STOCK PURCHASE AGREEMENT
BETWEEN
XXXXX X. XXXXXXX,
SELLER,
AND
HEARTLAND, INC.,
BUYER
THIS AGREEMENT is made and entered into effective December 30, 2004, by and
between Xxxxx X. Xxxxxxx, a Minnesota resident, (hereinafter referred to as
"Seller") and Heartland, Inc., a Maryland corporation, (hereinafter referred to
as "Buyer").
WHEREAS, Seller is the owner of all outstanding shares of Karkela
Construction, Inc., a Minnesota corporation (the "Company"); and
WHEREAS, Buyer wishes to acquire the Company on the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual promises, warranties,
conditions and mutual covenants contained in this Agreement, the parties agree
as follows:
Section 1. Sale of Shares.
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Seller shall convey to Buyer 1,000 shares of common stock of the Company
(the "Purchased Shares") and shall endorse and deliver all certificates
representing said Purchased Shares to Buyer at Closing.
Section 2. Purchase Price.
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The purchase price for the Purchased Shares shall be Three Million Dollars
($3,000,000.00), payable as follows:
A. Down Payment. One Hundred Thousand and No/100 Dollars ($100,000.00) in
certified funds, due at Closing. A short term Promissory Note for
Fifty Thousand and No/100 Dollars ($50,000.00) due on or before
January 31, 2005.
B. Promissory Note. One Million Three Hundred Fifty Thousand Dollars
($1,350,000.00), in a promissory note due on or before March 31, 2005
(the "Note"). The Note shall be interest free so long as it is paid
when due. If it is not paid when due, interest shall be due from the
Date of Closing to the date of actual payment at eight percent (8%)
per annum simple interest, compounding annually. The Note shall be
paid in certified or other immediately available funds.
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C. Stock. Five hundred thousand (500,000) shares of common stock of
Buyer, issued by Buyer to Seller at Closing (the "New Stock"). Should
the common stock of Buyer not be trading at a minimum of Four Dollars
($4.00) per share twelve (12) months after Closing (the "Adjustment
Date"), then Seller shall be compensated for the difference in
additional registered stock. The amount of additional stock to be
issued shall be calculated as follows: the value of the New Stock
shall be calculated by multiplying 500,000 by the per share trading
price of Buyer's common stock on the Adjustment Date. The result shall
then be subtracted from $2,000,000. The result shall then be divided
by the per share trading price of Buyer's common stock on the
Adjustment Date. The result shall be the number of additional shares
to be issued to Seller. Said shares shall be issued within ten (10)
days of the Adjustment Date. Buyer's shares will be unregistered.
Seller may not sell or transfer such shares (except to a Revocable
Trust whose Grantor and Trustee is the Seller) for a period of twelve
(12) months from the date of issuance.
D. Purchase Price Adjustment From Financial Review. Buyer shall conduct a
thorough and complete financial review and cause the necessary audited
financials solely at Buyer's expense to be prepared which may be
required to comply with Buyer's securities filing obligations. In the
event there is a downward cumulative adjustment in the reported Gross
Profit of the Company of more than Five Percent (5.0%) or a downward
adjustment in the reported Retained Earnings of the Company of more
than Ten Percent (10%) the Buyer may make a corresponding downward
adjustment in the total purchase price for the stock of the Company.
Such adjustment shall be made to the stock issued the Seller under
(C), above. In the event the proposed adjustment of the number of
shares exceeds Two Hundred Thousand (200,000) shares the Seller shall
have the option of repurchasing the Company by tendering the Note and
Stock received from Buyer and receiving from the Buyer the shares of
the Company transferred at Closing. Seller shall be entitled to retain
the cash Down Payment received as liquidated damages for the costs and
disruption the transaction caused to the Company, its employees,
suppliers and customers.
Section 3. Security Interest and Proxy.
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Buyer shall execute and deliver to Seller a security agreement granting
Seller a first security interest in the Purchased Shares to secure the Note and
all other obligations of Buyer hereunder (the "Security Agreement"). The
Security interest granted appoints Seller as proxy (which appointment shall be
coupled with Seller's security interest in the Purchased Shares and shall thus
be irrevocable by Buyer) with the unrestricted right to vote the Purchased
Shares until Buyer's obligations under the Note have been satisfied and stock
adjustment under 2(C) have been completed and the stock issued.
Section 4. Company Authority.
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The Company and Seller shall execute all documents necessary, including
without limitation, corporate resolutions, and deliver to Buyer all documents,
including Articles of Incorporation and Bylaws, necessary to establish the
Company's authority to enter into this Agreement and any other agreements
described herein.
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Section 5. Closing.
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The closing of this Agreement (the "Closing") shall take place at the
offices of St.Xxxxx Xxx Offices, P.A., 0000 Xxxxxxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxx, at 1:00 pm. on December 31, 2004 (the "Closing Date") or at such
other time and location as the Parties may mutually agree. At Closing, Seller
shall deliver to Buyer such certificates of shares and other instruments of
transfer as may be necessary to transfer ownership to Buyer of good and
marketable title to the Purchased Shares. All documents and papers to which the
parties are entitled under this Agreement, unless otherwise specified herein,
shall be delivered at Closing.
Section 6. Representations and Warranties of Seller.
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Seller represents and warrants the following to Buyer with the intention
that Buyer may rely upon the same. The purpose and general import of these
representations and warranties are that Seller has made appropriate full
disclosure to Buyer, that no material information has been withheld, and that
the information exchanged is accurate, true and correct.
A. Organization and Qualification. The Company is duly organized, in good
standing, and duly qualified to conduct any business it may be
conducting, as required by law or local ordinance.
B. Corporate Authority. The Company has corporate authority, under the
laws of its jurisdiction and its constituent documents, to do each and
every element of performance to which it has agreed, and which is
reasonably necessary, appropriate and lawful, to carry out this
Agreement in good faith.
C. Ownership of Assets and Property. The Company has lawful title and
ownership of its property as reported to Buyer, and as disclosed in
its financial statements.
D. Absence of Certain Changes or Events. There have been no material
changes of circumstances or events regarding the Company, which have
not been fully disclosed to Buyer. The Seller has declared a dividend
payable to shareholders of record as of December 15, 2004 to be paid
on or before January 5, 2005 in the amount of $200,000.00. Shareholder
will be purchasing the Non Depreciable Asset an its appraised value
upon receipt of the appraisal.
E. Absence of Undisclosed Liabilities. The Company does not have, and has
no reason to anticipate having, any material liabilities, which have
not been disclosed to Buyer, in the financial statements or otherwise
in writing. To secure bonding and working capital for the Company the
Seller has personally guaranteed the bonding obligations of the
Company and has personally guaranteed the line of credit in the amount
of $500,000.00 obtained from BNC National Bank. These guarantees will
be withdrawn upon the payment of the Promissory Note and the Buyer
will be obligated to provide the additional security necessary to
secure these financial facilities. The Company leases office space at
its headquarters, for storage and for remote office from Xxxxx X.
Xxxxxxx at commercially reasonable rental rates. The Company does
business with Karkela General Contractors, Inc., wholly owned by
Seller. The Company maintains a Profit Sharing Plan for its Employees.
F. Legal Proceedings. There are no legal, administrative, or regulatory
proceedings, pending or suspected, regarding the Company, which have
not been fully disclosed in writing to Buyer.
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G. No Breach of Other Agreements. This Agreement, and the faithful
performance of this Agreement, will not cause any breach of any other
existing agreement, or any covenant, consent decree, or undertaking by
either Seller or the Company.
H. Capital Stock. The capital of the Company consists of 200,000
authorized shares of common stock, no par value, of which 1,000 shares
are issued to Seller. The 1,000 shares issued to Seller are in fact
issued and outstanding, duly and validly issued, were issued as and
are fully paid and non-assessable shares and, other than as
represented in writing, there are no other securities, options,
warrants or rights outstanding, to acquire further shares of the
Company
Section 7. Representations and Warranties of Buyer.
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Buyer represents and warrants the following to Seller with the intention
that Seller may rely upon the same. The purpose and general import of these
representations and warranties are Buyer has made appropriate full disclosure to
Seller, that no material information has been withheld, and that the information
exchanged is accurate, true and correct.
A. Organization and Qualification. Buyer is duly organized, in good
standing, and duly qualified to conduct any business it may be
conducting, as required by law or local ordinance.
B. Corporate Authority. Buyer has corporate authority, under the laws of
its jurisdiction and its constituent documents, to do each and every
element of performance to which it has agreed, and which is reasonably
necessary, appropriate and lawful, to carry out this Agreement in good
faith.
C. Ownership of Assets and Property. Buyer has lawful title and ownership
of its property as reported to Seller, and as disclosed in its
financial statements.
D. Absence of Certain Changes or Events. There have been no material
changes of circumstances or events, which have not been fully
disclosed to Seller.
E. Absence of Undisclosed Liabilities. Buyer does not have, and has no
reason to anticipate having, any material liabilities, which have not
been disclosed to Seller, in the financial statements or otherwise in
writing.
F. Legal Proceedings. There are no legal, administrative, or regulatory
proceedings, pending or suspected, which have not been fully disclosed
in writing to Seller.
G. No Breach of Other Agreements. This Agreement, and the faithful
performance of this Agreement, will not cause any breach of any other
existing agreement, or any covenant, consent decree, or undertaking by
Buyer.
H. Capital Stock. The capital of Buyer consists of 100,000,000 authorized
shares of common stock, $.001 par value, of which 15,200,000 shares
are issued and outstanding as of the date of this Agreement and as of
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Closing, except as otherwise disclosed in writing, and 5,000,000
shares of preferred stock, $.001 par value, of which none are issued
and outstanding as of the date of this Agreement and as of Closing,
except as otherwise disclosed in writing. Said 15,200,000 shares of
common stock are in fact issued and outstanding, duly and validly
issued, were issued as and are fully paid and non-assessable shares
and, other than as represented in writing, there are no other
securities, options, warrants or rights outstanding to acquire further
shares of Buyer.
I. Acknowledgment of Disclaimer of Profits. Buyer expressly acknowledges
and agrees that Seller has not made any representation or warranty
with respect to the future profitability or financial prospects of the
Company after the Closing Date.
J. Ability to Perform on Agreement. Buyer has the authority and ability
to fully and timely perform on its obligations hereunder. Including
but not limited to, payment on the Note, replacement of security to
secure a working capital line of credit and appropriate bonding
capacity to continue the growth of the company. Buyer acknowledged
that the Company needs working capital in an amount of at least Ten
Percent (10%) of the Gross Revenues of the Company.
Section 8. Employment Matters.
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The Company has and will use its best efforts to keep available to Buyer
the services of its present key employees and will work in good faith to
implement a stock option plan to retain such key employees. The Company will
continue the employment agreement of Seller and other key employees in full
force and effect. The Company has obtained key employee insurance on the lives
of its key employees. Seller shall have the option to cause the Company to
transfer such insurance to Seller following payment on the Promissory Note. In
the event the Company or its successor seeks to terminate or modify the key
employee insurance policies in place at Closing, the affected employees shall
have the option to have such policies transferred to them at the Company's costs
of the policies as if the employee had retired from the Company. Seller and
Buyer agree to negotiate in good faith a reasonable stock option plan to cover
the key employees of the Company. At a minimum such a plan would provide for
annual stock option grants to key employees in amounts at least equal to Ten
Percent (10%) of W-2 compensation. Failure of the parties to implement such a
plan on or before the Note payment date will provide the Seller an additional
option to declare the Note in default, as if payment had not been made, and be
governed by Section 11(D).
Section 9. Confidentiality.
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"Confidential Information" means any information or compilation of
information not generally known, which is proprietary to the parties, and
includes, without limitation, trade secrets, inventions, and information
pertaining to development, marketing, sales, accounting and licensing of the
business products and services, customer information, customer lists, and any
customer information contained in customer records, working papers or
correspondence files and all financial information, including financial
statements, notes thereto and information contained in federal and state tax
returns. Information shall be treated as Confidential Information irrespective
of its source and all information, which is identified as being "confidential",
"trade secret", or is identified or marked with any similar reference shall be
presumed to be Confidential Information. The Parties hereby agree to treat as
confidential all Confidential Information of any Party received or learned by
any other Party, whether or not Closing occurs. The obligations imposed by this
section shall survive Closing.
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Section 10. Conditions to Closing; Abandonment of Transaction.
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A. Conditions to Obligation of Buyer to Proceed on the Closing Date. The
obligations of Buyer to proceed on the Closing Date shall be subject
(at its discretion) to the satisfaction, on or prior to the Closing,
of all of the following conditions:
(1) Truth of Representations and Warranties. The representations and
warranties of Seller herein shall be true in all material
respects on the Closing Date with the same effect as though made
at such time.
(2) Compliance with Obligations. Seller shall have performed all
material obligations and complied with all material covenants and
conditions prior to or as of the Closing Date.
(3) Review and Appraisal. Any appraisal obtained by Buyer at its
expense of the Company and any real estate owned by the Company
shall be satisfactory to Buyer. Buyer shall have reviewed the
Company's books and records and found the same satisfactory.
(4) Approval by Board. The Board of Directors of Buyer shall have
determined that it is advisable and in the best interests of
Buyer to proceed with the acquisition of the Company by Buyer, in
accordance with Internal Revenue Code Section 354(a) and 368(b).
B. Conditions to Obligations of Seller to Proceed on the Closing Date.
The obligations of Seller to proceed on the Closing Date shall be
subject (at its discretion) to the satisfaction, on or prior to the
Closing, of all of the following conditions:
(1) Truth of Representations and Warranties. The representations and
warranties of Buyer herein shall be true in all material respects
on the Closing Date with the same effect as though made at such
time.
(2) Compliance with Obligations. Buyer shall have performed all
material obligations and complied with all material covenants and
conditions prior to or as of the Closing Date.
(3) Due Diligence. Seller shall be fully satisfied, in his sole
discretion, with his due diligence review of Buyer.
C. Conduct of Due Diligence. Buyer and Seller shall have furnished to
each other all corporate and financial information which is customary
and reasonable, to conduct their respective due diligence. If, as a
result of their due diligence examination, either party determines
that there is a reason to terminate this Agreement, they must give
written notice to the other party prior to the Closing Date.
D. Termination of Agreement. This Agreement and the transactions
contemplated herein may be terminated at or prior to the Closing Date
as follows:
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(1) By mutual written consent of all parties.
(2) By Buyer pursuant to written notice delivered at or prior to the
Closing Date if Seller has failed in any material respect to
satisfy all of the conditions to Closing set forth in this
Agreement or any condition precedent to Buyer's obligation to
close has not been satisfied or waived.
(3) By Seller pursuant to written notice delivered at or prior to the
Closing Date if Buyer has failed in any material respect to
satisfy the conditions to Closing set forth in this Agreement or
any condition precedent to Seller's obligation to close has not
been satisfied or waived.
(4) By any party if the party shall have determined in its sole
discretion that because of the institution or threatened
institution of litigation, or for any other reason, it is
inadvisable to consummate the transaction provided for herein.
E. Consequences of Termination. In the event of termination of this
Agreement, each party will return to the other all documents and
materials obtained from the other in connection with the transaction
contemplated by this Agreement and shall not use and will keep
confidential all Confidential Information about the other party
obtained pursuant to this Agreement. Upon termination of this
Agreement as provided herein, each party will pay all costs and
expenses of its performance of and compliance with all agreements and
conditions contained herein, including fees, expenses and
disbursements of its own accountants and lawyers.
Section 11. Post-Closing Obligations.
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A. Further Actions. At any time and from time to time after the Closing
Date, each party shall, upon request of another party, execute,
acknowledge and deliver all such further and other assurances and
documents, and will take such action consistent with the terms of this
Agreement, as may be reasonably requested to carry out the
transactions contemplated herein and to permit each party to enjoy its
rights and benefits hereunder. If requested by Buyer, Seller further
agrees to prosecute or otherwise enforce in its own name for the
benefit of Buyer, any claim, right or benefit transferred by this
Agreement that may require prosecution or enforcement in Seller's
name. Any prosecution or enforcement of claims, rights, or benefits
under this provision shall be solely at Buyer's expense, unless the
prosecution or enforcement is made necessary by a breach of this
Agreement on the part of Seller.
B. Director and Officers. Seller shall remain the sole director of the
Company and have absolute authority to elect officers until such time
as the Note has been paid in full and the Security Interest granted
Seller has been fully satisfied and released. After the Note has been
paid in full, Buyer may elect additional directors of the Company.
C. Company Operations. So long as the Security Interest of Seller remains
in effect there shall be no intercompany transfer of assets,
liabilities or other obligations without the express written consent
of the Board of the Company. There shall be no assessment of the
Buyer's corporate overhead or other expenses against the Company
during such period. Further, the Company's bonding, customer deposits
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and loan agreements impose fiduciary obligations on the Company to
maintain adequate cash and other working capital to meet the
obligations of the Company. Buyer will respect these fiduciary
obligations and not seek to transfer cash and other liquid assets out
of the Company to the extent that these obligations are breached or
the working capital needs of the Company are impaired.
D. Buyer Default On Notes. In the event the Buyer is unable to make
timely payment on the Promissory Notes issued hereunder, the Seller
shall have the option to declare the Buyer in default, retain the Down
Payment, retain the stock issued by Buyer, retain all earnings accrued
from date of Close to the retransfer of stock and receive back from
Buyer the shares of the Company signed over to the Buyer at Closing.
Section 12. Integration.
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The parties acknowledge and agree that all agreements, documents,
obligations and transactions contemplated by this Agreement shall be integrated.
Accordingly, if there should be a material default, non-performance or breach of
any of said agreements, documents, obligations or transactions, which continues
after notice thereof and the expiration of any cure period, the same shall
constitute a material breach of all such agreements, documents, obligations and
transactions entitling the aggrieved party to pursue any or all available
remedies at law or in equity.
Section 13. Indemnification.
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A. Indemnification by Seller. Seller shall indemnify and hold Buyer
harmless at all times from and after the date of this Agreement
against and in respect of all damages, losses, costs and expenses
(including reasonable attorneys' fees) which Buyer may suffer or incur
in connection with the operation of the Company by Seller prior to
Closing or the breach by Seller of this Agreement or any
representation, warranty or covenant contained herein.
B. Indemnification by Buyer. Buyer shall indemnify and hold Seller
harmless at all times from and after the date of this Agreement
against and in respect of all losses, damages, costs and expenses
(including reasonable attorneys' fees) which Seller may suffer or
incur in connection with the operation of the Company by Buyer
following Closing or the breach by Buyer of this Agreement or any
representation, warranty or covenant contained herein.
C. Scope. All indemnity provisions in this Agreement are intended only to
benefit the specified party and shall not confer any rights upon any
third party.
Section 14. Expenses.
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Except as otherwise provided herein, each party hereto shall bear and pay
for the costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereby, including, without limitation, all fees
and disbursements of attorneys, accountants and financial consultants incurred
through the Closing Date.
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Section 15. Publicity.
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Seller and Buyer each represent and warrant that they will make no
announcement prior to Closing to public officials or the press in any way
relating to the transaction described herein without the prior written consent
of all parties, except for applications and other contacts necessary to satisfy
the terms of this Agreement. Further, the parties agree to take no steps to
beyond the obligations of securities filings to publicize the transaction and
change of ownership until after the Buyer has paid the Promissory Note in full.
The Company's employees, banker, bonding company and any other party for whom
failure to give notice of the transaction would create a breach of an existing
obligation may be notified of the change,
Section 16. Knowledge.
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Knowledge, as used in this Agreement or the instruments, certificates or
other documents required under this Agreement, means actual knowledge of a fact
or constructive knowledge if a reasonably prudent person in a like position
would have known, or should have known, the fact.
Section 17. Cost of Litigation.
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In the event that any party hereto is involved in litigation with any other
party to enforce the provisions hereof, the prevailing party in any such
litigation shall be reimbursed for its costs incurred therein, including
reasonable attorney fees, by the other party.
Section 18. Offset.
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Each party shall have the right to offset all obligations under this
Agreement and the other agreements described herein against all obligations of
the other parties under this Agreement and the other agreements described
herein.
Section 19. Plan of Acquisition.
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A. Reorganization and Acquisition. Buyer and the Company shall be
reorganized, such that Buyer shall acquire all the capital stock of
the Company with all of its current assets, liabilities and
businesses, and the Company shall become a wholly owned subsidiary of
Buyer.
B. Surviving Corporations. Both Buyer and the Company shall survive the
reorganization herein contemplated and shall continue to be governed
by the laws of their respective jurisdictions. The resulting parent
corporation is the entity responsible for the rights of dissenting
shareholders.
C. Surviving Articles of Incorporation. The Articles of Incorporation of
both Buyer and the Company shall remain in full force and effect,
unchanged.
D. Surviving Bylaws. The Bylaws of both Buyer and the Company shall
remain in full force and effect, unchanged.
E. Tax-Free Exchange. The parties agree that the transfer of the
Company's shares from Seller to Buyer and the issuance of the Buyer's
shares to Seller contemplated by this transaction shall be treated as
a "tax-free" transaction under Section 351 of the Internal Revenue
Code.
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Section 20. Notices.
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Any notice required to be given hereunder or otherwise by law, shall be in
writing and be sent by United States certified or registered mail, postage
prepaid and deposited in a United States post office or branch thereof, and
addressed to the party intended at its address set forth below or such other
address as it may designate by notice given. Such notice shall be effective upon
the date of deposit into the mail as herein provided.
SELLER: Xxxxx X. Xxxxxxx COPY TO:Xxxxx X. St.Xxxxx
0000 Xxxxxxxx Xxxxxx X. St.Xxxxx Xxx Offices, P.A
Xxxxxxxx, XX 00000 0000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
BUYER: Heartland, Inc. COPY TO:
Xxxxx # 000
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx
Section 21. Entire Agreement; Modification; Waivers.
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This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supercedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. There are no warranties, representations or agreements among the
parties in connection with the subject matter hereof, except as set forth or
referred to herein. No supplement, modification or waiver or termination of this
Agreement or any provision hereof shall be binding unless executed in writing by
the parties to be bound. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Section 22. Headings.
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Section and subsection headings are not to be considered part of this
Agreement and are included solely for convenience and not intended to be full or
accurate descriptions of the content thereof.
Section 23. Successors and Assigns.
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Except as otherwise provided for herein, no party may assign this Agreement
without the consent of all other parties. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and assigns.
Section 24. Governing Law.
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The parties hereby agree that this Agreement has been executed in the State
of Minnesota and shall be governed by the laws of said state.
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Section 25. Parties in Interest.
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Nothing in this Agreement is intended to confer upon any person other than
the parties hereto and their respective successors and assigns any rights or
remedies under or by reason of this Agreement, nor is anything in this Agreement
intended to relieve or discharge the liability of any other party, nor shall any
provisions hereof give any entity any right of subrogation against or action
against any party to this Agreement.
Section 26. Survival of Representations and Warranties.
---------- ------------------------------------------
All representations and warranties made pursuant to this Agreement and all
agreements made by the parties pursuant to this Agreement shall survive the
consummation of the transaction or transactions contemplated by this Agreement
and by investigations made by or on behalf of any of the parties.
Section 27. Tax Free Exchange.
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The Parties agree to structure the transaction as a tax free transaction
under the provisions of Section 351 of the Internal Revenue Code and will take
all reasonable measures to structure, perform and report this transaction as
such.
Section 28. Company Name.
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In the event the Buyer changes the name of the Company or reorganizes it in
a merger and ceases to actively use the Company name, Karkela Construction, Inc.
for a continuous period of six (6) or more months, the name shall automatically
revert to the Seller upon such occurrence.
Section 29. Stock Registration.
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Buyer agrees to complete registration of any and all stock issued to Seller
either by means of a piggy-back registration or other supplementary registration
on or before June 30, 2005. In the event Buyer does not complete such
registration of the stock issued to Seller hereunder, Seller shall have to
option to have such stock redeemed by Buyer on the anniversary date of this
Agreement by giving written notice to the Buyer of its default on this
Registration Obligation. Such notice must be given on or before July 15, 2005.
As security for Buyer's performance of such obligation, all cash raised by the
issuance of equity obligations issued by Buyer after June 30, 2005 to the extent
necessary to redeem Sellers' stock at a value of at least One Million Five
Hundred Thousand Dollars ($1,500,000.00) shall be escrowed and held until the
Anniversary date of this Agreement and then disbursed to Seller in redemption of
his unregistered stock.
Section 30. Broker's or Finder's Fees.
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All broker's or finder's fees due to any party regarding this transaction
will be paid by the party who incurred the obligation.
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Section 31. Right of First Refusal.
---------- ----------------------
In the event Buyer has a legitimate written offer to purchase the Company
after it has been fully integrated into the Buyer, the Seller shall have a right
of first refusal to match the terms and conditions of the offer. Buyer must
provide to Seller all documents and information provided to the purported
Offeror. Seller shall have thirty (30) days following receipt of all such
information and the written offer to respond in writing with Seller's decision
to exercise the Right of First Refusal.
Section 32. Counterparts.
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This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
THE PARTIES, by the execution hereof, state that this Agreement has been
read, that the parties hereto agree to each and every provision hereof, and
hereby acknowledge receipt of a copy of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SELLER: BUYER:
HEARTLAND, INC., a Maryland corporation
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
------------------------------ ------------------------------------
Xxxxx X. Xxxxxxx Xxxxx Xxxxxxxxxxx
Chairman of Heartland Inc.
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this December 31, 2004
by Xxxxx X. Xxxxxxx.
/s/ Xxxxx X. St. Xxxxx
------------------------------------
Signature of Notary Public
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this December 31, 2004
by ________________________ acting in his capacity as _____________ of
Heartland, Inc.
-----------------------------------
Signature of Notary Public
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Pledge and Security Agreement
PLEDGE AND SECURITY AGREEMENT ("Agreement"), December 31, 2004, between
Heartland, Inc., a corporation organized and existing under the laws of the
State of Maryland having its principal place of business at 0000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxx, XX (the "Pledgor"), Xxxxx X. Xxxxxxx, an individual
residing at 0000 Xxxxxxxx Xxxxxx X., Xxxxxxxx, XX 00000 (the "Secured Party").
WHEREAS, Karkela Construction, Inc., a corporation organized and existing
under the laws of the State of MN having an office at 0000 Xxxxxx Xxxxxx X.,
Xx.Xxxxx Xxxx, XX 00000 (the "Company"), Pledgor and Secured Party are parties
to a certain Purchase and Stock Purchase Agreement of even date herewith (the
"Stock Purchase Agreement") which Stock Purchase Agreement provides for the sale
of certain shares of the stock of the Company by Secured Party to Pledgor; and
WHEREAS, Pledgor is acquiring 100% of the stock of the Company ("Pledged
Securities") and will directly benefit from the transactions described herein
and in the Stock Purchase Agreement.
NOW THEREFORE, in consideration of the entering into the Stock Purchase
Agreement and the making of the obligations evidenced by the Covenant the
parties hereto as follows:
1. As collateral security for the full and timely payment, performance
and observance of all of the Obligations (as hereinafter defined), the
Pledgor hereby deposits, hypothecates, pledges, transfers and delivers
to the Secured Party all the Pledged Securities, in form transferable
for delivery, and grants to the Secured Party a security interest in,
the shares of stock and interest and the certificates pursuant to the
terms of the Stock Purchase Agreement executed by the parties December
31, 2004.). Pledgor hereby grants to Secured Party a security interest
in and to the Shares represented by the Pledged Securities and the
proceeds of same, as security for the payment and performance of all
obligations, liabilities and indebtedness of the Company arising under
or pursuant to the Stock Purchase Agreement. By executing this
Agreement, the Secured Party acknowledges the existence of such
security interest.
"Obligations" shall mean the obligations of the Company to the
Secured Party evidenced by the Stock Purchase Agreement and secured by
this Agreement.
2. (a) Based on the Secured Party's representations and warranties
to Pledgor contained in the Stock Purchase Agreement, the Pledgor
represents and warrants that the Pledged Securities are, and will
be on deposit hereunder, duly and validly issued and duly and
validly pledged with the Secured Party in accordance with law.
Pledgor hereby agrees to defend the Secured Party's right, title,
lien and security interest in and to the Pledged Securities
against the claims and demands of all persons whomsoever. The
Pledgor also represents and warrants to the Secured Party that
Pledgor has, and will have on deposit hereunder, good title to
all of the Pledged Securities, free and clear of all claims,
rights to purchase or redeem, requirements to sell or otherwise
transfer, mortgages, pledges, liens, encumbrances and security
interests of every nature whatsoever, and that no consent or
approval of any governmental or regulatory authority, or of any
securities exchange, or any other person was or is necessary to
the validity of this pledge which has not been obtained.
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(b) The Pledgor will not sell, assign, transfer or otherwise dispose
of, grant any option with respect to, or pledge or grant any
security interest in or otherwise encumber any of the Pledged
Securities or any interest therein, except for the pledge thereof
provided for in this Agreement.
(c) The Pledgor, without the prior written consent of the Secured
Party, will not cause the Company to merge or consolidate with
any third party or sell all or substantially all of the Company's
assets.
3. (a) In the Event of Default or in the event of a right of sale by
Secured Party pursuant to Paragraph 7 hereof, the Secured Party
shall cause all or any of the Pledged Securities to be
transferred to or registered in the Secured Party's name or the
name of its nominee or nominees. Any remedies available to the
Secured Party upon the occurrence of an Event of Default shall be
deemed to be available only after the expiration of any
applicable notice and cure period.
(b) If the amounts due under the Stock Purchase Agreement shall be
paid in full, the Secured Party shall deliver written notice to
that effect to the Secured Party. Upon receipt of such notice,
the Secured Party shall immediately release the Pledged
Securities from the escrow and deliver them to Pledgor, at which
time the escrow shall terminate.
4. So long as there shall exist no event of default under this Agreement
or the Stock Purchase Agreement ("Event of Default") or condition,
event or act which constitutes, or with notice or lapse of time, or
both, would constitute, an Event of Default, the Pledgor shall be
entitled to exercise, as Pledgor shall think fit, but in a manner in
the reasonable judgment of the Secured Party not inconsistent with the
terms hereof or with the terms of the Stock Purchase Agreement, the
voting power with respect to the Pledged Securities, and for that
purpose the Secured Party shall (if the Pledged Securities shall be
registered in the name of the Secured Party or its nominee) execute or
cause to be executed from time to time, at the expense of the Pledgor,
such proxies or other instruments in favor of the Pledgor or its
nominee, in such form and for such purposes as shall be reasonably
required by the Pledgor and shall be specified in a written request
therefor of its President or a Vice President, to enable Pledgor to
exercise such voting power with respect to the Pledged Securities.
5. In case, upon the dissolution or liquidation (in whole or in part) of
the Company, any sum be paid as a liquidating dividend or otherwise
upon or with respect to any of the Pledged Securities, such sum shall
be paid over to the Secured Party, to be held by the Secured Party as
substitute collateral hereunder. In case any shares of stock or
fractions thereof shall be issued pursuant to any stock split
involving any of the Pledged Securities, or any distribution of
capital shall be made on any of the Pledged Securities, or any shares,
obligations or other property shall be distributed upon or with
respect to the Pledged Securities pursuant to a recapitalization or
reclassification of the capital of the issuer thereof, or pursuant to
the dissolution, liquidation (in whole or in part), bankruptcy or
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reorganization of such issuer, or to the merger or consolidation of
such issuer with or into another corporation, the shares, obligations
or other property so distributed shall be delivered to the Secured
Party, to be held by it as additional collateral hereunder, and all of
the same (other than cash) shall constitute Pledged Securities for all
purposes hereof.
6. So long as there shall exist an Event of Default or a condition, event
or act which constitutes, or with notice or lapse of time, or both,
would constitute, an Event of Default, the Secured Party shall be
entitled to exercise all voting power with respect to the Pledged
Securities and to receive and retain, as additional collateral
hereunder, any and all dividends at any time and from time to time
declared or paid upon any of the Pledged Securities.
7. If an Event of Default shall occur, the Secured Party without
obligation to resort to other security, shall have the right at any
time and from time to time to sell, resell, assign and deliver, in its
discretion, all or any of the Pledged Securities, in one or more
parcels at the same or different times, and all right, title and
interest, claim and demand therein and right of redemption thereof, on
any securities exchange or broker's board on which the Pledged
Securities or any of them may be listed, or broker's board or at
public or private sale, for cash or for future delivery.
8. Intentionally Blank
9. The remedies provided herein in favor of the Secured Party shall not
be deemed exclusive, but shall be cumulative, and shall be in addition
to all other remedies in favor of the Secured Party existing at law
(whether under the Uniform Commercial Code or otherwise) or in equity
or under any other agreement or instrument.
10. If an Event of Default has occurred and is continuing, the Secured
Party shall have the right, for and in the name, place and stead of
the Pledgor, to execute endorsements, assignments or other instruments
of conveyance or transfer with respect to all or any of the Pledged
Securities.
11. The Secured Party shall have no duty as to the collection or
protection of the Pledged Securities or any income thereon or as to
the preservation of any rights pertaining thereto (including without
limitation rights against third parties), beyond the safe custody of
any thereof actually in its possession.
12. Upon the happening of an Event of Default, the Pledgor hereby appoints
the Secured Party as the Pledgor's attorney-in-fact for the purpose of
carrying out the provisions of this Agreement and taking any action
and executing any instrument which the Secured Party may deem
necessary or advisable to accomplish the purposes hereof. Without
limiting the generality of the foregoing, the Secured Party shall have
the right and power to receive, endorse and collect all checks and
other orders for the payment of money made payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Pledged Securities or any part thereof and to give full
discharge for the same.
13. No delay on the part of the Secured Party or of any other obligee with
respect to the Obligations in exercising any of its options, owners or
rights, or partial or single exercise thereof, shall constitute a
waiver thereof.
15
14. Upon payment in full or satisfaction of all Obligations the Pledgor
shall be entitled to the return of all of the Pledged Securities and
of all other property and cash which have not been used or applied
toward the payment of such Obligations and this Pledge and Security
Agreement shall be released and discharged. The assignment by the
Secured Party to the Pledgor of such Pledged Securities and other
property shall be without representation or warranty of any nature
whatsoever and wholly without recourse. Notwithstanding the foregoing,
the Secured Party shall have the right to continue to hold the Pledged
Securities as security for any Obligations arising by reason of the
avoidance of any prior payment of Obligations by reason of any
fraudulent conveyance, preference or similar provision of applicable
law during any period during which any such payment may be subject to
avoidance as aforesaid, and this Agreement shall remain in full force
and effect during such period.
15. Any notice or demand upon the Pledgor shall be deemed to have been
sufficiently given for all purposes thereof if mailed, postage
prepaid, by registered or certified mail, return receipt requested, or
if hand delivered, to the Pledgor at the address specified above, or
at such other address as the Pledgor may theretofore have designated
in writing and given in like manner to the Secured Party.
16. This Agreement shall be immediately effective as an instrument under
seal. The rights and obligations of the Secured Party and the Pledgor
hereunder shall be construed in accordance with and governed by the
laws of the State of Minnesota applicable to contracts executed and to
be performed therein, cannot be changed orally and shall bind and
inure to the benefit of the Pledgor and the Secured Party and their
respective successors, heirs, representatives and assigns (including,
without limitation, all subsequent obligees with respect to the
Obligations). Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice-versa.
17. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which taken together
shall constitute but one and the same instrument.
18. The Pledgor will do all such acts, and will furnish to the Secured
Party all such financing statements, certificates, legal opinions and
other documents and will obtain all such governmental consents and
corporate approvals and will do or cause to be done all such other
things as the Secured Party may reasonably request from time to time
in order to give full effect to this Agreement and to secure the
rights of the Secured Party hereunder.
19. Each party irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Minnesota, over any action or
proceeding arising out of or relating to this Agreement and agrees
that all claims in any such action or proceeding may be heard and
determined in any such court.
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20. The Pledgor represents and warrants to the Secured Party that (i)
the execution and delivery of this Agreement and pledging of the
Pledged Securities do not require any consents or approvals by
any person or contravene any law or any rule or regulation
thereunder or any judgment, decree or order of any tribunal or of
any agreement or instrument to which the Pledgor is a party or by
which Pledgor or any of Pledgor's property is bound or constitute
a default thereunder and (ii) this Agreement constitutes the
legal, valid and binding obligation of the Pledgor, enforceable
against Pledgor in accordance with its terms.
21. (a) The Secured Party shall not be responsible for the
genuineness of any certificate or signature and may rely
conclusively upon and shall be protected when acting upon any
notice, affidavit, request, consent, instruction, check, or other
instrument believed by it in good faith to be genuine or to be
signed or presented by the proper person, duly authorized. The
Secured Party shall have no responsibility except for the
performance of its express duties hereunder and no additional
duties shall be inferred herefrom or implied hereby. The Secured
Party shall not be responsible or liable for any act or omission
on its part in performing its duties as Secured Party under this
agreement unless such act or omission constitutes bad faith,
gross negligence, or fraud.
(b) The Secured Party shall not be required to institute or defend
any act involving any matter referred to herein or which affects
it or its duties or liabilities hereunder unless required to do
so by any party to this Agreement and then only upon receiving
full indemnity, in character satisfactory to the Secured Party,
against all claims, liabilities, and expenses in relation
thereto. In the event of any dispute among the parties with
respect to the Secured Party or its duties, (i) the Secured Party
may act or refrain from acting in respect of any matter referred
to herein in full reliance upon and by and with the advice of its
counsel and shall be fully protected in so acting or in
refraining from acting upon the advice of such counsel, or (ii)
the Secured Party may refrain from acting until required to do so
by an order of a Court of competent jurisdiction.
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IN WITNESS WHEREOF, the Pledgor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
PLEDGOR: Heartland, Inc. SECURED PARTY: Xxxxx X. Xxxxxxx
By: /s/ Xxxxx Xxxxxxxxxxx /s/Xxxxx X. Xxxxxxx
----------------------- --------------------------------
Xxxxx Xxxxxxxxxxx Xxxxx X. Xxxxxxx
Chairman of the Board of
Heartland Inc.
Print Name________________________
STATE OF _____________)
) ss.
COUNTY OF ____________)
The foregoing instrument was acknowledged before me this December 31, 2004
by ________________________ acting in his capacity as _____________ of
Heartland, Inc.
--------------------------
Signature of Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this December 31, 2004
by Xxxxx X. Xxxxxxx.
/s/ Xxxxx X. St. Xxxxx
--------------------------
Signature of Notary Public
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SCHEDULE A
Certificate No. Owner Number of Shares
0 Xxxxx X. Xxxxxxx signed over to Heartland, Inc. 1,000
19
