"PRELIMINARY PROXY MATERIALS"
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement dated as of November 30, 2000, by and
among Union Espanola de Explosivos S.A. ("Parent"), a Spanish S.A., Union
Espanola de Explosivos-MSI International, S.A., a Spanish S.A. ("Purchaser"),
UMSI Acquisition Co., a Delaware corporation ("Purchaser's Subsidiary"), and
Mining Services Interna tional Corporation, a Utah corporation ("Seller")
relating to the sale of the civil explosives business of Seller.
WHEREAS, each of the Boards of Directors of Parent, Purchaser,
Purchaser's Subsidiary and Seller has approved, and deems it advisable and in
the best interests of its respective shareholders to consummate the acquisition
of the Assets (as defined herein) and Seller's Purchased Subsidiaries (as
defined herein) by Purchaser, Purchaser's Subsidiary or an Affiliate of Parent,
which acquisition is to be effected by the sale by Seller of all the Assets to
Purchaser, Purchaser's Subsidiary or an Affiliate of Parent subject only to
those liabilities expressly assumed by Purchaser, Purchaser's Subsidiary or an
Affiliate of Parent as the case may be pursuant hereto, and otherwise upon the
terms and subject to the conditions set forth herein;
WHEREAS, simultaneously with the execution and delivery of
this Agreement and as a condition and inducement to the willingness of Parent,
Purchaser and Purchaser's Subsidiary to enter into this Agreement, Parent and
certain stockholders of Seller (collectively, the "Stockholders") are entering
into an agreement ("the Stockhold ers Agreement") pursuant to which the
Stockholders will vote to adopt and approve the Transactions (as defined herein)
contemplated by this Agreement and to take certain other actions in furtherance
of the transactions contemplated by this Agreement upon the terms and subject to
the conditions set forth in the Stockholders Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
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DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
"Accounts Receivable" means any and all trade accounts, notes
and other receivables of Seller and the Business Subsidiaries in respect of the
Business and all claims relating thereto or arising therefrom other than the
account receivables owed to Seller by West Africa Chemicals.
"Acquisition Proposal" shall mean any proposal or offer made
by any Person other than Parent, Purchaser, Purchaser's Subsidiary or any
Subsidiary of Parent to acquire all or a substantial part of the business or
properties of Seller, the Business or any Business Subsidiary or any capital
stock of any Business Subsidiary, whether by merger, tender offer, exchange
offer, sale of assets or similar transactions involving Seller or any Business
Subsidiary, or operating or principal business unit of the Business, but shall
not include a proposal or offer to acquire all or substantially all the stock or
assets of Seller on terms which do not interfere with the consummation of the
Transactions.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
"Agreement" or "this Agreement" shall mean this Asset Purchase
Agreement, together with the Exhibits and Appendices hereto and the Disclosure
Schedule.
"Applicable Law" shall mean any law, regulation, rule, order,
judgment or decree to which the Business, the Assets or Seller or any of its
Subsidiaries is subject, but shall not include any law, regulation, rule, order,
judgment or decree to which Seller is subject but which relates to Seller's
operations unrelated to the Business.
"Assets" has the meaning set forth in Section 2.1.
"Associate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
"Assumed Liabilities" has the meaning set forth in Section
2.3.
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"Balance Sheet Date" shall mean the date of the June 30, 2000
Balance Sheet.
"Business" shall mean the civil explosives and related
products business heretofore conducted by Seller, including the Assets and all
the goodwill appurtenant to such businesses and assets.
"Business Intellectual Property" shall mean all Intellectual
Property that is currently owned by Seller or any of its Subsidiaries for the
benefit of the Business or by any Business Subsidiary or used in the business of
the Business or any Business Subsidiary or that is necessary to conduct the
business of the Business or the Business Subsidiaries as presently conducted.
"Business Subsidiary" shall mean each Subsidiary of Seller
which comprises or conducts a part of the Business.
"Canadian Union Contract" shall mean the agreement entered
into by the unionized-employees of Seller.
"Closing" shall mean the closing referred to in Section 3.1.
"Closing Date" shall mean the date on which the Closing
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Contract" shall mean any agreement, contract, mortgage,
indenture, lease, franchise or other instrument to which Seller or any Business
Subsidiary is a party primarily relating to the Business or by which any of the
Assets is bound.
"Computer Software" shall mean computer software programs,
databases and all documentation related thereto other than "off-the-shelf" or
"shrinkwrap" software.
"Confidentiality Agreement" shall mean a letter agreement
dated April 11, 2000 between Seller and Parent.
"Copyrights" shall mean U.S. and foreign registered and
unregistered copyrights (including those in computer software and databases),
rights of publicity and all registrations and applications to register the same.
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"Defect" shall mean a defect or impurity of any kind, whether
in design, manufacture, processing, or otherwise, including any dangerous
propensity associated with any reasonably foreseeable use of a Product, or the
failure to warn of the existence of any defect, impurity, or dangerous
propensity other than the dangerous propensities inherent in a Product.
"Disclosure Schedule" shall mean the disclosure schedule of
even date herewith prepared and signed by Seller and delivered to Purchaser
simultaneously with the execution hereof.
"DOJ" shall mean the Antitrust Division of the United States
Department of Justice.
"Domestic Business" shall mean the portion of the Business
whose operations are primarily based within the United States, its territories
and possessions and Canada.
"Due Date" shall mean the last day on which under applicable
law any Tax Return is required or permitted to be filed with the appropriate
Governmental Entity without the imposition of any penalties or interest for late
filing.
"Encumbrances" shall mean any and all liens, charges, security
interests, options, claims, mortgages, charges, easements, restrictions on use
of enjoyment, pledges, proxies voting trusts or agreements, obligations,
understandings or arrangements imposing restrictions on title or use or other
restrictions on title or transfer of any nature whatsoever.
"Environmental Claim" shall mean any claim, action, cause of
action, investigation or notice (written or oral) by any Person alleging actual
or potential liability for investigatory, cleanup or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to (i) the presence, or release into the
environment, of any Materials of Environmental Concern at any location owned or
operated by Seller related to the Business or any Business Subsidiary, now or in
the past, or (ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
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"Environmental Law" shall mean each federal, state, local and
foreign law and regulation relating to pollution, protection or preservation of
human health or the environment including ambient air, surface water, ground
water, land surface or subsurface strata, and natural resources, and including
each law and regulation relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacturing, processing, distribution, use, treatment, generation,
storage, containment (whether above ground or underground), disposal, transport
or handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon and each law and regulation
with regard to record keeping, notification, disclosure and reporting
requirements respecting Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that together with Seller would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA.
"ERISA Claim" shall mean a claim for indemnification or
defense arising out of Section 9.1(b)(ii), including reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser or Purchaser's Subsidiary arising under
Section 9.1(b)(ii).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Financial Statements" shall mean (a) the consolidated balance
sheets of Seller as at December 31, in each of the years 1997, 1998 and 1999
together with consolidated statements of income, shareholders' equity and cash
flows for each of the years then ended, together with the notes thereto, all
certified by Xxxxxx+Co, independent certified public accountants, whose reports
thereon are included therein, (b) an unaudited consolidated balance sheet of the
Seller as at March 30 and June 30, 2000 and unaudited consolidated statements of
income, shareholders' equity and cash flows for the quarterly period then ended,
and (c) an unaudited balance sheet of each of the Seller's Foreign Subsidiaries
as at December 31, 1999 and March 31 and June 30, 2000 and unaudited statements
of income for the quarterly periods then ended, except for Eastern Mining
Services and Turon-MSI for which an unaudited balance sheet as at December 31,
1999 and October 31, 2000 will be provided and unaudited statements of income
for the one year and ten months periods then ended.
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"Foreign Subsidiary Balance Sheets" shall have the meaning set
forth in Section 4.6.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indebtedness" shall mean (i) all indebtedness for borrowed
money or for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (ii) any other indebtedness
that is evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all liabilities secured by any lien on
any property and (v) all guarantee obligations.
"Intangible Assets" has the meaning set forth in Section 2.1.
"Intellectual Property" shall mean all of the following:
Trademarks, Patents, Copyrights, Trade Secrets, Licenses and all of Seller's
proprietary and confidential information necessary for the conduct of the
Business as now being conducted, including, without limitation: (i) trade
secrets, technical information, know- how, designs, processes, patents, patent
applications, and copyrights, and all improve ments thereof, (ii) all data,
files, books and records, customer lists, and order informa tion, (iii) the
names "Mining Services International", "Green Mountain Explosives, Inc." and
"O'Brien Design Associates, Inc." and (iv) all of Seller's other information and
intangible property rights.
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"June 30, 2000 Balance Sheet" has the meaning set forth in
Section 2.5.
"Knowledge of Seller" concerning a particular subject, area or
aspect of the Business or affairs shall mean the knowledge of each of the
officers and directors of Seller and each of the officers of the Business and of
the Business Subsidiaries and all knowledge which was or could have been
obtained upon inquiry by such persons of those management level employees of
Seller and the Business Subsidiaries whose duties would, in the normal course of
Seller's affairs, result in such management level employees having knowledge
concerning such subject, area or aspect.
"Lease" shall mean each lease pursuant to which Seller (for
the use or benefit of the Business) or any Business Subsidiary leases any real
or personal property (excluding leases relating solely to personal property
calling for rental or similar periodic payments not exceeding $5,000 per annum).
"Liabilities" shall mean the debts, liabilities, claims,
demands, expenses, commitments and obligations (whether accrued or not, known or
unknown, disclosed or undisclosed, fixed or contingent, asserted or unasserted,
liquidated or unliquidated, arising prior to, at or after the Closing) of Seller
(other than the Retained Liabilities).
"Licenses" shall mean all licenses and agreements pursuant to
which Seller has acquired rights in or to any Trademarks, Patents or Copyrights
used by or for the benefit of the Business, or licenses and agreements pursuant
to which Seller has licensed or transferred the right to use any Trademark,
Patent or Copyright which constitutes a part of the Assets.
"Line of Credit" has the meaning set forth in Section 6.19.
"Material Adverse Effect" means a material adverse effect on
the financial condition, results of operations, prospects or business of the
Business or the Assets or Liabilities of the Business, each taken as a whole
(other than as a result of changes (a) in law or applicable regulations or the
official interpretations thereof or (b) in GAAP).
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"Materials of Environmental Concern" shall mean chemicals;
pollutants; contaminants; wastes; toxic or hazardous substances, materials and
wastes; petroleum and petroleum products; asbestos and asbestos-containing
materials; polychlorinated biphenyls; lead and lead-based paints and materials;
and radon.
"Nevada Loan" shall mean the loan between Nevada Chemicals
Inc. and Seller dated as of April 14, 2000, a copy of which is attached hereto
as Exhibit A.
"New Matter" has the meaning set forth in Section 6.20.
"ODA Business Conflict" shall have the meaning set forth in
Section 6.21.
"Parent" shall mean Union Espanola de Explosivos S.A., a
Spanish corporation.
"Parent's Requested Amount" has the meaning set forth in
Section 6.14.
"Patents" shall mean issued U.S. and foreign patents and
pending patent applications, patent disclosures, and any and all divisions,
continuations, continuations- in-part, reissues, reexaminations, and extensions
thereof, any counterparts claiming priority therefrom, utility models, patents
of importation/confirmation, certificates of invention and like statutory
rights.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" means permits, certificates, licenses, certificates,
filings, approvals and other authorizations of any Governmental Entity.
"Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
"Plan" shall mean each deferred compensation and each
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
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each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by Seller or by any ERISA
Affiliate, or to which Seller or an ERISA Affiliate is party, whether written or
oral, for the benefit of any director, employee or former employee of the
Business or any Business Subsidiary.
"Pre-Closing Period" shall mean a taxable period ending on or
prior to the Closing Date.
"Pre-Closing Straddle Period" shall mean the portion of a
Straddle Period ending on the Closing Date.
"Post-Closing Straddle Period" shall mean the portion of a
Straddle Period beginning the day after the Closing Date.
"Product" shall mean any product designed, manufactured,
shipped, sold, marketed, distributed and/or otherwise introduced into the stream
of commerce by Seller on behalf of the Business or by any Business Subsidiary,
including any product sold by Seller or any Business Subsidiary as the
distributor, agent, or pursuant to any other contractual relationship with a
third-party manufacturer.
"Purchaser" shall mean Union Espanola de Explosivos-MSI
International, S.A., a Spanish S.A.
"Purchaser Indemnified Persons" shall mean Parent, Purchaser,
Purchaser's Subsidiary and each of their Affiliates.
"Purchaser Losses" shall mean any and all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a third party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of the rights of Purchaser arising under Article IX)
incurred by any of the Purchaser Indemnified Persons that arise out of:
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(i) any breach by Seller of any of its
representa tions and warranties contained in or made by or pursuant to
this Agree ment;
(ii) any of the events, circumstances or
conditions described in Section 4.16 hereof, any pollution or threat to
human health or the environment that (A) is related in any way to the
Business or any Business Subsidiary's management, use, control,
ownership or operation of the properties or businesses of the Business
or any Business Subsidiary prior to the Closing, including all on-site
and off-site activities involving Materials of Environmental Concern,
and (B) occurred, existed, arises out of conditions or circumstances
that occurred or existed, or was caused, in whole or in part, on or
before the Closing Date, whether or not the pollution or threat to
human health or the environment is described in the Disclosure
Schedule; or any Environmental Claim against the Business or any Person
whose liability for such Environmental Claim the Business or any
Business Subsidiary has assumed or retained either contractually or by
operation of law;
(iii) any breach by Seller of any of its
covenants in this Agreement that survive the Closing; or
(iv) any breach by Seller prior to the
Closing of any of its covenants contained in this Agreement;
provided, however, that the term "Purchaser Losses" shall not include the
matters referred to in Section 9.1(b) hereof. All statements contained in any
schedule or other writing delivered by Seller pursuant hereto or in connection
with the Transactions shall be deemed representations and warranties.
"Purchaser's Subsidiary" shall mean UMSI Acquisition Co., a
Delaware corporation.
"Real Property" shall mean all real property that is owned,
leased or used by Seller for the use or benefit of the Business or by any
Business Subsidiary or that is reflected as an asset of the Business or any
Business Subsidiary on the June 30, 2000 Balance Sheet.
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"Required Consents" shall mean consents related to agreements
which involve the payment or receipt by Seller or Seller's Subsidiaries of
amounts in excess of $20,000 per annum or other agreements that may be material
or have a material impact on the Business. .
"Retained Assets" has the meaning set forth in Section 2.2.
"Retained Liabilities" has the meaning set forth in Section
2.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"SEC" shall mean the United States Securities and Exchange
Commis sion.
"Seller's Domestic Subsidiaries" shall mean the Business
Subsidiaries of Seller which have operations that are primarily based within the
United States and Canada and are listed on Schedule 1.1 hereto.
"Seller's Foreign Subsidiaries" shall mean the Business
Subsidiaries of Seller which have operations that are primarily based outside of
the United States and are listed on Schedule 1.1 hereto. Such list shall not
include West Africa Chemicals Limited.
"Seller Indemnified Persons" shall mean Seller, its
Subsidiaries and Affiliates.
"Seller Losses" shall mean any and all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a third party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of the rights of Seller) incurred by any of the
Seller Indemnified Persons arising out of:
(v) any breach by Purchaser of any of its
represen tations and warranties contained in or made by or pursuant to
this Agreement;
(vi) any breach by Purchaser of any of its
covenants in this Agreement that survive the Closing; or
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(vii) any breach by Purchaser prior to
Closing of any of its covenants contained in this Agreement.
"Seller's Purchased Subsidiaries" shall mean Seller's Foreign
Subsidiaries and Tennessee Blasting, LLC, or individually "Seller's Purchased
Subsidiary."
"Straddle Period"shall mean any taxable period beginning
before the Closing Date and ending after the Closing Date.
"Stockholders Meeting" shall mean the meeting of Seller's
stockholders convened for the purpose of considering and taking action upon this
Agreement.
"Subsidiary,"or in the plural, "Subsidiaries," shall mean,
with respect to any Person, any corporation or other organization, whether
incorporated or unincorpo rated, of which (a) 50% or more of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries or (b) such Person or any other
Subsidiary of such Person is a general partner (excluding any such partnership
where such Person or any Subsidiary of such party does not have 50% or more of
the voting interest in such partnership).
"Superior Proposal" means any bona fide Acquisition Proposal
which is on terms that the Board of Directors of Seller determines in its good
faith judgment (after receipt of the advice of a financial advisor used by
Seller in connection with this Transaction) provides for consideration which
would exceed the value of the consider ation provided for in this Agreement,
after taking into account all relevant factors, including any conditions to such
Acquisition Proposal, the timing of the closing thereof, the risk of
nonconsummation, the ability of the person making the Acquisition Proposal to
finance the transaction contemplated thereby and any required governmental or
other consents, filings and approvals.
"Takeover Laws" has the meaning set forth in Section 4.31.
"Tangible Assets" has the meaning set forth in Section 2.1.
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"Tax" or "Taxes" shall mean all taxes, charges, fees, duties,
levies, penalties or other assessments imposed by any federal, state, local or
foreign governmen tal authority, including income, gross receipts, excise,
property, sales, gain, use, license, custom duty, unemployment, capital stock,
transfer, franchise, payroll, withholding, social security, minimum estimated,
profit, gift, severance, value added, disability, premium, recapture, credit,
occupation, service, leasing, employment, stamp and other taxes, and shall
include interest, penalties or additions attributable thereto or attributable to
any failure to comply with any requirement regarding Tax Returns.
"Tax Arbitrator" has the meaning set forth in Section 6.14.
"Tax Audit" shall mean any deficiency, proposed adjustment,
adjustment, assessment audit, examination or other administrative or court
proceeding, suit, dispute or other claim.
"Tax Claim" shall mean a claim for indemnification or defense
arising out of Section 9.1(b)(i), including reasonable attorneys' fees and
expenses and reasonable accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser or Purchaser's Subsidiary arising under
Section 9.1(b)(i).
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
such document prepared on a consolidated, combined or unitary basis and also
including any schedule or attachment thereto, and including any amendment
thereof.
"Title IV Plan" shall mean a Plan that is subject to Section
302 or Title IV of ERISA or Section 412 of the Code.
"Trademarks" shall mean U.S. and foreign registered and
unregistered trademarks, trade dress, domain names, service marks, logos, trade
names, corporate names and all registrations and applications to register the
same.
"Trade Secrets" shall mean all categories of trade secrets as
defined in the Uniform Trade Secrets Act including business information.
"Transactions" shall mean all the transactions provided for or
contem plated by this Agreement.
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"Transfer Taxes" shall mean all sales (including, without
limitation, bulk sales), use, transfer, recording, ad valorem, privilege,
documentary, gains, gross receipts, registration, conveyance, excise, license,
stamp, duties or similar Taxes and fees.
"Transfer Tax Payor" shall mean the party which has primary
legal responsibility for the payment of any particular Transfer Tax.
"Voting Debt" shall mean indebtedness having general voting
rights and debt convertible into securities having such rights.
"WAC" shall mean West Africa Chemicals Limited, a Mauritius
limited liability company.
"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act.
Section 1.2 Interpretation.
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(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
(c) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(d) The meaning assigned to each term defined herein
shall be equally applicable to both the singular and the plural forms of such
term, and words denoting any gender shall include all genders. Where a word or
phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
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(e) A reference to any party to this Agreement or
any other agreement or document shall include such party's successors and
permitted assigns.
(f) A reference to any legislation or to any
provision of any legislation shall include any amendment to, and any
modification or re-enactment thereof, any legislative provision substituted
therefor and all regulations and statutory instruments issued thereunder or
pursuant thereto.
(g) References to $ are to United States Dollars.
(h) As used in this Agreement, any reference to any
event, change or effect being material or having a material adverse effect on or
with respect to any entity (or group of entities taken as a whole) means such
event, change or effect is materially adverse to (i) the prospects, consolidated
financial condition, businesses or results of operations of such entity as a
whole (or, if used with respect thereto, of such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to consummate the
Transactions.
(i) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Transfer of Assets. (a) On the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
shall sell, convey, assign, transfer and deliver to Purchaser's Subsidiary, and
Purchaser's Subsidiary shall purchase, acquire and accept from Seller, free and
clear of any Encumbrances, all of Seller's right, title and interest in and to
the tangible assets, properties and rights of the Domestic Business and all of
the tangible assets and certain intangible rights of Seller used in the
operations of the Domestic Business as those assets exist on Closing, other than
the Retained Assets, as that term is defined in Section 2.2, (collectively, the
"Tangible Assets"), including, without limitation, the following:
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(i) the Domestic Business;
(ii) all of the rights and benefits of Seller
under contracts, purchase orders, proposals or bids relating to the
Domestic Business;
(iii) all books, files and records of Seller
relating to the Domestic Business, the Tangible Assets or Assumed
Liabilities except for certain books and records described on Section
2.1(iii) of the Disclosure Schedule;
(iv) all personal computers used by the
Domestic Business and software used by the Domestic Business, as set
forth in Section 2.1(iv) of the Disclosure Schedule;
(v) all inventory, supplies, and other
consumables related to or used in connection with the Tangible Assets
or Domestic Business (the "Inventory");
(vi) all Permits used or held for use in
connection with the Domestic Business solely to the extent such Permits
may be assigned or transferred;
(vii) all Accounts Receivable of the Domestic
Business, except those listed in Section 2.2 (a)(vi) hereof and except
those described on Section 2.1(vii) of the Disclosure Schedule;
(viii) all investments set forth in Section
2.1(a)(viii) of the Disclosure Schedule;
(ix) all real property set forth in Section
2.1(a)(ix) of the Disclosure Schedule, together with (i) all buildings,
other facilities and other structures and improvements thereon, (ii)
all rights, privileges, hereditaments and appurtenances appertaining
thereto or to any of such buildings or other facilities or other
structures or improvements and (iii) to the extent constituting real
property under Applicable Laws, all fixtures, leasehold improvements,
installations, equipment (including furniture, fax machines and other
office equipment) and other property attached thereto or located
thereon;
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(x) all cash and cash equivalents of Seller
and its domestic subsidiaries or of the Domestic Business, except those
listed in Section 2.2 (a)(x) hereof;
(xi) all machinery, vehicles, tools, equipment
replacement and spare parts and supplies owned by Seller or a Business
Subsidiary and used primarily or held for use primarily in connection
with the Domestic Business, except as described on Section 2.1(xi) of
the Disclosure Schedule;
(xii) all tax refunds and recoveries and
similar benefits of the Domestic Business to the extent listed as an
asset of the Business on the June 30, 2000 Balance Sheet;
(xiii) any advertising or promotional
materials related to or used in connection with the Tangible Assets or
Domestic Business;
(xiv) all rights to the telephone numbers (and
related directory listings), internet domain names, and internet sites
used in connection with the Domestic Business or the Tangible Assets;
(xv) all manufacturer's warranties to the
extent related to the Tangible Assets and all claims under such
warranties;
(xvi) all prepaid expenses of the Domestic
Business to the extent they are shown as an asset of the Business on
the June 30, 2000 Balance Sheet or which have occurred prior to Closing
in the ordinary course of business since the June 30, 2000 Balance
Sheet;
(xvii) all of Seller's membership interests in
Tennessee Blasting, LLC;
(xviii)all promissory notes or notes
receivable of the Domestic Business;
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(xix) the license agreement between Seller and
West Africa Chemicals, except that Seller shall be granted a license to
operate the plant and equipment and provide technical support using the
explosives technology now transferred to West Africa Chemicals until
such time as Seller is no longer an owner in West Africa Chemicals or
such plant and equipment, it being agreed that the royalty now paid by
West Africa Chemicals to Seller shall continue for the benefit of
Seller so long as such license continues (the foregoing being referred
to as the "Ghana Activities");
(xx) the truck owned by Seller and used by
West Coast Explosives subject to the existing lease agreement with
respect to such truck as described on Section 2.1(xx) of the Disclosure
Schedule and with payment terms consistent with historical practice;
(xxi) all security deposits, xxxxxxx deposits,
and all other forms of security placed with Seller or Business
Subsidiaries related to the Business for the performance of a contract
or agreement which otherwise constitute a portion of the Tangible
Assets to the extent they are shown as an asset of the Business on the
June 30, 2000 Balance Sheet or which have occurred prior to Closing in
the ordinary course of business since the June 30, 2000 Balance Sheet;
(xxii) the goodwill in or arising from the
Tangible Assets and the Domestic Business; and
(xxiii)all other assets and properties of
Seller which are used primarily in connection with the Domestic
Business.
To the extent any tangible assets of the Domestic Business (other than Retained
Assets), within the descriptions of subsections (i) - (xxiii) above are owned,
managed or leased by any Subsidiary of Seller including Green Mountain
Explosives, Inc.(excluding Seller's Purchased Subsidiaries), (i) such items are
included within the term "Assets," (ii) such Subsidiary is deemed to be included
within the term "Seller" and (iii) Seller shall cause each such Subsidiary, at
the Closing, to convey such Assets to Purchaser's Subsidiary, or to Seller for
conveyance to Purchaser's Subsidiary, in accordance with the provisions hereof.
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(b) On the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, convey, assign,
transfer and deliver to Parent or Purchaser all the shares or interests it owns
in Seller's Foreign Subsidiaries, free and clear of all Encumbrances and Parent
or Purchaser shall purchase, acquire and accept from Seller, free and clear of
any Encumbrances, all of Seller's right, title and interest in and to the shares
of Seller's Foreign Subsidiaries. Nothing in this Agreement shall prevent Parent
or Purchaser, at their sole discretion, from transferring Seller's Foreign
Subsidiaries acquired pursuant to this Section 2.1(b) to any of Purchaser's
wholly owned Subsidiaries, but Seller makes no representation as to Purchaser's
right to do so and any such transfer shall be subject to the terms of agreements
governing such Seller's Foreign Subsidiaries. To the extent any shares or
interests Seller owns in Seller's Foreign Subsidiaries above are owned, by any
Subsidiary of Seller, (i) such Subsidiary is deemed to be included within the
term "Seller" and (ii) Seller shall cause each such Subsidiary, at the Closing,
to convey such shares or interests to Parent or Purchaser, or to Seller for
conveyance to Parent or Purchaser, in accordance with the provisions hereof.
(c) On the terms and subject to the conditions set
forth in this Agreement, at the Closing, Seller shall sell, convey, assign,
transfer and deliver to Parent or an Affiliate of Parent, and Parent or an
Affiliate of Parent shall purchase, acquire and accept from Seller, free and
clear of any Encumbrances except for Encumbrances created by the licensing of
Intellectual Property to Seller's Foreign Subsidiaries, all of Seller's right,
title and interest in and to the Intellectual Property of the Domestic Business
other than the intellectual property and intangible assets of Tennessee
Blasting, LLC, including all the intangible assets, properties and rights of the
Domestic Business wherever located, and all of the intangible assets of Seller
used in the operations of the Domestic Business, wherever located, as those
assets exist on Closing, other than the Retained Assets, as that term is defined
in Section 2.2 (collectively, the "Intangible Assets" and together, with the
"Tangible Assets" the "Assets"). To the extent any Intangible Assets are owned,
managed or leased by any Subsidiary of Seller other than Tennessee Blasting,
LLC, (i) such items are included within the term "Intangible Assets," (ii) such
Subsidiary is deemed to be included within the term "Seller" and (iii) Seller
shall cause each such Subsidiary, at the Closing, to convey such Assets to
Parent or an Affiliate of Parent, or to Seller for conveyance to Parent or an
Affiliate of Parent, in accordance with the provisions hereof.
Section 2.2 Retained Assets. (a) Notwithstanding Section
2.1(a), all of Seller's right, title and interest in the following properties,
assets and rights shall be excluded from the Assets (collectively, the "Retained
Assets"):
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(i) any assets and associated claims arising
out of Retained Assets or Retained Liabilities;
(ii) Seller's 50% interest in Cyanco a non-
corporate joint venture with Degussa Corporation for producing and
marketing liquid sodium cyanide ("Cyanco") including Seller's interest
in Nevada Chemicals, Inc.;
(iii) the office furniture, fixtures and
equipment in two offices located at 0000 Xxxxx Xxxxx Xxxxxxx in Sandy,
Utah, to be used by Cyanco;
(iv) the real property located at 0000 Xxxxx
Xxxxx Xxxxxxx in Sandy, Utah, which will be leased to Purchaser under
the terms of a lease agreement to be entered into with Seller (the
"Lease Agreement"), which Lease Agreement shall have an initial term of
one year with Purchaser having an option to renew such term for an
additional year;
(v) Seller's 50% interest in West Africa
Chemicals, Inc.;
(vi) the first $600,000 (six hundred thousand
dollars) in accounts receivables of West Africa Chemicals, Inc. as
reflected on the June 30, 2000 Balance Sheet or which arise thereafter
in the ordinary course of business;
(vii) all contracts between Seller and a
third party in which the third party is in material default or breach
or is subject of bankruptcy, insolvency, or similar proceedings;
(viii) any asset of Seller not used primarily
in the Business and not necessary for the conduct of the Business;
(ix) any asset, offset, refund, insurance
proceeds, receipts and other benefits related to litigation for which
Seller is retaining the liability related to such litigation; and
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(x) all Tax refunds or prepaid deposits as
shown on the June 30, 2000 Balance Sheet as being retained by Seller.
Section 2.3 Assumption of Liabilities. (a) At the Closing,
Purchaser's Subsidiary shall assume, the following Liabilities of the Domestic
Business (collectively, the "Assumed Liabilities"):
(i) all Liabilities reflected on the June 30,
2000 Balance Sheet included in the Financial Statements relating to the
Domestic Business;
(ii) all Liabilities relating to the Domestic
Business of the type reflected on the Financial Statements incurred in
the ordinary course of the Domestic Business since June 30, 2000 and
consistent in type and magnitude with the Liabilities reflected on the
Financial Statements;
(iii) all Liabilities arising from
commitments (in the form of issued purchase orders or otherwise), or
outstanding quotations, proposals or bids, to purchase or acquire
components, machinery, vehicles, tools, replacement and spare parts,
and/or other materials in connection with the Domestic Business;
(iv) the first $700,000 (seven hundred
thousand dollars) in Liabilities arising from the deferred compensation
to be paid to certain executives of Seller as listed on Section
2.3(a)(iv) of the Disclosure Schedule;
(v) all Liabilities under Contracts, Leases
and Permits used or held for use in connection with the Domestic
Business except those contracts listed on Section 2.4(a)(ix) of the
Disclosure Schedule which, for whatever reason, can not be assigned to
Parent, Purchaser or Purchaser's Subsidiary;
(vi) all Liabilities of Seller under any
guaranties issued, granted or provided in connection with the Domestic
Business, which are listed on Section 2.3(a)(vi) of the Disclosure
Schedule; and
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(vii) all warranty claims related to the
Products consistent with historical warranty claims and in an aggregate
amount not to exceed $40,000 (forty thousand dollars).
(b) Nothing contained in this Section 2.3 or in any instrument
of assumption executed by Purchaser or Purchaser's Subsidiary at the Closing
shall release or relieve Seller from its representations, warranties, covenants
and agreements contained in this Agreement or any certificate, schedule,
instrument, agreement or document executed pursuant hereto or in connection
herewith, including, without limitation, the obligations of Seller to indemnify
Purchaser and Purchaser's Subsidiary in accordance with the provisions of
Article IX hereto.
Section 2.4 Retained Liabilities. (a) Notwithstanding anything
in this Agreement to the contrary, Purchaser and Purchaser's Subsidiary shall
not assume, and shall be deemed not to have assumed, any Liabilities of Seller
or the Domestic Business except as provided in Section 2.3(a), and Seller shall
be solely and exclusively liable with respect to, and shall pay, perform or
discharge, and indemnify Purchaser and its Subsidiaries against any loss,
liability, damage or expense arising from all Liabilities of Seller and the
Domestic Business (it being understood that Seller shall indemnify Purchaser in
accordance with Section 9.1(a) hereof in proportion to Seller's ownership
interest in each such Seller's Foreign Subsidiary with respect to Liabilities
which arise in one of Seller's Foreign Subsidiaries to the extent such Liability
would be considered a Retained Liability under subsections (i)-(xv) of this
Section 2.4), whether disclosed or undisclosed, whether known or unknown, other
than the Assumed Liabilities (collec tively, the "Retained Liabilities"),
including, without limitation, those Liabilities set forth below:
(i) all Liabilities relating to the Retained
Assets;
(ii) all Liabilities each of Seller or its
Subsidiaries has expressly agreed to retain, pay for or be responsible
for pursuant to this Agreement;
(iii) all Liabilities of the Business or the
Business Subsidiaries arising out of the conduct of the Business on or
prior to Closing (other than Liabilities of the Seller's Foreign
Subsidiaries);
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(iv) all Liabilities of the Business or a
Business Subsidiary under Environmental Laws arising from activities
occurring on or prior to the Closing;
(v) all Liabilities of the Business or a
Business Subsidiary, for Taxes attributable to any period (or portion
thereof) ending on or prior to Closing, including all Taxes arising out
of the Business or the Assets, including any ad valorem, real or
personal or intangible property, sales, personal, social security or
other Taxes which are not due or assessed until after Closing but which
are attributable to any period (or portion thereof) ending on or prior
to Closing;
(vi) all Liabilities (excluding Liabilities
of Seller's Foreign Subsidiaries to the extent reflected on the Foreign
Subsidiaries Balance Sheets) of the Business or a Business Subsidiary
to the current or former employees of the Business or a Business
Subsidiary relating to or arising out any period on or prior to the
Closing except for Liabilities to current employees of the Business or
a Business Subsidiary for vacation days accrued and sick pay earned
under Seller's current programs;
(vii) all Liabilities of Seller arising out
of or related to any Encumbrances on any Asset, including, without
limitation, any and all mortgages on any of the Real Property other
than such Liabilities arising out of or relating to the ownership,
operation, use or disposition of the Assets after the Closing;
(viii) all Liabilities (excluding Liabilities
of Seller's Foreign Subsidiaries to the extent reflected on the Foreign
Subsidiaries Balance Sheets) for death, personal injury, other injury
to persons or property damage relating to, resulting from, caused by or
arising out of, directly or indirectly, use of or exposure to Assets or
products of the Business or a Business Subsidiary (or any part or
component) designed, manufactured, serviced, leased or sold, or
services performed, by the Business or a Business Subsidiary,
including, without limitation, any such Liabilities based on
negligence, strict liability, design or manufacturing defect,
conspiracy, failure to warn, or breach of express or implied warranties
of merchantability or fitness for any purpose or use or allegations
concerning any of the foregoing;
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(ix) all Liabilities arising from contracts
related to the Domestic Business entered into by Seller which, for
whatever reason, are not assignable to Parent, Purchaser or Purchaser's
Subsidiary as listed on Section 2.4(a)(ix) of the Disclosure Schedule;
(x) all Liabilities arising from the pending
litigation set forth on Section 2.4(a)(x) of the Disclosure Schedule
and other litigation pending at the Closing (other than litigation
being maintained or prosecuted for the benefit of the Business);
(xi) all Liabilities arising out of or
relating to the Business or Assets or products of the Business or a
Business Subsidiary and arising from events or circumstances occurring
on or prior to the Closing (or any part or component) or services which
are performed by the Business or a Business Subsidiary which
constitute, may constitute or are alleged to constitute a tort, breach
of contract or violation of, or noncompliance with any Applicable Law,
including, without limitation, any relating to employment, workers'
compensation, occupational health and safety, occupational disease,
occupational injury, toxic tort or Environmental Law;
(xii) all Liabilities arising from Article
VII of the Stock Purchase Agreement dated as of October 30, 1998
between Seller and Xxxx X. X' Xxxxx and Xxxxxx X. X'Xxxxx except to the
extent covered by the deferred compensation obligations set forth in
Section 2.3(a)(iv);
(xiii) all Liabilities arising from the Stock
Purchase Agreement dated as of December 9, 1998 between Seller and
Xxxxxxx X. Xxxxxxxxx, Xxxxxxxx X. Xxxxx, Xxxxxxxx X. Xxxxxxxxx, Xx.
Xxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx and the transactions
contemplated thereby ("the Green Purchase Agreement") except to the
extent covered by (i) the deferred compensation obligations set forth
in Section 2.3(a)(iv), (ii) as set forth on the June 30, 2000 Balance
Sheet and (iii) the obligations under the Supply Agreement as defined
in the Green Purchase Agreement;
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(xiv) any retrospective premiums, reinsurance
payments, payments under reimbursement contracts or other adjustments
under any insurance policy maintained for the benefit of the Business
and/or any of the Business Subsidiaries or their respective
predecessors covering any Liability that is a Retained Liability; and
(xv) all other Liabilities to the extent
relating to or arising out of the operations or businesses of Seller or
any of its Subsid iaries other than the Business or the Assets.
Section 2.5 The Purchase Price. On the basis of the June 30,
2000 pro forma balance sheet reviewed by Xxxxxx Xxxxxxxx and attached hereto as
Section 2.5 of the Disclosure Schedule (the "June 30, 2000 Balance Sheet"),
subject to the terms and conditions of this Agreement and the adjustments
provided for in Sections 2.6 and 2.7 hereof, in consideration of the aforesaid
assumption of the Liabilities and the sale, conveyance, assignment, transfer and
delivery: (x) to Purchaser's Subsidiary of the Tangible Assets of the Domestic
Business, (y) to Parent or an Affiliate of Parent of the Intangible Assets of
the Domestic Business and (z) to Parent or Purchaser of all of Seller's shares
or interests in Seller's Foreign Subsidiaries, at the Closing Purchaser shall
(i) pay to Seller an amount of cash equal to seven million seven hundred and
fifty thousand dollars ($7,750,000), (such amount, as adjusted, is referred to
herein as the "Purchase Price").
Section 2.6 General Price Adjustments. The Purchase Price is
subject to adjustments to be determined as follows:
(a) For purposes of this Agreement, the term "Net
Assets" shall mean, as of the date immediately preceding the Closing Date, the
total assets of the Business, which total net assets shall equal: (i) the gross
assets of the Business, (without taking into consideration any depreciation or
amortization accrued over the period from June 30, 2000 through the Closing
Date) minus (ii) the gross liabilities of the Business, each as determined in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied throughout the periods determined on the same basis as used
to prepare the June 30, 2000 Balance Sheet.
(b) The parties have heretofore mutually agreed that
the Net Assets as of June 30, 2000 shall be $11,514,709 (eleven million five
hundred and fourteen thousand seven hundred and nine dollars) as reflected on
the June 30, 2000 Balance Sheet (the "Target Net Assets").
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(c) Within sixty (60) days after the Closing Date,
Seller shall deliver to Purchaser (the date of such delivery being the
"Adjustment Date"), a statement of the Net Assets (the "Statement of the Closing
Date Net Assets" or "Statement"), which Statement shall (i) have been prepared
by Seller and Seller's auditors, Xxxxxx+Co, or such other firm of independent
certified public accountants appointed by Seller for this purpose) in accordance
with GAAP consistently applied, and (ii) set forth the Net Assets (the "Closing
Date Net Assets"). In rendering the Statement of the Closing Date Net Assets,
Seller and its auditors shall permit Parent, Purchaser and their auditors, at
the earliest practicable date, access to and copies of the work papers and
calculations related thereto.
(d) Any dispute which may arise between Purchaser and
Seller as to the Closing Date Net Assets shall be resolved in the following
manner:
(i) If Purchaser disputes the calculation of
the Closing Date Net Assets or any portion thereof, Purchaser shall
notify Seller within thirty (30) days after the Adjustment Date, and
shall specify therein in reasonable detail the basis and reason for
such dispute and the amount which is in dispute;
(ii) During the thirty (30) day period
following the date of such notice, Purchaser and Seller shall attempt
to resolve such dispute. In attempting to resolve such dispute,
Purchaser and its auditors shall permit Seller and its auditors, at the
earliest practicable date, access to and copies of the work papers and
calculations related thereto of Purchaser which Purchaser used to
determine the Closing Date Net Assets; and
(iii) If at the end of the thirty (30) day
period specified in clause (ii) above the parties shall have failed to
reach agreement with respect to such dispute, the matter shall be
referred to such accounting firm, which will be different than the firm
currently used by each of Seller, Parent or Purchaser, of independent
certified public accountants as the parties mutually agree (the
"Independent Accounting Firm") for resolution. The Independent
Accounting Firm shall be instructed to use every reasonable effort to
26
perform such services within thirty (30) days of the submission to it
of the Statement of the Closing Date Net Assets and related dispute
and, in any case, as soon as practica ble after such submission. The
fees, costs and expenses related to the Independent Accounting Firm
shall be shared equally by Purchaser and Seller. This provision for
Independent Accounting Firm shall be specifically enforceable by the
parties and the decision of the Independent Accounting Firm in
accordance herewith shall be final and binding and there shall be no
right of appeal therefrom.
(e) Within twenty (20) days after the later of (i)
the Adjustment Date, (ii) the date of the settlement of any dispute made in
accordance with the provisions of Section 2.6(d)(ii) above, or (iii) the date of
the decision of the Independent Accounting Firm in connection with any dispute
made in accordance with the provisions of Section 2.6(d)(iii) above and provided
that the difference is greater than $400,000 (four hundred thousand dollars):
Seller shall reimburse Purchaser, by wire transfer of immediately available
funds, to such bank as indicated by Purchaser in an amount by which the Closing
Date Net Assets (without giving effect to any change in depreciation or
amortization from June 30, 2000 through the Closing Date) is less than the
Target Net Assets minus $400,000.
Section 2.7 Accounts Receivable Price Adjustments. The
Purchase Price is also subject to adjustment to be determined as follows:
(a) Purchaser shall use reasonable commercial efforts
in the ordinary course of business (not including litigation) to collect the
Accounts Receivable of the Domestic Business. All payments from any customer
shall first be credited to the Original Accounts Receivable (as defined) unless
a customer expresses specific disputes with respect to an outstanding xxxx or
invoice, which dispute shall then be immediately brought to the attention of the
Seller. For purposes of this Agreement, the term "Original Accounts Receivable"
shall mean, the total Accounts Receivables of the Domestic Business which
constitute a part of the Assets as of the Closing Date. For purposes of this
Agreement, the term "Final Uncollected Accounts Receivable" shall mean, the
total Accounts Receivables of the Domestic Business which constitute a part of
the Assets which have not been collected in full by Purchaser as of the date two
hundred and forty days from the Closing Date.
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(b) The parties have heretofore mutually agreed that
the reserves shall be $153,000 (the "Reserve")
(c) Within two hundred and sixty (260) days after the
Closing Date, Purchaser shall deliver to Seller (the date of such delivery being
the "Account Receivable Adjustment Date"), a statement setting forth the Final
Uncollected Accounts Receivable (the "Statement of Accounts Receivable"), which
Statement of Accounts Receivable shall (i) have been prepared by Purchaser in
accordance with GAAP consistently applied, and (ii) set forth the Final
Uncollected Accounts Receivable. In rendering the Statement of Accounts
Receivable, Purchaser and its auditor shall permit Seller and its auditors, at
the earliest practicable date, access to and copies of the work papers and
calculations related thereto.
(d) Any dispute which may arise between Purchaser and
Seller as to the Statement of Accounts Receivable shall be resolved in the
following manner:
(i) If Seller disputes the Final Uncollected
Accounts Receivable or any portion thereof, Seller shall notify
Purchaser within thirty (30) days after the Accounts Receivable
Adjustment Date, and shall specify therein in reasonable detail the
basis and reason for such dispute and the amount which is in dispute;
(ii) During the thirty (30) day period
following the date of such notice, Purchaser and Seller shall attempt
to resolve such dispute; and
(iii) If at the end of the thirty (30) day
period specified in clause (ii) above the parties shall have failed to
reach agreement with respect to such dispute, the matter shall be
referred to the Independent Accounting Firm for resolution. The
Independent Account ing Firm shall be instructed to use every
reasonable effort to perform such services within thirty (30) days of
the submission to it of the Statement of Accounts Receivable and
related dispute and, in any case, as soon as practicable after such
submission. The fees, costs and expenses related to the Independent
Accounting Firm shall be shared equally by Purchaser and Seller. This
provision for Independent Accounting Firm shall be specifically
enforceable by the parties and the decision of the Independent
Accounting Firm in accordance herewith shall be final and binding and
there shall be no right of appeal therefrom.
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(e) Within twenty (20) days after the later of (i)
the Accounts Receivable Adjustment Date, (ii) the date of the settlement of any
dispute made in accordance with the provisions of Section 2.7(d)(ii) above, or
(iii) the date of the decision of the Independent Accounting Firm in connection
with any dispute made in accordance with the provisions of Section 2.7(d)(iii)
above: Seller shall reimburse Purchaser, through a set off against the Nevada
Loan in an amount equal to the aggregate amount of the Final Uncollected
Accounts Receivable less the Reserve. After Seller has fulfilled its payment
obligations under this Section 2.7(e), Purchaser shall assign and transfer to
Seller the right to collect the Final Uncollected Accounts Receivables and shall
cooperate and use reasonable efforts to assist Seller in collecting such Final
Uncollected Accounts Receivables including cooperating with Seller in connection
with any litigation arising therefrom, which cooperation shall not include
joining or becoming a party to any such litigation.
Section 2.8 Allocation of Purchase Price; Tax Filings.
Purchaser and Seller shall allocate the Purchase Price plus Assumed Liabilities
among the Business as set forth on Exhibit B hereto. Each of Purchaser,
Purchaser's Subsidiary and Seller shall (i) timely file all forms (including
Internal Revenue Service Form 8594) and Tax Returns required to be filed in
connection with such allocation, (ii) be bound by such allocation for purposes
of determining Taxes, (iii) prepare and file, and cause its Affiliates to
prepare and file, its Tax Returns on a basis consistent with such allocation and
(iv) take no position, and cause its Affiliates to take no position,
inconsistent with such allocation on any applicable Tax Return, in any audit or
proceeding before any taxing authority, in any report made for Tax, financial
accounting or any other purposes, or otherwise. In the event that the Allocation
is disputed by any taxing authority, the party receiving notice of such dispute
shall promptly notify the other party hereto concerning the existence and
resolution of such dispute.
ARTICLE III
THE CLOSING
Section 3.1 The Closing. Upon the terms and subject to the
conditions of this Agreement, the consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the New York offices of
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Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP at 10:00 a.m., Eastern time, five (5)
Business Days following the satisfaction and/or waiver of all conditions to
close set forth in Article VII (other than conditions which can be satisfied
only by the delivery of certificates, opinions or other documents at the
Closing), unless another date or place is agreed in writing by each of the
parties hereto.
Section 3.2 Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser or Purchaser's Subsidiary (unless
previously delivered), the following:
(a) a duly executed Xxxx of Sale in customary form
reasonably acceptable to Purchaser and Seller;
(b) warranty deeds in recordable form relating to the
Real Property owned by Seller in customary form reasonably acceptable to
Purchaser and Seller;
(c) all documents of title and instruments of
conveyance necessary to transfer record and/or beneficial ownership to Purchaser
or Purchaser's Subsidiary of all automobiles, trucks, trailers, aircraft (and
any other property owned by Seller which require execution, endorsement and/or
delivery of a document in order to vest record or beneficial ownership thereof
in Purchaser or Purchaser's Subsidiary) which are included in the Business;
(d) stock certificates (or similar evidence of
ownership) representing all the outstanding capital stock or interests owned by
Seller of each of Seller's Purchased Subsidiaries, each such certificate to be
duly and validly endorsed in favor of Purchaser or Purchaser's Subsidiary or
accompanied by separate stock powers duly and validly executed by Seller and
otherwise sufficient to vest in Purchaser or Purchaser's Subsidiary good and
marketable title to such stock;
(e) assignments of all patents, trademarks, trade
names, assumed names and copyrights and all applications therefor and all other
Intellectual Property which is listed in Section 3.2(e) of the Disclosure
Schedule as owned by Seller for the benefit of the Business;
(f) executed copies of the Required Consents referred
to in Section 4.5 hereof;
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(g) all documents containing or relating to
"know-how" to be acquired by Purchaser or Purchaser's Subsidiary pursuant
hereto;
(h) all of the books and records of Seller relating
to the Business, except as otherwise required by law and except as are set forth
in Section 2.1(a)(iii) of the Disclosure Schedule;
(i) the opinion of counsel referred to in Section
7.2(b) hereof;
(j) the Officers' Certificate referred to in Section
7.2(c) hereof;
(k) a certification of non-foreign status for Seller
in the form and manner which complies with the requirements of Section 1445 of
the Code and the regulations promulgated thereunder;
(l) all Permits necessary for the operation of the
Business and the Business Subsidiary's business to the extent transferrable;
(m) any other certifications from Seller or any of
its Affiliates which may be required under Applicable Law necessary to establish
that, except for Transfer Taxes for which Purchaser is responsible under Section
10.1 hereof, no Taxes (or a reduced amount) are due to any taxing authority for
which the Purchaser or Purchaser's Subsidiary could have liability to withhold
and pay with respect to the transfer of the Business;
(n) the lease referred to in Section 7.1(b) hereof;
(o) the license agreement referred to in Section
7.2(h) hereof;
(p) all such other deeds, endorsements, assignments
and other instruments as, in the reasonable opinion of Purchaser's counsel, are
necessary to vest in Purchaser or Purchaser's Subsidiary good and marketable
title to the Assets and Seller's interest in the Seller's Foreign Subsidiaries;
and
(q) all other previously undelivered documents
required to be delivered by Seller to Purchaser or Purchaser's Subsidiary at or
prior to the Closing in connection with the Transactions.
31
Section 3.3 Deliveries by Purchaser or Purchaser's Subsidiary.
At the Closing, Parent, Purchaser or Purchaser's Subsidiary shall deliver or
cause to be delivered to Seller (unless previously delivered), the following:
(a) a certified check (or wire transfer) payable to
Seller in the amount of seven million seven hundred and fifty thousand dollars
($7,750,000); provided, that if Seller shall fail to deliver the certification
of non-foreign status or other tax certifications required to be delivered by
Seller at the Closing pursuant to Sections 3.2(k) and 3.2(m) hereof, Purchaser
or Purchaser's Subsidiary may (but shall not be required to) withhold from the
cash payable at the Closing and pay over to the appropriate taxing authority an
amount equal to, in the case of a failure to provide a certification of
non-foreign status in compliance with section 1445 of the Code and the
regulations promulgated thereunder, ten percent (10%) of the total "amount
realized" (as defined in section 1445 of the Code) and, in the case of a failure
to provide any other certification, such amount is necessary to cover such
Taxes, based on the Purchaser's or Purchaser's Subsidiary's estimate of the
amount of such potential liability;
(b) the lease referred to in Section 7.1(b) hereof;
(c) an Instrument of Assumption in customary form
reasonably acceptable to Purchaser and Seller, duly executed by Purchaser;
(d) a guaranty from Parent in a form reasonably
satisfactory to Seller, guaranteeing Purchaser's and Purchasers Subsidiary's
full payment of the Nevada Loan; and
(e) such other documents as are required to be
delivered by Purchaser or Purchaser's Subsidiary to Seller pursuant to this
Agreement.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE SELLER
Except as specifically set forth in the Disclosure Schedule
prepared and signed by Seller and delivered to Purchaser or Purchaser's
Subsidiary simultaneously with the execution hereof, Seller represents and
warrants to Purchaser and Purchaser's Subsidiary that all of the statements
contained in this Article IV are true and complete as of the date of this
32
Agreement, and as amended pursuant to Section 6.20 hereof will be true and
complete as of the Closing Date as though made on the Closing Date. Each
exception set forth in the Disclosure Schedule and each other response to this
Agreement set forth in the Disclosure Schedule is identified by reference to, or
has been grouped under a heading referring to, a specific individual section of
this Agreement and, except as otherwise specifically stated with respect to such
exception, relates only to such section. In the event of any inconsistency
between statements in the body of this Agreement and statements in the
Disclosure Schedule (excluding exceptions expressly set forth in the Disclosure
Schedule with respect to a specifically identified representa tion or warranty),
the statements in the body of this Agreement shall control.
Section 4.1 Authorization. Seller has full corporate power and
authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance by Seller of this
Agreement and the consumma tion by it of the Transactions have been duly
authorized by Seller's Board of Directors, and no other corporate action on the
part of Seller is necessary to authorize the execution and delivery by Seller of
this Agreement or the consummation by it of the Transactions, except that the
vote of the holders of a majority of the common stock of Seller is necessary to
authorize the consummation by Seller of the Transactions.
Section 4.2 Binding Agreement. This Agreement has been duly
executed and delivered by Seller and, assuming due and valid authorization,
execution and delivery thereof by Purchaser and Purchaser's Subsidiary, this
Agreement is a valid and binding obligation of Seller enforceable against Seller
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforce ment of creditors' rights
generally and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Organization; Qualification of Seller. Each of
Seller and the Business Subsidiaries (i) is a legal entity duly organized,
validly existing and in good standing under the laws of its state or country of
incorporation; (ii) has full corporate power and authority to carry on the
Business as it is now being conducted and to own the Business; and (iii) is duly
qualified or licensed to do business as a foreign corporation in good standing
in every jurisdiction in which the conduct of the Business requires such
qualification or, if Seller or any Business Subsidiary is not so qualified in
33
any such jurisdiction, it can become so qualified in such jurisdiction without
any material adverse effect (including assessment of state taxes for prior
years) upon its business and properties. Seller has heretofore made available to
Purchaser and Purchaser's Subsidiary complete and correct copies of the
certificate of incorporation and by-laws of Seller and the Business Subsidiaries
as presently in effect or other organizational documents.
Section 4.4 Subsidiaries and Affiliates. Section 4.4 of the
Disclosure Schedule sets forth the name, jurisdiction of incorporation or
formation and authorized and outstanding capital of each Business Subsidiary and
the jurisdictions in which each Business Subsidiary is qualified to do business.
All the outstanding capital stock of each Business Subsidiary which is owned by
Seller or an Affiliate of Seller is free and clear of all Encumbrances and all
material claims or charges of any kind, and is validly issued, fully paid and
nonassessable, and there are no outstanding options, rights or agreements of any
kind relating to the issuance, sale or transfer of any capital stock or other
equity securities of any such Business Subsidiary.
Section 4.5 Required Consents and Approvals; No Violations.
Except as set forth on Section 4.5 of the Disclosure Schedule and except for the
filings, permits, authorizations, Required Consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act, the HSR
Act and state securities or blue sky laws, none of the execution, delivery or
performance of this Agreement by Seller, the consummation by Seller of the
Transactions or compliance by Seller with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation, the by-laws or similar organizational documents of Seller or any
Business Subsidiary, (ii) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity or other Person (including,
without limitation, consents from parties to loans, contracts, leases and other
agreements to which Seller or any Business Subsidiary is a party), (iii) require
any consent, approval or notice under, or result in a violation or breach of, or
constitute (with or without due notice or the passage of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any contract,
agreement, arrangement or understanding to which Seller or any Business
Subsidiary is a party or by which the Assets are bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to each
of Seller, the Business, the Assets, any Business Subsidiary or any of their
properties or assets.
Section 4.6 Financial Statements. True and complete copies of
the Financial Statements, together with the related auditors reports (if
applicable), are included in Section 4.6 of the Disclosure Schedule. The
Financial Statements have been prepared from, are in accordance with and
34
accurately reflect, the books and records of Seller and its Subsidiaries, comply
in all material respects with applicable accounting requirements, have been
prepared in accordance with GAAP and, with respect to the Seller's Foreign
Subsidiaries, with such generally accepted accounting principles as are
applicable to each Foreign Subsidiary applied on a consistent basis during the
periods involved (except as may be stated in the notes thereto) and fairly
present the consolidated financial position and the consolidated results of
operations and cash flows, if any (and changes in financial position, if any) of
the Business and the Business Subsidiaries as of the times and for the periods
referred to therein (subject, in the case of unaudited statements, to normally
recurring year-end audit adjustments which are not material either individually
or in the aggregate). The June 30, 2000 Balance Sheet has been prepared from, is
in accordance with and accurately reflects, the books and records of Seller and
its Subsidiaries with respect to the Business, complies in all material respects
with applicable accounting requirements, has been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be
stated in the notes thereto) and fairly presents the consolidated financial
position of the Business and the Business Subsidiaries as of the times and for
the periods referred to therein (subject, in the case of unaudited statements,
to normally recurring year-end audit adjustments which are not material either
individually or in the aggregate). The balance sheets prepared for each of the
Seller's Foreign Subsidiaries (the "Foreign Subsidiaries Balance Sheets") have
been prepared from, are in accordance with and accurately reflect, the books and
records of each of the Seller's Foreign Subsidiaries with respect to the
Business, comply in all material respects with applicable accounting
requirements applied on a consistent basis during the periods involved (except
as may be stated in the notes thereto) and fairly present the financial position
of each of the Seller's Foreign Subsidiaries as of the times referred to therein
pursuant to applicable accounting requirements (subject, in the case of
unaudited statements, to normally recurring year-end audit adjustments which are
not material either individually or in the aggregate).
Section 4.7 Books and Records. The books of account, minute
books, stock record books and other records of Seller relating to the Business
and the Business Subsidiaries are complete and correct in all material respects
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute books of
the Business Subsidiaries contain accurate and complete records of all meetings
of, and corporate action taken by, the shareholders and directors of such
subsidiaries and no meeting of the shareholders or boards of directors of such
subsidiaries has been held for which minutes have not been prepared and are not
35
contained in such minute books. True and complete copies of all minute books and
all stock record books of each Business Subsidiary have heretofore been
delivered to Purchaser.
Section 4.8 No Undisclosed Liabilities. Except (a) as
disclosed in the Financial Statements, (b) Section 4.8 of the Disclosure
Schedule and (c) for liabilities and obligations incurred in the ordinary course
of business and consistent with past practice since June 30, 2000, neither the
Business nor any Business Subsidiary has any liability or obligation of any
nature, (including, without limitation, any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured) that has, or would
be reasonably likely to have, a Material Adverse Effect.
Section 4.9 Accounts Receivable. All Accounts Receivable of
the Business, whether reflected in the June 30, 2000 Balance Sheet or otherwise,
represent sales actually made in the ordinary course of business. Subject to the
reserve shown on the June 30, 2000 Balance Sheet, each of the Accounts
Receivable to be included in the Assets will be collected in full, within two
hundred and forty days from the Closing Date. Amounts uncollected two hundred
and forty days from the Closing Date will be setoff against the Nevada Loan as
provided for in Sections 2.7 and 9.8 hereof.
Section 4.10 Material Contracts.
------------------
(a) Section 4.10(a) of the Disclosure Schedule sets
forth the follow ing, including any legally binding oral agreements or
arrangements covered by the following:
1. each agreement that materially or adversely affects or materially
restricts the freedom of Seller to compete in its lines of business or with any
Person or in any geographical area, for any length of time, or otherwise to
conduct its business as pres ently conducted or materially and adversely affect
or materially restrict, the business, operations, assets, properties or
condition (financial or other) of the Business as currently conducted;
2. each collective bargaining or union contract or agreement and each
employment or severance contract or agreement of Seller which constitutes a part
of the Assets related to an employee of the Business;
36
3. each contract or agreement for the receipt of maintenance,
consulting or other services which constitutes a part of the Assets, except
those contracts or agreements terminable without penalty on thirty (30) or fewer
days' notice or those involving the re ceipt or payment of less than $50,000 per
year;
4. each contract or agreement for the purchase of equipment, materials
or supplies which constitutes a part of the Assets, except those contracts or
agreements terminable without penalty on thirty (30) or fewer days' notice or
those involving the receipt or payment of less than $50,000 per year;
5. each contract or agreement with any employee or third party which
constitutes a part of the Assets which is not terminable without penalty on
thirty (30) or fewer days' notice;
6. other than this Agreement, each agreement for the acquisition or
disposition of Assets other than sale of inventory in the ordinary course of
business;
7. all leases and loans, capitalized or other, for Assets which are
leased, or owned, by Seller and which are not Retained Liabilities;
8. each indemnification agreement entered into by Seller in the last
two years from the date hereof which constitutes a part of the Assets and each
such agreement entered into prior thereto if Seller has any continuing
obligations to perform services thereunder;
9. each agreement which involves the receipt or payment of more than
$50,000 which constitutes a part of the Assets per year and (i) is not
terminable without Liability, penalty or premium (whether imposed by contract,
law, regulation or otherwise) on thirty (30) or fewer days' notice or (ii) has
an unexpired term of over one year; and
10. each agreement, warranty, contract, or lease involving more than
$20,000 relating to any of the Assets.
(b) Seller has made available to Purchaser true,
correct and complete copies of all agreements set forth in Section 4.10(a) of
the Disclosure Schedule (the "Material Contracts").
37
(c) Except as set forth in Section 4.10(c) of the
Disclosure Sched ule, each Material Contract is in full force and effect, has
not been modified or amended and constitutes the legal, valid and binding
obligation of Seller or its Subsidiaries, as the case may be, as a party
thereto, in accordance with the terms of such agreement. To the Knowledge of
Seller or Business Subsidiary, each Material Contract is a legal, valid and
binding obligation of the other party or parties to such Material Contract. In
the past twelve months, Seller or Business Subsidiary have not given or received
a notice of default under (whether oral or written) or had any material dispute
with respect to any Material Contract.
Section 4.11 Absence of Certain Changes. Except as set forth
in Section 4.11 of the Disclosure Schedule, since the Balance Sheet Date, the
Business and each Business Subsidiary has been conducted only in the ordinary
and usual course consistent with past practice, and neither Seller (with respect
to the Assets), the Business nor any Business Subsidiary has or could reasonably
be expected to have:
(a) suffered any Material Adverse Effect;
(b) except as set forth in Section 4.11(b) of the
Disclosure Schedule, incurred any liability or obligation (absolute, accrued,
contingent or otherwise) except items incurred in the ordinary course of
business and consistent with past practice, none of which exceeds $50,000
(counting obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;
(c) except as set forth in Section 4.11(c) of the
Disclosure Sched ule, paid, discharged or satisfied any claim, liability or
obligation (whether absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in the June 30, 2000 Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the Balance Sheet
Date;
(d) permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except for liens for current taxes not yet due, except as set forth in
Section 4.11(d) of the Disclosure Schedule;
38
(e) except as set forth in Section 4.11(e) of the
Disclosure Sched ule, written down the value of any inventory (including
write-downs by reason of shrinkage or xxxx-down) or written off as uncollectible
any notes or accounts receivable, except for immaterial write-downs and
write-offs in the ordinary course of business and consistent with past practice;
(f) except as set forth in Section 4.11(f) of the
Disclosure Sched ule, cancelled any debts or waived any claims or rights of
substantial value;
(g) sold, transferred, or otherwise disposed of any
of its properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past practice;
(h) except as set forth in Section 4.11(h) of the
Disclosure Sched ule, disposed of or permitted to lapse any rights to the use of
any Intellectual Property, or disposed of or disclosed to any Person other than
representatives of Purchaser any trade secret, formula, process, know-how or
other Intellectual Property not theretofore a matter of public knowledge;
(i) except as set forth in Section 4.11(i) of the
Disclosure Schedule, granted any general increase in the compensation of
officers or employees of the Business (including any such increase pursuant to
any bonus, pension, profitsharing or other plan or commitment) or any other
increase in the compensation payable or to become payable to any officer or
employee of the Business, and no such increase is customary on a periodic basis
or required by agreement or understanding;
(j) except as set forth in Section 4.11(j) of the
Disclosure Schedule, made any single capital expenditure or commitment in excess
of $50,000 for additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures and commitments in excess of
$100,000 (on a Business-wide basis) for additions to property, plant, equipment
or intangible capital assets;
(k) declared, paid or set aside for payment any
dividend or other distribution in respect of its capital stock, except dividends
with respect to Seller's capital stock in property which does not constitute a
part of the Assets or in cash;
39
(l) made any change in any method of accounting or
accounting practice; or
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers or directors or any Affiliate or Associate of any of its
officers or directors except for compensation to officers at rates not exceeding
the rates of such fees and compensation paid during the year ended December 31,
1999.
Section 4.12 Title to Assets; Encumbrances.
-----------------------------
Except for property having an aggregate book value not in
excess of $100,000 sold since the Balance Sheet Date in the ordinary course of
business and consistent with past practice and except for inventory sold in the
ordinary course of business, Seller and each Business Subsidiary has good, valid
and marketable title to all the Assets that each of them purports to own
(tangible and intangible) free and clear of all Encumbrances, including all the
properties and assets reflected in the June 30, 2000 Balance Sheet, and all such
material properties and assets purchased by Seller for the use and benefit of
the Business or by any Business Subsidiary since the date of the June 30, 2000
Balance Sheet, which subsequently acquired personal properties and assets (other
than inventory and short term investments) are listed in Section 4.12 of the
Disclosure Schedule. The rights, properties and other assets to be conveyed to
Purchaser pursuant hereto include all rights, properties and other assets used
by Seller to conduct the Business or necessary to permit Purchaser to conduct
the Business after the Closing in all material respects in the same manner as
such business has been conducted by Seller prior to the date hereof.
Section 4.13 Real Property.
-------------
(a) Section 4.13(a) of the Disclosure Schedule sets
forth a complete list and the location of all Real Property. True and complete
copies of (i) all deeds, title insurance policies, if any, and surveys relating
to the Real Property and in the case of surveys to the extent such surveys are
in the possession of Seller or its Subsidiaries and (ii) all documents
evidencing all Encumbrances upon the Real Property to the extent they are in the
possession of Seller have heretofore been or will be furnished to Purchaser.
There are no proceedings, claims, disputes or conditions affecting any Real
40
Property that might curtail or interfere with the use of such property. Neither
the whole nor any portion of the Real Property nor any other Asset is subject to
any governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor, nor to the Knowledge of Seller has any such condemnation,
expropriation or taking been proposed. Neither Seller nor any Business
Subsidiary is a party to any lease, assignment or similar arrangement under
which Seller or any Business Subsidiary is a lessor, assignor or otherwise makes
available for use by any third party any portion of the Real Property.
(b) Neither Seller nor any Business Subsidiary has
received any notice of, or other writing referring to, any requirements or
recommendations by any insurance company that has issued a policy covering any
part of the Real Property or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or work to
be done on any part of the Real Property, which repair or work has not been
completed.
(c) Seller has obtained all appropriate certificates
of occupancy, licenses, easements and rights of way, including proofs of
dedication, required to use and operate the Real Property in the manner in which
the Real Property is currently being used and operated. True and complete copies
of all such certificates, permits and licenses to the extent they are in the
possession of Seller or its Subsidiaries have heretofore been furnished to
Purchaser. Each of Seller (with respect to the Business) and each Business
Subsidiary has all approvals, permits and licenses (including any and all
environmental permits) necessary to own or operate the Real Property as
currently owned and operated, and no such approvals, permits or licenses will be
required, as a result of the Transac tions, to be issued after the date hereof
in order to permit Purchaser and the Business Subsidiaries, following the
Closing, to continue to own or operate the Real Property in the same manner as
heretofore, other than any such approvals, permits and licenses that are
ministerial in nature and are normally issued in due course upon application
therefore without further action by the applicant.
Section 4.14 Leases. Section 4.14(a) of the Disclosure
Schedule contains an accurate and complete description of the terms of each
Lease. A true and complete copy of each Lease has heretofore been delivered to
Purchaser. Each Lease is valid, binding and enforceable upon Seller and to the
Knowledge of Seller upon the other party thereto in accordance with its terms
and is in full force and effect. To the Knowledge of Seller, the leasehold
41
estate created by each Lease is free and clear of all Encumbrances. There are no
existing defaults by Seller or to the Knowledge of Seller by any Business
Subsidiary, under any of the Leases. No event has occurred that (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default under any Lease. Seller has no reason to believe that
any lessor under any Lease will not consent (where such consent is necessary) to
the consummation of the Transactions without requiring any modification of the
rights or obligations of the lessee thereunder.
Section 4.15 Plant and Equipment. Except as set forth in
Section 4.15 of the Disclosure Schedule, the plants, structures and equipment
owned or used by the Business and each Seller's Domestic Subsidiary and to the
Knowledge of Seller with respect to the Seller's Foreign Subsidiaries, have no
known defects and, to the Knowledge of Seller are in good operating condition
and repair and are adequate for the uses to which they are being put. To the
Knowledge of Seller, none of such plants, structures or equipment are in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
which are not material in nature or cost. Neither Seller (with respect to the
Business) nor any Seller's Domestic Subsidiary, nor to Seller's Knowledge with
respect to the Seller's Foreign Subsidiaries, has received notification that it
is in violation of any applicable building, zoning, health or other law,
ordinance or regulation in respect of its stores, plants or structures or their
operations or the Real Property.
Section 4.16 Environmental Matters.
---------------------
(a) Seller (with respect to the Business) and the
Seller's Domestic Subsidiaries, and to Seller's Knowledge the Seller's Foreign
Subsidiaries, are in material compliance with all Environmental Laws. Such
compliance includes, but is not limited to, the possession by Seller and each of
the Business Subsidiaries of all permits and other governmental authorizations
required under all applicable Environmental Laws, and compliance with the terms
and conditions thereof. Each permit and other governmental authorization
currently held by Seller (with respect to the Business) and each of the Business
Subsidiaries pursuant to the Environmental Laws is specifically identified in
Section 4.16(a) of the Disclosure Schedule.
(b) Except as set forth in Section 4.16(b) of the
Disclosure Sched ule, neither Seller (with respect to the Business) nor the
Seller's Domestic Subsidiaries, nor to Seller's Knowledge the Seller's Foreign
Subsidiaries, has received any communica tion (written or oral), whether from a
Governmental Entity, citizens group, employee or otherwise, that alleges that
42
Seller (with respect to the Assets), or any of the Business Subsidiaries is not
in full compliance with any Environmental Laws. Seller has delivered to
Purchaser prior to the execution of this Agreement all information that is in
the possession of or reasonably available to Seller, the Business or the
Business Subsidiaries regarding environmental matters pertaining to, or the
environmental condition of, the businesses of Seller and the Business
Subsidiaries or the compliance (or non-compliance) by the Business or any of the
Business Subsidiaries with any Environmental Laws.
(c) There is no Environmental Claim by any Person
that is pending or threatened against Seller, the Business or any of the
Seller's Domestic Subsidiaries or to Seller's Knowledge against the Seller's
Foreign Subsidiaries, or against any Person whose liability for any
Environmental Claim Seller (with respect to the Business) or any Business
Subsidiary has retained or assumed either contractually or by operation of law.
(d) Except as set forth in Section 4.16(d) of the
Disclosure Sched ule, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against Seller (with respect to
the Business) or any Seller's Domestic Subsidiary or, to the Knowledge of
Seller, against any Person whose liability for any Environmental Claim Seller
(with respect to the Business) or any Business Subsidiary has retained or
assumed either contractually or by operation of law.
(e) Without in any way limiting the generality of the
foregoing, (i) all on-site and off-site locations where the Business or any
Business Subsidiary, other than the Seller's Foreign Subsidiaries, has
(previously or currently) stored, disposed or arranged for the disposal of
Materials of Environmental Concern are specifically identified in Section
4.16(e) of the Disclosure Schedule, (ii) to Seller's Knowledge all on- site and
off-site locations where any Seller's Foreign Subsidiary has (previously or
currently) stored, disposed or arranged for the disposal of Materials of
Environmental Concern are specifically identified in Section 4.16(e) of the
Disclosure Schedule, (iii) all underground storage tanks, and the capacity and
contents of such tanks, located on any property owned, leased, operated or
controlled by Seller for the use or benefit of the Business or by any Business
Subsidiary are specifically identified in Section 4.16(e) of the Disclosure
Schedule, (iv) to Seller's Knowledge there is no asbestos contained in or
forming part of any building, building component, structure or office space
owned, operated or controlled by the Business or any Business Subsidiary and (v)
to Seller's Knowledge no PCBs or PCB-containing items are used or stored at any
property owned, operated or controlled by Seller for the benefit of the Business
or by any Business Subsidiary.
43
(f) Seller has provided to Purchaser a copy of each
assessment, report, datum, result of investigations or audit, and other
information that is in the possession of or reasonably available to Seller or
any Subsidiary regarding environmental matters pertaining to or the
environmental condition of the Business, or the compliance (or noncompliance) by
Seller (with respect to the Business) or any Business Subsidiary with any
Environmental Laws.
(g) Except as set forth in Section 4.16(g) of the
Disclosure Sched ule, none of Seller (with respect to the Business) nor any
Business Subsidiary is subject to any Environmental Laws requiring (i) the
performance of site assessment for Materials of Environmental Concern, (ii) the
removal or remediation of Materials of Environmental Concern, (iii) the giving
of notice to, or receiving the approval of, any Governmental Entity or (iv) the
recording or delivery to any other Person of any disclosure document or
statement pertaining to environmental matters by virtue of the Transactions or
as a condition to the effectiveness of any of the Transactions.
Section 4.17 Contracts and Commitments.
-------------------------
(a) Except as set forth in Section 4.17 of the
Disclosure Schedule, no person has any agreement, option, understanding or
commitments or any right or privilege (whether by law, preemptive or
contractual) capable of becoming an agreement, option or commitment, for the
purchase or other acquisition from Seller of the Business or any Business
Subsidiary.
(b) Neither the Business nor any Business Subsidiary
has any agreements, contracts, commitments or restrictions which require the
making of any charitable contribution.
(c) Except as set forth in Section 4.17 of the
Disclosure Schedule, no material purchase contracts or commitments of the
Business or any Business Subsidiary continue for a period of more than twelve
(12) months or are in excess of the normal, ordinary and usual requirements of
business.
44
(d) Except as set forth in Section 4.17 of the
Disclosure Schedule, neither the Business nor any Business Subsidiary has any
outstanding contracts with directors, officers, employees, agents, consultants,
advisors, salesmen, sales representa tives, distributors or dealers that are not
cancellable by it on notice of not longer than thirty (30) days and without
liability, penalty or premium or any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings.
(e) Except as set forth in Section 4.17 of the
Disclosure Schedule, neither the Business nor any Business Subsidiary has any
employment agreement, or any other agreement that contains any severance or
termination pay liabilities or obligations other than deferred compensation
obligations set forth in Section 2.3(a)(iv) of the Disclosure Schedule.
(f) Except as set forth in Section 4.17 of the
Disclosure Schedule, neither Seller (with respect to the Business) nor any
Business Subsidiary is in material default under or in violation of, nor is
there any valid basis for any claim of default under or violation of, any
contract, commitment or restriction to which it is a party or by which it is
bound which defaults and violations in the aggregate would have a Material
Adverse Effect upon the Business.
(g) Except as set forth in Section 4.17 of the
Disclosure Schedule, neither Seller nor any Business Subsidiary has any employee
to whom it is paying compensation at the annual rate of more than $100,000 for
services rendered.
(h) Except as set forth in Section 4.17 of the
Disclosure Schedule, neither Seller (with respect to the Assets) nor any
Business Subsidiary is restricted by agreement from carrying on its business
anywhere in the world.
(i) Neither the Seller nor any Business Subsidiary
has outstanding any agreement to acquire any debt obligations of others.
(j) Except as set forth in Section 4.17 of the
Disclosure Schedule, no Business Subsidiary has any power of attorney
outstanding or any obligations or liabilities (whether absolute, accrued,
contingent or otherwise), as guarantor, surety, co- signer, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any Person, corporation,
partnership, joint venture, association, organization or other entity.
45
Section 4.18 Customers and Suppliers. Except as set forth in
Section 4.18 of the Disclosure Schedule, there has not been a Material Adverse
Effect because of a change in the business relationship of the Business with any
customer who accounted for more than 5% of the Business' sales (on a
consolidated basis) during the period from July 1, 2000 to October 30, 2000, or
with any supplier from whom the Business purchased more than 5% of the goods or
services (on a consolidated basis) which it purchased during the same period.
Except as set forth in Section 4.18 of the Disclosure Schedule, since January 1,
2000, no material licensor or licensee of the Business has cancelled or
otherwise modified its relationship with the Business and, to the Knowledge of
Seller, (a) no such Person has any intention to do so and (b) the consummation
of the Transactions will not have a Material Adverse Effect on any such
relationship.
Section 4.19 Insurance. Section 4.19 of the Disclosure
Schedule sets forth (a) a true and complete list and description of all
insurance policies, other insurance arrangements and other contracts or
arrangements for the transfer or sharing of insurance risks by the Business or
the Business Subsidiaries in force on the date hereof with respect to the
business or assets of Business or the Business Subsidiaries, together with a
statement of the aggregate amount of claims paid out, and claims pending, under
each such insurance policy or other arrangement through the date hereof and (b)
a description of such risks which Business (with respect to the Business) or the
Business Subsidiaries, or the Board of Directors or officers thereof, have
designated as being self-insured. The Business and the Business Subsidiaries
have policies of insurance issued by an insurer that Seller believes is
financially sound and reputable of the type and in amounts Seller believes is
customarily carried by Persons conducting businesses or owning assets similar to
those of the Business. All such policies are in full force and effect, all
premiums due thereon have been paid and the Business and the Business
Subsidiaries are otherwise in compliance in all material respects with the terms
and provisions of such policies. Furthermore, (a) neither the Business nor any
Business Subsidiary has received any notice of cancellation or non-renewal of
any such policy or arrangement nor is the termination of any such policies or
arrangements threatened, (b) there is no claim pending under any of such
policies or arrangements as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or arrangements, (c) neither the
Business nor any Business Subsidiary has received any notice from any of its
insurance carriers that (i) any insurance premiums will be increased in the
future or (ii) that any insurance coverage presently provided for will not be
available to the Business or any Business Subsidiary in the future on
substantially the same terms as now in effect or (iii) any claims have been
46
denied by the insurer and no such notice is expected to be received and (d) none
of such policies or arrangements provides for any retrospective premium
adjustment, experienced-based liability or loss sharing arrangement affecting
the Business. A true and complete list of all outstanding claims for medical
expenses in excess of $10,000 made by or with respect to any single employee of
the Business is set forth in Section 4.19 of the Disclosure Schedule.
Section 4.20 Casualties. Since the Balance Sheet Date Seller
has not been affected in any way as a result of flood, fire, explosion or other
casualty which would have a Material Adverse Effect (whether or not material and
whether or not covered by insurance). Seller is not aware of any circumstance
which is likely to cause it to suffer any material adverse change in its
business, operations or prospects, other than general economic conditions and
typical industry risks.
Section 4.21 Litigation. Except as set forth in Section 4.21
of the Dis closure Schedule, there is no action, claim, charge, audit, suit,
inquiry, proceeding or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or to the
Knowledge of Seller threatened against or involving the Business, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by Seller or any Business Subsidiary pursuant to this Agreement or in
connection with the Transactions; and to the Knowledge of Seller there is no
valid basis for any such action, proceeding or investigation. Neither Seller nor
any Business Subsidiary is subject to any judgment, order or decree which may
have an a Material Adverse Effect on the Assets or on Seller's ability to
acquire any property or conduct its business in any area.
Section 4.22 Compliance with Laws; Permits and Licenses. (a)
Seller and the Seller's Domestic Subsidiaries, and to Seller's Knowledge with
respect to the Seller's Foreign Subsidiaries, have complied, in a timely manner
and in all material respects with all laws, rules and regulations, ordinances,
judgments, decrees, orders, writs and injunctions of all United States federal,
state, local, foreign governments and agencies thereof that affect the business,
properties or assets of the Business or the Assets, and to the Knowledge of
Seller there are no circumstances that, if not remedied or modified, would
prevent or materially interfere with such compliance.
(b) Seller and the Seller's Domestic Subsidiaries,
and to Seller's Knowledge with respect to the Seller's Foreign Subsidiaries,
have in effect, have obtained and will continue to obtain and renew until the
Closing Date, all Permits necessary to conduct the Business as it is presently
being conducted in accordance with the ordinances, rules, requirements and
regulations of any Governmental Entity having jurisdiction over its properties
47
or activities, and there has occurred no default under any such Permit, and to
the Knowledge of Seller there are no Permits or licences that, if not obtained,
would prevent or materially interfere with the conduct of the Business as it is
presently being conducted. A list of all Permits necessary to conduct the
Domestic Business is attached hereto as Section 4.22(b) of the Disclosure
Schedule.
(c) Without limiting the foregoing, neither the
operations of the Business, nor the Seller's Domestic Subsidiaries nor, to the
Knowledge of Seller, the Seller's Foreign Subsidiaries, violate or fail to
comply in any material respect with applicable health, fire, safety, zoning or
building codes, laws or ordinances, rules or regulations; (ii) Seller has not
received any notice not heretofore complied with or in the process of being
complied with, from any Governmental Entity having jurisdiction over its
properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment, or business
procedures or practices fail to comply in all material respects with any
Applicable Law, ordinance, regulation, building or zoning law, or requirement of
any public authority or body; and (iii) there are no pending or, to the
Knowledge of Seller, threatened actions or proceedings by any Governmental
Entity alleging violations in any material respect of such codes, laws or
ordinances.
Section 4.23 Employee Benefit Plans.
----------------------
(a) Section 4.23(a) of the Disclosure Schedule
contains a true and complete list of all Plans (other than oral or at will
employment agreements that may be terminated at any time without liability).
Neither Seller nor any Subsidiary nor any ERISA Affiliate has any commitment or
formal plan, whether legally binding or not, to create any additional employee
benefit plan or modify or change any existing Plan that would affect any
employee or former employee of the Business or any Business Subsidiary.
(b) Seller has heretofore delivered to Purchaser a
true and complete copy of each Plan (other than oral or at will employment
agreements that may be terminated at any time without liability) and any
amendments thereto (or if a Plan is not a written Plan, a description thereof),
each agreement creating or modifying any related trust or other funding vehicle,
the most recent annual report or summary required under ERISA or the Code and
the most recent determination letter received from the Internal Revenue Service
with respect to each Plan intended to qualify under Section 401 of the Code.
48
(c) Neither Seller nor any ERISA Affiliate has
incurred any liability under Title IV of ERISA or Section 302 of ERISA that has
not been satisfied in full and neither the Seller nor any ERISA Affiliate has
maintained, sponsored or been required to make contributions to a Plan that is
subject to Title IV or Section 302 of ERISA.
(d) Neither Seller (with respect to the Business) nor
any ERISA Affiliate, nor any Plan, nor any trust thereunder, nor to Seller's
Knowledge any trustee or administrator thereof has engaged in a transaction with
respect to a Plan pursuant to which either a civil penalty under Section 409 or
Section 502(i) of ERISA or a tax under Section 4975 or 4976 of the Code could be
imposed on Purchaser, Purchaser's Subsidiary or any Seller's Purchased
Subsidiary.
(e) Each Plan which covers employees of any Seller
Purchased Subsidiary has been operated and administered in all material respects
in accordance with its terms and Applicable Law, including ERISA and the Code.
(f) Each Plan which covers employees of any Seller
Purchased Subsidiary intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified, and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code. Each Plan intended to
satisfy the requirements of Section 501(c)(9) has satisfied such requirements.
(g) No Plan provides medical, surgical,
hospitalization or death benefits (whether or not insured) for employees or
former employees of the Seller's Purchased Subsidiaries for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by Applicable Law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary).
(h) Neither Purchaser, Purchaser's Subsidiary nor any
Seller's Purchased Subsidiary will as a result of the consummation of the
Transactions be liable to any current or former employee of the Business or any
Business Subsidiary for severance pay, unemployment compensation or any other
payment related to termination of employment or consummation of the
Transactions, except as expressly provided in this Agreement or, in the case of
Seller's Foreign Subsidiaries, under Applicable Law. The consummation of the
Transactions will not, either alone or in combination with another event,
accelerate the time of payment or vesting, or increase the amount of any
compensation under any Plan which covers employees of Seller of any Seller's
Purchased Subsidiary.
49
(i) Except for routine claims for benefits, there are
no pending, threatened or anticipated claims with respect to any Plan, by any
employee of Seller's Purchased Subsidiaries.
(j) With respect to each Plan that is sponsored,
maintained or contributed to by a Seller's Purchased Subsidiary or with respect
to which and any Seller's Purchased Subsidiary is obligated or liable and that
is not subject to United States law (each, a "Foreign Plan"):
(i) all employer and employee contributions
to each Foreign Plan required by law or by the terms of such Foreign
Plan have been made, or, if applicable, accrued, in accordance with
normal accounting practices;
(ii) the fair market value of the assets of
each funded Foreign Plan, the liability of each insurer for any Foreign
Plan funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations, as of the
Closing Date, with respect to all current and former participants in
such plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Foreign Plan
and no transaction contemplated by this Agreement shall cause such
assets or insurance obligations to be less than such benefit
obligations; and there has been no material change in the financial
condition of any funded Foreign Plan from that shown in the last annual
or actuarial report;
(iii) each Foreign Plan required to be
registered has been registered, has been maintained in good standing
with applicable regulatory authorities and has been operated in
accordance with applicable law; and no event has occurred which will or
could give rise to deregistration or proceedings being commenced in
respect of any Foreign Plan under any Applicable Law;
(iv) there are no pending, threatened or
anticipated claims under any Foreign Plan and there has been no act or
omission which has given or may give rise to fines, penalties, taxes or
related charged under any Applicable Law; and
50
(v) The representations and warranties set
forth in this Section 4.23 with respect to any Seller's Purchased
Subsidiary not organized under the laws of the United States or any
State thereof shall be given to the best of the Knowledge of Seller.
Section 4.24 Taxes
(a) All material Tax Returns required to be filed on
or prior to the Closing Date by or with respect to the Assets or the operations
or the income of Seller and its Subsidiaries have, within the time and manner
prescribed by law, been duly filed with the appropriate tax authorities. All
such Tax Returns are true, correct, and complete in all material respects and
all Taxes shown to be due on such Tax Returns have been paid. Seller and its
Subsidiaries have timely paid or caused to be paid all Taxes required to be paid
or have made adequate reserves therefor for all taxable years or periods ending
on or before the Closing Date and for the portion of the taxable year or period
through and including the Closing Date in the case of any Straddle Period.
(b) There are no Encumbrances for Taxes upon any of
the Assets or upon the stock of any Seller's Purchased Subsidiary or upon the
assets or properties of any Seller's Purchased Subsidiary except for statutory
liens for Taxes not yet due.
(c) Each Seller's Purchased Subsidiary (i) have
prepared in good faith and duly and timely filed all material Tax Returns
required to be filed by any of them and all such filed Tax Returns are complete
and accurate in all respects, (ii) have paid all Taxes that are required to be
paid on or prior to the Closing Date or that any Seller's Purchased Subsidiary
is obligated to withhold on or prior to the Closing Date from amounts owing to
any employee, creditor or third party, except with respect to matters contested
in good faith or adequately reserved on the books of the Seller's Purchased
Subsidiary, and (iii) have not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency;
51
(d) There are not pending or threatened in writing
any audits, examinations, investigations or other proceedings in respect of
Taxes or Tax matters of any Seller's Purchased Subsidiary. The Tax Returns of
each Seller's Purchased Subsidiary for the taxable periods ended before January
1, 1995 have been examined by the appropriate Governmental Entity (or the
applicable statute of limitations for the assessment of Taxes for such periods
has expired). A list of all audits, examinations or investigations commenced or
completed with respect to any Seller's Purchased Subsidiary with respect to
taxable periods ending after December 31, 1994 is set forth in Section 4.24(d)
of the Disclosure Schedule;
(e) No Seller's Purchased Subsidiary is a party to,
is bound by, or has any obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement, and no Seller's
Purchased Subsidiary has any potential liability or obligation to any person as
a result of, or pursuant to, any such agreement, contract or arrangement;
(f) No power of attorney has been granted by or with
respect any Business Subsidiary with respect to any matter relating to Taxes;
(g) No Seller's Purchased Subsidiary is a party to
any agreement, plan, contract or arrangement (whether oral or in writing) that
would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code or any
similar provision of state, local or foreign law;
(h) All material Tax deficiencies which have been
claimed, proposed or asserted against any Seller's Purchased Subsidiary have
been fully paid or finally settled, and no issue has been raised in any
examination by any Tax authority, which, by application of similar principles,
could reasonably be expected to result in the proposal or assertion of a
material Tax deficiency for another year not so exam ined;
(i) No Seller's Purchased Subsidiary has been a
member of any affiliated group within the meaning of Section 1504 of the Code
(or similar state, local, or foreign filing group).
52
(j) Each of Seller's Purchased Subsidiaries have
receipts or other appropriate documentation for all material foreign taxes,
charges, fees, levies or other assessments paid or accrued from January 1, 1994;
(k) With respect to each Seller's Purchased
Subsidiary that is classified as a partnership for United States federal income
tax purposes or any Asset that is an interest in an entity that is classified as
a partnership for United States federal income tax purposes, (i) each such
partnership has complied with all applica ble requirements of the Code,
including but not limited to the registration and investor list requirements
applicable to tax shelters; (ii) all partnership allocations comply with the
requirements of Section 704 of the Code and (iii) the capital account with
respect to any interest in such partnership being acquired hereunder or owned by
any Seller Purchased Subsidiary does not have a deficit balance that is required
to be restored;
(l) Other than any Tax Returns which have not yet
been required to be filed, Seller has made available to Purchaser true and
correct copies of the United States federal income Tax Return and any material
state, local or foreign Tax Return filed by each Seller's Purchased Subsidiary
for each of the taxable years ended December 31, 1997, 1998, and 1999;
(m) Section 4.24(m) of the Disclosure Schedule sets
forth (i) all material elections with respect to Taxes of each Seller's
Purchased Subsidiary and (ii) all foreign, state and local jurisdictions in
which any Seller's Purchased Subsid iary is or has been subject to Tax and each
material type of Tax payable in such jurisdiction during the taxable years ended
December 31, 1999 and 2000;
(n) Seller has previously delivered or made available
to Purchaser complete and accurate copies of each of (i) all material audit
reports, letter rulings, technical advice memoranda, and similar documents
issued by a governmen tal authority from December 31, 1997 relating to the
United States federal, state, local or foreign Taxes due from or with respect to
any Seller's Purchased Subsidiary and (ii) any closing agreements entered into
by any Seller's Purchased Subsidiary with any Tax authority in each case
existing on the date hereof. Seller will deliver to Purchaser all materials with
respect to the foregoing for all matters arising after the date hereof.
53
(o) No Seller's Purchased Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or any
similar provision of state, local or foreign law) by reason of any voluntary
change in account ing method (nor has any Governmental Entity proposed in
writing any such adjust ment or change of accounting method).
Section 4.25 Intellectual Property.
---------------------
(a) Section 4.25(a) of the Disclosure Schedule sets
forth a true and complete list of all patents and patent applications, trademark
registrations and applications, service xxxx registrations and applications,
Computer Software, Copyright registrations and applications, material
unregistered trademarks, service marks, Copyrights and Internet domain names
used or held for use in connection with the Business or any Business Subsidiary,
together with all licenses related to the foregoing, whether Seller, the
Business or any Business Subsidiary is the licensee or licensor thereunder.
(b) Seller, a Seller's Domestic Business Subsidiary
or to Seller's Knowledge a Seller's Foreign Subsidiary is the sole and exclusive
owner or valid licensee of all Business Intellectual Property, free and clear of
all Encum brances.
(c) All patents, registrations and applications for
Intellectual Property that are owned by Seller, a Seller's Domestic Business
Subsidiary or to Seller's Knowledge by a Seller's Foreign Subsidiary and are
used in and are material to the conduct of the businesses of the Business and
any Business Subsidiary as currently conducted (i) are valid, subsisting, in
proper form and to the Knowledge of Seller are enforceable, and have been duly
maintained, including the submission of all necessary filings and fees in
accordance with the legal and administrative require ments of the appropriate
jurisdictions and (ii) have not lapsed, expired or been abandoned, and no
patent, registration or application therefor to the Knowledge of Seller is the
subject of any opposition, interference, cancellation proceeding or other legal
or governmental proceeding before any Governmental Entity in any jurisdiction.
(d) Seller, each of Seller's Domestic Business
Subsidiary or to Seller's Knowledge a Seller's Foreign Subsidiary own or has the
valid right to use all of the Intellectual Property used by it or held for use
by it in connection with its business. To the Knowledge of Seller, there are no
conflicts with or infringements of any Business Intellectual Property by any
third party. The conduct of the businesses of the Business, and any Business
54
Subsidiary as currently conducted to the Knowl edge of Seller, does not conflict
with or infringe in any way on any proprietary right of any third party. There
is no claim, suit, action or proceeding pending or, to the Knowledge of Seller,
threatened against Seller, the Business or any Business Subsid iary (i) alleging
any such conflict or infringement with any third party's proprietary rights or
(ii) challenging the ownership, use, validity or enforceability of the Business
Intellectual Property.
(e) The Computer Software used by the Business or any
Business Subsidiary in the conduct of its business was either (i) developed by
employees of Seller, the Business or Business Subsidiary within the scope of
their employment, (ii) developed on behalf of Seller, the Business or any
Business Subsid iary by a third party, and all ownership rights therein have
been assigned or otherwise transferred to or vested in Seller or such Business
Subsidiary, as the case may be, pursuant to written agreements or (iii) licensed
or acquired from a third party pursuant to a written license, assignment, or
other contract that is in full force and effect and of which none of Seller nor
any Business Subsidiary is in material breach.
(f) All consents, filings, and authorizations by or
with Governmental Entities or third parties necessary with respect to the
consummation of the Transactions, as they may affect the Intellectual Property,
have been obtained.
(g) Neither Seller nor any Business Subsidiary has
entered into any consent, indemnification, forbearance to xxx, settlement
agreement or cross- licensing arrangement with any Person relating to the
Business Intellectual Property or, to the Knowledge of Seller, any Business
Intellectual Property licensed by Seller for the use of the Business or licensed
by any Business Subsidiary, or the Intellectual Property of any third party,
except as contained in any license agreements listed in Section 4.25(g) of the
Disclosure Schedule.
(h) Neither Seller, any Business Subsidiary,
Purchaser's Subsidiary nor Purchaser is, nor will be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Business Intellectual Property, as long as the Required Consents
set forth in Section 4.5 of the Disclosure Schedule are obtained.
55
Section 4.26 Labor Matters
-------------
(a) There is no labor strike, dispute, corporate
campaign, slowdown, stoppage or lockout actually pending, or to the Knowledge of
Seller, threatened against or affecting the Business or any Business Subsidiary,
and during the past five years there has not been any such action.
(b) Neither Seller (with respect to the Business) nor
any Business Subsidiary is a party to or bound by any collective bargaining or
similar agreement with any labor organization or work rules or practices agreed
to with any labor organization or employee association applicable to employees
of Seller or any Business Subsidiary.
(c) No labor union has been certified by the National
Labor Relations Board as bargaining agent for any of the employees of the
Business; no notice has been received from any labor union stating that it has
been designated as the bargaining agent for any of said employees; and no
petition has been filed by any labor union requesting an election to determine
whether or not it is the exclusive bargaining agent for any of said employees.
(d) None of the employees of the Business is
represented by any labor organization and, to the Knowledge of Seller, there
have been no union organizing activities among the employees of the Business
within the past five years, nor does any question concerning representation
exist concerning such employees.
(e) No collective bargaining agreement which is
binding on Seller (with respect to the Business) or any Business Subsidiary
restricts any of them from relocating or closing any of their operations.
(f) The Business has not experienced any work
stoppage or other general labor difficulty since June 30, 1999.
(g) A true and complete copy of each written
personnel policy, rule and procedure applicable to employees of the Business is
included in Section 4.26(g) of the Disclosure Schedule.
(h) Each of Seller (with respect to the Assets) and
any Seller's Domestic Subsidiary, and to the Knowledge of the Seller with
respect to each of the Seller's Foreign Subsidiaries, is and has at all times
56
been, in compliance, in all material respects, with all Applicable Laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupa tional safety and health, and is not
engaged in any unfair labor practices, as defined in the National Labor
Relations Act or other Applicable Laws.
(i) There is no unfair labor practice charge or
complaint against Seller (with respect to the Assets) or any Business Subsidiary
pending or, to the Knowledge of Seller, threatened before the National Labor
Relations Board or any similar state or foreign agency.
(j) There is no presently pending grievance arising
out of any collective bargaining agreement or other grievance procedure.
(k) To the Knowledge of Seller, no charge with
respect to or relating to the Business or any Business Subsidiary is pending
before the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices.
(l) Neither Seller (with respect to the Business) nor
any Business Subsidiary has received notice of the intent of any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Business,
and no such investigation is in progress.
(m) There are no complaints, lawsuits or other
proceedings pending or, to the Knowledge of Seller, threatened in any forum by
or on behalf of any present or former employee of Business, any applicant for
employment or classes of the foregoing alleging breach of any express or implied
contract of employment, any laws governing employment or the termination thereof
or other discriminatory, wrongful or tortious conduct in connection with the
employment relationship.
(n) Since the enactment of the WARN Act, (i) neither
Seller (with respect to the Business) nor any Business Subsidiary has
effectuated a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Business, (ii) there has not occurred a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of Business, (iii) the Business has not been affected by any
transaction or engaged in layoffs or employment termina tions sufficient in
57
number to trigger application of any similar state, local or foreign Law or
regulation and (iv) none of Business' employees has suffered an "employment
loss" (as defined in the WARN Act) during the six-month period prior to the date
hereof.
Section 4.27 Share Ownership. As of the date hereof, each
share holder of a Seller's Purchased Subsidiaries is the record and beneficial
owner of the number of shares set opposite such shareholder's name on Exhibit C
hereto, as amended from time to time. No shareholder owns any securities issued
by, or other obligations of, a Seller's Purchased Subsidiary which are not
listed on Exhibit C hereto, as amended from time to time
Section 4.28 Ownership and Possession of Shares. The Seller's
Purchased Subsidiaries' shares and interests and the certificates representing
such shares and interests are as of the date hereof, and at all times shall be
free and clear of all Encumbrances whatsoever, except for any Encumbrances
created by this Agree ment and the restrictions on transfer contained in the
agreements with the other owners of the Seller's Foreign Subsidiaries.
Section 4.29 Good Title Conveyed. The stock certificates,
stock powers, endorsements, assignments and other instruments to be executed and
deliv ered by the shareholders to Purchaser or Purchaser's Subsidiary at the
Closing will be valid and binding obligations of the shareholders, enforceable
in accordance with their respective terms, and will effectively vest in
Purchaser or Purchaser's Subsidiary good, valid and marketable title to all the
shares and interests to be transferred to Purchaser or Purchaser's Subsidiary
pursuant to and as contemplated by this Agree ment free and clear of all
Encumbrances except for any Encumbrances created by this Agreement and the
restrictions on transfer contained in the agreements with the other owners of
the Seller's Foreign Subsidiaries.
Section 4.30 Takeover Laws. Neither Seller nor any of its
Subsidiar ies is subject to any "moratorium", "control share", "fair price" or
other antitakeover laws and regulations of any state (collectively the "Takeover
Laws") that would affect this Agreement, the Stockholders Agreement, or the
Transactions contemplated hereby or thereby. Seller's Board of Directors has
approved this Agreement, the Stockholders Agreement, and the Transactions
contemplated hereby or thereby for the purpose of such Takeover Laws.
58
Section 4.31 Opinion of Financial Advisor. Seller's Board of
Direc tors has received the opinion of Xxxxxxxxxxxxx Collet and Company, Inc.,
dated the date hereof, a copy of which has been provided to Parent, Purchaser's
Subsidiary and Purchaser, to the effect that, as of such date, the consideration
to be received by Seller pursuant to this Agreement is fair to Seller and
Seller's stockholders from a financial point of view.
Section 4.32 Brokers or Finders. Except for (i) Xxxxxxxxxxxxx
Collet and Company, Inc. and (ii) Xxxxxx Xxxxxxxxx Associates, no agent, broker,
invest ment banker, financial advisor or other firm or Person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the Transactions.
Section 4.33 Certain Information. Subject to Parent's,
Purchaser's and Purchaser's Subsidiary's fulfillment of their respective
obligations with respect thereto, the proxy statement relating to the
Stockholders Meeting as defined will contain (or will be amended in a timely
manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and any other applicable law and will conform in all material
respects with the requirements of the Exchange Act and any other Applicable Law,
and the proxy statement will not, at the time it is filed with the SEC or pub
lished, sent or given to Seller's stockholders, and at the time of the
Stockholders Meeting contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; provided, however, that no representation or warranty is
hereby made by Seller with respect to any information supplied by Parent,
Purchaser, or Purchaser's Subsidiary in writing for inclusion in the proxy
statement. If at any time prior to the Stockholders Meeting any event with
respect to Seller, or with respect to any information supplied by Seller for
inclusion in the proxy statement, shall occur which is required to be described
in an amendment of, or a supplement to, the proxy statement, Seller shall so
describe the event to Parent and shall so amend or supplement the proxy
statement.
Section 4.34 Full Disclosure. No representation or warranty by
Seller contained in this Agreement and no statement contained in any document
(including, without limitation, financial statements and the Disclosure
Schedule), certificate, or other writing furnished or to be furnished by Seller
to Purchaser, Purchaser's Subsid iary, Parent or any of their representatives
59
(excluding financial forecasts, and other forward looking projections or
information) pursuant to the provisions hereof or in connection with the
Transactions, contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER, PURCHASER'S SUBSIDIARY AND PARENT
Parent, Purchaser, and Purchaser's Subsidiary represent and
warrant to Seller that:
Section 5.1 Organization. Each of Parent, Purchaser, and Pur
chaser's Subsidiary are corporations duly organized, validly existing and in
good standing under the laws of Spain, Spain and Delaware, respectively, and
have all requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
their business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have, individually or in the aggregate, a
material adverse effect on the ability of Parent, Purchaser and Purchaser's
Subsidiary to consummate the Transactions.
Section 5.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent, Purchaser and Purchaser's Subsidiary have full corporate
power and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance by each of Parent,
Purchaser and Purchaser's Subsidiary of this Agreement and the consummation of
the Transac tions have been duly authorized by the Boards of Directors of each
of Parent, Pur chaser and Purchaser's Subsidiary, and no other corporate action
on the part of each of Parent, Purchaser or Purchaser's Subsidiary is necessary
to authorize the execution and delivery by each of Parent, Purchaser or
Purchaser's Subsidiary of this Agreement or the consummation of the
Transactions. No vote of, or consent by, the holders of any class or series of
stock is necessary to authorize the execution and delivery by each of Parent,
Purchaser or Purchaser's Subsidiary of this Agreement or the consum mation by it
of the Transactions. This Agreement has been duly executed and deliv ered by
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each of Parent, Purchaser and Purchaser's Subsidiary, and, assuming due and
valid authorization, execution and delivery hereof by Seller, is a valid and
binding obligation of each of Parent, Purchaser and Purchaser's Subsidiary,
enforceable against each of Parent, Purchaser and Purchaser's Subsidiary in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.
Section 5.3 Consents and Approvals; No Violations. Except for
the filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act and
state securities or blue sky laws, none of the execution, delivery or
performance of this Agreement by each of Parent, Purchaser or Purchaser's
Subsidiary, the consummation by each of Parent, Purchaser and Purchaser's
Subsidiary of the Transactions or compliance by each of Parent, Purchaser or
Purchaser's Subsidiary with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the certificate of incorporation or
by-laws of each of Parent, Purchaser or Purchaser's Subsidiary, (ii) require any
filing with, or permit, authorization, consent or approval of, any Govern mental
Entity, (iii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instru ment or obligation to which each of Parent, Purchaser
or Purchaser's Subsidiary is a party or by which any of them or any of their
respective properties or assets may be bound, or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to each of Parent,
Purchaser or Purchaser's Subsidiary, or any of their Subsidiaries or any of
their properties or assets, excluding from the foregoing clauses (ii), (iii) and
(iv) such violations, breaches or defaults which would not, individually or in
the aggregate, have a material adverse effect on the ability of each of Parent,
Purchaser or Purchaser's Subsidiary to consummate the Transactions or which
arise from the regulatory status of Seller or the Business Subsidiaries.
Section 5.4 Sufficient Funds. Purchaser has available, or has
made arrangements to obtain (through existing cash on hand or credit
arrangements of Parent or otherwise), sufficient funds to consummate the
Transactions and to pay all fees and expenses of each of Parent, Purchaser and
Purchaser's Subsidiary related to the Transactions.
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Section 5.5 Brokers or Finders. None of Parent, Purchaser, Pur
chaser's Subsidiary nor any of their Subsidiaries or their Affiliates has
entered into any agreement or arrangement entitling any agent, broker,
investment banker, financial advisor or other firm or Person to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the Transactions, except Santander Investment Securities, Inc., whose fees and
expenses will be paid by Parent in accordance with Purchaser's agreement with
such firm.
Section 5.6 Certain Information. None of the information
supplied or to be supplied by Parent, Purchaser or Purchaser's Subsidiary for
inclusion in the proxy statement relating to the Stockholders Meeting will, at
the time the proxy statement is filed with the SEC or published, sent or given
to Seller's stockholders and of the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Stockholders Meeting any event with respect to Parent,
Purchaser, or Purchaser's Subsidiary, or with respect to any information
supplied in writing by Parent, Purchaser or Purchaser's Subsidiary for inclusion
in the proxy statement, shall occur which is required to be described in an
amendment of, or a supplement to, such document, Parent, Purchaser or
Purchaser's Subsidiary shall so describe the event to Seller.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Business. Seller shall
use commercially reasonable efforts to procure that, and Seller covenants and
agrees that, after the date hereof and prior to the Closing Date, except (i) as
expressly provided in this Agreement, (ii) as set forth in the Disclosure
Schedule or (iii) as may be agreed in writing by Purchaser or Purchaser's
Subsidiary, which agreement shall not be unreasonably withheld or delayed:
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(a) Except as set forth in Section 6.1(a) of the
Disclosure Schedule, the Business shall be conducted in the same manner as
heretofore conducted and only in the ordinary course, and each of Seller, the
Business and any Business Subsidiary shall use commercially reasonable efforts
to preserve the business organization of the Business intact, keep available the
services of the current officers and key employees of the Business and maintain
the existing relations with franchisees, customers, suppliers, creditors,
business partners, employees and others having business dealings with the
Business, to the end that the goodwill and ongoing business of the Business
shall be unimpaired at the Closing Date. The Business shall not institute any
new methods of manufacture, purchase, sale, lease, management, accounting or
operation or engage in any transaction or activity other than minor changes in
the ordinary course of business and consistent with past practice, except as set
forth in Section 6.1(a) of the Disclosure Schedule;
(b) Seller and the Business Subsidiaries will obtain
and renew, all Permits necessary to conduct the Business as it is presently
being conducted or will be conducted in accordance with the ordinances, rules,
requirements and regulations of any Governmental Entity having jurisdiction over
its properties or activities in all material respects;
(c) Seller shall (i) take reasonable actions
consistent with historical practice to preserve and protect the Intellectual
Property, (ii) maintain the books, records and accounts of the Business in the
usual, regular and ordinary course of business on a basis consistent with past
practice and in accordance with GAAP and (iii) maintain, preserve and protect
all of the Assets in the condition in which they exist on the date hereof,
except for ordinary wear and tear;
(d) Without the prior consent of the other party, no
party hereto may intentionally and knowingly take any action that would cause
the conditions precedent set forth in Article VII to effect the Transactions
contemplated hereby not to be fulfilled, including, without limitation, taking
or causing to be taken any action which would cause the representations and
warranties made by such party herein not to be true, correct and complete as of
the Closing;
(e) Seller shall use all commercially reasonable
efforts not to allow any Business Subsidiary to: (i) amend its certificate of
incorporation or by- laws or similar organizational documents, (ii) issue, sell,
transfer, pledge, dispose of or encumber any shares of any class or series of
its capital stock or Voting Debt, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
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any shares of any class or series of its capital stock or any Voting Debt, (iii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to any shares of any class or series of its
capital stock; (iv) split, combine or reclassify any shares of any class or
series of its capital stock; or (v) redeem, purchase or otherwise acquire
directly or indirectly any shares of any class or series of its capital stock,
or any instrument or security which consists of or includes a right to acquire
such shares;
(f) Seller shall not allow (with respect to the
Business) nor vote to allow any Business Subsidiary, and shall use all
commercially reasonable efforts not to allow any Business Subsidiary, to modify,
amend or terminate any of its Material Contracts or waive, release or assign any
material rights or claims, except in the ordinary course of business and
consistent with past practice;
(g) Seller shall use all commercially reasonable
efforts to not allow, and shall not vote to allow, any of the Business
Subsidiaries to: (i) incur or assume any long-term debt, or except in the
ordinary course of business, incur or assume short-term Indebtedness exceeding
$50,000 in the aggregate from the date hereof until the Closing; (ii) pay,
repay, discharge, purchase, repurchase or satisfy any Indebtedness issued or
guaranteed by any Business Subsidiary, except as required by the terms thereof;
(iii) modify the terms of any Indebtedness or other liability, (iv) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person, except as
described in Section 6.1(g) of the Disclosure Schedule as being in the ordinary
course of business and consistent with past practice; (v) make any loans,
advances or capital contributions to, or investments in, any other Person; (vi)
enter into any material commitment or transaction (including any joint venture,
partnership, capital expenditure or purchase, sale or lease of assets or real
estate) other than pursuant to those set forth in Section 6.1(g) of the
Disclosure Schedule; (vii) write down the value of any inventory or write off as
uncollectible any notes or accounts receivable; or (viii) change any of the
banking or safe deposit arrangements described or referred to in Section 6.1(g)
of the Disclosure Schedule;
(h) Seller shall not allow (with respect to the
Business), and shall not vote to allow, and shall use all commercially
reasonable efforts to not allow, any Business Subsidiary to lease, license,
mortgage, pledge, or encumber any assets other than in the ordinary and usual
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course of business and consistent with the past practice described in Section
6.1(f) of the Disclosure Schedule or transfer, sell or dispose of any assets
other than in the ordinary and usual course of business and consistent with past
practice or dispose of or permit to lapse any rights to any Intellectual
Property;
(i) Seller shall not allow (with respect to the
Business), and shall not vote to allow, and shall use all commercially
reasonable efforts to not allow, any Business Subsidiary to make any change in
the compensation payable or to become payable to any of the officers, employees,
agents or consultants of the Business (other than normal recurring increases in
the ordinary course of business consistent with past practice in wages payable
to employees who are not officers of the Business) or to Persons providing
management services to the Business, or enter into or amend any employment,
severance, consulting, termination or other agreement with, or employee benefit
plan for, or make any loan or advance to, any of the officers, employees,
Affiliates, agents or consultants of the Business or make any change in its
existing borrowing or lending arrangements for or on behalf of any of such
Persons pursuant to an employee benefit plan or otherwise;
(j) Seller shall not allow (with respect to the
Business) nor vote to allow, and shall use all commercially reasonable efforts
to not allow, any Business Subsidiary to (i) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any officer
or employee of the Business, or pay or agree to pay or make any accrual or
arrangement for payment to any officer or employee of the Business of any amount
relating to unused vacation days, except to the extent Seller or a Business
Subsidiary is unconditionally obligated to do so on the date hereof, (ii) adopt
or pay, grant, issue, accelerate or accrue salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with or for
the benefit of any officer, employee, agent or consultant of the Business,
whether past or present, except to the extent Seller or a Business Subsidiary is
unconditionally obligated to do so on the date hereof, or (iii) amend in any
material respect any such existing plan, agreement or arrangement in a manner
inconsistent with the foregoing;
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(k) Seller shall not allow (with respect to the
Business) and shall not vote to allow, and shall use all commercially reasonable
efforts to not allow, any Business Subsidiary to permit any insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or terminated
without notice to Purchaser and Purchaser's Subsidiary, except policies
providing coverage for losses not in excess of $100,000 which are replaced
without diminution in or gaps in coverage ;
(l) Seller shall not allow (with respect to the
Business) and shall not vote to allow, and shall use all commercially reasonable
efforts to not allow, any Business Subsidiary to enter into any contract or
transaction relating to the purchase of assets other than in the ordinary course
of business consistent with past practices;
(m) Seller shall not vote to allow and shall use all
commercially reasonable efforts to not allow any Business Subsidiary to pay,
repurchase, discharge or satisfy any of its claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), or settle
any pending litigation other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the Financial Statements or incurred since the Balance Sheet Date in the
ordinary course of business;.
(n) Seller shall not vote to allow and shall use all
commercially reasonable efforts to not allow any Seller's Foreign Subsidiary to
pay, repurchase, discharge or satisfy any of its claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or settle any pending litigation other than the payment, discharge
or satisfaction in the ordinary course of business consistent with past
practice, of claims, liabilities or obligations or in the ordinary course of
business;
(o) Seller shall not vote to allow and shall use all
commercially reasonable efforts to not allow any Business Subsidiary to adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization;
(p) Seller shall file, on a timely basis, with
appropriate taxing authorities all Tax Returns required to be filed prior to the
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Closing Date with respect to, or on behalf of, operations of the Business or any
Seller's Purchased Subsidiary.
(q) Seller shall not vote to allow and shall use all
commercially reasonable efforts to not allow any Seller's Purchased Subsidiary
to (i) change any of the accounting methods used by it unless required by GAAP
or the laws or accounting principles or practices of the jurisdiction to which
it is subject or (ii) make any election relating to Taxes, change any election
relating to Taxes already made, adopt any accounting method relating to Taxes,
change any accounting method relating to Taxes unless required by GAAP or the
laws or accounting principles or practices of the jurisdiction to which it is
subject, enter into any closing agreement relating to Taxes, settle any claim or
assessment relating to Taxes or consent to any claim or assessment relating to
Taxes or any waiver of the statute of limitations for any such claim or
assessment;
(r) Seller shall not allow (with respect to the
Business) and shall not vote to allow, and shall use all commercially reasonable
efforts to not allow, any Business Subsidiary to take, or agree to or commit to
take, any action that would or is reasonably likely to result in any of the
conditions to the Closing set forth in Article VII not being satisfied, or would
make any representation or warranty of Seller contained herein inaccurate in any
respect at, or as of any time prior to, the Closing Date, or that would
materially impair the ability of Seller, Purchaser or Purchaser's Subsidiary to
consummate the Closing in accordance with the terms hereof or materially delay
such consummation;
(s) Seller shall not allow (with respect to the
Business) and shall not vote to allow, and shall use all commercially reasonable
efforts to not allow, any Business Subsidiary to take any action which would
increase the accounts receivables of West Africa Chemicals to an amount greater
than $600,000 (six hundred thousand dollars), between the date hereof and the
Closing Date;
(t) Seller shall keep Parent and Purchaser informed
of the status of any discussion regarding the renegotiated license agreement
with B.M.E. and any developments related thereto;
(u) Seller shall not allow (with respect to the
Business) and shall not vote to allow, and shall use all commercially reasonable
efforts to not allow, any Business Subsidiary to take any action which would
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have or be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect; and
(v) Seller shall not allow (with respect to the
Business) and shall not vote to allow and shall use all commercially reasonable
efforts to not allow any Business Subsidiary to enter into any agreement,
contract, commitment or arrangement to do any of the foregoing, or authorize,
recommend, propose or announce an intention to do, any of the foregoing.
Section 6.2 Access; Confidentiality.
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(a) Between the date of this Agreement and the
Closing, Seller shall (i) afford each of Parent, Purchaser, Purchaser's
Subsidiary and their authorized representatives reasonable access to all offices
and other facilities of the Business and to all books and records relating to
the Business and to the employees and personnel of the Business, (ii) permit
each of Parent, Purchaser and Purchaser's Subsidiary to make such inspections
and to make copies of such books and records as they may reasonably require and
(iii) furnish each of Parent, Purchaser and Purchaser's Subsidiary with such
financial and operating data and other information concerning the Business as
they may from time to time reasonably request. Each party will direct its
employees to render any assistance which the other party may reasonably request
in examining or utilizing records referred to in this Section 6.2.
(b) On and after the Closing, during normal business
hours, Seller will permit each of Parent, Purchaser, Purchaser's Subsidiary and
their authorized representatives, to have access to and examine and make copies
of all books and records of Seller relating to the Business which are not
delivered to Purchaser or Purchaser's Subsidiary pursuant hereto (including
correspondence, memoranda, books of account, Tax records and the like) and
relating to events occurring prior to the date hereof and to transactions or
events occurring prior to the date hereof.
(c) Parent, Purchaser and Purchaser's Subsidiary
shall cooperate with Seller, at Seller's expense, and make available to Seller
such documents, books, records or information transferred to Purchaser or
Purchaser's Subsidiary and relating to activities of the Business or Seller
prior to the Closing as Seller may reasonably require after the Closing in
connection with any tax determination or contractual obligations to third
parties or to defend or prepare for the defense of any claim against Seller or
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to prosecute or prepare for the prosecution of claims against third parties by
Seller relating to the conduct of the business of the Business by Seller prior
to the Closing or in connection with any governmental investigation of Seller or
any of its Affiliates.
(d) Each party agrees not to destroy any files or
records which are subject to this section without giving reasonable notice to
the other, and within 15 days of receipt of such notice, such other party may
cause to be delivered to it the records intended to be destroyed, at such other
party's expense.
(e) Parent, Purchaser, Purchaser's Subsidiary and
their authorized representatives (including its designated engineers or
consultants) may at any time enter into and upon all or any portion of the
Business' or any Business Subsidiary's properties (including all Real Property)
in order to investigate and assess, as Parent, Purchaser and Purchaser's
Subsidiary deem necessary or appropriate in their sole and absolute discretion,
the environmental condition of such properties or the business conducted
thereat. Such investigation may include, but need not be limited to, the
performance of soil and surface or ground water sampling, monitoring, borings or
testing and any other tests, investigations, audits, assessments, studies,
inspections or other procedures relating to environmental conditions or
Materials of Environmental Concern. Seller shall, and shall cause the Business
and any Business Subsidiary to, cooperate with each of Parent, Purchaser,
Purchaser's Subsidiary and their authorized representatives in conducting such
investigation, shall allow Parent, Purchaser, Purchaser's Subsidiary and their
authorized representatives full access to their properties and businesses,
together with full permission to conduct such investigation, and shall provide
to Parent, Purchaser, Purchaser's Subsidiary and their authorized
representatives all plans, soil or surface or ground water tests or reports, any
environmental investigation results, reports or assessments previously or
contemporaneously conducted or prepared by or on behalf of, or in the possession
of or reasonably available to Seller or any Business Subsidiary or any of their
engineers, consultants or agents and all other information relating to
environmental matters in respect of the Business. Purchaser shall restore,
repair or replace Assets that are damaged or destroyed, other than ordinary wear
and tear, as a result of Purchaser's action. Purchaser shall indemnify Seller
for all such damage or destruction, including the damage or destruction arising
out of an inspection conducted by Purchaser or Purchaser's representatives.
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(f) Any information regarding the Business or Assets
heretofore or hereafter obtained from Seller or its Subsidiaries by Parent,
Purchaser, Purchaser's Subsidiary or their representatives shall be subject to
the terms of the Confidentiality Agreement, and such information shall be held
by Parent, Purchaser, Purchaser's Subsidiary and their representatives in
accordance with the terms of the Confidentiality Agreement provided, however,
that following the Closing, this Section 6.2 and the Confidentiality Agreement
shall not prohibit Parent, Purchaser or Purchaser's Subsidiary from using and
providing to third parties such information concerning the Assets or the
Business as it may deem appropriate. The foregoing shall not preclude Parent,
Purchaser or Purchaser's Subsidiary from (i) the use or disclosure of such
information which currently is known generally to the public or which
subsequently has come into the public domain, other than by way of disclosure in
violation of this Agreement, (ii) the use or disclosure of such information that
becomes available to Parent, Purchaser or Purchaser's Subsidiary on a non-
confidential basis from a source other than Seller or the Seller's
representatives, provided that such source is not known by Purchaser or
Purchaser's Subsidiary to have a legal obligation prohibiting the disclosure of
such information, or (iii) the disclosure of such information required by law or
court order, provided that, to the extent practicable, prior to such disclosure
required by law or court order Parent, Purchaser or Purchaser's Subsidiary will
give Seller prior written notice of the nature of the law or order requiring
disclosure and the disclosure to be made in accordance therewith.
Section 6.3 Efforts and Actions to Cause Closing to Occur.
-------------------------------------------------
(a) Prior to the Closing, upon the terms and subject
to the conditions of this Agreement, each of Purchaser and Seller shall use
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done and cooperate with each other in order to do, all
things necessary, proper or advisable (subject to any Applicable Laws) to
consummate the Closing and the other Transactions as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Closing and the
other Transactions and the taking of such actions as are necessary to obtain any
requisite approvals, authorizations, consents, orders, licenses, permits,
qualifications, exemptions or waivers by any third party or Governmental Entity,
and (ii) the preparation of any documents requested by Purchaser in order to
facilitate financing of any of the Transactions. In addition, no party hereto
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shall take any action after the date hereof that could reasonably be expected to
materially delay the obtaining of, or result in not obtaining, any permission,
approval or consent from any Governmental Entity or other Person required to be
obtained prior to Closing.
(b) Prior to the Closing, each party shall promptly
consult with the other parties hereto with respect to, provide any necessary
information with respect to, and provide the other parties (or their respective
counsel) with copies of, all filings made by such party with any Governmental
Entity or any other information supplied by such party to a Governmental Entity
in connection with this Agreement and the Transactions. Each party hereto shall
promptly provide the other parties with copies of any written communication
received by such party from any Governmental Entity regarding any of the
Transactions. If any party hereto or Affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
with respect to any of the Transactions, then such party shall endeavor in good
faith to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance with
such request. To the extent that transfers, amendments or modifications of
permits (including environmental permits) are required as a result of the
execution of this Agreement or consummation of any of the Transactions, Seller
shall use commercially reasonable efforts to effect such transfers, amendments
or modifications.
(c) Seller shall use commercially reasonable efforts
to obtain, prior to the Closing, (i) if required, the unconditional consent to
the Closing and the other Transactions of each lender to whom Seller or any
Business Subsidiary, excluding any Seller's Foreign Subsidiary, owes in excess
of $20,000 as of the Closing Date, (ii) the unconditional release of each Person
holding a mortgage or lien that is not an Assumed Liability on real property or
material personal property owned or leased by Seller for the use or benefit of
the Business or any Business Subsidiary, excluding any Seller's Foreign
Subsidiary; (iii) the unconditional consent to the Closing and the other
Transactions of each lessor under each Lease relating to Real Property and each
other material lease; (iv) with the commercially reasonable assistance of
Purchaser, the transfer to Parent, Purchaser or Purchaser's Subsidiary of all
Permits required by the Business and the Business Subsidiaries in the ordinary
course of business or where such transfer is not possible, Seller will use
commercially reasonable efforts to assist Parent, Purchaser or Purchaser's
Subsidiary in obtaining new Permits for the Business and the Business
Subsidiaries and (v) the unconditional consent to the Closing and the other
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Transactions of each other party to each Material Contract with Seller for the
use or benefit of the Business or with any Business Subsidiary, but only if and
to the extent the failure to obtain such consent would have an adverse effect on
the Business or any Business Subsidiary or the ability of Seller, Purchaser or
Purchaser's Subsidiary to consummate the Transactions. All such releases and
consents shall be in writing and executed counterparts thereof shall be
delivered to Purchaser or Purchaser's Subsidiary at or prior to the Closing.
(d) In addition to and without limiting the
agreements of the parties contained above, Seller, Purchaser and Purchaser's
Subsidiary shall:
(i) take promptly all actions necessary to
make the filings required of them or any of their Affiliates under the
HSR Act;
(ii) comply at the earliest practicable date
with any request for additional information or documentary material
received by Seller, Purchaser's Subsidiary or Purchaser or any of their
Affiliates from the FTC or the DOJ pursuant to the HSR Act or from any
State Attorney General or other Governmental Entity in connection with
antitrust matters;
(iii) cooperate with each other in connection
with any filing under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the Transactions commenced by
the FTC, DOJ, any State Attorney General or any other Governmental
Entity;
(iv) use all reasonable commercial efforts to
resolve such objections, if any, as may be asserted with respect to the
Transactions under any antitrust law; and
(v) advise the other parties promptly of any
material communication received by such party from the FTC, DOJ, any
State Attorney General or any other Governmental Entity regarding any
of the Transactions, and of any understandings, undertakings or
agreements (oral or written) such party proposes to make or enter into
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with the FTC, DOJ, any State Attorney General or any other Governmental
Entity in connection with the Transactions.
Concurrently with the filing of notifications under the HSR Act or as soon
thereafter as practicable, Seller and Purchaser shall each request early
termination of the HSR Act waiting period.
(e) Notwithstanding the foregoing or any
other covenant herein contained, in connection with the receipt of any
necessary approvals under the HSR Act, neither Seller nor any Business
Subsidiary shall be entitled without Purchaser's prior written consent
or required to divest or hold separate or otherwise take or commit to
take any action that limits Purchaser's freedom of action with respect
of, or its ability to retain, the Business or the Assets any material
portions thereof or any of the businesses, product lines, properties or
assets of the Business.
(f) Notwithstanding the foregoing or any other
covenant herein contained, nothing in this Agreement shall be deemed to require
Seller, Purchaser or Purchaser's Subsidiary (i) to divest or hold separate any
assets (including the Assets) or agree to limit its future activities, method or
place of doing business, (ii) to commence any litigation against any entity in
order to facilitate the consummation of any of the Transactions, (iii) to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on the business,
assets, condition (financial or otherwise), results of operations or prospects
of either Seller, Parent, Purchaser or Purchaser's Subsidiary on the one hand,
or the Business, on the other hand or (iv) to defend against any litigation
brought by any Governmental Entity seeking to prevent the consummation of, or
impose limitations on, any of the Transactions.
Section 6.4 Notification of Certain Matters.
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(a) Seller shall give notice to Purchaser and
Purchaser's Subsidiary promptly after becoming aware of (i) the occurrence or
non-occurrence of any event whose occurrence or non-occurrence would be likely
to cause either (A) any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date
hereof to the Closing Date or (B) any condition set forth in Article VII to be
unsatisfied in any material respect at any time from the date hereof to the
Closing Date and (ii) any failure of Seller or any officer, director, employee
or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
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failure to give such notice shall not be required from and after the time the
party to whom such notice is to be given has actual knowledge of the information
required to be included in such notice.
(b) Seller shall deliver to Purchaser and Purchaser's
Subsidiary copies of (i) all audit reports, letter rulings, technical advice
memoranda and similar documents issued by a Governmental Entity relating to the
United States federal, state, local or foreign Taxes due from or with respect to
any Business Subsidiary and (ii) any closing agreements entered into by or on
behalf of Seller relating to the Business or any Business Subsidiary with any
taxing authority, which come into the possession of Seller after the date
hereof.
Section 6.5 No Solicitation of Competing Transaction. (a) From
the date of this Agreement until the Closing or, if earlier, the termination of
this Agreement in accordance with its terms, Seller shall not (whether directly
or indirectly through advisors, agents or other intermediaries), and Seller
shall cause its and its Subsidiaries' respective officers, directors, advisors,
representatives and other agents not to, directly or indirectly, (i) solicit,
initiate or knowingly encourage, or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal or (ii) participate or engage in
substantive discussions or negotiations with, or disclose or provide any
non-public information relating to Seller or its subsidiaries or afford access
to the properties, books or records of Seller or its Subsidiaries to, any person
(including any "person" as defined in Section 13(d)(3) of the Exchange Act) that
has made an Acquisition Proposal or with or to any Person in contemplation of an
Acquisition Proposal or (iii) enter into any agreement or agreement in principle
providing for or relating to an Acquisition Proposal; provided, however, that if
and only if (A) a person has submitted an unsolicited written Acquisition
Proposal (under circumstances in which Seller has complied with its obligations
under this Section 6.5(a)) to Seller's Board of Directors, (B) Seller's Board of
Directors believes in good faith, based on such matters as it deems relevant,
including the advice of Seller's financial advisor, that such Acquisition
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Proposal is a Superior Proposal and (C) Seller's Board of Directors determines
in good faith, based on such matters as it deems relevant, including
consultation with Seller's outside legal counsel, that engaging in such
negotiations or discussions or providing such information is required to satisfy
the fiduciary duties of the Board of Directors of Seller under Utah law, then
Seller may furnish information to such person with respect to Seller and the
Business Subsidiaries (so long as Seller has entered into a customary
confidentiality agreement with such party) and participate in negotiations and
discussions with such person regarding such Acquisition Proposal; provided
further that, after the fifth business day following Parent's receipt of written
notice advising Parent that Seller's Board of Directors is prepared to accept
such Superior Proposal, which notice specifies the material terms and conditions
of such Superior Proposal and identifies the person making such Superior
Proposal, the Board of Directors of Seller may, in response to a Superior
Proposal which was not solicited by Seller and which did not otherwise result
from a breach of this Section 6.5(a), terminate this Agreement, if the Board of
Directors of Seller determines in good faith, based on such matters as it deems
relevant, including consultation with the Seller's outside legal counsel, that
it is a Superior Proposal under Applicable Law, and, concurrently with such
termination, causes Seller to pay the fee payable pursuant to Section 8.2(b)
hereof by reason thereof. Nothing contained in this Agreement shall prohibit
Seller or Seller's Board of Directors from taking and disclosing to Seller's
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e- 2(a) promulgated under the Exchange Act
or from making any disclosure required by applicable law or, in the case of
Seller's Board of Directors, making any other disclosure to Seller's
stockholders that Seller's Board of Directors determines in good faith is
required to be made to satisfy the fiduciary duties of Seller's Board of
Directors under Applicable Law. Seller shall immediately cease and cause to be
terminated and shall cause its Affiliates and Subsidiaries and its or their
respective officers, directors, employees, representatives or agents, to
terminate all existing discussions or negotiations, if any, with any persons
conducted heretofore with respect to, or that could reasonably be expected to
lead to, an Acquisition Proposal.
(b) Except as set forth in this Section 6.5, neither
the Board of Directors of Seller nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent,
Purchaser or Purchaser's Subsidiary the approval or recommendation by the Board
of Directors of Seller of this Agreement, (ii) approve or recommend, or propose
to approve or recommend, any Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing or anything else herein, subject to compliance with the provisions of
this Section 6.5, prior to the Closing, Seller's Board of Directors may withdraw
or modify its approval or recommendation of the Agreement, approve or recommend
a Superior Proposal, or enter into an agreement with respect to a Superior
Proposal, in each case at any time after the fifth business day following
Parent's receipt of written notice (including by facsimile) from Seller advising
Parent that the Board of Directors of Seller has received a Superior Proposal
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which it intends to accept, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal, but
only if Seller shall have caused its financial and legal advisors to negotiate
with Parent to make such adjustments to the terms and conditions of this
Agreement as would enable Seller to proceed with the Transactions.
(c) In addition to the other obligations of Seller
set forth in this Section 6.5, Seller shall promptly advise Parent orally and in
writing of any request for information with respect to any Acquisition Proposal,
or any inquiry with respect to or which is reasonably likely to result in an
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person making the same.
Seller shall inform Parent on a prompt basis of the status and content of any
discussions regarding any Acquisition Proposal with a third party and as
promptly as practicable of any change in the price, structure or form of the
consideration or material terms of and conditions regarding the Acquisition
Proposal.
(d) Nothing in this Section 6.5, and no action taken
by the Board of Directors of Seller pursuant to this Section 6.5, will (i)
permit Seller to enter into any agreement providing for any transaction
contemplated by an Acquisition Proposal for as long as this Agreement remains in
effect or (ii) affect in any manner any other obligation of Seller under this
Agreement.
Section 6.6 Hiring by Purchaser. Purchaser or Purchaser's
Subsid iary will offer employment to all of the employees of the Business,
subject to the satisfaction by the employees of conditions in the ordinary
course of business. If Purchaser or Purchaser's Subsidiary's failure to hire any
employees of Seller shall result in any WARN Act liability to Seller, Purchaser
shall indemnify and hold harmless Seller against such liabilities resulting
therefrom. Purchaser or Purchaser's Subsidiary shall be free in their sole
discretion to hire persons previously employed by the Business or not previously
employed by the Business.
Section 6.7 Release of Purchaser from Retained Liabilities.
Pur chaser and Purchaser's Subsidiary shall not assume any Retained Liability
and Seller shall pay, satisfy and perform all Retained Liabilities.
Notwithstanding any other provision of this Agreement, the obligations of Seller
pursuant to this Section 6.7 shall survive the Closing and the transactions
contemplated by this Agreement. Moreover, except (i) to the extent reflected on
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the June 30, 2000 Balance Sheet, (ii) for the Canadian Union Contract and (iii)
as otherwise agreed to pursuant to this Agreement, neither Parent, Purchaser nor
Purchaser's Subsidiary shall assume any labor agreements or any liabilities
thereunder or the fringe benefit plans or any other liabilities which Seller may
have with respect to any union or the employees of the Business (including
former employees) either on the date hereof or the date of the Closing,
including liabilities of Seller with respect to payment of wages or pensions
which may have accrued, vested or been earned prior to the Closing and
liabilities of Seller to contribute to pension or other fringe benefit plans
with respect to or on account of service prior to the Closing, and/or any other
term or condition of employ ment presently enjoyed by employees of the Business.
Section 6.8 Insurance; Risk of Loss. Seller shall maintain
insurance coverage and related risk of loss for one year following the Closing
with respect to the Business and the Assets for events occurring, circumstances
existing and Liabilities accruing before the Closing.
Section 6.9 Seller's Non-Compete.(a) Except for Seller's (and
certain of Seller's employees) continuation of the Ghana Activities consistent
in magnitude and scope with its current operations there, without the express
prior written consent of Purchaser, neither Seller nor any Subsidiary of Seller
shall, at any time during the seven-year period immediately following the
Closing Date, directly or indirectly, own, manage, control or participate in the
ownership, management or control of, or be related or otherwise affiliated in
any manner with, any business that competes with the Business; and provided,
further, that the foregoing shall not prohibit Seller from owning as a passive
investment 5% or less of the outstanding equity of any publicly- traded entity.
Seller agrees that Seller and Seller's Subsidiaries will not, for a period of
two years after the Closing Date, seek to employ any person now employed by
Seller for the primary benefit of the Business if such Person is then employed
by Purchaser or any Subsidiary of Purchaser.
(b) The provisions of the covenant contained in
Section 6.9(a) above shall be deemed to be a separate covenant in each of the
states, cities, counties, or other political subdivisions of the United States
and in foreign countries. The parties acknowledge and agree that the time,
scope, and other provisions of Section 6.9(a) have been specifically negotiated
by sophisticated, commercial parties and specifi cally hereby agree that such
time, scope and other provisions are reasonable under the circumstances. The
parties further agree that if, at any time, despite the express agreement of the
parties, a court of competent jurisdiction holds that any portion of Section
6.9(a) is unenforceable because any of the restrictions therein are unreason
able, or for any other reason, such decision shall not affect the validity or
enforceability of any of the other provisions of this Agreement, and the maximum
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estrictions of time or scope reasonable under the circumstances, as determined
by such court, will be substituted for any such restrictions which are held
unenforceable. In the event, of a breach by any party of any of the provisions
of Section 6.9(a), the parties acknowledge that such breach may cause
irreparable damage to Purchaser and Purchaser's Subsidiary, the exact amount of
which may be difficult to ascertain, and the remedies at law for any such breach
may be inadequate. Accordingly, Purchaser and Purchaser's Subsidiary may be
entitled, in addition to any other rights or remedies existing in their favor,
to seek specific performance and injunctive relief in order to enforce or
prevent breach of any such provisions.
Section 6.10 Subsequent Actions.
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(a) If at any time after the Closing Purchaser or
Purchaser's Subsidiary will consider or be advised that any deeds, bills of
sale, instruments of conveyance, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or confirm ownership (of
record or otherwise) in Purchaser or Purchaser's Subsidiary, its right, title or
interest in, to or under any or all of the Assets or otherwise to carry out this
Agreement, Seller shall execute and deliver all deeds, bills of sale,
instruments of conveyance, powers of attorney, assignments and assurances and
take and do all such other actions and things as may be reasonably requested by
Purchaser or Purchaser's Subsidiary in order to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in Purchaser or Purchaser's Subsidiary or otherwise to carry out this Agreement.
(b) After the Closing, each of Purchaser, Purchaser's
Subsidiary, any Seller's Purchased Subsidiary and Seller shall:
(i) cooperate fully in preparing any Tax
Returns of the Seller and the Seller's Purchased Subsidiaries and
preparing for any audits of, or disputes or litigation with taxing
authorities regarding, any Tax Returns with respect to any Seller's
Purchased Subsidiary;
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(ii) make available to the others and to any
taxing authority as reasonably requested all information and documents
relating to Taxes of the Seller or the Seller's Purchased Subsidiaries
or any Taxes imposed on the Business or Assets for which the party may
have liability;
(iii) provide timely notice to the others in
writing of any pending or threatened tax audits, assessments or
litigation with respect to Seller for any taxable period for which the
other party may have liability under this Agreement; and
(iv) furnish the others with copies of all
correspondence received from any taxing authority in connection with
any tax audit or information request with respect to any taxable period
for which the other may have liability under this Agreement.
(c) In case at any time after the Closing Date any
further action is necessary, proper or advisable to carry out the purposes of
this Agreement, as soon as reasonably practicable, each party hereto shall take,
or cause its proper officers or directors to take, all such necessary, proper or
advisable actions.
Section 6.11 Publicity. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Purchaser, Purchaser's Subsidiary and Seller. Thereafter, until the Closing, or
the date the Transactions are terminated or abandoned pursuant to Article VIII,
neither Seller, Purchaser, Purchaser's Subsidiary, nor any of their respective
Affiliates shall issue or cause the publication of any press release or other
public announcement with respect to this Agreement or the other Transactions
without prior consultation with the other party, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 6.12 Waiver of Bulk Sales Requirement. Each of the
parties waives compliance with any applicable bulk sales laws, including without
limitation the Uniform Commercial Code Bulk Transfer provisions. Seller agrees
to pay and discharge in due course and will indemnify and save harmless
Purchaser and Purchaser's Subsidiary, from and against all claims made by
creditors of Seller, including expenses and attorneys' fees incurred by
Purchaser and Purchaser's Subsidiary in defending against such claims, except
those expressly assumed by Purchaser and Purchaser's Subsidiary pursuant hereto.
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Section 6.13 Completion of Non-assignable Contracts.
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(a) Seller shall use its commercially reasonable
efforts to obtain any consent, approval or amendment required to novate and/or
assign any contract or agreement included in the Assets, or any other Asset to
be assigned to Purchaser or Purchaser's Subsidiary hereunder and Purchaser shall
use all commercially reasonable efforts to fulfill Seller's obligations under
such contracts. Seller shall keep Purchaser and Purchaser's Subsidiary
reasonably informed from time to time of the status of the foregoing and
Purchaser and Purchaser's Subsidiary shall cooperate with Seller in this regard.
To the extent that the rights of Seller or any of its Subsidiaries under any
contract or agreement included in the Assets, or under any other Asset to be
assigned to Purchaser or Purchaser's Subsidiary hereunder, may not be assigned
without the consent of another Person which has not been obtained prior to the
Closing, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would be unlawful. If any such consent has not been
obtained or if any attempted assignment would be ineffective or would impair
Purchaser or Purchaser's Subsidiary's rights under the instrument in question so
that Purchaser or Purchaser's Subsidiary would not acquire the benefit of all
such rights, then Seller or a Subsidiary thereof, as applicable, to the maximum
extent permitted by Applicable Law and the instrument, shall act as Purchaser's
agent (or Purchaser's Subsidiary's Agent) in order to obtain for Purchaser or
Purchaser's Subsidiary the benefits thereunder and shall cooperate, to the
maximum extent permitted by Applicable Law and the instrument, with Purchaser or
Purchaser's Subsidiary in any other reasonable arrangement designed to provide
such benefits to Purchaser or Purchaser's Subsidiary(including, without
limitation, by entering into an equivalent arrangement).
Section 6.14 Tax Matters
(a) Computation of Tax Liabilities. For purposes of
determining the Taxes imposed which relate to a Straddle Period and must be
allocated between a Pre-Closing Straddle Period and a Post-Closing Straddle
Period, the Taxes attributable to the Pre-Closing Straddle Period shall be
determined as follows:
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(i) In the case of Taxes that are either (A)
based upon or related to income or receipts or (B) imposed in
connection with any sale or other transfer or assignment of property
(real, personal, tangible, or intangible), such Taxes shall be deemed
equal to the amount that would be payable if the taxable year ended on
and included the Closing Date; and
(ii) In the case of Taxes not described in
Section 6.14(a)(i), that are imposed on a periodic basis and measured
by the amount, value or level of any item (such as personal property
taxes and real estate taxes), such Taxes shall be deemed to be the
amount of such Taxes for the entire period (or, in the case of such
Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preced ing period) multiplied by a fraction, the numerator
of which is the number of calendar days in the taxable period ending on
(and including) the Closing Date, and the denominator of which is the
number of calendar days in the entire taxable period.
(iii) If, for a particular Tax Return, Seller
does not agree with Parent's determination of the amount for which
Seller is responsible pursuant to Section 9.1(b)(i) ("Parent's
Requested Amount"), the parties shall attempt to resolve the
disagreement. If the parties are unable to resolve the disagreement
within 30 days before the filing of the relevant Tax Return, the
dispute shall be referred to a "Big Five" accounting firm reasonably
acceptable to both Seller and Purchaser (the "Tax Arbitrator") whose
determination shall be binding upon the parties. The fees and expenses
of the Tax Arbitrator shall be borne equally by Seller and Purchaser.
If the Tax Arbitrator has not rendered a decision at least two (2) days
prior to the Due Date for filing the relevant Tax Return, the Tax
Return shall be filed in the manner determined by Purchaser and Seller
shall pay any amounts determined by Purchaser to be due and owing from
the Seller at least one (1) day before the Due Date of such Tax Return.
At such time as the amount due from Seller to Purchaser is finally
determined by the Tax Arbitrator, a payment shall be made from Seller
to Purchaser in an amount equal to the excess, if any, of (i) the
amount finally determined to be due over (ii) the Parent's Requested
Amount or from Purchaser to Seller in an amount equal to the excess, if
any, of (i) Parent's Requested Amount over (ii) the amount finally
determined to be due.
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(b) Tax Returns. Seller shall prepare, in a manner
consistent with past practice other than as required by law, all Tax Returns of
any Seller's Purchased Subsidiary for any Pre-Closing Period. Seller shall file
or cause to be filed when due such Tax Returns described in this Section
6.14(b)(i);
(i) Parent shall prepare all other Tax
Returns with respect to any Seller's Purchased Subsidiary for taxable
periods due to be filed after the Closing Date. With respect to any Tax
Return for a Straddle Period, Parent shall deliver a copy of such Tax
Return not less than sixty (60) days prior to the Due Date with respect
to such Tax Return to Seller for its review and approval, which may not
be unreasonably withheld. Seller shall be entitled to object to any
items reflected on such Tax Return relating solely to Taxes for which
Seller is liable pursuant to this Agreement. If Seller objects (which
objection shall be made no later than 30 days before the Due Date), the
parties shall attempt to resolve the disagreement. If the parties are
unable to resolve the disagreement at least three (3) days prior to the
Due Date, the same dispute resolution and payment procedures set forth
in Section 6.14(a)(iii) shall apply to this Section 6.14(b)(i).
(ii) Information to be Provided by Seller.
Seller shall prepare and provide to Parent a package of tax information
materials (the "Tax Package") with respect to any and all Tax Returns
required to be filed by Parent pursuant to Section 6.14(b)(ii) for any
Seller's Purchased Subsidiary which Tax Return is related to any
Straddle Period. Such Tax Package shall be completed in accordance with
Seller's past practice including past practice as to providing the
information, schedules and work papers and as to the method of
computation of separate taxable income, tax credits, and other relevant
measures of income and credits of Seller's Purchased Subsidiary. Seller
shall deliver to Parent the Tax Package for any Tax Return related to
any Straddle Period within ninety 90 days after the end of such period.
(c) Assistance and Cooperation. Seller and Parent
agree that, after the Closing Time:
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(i) each party shall assist (and cause its
Affiliates to assist) the other in preparing any Tax Returns which the
other is responsible for preparing and filing;
(ii) the parties shall cooperate fully in
preparing for any audits of, or disputes with taxing authorities
regarding, any Tax Returns and payments in respect thereof;
(iii) the parties shall make available to
each other and to any taxing authority as reasonably requested all
relevant books and records relating to Taxes;
(iv) the parties shall provide timely notice
to the other in writing of any pending or proposed audits or
assessments with respect to Taxes for which the other may have an
indemnification obligation under this Agreement;
(v) the parties shall furnish each other with
copies of all relevant correspondence received from any Tax authority
in connection with any audit or information request with respect to any
Taxes referred to in subsection (D) above; and
(vi) except as otherwise provided herein, the
party requesting assistance or cooperation shall bear the other's
out-of- pocket expenses in complying with such request to the extent
that those expenses are attributable to fees and other costs of
unaffiliated third-party service providers other than attorneys' fees.
(d) Maintenance of Books and Records. Seller shall
transfer to Parent all books and records in existence on the Closing Date
related to any Seller's Purchased Subsidiary. Until the applicable statute of
limitations (including periods of waiver) has run for any Tax Returns filed or
required to be filed covering the periods up to and including the Closing Date,
Parent shall, or cause its Affiliates to, retain all books and records in
existence on the Closing Date related to any Seller's Purchased Subsidiary and
after the Closing Date will provide Seller access to such books and records for
inspection and copying by Seller and its representatives during normal business
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hours upon reasonable request and upon reasonable notice. After the expiration
of such period, no such books and records shall be destroyed by Parent or its
Affiliates without first advising Seller in writing detailing the contents of
any such books and records and giving Seller at least 120 days to obtain
possession thereof.
(e) Certain Post-Closing Settlement Payments.
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(i) Refunds and Overpayments. If, after the
Closing, Parent or its Affiliates (a) receive any refund, or (b)
applies any overpayment of Taxes with respect to any Pre-Closing Period
(except to the extent reflected in the Financial Statements as a
current asset) which, in either case (a) and (b), (i) relate to a Tax
paid by any Business Subsidiary or (ii) is the subject of
indemnification by Seller, Parent shall promptly pay, or cause to be
paid, to Seller an amount in aggregate equal to the refund or
overpayment (including interest) received or applied by Parent or its
Affiliates. Parent agrees to notify Seller promptly of the receipt of
any such refund or application of any such overpayment;
(ii) Subsequent Adjustment. In the event that
any Tax refund, benefit or savings described in any clause of this
Section 6.14(e) is subsequently reduced as a result of any adjustment
required by any Tax authority, this Section 6.14(e) shall be applied,
taking into account such adjustment. If Seller, on the one hand, or
Parent or its Affiliates, on the other hand, have paid any amount to
the other on the basis of the application of this Section 6.14(e) prior
to such subsequent adjustment or such subsequent creation of tax
attributes (each, a subsequent event) and the amount due pursuant to
this Section 6.14(e) taking into account such subsequent event is
determined to have changed as a result of such subsequent event, the
parties agree to make any payment necessary to settle the difference
between the amount previously paid and the amount subsequently
determined to be due.
Section 6.15 General Cooperation. From the date hereof through
the Closing, Seller will use its good faith efforts to operate the Business in
such a manner as to achieve a smooth transition consistent with the mutual
business interests of Seller, Purchaser's Subsidiary and Purchaser. In this
regard, Seller, Purchaser's Subsidiary and Purchaser agree that they will enter
into good faith discussions concerning the Business, including, but not limited
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to, personnel policies and procedures, and other operational matters relating to
the Business.
Section 6.16 Stockholders Meeting. As soon as practicable
Seller shall take all action necessary, in accordance with Utah law and other
applicable law and its certificate of incorporation and bylaws to convene and
hold a special meeting of the stockholders of Seller (the "Stockholders
Meeting") for the purpose of considering and voting upon (i) this Agreement and
(ii) a change in Seller's name. The Board of Directors of Seller shall recommend
that the holders of shares vote in favor of both the adoption of this Agreement
and a change in Seller's name at the Stockholders Meeting. Once the Stockholders
Meeting has been called and noticed, Seller shall not postpone or adjourn the
Stockholders Meeting (other than for the absence of a quorum) without the
consent of Parent unless required by law or court order.
Section 6.17 Preparation of Proxy. Following the date hereof,
Seller shall, as soon as practicable, prepare and file with the Securities and
Exchange Commission ("SEC") a preliminary proxy statement relating to the
Stockholders Meeting. Seller shall use all reasonable efforts to have the
preliminary proxy state ment cleared by the SEC and Seller shall use all
reasonable efforts to cause the proxy statement to be mailed to Seller's
stockholders as promptly as practicable after the definitive proxy statement is
filed with the SEC. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to, the proxy statement will
be made by Seller, without providing Purchaser, Purchaser's Subsidiary and
Parent a reasonable opportunity to review and comment thereon. Seller will
advise Parent, Purchaser and Purchaser's Subsidiary promptly after it receives
notice thereof, of any request by the SEC for the amendment of the proxy
statement or comments thereon and responses thereto or requests by the SEC for
additional information. All such information shall be treated as confidential
information under the terms of the Confidentiality Agreement. If at any time
prior to the Stockholders Meeting any information relating to Seller or Parent,
or any of their respective affiliates, officers or directors, should be
discovered by Seller or Parent which should be set forth in an amendment or
supplement to the proxy statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circum stances under
which they were made, not misleading, the party which discovers such information
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shall promptly notify the other parties hereto and an appropriate amend ment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of Seller.
Section 6.18 Lease. Seller and Purchaser shall negotiate in
good faith a customary commercial lease agreement to be entered into prior to
the Closing pursuant to which Purchaser will lease the real property located at
0000 Xxxxx Xxxxx Xxxxxxx in Sandy, Utah. The lease shall provide for a one-year
term (with a one-year renewal option and a rental fee to be mutually agreed upon
by Seller and Purchaser based on current market rates in Sandy, Utah.
Section 6.19 Cooperation with Respect to Line of Credit.
Between the date hereof and the Closing, Purchaser agrees to use commercially
reasonable efforts to secure a $4,500,000 (four million five hundred thousand
dollars) all purpose credit facility for the Business (which maybe a refinancing
or restructuring of the existing working capital facility between Seller and
Xxxxx Fargo) (the "Line of Credit"). Between the date hereof and the Closing,
Purchaser and Seller agree to reasonably cooperate in connection with
Purchaser's efforts to secure the Line of Credit with Xxxxx Fargo or any other
financial institution.
Section 6.20 Disclosure Supplements. From time to time prior
to the Closing, Seller shall promptly but in no event more than once every
thirty days, supplement or amend the Disclosure Schedule with respect to any
matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agree ment, would have been required to be set
forth or described in the Disclosure Sched ule ("New Matter"). Such supplements
shall at the minimum include financial statements with respect to Eastern Mining
Services and Turon-MSI to the extent not included in the Financial Statements
delivered in connection with this Agreement. No supplement or amendment shall be
deemed to cure any breach of any representation or warranty made in this
Agreement for the purpose of determining satisfaction of the conditions set
forth in Article VII hereof provided, however, that if Purchaser elects to close
the Transactions contemplated hereby after receiving notice of a New Matter,
Purchaser shall not be entitled to indemnification as contemplated under Article
IX with respect to such New Matter.
Section 6.21 Resolution of Business Conflict. Purchaser and
Seller shall cooperate fully with each other and in connection with any steps
required to be taken to resolve the business conflict of O'Brien Design
Associates, Inc., a Delaware corporation (the "ODA Business Conflict"), which
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will result upon consummation of the transactions contemplated by this
Agreement, and each of them shall use their commercially reasonable efforts to
consummate the transactions contemplated herein and to fulfill their obligations
hereunder, including, without limitation, causing to be fulfilled at the
earliest practical date the conditions precedent set forth in Article VII in
order to consummate the Transactions contemplated hereby. Each of Purchaser and
Seller shall provide the other with such assistance as may reasonably be
requested by either of them in connection with the resolution of the ODA
Business Conflict.
Section 6.22 Shareholders in Business Subsidiaries. Seller
shall use its best efforts to cause each shareholder in its Business
Subsidiaries to take all necessary corporate or other actions to to consummate
the Transactions.
Section 6.23 Further Assurances. Each party shall cooperate
with the other, and execute and deliver, or use its commercially reasonable
efforts to cause to be executed and delivered, all such other instruments,
including instruments of conveyance, assignment and transfer, and to make all
filings with and to obtain all consents (including Required Consents), approvals
or authorizations of any Govern mental Entity or other regulatory authority or
any other Person under any Permit, agreement, indenture or other instrument, and
take all such other actions as such party may reasonably be requested to take by
the other party hereto from time to time, consistent with the terms of this
Agreement, in order to effectuate the provisions and purposes of this Agreement
and the transactions contemplated hereby.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect
the Closing. The respective obligation of each party to effect the Closing shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions:
(a) Statutes; Court Orders. No statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
which prohibits the consummation of the Closing; and there shall be no pending
or threatened suit, action, order or injunction of a court of competent
jurisdiction or Governmental Entity in effect precluding consummation of the
Closing;
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(b) Lease. At or prior to the Closing Date, the
parties will enter into a lease for the real property located at 0000 Xxxxx
Xxxxx Xxxxxxx xx Xxxxx, Xxxx;
(c) HSR Approval. The applicable waiting period under
the HSR Act shall have expired or been terminated; and
(d) Shareholder Approval. The Agreement shall have
been approved and adopted by the affirmative vote of the requisite number of
shares of the outstanding shares of Seller's common stock.
Section 7.2 Conditions to Obligations of Parent, Purchaser and
Purchaser's Subsidiary to Effect the Closing. The obligations of Parent,
Purchaser and Purchaser's Subsidiary to consummate the Closing shall be subject
to the satisfac tion on or prior to the Closing Date of each of the following
conditions:
(a) Government Action. There shall not be threatened
or pending any suit, action or proceeding by any Governmental Entity:
(i) seeking to prohibit or impose any material
limitations on Par ent, Purchaser or Purchaser's
Subsidiary's ownership or opera tion (or that of any
of its Subsidiaries or Affiliates) of all or a
material portion of their businesses or assets or the
Assets, or to compel Parent, Purchaser or Purchaser's
Subsidiary or any of their Subsidiaries or Affiliates
to dispose of or hold separate any material portion
of the Assets or the business or assets of Parent,
Purchaser, Purchaser's Subsidiary or any of their Sub
sidiaries or Affiliates;
(ii) seeking to restrain or prohibit the consummation of
the Closing or the performance of any of the other
Transactions, or seeking to obtain from Parent,
Purchaser, Purchaser's Subsidiary or any of their
Subsidiaries any damages that are material;
(iii) seeking to impose material limitations on the ability
of Parent, Purchaser or Purchaser's Subsidiary, or
rendering Purchaser or Purchaser's Subsidiary unable,
to accept for payment or pay for or purchase some or
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all of the Assets or otherwise to consum mate the
Closing;
(iv) seeking to impose material limitations on the ability
of Parent, Purchaser or Purchaser's Subsidiary
effectively to exercise full rights of ownership of
the Assets; or
(v) which otherwise is reasonably likely to have a
Material Ad verse Effect; or
any other action shall be taken by any Governmental Entity, other than the
application to the Transactions of applicable waiting periods under the HSR Act,
that is reason ably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) above.
(b) Opinion of Seller's Counsel. Seller shall have
delivered to Purchaser at the Closing an opinion of Seller's counsels, dated the
Closing Date, in form and substance satisfactory to Purchaser, to the effect
that:
(i) Except as specified in Section 7.2(b)(i)
of the Disclosure Schedule, all the outstanding capital stock of each
Business Subsidiary is owned directly or indirectly by Seller and is
validly issued, and nonassessable, and to the knowledge of such
Seller's counsel there are no outstanding options, rights or agreements
of any kind relating to the issuance, sale or transfer of any capital
stock or other equity securities of any such Subsidiary to any Person;
(ii) Each Business Subsidiary (x) is a
corporation or other entity duly organized, validly existing and in
good standing under the laws of its state of incorporation; and (y) has
full corporate power and authority to carry on its business as it is
now being conducted and to own the properties and assets it now owns;
(iii) Seller has full corporate power and
authority to execute and deliver this Agreement, and to consummate the
Transactions. The execution, delivery and performance by Seller of this
Agreement and the consummation by it of the Transactions, have been
duly authorized by Seller's Board of Directors and approved by Seller's
shareholders, and no other corporate action on the part of Seller is
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necessary to authorize the execution and delivery by Seller of this
Agreement or the consummation by it of the Transactions;
(iv) This Agreement has been duly executed
and delivered by Seller and, assuming due and valid authoriza tion,
execution and delivery thereof by Parent, Purchaser and Purchaser's
Subsidiary, this Agreement is a valid and binding obligation of Seller
enforceable against Seller in accordance with its terms except (a) as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws of general
application affecting enforcement of creditors' rights generally and
(b) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court
before which any proceeding therefor may be brought;
(v) Except for the filings, permits,
authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act and
state securities or blue sky laws, none of the execution, delivery or
perfor xxxxx of this Agreement by Seller, the consummation by Seller of
the Transactions or compliance by Seller with any of the provisions
hereof will (w) conflict with or result in any breach of any provision
of the certificate of incorporation, the by-laws or similar
organizational docu ments of Seller or any Business Subsidiary, (x)
require any filing with, or permit, authorization, consent or approval
of, any Governmental Entity which have not been obtained, or (y) to the
knowledge of such counsel, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Seller, any Business
Subsidiary or any of their properties or assets, excluding from the
foregoing clauses (x) and (z) such violations, breaches or defaults
which would not, individually or in the aggregate, have a Material
Adverse Effect on the Business and the Business Subsid iaries, taken as
a whole;
(vi) Except as set forth in Section
7.2(b)(vi) of the Disclosure Schedule, to such counsel's knowledge, no
consent of any Person is necessary to the consummation of the Transac
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tions, including consents from parties to loans, contracts, leases or
other agreements and consents from governmental agencies, whether
federal, state or local;
(vii) Except as set forth in Section
7.2(b)(vii) of the Disclosure Schedule, to such counsel's knowledge,
there is no action, suit, inquiry, proceeding or investigation by or
before any court or governmental or other regulatory or administrative
agency or commission pending or threatened against or involving Seller
or any Business Subsidiary, or which questions or challenges the
validity of this Agreement or any action taken or to be taken by Seller
or any Business Subsidiary pursuant to this Agreement or in connection
with the Transac tions other than to contracts or agreements which the
parties have deemed to be non-Material Contracts;
(viii) no facts have come to the attention of
such counsel which would lead such counsel to believe that any repre
sentation or warranty of Seller contained herein or in the Disclosure
Schedule or any supplement thereto is incorrect or misleading;
(ix) Except as set forth in Section
7.2(b)(ix) of the Disclosure Schedule, to such counsel's knowledge,
neither Seller (with respect to the Business) nor any Business
Subsidiary is subject to any judgment, order or decree which may have
an adverse effect on its business practices or on its ability to
acquire any property or conduct its business in any area; and
(x) Except as set forth in Section 7.2(b)(x)
of the Disclosure Schedule, to such counsel's knowledge, no notice,
charge, claim, action or assertion has been received by Seller or any
Business Subsidiary or has been filed, commenced or threatened against
Seller or any Business Subsidiary alleging any violation of any of the
foregoing.
(c) Consents Obtained. All Required Consents and
approvals of any Person necessary to the consummation of the Closing and the
other Transactions, including Required Consents and approvals from parties to
loans, contracts, Leases or other agreements and consents and approvals from
Governmental Entities, whether federal, state, local or foreign shall have been
91
obtained, and a copy of each such Required Consent or approval shall have been
provided to Purchaser at or prior to the Closing. All Permits necessary for the
operation of the Business and the Business Subsidiary's business either have
been transferred to Parent, Purchaser or Purchaser's Subsidiary or have been
obtained by Purchaser and its Subsidiaries.
(d) Material Adverse Effect. There shall not have
occurred any Material Adverse Effect or any development that, insofar as
reasonably can be foreseen, is reasonably likely to result in a Material Adverse
Effect;
(e) Representations and Warranties. All of the
representations and warranties of Seller set forth in this Agreement that are
qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, other than repre sentations and warranties that
speak as of a specific date or time (which need only be so true and correct as
of such date or time);
(f) Seller's Performance of Covenants. Seller shall
not have failed to perform in any material respect any obligation or to comply
in any material respect with any agreement or covenant of Seller to be performed
or complied with by it under this Agreement;
(g) Line of Credit. At or prior to the Closing Date,
Parent or Purchaser will have obtained on terms reasonably acceptable to the
Parent or Pur chaser the Line of Credit;
(h) Licence Agreement. At or prior to the Closing
Date, Seller shall have entered into a renegotiated license agreement with
B.M.E. on terms set forth on Section 7.2(h) of the Disclosure Schedule or on
such other terms which are reasonably acceptable to Parent and Purchaser;
(i) Certificate of Seller's Officers. Purchaser and
Purchaser's Subsidiary shall have received from Seller a certificate, dated the
Closing Date, duly executed by the Chairman of the Board or the President, and
the Chief Financial Officer, Chief Accounting Officer, Treasurer or Controller
of Seller, satisfactory in form to Purchaser and Purchaser's Subsidiary, to the
effect of para graphs (c), (d), (e) and (f) above; and
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(j) Purchaser shall have received (i) a certification
of non- foreign status for Seller or any Business Subsidiary that is selling
assets pursuant to this Agreement in the form and manner which complies with the
requirements of Section 1445 of the Code and the regulations promulgated
thereunder and (ii) any other certifications which may be required under
Applicable Law stating that, except for Transfer Taxes for which Purchaser is
responsible under Section 10.1 hereof, no Taxes are due to any taxing authority
for which the Purchaser could have liability to withhold and pay with respect to
the transfer of the Assets.
The foregoing conditions are for the sole benefit of Purchaser and Purchaser's
Subsidiary and may be waived by either Purchaser or Purchaser's Subsidiary, in
whole or in part, at any time and from time to time in the sole discretion of
Purchaser or Purchaser's Subsidiary. The failure by Purchaser or Purchaser's
Subsidiary at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
(k) Resolution of ODA Business Conflict. Purchaser
shall have obtained with the cooperation of Seller, on terms satisfactory to
Purchaser and its counsel, resolution of the ODA Business Conflict.
(l) Due Diligence. Purchaser shall have completed a
due diligence review of the Domestic Business and Seller's Purchased
Subsidiaries and such due diligence review shall not reveal any facts,
developments or circumstances that cause or are reasonably likely to cause a
Material Adverse Effect.
(l) Name Change. Seller shall have changed its name
in a manner reasonably satisfactory to Purchaser.
Section 7.3 Conditions to Obligations of Seller to Effect the
--------------------------------------------------
Closing.
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(a) Representations and Warranties. All of the
representations and warranties of each of Parent, Purchaser's Subsidiary and
Purchaser set forth in this Agreement that are qualified as to materiality shall
be true and complete and any such representations and warranties that are not so
qualified shall be true and complete in all material respects, in each case as
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of the date of this Agreement and as of the Closing Date, other than
representations and warranties that speak as of a specific date or time (which
need only be so true and correct as of such date or time).
(b) Parent's, Purchaser's and Purchaser's
Subsidiary's Performance of Covenants Breach. Parent, Purchaser and Purchaser's
Subsidiary shall not have failed to perform in any material respect any material
obligation or to comply in any material respect with any agreement or covenant
of Parent, Purchaser and Purchaser's Subsidiary to be performed or complied with
by it under this Agreement;
(c) Certificate of Parent's, Purchaser's and
Purchaser's Subsidiary's Officers. Seller shall have received from Purchaser's
Subsidiary, Purchaser and Parent a certificate, dated the Closing Date, duly
executed by the Chairman of the Board or President, and the Chief Financial
Officer, Chief Account ing Officer, Treasurer or Controller, of the Parent,
Purchaser, and Purchaser's Subsid iary satisfactory in form to Seller, to the
effect of (a) and (b) above.
(d) Government Action. There shall not be threatened
or pending any suit, action or proceeding by any Governmental Entity: seeking to
impose material limitation on the ability of, or rendering Seller unable, to
accept for payment or pay for or purchase some or all of the Assets or otherwise
to consummate the Closing.
(e) Line of Credit. At or prior to the Closing Date,
Seller will have obtained a release of liabilities arising form its existing
line of credit.
(f) Resolution of ODA Business Conflict. If the
resolution of the ODA Business Conflict involves and impacts Seller, the
resolution of the ODA Business Conflict shall be on terms reasonably
satisfactory to Seller and its counsel.
(g) Consents. All consents and approvals of any
Person necessary to the consummation of the Closing and the other Transactions,
including Required Consents and approvals from parties to loans, contracts,
Leases or other agreements and consents and approvals from Governmental
Entities, whether federal, state, local or foreign shall have been obtained, and
a copy of each such Required Consent or approval shall have been provided to
Seller at or prior to the Closing.
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(h) Nevada Loan. At or prior to the Closing Date,
Seller will have received a payment guarantee from Parent with respect to
Purchaser's obligations under the Nevada Loan.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated or
abandoned at any time prior to the Closing Date:
(a) By the mutual written consent of Purchaser and
Seller;
(b) By either Purchaser, Purchaser's Subsidiary or
Seller if any Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action the
parties hereto shall use their reasonable efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the acquisition by Purchaser or
Purchaser's Subsidiary of the Business or any of the Business Subsidiaries and
such order, decree, ruling or other action shall have become final and
non-appealable;
(c) By either Purchaser, Purchaser's Subsidiary or
Seller upon written notice given to the other party in the event that the
Closing shall not have taken place on or before June 30, 2001; provided, that
the failure of the Closing to occur on or before such date is not the result of
a breach of any covenant, agree ment, representation or warranty hereunder by
the party seeking such termination;
(d) By either Purchaser, Purchaser's Subsidiary or
Seller upon written notice given to the other party in the event that the
Transactions contem plated by this Agreement are not approved and adopted at the
Stockholders Meeting by the affirmative vote of the requisite number of shares
of the outstanding shares of Seller's common stock;
(e) By Seller:
(i) if Parent, Purchaser or Purchaser's
Subsidiary shall have breached in any material respect any of its
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represen tations, warranties, covenants or other agreements contained
in this Agreement, which breach cannot be or has not been cured within
30 days after the giving of written notice by Seller to Parent,
Purchaser or Pur chaser's Subsidiary specifying such breach; or
(ii) if Seller has entered into an agree ment
with respect to a Superior Proposal or Seller or the Board of Direc
tors of Seller has approved or recommended a Superior Proposal in
accordance with Section 6.5(b), provided Seller has complied with all
provisions of Section 6.5, including the notice provisions therein, and
that simultaneously with the termination of this Agreement Seller makes
payment to the Parent as provided in Section 8.2(b);
(f) By Parent, Purchaser or Purchaser's Subsidiary:
(i) if Seller shall have breached in any
material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or
has not been cured within 30 days after the giving of written notice by
Parent, Purchaser or Purchaser's Subsidiary to Seller specifying such
breach;
(ii) if the investigation referred to in
Section 6.2(e) reveals any environmental condition at, on, under or in
relation to, all or any portion of the Assets (including all Real
Property) or the business conducted thereat that could, in Purchaser's
or Purchaser's Subsidiary's sole and absolute opinion, subject the
Business, Purchaser, Purchaser's Subsidiary or any of their Affiliates
to (x) environmental liability or potential environmental liability
arising out of, resulting from or relating to any Environmental Claim,
(y) any investigation, audit, enforcement action, administrative or
court proceeding, or any other proceeding, by or on behalf of any
Governmental Entity or (z) liability under any Environmental Laws;
(iii) if, prior to the Closing, the Board of
Directors of Seller shall have withdrawn, or modified or changed in a
manner adverse to Parent, Purchaser, or Purchaser's Subsidiary its ap
proval or recommendation of the Agreement or shall have recommended or
approved, or announced a neutral position with respect to, an Acquisi
96
tion Proposal or upon request of Parent, Purchaser, or Purchaser's
Subsid iary shall fail to reaffirm its approval and recommendation of
this Agree ment;
(iv) if there shall have been a material
breach by Seller of any provision of Section 6.5; or
(v) there shall have occurred any Material
Adverse Effect or any development that, insofar as reasonably can be
foreseen, is reasonably likely to result in any Material Adverse
Effect.
Section 8.2 Effect of Termination.
---------------------
(a) In the event of the termination or abandonment of
this Agreement by any party hereto pursuant to the terms of this Agreement,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination or
abandonment of the Agreement is made, and there shall be no liability or
obligation thereafter on the part of Parent, Purchaser, Purchaser's Subsidiary
or Seller except (A) for fraud, (B) for breach of this Agreement prior to such
termination or abandonment of the Transactions, (C) as set forth in Section
8.2(b) hereof and (D) as set forth in Section 10.1.
(b) If (x) Parent, Purchaser or Purchaser's
Subsidiary terminates this Agreement pursuant to Section 8.1(f)(iii) or Section
8.1(f)(iv), or (y) Seller terminates this Agreement pursuant to Section
8.1(e)(ii), or (z) either Parent, Purchaser or Purchaser's Subsidiary terminates
this Agreement pursuant to Section 8.1(d) and at the time of the Stockholders
Meeting an acquisition proposal is pending then in each case, Seller shall pay,
or cause to be paid to Parent, at the time of termination, an amount equal to
$200,000 (two hundred thousand dollars) (the "Termination Fee") plus an amount
equal to Parent's, Purchaser's and Purchaser's Subsidiary's actual and
reasonably documented out-of-pocket expenses (the "Ex penses") incurred by
Parent, Purchaser or Purchaser's Subsidiary in connection with the this
Agreement and the consummation of the Transactions, which Expenses shall not
exceed $500,000 (five hundred thousand dollars). In addition, if this Agreement
is terminated by Parent, Purchaser's Subsidiary or Purchaser pursuant to Section
8.1(f)(i) and if Seller shall thereafter, within 12 months after such
97
termination, enter into an agreement with respect to any Acquisition Proposal,
then Seller shall pay the Termination Fee concurrently with entering into any
such agreement and Seller shall pay Parent the Expenses. Any payments required
to be made pursuant to this Section 8.2(b) shall be made by wire transfer of
same day funds to an account designated by Parent.
Section 8.3 Extension; Waiver. At any time prior to the
Closing, each of the parties hereto may (i) extend the time for the performance
of any of the obligations or acts of the any other party hereto, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto, (iii) waive compliance with
any of the agreements of the other party contained herein or (iv) waive any
condition to its obligations hereunder. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification; Remedies.
-------------------------
(a) Seller shall indemnify, defend and hold harmless
the Purchaser Indemnified Persons from and against and in respect of (x) all
Purchaser Losses and (y) all Retained Liabilities (including those Liabilities
arising from Seller's Foreign Subsidiaries which would be considered Retained
Liabilities as provided in Section 2.4 hereof).
(b) Seller shall indemnify, defend and hold harmless
the Purchaser Indemnified Persons from and against and in respect of:
(i) any and all Taxes imposed upon Parent,
Purchaser, Purchaser's Subsidiary, any Affiliate of Parent or any
Seller's Purchased Subsidiary attributable to the Assets or Business or
the operations or the income of Seller or any Business Subsidiary
(provided that with respect to Taxes imposed on any Seller's Purchased
Subsidiary, solely to the extent such Taxes exceed the amounts shown as
reserved for Taxes on the Statement of the Closing Date Net Assets with
respect to such Seller's Purchased Subsidiary) with respect or pursuant
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to (w) any Pre-Closing Period, (x) any Straddle Period, but only with
respect to the Pre-Closing Straddle Period and in the manner provided
in Section 6.14(a) and (y) a breach or inaccuracy in any representation
contained in Section 4.24 of this Agreement or any covenant of Seller
set forth in Section 6.14 or this Article IX; and
(ii) any withdrawal liability under ERISA to
which the Purchaser or Purchaser's Subsidiary becomes liable arising
solely as a result of any complete or partial withdrawal from any
multi-employer plan (as defined in Section 3(37) or Section 4001(a)(3)
of ERISA or Section 414(f) of the Code) by Seller or any ERISA
Affiliate.
(c) Seller's indemnification obligations under
Sections 9.1(a) and 9.1(b) shall be subject to each of the following
limitations:
(i) Seller's indemnification obligations
relating to (A) ERISA Claims shall survive only until the sixth anniver
sary of the Closing Date and (B) Tax Claims shall survive until six
months after the expiration of the applicable tax statute of
limitations (as the same may be extended). No claim for the recovery of
any Tax Claims or ERISA Claims may be asserted by any Purchaser
Indemnified Person after the expiration of the applicable
indemnification period; provided, however, that claims first asserted
in writing by any Purchaser Indemni fied Person with reasonable
specificity prior to the expiration of the applicable indemnification
period shall not thereafter be barred by the expiration of the
applicable indemnification period; and
(ii) No indemnification for Purchaser Losses
related to breaches of representations and warranties asserted under
Section 9.1(a) including with regard to Seller's Foreign Subsidiaries
shall be required until such Purchaser Losses exceed $50,000, and then
such Purchaser Losses, shall be indemnified from the first dollar of
Purchaser Losses.
(iii) Except as provided in this Section
9.1(c)(iii), no indemnification for Purchaser Losses related to
breaches of representations and warranties relating to Seller's Foreign
Subsidiaries or to the deemed "Retained Liabilities" of the Seller's
Foreign Subsidiaries asserted under Section 9.1(a)(y) hereof shall
exceed $500,000 (five hundred thousand dollars) with respect to each
Seller's Foreign Subsidiary provided that there will be no
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indemnification for Purchaser Losses related to breaches of
representations and warranties relating to Turon MSI or to the deemed
"Retained Liabilities" of Turon MSI asserted under Section 9.1(a)(y)
hereof.
(d) Purchaser and Purchaser's Subsidiary shall
indemnify and hold Seller Indemnified Persons harmless from and against, Seller
Losses all liability, demands, claims, actions or causes of action, assessments,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) imposed on, sustained, incurred or suffered by
Seller, directly or indirectly, by reason of or resulting from any and all Taxes
imposed upon any Seller's Purchased Subsidiary with respect or pursuant to (i)
any taxable period beginning after the Closing Date and (ii) any Straddle
Period, but only for taxes with respect to the portion of such Straddle Period
which is not attributable to a Pre-Closing Straddle Period in the manner
provided in Section 6.14(a) hereof.
(e) Without regard to the limitations set forth in
Section 9.1(c)(iii), the aggregate liability of Seller for breaches in the
representations and warranties included in this Agreement shall not exceed
$6,000,000 (six million dollars) ("Seller's Indemnification Amount").
Section 9.2 Notice of Claim; Defense. Purchaser or Purchaser's
Subsidiary on one hand and Seller on the other hand shall give each other prompt
notice of any third-party claim that may give rise to any indemnification
obligation under this Article IX, together with the estimated amount of such
claim, and Seller shall have the right to assume the defense (at Seller's
expense) of any such claim through counsel of Seller' own choosing by so
notifying Purchaser or Purchaser's Subsidiary within 30 days of the first
receipt by Seller of such notice from Purchaser; provided, however, that any
such counsel shall be reasonably satisfactory to Purchaser or Purchaser's
Subsidiary. Failure to give such notice shall not affect the indemnifica tion
obligations hereunder in the absence of actual and material prejudice. If, under
applicable standards of professional conduct, a conflict with respect to any
significant issue between any Purchaser Indemnified Person and Seller exists in
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respect of such third-party claim, Seller shall pay the reasonable fees and
expenses of such additional counsel as may be required to be retained in order
to eliminate such conflict. Seller shall be liable for the fees and expenses of
counsel employed by Purchaser or Pur chaser's Subsidiary for any period during
which Seller has not assumed the defense of any such third-party claim (other
than during any period in which Purchaser or Purchaser's Subsidiary will have
failed to give notice of the third-party claim as provided above). If Seller
assumes such defense, Purchaser or Purchaser's Subsidiary shall have the right
to participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by Seller, it being understood that Seller
shall control such defense. If Seller chooses to defend or prosecute a third-
party claim, Purchaser or Purchaser's Subsidiary shall cooperate in the defense
or prosecution thereof, which cooperation shall include, to the extent
reasonably requested by Seller, the retention, and the provision to Seller, of
records and informa tion reasonably relevant to such third-party claim, and
making employees of the Business available on a mutually convenient basis to
provide additional information and explanation of any materials provided
hereunder. If Seller chooses to defend or prosecute any third-party claim,
Purchaser shall agree to any settlement, compromise or discharge of such
third-party claim that Seller may recommend and that, by its terms, discharges
Purchaser, Purchaser's Subsidiary and any of their Affiliates from the full
amount of liability in connection with such third-party claim; provided,
however, that, Seller shall not consent to, and Purchaser shall not be required
to agree to, the entry of any judgment or enter into any settlement that (i)
provides for injunc tive or other non-monetary relief affecting Purchaser,
Purchaser's Subsidiary or any of their Affiliates or (ii) does not include as an
unconditional term thereof the giving of a release from all liability with
respect to such claim by each claimant or plaintiff to each Purchaser
Indemnified Person that is the subject of such third-party claim.
Section 9.3 Procedures Related to Tax Contests.
----------------------------------
(a) Notice Requirement. Seller and Parent shall
promptly notify the other in writing upon receipt by either or any of their
Affiliates of notice of any pending or threatened Tax Audit which may materially
affect the liability for Taxes for which Seller would be required to indemnify
Parent, any of its Affiliates or any Seller's Purchased Subsidiary pursuant to
Section 9.1(b)(i) or for which Parent would be required to indemnify Seller
pursuant to Section 9.1(d).
(b) If such Tax Audit involves solely Taxes for which
Seller is liable (taking into consideration any indemnification obligation
pursuant to this Agreement), Seller shall at its expense control the complete
defense and settlement of the interests of itself and each other party in such
Tax Audit, provided that Seller notifies Parent in writing within thirty (30)
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days of receiving notice from Parent under Section 9.3(a). Seller shall keep
Parent informed about, and shall allow Parent to participate in, at its sole
expense, the defense of any such Tax Audit. Seller shall not pay, discharge,
settle, compromise, litigate, or otherwise dispose (collectively, "dispose") of
any item subject to such Tax Audit without obtaining the prior written consent
of Parent, which consent shall not be unreasonably withheld or delayed; such
consent shall be deemed not to be unreasonably withheld or delayed if the
disposition of any item would result in an increase in the liability for Taxes
of Parent or any Affiliate of Parent.
(c) If Seller does not provide Parent with notice as
required under this Section 9.3(b), Parent shall control the defense of any Tax
Audit involving solely Taxes for which Seller is liable (taking into account any
indemnification obligation imposed pursuant to this Agreement) and shall be
entitled to dispose of such item subject to Tax Audit without the written
consent of Seller. If, prior to Parent reaching a proposed settlement with
respect to such Tax Audit, Seller notifies Parent that it desires to participate
in such Tax Audit, Seller shall be entitled to do so provided that Seller doing
so would not prejudice Parent with respect to the Tax authorities dealing with
such audit and Seller shall pay to Parent, prior to Seller assuming control of
such Tax Audit, Parent's costs and expenses (including attorneys' fees, other
out-of-pocket costs and any allocable costs) incurred to date in handling such
Tax Audit. Thereafter, the provisions of Section 9.3(b) shall govern the han
dling of such Tax Audit.
(d) If a Tax Audit involves Taxes for which both
Seller and Parent may be liable, Parent shall at its expense control the
complete defense and settlement of the interests of itself and each other party
in such Tax Audit; provided, however, that (i) Parent shall keep Seller informed
about, and shall consult with Seller in good faith about, any items in such Tax
Audit with respect to Taxes for which Seller is liable and (ii) Parent shall not
be entitled to dispose of any item subject to such Tax Audit with respect to
Taxes for which Seller is liable without obtaining the prior consent of Seller,
which consent shall not be unreasonably withheld.
(e) Parent, in its sole discretion and at its
expense, shall control the complete defense and settlement of the interests of
itself and each other party in any other Tax Audit.
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Section 9.4 Survival of Indemnification Claims. The
indemnification obligations set forth in this Article IX shall survive the
Closing.
Section 9.5 Tax Effect of Indemnification Payments. All
indemnity payments made by Seller to Purchaser Indemnified Persons, or by
Purchaser Indemni fied Persons to Seller, pursuant to this Agreement shall be
treated for all Tax purposes as adjustments to the consideration paid with
respect to the Assets.
Section 9.6 Effect of Investigation. The right to
indemnification, payment of Purchaser Losses or for other remedies based on any
representation, warranty, covenant or obligation of Seller contained in or made
pursuant to this Agreement shall not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the date the Closing occurs, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or obligation. The
waiver of any condition to the obligation of Purchaser or Purchaser's Subsidiary
to consummate the Transactions, where such condition is based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, shall not affect the right to indemnification, payment
of Purchaser Losses, or other remedy based on such representation, warranty,
covenant or obligation.
Section 9.7 Survival of Covenants, Representations and
Warranties. Except for the representations and warranties set forth in Section
4.1, Section 4.2, Section 4.12, Section 4.16, Section 4.24, Section 4.28,
Section 4.29, Section 4.32 and Section 6.14 each of which shall survive forever,
the remaining representations and warranties of Seller made herein or in any
other documentation delivered pursuant to this Agreement and the covenants and
agreements to be performed on or prior to the Closing Date shall survive until
April 30, 2002; provided, that (a) expiration of a representation, warranty,
covenant or agreement shall not affect the obligations of a party with respect
to claims for indemnification for which notice has been given to the
indemnifying party in accordance with this Article IX prior to such expiration
and (b) all covenants, agreements and indemnification matters that contemplate
or may involve actions to be taken or obligations in effect after the Closing
shall survive the Closing Date.
Section 9.8 Right of Offset. The parties hereto agree that in
the event a claim for indemnification by a Purchaser Indemnified Person is not
paid within thirty (30) days of reaching an agreement thereof or a court
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determination that Seller has an indemnifiable obligation, Purchaser and Parent
shall have the uncondi tional right to offset, on a dollar for dollar basis,
against the principal payments on the Nevada Loan, in the reverse order of
maturity, the amount of any such claim for indemnification made by a Purchaser
Indemnified Person pursuant to Article IX hereof.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such expenses, except as
specifically provided to the contrary in this Agreement and except as provided
in Section 8.2(b) and as follows:
(a) Purchaser shall bear the fee payable in
connection with the Pre-Merger Notification filing required by the HSR Act; and
(b) All Transfer Taxes arising out of, in connection
with or attributable to the transactions effected pursuant to this Agreement
shall be borne and paid by the party on whom the law imposes the primary
obligation to pay such Transfer Tax. Notwithstanding Section 6.14(b), the
Transfer Tax payor shall prepare and timely file all relevant Tax Returns
required to be filed in respect of such Transfer Tax, pay the Transfer Tax shown
on such Tax Return, and notify the other parties in writing of the Transfer Tax
shown on such Tax Return and how such Transfer Tax was calculated. The party
making such Transfer Tax payment shall provide the other party for its review
and comment a copy of the Transfer Tax Return at least ten (10) days prior to
the Due Date for filing such Tax Return. The Parties shall attempt to resolve
any disagreement with respect to the contents of the Transfer Tax Return prior
to filing. If any disagreements cannot be resolved, the Transfer Tax Return
shall be filed as prepared by the Transfer Tax Payor.
Section 10.2 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects, but only by a
written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.
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Section 10.3 Notices. All notices and other communications
hereun der shall be in writing and shall be deemed given when delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as Federal Express, to the parties at the following addresses (or
at such other address for a party as shall be specified by such party by like
notice):
if to Parent, Purchaser or Purchaser's Subsidiary, to:
Union Espanola de Explosivos S.A.
Av. Del Partenon, 16-5a Xx.
Xxxxx xx xxx Xxxxxxxx
00000 Xxxxxx, Xxxxx
Attention: Xxxx Xxxxxxxx Xxxxxxx-Xxxxx
and
Xxxxxx Xxxxxxxxxx
Telephone: 00-00-000-0000
Telocopy: 00-00-000-0000
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
and
Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
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if to Seller, to:
Mining Services International Corporation
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxx, Xxxx 00000-0000
Attention: Xxxx X. Day, Sc.D.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxx Xxxxxxxx Xxxxx Xxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx. Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as a party may from time to time designate in writing
in accordance with this section. Each notice or other communication given to any
party hereto in accordance with the provisions of this Agreement shall be deemed
to have been received (a) on the Business Day it is sent, if sent by personal
delivery, or (b) on the first Business Day after sending, if sent by overnight
delivery, properly addressed and prepaid or (c) upon receipt, if sent by mail
(regular, certified or registered); provided, however, that notice of change of
address shall be effective only upon receipt. The parties agree that delivery of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 10.3, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
Section 10.4 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
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Section 10.5 Entire Agreement; No Third Party Beneficiaries.
This Agreement, the Disclosure Schedule and other schedules, annexes, and
exhibits hereto and the Confidentiality Agreement (a) constitute the entire
agreement and supercede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof and supersede and cancel all prior agreements, negotiations,
correspondence, undertakings, understandings and communications of the parties,
oral and written, with respect to the subject matter hereof, and (b) are not
intended to confer upon any Person other than the parties hereto and thereto any
rights or remedies hereunder.
Section 10.6 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 10.7 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 10.8 Enforcement; Venue. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States located in the State of Delaware or in Delaware state court,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any Federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions, (b) agrees that it shall not attempt to
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deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it shall not bring any action relating
to this Agreement or any of the Transactions in any court other than a Federal
or state court sitting in the State of Delaware.
Section 10.9 Election of Remedies. Neither the exercise of nor
the failure to exercise a right of set-off or to give notice of a claim under
this Agreement will constitute an election of remedies or limit Purchaser or
Purchaser's Subsidiary or any of the Purchaser Indemnified Persons on the one
hand, or Seller or any of the Seller Indemnified Persons on the other hand, in
any manner in the enforcement of any other remedies that may be available to any
of them, whether at law or in equity.
Section 10.10 Assignment. Neither this Agreement not any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that Purchaser or Purchaser's
Subsidiary may assign, in their sole discretion, any or all of their rights and
interests hereunder to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 10.11 Headings. The article, section, paragraph and
other headings contained in this Agreement are inserted for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, Parent, Purchaser, Purchaser's Subsidiary
and Seller have executed this Agreement or caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
UNION ESPANOLA DE EXPLOSIVOS S.A.
[SEAL]
By: /s/ Xxxx X. Xxxxxxx-Xxxxx
-------------------------
Name: Xxxx X. Xxxxxxx-Xxxxx
Title: Chairman and CEO
UNION ESPANOLA DE EXPLOSIVOS - MSI
INTERNATIONAL, S.A.
[SEAL]
By :/s/ Xxxx X. Xxxxxxx-Xxxxx
--------------------------
Name: Xxxx X. Xxxxxxx-Xxxxx
Title: Chairman
UMSI ACQUISITION CO.
[SEAL]
By : /s/ Xxxx X. Xxxxxxx-Xxxxx
---------------------------
Name: Xxxx X. Xxxxxxx-Xxxxx
Title: President
MINING SERVICES INTERNATIONAL, INC.
[SEAL]
By: /s/ Xxxx X. Day
---------------------------
Name: Xxxx X. Day
Title: President
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Solely for purposes of Section 9.8 hereof
NEVADA CHEMICALS INC.
[SEAL]
By : /s/ Xxxx X. Day
-----------------------------
Name: Xxxx X. Day
Title: President
432667.07-New York S7A
D- 1
