RIVER HILL PROJECT
PURCHASE AGREEMENT
by and between
**
and
COVOL TECHNOLOGIES, INC.
August 27, 1999
** This exhibit contains confidential material which has been omitted
pursuant to a Confidential Treatment Request. The omitted information
has been filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
Page
RECITALS................................................................... 1
ARTICLE I DEFINITIONS.......................................................1
1.1. Affiliate.....................................................1
1.2. Agreement.....................................................1
1.3. As-Built Drawings.............................................2
1.4. Assets........................................................2
1.5. Assignment and Assumption Agreement...........................2
1.6. Assumed Liabilities...........................................2
1.7. Xxxx of Sale..................................................2
1.8. Books and Records.............................................2
1.9. Business......................................................2
1.10. Buyer's Closing Certificate..................................2
1.11. Closing......................................................2
1.12. Closing Date.................................................3
1.13. Code.........................................................3
1.14. Confidentiality Agreement....................................3
1.15. Construction Agreements......................................3
1.16. Contracts....................................................3
1.17. Covol Plant..................................................3
1.18. Covol Process................................................3
1.19. Effective Time...............................................3
1.20. Excluded Assets..............................................3
1.21. Facility.....................................................3
1.22. Fixed Assets.................................................3
1.23. Fun Enterprises..............................................4
1.24. Fun Indebtedness.............................................4
1.25. GAAP.........................................................4
1.26. Ground Lease.................................................4
1.27. HSR Act......................................................4
1.28. Improvements.................................................4
1.29. Improvements Deed............................................4
1.30. Inventory....................................................4
1.31. IRS..........................................................4
1.32. Knowledge of Buyer...........................................4
1.33. Knowledge of Seller..........................................4
1.34. Law..........................................................4
Page
1.35. License and Binder Purchase Agreement........................4
1.36. Lien.........................................................5
1.37. Loss.........................................................5
1.38. Material Adverse Effect......................................5
1.39. Modification Agreement.......................................5
1.40. O&M Agreement................................................5
1.41. Opinion of Seller's Counsel..................................5
1.42. Performance Payments.........................................5
1.43. Performance Thresholds.......................................5
1.44. Permits......................................................5
1.45. Permitted Liens..............................................5
1.46. Plans and Specifications.....................................6
1.47. Product......................................................6
1.48. Purchase Consideration.......................................6
1.49. Real Property................................................6
1.50. Required Consents............................................6
1.51. Requirements Supply Agreement................................6
1.52. RHC..........................................................6
1.53. Sales Agency Agreement.......................................6
1.54. Section 29 Product...........................................6
1.55. Seller's Closing Certificate.................................6
1.56. Transaction Documents........................................6
ARTICLE II PURCHASE AND SALE................................................7
2.1. Purchase and Sale; Assignment and Assumption..................7
2.2. Payment of the Purchase Consideration.........................7
2.3. Deliveries at Closing.........................................7
2.4. Allocation of Purchase Price..................................8
2.5. No Assumption of Liabilities..................................8
2.6. Prorations....................................................8
2.7. Performance Payments..........................................8
2.8. Sales Tax Exemption...........................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................9
3.1. Corporate Standing............................................9
3.2. Authorizations; Binding Agreements............................9
3.3. No Actions Affecting Enforcement of the Agreement and
the other Transaction Documents..............................10
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Page
3.4. Taxes........................................................10
3.5. Brokers or Finders Fees......................................10
3.6. No Imposition of Liens.......................................11
3.7. Applicable Contracts and Permits.............................11
3.8. Title to Assets..............................................11
3.9. Condition of Assets..........................................11
3.10. Inventory...................................................11
3.11. Pending Litigation..........................................11
3.12. Compliance with Laws........................................12
3.13. Status of Contracts.........................................12
3.14. Consents....................................................12
3.15. Ground Lease................................................12
3.16. No Fee Property.............................................12
3.17. Books and Records...........................................13
3.18. Environmental Conditions....................................13
3.19. Liabilities.................................................14
3.20. Agreements with Related Persons.............................14
3.21. Adequacy of the Purchased Assets............................14
3.22. Production Capacity.........................................14
3.23. Section 29 Issues...........................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.........................14
4.1. Organization and Standing....................................14
4.2. Authorizations; Binding Agreements...........................15
4.3. Brokers or Finders Fees......................................15
4.4. No Actions Affecting Enforcement of the Agreement
and the other Transaction Documents..........................15
ARTICLE V CERTAIN UNDERSTANDINGS AND AGREEMENTS............................16
5.1. Conduct of Seller Prior to Closing...........................16
5.2. Exclusivity..................................................16
5.3. Access to Information........................................16
5.4. Best Efforts.................................................17
5.5. Public Announcements.........................................17
5.6. Confidentiality..............................................17
5.7. Negative Covenants...........................................17
5.8. Taxes........................................................18
5.9. Private Letter Ruling........................................18
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Page
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER................19
6.1. Compliance with Agreement....................................19
6.2. Proceedings and Instruments Satisfactory.....................19
6.3. No Litigation................................................19
6.4. Representations and Warranties...............................19
6.5. Material Damage to Assets....................................20
6.6. Permits......................................................20
6.7. Consents.....................................................20
6.8. Lien Waivers and Estoppel Certificates.......................20
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER..............20
7.1. Compliance with Agreement....................................20
7.2. Proceedings and Instruments Satisfactory.....................21
7.3. No Litigation................................................21
7.4. Representations and Warranties...............................21
7.5. Required Consents............................................21
ARTICLE VIII INDEMNITIES AND ADDITIONAL COVENANTS..........................21
8.1. Seller's Indemnity...........................................21
8.2. Buyer's Indemnity............................................23
8.3. Bulk Sales Compliance........................................24
8.4. Additional Instruments.......................................24
8.5. Access to Books, Records and Employees.......................24
ARTICLE IX TERMINATION.....................................................25
9.1. Termination..................................................25
9.2. Rights on Termination; Waiver................................25
ARTICLE X MISCELLANEOUS....................................................26
10.1. Entire Agreement; Amendment.................................26
10.2. Expenses....................................................26
10.3. Governing Law; Consent to Jurisdiction......................26
10.4. Assignment..................................................27
10.5. Notices.....................................................27
10.6. Counterparts; Headings......................................28
iv
Page
10.7. Interpretation..............................................28
10.8. Severability................................................28
10.9. No Reliance.................................................28
10.10. Parties in Interest........................................29
10.11. Specific Performance.......................................29
v
EXHIBITS AND SCHEDULES
SCHEDULE 1.6 Exclusions from Assumed Liabilities
SCHEDULE 1.16 Contracts
SCHEDULE 1.20 Excluded Assets
SCHEDULE 1.22 Fixed Assets
SCHEDULE 1.32 Knowledge of Buyer
SCHEDULE 1.33 Knowledge of Seller
SCHEDULE 1.41 Opinion of Seller's Counsel
SCHEDULE 1.44 Permits
SCHEDULE 1.45 Permitted Liens
SCHEDULE 1.49 Real Property
SCHEDULE 1.50 Required Consents
SCHEDULE 3.5 Brokers or Finders Fees of Seller
SCHEDULE 3.8 Title
SCHEDULE 3.11 Pending Litigation
SCHEDULE 3.15 Ground Lease Exceptions
SCHEDULE 3.18 Environmental Matters
SCHEDULE 3.20 Agreements with Related Persons
SCHEDULE 4.3 Brokers or Finders Fees of Buyer
SCHEDULE 5.9 Post-Closing Conditions
EXHIBIT A Assignment and Assumption Agreement
EXHIBIT B Xxxx of Sale
EXHIBIT C Buyer's Closing Certificate
EXHIBIT D [Reserved]
EXHIBIT E Improvements Deed
EXHIBIT F O&M Agreement
EXHIBIT G Performance Thresholds
EXHIBIT H Seller's Closing Certificate
EXHIBIT I License and Binder Purchase Agreement
EXHIBIT J Allocation of Purchase Price
EXHIBIT K Estoppel Certificate
EXHIBIT L Modification Agreement
vi
PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of August 27, 1999, by and between
**, a Delaware limited liability company ("Buyer"), and COVOL TECHNOLOGIES,
INC., a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller has constructed and owns the Assets comprised
principally of a processing facility to produce solid synthetic fuel pellets
from coal fines located near Karthus, Clearfield County, Pennsylvania; and
WHEREAS, Seller desires to sell the Assets and the Contracts
to Buyer and Buyer desires to purchase the Assets from Seller, all on the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the Recitals and of the
mutual covenants, conditions and agreements set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
1.1 Affiliate shall mean, as to any person, any other person or entity
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person.
1.2. Agreement shall mean this Purchase Agreement, together with the
Exhibits and Schedules attached hereto, as the same may be amended from time to
time in accordance with the terms hereof.
** This exhibit contains confidential material which has been omitted
pursuant to a Confidential Treatment Request. The omitted information
has been filed separately with the Securities and Exchange Commission.
1.3. As-Built Drawings shall mean as-built drawings reflecting
necessary revisions on the original tracings of the Plans and Specifications and
related drawings relating to the Facility necessary to indicate such field
changes as may have been found necessary to suit conditions at the Real Property
and any other revisions made in the course of construction of the Facility.
1.4. Assets shall mean, collectively, all of the assets, other than the
Contracts and the Excluded Assets, owned by Seller and relating primarily to the
Business, and comprising, used in or necessary for the operation of the Facility
as of the Effective Time, including, without limitation, the Improvements, the
Books and Records, the Fixed Assets, and the Inventory, together with all
goodwill associated with the Facility.
1.5. Assignment and Assumption Agreement shall mean the Assignment and
Assumption Agreement between Seller and Buyer relating to the Contracts and the
Assumed Liabilities, in the form of Exhibit A attached hereto.
1.6. Assumed Liabilities shall mean the obligations to be assumed by
Seller pursuant to the Modification Agreement and those obligations of Seller,
if any, arising under the Contracts which, pursuant to the terms thereof, relate
to periods and become due from and after the Effective Time, other than
obligations under those Contracts listed in Schedule 1.6 attached hereto.
1.7. Xxxx of Sale shall mean the Xxxx of Sale from Seller to Buyer
relating to the Assets, in the form of Exhibit B attached hereto.
1.8. Books and Records shall mean original or true and complete copies
of all of the books, records, files, data and information of Seller relating to
the design, construction and operation of the Facility and operation of the
business prior to the Effective Time, which are relevant to Buyer's use of the
Assets, performance under the Contracts and operation of the Facility and the
Business after the Effective Time, including without limitation Plans and
Specifications, all original tracings of the related drawings and designs and
the As-Built Drawings.
1.9. Business shall mean the business conducted by Seller at the
Facility, which consists of the ownership, construction, moving, financing,
selling and operation of and otherwise dealing with the Facility and the
manufacture and sale of the Product.
1.10. Buyer's Closing Certificate shall mean the certificate of Buyer
substantially in the form of Exhibit C attached hereto.
1.11. Closing shall mean the meeting of the parties to be held at 9:00
a.m., local time, on the Closing Date, at the offices of Hunton & Xxxxxxxx,
Riverfront Plaza, East Tower, 951 East Xxxx Street, Richmond, Virginia, or such
other time and place as the parties may mutually agree in writing.
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1.12. Closing Date shall mean five business days following the date on
which all conditions set forth in Articles VI and VII have been satisfied or
waived by the applicable parties, as the case may be, or such other date as the
parties may mutually agree in writing.
1.13. Code shall mean the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
1.14. Confidentiality Agreement shall mean the Letter Agreement, dated
April 27, 1999, between Seller and **.
1.15. Construction Agreements shall mean all construction agreements
relating to the Facility and the Improvements, or components thereof.
1.16. Contracts shall mean all contracts, agreements, leases, license
agreements, relationships, understandings, or commitments, whether written, oral
or implied, to which Seller is a party and which relate primarily to the
construction or operation of the Facility and the Business, all as listed on
Schedule 1.16 attached hereto or as otherwise agreed upon by Buyer prior to the
Closing Date, and including, without limitation, the Ground Lease, the
Requirements Supply Agreement and the Sales Agency Agreement, and excluding
those relating to the Fun Indebtedness.
1.17. Covol Plant shall mean the Facility that produces solid synthetic
fuel pellets from coal fines using the Covol Process in accordance with the
terms of the Technology License and Binder Supply Agreement.
1.18. Covol Process shall mean Seller's proprietary synthetic coal fuel
production process for manufacturing solid synthetic fuel from coal fines which
is defined in and is the subject of the Technology License and Binder Supply
Agreement.
1.19. Effective Time shall mean 12:01 a.m., Eastern Time, on the
Closing Date.
1.20. Excluded Assets shall mean the items listed on Schedule 1.20
attached hereto
1.21. Facility shall mean the solid synthetic fuel pellet manufacturing
facility and related support facilities owned or leased by Seller and located on
the Real Property.
1.22. Fixed Assets shall mean all tangible personal property located at
the Real Property which constitute part of, or are otherwise owned and used by
Seller in the operation of, the Facility as of the Effective Time and which are
listed on Schedule 1.22 attached hereto, including, but not limited to, all
fixed assets, chattels, machinery, equipment, leasehold improvements, computer
hardware, fixtures, furniture, furnishings, handling equipment, implements,
parts, tools and accessories of all kinds; provided, however, that Fixed Assets
shall exclude (i) leased items of tangible personal property that are the
subject of Contracts and (ii) the Excluded Assets.
3
1.23. Fun Enterprises shall mean Fun Enterprises PTY (ACN 056 689 304),
a company incorporated in New South Wales, Australia.
1.24. Fun Indebtedness shall mean the indebtedness of Seller to Fun
Enterprises referenced in the Modification Agreement.
1.25. GAAP shall mean generally accepted accounting principles of the
United States as applied by Seller in a manner consistent with prior periods.
1.26. Ground Lease shall mean that certain Lease Agreement, dated as of
August 25, 1999, by and between Seller and RHC and relating to the Real
Property.
1.27. HSR Act shall mean the Hard-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (15 X.X.X.xx. 18a), as amended.
1.28. Improvements shall mean the structures, buildings and
improvements now standing or to be constructed on the Real Property, and
replacements thereof, including, without limitation, the following:
(a) the Covol Plant; and
(b) all other plant equipment, apparatus, machinery and
fixtures of every kind and nature forming a part of such facilities, buildings
and improvements.
1.29. Improvements Deed shall mean the Improvements Deed from Seller to
Buyer relating to the Improvements, in the form of Exhibit E attached hereto.
1.30. Inventory shall mean all inventories of raw materials and all
supplies held for use at the Facility by Seller as of the Effective Time.
1.31. IRS shall mean the Internal Revenue Service.
1.32. Knowledge of Buyer shall mean the actual knowledge, after due
inquiry, of any person listed on Schedule 1.32 attached hereto.
1.33. Knowledge of Seller shall mean the actual knowledge, after due
inquiry, of any person listed on Schedule 1.33 attached hereto.
1.34. Law shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.35. License and Binder Purchase Agreement shall mean that certain
License and Binder Purchase Agreement to be entered into by Buyer and Seller,
relating to the licensing by
4
the Buyer of Seller's proprietary synthetic coal fuel extrusion, pellet and
briquette production process, and substantially in the form of Exhibit I
attached hereto.
1.36. Lien shall mean any interest in property securing an obligation,
whether such interest is based on common law, statute or contract, and including
any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership, any security interest or lien arising
from a mortgage, claims, encumbrance, pledge, charge, easement, servitude,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes. The term "Lien" shall also include reservations,
exceptions, covenants, conditions, restrictions, leases, subleases, licenses,
occupancy agreements, pledges, equities, charges, assessments, covenants,
reservations, defects in title, encroachments and other burdens, and other title
exceptions and encumbrances affecting property of any nature, whether accrued or
unaccrued, or absolute or contingent.
1.37. Loss shall have the meaning given to such term in Section
8.1((a)).
1.38. Material Adverse Effect shall mean a material adverse effect on
the Assets and Contracts, taken as a whole, the Business or the maintenance and
operation of the Facility.
1.39. Modification Agreement shall mean that certain Modification and
Assumption Agreement to be entered into by Seller, Buyer and Fun Enterprises
relating to the Fun Indebtedness, and substantially in the form of Exhibit L
attached hereto.
1.40. O&M Agreement shall mean that certain Operations and Maintenance
Agreement, of even date herewith, to be entered into by Buyer and Seller,
relating to the operation and maintenance of the Facility, substantially in the
form of Exhibit F attached hereto.
1.41. Opinion of Seller's Counsel shall mean the opinions of Pillsbury
Madison & Sutro, LLP, counsel to Seller, and Xxxxxx Xxxxxxxx, General Counsel of
Seller, substantially in the forms of Schedules 1.41-A and 1.41-B, respectively.
1.42. Performance Payments shall mean those contingent payments of
additional Purchase Consideration to be paid to Seller by Buyer upon the
achievement by the Facility of the Performance Thresholds.
1.43. Performance Thresholds shall mean those levels of
production/sales of Section 29 Product meeting the quantities described on
Exhibit G attached hereto.
1.44. Permits shall mean all governmental approvals, authorizations,
registrations, permits and licenses necessary or required for the operation of
the Facility, including, without limitation, those Permits listed on Schedule
1.44 attached hereto.
1.45. Permitted Liens shall mean Liens (but only for amounts not yet
due and payable) securing taxes, assessments or governmental charges or levies,
Liens of an immaterial nature
5
which could not reasonably be expected to have an adverse effect on the
maintenance and operation of the Facility or the good and marketable title of
the Assets or the enforceability of the Contracts, and Liens disclosed on
Schedule 1.45 attached hereto.
1.46. Plans and Specifications shall have the meaning given such terms
in the Construction Agreements.
1.47. Product shall mean the solid synthetic fuel pellet product
produced at the Facility using and pursuant to the Covol Process.
1.48. Purchase Consideration shall have the meaning given to such term
in Section 2.2 hereof.
1.49. Real Property shall mean that certain parcel of land located near
Karthus, Clearfield County, Pennsylvania and more particularly described on
Schedule 1.49 attached hereto.
1.50. Required Consents shall mean those consents, approvals and
waivers required from parties to the Contracts or from governmental authorities
or other third parties that are necessary or required in order to transfer the
Assets and Contracts to Buyer and otherwise give effect to the transactions
contemplated herein (other than such consents, the failure of which to obtain,
taken as a whole, could not reasonably be expected to have a Material Adverse
Effect) and that are specifically identified on Schedule 1.50 attached hereto.
1.51. Requirements Supply Agreement shall mean that certain Agreement
for Supply of Coal Fines dated as of August 25, 1999, entered into by Seller and
RHC, relating to the provision of feedstock to the Facility by RHC.
1.52. RHC shall mean River Hill Coal Company, Inc., a Pennsylvania
corporation.
1.53. Sales Agency Agreement shall mean that certain Agreement for the
Sale of Synthetic Fuel, dated as of August 25, 1999, entered into by Seller and
RHC, relating to the sale of the Product processed at the Facility.
1.54. Section 29 Product shall mean Product which is reasonably
expected to constitute "qualified fuels" pursuant to the terms of Section
29(c)(1)(C) of the Code and with respect to which Section 29 is applicable
pursuant to the terms of Sections 29(f) and 29(g) of the Code.
1.55. Seller's Closing Certificate shall mean the certificate of Seller
substantially in the form of Exhibit H attached hereto.
1.56. Transaction Documents shall mean this Agreement, the Xxxx of
Sale, the Assignment and Assumption Agreement, the Modification Agreement, the
Improvements Deed and those agreements and instruments to be executed and
delivered as provided in Section 2.3.
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ARTICLE II
PURCHASE AND SALE
2.1. Purchase and Sale; Assignment and Assumption.
(a) Buyer and Seller hereby agree that at the Closing, and
upon all of the terms and subject to all of the conditions of this Agreement,
Seller shall sell, convey, transfer and assign to Buyer, and Buyer shall
purchase and accept from Seller, all of the Assets, free and clear of all liens,
claims, mortgages or encumbrances.
(b) Buyer and Seller hereby agree that at the Closing, and
upon all of the terms and subject to all of the conditions of this Agreement,
Seller shall assign to Buyer the Contracts and all rights arising thereunder,
and Buyer shall assume from Seller all of Seller's obligations constituting the
Assumed Liabilities.
2.2. Payment of the Purchase Consideration.
In consideration of Seller's sale, conveyance, transfer,
delivery and assignment of the Assets and Contracts, Buyer shall (a) on the
Closing Date, make a cash payment to Seller in the amount of One Million Two
Hundred Fifty Thousand Dollars ($1,250,000.00), payable by wire transfer in
readily available funds to First Security Bank; Salt Lake City, Utah; 18A 124
000012; for the account of Covol Technology; Acct. **; (b) on the Closing Date,
make a cash payment, on behalf of Seller, to Fun Enterprises in the amount of
Four Million Dollars ($4,000,000.00), payable by wire transfer in accordance
with the Modification Agreement; (c) on the Closing Date and pursuant to the
Modification Agreement, execute and deliver a Replacement Promissory Note made
payable to the order of Fun Enterprises in the amount of Nine Hundred Forty-Five
Thousand Eight Hundred Ninety-Two Dollars ($945,892.00) and bearing interest at
a per annum rate of 5.5 percent; and (d) thereafter make the Performance
Payments, if any, when and as provided in Section 2.7, in the form of cash
payments to Seller, payable by wire transfer in readily available funds to First
Security Bank; Salt Lake City, Utah; 18A 124 000012; for the account of Covol
Technology; Acct. **, or pursuant to such other payment instructions delivered
by written notice given by Seller to Buyer pursuant to Section 10.5 hereof at
least two business days prior to the due date of any such payment (the payments
described in clauses (a), (b), (c) and (d) of this Section 2.2 shall
collectively be referred to herein as the "Purchase Consideration").
2.3. Deliveries at Closing.
(a) By Seller to Buyer. At the Closing, Seller shall deliver
the following items to Buyer, each properly executed and dated as of the Closing
Date by Seller and in form and substance reasonably acceptable to Buyer: (i) the
Assignment and Assumption Agreement, (ii) the Xxxx of Sale, (iii) the
Improvements Deed, (iv) the License and Binder Purchase Supply Agreement, (v)
the O&M Agreement, (vi) estoppel certificates as required by Section 6.9,
7
(vii) all Permits as required by Section 6.6, (viii) all Required Consents
applicable to Seller, (ix) the Opinion of Seller's Counsel, (x) Seller's Closing
Certificate and (xi) a certificate of the corporate secretary of Seller as to
such matters as may reasonably be requested by Buyer.
(b) By Buyer to Seller. At the Closing, Buyer shall deliver
the Purchase Consideration and the following items to Seller, each properly
executed and dated as of the Closing Date by Buyer and in form and substance
reasonably acceptable to Seller: (i) the Assignment and Assumption Agreement,
(ii) the License and Binder Purchase Agreement, (iii) the O&M Agreement, (iv)
the Modification Agreement, (v) all Required Consents applicable to Buyer, (vi)
Buyer's Closing Certificate and (vii) a certificate of the corporate secretary
(or equivalent official) of Buyer as to such matters as may reasonably be
requested by Seller.
2.4. Allocation of Purchase Price.
On the Closing Date, or at a later time agreed to by the
parties, not to exceed 30 days following the Closing Date, the purchase price
shall be allocated among the Assets and Contracts in accordance with ExhibitJ
attached hereto. Such allocation shall be intended to comply with the
requirements of Section 1060 of the Code, and no party shall take any position
inconsistent with such allocation for income tax purposes, except that Buyer's
cost for the Assets and Contracts may differ from the amount so allocated to the
extent necessary to reflect Buyer's capitalized acquisition costs other than the
amount realized by Seller.
2.5. No Assumption of Liabilities.
Except as specifically set forth herein with respect to the
Assumed Liabilities, Buyer does not and will not assume any liability or
obligation of any kind of Seller, or any obligation relating to the use of the
Assets or performance by Seller under the Contracts prior to the Effective Time,
whether absolute or contingent, accrued or unaccrued, asserted or unasserted,
known or unknown, or otherwise.
2.6. Prorations.
As of the Closing Date, any personal property taxes,
assessments, water, gas, electricity and other utility charges, lease payments
and other expenses relating to the Business shall be prorated as of the
Effective Time. Such prorations may be estimated as necessary and final
settlement shall be made within sixty (60) days of the Closing Date.
2.7. Performance Payments.
Within 30 days following the date that the Facility achieves
the Performance Thresholds set forth on Exhibit G attached hereto, the Buyer
shall pay to Seller, as provided in Section 2.2, amounts equal to the applicable
Performance Payment set forth on Exhibit G attached hereto.
8
2.8. Sales Tax Exemption.
To the extent applicable, at the Closing, Buyer will deliver
to Seller appropriate and customary sales tax exemption certificates relating to
the transfer of the Assets and the assignment and assumption of the Contracts
contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Buyer that:
3.1 Corporate Standing.
Seller is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware. Seller has the
power to own its property, and to execute, deliver and perform this Agreement
and each of the Transaction Documents applicable to it, and to carry on its
business as now being conducted. Seller is duly qualified to do business in and
is in good standing as a foreign corporation, authorized to do business under
the laws of the States of Utah and Pennsylvania.
3.2. Authorizations; Binding Agreements.
The execution, delivery and performance of this Agreement and
the other Transaction Documents by Seller and each conveyance, assignment,
agreement, and other document herein contemplated to be executed by Seller, has
been duly authorized by all necessary corporate action. This Agreement and the
other Transaction Documents and the conveyances, assignments, agreements, and
other documents herein contemplated to be executed, delivered and performed by
Seller are, or will be upon execution, legal, valid and binding obligations of
Seller, duly enforceable against Seller in accordance with their terms (subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium,
and similar laws from time to time in effect relating to the rights and remedies
of creditors as well as to general principles of equity). This Agreement and the
other Transaction Documents and the conveyances, assignments, agreements, and
other documents herein contemplated to be executed, delivered and performed by
Seller (i) do not and will not result in any violation of, conflict with or
default under the terms of any of Seller's organizational documents (nor, to the
Knowledge of Seller, does there exist any condition which upon the passage of
time or the giving of notice would cause such violation, conflict or default),
and (ii) subject only to the Required Consents, do not and will not result in
any violation of, conflict with or default under any Contract or any other
material permit, lease, venture, indenture, mortgage, agreement, contract,
judgment, order or other obligation or restriction to which Seller, the Assets,
the Contracts or the conduct of the maintenance and operation of the Facility
may be bound or encumbered (nor, to the Knowledge
9
of Seller, does there exist any condition which upon the passage of time or the
giving of notice would cause such violation, conflict or default).
3.3. No Actions Affecting Enforcement of the Agreement and the
other Transaction Documents.
There are no actions, suits, or proceedings pending, or, to
the Knowledge of Seller, threatened, against Seller in any court, or
administrative governmental body or agency which will affect in any adverse
manner the ability of Seller to execute, deliver and perform this Agreement and
the other Transaction Documents. Subject only to the Required Consents and such
consents which the failure to obtain could not reasonably be expected to have a
Material Adverse Effect, Seller has obtained all permits, licenses, franchises,
authorizations, variances, exemptions, concessions, leases, instruments, orders,
consents or approvals of governmental entities and third parties necessary to
construct, maintain and operate the Facility and to execute, deliver and perform
this Agreement and the other Transaction Documents.
3.4. Taxes.
All tax returns and reports relating to the Assets, the
Contracts and the conduct of the construction, maintenance and operation of the
Facility required by law (including all federal, state, and local property tax,
severance and franchise tax laws) to be filed by Seller prior to the Closing
have been timely filed or will be caused to be timely filed, including those tax
returns relating to periods prior to Closing that are not yet due, except for
such returns and reports which the failure to file could not reasonably be
expected to have a material adverse effect on the Assets, the Contracts or the
maintenance and operation of the Facility. All taxes, assessments, fees,
interest, penalties and other governmental charges relating to the Assets, the
Contracts or the conduct of the construction, maintenance and operation of the
Facility prior to Closing have been paid when due and payable or payment has
been provided for, except for such taxes, assessments, fees, interest, penalties
and other governmental charges which the failure to pay could not reasonably be
expected to have a material adverse effect on the Assets, the Contracts or the
construction, maintenance and operation of the Facility.
3.5. Brokers or Finders Fees.
Except as set forth in Schedule 3.5, there are no obligation
or liability, contingent or otherwise, for brokers or finders fees created by
Seller with respect to the matters provided for in this Agreement and the other
Transaction Documents. No obligation or liability for brokers or finders fees
created by Seller with respect to the matters provided for in this Agreement and
the other Transaction Documents shall be imposed upon Buyer, the Assets or the
Contracts.
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3.6. No Imposition of Liens.
The execution, delivery and performance of this Agreement and
the other Transaction Documents by Seller shall not result in the imposition of
any Lien, other than Permitted Liens, upon any of the Assets, the Contracts or
by which the maintenance and operation of the Facility may be bound or
encumbered.
3.7. Applicable Contracts and Permits.
The Contracts listed on Schedule 1.16 and the Permits listed
on Schedule 1.41 are the only material agreements, contracts, leases, permits,
or licenses necessary for the ownership, maintenance and operation of the
Facility and the Business after the Effective Time.
3.8. Title to Assets.
Except as set forth on Schedule 3.8, as of the date hereof,
Seller owns, and as of the Effective Time, Seller will own, good, valid and
marketable title to all of the Assets, free and clear of any and all Liens,
except for Permitted Liens. As of the Effective Time and upon Buyer's payment of
the Purchase Consideration pursuant hereto, good, valid and marketable title to
the Assets, free and clear of all Liens, except for Permitted Liens, shall pass
to Buyer.
3.9. Condition of Assets.
Except as set forth on Schedule 3.9, as of the Closing Date,
the Fixed Assets, taken as a whole, will be in good operating condition and
repair and substantially fit for the production of Section 29 Product at a rate
of 360,0000 tons per year, and the Facility has been constructed in conformance
with that degree of skill and judgment normally exercised by recognized
engineering and construction firms of similar size and experience to that of the
contractors under the Construction Agreements, and the Assets comprising the
Facility conform to the standards of material and workmanship prevailing in
applicable industries and are free from material defects in design, material and
workmanship and are of good quality.
3.10. Inventory.
As of the Closing Date, the Inventory will not include any
material amount of damaged, defective or obsolete items or materials and will be
useable or salable by Buyer in the ordinary course of business.
3.11. Pending Litigation.
Except as disclosed on Schedule 3.11, there are no actions,
suits, arbitrations or proceedings currently pending or, to the Knowledge of
Seller, threatened against the Assets or the Contracts. There are no outstanding
or unsatisfied judgments, orders or decrees to which Seller is bound.
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3.12. Compliance with Laws.
To the Knowledge of Seller, Seller is in compliance with all
orders, writs, injunctions, decrees, judgments, rulings, laws, rules or
regulations of any governmental entity to which Seller, the Assets or the
Contracts are subject, the violation of which could reasonably be expected to
have a Material Adverse Effect.
3.13. Status of Contracts.
Schedule 1.16 is a true, correct and complete list of all the
material contracts, leases, mortgages, credit agreements, indentures, sales
contracts, purchase orders, and other agreements entered into by Seller relating
primarily to the Business or the Assets. Except as described in the Schedule
3.11, the Contracts are valid and in good standing, and there is no violation
of, conflict with or default under the Contracts, the consequence of which could
reasonably be expected to have a Material Adverse Effect. Seller has not
received any notice from any party to any Contract that such party intends to
terminate, cancel or refuse to renew the same or that such party intends to
offset any amount due thereunder or assert any defense to the enforceability
thereof.
3.14. Consents.
Schedule 1.50 is a true, correct and complete list of all
Required Consents. Seller has not received any notice from any party to any
Permit that such party intends to terminate, cancel or refuse to renew the same
or that such party intends to assert any defense to the enforceability thereof.
3.15. Ground Lease.
The Ground Lease constitutes all of the real property
interests necessary for the Business and the operation of the Facility during
the term of such Ground Lease. Except as indicated on Schedule 3.15, there is no
violation of, conflict with or default under the Ground Lease, except for such
violations, conflicts and defaults the consequences of which could not
reasonably be expected to have a Material Adverse Effect. Seller has not
received any notice from any party to the Ground Lease that such party intends
to terminate, cancel or refuse to renew the same or that such party intends to
assert any defense to the enforceability thereof.
3.16. No Fee Property.
Other than the Ground Lease, no interest in real property is
held or used by Seller in connection with the construction, maintenance,
ownership and operation of the Facility.
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3.17. Books and Records.
As of the Closing Date, the Books and Records shall be
complete and correct in all material respects.
3.18. Environmental Conditions.
(a) Definitions. When used in this Section 3.18:
(i) "Environmental Laws" shall mean all applicable
laws (including common law), rules, orders, regulations, statutes, ordinances,
codes, decrees and requirements of any Governmental Authority regulating,
relating to or imposing liability standards of conduct concerning any Hazardous
Materials or environmental protection.
(ii) "Governmental Authority" shall mean any federal,
state, local, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, or any court, in each case having
jurisdiction over the applicable matter.
(iii) "Hazardous Materials" shall mean any solid
waste, petroleum or petroleum product, hazardous material, hazardous waste,
infectious medical waste, or hazardous or toxic substance defined or regulated
as such in any Environmental Law.
(b) Environmental Representations and Warranties. Except as
set forth on Schedule 3.18 attached hereto:
(i) Seller has not operated the Facility or conducted
business or other activities at or from the Facility, in connection with the
construction of the Facility or otherwise, in a manner that constituted or
constitutes a violation of any applicable Environmental Law;
(ii) There has been no off-site shipment or release
of any Hazardous Materials by the Seller on, under, at, from or in any way
affecting the Facility or any part thereof, which off-site shipment or release
gives rise to liabilities or obligations under applicable Environmental Laws;
(iii) Seller has not received any notices or claims
that it is a responsible party in connection with any claim or notice asserted
pursuant to 42 U.S.C. Section 9601 et seq., or any state superfund law, in
connection with the Facility; and
(iv) Seller has received all Permits as may be
required under applicable Environmental Laws to operate the Facility as of the
Effective Time, and Seller is in compliance in all material respects with the
terms and conditions of each such Permit. Such Permits shall be transferable to
Buyer and will be effective immediately after the Closing.
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3.19. Liabilities.
Except for liabilities underlying any Permitted Liens and
Assumed Liabilities, the Seller has no liabilities which could reasonably be
expected to have a Material Adverse Effect following the Closing, nor has any
condition existed or any event occurred which could reasonably be expected to
give rise to any such liability.
3.20. Agreements with Related Persons.
There are no contracts, licenses, agreements or arrangements
with any Affiliate of Seller in connection with the construction, maintenance,
ownership and operation of the Facility, or ownership and operation of the
Business other than as disclosed on Schedule 3.20.
3.21. Adequacy of the Purchased Assets.
Except as described in Schedule 3.9, the Assets and the
Contracts, together with (i) the technology and know-how being licensed to Buyer
by Seller under the License and Binder Purchase Agreement, and (ii) the chemical
binder to be supplied to Buyer by Seller under the License and Binder Purchase
Agreement, constitute all of the assets, technology, raw materials (other than
feedstock raw materials) and rights reasonably expected to be necessary for the
production by Buyer of Section 29 Product at the rate of 360,000 tons per year.
3.22. Production Capacity.
The Facility has a rated capacity to produce Product at the
rate of 360,000 tons per year.
3.23. Section 29 Issues.
The Facility was placed "in service" for purposes of the Code
prior to July 1, 1998 pursuant to a binding contract entered into prior to
January 1, 1997 and effective at all times thereafter through completion of
construction..
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
4.1 Organization and Standing.
Buyer is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
the power to own its own property, and to execute, deliver and perform this
Agreement and each of the Transaction Documents, and to
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carry on its business as now being conducted. Buyer is qualified to do business
in and is in good standing as a foreign limited liability company authorized to
do business under the laws of the State of Pennsylvania.
4.2. Authorizations; Binding Agreements.
The execution, delivery, and performance of this Agreement and
the other Transaction Documents by Buyer and of each conveyance, assignment,
agreement, and other document herein contemplated to be executed by Buyer have
been fully authorized by all necessary limited liability company action. This
Agreement and the other Transaction Documents and the conveyances, assignments,
agreements, and other documents herein contemplated to be executed, delivered
and performed by Buyer are, or will be upon execution, legal, valid and binding
obligations of Buyer, duly enforceable against Buyer in accordance with their
terms (subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium, and similar laws from time to time in effect
relating to the rights and remedies of creditors as well as to general
principles of equity). This Agreement and the other Transaction Documents and
the conveyances, assignments, agreements, and other documents herein
contemplated to be executed, delivered and performed by Buyer (i) do not and
will not result in any violation of, conflict with or default under the terms of
Buyer's organizational documents, and (ii) subject only to the Required
Consents, do not and will not result in any violation of, conflict with or
default under any material permit, lease, venture, indenture, mortgage,
agreement, contract, judgment, order or other obligation or restriction to which
Buyer is bound (nor, to the Knowledge of Buyer, does there exist any condition
which upon the passage of time or the giving of notice would cause such
violation, conflict or default).
4.3. Brokers or Finders Fees.
Except as set forth on Schedule 4.3, no obligation or
liability, contingent or otherwise, for brokers or finders fees created by Buyer
with respect to the matters provided for in this Agreement shall be imposed upon
Seller.
4.4. No Actions Affecting Enforcement of the Agreement and the
other Transaction Documents.
There are no actions, suits, or proceedings pending, or, to
the Knowledge of Buyer, threatened, against Buyer in any court, or
administrative governmental body or agency which will affect in any adverse
manner the ability of Buyer to execute, deliver and perform this Agreement and
the other Transaction Documents.
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ARTICLE V
CERTAIN UNDERSTANDINGS AND AGREEMENTS
5.1. Conduct of Seller Prior to Closing.
From the date hereof through the Closing Date, Seller shall
operate the Facility in the ordinary course and shall not take any action
inconsistent therewith, except as otherwise permitted by this Agreement or
consented to by Buyer in writing. In connection therewith, Seller shall operate
the Fixed Assets and systems comprising the Facility in a safe manner, using
qualified, competent, and, if necessary, licensed personnel. Without limiting
the generality of the foregoing, Seller shall: (a) keep full and complete Books
and Records in all material respects; (b) maintain in full force and effect
adequate insurance policies covering property, casualty, and general liability
on the Assets; (c) take such commercially reasonable action as may be necessary
to preserve the Facility and the Assets in good condition, normal wear and tear
excepted; (d) use its commercially reasonable efforts to preserve the Facility
and the Assets intact, and to preserve for Buyer the goodwill of the suppliers,
customers and others having business relations with Seller in connection with
the Facility; and (e) comply in all material respects with all Laws applicable
to Seller in the ownership and operation of the Facility.
5.2. Exclusivity.
From the date hereof through the Closing Date, none of Seller
or any Affiliate shall, directly or indirectly, through any officer or director
of Seller or any Affiliate, any agent or otherwise, with respect to the Assets
and the Contracts: (a) solicit, initiate, encourage the submission of, respond
to or discuss inquiries, proposals or offers from any person relating to any
acquisition or purchase of any of the Assets or Contracts, or any exchange
offer, merger, consolidation, business combination or sale of substantial
assets, sale of securities, or similar transactions involving the Assets (a
"Competing Transaction"); (b) enter into or participate in any discussions or
negotiations regarding a Competing Transaction, or furnish to any other person
any information with respect to the Assets or Contracts, except for disclosures
which are required under federal securities laws or required to meet Seller's
obligations hereunder; or (c) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek a Competing Transaction. Seller shall immediately notify
Buyer of any proposal relating to a Competing Transaction or if any inquiry or
contact with any person with respect thereto is made and shall immediately
deliver to Buyer copies of any such written proposal or offer and any
communications made in response thereto. It is agreed that a sale in any form of
Seller's remaining assets not associated with the Facility, including a sale of
equity in Seller, shall not be a Competing Transaction.
5.3. Access to Information.
Between the date of this Agreement and the Effective Time,
Seller will give Buyer and its authorized representatives reasonable access
during normal business hours to all
16
information, facilities and books and records relating to the Facility and the
Business, permit Buyer to make such inspections as it may reasonably require and
cause its officers to furnish Buyer with such financial and operating data and
other information with respect to the Facility and the Business as Buyer may
from time to time reasonably request, and, further, Seller shall make available
to Buyer for examination the originals or the true and correct copies of all
documents which Buyer may reasonably request in connection with the transactions
contemplated by this Agreement; provided, however, that all such activities
shall be conducted during normal business hours with a view towards minimizing
any disruption of the day-to-day business of Seller.
5.4. Best Efforts.
Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, and to obtain the Required
Consents, necessary to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Buyer and Seller will execute any
additional instruments necessary to consummate the transactions contemplated
hereby.
5.5. Public Announcements.
Buyer and Seller will consult with each other before issuing
any press release or otherwise making any public statement with respect to this
Agreement and the transactions contemplated herein, and shall not issue any such
press release or make any such public statement prior to such consultation or as
to which the other party reasonably objects, except as may be required by Law or
by obligations pursuant to any listing agreement with any national securities
exchange or inter-dealer quotation system.
5.6. Confidentiality.
Notwithstanding the execution of this Agreement, the
confidentiality provisions of the Confidentiality Agreement shall remain in full
force and effect and shall survive the Closing.
5.7. Negative Covenants.
During the period from the date hereof and the Effective Time,
Seller shall:
(a) not sell, lease, assign, hypothecate or agree to sell,
lease, assign, hypothecate or otherwise transfer or dispose of, any material
component of the Assets, except as contemplated by the Permitted Liens;
17
(b) not enter into any lease, contract, agreement, commitment,
arrangement or transaction relating to the Assets or the Facility except in the
normal course of operation of the Facility and in accordance with past practice,
or terminate, cancel or modify or in any way impair any of the Contracts or
Permits other than in the normal course of operation of the Facility;
(c) not subject to any Lien, other than Permitted Liens, any
of the Assets, and shall use commercially reasonable efforts not to permit or
allow any of the Assets to become subject to any Lien, other than Permitted
Liens; and
(d) not enter into any lease, contract, agreement, commitment,
arrangement or transaction or do any other act or omit to do any commercially
reasonable act that might reasonably be expected to adversely affect the Assets
or the construction, maintenance and operation of the Facility or the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents.
5.8. Taxes.
Following Closing, Seller shall timely file all tax returns
and reports relating to the Assets, the Contracts and the conduct of the
construction, maintenance and operation of the Facility prior to Closing which
have not been filed or were not yet due to be filed prior to Closing, and Seller
shall timely pay all taxes, assessments, fees, interest, penalties and
governmental charges relating to the Assets, the Contracts or the conduct of the
construction, maintenance and operation of the Facility prior to Closing which
have not been paid or were not yet due and payable prior to Closing.
5.9. Private Letter Ruling.
(a) Following Closing, Buyer plans to seek a Private Letter
Ruling from the IRS as to matters relating to the Facility and Section 29 of the
Code. Seller shall cooperate with and assist Buyer, as reasonably requested by
Buyer, in connection with seeking such Private Letter Ruling. In the event that
Buyer does seek such a Private Letter Ruling and the IRS refuses or fails to
issue it in a form that is satisfactory in the sole and absolute discretion of
Buyer, Buyer shall be entitled to elect (by giving written notice to Seller to
such effect) to terminate the obligation to make further royalty payments under
Section 3 of the License and Binder Purchase Agreement and, in such event,
Seller shall have the option to purchase, within one year following such notice,
the Assets and Contracts (and assume obligations under the Contracts) from Buyer
at the greater of (i) the amount of Purchase Consideration theretofore paid by
Buyer plus the amount of any capital expenditures made by Buyer in connection
with the Facility and Assets plus any obligations of Buyer in respect of the
Facility and the Assets and Contracts, or (ii) the fair market value of such
Assets and Contracts.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the License and Binder Purchase Agreement, Buyer shall not be
obligated to make any payments
18
after the Effective Time in respect of the Purchase Consideration or royalties
until the conditions set forth in Schedule 5.9 are satisfied, other than any
such condition, the failure of which to obtain could not reasonably be expected
to have a Material Adverse Effect on the ownership and operation of the Assets,
Contracts, Facility and Business after the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement.
Seller shall have performed and complied in all material
respects with all of its obligations under this Agreement which are to be
performed or complied with by it prior to or on the Closing Date.
6.2. Proceedings and Instruments Satisfactory.
All proceedings, corporate or other, to be taken by Seller in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Buyer.
6.3. No Litigation.
No investigation, suit, action or other proceedings shall be
threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.4. Representations and Warranties.
The representations and warranties made by Seller in this
Agreement shall be true and correct in all respects (as to representations and
warranties qualified or limited by the term "Material Adverse Effect," the word
"material," or phrases of like import), and in all material respects (as to
representations and warranties not so qualified or limited) as of the Closing
Date with the same force and effect as though said representations and
warranties had been made on the Closing Date.
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6.5. Material Damage to Assets.
Between the date of this Agreement and the Closing Date, the
Assets shall not have been materially and adversely affected by reason of any
loss, taking, condemnation, destruction or physical damage, whether or not
insured against.
6.6. Permits.
All Permits required to operate the Facility as contemplated
hereby shall have been obtained by, or transferred to Buyer, other than (i) such
Permits, the failure of which to obtain could not reasonably be expected to have
a Material Adverse Effect and, (ii) a non-temporary Pennsylvania Air Quality
Permit as referenced in Section 1.41.
6.7. Consents.
All Required Consents applicable to Seller shall have been
obtained.
6.8. Lien Waivers and Estoppel Certificates.
Seller shall have delivered to Buyer: (a) waivers of any
statutory landlord or lessor liens with respect to the Real Property and any
material item of leased tangible personal property; and (b) estoppel
certificates, substantially in the form of Exhibit K attached hereto or
otherwise reasonably satisfactory in form and substance to Buyer, from the
landlord of the Real Property and the lessor of each material item of leased
tangible personal property.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
7.1 Compliance with Agreement.
Buyer shall have performed and complied in all material
respects with all of its obligations under this Agreement which are to be
performed or complied with by it prior to or on the Closing Date.
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7.2. Proceedings and Instruments Satisfactory.
All proceedings, corporate or other, to be taken by Buyer in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Seller.
7.3. No Litigation.
No investigation, suit, action or other proceeding shall be
threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.4. Representations and Warranties.
The representations and warranties made by Buyer in this
Agreement shall be true and correct in all respects (as to representations and
warranties qualified or limited by the term "Material Adverse Effect," the word
"material," or phrases of like import), and in all material respects (as to
representations and warranties not so qualified or limited) as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
7.5. Required Consents.
All Required Consents applicable to Buyer shall have been
obtained.
ARTICLE VIII
INDEMNITIES AND ADDITIONAL COVENANTS
8.1. Seller's Indemnity.
(a) Seller hereby indemnifies and holds Buyer harmless from
and against, and agrees to defend promptly Buyer from, and reimburse Buyer for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind, including, without limitation, environmental liabilities
(whether involving personal injury or property damage), reasonable attorneys'
fees and other legal costs and expenses (hereinafter referred to collectively as
"Losses"), that Buyer and any Affiliate of Buyer may at any time suffer or
incur, or become subject to, as a result of or in connection with: (i) any
breach or inaccuracy of any of the representations and warranties made by Seller
in this Agreement or any other agreement or instrument delivered by Seller
pursuant hereto; (ii) any failure of Seller to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the agreements and instruments
delivered by Seller pursuant to this Agreement; (iii) claims by third parties
(including governmental authorities)
21
against Buyer relating to the construction, operation and ownership by Seller of
the Assets and the performance by Seller under the Contracts in each case under
this clause (iii) for the period prior to the Effective Time; (iv) any of the
matters referenced in Schedules 3.5 and 3.11; (v) any violations of, or failure
to operate in accordance with, necessary Permits prior to the effective time;
(vi) failure by Seller to satisfy and perform any of the obligations set forth
in Schedule 5.9 and any cost incurred to satisfy and perform any such obligation
or resulting from any additional or modified terms under any Contracts (or
substitute contracts) required for or resulting from the satisfaction and
performance of such obligations; and (vii) any and all liabilities and
obligations of Seller which are not expressly assumed by Buyer as Assumed
Liabilities pursuant hereto;
(b) In the event a claim against Buyer arises that Buyer
reasonably believes is covered by the indemnity provisions of Section 8.1((a))
of this Agreement, notice shall be given promptly by Buyer to Seller containing
detail reasonably sufficient for Seller to identify the nature and basis of the
claim. Provided that Seller admits in writing to Buyer that such claim is
covered by the indemnity provisions of Section 8.1((a)) hereof, Seller shall
have the right to contest and defend by all appropriate legal proceedings such
claim and to control all settlements (unless Buyer agrees to assume the cost of
settlement and to forgo such indemnity) and to select lead counsel to defend any
and all such claims at the sole cost and expense of Seller; provided, however,
that Seller may not effect any settlement that could result in any cost, expense
or liability to Buyer unless Buyer consents in writing to such settlement and
Seller agrees to indemnify Buyer therefor. Buyer may select counsel to
participate with Seller's counsel in any such defense, in which event Buyer's
counsel shall be at its own sole cost and expense. In connection with any such
claim, action or proceeding, the parties shall cooperate with each other and
provide each other with access to relevant books and records in their
possession.
(c) Seller shall not be required to indemnify and hold
harmless Buyer pursuant to Section 8.1((a))(i) hereof in respect of the
representations and warranties made by Seller herein unless such right to
indemnification is asserted by Buyer (whether or not such Losses have actually
been incurred) by notice to Seller within 12 months after the Closing Date, with
the exception of (i) the representations and warranties set forth in Sections
3.4 and 3.23, which must be asserted by Buyer within the applicable statute of
limitations or any extensions thereof required by any applicable authority
relating to the taxes or assessments giving rise to the Loss, plus 60 days, (ii)
the representations and warranties set forth in Section 3.12, which must be
asserted by Buyer within the applicable statute of limitations for the violation
of the underlying law that forms the basis of such claim, plus 60 days, (iii)
the representations and warranties set forth in Sections 3.1, 3.2, and 3.8,
which shall be without time limitation, and (iv) the representations and
warranties set forth in Section 3.18 hereof, which must be asserted within 24
months after the Closing Date.
(d) Notwithstanding the foregoing, Seller shall not be
required to indemnify Buyer under Section 8.1((a))(i) in respect of the
representations and warranties made by Seller unless the amount of all Losses
for which indemnification is sought by Buyer under Section 8.1((a))(i) exceeds,
in the aggregate, $250,000, in which event, Seller's indemnity obligation
22
hereunder would apply to all such Losses. Seller's aggregate indemnification
obligation pursuant to Section 8.1((a))(i) shall in no event exceed the Purchase
Consideration described in Section 2.2((a)), together with that portion of the
Purchase Consideration described in Section 2.2((b)) which ultimately is
released to Seller.
(e) The indemnification provided in this Section 8.1,
including the limitations with respect thereto, shall be the exclusive remedy
for Buyer with respect to Losses as a result of or in connection with the
matters described in Section 8.1((a))(i), notwithstanding any provisions in this
Agreement or any other such agreement or instrument to the contrary.
8.2. Buyer's Indemnity.
(a) Buyer hereby indemnifies and holds Seller harmless from
and against, and agrees to defend promptly Seller from and reimburse Seller for,
any and all Losses that Seller may at any time suffer or incur, or become
subject to, as a result of or in connection with: (i) any breach or inaccuracy
of any of the representations and warranties made by Buyer in this Agreement or
any other agreement or instrument delivered by Buyer pursuant hereto; (ii) any
failure by Buyer to carry out, perform, satisfy and discharge any of its
covenants, agreements, undertakings, liabilities or obligations under this
Agreement or under any of the agreements and instruments delivered by Buyer
pursuant to this Agreement; and (iii) claims by third parties (including
governmental authorities) against Seller relating to the operation and ownership
by Buyer of the Assets and the performance by Buyer under the Contracts in each
case under this clause (iii) for the period following the Effective Time.
(b) In the event a claim against Seller arises that is covered
by the indemnity provisions of Section 8.2.((a)) of this Agreement, notice shall
be given promptly by Seller to Buyer containing detail reasonably sufficient for
Buyer to identify the nature and basis of the claim. Provided that Buyer admits
in writing to Seller that such claim is covered by the indemnity provisions of
Section 8.2.((a)) hereof, Buyer shall have the right to contest and defend by
all appropriate legal proceedings such claim and to control all settlements
(unless Seller agrees to assume the cost of settlement and to forgo such
indemnity) and to select lead counsel to defend any and all such claims at the
sole cost and expense of Buyer; provided, however, that Buyer may not effect any
settlement that could result in any cost, expense or liability to Seller unless
Seller consents in writing to such settlement and Buyer agrees to indemnify
Seller therefor. Seller may select counsel to participate with Buyer's counsel
in any such defense, in which event Seller's counsel shall be at the sole cost
and expense of Seller. In connection with any such claim, action or proceeding,
the parties shall cooperate with each other and provide each other with access
to relevant books and records in their possession.
(c) Buyer shall not be required to indemnify and hold harmless
Seller pursuant to Section 8.2.((a))(i) hereof in respect of the representations
and warranties made by Buyer herein unless such right to indemnification is
asserted by Seller (whether or not such Losses have actually been incurred) by
notice to the Buyer within 12 months after the Closing Date, with the
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exception of the representations and warranties set forth in Sections 4.1 and
4.2 hereof, which shall be without time limitation.
(d) Notwithstanding the foregoing, Buyer shall not be required
to indemnify Seller under Section 8.2.((a))(i) in respect of the representations
and warranties made by Buyer unless the amount of all Losses for which
indemnification is sought by Seller under Section 8.2.((a))(i) exceeds, in the
aggregate, $250,000, in which event, Buyer's indemnity obligation hereunder
would apply to all such Losses.
(e) The indemnification provided in this Section 8.2,
including the limitations with respect thereto, shall be the exclusive remedy
for Seller with respect to Losses as a result of or in connection with the
matters described in Section 8.2((a))(i), notwithstanding any provisions in this
Agreement or any other such agreement or instrument to the contrary.
8.3. Bulk Sales Compliance.
To the extent applicable, Buyer hereby waives compliance by
Seller with the provisions of the bulk sales law of any U.S. jurisdiction, and
in any event, Seller covenants and agrees to pay and discharge when due all
claims of any governmental entities and creditors of Seller and its subsidiaries
that could be asserted against Buyer by reason of such non-compliance. Seller
agrees to indemnify and hold Buyer harmless from and against and shall on demand
reimburse Buyer for any and all Losses suffered by Buyer by reason of Seller's
failure to pay and discharge any such claims.
8.4. Additional Instruments.
At any time and from time to time after the Closing, at either
party's request and without further consideration, Seller or Buyer, as the case
may be, shall execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such other action as Seller or
Buyer may reasonably deem necessary or desirable in order to more effectively
transfer, convey, and assign to Buyer, and confirm Buyer's title to and interest
in and responsibility and liability for, the Assets and Contracts and the
consummation of the transactions contemplated herein. Without limiting the
generality of the foregoing, Seller will cooperate with and assist Buyer in
renewing, or transferring, into Buyer's name those Permits for which Buyer
requests such assistance and cooperation at the appropriate time for such
renewal or transfer as determined by Buyer.
8.5. Access to Books, Records and Employees.
From and after the Closing Date, Buyer will authorize and
permit Seller and its respective representatives to have access during normal
business hours, upon reasonable notice and for reasonable purposes and in such
manner as will not unreasonably interfere with the conduct of Buyer's business,
to Books and Records within the control of Buyer that relate to the
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Facility. From and after the Closing Date, Seller will authorize and permit
Buyer and its representatives to have access during normal business hours, upon
reasonable notice and for reasonable purposes and in such manner as will not
unreasonably interfere with the conduct of Seller's business, to all books and
records, files, documents and other correspondence related to the Facility prior
to the Effective Time, which are not included among the Books and Records. Buyer
and Seller agree to maintain all books, records, files, documents and other
correspondence related to the Facility prior to the Effective Time in accordance
with their respective normal document retention practices after the Closing
Date.
ARTICLE IX
TERMINATION
9.1. Termination.
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned as follows: (a) at any time prior to the
Closing Date by mutual written agreement of Seller and Buyer; or (b) by either
Seller or Buyer if the Effective Time shall not have occurred on or before
August 31, 1999, provided, however, that the right to terminate this Agreement
pursuant to this clause (b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur prior to such date.
9.2. Rights on Termination; Waiver.
(a) If this Agreement is terminated pursuant to Section 9.1,
all further obligations of the parties under or pursuant to this Agreement shall
terminate.
(b) If any of the conditions set forth in Article VI of this
Agreement have not been satisfied, Buyer may nevertheless elect to waive such
conditions and proceed with the consummation of the transactions contemplated
hereby. If any of the conditions set forth in Article VII of this Agreement have
not been satisfied, Seller may nevertheless elect to waive such conditions and
proceed with the consummation of the transactions contemplated hereby. The
election by Buyer or Seller to terminate this Agreement pursuant to Section
9.1(b) shall not in any way affect the rights of such party against the other
party for any breach or default under this Agreement.
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ARTICLE X
MISCELLANEOUS
10.1. Entire Agreement; Amendment.
This Agreement and the documents referred to herein and to be
delivered pursuant hereto constitute the entire agreement between the parties
pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or therein. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. The representations and warranties of each party hereto shall be
deemed to be material and to have been relied upon by the other party. The
representations, warranties, covenants and agreements of Seller and Buyer
contained herein shall survive the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby and, as to the
representations and warranties, shall be effective until the relevant time
limitation for making any indemnity claim with respect to such representations
and warranties under Sections 8.1 and 8.2. shall have been reached and no
longer.
10.2. Expenses.
Except as otherwise specifically provided herein, each of the
parties hereto shall pay the fees and expenses of their respective counsel,
accountants and other experts and the other expenses incident to the negotiation
and preparation of this Agreement and consummation of the transactions
contemplated hereby.
10.3. Governing Law; Consent to Jurisdiction.
This Agreement shall be construed and interpreted according to
the laws of the State of New York, without regard to the conflicts of law rules
thereof; provided, however, that Section 5-1401 of the New York General
Obligations Law shall apply to this Agreement. Each of the parties hereto, in
respect of itself and its properties, agrees to be subject to (and hereby
irrevocably submits to) the nonexclusive jurisdiction of the United States
federal court for the Southern District of New York or New York state court
sitting in the Borough of Manhattan, New York, in respect of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated herein, and irrevocably agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court.
Each of the parties hereto irrevocably waives, to the fullest extent it may
effectively do so under applicable
26
Law, any objection to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Either party hereto may make service on the other party by sending or delivering
a copy of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 10.5 hereof. Nothing in this
Section 10.3, however, shall affect the right of any party to bring any action
or proceeding arising out of or relating to this Agreement in any other court or
to serve legal process in any other manner permitted by law or in equity.
10.4. Assignment.
This Agreement and each party's respective rights hereunder
may not be assigned, by operation of law or otherwise, without the prior written
consent of the other party.
10.5. Notices.
All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given at the earlier of the date (a) when delivered personally or by messenger
or by overnight delivery service to an officer of the other party, (b) five days
after being mailed by registered or certified United States mail, postage
prepaid, return receipt requested, or (c) when received via telecopy, telex or
other electronic transmission, in all cases addressed to the person for whom it
is intended at his address set forth below or to such other address as a party
shall have designated by notice in writing to the other party in the manner
provided by this Section:
If to Buyer: **
Fax: **
Attn: **
and:
With a copy to: ** Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax: ** Fax: (000) 000-0000
Attn: General Counsel. Attn: Xxxxxxx X. Xxxxxx, Esq.
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If to Seller: Covol Technologies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxx
and:
With a copy to: Covol Technologies, Inc. Pillsbury Madison & Sutro LLP
0000 Xxxxx Xxxxxxxx Xxxx 000 Xxxxxxxxxx Xxxxxx
Xxxx, Xxxx 00000 Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx Xxxxxxxx, Esq. Attn: Xxxxxxxxx X. Xxxxxxxx III,
Esq.
10.6. Counterparts; Headings.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but such counterparts shall together
constitute but one and the same Agreement. The Table of Contents and Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
10.7. Interpretation.
Unless the context requires otherwise, all words used in this
Agreement in the singular number shall extend to and include the plural, all
words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders. All references to
contracts, agreements, leases or other understandings or arrangements shall
refer to oral as well as written matters. The specificity of any representation
or warranty contained herein shall not be deemed to limit the generality of any
other representation or warranty contained herein.
10.8. Severability.
If any provision, clause or part of this Agreement, or the
application thereof under certain circumstances, is held invalid, the remainder
of this Agreement, or the application of such provision, clause or part under
other circumstances, shall not be affected thereby.
10.9. No Reliance.
No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement. Buyer
and Seller assume no liability to any third party because of any reliance on the
representations, warranties and agreements of Buyer or Seller contained in this
Agreement. Nothing contained in this Agreement shall be construed as creating
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a partnership or joint venture or any agency relationship between the parties
hereto, or any other relationship other than buyer and seller as provided
herein.
10.10. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
10.11. Specific Performance.
The parties hereto agree that irreparable damage would occur
in the event any of the provisions of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity.
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IN WITNESS WHEREOF, each party hereto has caused this Purchase
Agreement to be executed in its name by a duly authorized officer as of the day
and year first above written.
**
By: **
Its: Vice President and Chief
Financial Officer
COVOL TECHNOLOGIES, INC.
---------------------------------
By: Xxxx X. Xxxxxx
Its: Chairman and Chief Executive
Officer
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