales will be filed with the SEC. Each
Selling Party understands that the foregoing constitutes only a general
description of Rule 144 and that such person is or has the means to become
familiar with all of the specific provisions and terms of Rule 144 through
his independent legal advisors. Each of the Selling Parties further
acknowledges and agrees that while Rule 144 is not exclusive, that it is
anticipated and intended that it would be the primary means by which
securities acquired under this Agreement could be resold absent the specific
registration provisions of this Agreement.
15.5 Each Selling Party further acknowledges and agrees that, except
as specifically provided by the terms of this Agreement, none of the corporate
parties will have any obligation to register securities issued, and have no
present intention to register such securities other than is specifically
provided for by this Agreement. Each person under this Agreement acquiring
securities further understands and agrees that individual registration of
securities, absents registration by the issuer, is usually not practical and
should not be relied upon as a means for resales or other distributions of
securities acquired under this Agreement.
15.6 Any entity acquiring securities pursuant to this Agreement with
the intent to divide such securities among its principal shareholders as part of
the acquisition process, will be responsible for obtaining the knowledgeable
consent and agreement of such actual shareholder to the terms of this Agreement,
specifically referencing this paragraph.
15.7 Each Selling Party fully understands and agrees that should such
person be deemed to be in a "control" position as to Dynatec incident to the
completion of this Agreement, that such person must comply with the volume
limitations of Rule 144 to complete sales of his or her securities acquired,
except for securities which have been otherwise registered pursuant to this
Agreement. A control
Page 32-54
person has been defined by the SEC, and by most states securities regulatory
agencies, as a person who has the capacity to exercise control over the
issuing company. While no precise mathematical formulation of a control
person is applicable to all situations, the following are generally presumed
to be control people:
(i) a person holding 10% or more of the shares of the issuing
company;
(ii) any principal officer or any director of the issuing
company.
ARTICLE 16. FORM OF AGREEMENT
16.1 HEADINGS. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
16.2 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall
be binding unless executed in writing by the party making the waiver.
16.3 COUNTERPARTS. This Agreement may be executed simultaneously 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.
ARTICLE 17. PARTIES
17.1 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provisions give any third persons
any right of subrogation or action over against any party to this Agreement.
Page 33-54
17.2 ASSIGNMENT. This Agreement shall be binding on and shall inure to
the benefit of the parties to it and their respective heirs, legal
representatives, successors and assigns.
ARTICLE 18. REMEDIES
18.1 RECOVERY OF LITIGATION COSTS. If any legal action or any arbitration
or other proceeding so brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
18.2 CONDITIONS PERMITTING TERMINATION. Subject to the provisions of
Article 3 relating to the postponement of the Closing Date, either party may on
or prior to the Closing Date terminate this Agreement by written notice to the
other, without liability to the other, if any bona fide action or proceeding
shall be pending against either party on the Closing Date that could result in
an unfavorable judgment, decree or order that would prevent or make unlawful the
carrying out of this Agreement.
18.3 DEFAULTS PERMITTING TERMINATION. If either Buyer or Seller
materially defaults in the due and timely performance of any of its warranties,
covenants, or agreements under this Agreement, the non-defaulting party or
parties may on the Closing Date give notice of termination of this Agreement, in
the manner provided in Article 20. The notice shall specify with particularity
the default or defaults on which the notice is based. The termination shall be
effective five days after the Closing Date, unless the specified default or
defaults have been cured on or before this effective date for termination.
ARTICLE 19. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations, warranties, covenants and agreements of the parties
contained in this Agreement, or in any instrument, certificate, opinion or other
writing provided for in it, shall survive the Closing.
ARTICLE 20. NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the third day
Page 34-54
after mailing if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, and properly addressed
as follows:
Seller: Nordic-Lites, Inc.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
with copy to: Xxxxxx X. Xxxxx
2200 One Galleria Tower
00000 Xxxx Xxxx, X.X. 00
Xxxxxx, Xxxxx 00000-0000
Shareholders: Nordic Industries, Inc.
c/o Nordic-Lites, Inc.
Attn: Xxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
with copy to: Xxxxxx X. Xxxxx
2200 One Galleria Tower
00000 Xxxx Xxxx, X.X. 00
Xxxxxx, Xxxxx 00000-0000
Cornerstone Capital Group, LLC
000 Xxxxxx Xxxxxxxx
0 Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
with copy to: Xxxxx X. Xxxxxx
LEBOEUF, LAMB, GREEN & XXXXXX
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Buyer: Nordic Technologies, Inc.
0000 Xxxx Xxxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
with copy to: Xxxxx X. Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Page 35-54
Dynatec: Dynatec International, Inc.
0000 Xxxx Xxxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
with copy to: Xxxxx X. Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Any party may change its address for purposes of this Article by giving the
other parties written notice of the new address in the manner set forth above.
ARTICLE 21. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed by
the laws of the State of Utah.
ARTICLE 22. MISCELLANEOUS
22.1 ANNOUNCEMENTS. None of Selling Parties will make any
announcements to the public or to employees of Seller concerning this Agreement
or the transactions contemplated hereby without the prior approval of Buyer,
which will not be unreasonably withheld. Notwithstanding any failure of Buyer
to approve it, Selling Parties may make an announcement of substantially the
same information as theretofore announced to the public by Buyer or any
announcement required by applicable law, but Selling Parties shall in either
case notify Buyer of the contents thereof reasonably promptly in advance of its
issuance.
22.2 REFERENCES. Unless otherwise specified, references to Sections
or Articles are to Sections or Articles in this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it as of the day and year first above written.
DYNATEC INTERNATIONAL, INC.,
a Utah corporation
By
---------------------------------
Its:
Page 36-54
BUYER
NORDIC TECHNOLOGIES, INC.,
a Utah corporation
By
---------------------------------
Its:
SELLER
NORDIC-LITES, INC.,
a Texas corporation
By
---------------------------------
Its:
SHAREHOLDERS
NORDIC INDUSTRIES, INC.
By
---------------------------------
Its:
CORNERSTONE VENTURE CAPITAL, L.C.
By
---------------------------------
Its:
Page 37-54
