Citadel Environmental Group, Inc., form 10K-SB, Exhibit 10.1
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement is entered into as of March 26,
1997, by and among Citadel Environmental Group, Inc., a Colorado
corporation ("Company"), Applied Medical Recovery, Inc., an Arizona
corporation ("AMR") and each of the persons whose names and
addresses are set forth on Exhibit A attached hereto and
incorporated herein by this reference (the "AMR Shareholders").
R E C I T A L S
WHEREAS, the AMR Shareholders own all of the issued and
outstanding capital stock of "AMR"; and
WHEREAS, AMR owns 99.9% of Applied Medical Technologies, LLC
and Arizona Medical Recovery and Reprocessing, LLC, each of which
is an Arizona Limited Liability Company ("AMT" and "AMRR,"
respectively); and
WHEREAS, the AMR Shareholders have entered into that certain
agreement and plan of exchange dated as of the 26 day of March,
1997, exchanging in the aggregate all of their respective ownership
interests in AMT and AMRR for 200 shares of AMR Common Stock,
constituting all of the issued and outstanding shares of AMR; and
WHEREAS, the Company is a "public company" whose shares trade
on the Nasdaq Bulletin Board; and
WHEREAS, the Company has been a holding company which seeks to
acquire small to medium sized environmental businesses; and
WHEREAS, the Company as of September 30, 1996 has elected to
liquidate its interests in various partially owned subsidiaries
engaged in handling, treatment and disposal of various categories
of solid and hazardous waste; and
WHEREAS, the Company currently seeks to acquire at least a 51%
ownership interest of AMR from the AMR Shareholders in exchange for
1,530,000 shares of the Company's restricted common stock; and
WHEREAS, the AMR Shareholders desire to exchange, in the
aggregate, 102 shares of common stock of AMR, constituting 51% of
all of the issued and outstanding shares of capital stock of AMR in
exchange for 1,530,000 shares of newly issued restricted common
stock of the Company, upon the terms set forth and described
herein.
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A G R E E M E N T
NOW THEREFORE, in consideration of the premises, the mutual
promises, agreements, provisions and covenants herein contained,
the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS/EXCHANGE/CLOSING
1.1Definitions.
For all purposes of this Agreement, except as otherwise
expressly provided unless the context otherwise requires,
(a)the terms defined in this Article 1 have the meaning
assigned to them in this Article 1 and include the plural as well
as the singular,
(b)all accounting terms not otherwise defined herein
have the meanings assigned under generally accepted accounting
principals,
(c)all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of the body of this
Agreement,
(d)pronouns of either gender or neuter shall include,
as appropriate, the other pronoun forms, and
(e)the words, "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions
shall apply.
"Action" means any action, complaint, petition, investigation,
suit or other proceeding, whether civil or criminal, in law or in
equity, or before any arbitrator or Governmental Entity.
"Agreement" means this Agreement by and among Company, and the
AMR Shareholders as amended or supplemented together with all
Exhibits and Schedules attached or incorporated by reference.
"Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the
foregoing, required to be obtained from, or any notice, statement
or other communication required to be filed with or delivered to,
any Governmental Entity or any other Person.
"Associate" of a Person means
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(f)a corporation or organization of which such person
is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% of more of any class of equity securities;
(g)any trust or other estate in which such person has
a substantial beneficial interest or as to which such person serves
as trustee or in a similar capacity; and
(h)any relative or spouse of such person or any
relative of such spouse.
"Auditors" means Xxxxxxx & Company, independent public
accountants to the Company, and (to be named by the Board of
Directors), independent public accountants to AMR.
"AMR Shares" means 51% all of the issued and outstanding
shares of AMR common stock.
"Business" means the business of AMR and its subsidiaries as
currently conducted, and shall be deemed to include any of the
following incidents of such business: income, cash flow,
operations, condition (financial or other), assets, properties,
anticipated revenues, prospects, liabilities and personnel.
"Closing" means the consummation of the purchase and sale of
the AMR Shares under this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or
understanding, whether or not in writing.
"Disclosure Schedule" means the Disclosure Schedule dated the
date hereof and delivered by the AMR Shareholders and the Company.
The Sections of the Disclosure Schedule shall be numbered to
correspond to the applicable Section of this Agreement and,
together with all matters under such heading, shall be deemed to
qualify only that section.
"Employee Plan" means any employee benefit plan, collective
bargaining, employment or severance agreement or other similar
arrangement to which AMR is a party or by which it is bound,
legally or otherwise.
"Encumbrance" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of
others, or restriction (whether on voting, sale, transfer,
disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise, except for any
restrictions on transfer generally arising under any applicable
federal or state securities law.
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"Equity Securities" means any capital stock or other equity
interest or any securities convertible into or exchangeable for
capital stock or any other rights, warrants or options to acquire
any of the foregoing securities.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time,
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related regulations
and published interpretations.
"Hazardous Substance" means (but shall not be limited to)
substances that are defined or listed in, or otherwise classified
pursuant to, any applicable Laws as "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances," or
any other formulation intended to define, list or classify
substances by reason of deleterious properties such as
ignitibility, corrosivity, reactivity, radioactivity,
carcinogenicity, reproduction toxicity or "EP toxicity," and
petroleum and drilling fluids, produced waters and other wastes
associated with the exploration, development, or production of
crude oil, natural gas or geothermal energy.
"Indemnifiable Claim" means any Loss for or against which any
party is entitled to indemnification under this Agreement;
"Indemnified Party" means the party entitled to indemnity
hereunder; and "Indemnifying Party" means the party obligated to
provide indemnification hereunder.
"Intangible Property" means any trade secret, secret process
or other confidential information or know-how and any and all
Marks.
"IRS" means the Internal Revenue Service or any successor
entity.
"Law" means any constitutional provision, statute or other
law, rule, regulation, or interpretation of any Governmental Entity
and any Order.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation,
penalty or settlement of any kind or nature, whether foreseeable or
unforeseeable, including but not limited to, interest or other
carrying costs, penalties, legal, accounting and other professional
fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement,
that may be imposed on or otherwise incurred or suffered by the
specified person.
"Xxxx" means any brand name, copyright, patent, service xxxx,
trademark, tradename, and all registrations or applications for
registration of any of the foregoing.
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"Material Adverse Effect" means any change in or effect on AMR
or the Company that is materially adverse to the Business.
"Material Contract" means those Contracts listed on the
Disclosure Schedule as Material Contracts.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be
issued by any Governmental Entity.
"Person" means an association, a corporation, an individual,
a partnership, a trust or other entity or organization, including
a Governmental Entity.
"Subsidiary" means any Person in which AMR has a direct or
indirect equity or ownership interest in excess of 5%.
"Tax" means any foreign, federal, state, county or local
income, sales and use, excise, franchise, real and personal
property, transfer, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll, severance
or withholding tax or charge imposed by any Governmental Entity,
any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any Loss in connection with the
determination, settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information
required to be supplied to a Governmental Entity with respect to
Taxes.
1.2Transfer of AMR Shares by AMR Shareholders.
Subject to the terms and conditions of this Agreement,
the AMR Shareholders agree to transfer and convey the AMR Shares
and deliver the certificates evidencing the AMR Shares to Company
at the Closing. The certificates will be properly endorsed for
transfer to or accompanied by a duly executed stock power in favor
of the Company or its nominee as Company may have directed prior to
the Closing Date and otherwise in a form acceptable for transfer on
the books of AMR.
1.3Purchase of the AMR Shares by Company.
Subject to the terms and conditions of this Agreement,
Company agrees to acquire the AMR Shares from the AMR Shareholders
and to issue, convey, transfer and deliver 1,530,000 shares of
common stock of the Company (the "Restricted Shares") to the AMR
Shareholders as set forth on Exhibit A attached hereto.
1.4The Closing.
The Closing will take place at the offices of
AMR , at 10:00 a.m. on March 26, 1997 or on
such other date, not later than March __, 1997, which the Company
and a majority in interest of the AMR Shareholders may mutually
choose, provided that the Closing is not dependent on the Company's
receiving any minimum number of AMR Shares.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE AMR SHAREHOLDERS
Except as otherwise indicated on the Disclosure Schedule, AMR
and the AMR Shareholders represent, warrant and agree to the best
of their knowledge and except as disclosed in writing to Company,
as follows:
2.1Organization and Related Matters.
AMR is a corporation duly organized, validly existing and
in good standing under the laws of Arizona. AMR has two
Subsidiaries, Applied Medical Recovery and Reprocessing, LLC
("AMRR") and Applied Medical Technologies, LLC ("AMT"), each of
which is a limited liability company formed under the laws of
Arizona. AMR, AMRR and AMT are each in good standing under the
laws of Arizona and have all necessary corporate or company power
and authority to own their properties and assets and to carry on
their respective businesses as now conducted. There are no
jurisdictions outside of Arizona and Utah where the character or
the location of the assets owned or leased by AMR, AMRR and AMT (or
any of them) or the nature of the Business requires licensing or
qualification. True, correct and complete copies of the charter
documents of AMR as in effect on the date hereof have been
delivered to Company.
2.2AMR Shares.
The AMR Shareholders own all of their shares of capital
stock of AMR beneficially and of record, free and clear of any and
all covenants, conditions, rights or other Encumbrances. At the
Closing, the Company will acquire good and marketable title to and
complete ownership of the AMR Shares, free of any and all
covenants, conditions, or other Encumbrances. The authorized
capital stock of AMR consists of 40,000,000 shares, of which
20,000,000 are shares of common stock and 20,000,000 are shares of
preferred stock, of which 200 shares of common stock are issued and
outstanding. There are no outstanding contracts or other rights to
subscribe for or purchase, or Contracts or other obligations to
issue or grant any rights to acquire, any Equity Securities of AMR,
or to restructure or recapitalize AMR. There are no outstanding
Contracts of any of the AMR Shareholders or AMR to repurchase,
redeem or otherwise acquire any Equity Securities of AMR. All
shares of capital stock of AMR are duly authorized, validly issued
and outstanding and are fully paid and nonassessable and were
issued in conformity with applicable laws. There are no preemptive
rights in respect of any Equity securities of AMR. Any Equity
Securities of AMR which were issued and reacquired by AMR were so
reacquired (and, if reissued, so reissued) in compliance with all
applicable Laws, and AMR has no outstanding obligation or liability
with respect thereto.
2.3Financial Statements; Changes; Contingencies.
(a)Unaudited Financial Statements. AMR has delivered
to the Company pro forma consolidated balance sheets for AMR at
December 31, 1996 and the related statements of loss and deficit
and the monthly delinquency reports, if any, for the months then
ended. All such interim financial statements have been prepared in
accordance with GAAP consistently applied during the periods
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covered (except as disclosed therein), the statements of loss and
deficit present fairly the results of operations of AMR and its
Subsidiaries for the respective periods covered, and the balance
sheets present fairly the financial condition of AMR and its
Subsidiaries as of their respective dates, except that such
financial statements may omit footnote disclosures required by GAAP
to the extent the content thereof would not materially differ in
nature or amount from those disclosures reported in the most recent
audited period, and year-end adjustments to the extent not
material. Notwithstanding the foregoing, all such interim
financial statements reflect all adjustments (which consist only of
normal recurring adjustments not material in amount) necessary for
a fair presentation.
(b)No Material Adverse Changes. Since December 31,
1996, whether or not in the ordinary course of business, there has
not been, occurred or arisen:
(i)any change in or event affecting AMR and any of
its Subsidiaries, the Business or the AMR Shares that has
had or may reasonably be expected to have a Material
Adverse Effect.
(ii)any agreement (other than a Material Contract
listed on the Disclosure Schedule), condition, action or
omission which would be proscribed by (or require consent
under) Section 4.3 had it existed, occurred or arisen
after the date of this Agreement,
(iii)any strike or other labor dispute, or
(iv)any casualty, loss, damage or destruction
whether or not covered by insurance) or any material
property of AMR or the Subsidiaries.
(c)No Other Liabilities or Contingencies. To the best
knowledge of the AMR Shareholders, AMR does not have any
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion
or not, that, in accordance with GAAP applied on a consistent
basis, should have been but were not reflected or disclosed in the
financial statements (including the notes thereto) referred to in
subsections (a) and (b) above, except liabilities which were
incurred after March ___, 1997, in the ordinary course of business
or disclosed in the Disclosure Schedule.
2.4Tax and Other Returns and Reports.
AMR has filed and has caused its Subsidiaries to timely
file or will, on or before the Closing Date, file all Tax Returns
required to be filed by it or them and has paid all Taxes due for
all periods ending on or before December 31, 1996, which Taxes are
required to be paid by it on or before the Closing Date. Adequate
provision has been made in the books and records of AMR and in the
financial statements referred to in Section 2.3 above or delivered
to the Company, for all Taxes relating to operations through, or
property owned on or before, the date of the most recent of such
financial statements. No liability for Taxes has arisen since such
date other than in the ordinary course of AMR's business. All
required Tax Returns including amendments to date, have been
prepared in good faith without negligence or willful
misrepresentation and are complete and accurate in all material
respects. No Governmental Entity has, during the past three years,
examined or is in the process of examining any Tax Returns of AMR
and its Subsidiaries. No Governmental Entity has proposed
(tentatively or definitively), asserted or assessed or, to the best
knowledge of the AMR Shareholders, threatened to propose or assert,
any deficiency, assessment or claim for Taxes and there would be no
basis for any such delinquency, assessment or claim.
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2.5Material Contracts.
AMR has duly performed all its obligations and each
Subsidiary has duly performed its obligations to the extent that
such obligations to perform have accrued under any Contract; and no
material breach or default, alleged material breach or default, or
event which would (with the passage of time, notice or both)
constitute a material breach or default thereunder by AMR, or any
of its Subsidiaries, or, to the best knowledge of the AMR
Shareholders, by any other party or obligor with respect thereto,
has occurred or as a result of this Agreement or performance will
occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any Person a right to)
terminate or modify any rights of, or accelerate or augment any
obligation of, AMR or any of its Subsidiaries under any Material
Contract.
2.6Tangible Property.
(a)Neither AMR nor any of its Subsidiaries owns any
real property except for that leased property or properties which
are identified on the Disclosure Schedule. There is no pending or
threatened action that would materially interfere with the quiet
enjoyment of any such leasehold by AMR or any of the Subsidiaries.
(b)AMR and its Subsidiaries each owns or leases all
tangible personal property that is material to the Business free of
Encumbrances except for Encumbrances consisting of liens for Taxes
not yet due.
(c)All material leasehold properties held by AMR, or
its Subsidiaries, as lessee are held under valid, binding and
enforceable leases, subject only to such exceptions as are not,
individually or in the aggregate, material to the Business. All
material tangible properties of AMR or any of the Subsidiaries are
in a good state of maintenance and repair (except for ordinary wear
and tear) and are adequate for the Business.
2.7Intangible Property.
Each of AMR or any of the Subsidiaries has no Intangible
Property, required for use in connection with the Business.
2.8Authorization; No Conflicts.
The execution, delivery and performance of this Agreement
and or related agreements by AMR has been duly and validly
authorized by the Board of Directors of AMR and by all other
necessary corporate action on the part of AMR. The Shareholders of
AMR have the full capacity, right, power and authority to enter
into this Agreement and any related agreements to which they are
parties. Each AMR Shareholder has the full capacity, right, power
and authority to transfer, convey and sell the AMR Shares owned by
8
such Shareholder to the Company at the Closing. The execution,
delivery and performance of this Agreement by the Shareholders of
AMR and the execution, delivery and performance of any related
agreements or contemplated transactions by the Shareholders of AMR
will not violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or
otherwise) under, the charter documents or by-laws of AMR or any
Material Contract of AMR, result in the imposition of any
Encumbrance against any asset or properties of AMR, or violate any
Law. No Permits and Approvals are required to be obtained by the
Shareholders of AMR, or for AMR Shares to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Shareholders of AMR and the
performance of this Agreement and any related or contemplated
transactions by the Shareholders of AMR or the Company will not
require filing or registration with, or the issuance of any Permit
by, any other third party or Governmental Entity. The "ultimate
parent entity" of AMR and all entities which such entity controls
directly or indirectly did not have annual net sales (as stated on
the last regularly prepared annual income statement or statements)
or total assets (as stated on the last regularly prepared balance
sheet or sheets) of $100,000,000 or more, and, to the best
knowledge of the AMR Shareholders, the consummation of the
transactions contemplated by this Agreement would not require any
filings under the Xxxx-Xxxxx-Xxxxxx Act.
2.9Legal Proceedings.
There is no Order or Action pending, or, to the best
knowledge of the AMR Shareholders, threatened, against or affecting
AMR or any of its properties or assets that individually or when
aggregated with one or more other Orders or Actions has or might
reasonably be expected to have a Material Adverse Effect, or
adversely affect AMR's ability to perform this Agreement or any
aspect of the transactions contemplated by this Agreement. There
is no matter as to which the AMR Shareholders or AMR has received
any notice, claim or assertion, or, to the best knowledge of the
AMR Shareholders, which otherwise has been threatened against or
affecting any director, officer, employee, agent or representative
of AMR or any other Person, in connection with which any such
Person has or may reasonably be expected to have any right to be
indemnified by AMR.
2.10Minute Books.
The minute books of AMR accurately reflect all actions
and proceedings taken to date by its shareholders, board of
directors and committees, and such minute books contain true and
complete copies of the charter documents of AMR and all related
amendments. The stock record books of AMR reflect accurately all
transactions in its capital stock of all classes.
2.11Accounting Records; Internal Controls.
(a)Accounting Records. AMR and Subsidiaries have
records that accurately and validly reflect their transactions, and
accounting controls sufficient to insure that such transactions are
(i) executed in accordance with management's general or specific
authorization and (ii) recorded so as to maintain accountability
for assets.
(b)Data Processing; Access. Such records, to the
extent they contain important information that is not easily and
readily available elsewhere, have been duplicated, and such
duplicates are stored safely and securely pursuant to procedures
and techniques utilized by companies of comparable size in similar
lines of business.
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2.12Insurance.
AMR and Subsidiaries do not have policies of insurance
against any of the risks associated with its or their Business
except as set forth on the Disclosure Schedule.
2.13Permits.
AMR and its Subsidiaries each holds all material Permits
that are required by any Governmental Entity to permit them or
either of them to conduct its business as now conducted, and all
such permits are valid and in full force and effect and will remain
so upon consummation of the transactions contemplated by this
Agreement. To the best knowledge of the AMR Shareholders, no
suspension, cancellation or termination of any of such Permits is
threatened or imminent.
2.14Compliance with Law.
(a)Each of AMR, AMRR, AMT and any other Subsidiary is
organized and has conducted its businesses in accordance with
applicable Laws in all material respects, and the forms, procedures
and practices of AMR and its Subsidiaries are in compliance with
all such Laws, to the extent applicable, in all material respects.
(b)The use and operation of the assets of AMR and its
Subsidiaries are in compliance in all material respects with all
applicable Laws and there is no material violation of any of such
Laws.
2.15Employee Benefits.
Except as may be set forth in an Employment Agreement
between Xxxxxxx Xxxx and AMR and except as set forth on the
Disclosure Schedule, there are no employee benefit plans or other
employee benefits accruing for the benefit of any employee of AMR
and its Subsidiaries.
2.16Certain Interests; Dividends.
No AMR Shareholder and no officer or director of AMR and
its Subsidiaries, and no Associate of any such individual, has any
material interest in any property used in or pertaining to the
Business; no such Person is indebted or otherwise obligated to AMR;
and AMR is not indebted or otherwise obligated to any such Person,
except for amounts due under normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary
business expenses not unusual in amount or significance. The
consummation of the transactions contemplated by this Agreement
will not (either alone, or upon the occurrence of any act or event,
or with the lapse of time, or both) result in any benefit or
payment (severance or other) arising or becoming due from AMR or
the successor or assign thereof or from any Subsidiary to any
Person. Except as expressly permitted by this Agreement, there has
been no dividend or other distribution of assets or securities
whether consisting of money, property or any other thing of value,
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declared, issued or paid to or for the benefit of the AMR
Shareholders subsequent to the date of the most recent financial
statements described in Section 2.3. Since December 31, 1996,
neither AMR nor any Subsidiary has paid or accrued any special
bonuses to any officer, director or employee.
2.17No Brokers, Finders or Financial Advisors.
No agent, broker, finder or investment or commercial
banker, or other Person or firm engaged by or acting on behalf of
the AMR Shareholders or AMR or any of their respective Affiliates
in connection with the negotiation, execution or performance of
this Agreement or the transactions contemplated by this Agreement,
is or will be entitled to any brokerage or finder's or similar fee
or other commission as a result of this Agreement or such
transactions.
2.18Environmental Compliance.
To the best knowledge of the AMR Shareholders, (i) AMR
has not generated, used, transported, treated, stored, released or
disposed of, or has suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous
Substance in violation of any Laws, (ii) there has not been any
generation, use, transportation, treatment, storage, release or
disposal of any Hazardous substance in connection with the conduct
of the Business of AMR or the use of any property or facility of
AMR or to the knowledge of the AMR Shareholders any nearby or
adjacent properties or facilities, which has created or might
reasonably be expected to create any liability under any Laws or
which would require reporting to or notification of any
Governmental Entity, (iii) no asbestos or polychlorinated biphenyl
or underground storage tank is contained in or located at any
facility of AMR, and (iv) any Hazardous Substance handled or dealt
with in any way in connection with the business of AMR, whether
before or during ownership by the AMR Shareholders, has been and is
being handled or dealt with in all respects in compliance with
applicable Laws.
2.19Accuracy of Information.
The statements, representations and warranties contained
in the Disclosure Schedule are true, and all lists contained
therein are complete and correct. None of the information
expressly required by this Agreement to be supplied by or on behalf
of the AMR Shareholders to the Company, or contained in this
Agreement, the Disclosure Schedule or the documents listed in the
Disclosure Schedule, did contain or will contain, at the respective
times such information is or was delivered, any untrue statement of
a material fact, or omitted or will omit to state any 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. If to the knowledge of an AMR
Shareholder any of such information at any time subsequent to
delivery and prior to Closing becomes untrue or misleading, in any
material respect, such AMR Shareholder will promptly notify the
Company in writing of such fact and the reason for such change.
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2.20Investment Representation.
The Restricted Shares are restricted securities within
the meaning of the United States federal securities laws, and each
AMR Shareholder is acquiring the Restricted Shares for such AMR
Shareholder's own account for investment purposes only and not with
a view to or for sale in connection with the distribution thereof.
The certificate or certificates evidencing the Restricted Shares
shall bear a legend substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE OR SECURITIES LAWS AND NEITHER THESE SECURITIES NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH
LAWS WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER, IS AVAILABLE."
2.21Restricted Shares Are Speculative Securities;
Registration Rights.
The Restricted Shares are speculative securities and
involve a high degree of risk including a risk of complete loss of
investment. Upon completion of the share exchanges contemplated by
this Agreement the active business of the Company will be
substantially that of AMR. THE COMPANY HAS NOT REGISTERED OR
QUALIFIED THE RESTRICTED SHARES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR UNDER THE STATE SECURITIES LAWS OF
ARIZONA, CALIFORNIA, COLORADO OR ANY OTHER STATE. The Company will
undertake to file a registration statement under the Act (the
"Registration Statement") covering the Restricted Shares within
four months of Closing and will use its reasonable best efforts to
cause the registration to become effective under the Act. The AMR
Shareholders acknowledge that the Company can give no assurance
that the Securities and Exchange Commission will declare the
Registration Statement to be effective or that the Registration
Statement will remain effective through any period necessary to
sell all or any part of the Restricted Shares. The AMR
Shareholders have made their individual decisions to enter into
this Agreement based on their own examination of the Company or
based on such advice from their own independent advisors as they
deemed appropriate and not based on the recommendations of any
party directly affiliated with the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents, warrants and agrees as follows:
3.1Organization and Related Matters.
The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Colorado. The Company has all necessary corporate power and
authority to carry on its business as now being conducted. The
Company has the necessary corporate power and authority to execute,
deliver and perform this Agreement and any related agreements to
which it is a party.
12
3.2Authorization.
The execution, delivery and performance of this Agreement
and any related agreements, by the Company has been duly and
validly authorized by the Board of Directors of the Company and by
all other necessary corporate action on the part of the Company.
This Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with
its respective terms except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting
creditors' rights generally.
3.3No Conflicts; Possible "Blue Sky" Violations.
The execution, delivery and performance of this Agreement
and any related agreements by the Company will not violate the
provisions of, or constitute a breach or default whether upon lapse
of time and/or the occurrence of any act or event or otherwise
under (a) the charter documents of the Company, (b) any Law to
which the Company is subject or (c) any Contract to which the
Company is a party that is material to the financial condition,
results of operations or conduct of the business of the Company.
The execution and delivery of this Agreement by the Company and the
performance of this Agreement and any related or contemplated
transaction by the Company will not require filing or registration
with, or the issuance of any Permit by, any other third party or
Governmental Entity except that the Company has not sought to
qualify the Restricted Shares under the jurisdiction of any state.
The failure so to qualify the Restricted Shares may constitute a
violation of the "blue sky" or other laws (the "Blue Sky
Violations" and in the singular, a "Blue Sky Violation") of one or
more of the states in which the AMR Shareholders reside. In the
event it is determined that the offer or issuance of the Restricted
Shares by the Company in exchange for the AMR Shares constitute
Blue Sky Violations then the AMR Shareholders or certain of them
may be afforded rights to rescind their exchange of AMR Shares for
Restricted Shares. The "ultimate parent " of the Company and all
entities which such controls directly or indirectly did not have
annual net sales (as stated on the last regularly prepared annual
income statement or statements) or total assets (as stated on the
last regularly prepared balance sheet or sheets) of $10,000,000 or
more, and, to the best knowledge of the Company, the consummation
of the transactions contemplated by this Agreement would not
require any filings under the Xxxx-Xxxxx-Xxxxxx Act.
3.4No Brokers, Finders or Financial Advisors.
No agent, broker, finder or investment or commercial
banker, or other Person or firm engaged by or acting on behalf of
the Company in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by
this Agreement, is or will be entitled to any broker's or finder's
or similar fees or other commissions as a result of this Agreement
or such transactions.
3.5Investment Representation.
The Company is acquiring the AMR Shares from the AMR
Shareholders for the Company's own account, for investment purposes
only and not with a view to or for sale in connection with the
distribution thereof. THE CERTIFICATE OR CERTIFICATES EVIDENCING
THE AMR SHARES WILL CONTAIN A LEGEND OR LEGENDS SUBSTANTIALLY
SIMILAR TO THE LEGEND SET FORTH IN SECTION 2.20.
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3.6Financial Statements; Changes; Contingencies.
(a)Financial Statements. The Company has delivered to
AMR and the AMR Shareholders balance sheets for the Company at
September 30, 1996 and at December 31, 1995, and the related
statements of operations (reflecting zero revenues) for the periods
then ended. All such financial statements have been prepared
largely in conformity with GAAP applied on a consistent basis
(except for changes, if any, disclosed therein). Such statements
of operations present fairly the results of operations and cash
flows of the Company for the respective periods covered, and the
balance sheets present fairly the financial condition of the
Company as of their respective dates. Since September 30, 1996,
there has been no change in any of the significant accounting
policies, practices or procedures of the Company.
(b)No Material Adverse Changes. Since September 30,
1996, whether or not in the ordinary course of business, there has
not been, occurred or arisen:
(i)any change in or event affecting the Company,
that has had or may reasonably be expected to have a
Material Adverse Effect,
(ii)any agreement (other than a Material Contract
listed on the Disclosure Schedule),
(iii)any strike or other labor dispute, or
(iv)any casualty, loss, damage or destruction
whether or not covered by insurance) or any material
property of the Company.
(c)No Other Liabilities or Contingencies. To the best
of the Company's knowledge, the Company does not have any
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion
or not, that, in accordance with GAAP applied on a consistent
basis, should have been but were not reflected or disclosed in the
financial statements (including the notes thereto) referred to in
subsections (a) and (b) above, except liabilities which were
incurred after September 30, 1996, in the ordinary course of
business or disclosed in the Disclosure Schedule.
3.7Tax and Other Returns and Reports.
The Company has timely filed or will file, on or before
the Closing Date, all Tax Returns required to be filed by it on or
before the Closing Date and has paid all Taxes due for all periods
ending on or before December 31, 1996, which Taxes are required to
be paid by it on or before the Closing Date. Adequate provision
has been made in the books and records of the Company and in the
financial statements referred to in Section 3.7 above or delivered
to the AMR Shareholders, for all Taxes relating to operations
through, or property owned on or before, the date of the most
recent of such financial statements. No liability for Taxes has
arisen since such date other than in the ordinary course of the
Company's business. All required Tax Returns including amendments
to date, have been prepared in good faith without negligence or
willful misrepresentation and are complete and accurate in all
material respects. No Governmental Entity has, during the past
three years, examined or is in the process of examining any Tax
Returns of the Company. No Governmental Entity has proposed
(tentatively or definitively), asserted or assessed or, to the best
knowledge of the Company, threatened to propose or assert, any
deficiency, assessment or claim for Taxes and there would be no
basis for any such delinquency, assessment or claim.
14
3.8Material Contracts.
Each Material Contract of the Company is to the knowledge
of the Company valid and subsisting; the Company has duly performed
all its obligations thereunder to the extent that such obligations
to perform have accrued; and no material breach or default, alleged
material breach or default, or event which would (with the passage
of time, notice or both) constitute a material breach or default
thereunder by the Company or, to the best knowledge of the Company,
by any other party or obligor with respect thereto, has occurred or
as a result of this Agreement or performance will occur.
Consummation of the transactions contemplated by this Agreement
will not (and will not give any Person a right to) terminate or
modify any rights of, or accelerate or augment any obligation of
the Company under any Material Contract.
3.9Legal Proceedings.
There is no Order or Action pending, or, to the best
knowledge of the Company, threatened, against or affecting the
Company or any of its properties or assets that individually or
when aggregated with one or more other Orders or Actions has or
might reasonably be expected to have a Material Adverse Effect, or
adversely affect the Company's ability to perform this Agreement or
any aspect of the transactions contemplated by this Agreement.
There is no matter as to which the Company has received any notice,
claim or assertion, or, to the best knowledge of the Company, which
otherwise has been threatened against or affecting any director,
officer, employee, agent or representative of the Company or any
other Person, in connection with which any such Person has or may
reasonably be expected to have any right to be indemnified by the
Company.
3.10Minute Books.
The minute books of the Company accurately reflect all
actions and proceedings taken to date by its shareholders, board of
directors and committees, and such minute books contain true and
complete copies of the charter documents of the Company and all
related amendments. The stock record books of the Company reflect
accurately all transactions in its capital stock of all classes.
3.11Accounting Records; Internal Controls.
Accounting Records. The Company has records that
accurately and validly reflect its transactions, and accounting
controls sufficient to insure that such transactions are executed
in accordance with management's general or specific authorization.
3.12Authorized Capital. The authorized capital of the
Company consists of 25,000,000 common shares with no par value, of
which at September 30, 1996 a total of 4,524,744 shares have been
issued and are outstanding as fully paid and non-assessable. No
more than 7,000,000 shares of common stock will be outstanding
prior to the Closing.
15
3.13The Company has not declared or paid any dividends of any
kind nor declared or made any other distributions of any kind
whatsoever including, without limitation, by way of redemption or
repurchase or reduction of authorized capital.
3.14No change will occur in the Articles of Incorporation,
By-laws or other charter documents of the Company from the date
hereof to the Closing Date.
3.15Based upon a budget and forecast (the "Forecast")
prepared by AMR, attached hereto as Exhibit B and incorporated
herein by this reference, the Company has agreed to lend upon
commercial terms to AMR or cause loans to be made to AMR from time
to time, as may be needed to bridge any shortfall of money as set
forth on the Forecast, provided that the obligation of the Company
hereunder shall be limited to a maximum of $1,500,000. The Company
has also agreed that for a period of two years from Closing it will
on behalf of AMR obtain or cause to be obtained, loan upon
commercial terms or cause to be loaned, up to an additional
$2,000,000 for necessary capital expenditures approved by the Board
of Directors of AMR.
ARTICLE 4
COVENANTS WITH RESPECT TO CONDUCT
OF AMR PRIOR TO CLOSING
4.1Access.
AMR and the AMR Shareholders shall cause AMR to authorize
and permit the Company and its representatives (which term shall be
deemed to include its independent accountants and counsel and
representatives of prospective financing institutions of the
Company) to have reasonable access during normal business hours,
upon reasonable notice and in such manner as will not unreasonably
interfere with the conduct of its business, to all of its
properties, books, records, operating instructions and procedures,
Tax Returns and all other information with respect to the Business
as the Company may from time to time request, and to make copies of
such books, records and other documents and to discuss its business
with such other Persons, including, without limitation, its
directors, officers, employees, accountants and counsel and, with
prior notice to AMR, its suppliers, customers and creditors, as the
Company considers necessary or appropriate for the purposes of
familiarizing itself with the Business, obtaining any necessary
Approvals of or Permits for the transactions contemplated by this
Agreement and conducting an evaluation of the organization and
Business of AMR and the Subsidiaries.
4.2Material Adverse Changes; Reports; Financial Statements.
(a)AMR and the AMR Shareholders will promptly notify
the Company of any event of which AMR and the AMR Shareholders
obtain knowledge which has had or might reasonably be expected to
have a Material Adverse Effect or which if known as of the date
hereof would have been required to be disclosed to the Company.
16
(b)AMR will furnish to the Company (i) as soon as
available, and in any event within five days after it is prepared,
any report by AMR for submission to its board of directors and the
working papers related thereto and other operating or financial
reports (including any projections and budgets) prepared for
management and the working papers related thereto, (ii) as soon as
available, copies of all nonconfidential portions of all reports,
renewals, filings, certificates, statements and other documents
filed with any Governmental Entity, (iii) monthly and quarterly
unaudited balance sheets, statements of earnings and delinquency
reports for AMR and any of its Subsidiaries, and (iv) such other
reports as the Company may reasonably request relating to AMR and
any of its Subsidiaries. Each of the financial statements
delivered pursuant to this Section 4.2(b) shall be prepared in
accordance with GAAP consistently applied during the periods
covered (except as disclosed therein), except that such financial
statements may omit footnote disclosures required by GAAP to the
extent the content thereof would not materially differ in nature or
amount from those disclosures reported in the most recent audited
period and year end adjustments to the extent not material. Each
of the financial statements delivered pursuant to this Section
4.2(b) shall be accompanied by a certificate of the chief financial
officer of AMR to the effect that such financial statement presents
fairly the financial condition and results of operations of AMR and
any of its Subsidiaries for the periods covered and reflects all
adjustments (which consist only of normal recurring adjustments not
material in amount) necessary for a fair presentation.
4.3Conduct of Business.
AMR and the AMR Shareholders jointly and severally agree
with and for the benefit of the Company that AMR and its
Subsidiaries shall not, without the prior consent in writing of the
Company which may be withheld for any reason, (a) conduct the
Business in any manner except in the ordinary course consistent
with past practices; or (b) pay special bonuses to any officer,
director or employee or declare and pay dividends.
4.4Notification of Certain Matters.
AMR and the AMR Shareholders shall give prompt notice to
the Company, and the Company shall give prompt notice to AMR and
the AMR Shareholders, of (i) the occurrence, or failure to occur,
of any event that would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in
any material respect at any time from the date of this Agreement to
the Closing Date and (ii) any failure of the Company or AMR and the
AMR Shareholders, as the case may be, to comply with or satisfy, in
any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Except as
provided in Section 7.4, no such notification shall affect the
representations or warranties of the parties or the conditions to
their respective obligations hereunder.
4.5Permits and Approvals.
AMR, the AMR Shareholders and the Company each agree to
cooperate and use their best efforts to obtain (and will
immediately prepare all registrations, filings and applications,
requests and notices preliminary to) all Approvals and Permits that
may be necessary or which may be reasonably requested by the
Company to consummate the transactions contemplated by this
Agreement. To the extent that the approval of a third party with
respect to any Contract is required in connection with the
transactions contemplated by this Agreement, AMR and the AMR
Shareholders shall use their best efforts to obtain such Approval
prior to the Closing Date.
17
4.6Preservation of Business Prior to Closing Date.
During the period beginning on the date hereof and ending
on the Closing Date, (a) the AMR Shareholders shall use their
reasonable efforts to preserve the Business and to preserve the
good will of customers, suppliers and others having business
relations with AMR and (b) the AMR Shareholders and the Company
shall consult with each other concerning, and the AMR Shareholders
shall cooperate to keep available to the Company, the services of
the officers and employees of AMR that the Company may wish to have
AMR retain. Nothing in this Section shall obligate the Company or
AMR after the Closing to retain or offer employment to any officer
or employee of AMR.
4.7Inconsistent Agreements.
The AMR Shareholders shall not, either directly or
indirectly, through AMR or otherwise, initiate, solicit or
encourage any inquiry, offer or proposal with respect to, or
furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, merger,
tender or exchange offer or other form of business combination, of
the assets or AMR Shares or other securities of AMR, other than as
expressly contemplated by this Agreement. The AMR Shareholders
shall promptly notify the Company of the details of any discussions
with or proposal or offer from any other Person relating to an
acquisition, merger, tender or exchange offer or other form of
business combination involving AMR, any of its securities or
substantial assets or any other proposal, the acceptance of which
would be inconsistent with the consummation of this Agreement in
accordance with its terms.
ARTICLE 5
COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY
PRIOR TO CLOSING
5.1Material Adverse Changes. The Company will promptly
disclose to AMR and the AMR Shareholders any change in or effect on
the Company occurring after the date hereof which is materially
adverse to its business or financial position prior to the Closing.
5.2Access. The Company will authorize and permit
representatives of AMR and the AMR Shareholders to have reasonable
access during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of
its business, to all of its properties, books, records, operating
instructions and procedures, Tax Returns and all other information
with respect to the Business as AMR and the AMR Shareholders may
from time to time request, and to make copies of such books,
records and other documents and to discuss its business with such
other Persons, including, without limitation, its directors,
officers, employees, accountants and counsel and, with prior notice
to AMR, its suppliers, customers and creditors, as AMR and the AMR
Shareholders consider necessary or appropriate for the purposes of
familiarizing itself with the Business, obtaining any necessary
Approvals of or Permits for the transactions contemplated by this
Agreement and conducting an evaluation of the organization and
Business of the Company.
18
5.3Notification of Certain Matters. The Company shall give
prompt notice to AMR and the AMR Shareholders of (i) the
occurrence, or failure to occur, of any event that would be likely
to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing Date and (ii) any failure
of the Company or AMR and the AMR Shareholders, as the case may be,
to comply with or satisfy, in any material respect, any covenant,
condition or agreement to be complied with or satisfied by it under
this Agreement. Except as provided in Section 7.4, no such
notification shall affect the representations or warranties of the
parties or the conditions to their respective obligations
hereunder.
5.4Permits and Approvals. The Company agrees to cooperate
and use its best efforts to obtain (and will immediately prepare
all registrations, filings and applications, requests and notices
preliminary to) all Approvals and Permits that may be necessary or
which may be reasonably requested by AMR and the AMR Shareholders
to consummate the transactions contemplated by this Agreement. To
the extent that the approval of a third party with respect to any
Contract is required in connection with the transactions
contemplated by this Agreement, the Company shall use its best
efforts to obtain such Approval prior to the Closing Date.
ARTICLE 6
CONDITIONS OF PURCHASE
6.1General Conditions.
The obligations of the parties to effect the Closing
shall be subject to the following conditions unless waived in
writing by all parties:
(a)No Orders; Legal Xxxxxxxxxxx.Xx Law or Order shall
have been enacted, entered, issued, promulgated or enforced by any
Governmental Entity, nor shall any Action have been instituted and
remain pending at what would otherwise be the Closing Date, which
prohibits or restricts or would (if successful) prohibit or
restrict the transactions contemplated by this Agreement or (with
respect to obligations of the Company only) which would not permit
the Business as presently conducted to continue unimpaired
following the Closing Date. No Governmental Entity shall have
notified any party to this Agreement that consummation of the
transactions contemplated by this Agreement would constitute a
violation of any Laws of any jurisdiction and that it intends to
commence proceedings to restrain or prohibit such transactions or
force divestiture or rescission, unless such Governmental Entity
shall have withdrawn such notice and abandoned any such proceedings
prior to the time which otherwise would have been the Closing Date.
(b)Approvals. To the extent required by applicable
Law, all Permits and Approvals required to be obtained from any
Governmental Entity shall have been received or obtained on or
prior to the Closing Date.
6.2Conditions to Obligations of the Company.
The obligations of the Company to effect the Closing
shall be subject to the following conditions except to the extent
waived in writing by the Company:
19
(a)Representations and Warranties and Covenants of the
AMR Shareholders. The representations and warranties of the AMR
Shareholders herein contained shall be true at the Closing Date
with same effect as though made at such time; the AMR Shareholders
shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed
or complied with by it at or prior to the Closing Date.
(b)No Material Adverse Effect. There shall not have
been any Material Adverse Effect relating to AMR and its
Subsidiaries subsequent to December 31, 1996.
(c)Consents. The AMR Shareholders shall have obtained
and provided to the Company any required Approvals and Permits,
each in form and substance reasonably satisfactory to the Company.
(d)Due Diligence. The Company shall not, in the course
of its ongoing business investigation, have discovered information
not previously disclosed by the AMR Shareholders or AMR, which the
Company reasonably believes has or is likely to have a Material
Adverse Effect or is materially inconsistent with information
disclosed to the Company prior to the date hereof.
(e)Acquisition of AMR Shares. The Company shall have
received the AMR Shares in exchange for the Restricted Shares. To
the extent that one or more AMR Shareholders do not exchange their
shares of AMR common stock for shares of common stock of the
Company, as set forth next to the names of such AMR Shareholders on
Exhibit A attached hereto (the "AMR Shortfall") the Company may
acquire the AMR Shortfall from other AMR Shareholders.
6.3Conditions to Obligations of the AMR Shareholders.
The obligations of the AMR Shareholders to effect the
Closing shall be subject to the following conditions, except to the
extent waived by any of the AMR Shareholders:
(a)Representations and Warranties and Covenants of the
Company. The representations and warranties of the Company herein
contained shall be true at the Closing Date with same effect as
though made at such time; the Company shall have performed all
obligations and complied with all covenants and conditions required
by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
(b)No Material Adverse Effect. There shall not have
been any Material Adverse Effect relating to the Company subsequent
to September 30, 1996.
(c)Consents. The Company shall have obtained and
provided to the AMR Shareholders any required Approvals and
Permits, each in form and substance reasonably satisfactory to the
AMR Shareholders.
(d)Due Diligence. The AMR Shareholders shall not, in
the course of its ongoing business investigation, have discovered
information not previously disclosed by the Company which the AMR
Shareholders reasonably believe has or is likely to have a Material
Adverse Effect or is materially inconsistent with information
disclosed to the AMR Shareholders prior to the date hereof.
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ARTICLE 7
TERMINATION OF OBLIGATIONS; SURVIVAL
7.1Termination of Agreement.
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this Agreement shall
terminate if the Closing does not occur on or before the close of
business on April 10, 1997, unless extended by mutual consent in
writing of the Company and the AMR Shareholders and otherwise may
be terminated at any time before the Closing as follows and in no
other manner:
(a)Mutual Consent. By mutual consent in writing of the
Company and the AMR Shareholders.
(b)Conditions to the Company's Performance Not Met. By
the Company by written notice to the AMR Shareholders if any event
occurs or conditions exists which would render impossible the
satisfaction of one or more conditions to the obligations of the
Company to consummate the transactions contemplated by this
Agreement as set forth in Section 6.1 or 6.2.
(c)Conditions to Performance by AMR's Shareholders Not
Met. By the AMR Shareholders by written notice to the Company if
any event occurs or condition exists which would render impossible
the satisfaction of one or more conditions to the obligation of the
AMR Shareholders to consummate the transactions contemplated by
this Agreement as set forth in Section 6.1 or 6.3.
(d)Inaccurate Information. By the Company if any
material information expressly required by this Agreement or the
Disclosure Schedule to be delivered by or on behalf of the AMR
Shareholders or AMR to the Company is inaccurate or incomplete in
any material respect.
(e)Material Breach. By the Company or the AMR
Shareholders if there has been a material misrepresentation or
other material breach by the other party in its representations,
warranties and covenants set forth herein; provided, however, that
if such breach is susceptible to cure, the breaching party shall
have five business days after receipt of notice from the other
party of its intention to terminate this Agreement if such breach
continues in which to cure such breach.
7.2Effect of Termination.
In the event that this Agreement shall be terminated
pursuant to Section 7.1, all further obligations of the parties
under this Agreement shall terminate without further liability of
any party to another; provided that the obligations of the parties
contained in Article VIII, Section 9.9 and Section 9.12 shall
survive any such termination. A termination under Section 7.1
shall not relieve any party of any liability for a breach of, or
for any misrepresentation under, this Agreement, or be deemed to
constitute a waiver of any available remedy (including specific
performance if available) for any such breach or misrepresentation.
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7.3Survival of Representations and Warranties.
The representations and warranties contained in or made
pursuant to this Agreement shall survive the Closing and expire at
the end of 12 full calendar months after the Closing.
7.4Effect of Closing Over Known Unsatisfied Conditions.
If, with actual knowledge of the failure of any condition
or breach of any representation and warranty, either the Company or
the AMR Shareholders elect to proceed with the Closing, the
condition that is unsatisfied at the Closing Date shall be deemed
to be waived; provided, however, that the foregoing provision shall
not limit any party's right not to waive any condition or right to
condition any waiver hereunder upon mutually acceptable conditions.
Such decision shall constitute a waiver of any liability for breach
of or misrepresentation under this Agreement, but only with respect
to, and such waiver shall be limited to the extent of, the facts or
circumstances, actually known by the electing party, giving rise to
or in respect of such waived condition. Notwithstanding the
foregoing, the Company has expressly notified AMR and the AMR
Shareholders that the Company does not waive the obligation of AMR,
including the obligation of any AMR Subsidiary to collect promptly
any funds owing by Arizona Medical Waste, an Arizona-based company
owned or controlled by an officer of AMR.
ARTICLE 8
INDEMNIFICATION
8.1Obligations of the AMR Shareholders.
The AMR Shareholders shall indemnify and hold harmless
the Company and AMR, and their respective directors, officers,
employees, affiliates, agents and assigns from and against any and
all Losses of the Company or AMR, directly or indirectly, as a
result of, or based upon or arising from:
(a)any inaccuracy in or breach or nonperformance of any
of the representations, warranties, covenants or agreements made by
AMR in or pursuant to this Agreement; or
(b)any other matter as to which the AMR Shareholders in
other provisions of this Agreement have agreed to indemnify the
Company or (subsequent to Closing) AMR.
8.2Obligations of the Company.
The Company agrees to indemnify and hold harmless the AMR
Shareholders from and against any Losses of the AMR Shareholders,
directly or indirectly, as a result of, or based upon or arising
from, any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by the
Company in or pursuant to this Agreement.
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8.3Procedure.
(a)Notice. Any party seeking indemnification with
respect to any Loss shall give notice to the Indemnifying Party.
(b)Defense. If any claim, demand or liability is
asserted by any third party against any Indemnified Party, the
Indemnifying Party shall, upon the written request of the
Indemnified Party, defend any actions or proceedings brought
against the Indemnified Party in respect of matters embraced by the
indemnity, but the Indemnified Party shall have the right to
conduct and control the defense, compromise or settlement of any
Indemnifiable Claim if the Indemnified Party chooses to do so, on
behalf of and for the account and risk of the Indemnifying Party
who shall be bound by the result so obtained to the extent provided
herein; provided, however, that the Indemnified Party shall not
settle or compromise any Indemnifiable Claim without the written
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. If, after a request to defend any action or
proceeding, the Indemnifying Party neglects to defend the
Indemnified Party, a recovery against the latter suffered by it in
good faith, is conclusive in its favor against the Indemnifying
Party; provided, however, that, if the Indemnifying Party has not
received reasonable notice of the action or proceeding against the
Indemnified Party, or is not allowed to control its defense,
judgment against the Indemnified Party is only presumptive evidence
against the Indemnifying Party. The parties shall cooperate in the
defense of all third party claims which may give rise to
Indemnifiable Claims hereunder. In connection with the defense of
any claim, each party shall make available to the party controlling
such defense, any books, records or other documents within its
control that are reasonably requested in the course of such
defense.
(c)Tax Adjustments. Any amount payable by the
Indemnifying Party to or on behalf of an Indemnified Party in
respect of a Loss shall be adjusted as follows:
(i)If such Indemnified Party is liable for any
additional Taxes as a result of the payment of amounts in
respect of an Indemnifiable Claim, the Indemnifying Party
will pay to the Indemnified Party in addition to such
amounts in respect of the Loss within 10 days after being
notified by the Indemnified Party of the payment of such
liability (x) an amount equal to such additional Taxes
(the "Tax Reimbursement Amount") plus (y) any additional
amounts required to pay additional Taxes imposed with
respect to the Tax Reimbursement Amount and with respect
to amounts payable under this clause (y), with the result
that the Indemnified Party shall have received from the
Indemnifying Party, net of the payment of Taxes, an
amount equal to the Loss.
(ii)The Indemnified Party shall reimburse the
Indemnifying Party an amount equal to the net reduction
in any year in the liability for payment of Taxes (that
are based upon or measured by income) of the Indemnified
Party or any member of a consolidated or combined tax
group of which the Indemnified Party is, or was at any
time, part, which reduction has been actually realized
with respect to any period after the Closing Date and
which reduction would not have been realized but for the
amounts paid (or any audit adjustment or deficiency with
respect thereto, if applicable) in respect of a Loss, or
amounts paid by the Indemnified Party pursuant to this
paragraph (a "net Tax Benefit"). The amount of any Net
Tax Benefit shall be paid not later than 15 days after
the date on which such Net Tax Benefit shall be realized.
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(d)Interest. Any amounts payable by the Indemnifying
Part to or on behalf of an Indemnified Party in respect of a Loss
shall be paid together with interest on such amount, from and
including date of Loss to the date of payment, at a rate equal to
the Prime Rate; provided, however, that such interest shall not be
payable with respect to Losses which include an interest factor;
and provided further that, with respect to Losses which were, at
December 31, 1996, so remote or contingent that it would not have
been appropriate under GAAP to record them on the financial
statements of AMR, AMRR, AMT or any other Subsidiary on such date,
except no interest shall be payable until the Indemnified Party is
required to make a payment with respect to such Loss or to record
the liability which ultimately results in such Loss on its or AMR's
financial statements.
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8.4Notice by the AMR Shareholders.
The AMR Shareholders agree to notify the Company of any
liabilities, claims or misrepresentations, breaches or other
matters covered by this Article VIII upon discovery or receipt of
notice thereof (other than from the Company), whether before or
after Closing.
8.5Not Exclusive Remedy.
This Article VIII shall not be deemed to preclude or
otherwise limit in any way the exercise of any other rights or
pursuit of other remedies for the breach of this Agreement or with
respect to any misrepresentation.
8.6Limitations on Indemnification.
No party shall be required to indemnify any other Person
under this Article VIII unless the Loss for which indemnity would
otherwise be payable by such party exceeds $50,000 individually or
$100,000 in the aggregate, and in such event, the Indemnifying
Party
shall be responsible for the full amount of any Loss.
ARTICLE 9
GENERAL
9.1Amendments; Waivers.
This Agreement and any schedule or exhibit attached
hereto may be amended only by agreement in writing of all parties.
No waiver of any provision nor consent to any exception to the
terms of this Agreement shall be effective unless in writing and
signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
9.2Schedules; Exhibits; Integration.
Each schedule and exhibit delivered pursuant to the terms
of this Agreement shall be in writing and shall constitute a part
of this Agreement, although schedules need not be attached to each
copy of this Agreement. This Agreement, together with such
schedules and exhibits, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings of the parties in connection
therewith.
9.3Best Efforts; Further Assurances.
Except as otherwise expressly provided herein, each party
will use its best efforts to cause all conditions to its
obligations hereunder to be timely satisfied and to perform and
fulfill all obligations on its part to be performed and fulfilled
under this Agreement, to the end that the transactions contemplated
by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable. The parties
shall cooperate with each other in such actions and in securing
requisite Approvals. Each party shall execute and deliver both
before and after the Closing such further certificates, agreements
and other documents and take such other actions as the other party
may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
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9.4Governing Law.
This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the
laws of the State of Arizona applicable to contracts made and
performed in such State without regard to conflicts of law
doctrines, except to the extent that certain matters are preempted
by federal law or governed by the law of the jurisdiction of
organization of the respective parties.
9.5No Assignment.
Neither this Agreement nor any rights or obligations
under it are assignable except that (i) the Company may assign its
rights, and delegate its obligations, hereunder (including but not
limited to its rights under Article VIII) to any subsidiary of the
Company.
9.6Headings.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not
constitute a part of this Agreement.
9.7Counterparts.
This Agreement any amendment hereto or any other
agreement (or document) delivered pursuant hereto may be executed
in one or more counterparts and by different parties in separate
counterparts. All of such counterparts shall constitute one and
the same agreement (or other document) and shall become effective
(unless otherwise provided therein) when one or more counterparts
have been signed by each party and delivered to the other party.
9.8Publicity and Reports.
The AMR Shareholders and the Company shall coordinate all
publicity relating to the transactions contemplated by this
Agreement and no party shall issue any press release, publicity
statement or other public notice relating to this Agreement, or the
transactions contemplated by this Agreement, without consulting
with the other party except to the extent that a particular action
is required by applicable law or stock exchange or regulatory
policy.
9.9Confidentiality.
All information disclosed in writing by any party (or its
representatives) in connection with the transactions contemplated
by this Agreement to any other party (or its representatives) shall
be kept confidential by such other party and its representatives
and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such
information or disclosure (i) was known by the recipient when
received, (ii) is or hereafter becomes lawfully obtainable from
other sources, (iii) is necessary or appropriate to disclose to a
Governmental Entity or stock exchange having jurisdiction over the
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parties, or (iv) may otherwise be required by law. If this
Agreement is terminated in accordance with its terms, each party
shall use all reasonable efforts to return upon written request
from the other party all documents (and reproductions thereof)
received by it or its representatives from such other party (and,
in the case of reproductions, all such reproductions made by the
receiving party) that include information not within the exceptions
contained in the first sentence of this Section 99, unless the
recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
9.10Parties in Interest.
This Agreement shall be binding upon and inure to the
benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this
Agreement except for Sections 8.1 and 9.5 (which are intended to be
for the benefit of the Persons provided for therein and may be
enforced by such Persons). Nothing in this Agreement is intended
to relieve or discharge the obligation of any third person to any
party to this Agreement.
9.11Notices.
Any notice or other communication hereunder must be given
in writing and (a) delivered in person, (b) transmitted by telex,
telefax or other telecommunications mechanism or (c) mailed by
certified or registered mail, postage prepaid, receipt request, as
follows:
If to AMR Shareholders:
To the name or names and address or addresses
set forth on Exhibit A attached hereto.
With a copy to their counsel:
Xxxxxxxx Xxxxxxxxxx & Xxxxxxxxx
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
If to AMR:
Applied Medical Recovery, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxx, President
With a copy to its counsel:
Xxxxxxxx, Xxxxxxx & Salmon, P.L.C.
One Renaissance Square
Xxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: X. Xxxxx Xx Xxxxxxx, Xx.
00
If to the Company:
Citadel Environmental Group, Inc.
0000 X. Xxxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
With a copy to its counsel:
Xxxxx Xxxxxxx Xxxxxx & Xxxxxx, LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
or to such other address or to such other person as either party
shall have last designated by such notice to the other party. Each
such notice or other communication shall be effective (i) if given
by telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 9.11 and an appropriate
answer back is received, (ii) if given by mail, three days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when actually received at such address.
9.12Expenses.
AMR and the Company shall each pay its own expenses
incident to the negotiation, preparation and performance of this
Agreement and the transactions contemplated hereby, including but
not limited to the fees, expenses and disbursements of their
respective advisors, accountants and counsel.
9.13Remedies; Waiver.
All rights and remedies existing under this Agreement and
any related agreements or documents are cumulative to and not
exclusive of, any rights or remedies otherwise available. No
failure on the part of any party to exercise or delay in exercising
any right hereunder shall be deemed a waiver thereof, nor shall any
single or partial exercise preclude any further or other exercise
of such or any other right.
9.14Attorney Fees.
In the event of any Action for the breach of this
Agreement or misrepresentation by any party, the prevailing party
shall be entitled to reasonable attorney's fees, costs and
expenses, including the costs of arbitration, incurred in
connection with such action.
9.15Knowledge Convention.
Whenever any statement herein or in any schedule,
exhibit, certificate or other documents delivered to any party
pursuant to this Agreement is made "to its knowledge" or "to its
best knowledge" or words of similar intent or effect of any party
or its representative, such person shall be under no duty to
investigate such matter.
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9.16Representation by Counsel; Interpretation.
The AMR Shareholders and the Company each acknowledge
that each party to this Agreement has been represented by counsel
in connection with this Agreement and the transactions contemplated
by this Agreement. Accordingly, any rule of Law, including but not
limited to Section 1654 of the California Civil Code, or any legal
decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has
no application and is expressly waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the
intent of the Company and the AMR Shareholders.
9.17Specific Performance.
The AMR Shareholders and the Company each acknowledge
that, in view of the uniqueness of the Business and the
transactions contemplated by this Agreement, each party would not
have an adequate remedy at law for money damages in the event that
this Agreement has not been performed in accordance with its terms,
and therefore agrees that the other party shall be entitled to
specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
9.18Severability.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement to the extent permitted by
Law shall remain in full force and effect provided that the
economic and legal substance of the transactions contemplated is
not affected in any manner materially adverse to any party.
9.19Arbitration; Waiver of Jury Trial.
Any controversy, dispute or claim under, arising out of,
in connection with or in relation to this Agreement shall be
settled, at the request of either party, by arbitration conducted
in accordance with the Center for Public Resources Rules for Non-
Administered Arbitration or Business Disputes, by three
arbitrators, of whom the Company and the AMR Shareholders each
shall appoint one and the third shall be selected by the other two.
The arbitration shall be governed by the United States Arbitration
Act (9 U.S.C.§§ 1-16). The arbitration of such issues,
including
the determination of any amount of damages suffered by any party
hereto by reason of the acts or omissions of any other party, shall
be final and binding upon the parties to the maximum extent
permitted by law, except that the arbitrators shall not be
authorized to award punitive damages with respect to any such
claim, dispute or controversy. No party shall seek (and no
arbitrators shall be authorized to award) any punitive damages
relating to any matters under, arising out of, in connection with
or relating to this Agreement in the proceedings hereunder or in
any other forum. The parties intend that this Section shall be
valid, binding, enforceable and irrevocable and shall survive the
termination of this Agreement. The place of arbitration shall be
selected by the arbitrators in the County of Los Angeles.
Judgment upon the award rendered by the arbitrators may be entered
by any court having jurisdiction thereof. By executing this
Agreement, the parties hereto hereby waive any rights they may
possess to have any controversy, dispute or claim under, arising
out of, in connection with or in relation to this Agreement
litigated in a court or jury trial.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the
day and year first above written.
APPLIED MEDICAL RECOVERY, INC.
An Arizona Corporation
By: Xxxxxxx Xxxx
Its: President
The "Company"
CITADEL ENVIRONMENTAL GROUP, INC.
A Colorado Corporation
By: Xxx Xxxxxxx
Its: President
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