PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is dated October 26, 1999,
between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Xxxx Xxxxx
Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust, u/d/t
October 19, 1990, an individual residing in the state of California and Xxxxxx
X. Xxxxxx, as Trustee of the Xxxxxxx Trust, also an individual residing in the
state of California (Xxx. Xxxxxx and Xxx. Xxxxxx may be individually referred to
as a "Seller" or collectively as the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires
to purchase from the Sellers, all of the issued and outstanding shares of
capital stock of Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc.,
both California corporations, as well as 1.3 acres, more or less, of real
property located at 00000 Xxxxxx Xxxxxx, Xx Xxxxxx, Xxxxxxxxxx (the "Real
Property"), more particularly described on the attached Exhibit A.
The authorized capital stock issued and outstanding of both Xxxxx X.
Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc. is referred to herein as the
"Purchased Stock." Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc.
will be collectively referred to in this Agreement as the "Company". Whenever a
statement, representation, warranty or covenant is made by or about the
"Company" it is understood that the statement, representation, warranty or
covenant is made by or about both Xxxxx X. Xxxxxxx, Inc. and United Terrazzo
Supply Co., Inc.
Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
1 SALE OF PURCHASED STOCK and REAL PROPERTY; CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and conditions set
forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will
purchase from the Sellers, the Purchased Stock and the Real Property.
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the
Purchased Stock and Real Property will be one million eight hundred thousand
dollars ($1,800,000.00) (subject to adjustment as described below) and will be
paid in cash at the Closing. The Purchase Price shall be allocated as follows:
1.2.1.1 For the Real Property - $700,000.00;
1.2.1.2 For the Xxxxx X. Xxxxxxx, Inc. stock -
$900,000.00
1.2.1.3 For the United Terrazzo, Inc. stock -
$200,000.00.
1.2.2 Commencing the first business day following the Closing
Date, Purchaser, with the cooperation of Sellers, shall prepare a balance sheet
for the Company reflecting the consolidated financial condition of Xxxxx X.
Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc. as of the end of business day
on October 31, 1999 (the "Closing Date Balance Sheet"). Such Closing Date
Balance Sheet will be prepared on a basis consistent with GAAP as consistently
applied during the past two years by the Company's certified public accountants,
except as set forth below. On the basis of the Closing Date Balance Sheet and
within forty-five (45) days of the Closing Date, the Purchaser, with the
cooperation of the Sellers, shall calculate the consolidated adjusted net worth
of the Company as of the Closing Date ("Adjusted Net Worth"):
1.2.2.1 The trade accounts receivable shall be the
actual accounts receivable less the accounts receivable that
were more than 90 days old on the Closing Date. No reserve for
doubtful accounts shall be required in either the Closing Date
Balance Sheet or for the calculation of the Adjusted Net
Worth;
1.2.2.2 The final inventory value shall be obtained
by the parties taking a joint physical inventory on the
Closing Date to arrive at the final inventory as of the
Closing Date. The final inventory shall be evaluated at the
Company's replacement cost, but not lower than the actual cost
of the inventory paid by the Company; and
1.2.2.3 No reserve or accounts payable for the
Casmalia Disposal Site Superfund liabilities shall be required
in either the Closing Date Balance Sheet or for the
calculation of the Adjusted Net Worth.
Within forty-five (45) days following the Closing Date, the
Purchaser shall deliver to the Sellers the Closing Date
Balance Sheet and a statement reflecting the Adjusted Net
Worth (collectively, the "Final Statement"). The Purchaser
shall provide Sellers with access to copies of the work papers
and other relevant documents to verify the entries contained
in the Final Statement. The Sellers shall have a period of
thirty (30) days after delivery of the Final Statement to
review it and make any objections the Seller may have in
writing to the Purchaser. If written objections to the Final
Statement are delivered to the Purchaser within such thirty
(30) day period, then the Purchaser and Sellers shall
negotiate in good faith in an effort to resolve the matter or
matters in dispute. Following such good faith effort, any
unresolved matter shall be submitted to dispute resolution
pursuant to the provisions of Section 1.6.
1.2.3 The Base Net Worth is defined herein as the sum of One
Million One Hundred Nine Thousand One Hundred and Seventy Nine Dollars
($1,109,179.00) which is the consolidated net worth of the Company as of June
30, 1999. To the extent the Adjusted Net Worth is less than the Base Net Worth,
one-half of the difference shall be paid to Purchaser by Xxxx X. Xxxxxx, as
Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust, u/d/t October 19,
1990 and one-half of the difference shall be paid to Purchaser by Xxxxxx X.
Xxxxxx, Trustee of the Xxxxxxx Trust. To the extent the Adjusted Net Worth
exceeds the Base Net Worth, Purchaser shall pay one-half the difference to Xxxx
X. Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust, u/d/t
October 19, 1990 and one-half of the difference to Xxxxxx X. Xxxxxx, Trustee of
the Xxxxxxx Trust. Said payments shall be made within ten (10) days of Sellers
accepting the Final Statement or within ten (10) days of a resolution under
section 1.6.
1.3 Closing. The Closing (the "Closing" or "Closing Date") of the
purchase and sale of the Purchased Stock will take place at the offices of
Ferruzzo & Ferruzzo, 0000 Xxxxx Xxxxxxxx, Xxxxx Xxx, Xxxxxxxxxx with the
ancillary escrow closing simultaneously taking place at Chicago Title, 00000 Xxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, for the transfer of the Real Property, or at
such other place as Purchaser and the Sellers shall mutually agree, at 9:00 A.M.
local time, on October 26, 1999.
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the
Purchase Price to the Sellers by wire transfer to such account(s) as the Sellers
may direct by written notice delivered to Purchaser by the Sellers at least
three (3) Business Days before the Closing Date as follows:
1.4.1 To Xxxx X. Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx
Revocable Intervivos Trust, u/d/t October 19, 1990:
for the Real Property $350,000
for the Purchased Stock $595,000
---------
Total $945,000
1.4.2 To Xxxxxx X. Xxxxxx, Trustee of the Xxxxxxx Trust
for the Real Property $350,000
for the Purchased Stock $505,000
---------
Total $855,000.
Simultaneously, the Sellers will sell and convey to Purchaser the
Purchased Stock and the Real Property free and clear of all Liens, by delivering
to Purchaser stock certificates, registered in the name of Purchaser,
representing the Purchased Stock, and a Grant Deed conveying title to the Real
Property. At the Closing, the parties shall also deliver the opinions,
certificates, contracts, documents and instruments to be delivered pursuant to
this Agreement. The Parties shall open an ancillary escrow with Chicago Title
for the transfer of the Real Property and shall execute escrow instructions as
prepared by Chicago Title consistent with this Agreement.
1.5 Real Property Provisions.
1.5.1 The transfer of the Real Property shall be consummated
through an escrow established with Chicago Title Insurance Company. The Closing
Date of the escrow will be October 26, 1999.
1.5.2 On the close of escrow, title shall vest in Purchaser.
1.5.3 Sellers shall by Grant Deed convey to Purchaser a fee
simple interest free and clear of all title defects, liens, encumbrances, deeds
of trust, and mortgages, except real property taxes, a lien not delinquent, and
other exceptions approved by Purchaser ("Permitted Exceptions"). Sellers shall
procure a California Land Title Association standard policy of title insurance
in the amount of $700,000 to be paid by Purchaser issued by Chicago Title
Insurance Co. showing title vested in Purchaser with only the Permitted
Exceptions.
1.5.4 There shall be no prorations since the Company is
responsible for the taxes and insurance.
1.5.5 Sellers shall pay all costs and expenses of clearing
title, preparing, executing, acknowledging and delivering the Grant Deed and
shall pay any transfer taxes. Purchaser shall pay the recording fees (except
those in connection with clearing title) the premium for the title insurance
policy and all fees and costs for any new financing. Sellers and Purchaser shall
each pay half of the escrow fees.
1.5.6 Sellers shall have Chicago Title prepare a preliminary
title report and deliver same to Purchaser for review. Purchaser shall within
five (5) days of receipt of said report approve of it or notify Sellers in
writing of any objections. Sellers may at Sellers election correct these matters
or elect to notify Purchaser that the matters will not be corrected. Upon
receipt of notice that the matters will not be corrected, Purchaser may waive
the objections and accept the title as is or terminate the entire Agreement
without liability on either parties part. All exceptions approved by Purchaser
are Permitted Exceptions.
1.5.7 Notwithstanding Article II, Sellers disclaim the making
of any representations or warranties, express or implied, regarding the Real
Property and Purchaser shall purchase the Real Property in its "As Is" condition
on the Closing Date.
1.6 Dispute Resolution.
1.5.8 In the event Purchaser and Sellers do not agree with the
determination of the Adjusted Net Worth and/or the Closing Date Balance Sheet
within sixty (60) days of the Closing Date, Purchaser and Sellers shall submit
the specific disagreement to a national independent public accountant firm (a
"Big 5 Firm") acceptable to Purchaser and to Sellers for resolution. Such Big 5
Firm to be selected by Purchaser and Sellers, but excluding any Big 5 Firm
presently used or previously used by Purchaser or Sellers or the Company.
1.5.9 Purchaser and Sellers shall cause the Big 5 Firm
selected, within forth-five (45) days after its selection, to resolve such
disagreement, which resolution shall be binding on all of the parties. The fees
and expenses of such Big 5 Firm shall be paid one-half (1/2) by Purchaser and
one-half (1/2) by Sellers.
1.5.10 In the event the parties are unable to select a Big 5
Firm acceptable to Purchaser and Sellers or in the event the Big 5 Firm selected
fails or refuses to act or resolve the dispute or refuses the proposed
engagement, then either Purchaser or Sellers can demand arbitration before the
American Arbitration Association under the Commercial Arbitration Rules and
Regulations in Orange County California. The arbitrator must have an accounting
background, preferably be a Certified Public Accountant and be familiar with the
purchase and sale of businesses.
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, to their best knowledge, hereby represent and warrant to
Purchaser as follows:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets. The
Company is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, (i) are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of the Company and (ii)
could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or any other agreement to which the
Company is a party or on the ability of the Sellers or the Company to perform
their obligations hereunder or thereunder. The Sellers have delivered to
Purchaser true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable corporate charter documents) of
the Company, including all amendments thereto effected through the Closing Date.
2.2 Capital Stock. The Purchased Stock consists of the following number
of shares of capital stock:
The authorized capital structure of Xxxxx X. Xxxxxxx, Inc. consists of
25,000 shares of voting common stock with a par value of $1.00 per
share of which 12,296 shares are issued and outstanding. Xxxx X.
Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust,
u/d/t October 19, 1990 owns 6,764 shares of Xxxxx X. Xxxxxxx, Inc. and
Xxxxxx X. Xxxxxx, Trustee of the Xxxxxxx Trust owns 5,532 shares of
Xxxxx X. Xxxxxxx, Inc.
The authorized capital structure of United Terrazzo Supply Co., Inc.
consists of 800 shares of voting common stock with a par value of $250
per share of which 16 shares are issued and outstanding. Xxxx X.
Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust,
u/d/t October 19, 1990 owns 8 shares of United Terrazzo Supply Co.,
Inc. and Xxxxxx X. Xxxxxx, Trustee of the Xxxxxxx Trust owns 8 shares
of United Terrazzo Supply Co., Inc.
The Purchased Stock constitutes all of the issued and outstanding shares of
capital stock of the Company. The shares of Purchased Stock are validly issued,
fully paid and nonassessable, issued in compliance with all applicable Laws and
no additional shares of capital stock have been reserved for issuance. There are
no outstanding Options with respect to the stock of the Company or agreements,
arrangements or understandings to issue Options with respect to the Company, nor
are there any preemptive rights or agreements, arrangements or understandings to
issue preemptive rights with respect to the issuance or sale of the capital
stock of the Company. The Sellers are the record and beneficial owners of all of
the shares of Purchased Stock, free and clear of all Liens. The delivery to
Purchaser of the certificates representing the Purchased Stock will transfer to
Purchaser good and valid title to all shares of the Purchased Stock, free and
clear of all Liens, and restrictions and after such transfer the Purchased
Stock, in the hands of Purchaser, will have been duly authorized, validly
issued, fully paid and nonassessable. From and after the Closing, no Seller nor
any other Person (other than the Purchaser) will have any rights whatsoever with
respect to the Purchased Stock or to any other securities of the Company.
2.3 Authority Relative to This Agreement. The Sellers have full
authority to enter into this Agreement, to perform their obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Sellers and constitutes the
legal, valid and binding obligations of the Sellers, enforceable against them in
accordance with its terms.
2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure
Schedule lists all lines of business in which the Company is participating or
engaged or has participated or engaged in the preceding three years. The name of
each director and officer of the Company, and the position with the Company held
by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds
no equity, partnership, joint venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Sellers of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not:
2.5.1 conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
the Company;
2.5.2 conflict with or result in a violation or breach of any
term or provision of any Laws or Order applicable to any of the Sellers, to the
Real Property, or to the Company, or any of their Assets; or
2.5.3 except as disclosed in Section 2.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any of the Sellers or the Company to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Real Property, the Company or
any of its Assets under, any Contract or License to which any of the Sellers or
the Company is a party or by which any of their respective Assets is bound
except for such conflicts, violations, breaches, defaults, consents, approvals,
actions, filings, notices, terminations, cancellations, accelerations,
modifications, additional rights or entitlements or Liens that, individually or
in the aggregate, (A) are not having and could not be reasonably expected to
have a material adverse effect on the business or condition of the Company, and
(B) could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or on the ability of any of the
Sellers or the Company to perform its obligations hereunder.
2.6 Governmental Approvals and Filings. Except as disclosed in Section
2.6 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of the Sellers
or the Company is required in connection with the execution, delivery and
performance of this Agreement or the consummation of transactions contemplated
herein.
2.7 Books and Records. The minute books and other similar records of
the Company to be provided to Purchaser upon execution of this Agreement contain
a true and complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the boards of directors
(or other similar governing entities) of the Company.
2.8 Financial Statements. The Sellers have caused the Company to
furnish to Purchaser true and complete copies of the complied but unaudited
financial statements of the Company for the periods ending June 30, 1999, along
with the related internal balance sheets and statements of operations and cash
flows certified as true and correct by the chief financial officer of the
Company. All of these statements, opinions, etc. (collectively referred to
herein as the "Financial Statements") are in accordance with the Books and
Records of the Company and fairly and accurately present the financial position
of the Company as of the dates thereof, for the periods covered thereby and the
results of operations and cash flows of the Company for the periods set forth
therein, all in conformity with GAAP as consistently applied by the Company's
Certified Public Accountants during the last two years and except as
specifically noted in the notes thereto and in section 2.8 of the Disclosure
Schedule. Further, the Sellers represent and warrant that, as of the Closing
Date, the Adjusted Net Worth shall be not less than 95% of the Base Net Worth.
2.9 Absence of Changes. Since June 30, 1999, there has not been any
material adverse change or any event or development, which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the business or condition of the Company. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.9 of the Disclosure Schedule, there has not occurred since June 30,
1999:
2.9.1 any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock (or other equity
interests) of the Company or any direct or indirect redemption, purchase or
other acquisition by the Company of any such capital stock (or other equity
interests) of the Company;
2.9.2 any authorization, issuance, sale or other disposition
by the Company of any shares of its capital stock (or other equity interests),
or any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other equity interests) of the Company;
2.9.3 (i) any increase in salary, rate of commissions or rate
of consulting fees of any employee or consultant of the Company; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any employee or consultant of the
Company) to any officer, director, stockholder, employee or consultant of the
Company; (iii) any establishment or modification of (A) targets, goals, pools or
similar provisions under any Benefit Plan, employment contract or other employee
compensation arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any Benefit Plan, employment contract or other employee
compensation arrangement; or (iv) any adoption, entering into, amendment,
modification or termination (partial or complete) of any Benefit Plan;
2.9.4 (i) incurrences by the Company of Indebtedness or (ii)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of the Company under, any Indebtedness of or owing to the Company;
2.9.5 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets of the Company
in an aggregate amount exceeding $10,000;
2.9.6 any write-off or write-down of or any determination to
write off or write down any of the Assets of the Company;
2.9.7 any purchase of any Assets of any Person or disposition
of, or incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
2.9.8 any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any
intellectual property rights owned by the Company;
2.9.9 any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
2.9.10 any commencement, termination or change by the Company
of any line of business;
2.9.11 any transaction by the Company with any of its
officers, directors, stockholders or Affiliates, other than pursuant to a
Contract or arrangement in effect on July 1, 1998 and disclosed to Purchaser
pursuant to Section 2.18.1.8 or other than pursuant to any Contract of
employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule;
2.9.12 any entering into of an agreement to do or engage in
any of the foregoing; or
2.9.13 any change in the accounting methods or procedures of
the Company or any other transaction involving or development affecting the
Company outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the June 30, 1999 balance sheet included in the Financial Statements
or as incurred in the ordinary course of business from June 30, 1999 through the
Closing Date or as disclosed in Section 2.10 of the Disclosure Schedule, the
Company has no Liabilities, nor are there any Liabilities relating to or
affecting the Company or any of its Assets.
2.11 Taxes.
2.11.1 Except as disclosed in Section 2.11 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company and/or the Real Property with any Taxing Authority have been duly and
timely filed, and each such Tax Return correctly and completely reflects the
income, franchise or other Tax liability and all other information required to
be reported thereon. The Company is not and has never been a member of any
affiliated, combined, consolidated, unitary or similar group with respect to the
filing of tax returns or otherwise with respect to any Taxing Authority. All
Taxes owed by the Company or related to the real Property (whether or not shown
on any Tax Return) have been paid. All monies required to be withheld by the
Company from employees, independent contractors, creditors or other third
parties for Taxes have been collected or withheld, and either duly and timely
paid to the appropriate Taxing Authority or (if not yet due for payment) set
aside in accounts for such purposes. The Company has no liability for Taxes for
any Person other than the Company.
2.11.2 The provisions for current Taxes in the Financial
Statements are sufficient for the payments of all accrued and unpaid Taxes not
yet due and payable as of their dates, whether or not disputed. As of the
Closing Date, such provisions, as adjusted for the passage of time through the
Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet
due and payable of the Company.
2.11.3 The Company is not a party to any agreement extending,
or having the effect of extending, the time within which to file any Tax Return
or the period of assessment or collection of any Taxes. The Company has not
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
2.11.4 No Taxing Authority is now asserting or threatening to
assert against the Company any deficiency, claim or liability for additional
Taxes or any adjustment of Taxes, and there is no reasonable basis for any such
assertion of which any of the Sellers or the Company is or reasonably should be
aware. No issues have been raised in any examination by any Taxing Authority
with respect to the Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. The federal income Tax Returns of the Company disclose
(in accordance with Section 6662(d)(2)(B) of the Code) all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662(d) of the Code. No claim has ever been
made by any Taxing Authority in a jurisdiction in which the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Section 2.11 of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after December 31, 1996, indicates those Tax
Returns, if any, that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to Purchaser
complete and correct copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company since
December 31, 1996. There are no Liens for Taxes upon the Assets of the Company
and/or the real Property.
2.11.5 Except as disclosed in Section 2.11 of the Disclosure
Schedule, the Company is not (i) a party to or bound by any obligations under
any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject
to any election under sections 338(e) or 341(f) of the Code or the regulations
thereunder, (iii) required to make, or reasonably expects that it might have to
make, any adjustment under section 481 of the Code (or any comparable provision
of state, local or foreign law) by reason of a change in accounting method or
otherwise, (iv) subject to any agreement or arrangement that could result
separately or in the aggregate in the payment of any "excess parachute payments"
within the meaning of section 280G of the Code, (v) and at no time has ever
been, a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is
subject to the provisions of section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986 or to any "long-term contract"
within the meaning of section 460 of the Code, (vii) a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes, or (viii) nor has it ever been, a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.12 Legal Proceedings.
2.12.1 Except as disclosed in Section 2.12 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
2.12.1.1 there are no actions or proceedings pending
or, to the knowledge of the Sellers or the Company, threatened against, relating
to or affecting the Company, the Real Property, or any of its Assets which (A)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement or otherwise result in a material diminution of
the benefits contemplated by this Agreement to Purchaser, or (B) if determined
adversely to the Company, could reasonably be expected to result in (x) any
injunction or other equitable relief against the Company, or (y) Losses by the
Company, individually or in the aggregate with Losses in respect of other such
actions or proceedings, exceeding $10,000;
2.12.1.2 there are no facts or circumstances known to
the Sellers or to the Company that could reasonably be expected to give rise to
any action or proceeding that would be required to be disclosed pursuant to
clause 2.12.1.1 above;
2.12.1.3 neither the Sellers nor the Company has
received notice, or is aware of any
Orders or lawsuits outstanding against the Company; and
2.12.1.4 neither the Sellers nor the Company has
received notice or is aware of any defects, dangerous or substandard conditions
in the products or materials manufactured, sold, distributed, or to be
manufactured, sold or distributed by the Company that could cause bodily injury,
sickness, disease, death, or damage to property, or result in loss of use of
property, or any claim, suit, demand for arbitration or notice seeking damages
for bodily injury, sickness, disease, death, or damage to property, or loss of
use or property.
2.12.2 Prior to the execution of this Agreement, the Sellers
and the Company have delivered all responses of counsel for the Company to
auditors' requests for information regarding actions or proceedings pending or
threatened against, relating to or affecting the Company during the period
commencing January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth
all actions or proceedings relating to or affecting the real Property, the
Company or its Assets during the period commencing January 1, 1996 prior to the
date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section
2.13 of the Disclosure Schedule, neither the Sellers nor the Company has
received at any time since January 1, 1996 any notice that the Company is or has
been at any time since such date, in violation of or in default under, any Law
or Order applicable to the Real Property, the Company or any of its Assets. In
furtherance and not limitation of the foregoing, neither the Sellers nor the
Company has violated any federal or state securities law in connection with the
offer, sale or purchase of any securities.
2.14 Benefit Plans; ERISA. All Benefit Plans relating to the Company
are listed in Section 2.14 of the Disclosure Schedule, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to Purchaser (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications, and IRS
determination letters). Except as disclosed in Section 2.14 of the Disclosure
Schedule:
2.14.1 each Benefit Plan, and the administration thereof,
complies, and has at all times complied, with the requirements of all applicable
Law, including ERISA and the Code, and each Benefit Plan intended to qualify
under section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such plan has at all times
since its adoption been tax-exempt under section 501(a) of the Code;
2.14.2 no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code;
2.14.3 no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
2.14.4 the "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA;
2.14.5 no "reportable event" (within the meaning of section
4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA affiliate since the effective date of said section 4043;
2.14.6 no Benefit Plan is a multiemployer plan within the
meaning of section 3(37) of ERISA;
2.14.7 Neither the Company nor any ERISA affiliate has
incurred any liability for any Tax imposed under section 4971 through 4980B of
the Code or civil liability under section 502(i) or (l) of ERISA;
2.14.8 no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
2.14.9 no Tax has been incurred under section 511 of the Code
with respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
2.14.10 no Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any
state laws requiring continuation of benefits coverage following termination of
employment;
2.14.11 no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) have been
brought or, to the knowledge of any Seller or the Company, threatened against or
with respect to any Benefit Plan and there are not facts or circumstances known
to any the Sellers or the Company that could reasonably be expected to give rise
to any such suit, action or other litigation; and
2.14.12 all contributions to Benefit Plans that were required
to be made under such Benefit Plans have been made, and all benefits accrued
under any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Section 2.14 of the Disclosure Schedule, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
2.15 Property.
2.15.1 Section 2.15.1 of the Disclosure Schedule contains a
true and correct list of (i) each parcel of real property owned (the "Owned Real
Property") by the Company, (ii) each parcel of real property leased or subleased
or otherwise occupied by the Company as tenant or subtenant (the "Leased Real
Property"; together with the Owned Real Property, the "Property") together with
a true and correct list of all such leases, subleases or other similar
agreements and any amendments, modifications or extensions thereto (the
"Property Leases"), and (iii) all Liens relating to or affecting any parcel of
Property, in each case identifying the owner, lessor and lessee thereof.
2.15.2 The Sellers or the Company have good and marketable
title to the Real Property and the Owned Real Property, free and clear of all
Liens, other than as specifically listed in Section 2.15.2 of the Disclosure
Schedule.
2.15.3 Subject to the terms of its leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment to the
Leased Real Property for the full term of the lease thereof. Each Property Lease
is a legal, valid and binding agreement, enforceable in accordance with its
terms, of the Company and of each other Person that is a party thereto, and
except as set forth in Section 2.15.3 of the Disclosure Schedule, there is no,
and neither the Sellers nor the Company, has knowledge of any, or has received
any, notice of any default (or any condition or event which, after notice or
lapse of time or both, would constitute a default) thereunder. The Company has
not assigned, sublet, transferred, hypothecated or otherwise disposed of its
interest in any Property Lease. No penalties are accrued and unpaid under any
Property Lease.
2.15.4 The Sellers shall deliver to Purchaser upon the
execution of this Agreement true and complete copies of all (i) title policies,
mortgages, deeds of trust, deeds, leases, easements, restrictive covenants,
certificates of occupancy, and similar documents, and all amendments thereto
concerning the Real Property and/or the Owned Real Property, and (ii) Property
Leases and all other documents referred to in clause (i) of this paragraph with
respect to the Leased Real Property.
2.15.5 Except as disclosed in Section 2.15.5 of the Disclosure
Schedule, the improvements on the Real Property and the Property are in good
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of each of the Sellers and of the
Company, there are no condemnation or appropriation proceedings pending or
threatened against Property or the improvements thereon.
2.15.6 Neither the Sellers nor the Company has any knowledge
of any claim, action or proceeding, actual or threatened, against the Company,
the Real Property or the Property by any Person which would materially affect
the future use, occupancy or value of the Real Property or the Property or any
part thereof.
2.16 Tangible Personal Property. The Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Financial Statements and tangible personal property acquired since June 30, 1999
other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement. All such
tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing
Date, is adequate and suitable for the conduct by the Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Company has interests in or uses
only the intellectual property described in Section 2.17 of the Disclosure
Schedule. The Company either has all right, title and interest in or a valid and
binding license to use such intellectual property. No other intellectual
property is used in or necessary to the conduct of the business of the Company.
All registrations, pending applications, registered rights and executed
agreements related to intellectual property are listed in Section 2.17 of the
Disclosure Schedule. Except as disclosed therein, (i) the Company has the right
to use the intellectual property described therein, (ii) all registrations on
behalf of the Company with and applications to Governmental or Regulatory
Authorities in respect of such intellectual property are valid and in full force
and effect and are not subject to the payment of any Taxes or maintenance fees
or the taking of any other actions by the Company to maintain their validity or
effectiveness, (iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no restrictions on
the direct or indirect transfer of any License, or any interest therein, held by
the Company in respect of such intellectual property, (v) the Sellers have
delivered, or have caused the Company to deliver, to Purchaser prior to the
execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets, (vii) neither the
Sellers nor the Company is, or has received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any License to use such intellectual property and (viii) neither the
Sellers nor the Company has any knowledge that such intellectual property is
being infringed by any other Person. To the knowledge of the Sellers and the
Company, the Company is not infringing any intellectual property of any Person,
and no litigation is pending and no claim has been made or, to the knowledge of
any the Sellers or of the Company, has been threatened to such effect.
2.18 Contracts.
2.18.1 Section 2.18.1 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts or other arrangements (true and
complete copies, or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company is a party or by which any of
its Assets is bound.
2.18.1.1 (A) all Contracts (excluding Benefit Plans)
providing for a commitment of employment or consultation services for a
specified or unspecified term, the name, position and rate of compensation of
each Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of the
Company to make payments (with or without notice, passage of time or both) to
any Person in connection with, or as a consequence of, the transactions
contemplated hereby or to any employee, other than with respect to salary or
incentive compensation payments in the ordinary course of business consistent
with past practice;
2.18.1.2 all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of the Company to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company or prohibiting or
limiting disclosure of confidential or proprietary information;
2.18.1.3 all partnership, joint venture,
shareholders' or other similar Contracts with any Person;
2.18.1.4 all Contracts relating to Indebtedness of
the Company;
2.18.1.5 all Contracts relating to the Real Property;
2.18.1.6 all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees;
2.18.1.7 all guarantees of any Indebtedness or other
obligations of the Company or any third Person;
2.18.1.8 all Contracts relating to the future
disposition or acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent with past practice
and the provisions of this Agreement;
2.18.1.9 all Contracts between or among the Company
and any of the Sellers, any current or former officer, director, stockholder or
Affiliate of the Company or of any such officer, director, stockholder or
Affiliate, on the other hand, other than Contracts disclosed pursuant to Section
2.18.1.8;
2.18.1.10 all collective bargaining or similar labor
Contracts;
2.18.1.11 all Contracts that (A) limit or contain
restrictions on the ability of the Company to declare or pay dividends on, to
make any other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer
to exist any Lien, to purchase or sell any Assets or to change the lines of
business, (B) require the Company to maintain specified financial ratios or
levels of net worth or other indicia of financial condition or (C) require the
Company to maintain insurance in certain amounts or with certain coverages; and
2.18.1.12 all other Contracts, including but not
limited to Contracts with customers, that involve the payment or potential
payment, pursuant to the terms of any such Contract, by or to the Company of
more than $10,000 and all powers of attorney and comparable delegations of
authority.
2.18.2 Each Contract required to be disclosed in Section
2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure
Schedule, neither the Company nor, to the knowledge of any the Sellers, any
other party to such Contract is, or has received notice that it is, in violation
or breach of or default under any such Contract (or with notice or lapse of time
or both, would be violation or breach of or default under any such Contract).
2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure
Schedule, the Company is not a party to or bound by any Contract that has been
or could reasonably be expected to be, individually or in the aggregate with any
other such Contracts, materially adverse to the business or condition of the
Company.
2.18.4 To the extent any of the guaranties for the benefit of
the Company or any of its Assets are not integrated with Contracts disclosed in
Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, or each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Sellers or the Company or any other
party to such guaranty is, or has received notice that it is, in violation or
breach of or default under any such guaranty (or with notice or lapse of time or
both, would be in violation or breach of default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of the Company, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Sellers or the Company have delivered to Purchaser true and complete copies
of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure
Schedule:
2.19.1 the Company owns or validly holds all Licenses that are
material to its respective business or operations;
2.19.2 each license listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect;
2.19.3 neither the Sellers nor the Company is, or has received
any notice that it is in default (or with the giving of notice of lapse of time
or both, would be in default) under any such License; and
2.19.4 the transactions contemplated in this Agreement will
not violate any such License or give any other party thereto rights to terminate
the License or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true
and complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or
affect or relate to the ownership, use or operation of any of the Assets of the
Company and that (i) have been issued to the Company, or (ii) have been issued
to any Person (other than the Company) for the benefit of the Company. Each
policy listed in Section 2.20 of the Disclosure Schedule is valid and binding
and in full force and effect, all premiums due thereunder have been paid when
due and neither the Sellers nor the Company or the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder, and the Company does not
know of any reason or state of facts that could lead to the cancellation of such
policies. Section 2.20 of the Disclosure Schedule contains a list of all claims
made under any insurance policies covering the Company since January 1, 1996.
Neither the Sellers nor the Company have received notice that any insurer under
any policy referred to in this Section is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause.
2.21 Affiliate Transactions. Except for the Shareholder Debt, (i) there
are no Liabilities between the Company and any current or former officer,
director, stockholder, Affiliate of the Company or any Affiliate of any such
officer, director, stockholder or Affiliate, and (ii) the Company does not
provide or cause to be provided any assets, services or facilities to any such
current or former officer, director, stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any
unfair labor practice. There is (i) no unfair labor practice complaint pending
or, to the knowledge of the Sellers or the Company, threatened against the
Company before the National Labor Relations Board or comparable or similar state
agency, and no grievance or arbitration proceeding arising out of under
collective bargaining agreements is so pending or, to the knowledge of the
Sellers or of the Company, threatened against the Company, (ii) no strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the
Company, threatened against the Company, and (iii) no union representation
question exists with respect to the employees of the Company or, to the
knowledge of the Sellers or the Company, no union organization activities are
taking place.
2.23 Environmental Matters.
2.23.1 The Company has obtained and holds all necessary
Environmental Permits, and all necessary Environmental Permits related to the
operations conducted on the Real Property have been obtained by the owner of the
Real Property.
2.23.2 Except as disclosed in Section 2.23.2 of the Disclosure
Schedule, to the best knowledge of the Sellers:
2.23.2.1 The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Sellers nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct they may be
held to be responsible received, any actual or threatened Order, notice, or
other communication from (A) any Governmental Body or private citizen acting in
the public interest, or (B) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the Company
or any other Person for whose conduct they are or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
2.23.2.2 There are no pending or, to the knowledge of
the Sellers or the Company, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting the Real Property or any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in which the Sellers or
the Company has or had an interest.
2.23.2.3 Neither the Sellers nor the Company has
knowledge of or any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held responsible received any citation,
directive, inquiry, notice, Order, summons, warning, or other communications
that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual,
or potential violation or failure to comply with any Environmental Law, or of
any Environmental, Health, and Safety Liabilities with respect to the Real
Property or any of the Facilities or any other Assets in which the Company had
an interest , or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
the Sellers, the Company, or any other Person for whose conduct it or they are
or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
2.23.2.4 Neither the Company nor any other Person for
whose conduct it may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Real Property or any Facilities or with
respect to any other Assets (whether real, personal, or mixed) in which the
Company (or any predecessor thereof), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such Assets.
2.23.3 There are no Hazardous Materials present on or in the
Environment at the Real Property or the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Company nor any other Person for whose conduct
it may be held responsible, or any other Person, has permitted or conducted, or
is aware of, any Hazardous Activity conducted with respect to the Real Property
or the Facilities or any other properties or assets (whether real, personal, or
mixed) in which the Sellers or the Company has or had an interest except in full
compliance with all applicable Environmental Laws.
2.23.4 There has been no Release or, to the knowledge of the
Sellers or of the Company, any threat of Release of any Hazardous Materials at
or from the Facilities or at any other locations where any Hazardous Materials
were generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which the Company has or had an
interest, or any geologically or hydrologically adjoining property.
2.23.5 The Sellers have delivered to Purchaser true and
complete copies and results of any reports, studies, analyses, tests, and
monitoring possessed or initiated by the Sellers or the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Real Property
or the Facilities, or concerning compliance by the Sellers, the Company or any
other Person for whose conduct it or they are or may be held responsible, with
Environmental Laws.
2.23.6 There are no Liens arising under or pursuant to any
Environmental Law on the Real Property or any Owned Real Property or Leased Real
Property and there are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions that could reasonably be expected to restrict, encumber, or
result in the imposition of special conditions under any Environmental Law with
respect to the ownership, occupancy, development, use, or transferability of any
Property.
2.23.7 There are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos
containing material, at the Real property or any Property.
2.23.8 There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Sellers or the Company with respect to any
Asset of, or property that is adjacent to an Asset of the Company which have not
been delivered to Purchaser prior to execution of this Agreement.
2.24 Substantial Customers and Suppliers. Section 2.24.1 of the
Disclosure Schedule lists the ten (10) largest customers of the Company on the
basis of revenues for goods sold or services provided for the twelve month
period ending June 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the
ten (10) largest suppliers of the Company on the basis of cost of goods or
services purchased during the twelve month period ending June 30, 1999. Except
as disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of
the Sellers and the Company, no such customer or supplier is insolvent or
threatened with bankruptcy or insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Financial Statements for the period ended
December 31, 1998, and all accounts and notes receivable arising subsequent to
such date, (i) arose from bona fide sales transactions in the ordinary course of
business consistent with past practice and are payable on ordinary trade terms,
(ii) are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangements, and (v) are not subject of any Actions
or Proceedings brought by or on behalf of the Company. Section 2.25 of the
Disclosure Schedule sets forth (x) a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company and (y) all jurisdictions in which the records relating to accounts
and notes receivable are located.
2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company,
nor any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers or the Company or any such Affiliate) have entered into
any agreement or had any discussions with any third party regarding any
transaction involving the Company which could result in the Company, the
Purchaser or its stockholders, or any officer, director, employee, agent or
Affiliate of any of them, being subject to any claim for liability to said third
party as a result of entering into this Agreement or consummating the
transactions contemplated hereby or thereby. No agent, broker, finder,
investment banker, financial advisor or other Person will be entitled to any
fee, commission or other compensation in connection with the transactions
contemplated by this Agreement on the basis of any act or statement made by the
Sellers, the Company or any of their respective Affiliates, or any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of the Sellers, the Company, or any such Affiliate.
2.27 Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. The Company is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure
Schedule sets forth (a) a list of the names and locations of all banks,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; and (b) a true and complete list and description of each
such account, box and relationship, indicating in each case the account number
and the names of all persons having signatory power and respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act. Neither any the Sellers, nor the Company nor
any Person authorized to act on behalf of any of the foregoing has, in
connection with the offering of the Purchased Stock, engaged in (i) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 501(c) under the Securities Act), (ii) any action involving a
public offering within the meaning of section 4(2) of the Securities Act, or
(iii) any action that would require the registration under the Securities Act of
the offering and sale of the Purchased Stock pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
the Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best knowledge, represents and warrants to the
Sellers as follows:
3.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Purchaser is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing which,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the validity or enforceability of this Agreement or
on the ability of Purchaser to perform its obligations hereunder or thereunder.
3.2 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby, do
not and will not:
3.3.1 conflict or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
3.3.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in Section 3.4 of
the Disclosure Schedule, if any, conflict with or result in a violation or
breach of any term or provision of any Law or Order applicable to Purchaser or
its Assets and Properties; or
3.3.3 except as disclosed in Section 3.3.3 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under, or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which Purchaser is a party, or by which it is bound.
3.4 Governmental Approvals and Filings. Except as disclosed in Section
3.4 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of this
Agreement to which it is a party or the consummation of the transactions
contemplated herein.
3.5 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.6 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.7 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.8 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Sellers may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, nonetheless, shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE IV
4 COVENANTS BY THE SELLERS AND PURCHASER
4.1 Regulatory and Other Approvals. The Sellers and Purchaser shall,
and the Sellers shall cause the Company to, (a) take all necessary or desirable
steps and proceed diligently and in good faith and use its diligent efforts, as
promptly as practicable, to obtain all consents, approvals or actions of, to
make all filings with and to give all notices to, Governmental or Regulatory
Authorities or any other Person required to consummate the transactions
contemplated hereby and those described in Sections 2.5 and 2.6 of the
Disclosure Schedule, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Purchaser or
such Governmental or Regulatory Authorities or other Persons may reasonably
request and (c) cooperate with Purchaser as promptly as practicable in obtaining
all consents, approvals or actions of, making all filings with and giving all
notices to, Governmental or Regulatory Authorities or other Persons required of
Purchaser to consummate the transactions contemplated hereby. The Sellers will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
4.2 Investigation by Purchaser.
4.2.1 From the date of this Agreement until the date on which
either Party provides the other Party with written notice that this Agreement is
terminated (the "Termination Date"), or until the Closing, whichever is earlier,
the Sellers will afford Purchaser's agents, employees, representatives and
accountants, and their representatives, access to the contracts, books and
records, and all other documents and data of the Company. Purchaser acknowledges
that certain of the books and records are highly confidential and their
disclosure will not be made except as provided herein due to the Sellers'
confidentiality and proprietary concerns.
4.3 Accounts Receivable.
4.3.1 At the Closing, the Company shall assign to the Sellers,
without recourse, all accounts receivable (including all accounts receivable
that have been written off as being uncollectible) of the Company which are more
than ninety (90) days old on the Closing Date.
4.3.2 Sellers agree to indemnify and hold harmless the
Purchaser from and against any losses resulting from the failure of the Company
to collect any account receivable which was taken into account as an asset in
determining the Adjusted Net Worth and not otherwise assigned to Sellers
pursuant to Section 4.3.1 hereof (hereinafter a "Warranted Receivable"). In the
event the Company shall fail to collect any Warranted Receivable within ninety
(90) days after the Closing Date ("Collection Period"), Purchaser shall have the
right to exchange for the assignment to the Sellers, without recourse, of unpaid
Warranted Receivables having an aggregate face amount equal to the amount paid
to Purchaser by Sellers under this indemnity.
4.3.3 Purchaser covenants and agrees that from and after the
Closing it will cause the Company to exercise prompt and diligent efforts in
good faith to collect all accounts receivable of the Company in existence
immediately before the Closing, provided, however, that neither Purchaser nor
the Company shall be required to initiate legal proceedings to collect any such
account. The Company will use reasonably diligent efforts to assist Sellers to
collect any such accounts transferred to them by the Company, and Sellers shall
reimburse the Company for any out of pocket costs it shall incur incident to
such efforts. In the event the Company shall collect in whole or in part any
such account which has been transferred to the Sellers, the Company will
transfer the amount collected to the Sellers within ten (10) days following
receipt thereof by the Company.
ARTICLE V
5 CLOSING CONDITIONS
5.1 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock and the Real Property are
subject to the fulfillment, at or prior to the Closing, of the following
conditions precedent (any or all of which may be waived in whole or in part by
Purchaser in its sole discretion):
5.1.1 Representations and Warranties. Each of the
representations and warranties made by the Sellers in this Agreement shall,
unless waived, be true and correct in all material respects as of the date of
this Agreement and on and as of the Closing Date as though each such
representation and warranty was made on and as of the Closing Date.
5.1.2 Performance. The Sellers shall have performed and
complied with, unless waived, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by them at or before the
Closing.
5.1.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to Purchaser.
5.1.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
be in form and substance reasonably satisfactory to Purchaser, (iii) shall not
impose any limitations or restrictions on Purchaser, (iv) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived, and
(v) shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation for the transactions contemplated by this Agreement shall
have occurred.
5.1.5 Third Party Consents. Any consents (or waivers)
identified in Section 2.5 of the Disclosure Schedule, and all other consents (or
waivers) to the performance by the Purchaser of its obligations under this
Agreement, or to the consummation for the transactions contemplated hereby as
are required under any Contract or License to which the Purchaser is a party or
by which any of its Assets are bound and where the failure to obtain any such
consent (or in lieu thereof waiver) could reasonably be expected, individually
or in the aggregate with other such failures, to materially adversely affect the
Purchaser or the business or condition of the Company or otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to the Purchaser in its sole discretion, (i) shall have been obtained,
(ii) shall be in form and substance satisfactory to the Purchaser in its sole
discretion, (iii) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (iv) shall be in full force and effect.
5.1.6 Purchaser's Investigation. Purchaser shall not have
discovered, as a result of its investigation and review pursuant to Section 4.2
hereof, any condition (financial or otherwise) relating in any way to the Real
Property, the Company, its Assets, business or prospects, that convinces
Purchaser, in its sole discretion, that it is not advisable to complete the
Closing.
5.1.7 Sellers' Certificates. The Sellers shall have delivered
to Purchaser (i) certificates, dated the Closing Date and executed by an
executive officer of the Company, substantially in the form and to the effect of
Exhibit B-1 hereto and (ii) certificates, dated the Closing Date and executed by
the chief financial officer of the Company, substantially in the form of Exhibit
B-2 hereto.
5.1.8 Resignations of Officers and Directors. The Sellers
shall have delivered to Purchaser the resignations of all current officers and
directors of the Company, effective as of the Closing Date.
5.1.9 Opinion of Counsel. Purchaser shall have received the
opinions of Ferruzzo & Ferruzzo, counsel to the Company and Xxxx X. Xxxxxx, as
Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust, u/d/t October 19,
1990, and Xxxxxx, Lassleben & Xxxxxx, LLP counsel to Xxxxxx X. Xxxxxx in
connection with this Agreement, dated the Closing Date, substantially in the
form and to the effect of Exhibit C hereto, and to such further effect as
Purchaser may reasonably request.
5.1.10 Disclosure Schedule. The Sellers shall have delivered
to Purchaser a copy of the Disclosure Schedule, updated and current through the
Closing Date.
5.1.11 Good Standing Certificates. The Sellers shall have
delivered to Purchaser (i) copies of the certificate or articles of
incorporation (or other comparable corporate charter documents), including all
amendments thereto of the Company certified by the applicable Secretary of State
or other appropriate governmental official, (ii) certificates from the
applicable Secretary of State or other appropriate governmental official to the
effect that the Company is in good standing in such jurisdiction, listing all
charter documents of the Company on file and attesting to its payment of all
franchise or similar Taxes, and (iii) certificates from the Secretary of State
or other appropriate official in each jurisdiction in which the Company is
qualified or admitted to do business to the effect that the Company is duly
qualified or admitted in good standing in such jurisdiction.
5.1.12 Receipt of Purchased Stock. Certificates representing
the Purchased Stock shall have been transferred to Purchaser in accordance with
the terms of this Agreement.
5.1.13 Receipt of Grant Deed. The Sellers shall present the
Purchaser with a Grant Deed, with all transfer stamps affixed thereon, conveying
the Real Property, with all improvements situated thereon, to the Purchaser,
free and clear of all liens and encumbrances except for those approved by
Purchaser referred to as Permitted Exceptions in accordance with the terms of
this Agreement.
5.1.14 No Adverse Change. There shall have occurred no
material adverse change in the business or financial condition of the Company
between June 30, 1999 and the Closing Date.
5.2 Conditions to the Obligations of the Sellers. The obligations of
the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject
to the fulfillment, at or prior to the Closing, of the following conditions
precedent (any or all of which may be waived in whole or in part by the Sellers
in theirs sole discretion):
5.2.1 Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and on and
as of the Closing Date as though each such representation and warranty was made
on and as of the Closing Date.
5.2.2 Performance. Purchaser shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or before
the Closing.
5.2.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Orders or Laws restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
5.2.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
not be subject to the satisfaction or any condition that has not been satisfied
or waived, and (iii) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have occurred.
5.2.5 Officers' Certificates. Purchaser shall have delivered
to the Sellers a certificate, dated the Closing Date and executed by the
president or vice-president or other officer of Purchaser, substantially in the
form and to the effect of Exhibit D hereto.
5.2.6 Opinion of Counsel. The Sellers shall have received the
opinion of Xxxxx X. Xxxxxxx, Esquire, counsel of the Purchaser in connection
with this Agreement, dated the Closing Date, substantially in the form and to
the effect of Exhibit E hereto.
ARTICLE VI
6 TERMINATION
6.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
6.1.1 by Purchaser or the Sellers for their respective
convenience;
6.1.2 by Purchaser or by the Sellers if a material breach of
any provision of this Agreement has been committed by the other party and such
breach has not been waived;
6.1.3 (i) by Purchaser if any of the conditions in Section 5.1
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Purchaser
to comply with its obligations under this Agreement) and Purchaser has not
waived such condition on or before the Closing Date, or (ii) by the Sellers, if
any of the conditions in Section 5.2 has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or becomes impossible (other than
through the failure of the Sellers to comply with his obligations under this
Agreement) and the Sellers has not waived such condition on or before the
Closing Date;
6.1.4 by mutual consent of Purchaser and the Sellers; or
6.1.5 by Purchaser or by the Sellers if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before October 26, 1999, or such later date as the parties may agree upon.
6.2 Effect of Termination. Each party's right of termination under
Section 6.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 6.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article
X will survive; provided, however, that if this Agreement is terminated by a
party because of a breach of the Agreement by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies (including specific performance) will survive such
termination unimpaired.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Company, the Purchaser
and their respective stockholders and the officers, directors, employees, agents
and Affiliates of each of them in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of the Sellers
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.1.2 Purchaser will indemnify the Sellers in respect of, and
hold them harmless from and against, any and all Losses suffered, incurred or
sustained by him or to which he becomes subject, resulting from, arising out of
or relating to any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.1 will be asserted and resolved as follows:
7.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by
such Indemnified Party of written notice of the Third Party Claim; provided,
that failure to give such Claim Notice shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure.
7.2.2 If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, but shall continue to
pay for any expenses of investigation or any Loss suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. If (i) the
Indemnifying Party shall not assume the defense of a Third Party claim with
counsel satisfactory to the Indemnified Party within five Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnifying Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnified Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) if the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party, and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation or any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damage and such monetary damages are paid in
full by the Indemnifying Party.
7.2.3 In the event any Indemnified Party should have a claim
under Section 7.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to
the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within thirty (30) days, such dispute shall be resolved as provided in Article X
hereof.
7.2.4 Any payment made by the Indemnifying Party to the
Indemnified Party in respect to any Third Party Claim or other claim shall be
net of any insurance proceeds realized by and paid to the Indemnified Party in
respect to such claims. The Indemnified Party shall make insurance claims
relating to any claim for which it is seeking Indemnification pursuant to this
Article VII. In computing the amount of indemnification due to the Indemnifying
Party there shall be deducted therefrom an amount equal to the net actual income
tax savings, if any, demonstrably resulting to the Indemnified Party from the
income tax deduction or deferral, if any, to the which the Indemnified Party
becomes entitled as a consequence of any loss, claim, damage, liability, cost,
expenses or deficiency giving rise to indemnification.
7.2.5 All claims for indemnification must be asserted within
eighteen (18) months of the Closing Date except for tax liability under Section
7.3 which shall be made prior to the termination of the Statute of Limitations
for tax claims and for claims under sections 2.1, 2.2, 2.3 and 2.11 which may be
made at any time.
7.2.6 Notwithstanding the foregoing, the maximum amount of
indemnification collectively payable by the Sellers arising under Article VII
hereof in no event shall exceed three hundred thousand dollars ($300,000),
except for claims arising from fraud or intentional misrepresentation where the
maximum amount of indemnification shall be the Purchase Price for the Purchased
Shares. Moreover, the Purchaser shall not be entitled to receive indemnification
for any matter (except for taxes under section 7.3) unless and until the
aggregate of the claims for such indemnification asserted pursuant to Section
7.1 exceeds Fifty Thousand Dollars ($50,000), in such event the Sellers shall be
liable for the entire amount asserted, including the first Fifty Thousand
Dollars ($50,000).
7.3 Allocation of Tax Liability.
7.3.1 In the case of Taxes with respect to or payable by the
Company with respect to a period that includes but does not end on the Closing
Date, the allocation of such Taxes between the Pre-Closing Period and the
Post-Closing Period shall be made on the basis of an interim closing of the
books of the Company as of the close of business on the Closing Date. In the
case of (i) franchise Taxes based on capitalization, debt or shares of stock
authorized, issued or outstanding and (ii) ad valorem Taxes, in either situation
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of days in such taxable period ending on
and including the Closing Date and the denominator of which is the entire number
of days in such taxable period; provided, that if any Company Asset is sold or
otherwise transferred prior to the Closing Date, then ad valorem Taxes
pertaining to such property, asset or other right shall be attributed entirely
to the Pre-Closing Period.
7.3.2 Except to the extent a reserve for Taxes is reflected on
the Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the Company is liable
with respect to any periods ending on or before the Closing Date; provided, that
in the case of any adjustment to any item of loss or expense for any such years,
which gives rise to corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually realized by the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers's obligations shall be limited to
the amount of interest (computed at the appropriate statutory rates) and
penalties actually paid to the appropriate taxing authorities by the Company as
a result of such timing differences in the case of audit adjustments, or at a
rate of eight percent (8%) per annum in the case of other adjustments, (ii)
without duplication (subject to the same proviso), all Taxes arising out of a
breach of the representations, warranties or covenants contained herein, (iii)
any Tax liability resulting from any ongoing state audits that exceed, in the
aggregate, any reserve therefore set forth on the Financial Statements, and (iv)
any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified
hereunder.
7.3.3 From and after the Closing Date, Purchaser shall cause
the Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.4 Tax Contests.
7.4.1 If any Taxing Authority or other Person asserts a Tax
Claim, then the party hereto first receiving notice of such Tax Claim shall
promptly provide written notice thereof to the other parties hereto. Such notice
shall specify in reasonable detail the basis for such Tax Claim and shall
include a copy of any relevant correspondence received from the Taxing Authority
or other Person.
7.4.2 If, within 30 calendar days after any the Sellers
receives or delivers, as the case may be, notice of a Tax Claim, the Sellers
provide to the Purchaser an Election Notice, then subject to the provisions of
this Section 7.4, the Sellers shall defend or prosecute, at their sole cost,
expense and risk, such Tax Claim by all appropriate proceedings, which
proceedings shall defended or prosecuted diligently by the Sellers to a Final
Determination; provided, that the Sellers shall not, without the prior written
consent of the Company, enter into any compromise or settlement of such Tax
Claim that would result in any Tax detriment to the Company. So long as the
Sellers are defending or prosecuting a Tax Claim, with respect to the Company,
the Company shall provide or cause to be provided to the Sellers any information
reasonably requested by the Sellers relating to such Tax Claim, and shall
otherwise cooperate with the Sellers and their representatives in good faith in
order to contest effectively such Tax Claim. The Sellers shall inform the
Company of all developments and events relating to such Tax Claim (including,
without limitation, providing to the Company copies of all written materials
relating to such Tax Claim) and the Company or its authorized representatives
shall be entitled, at the expense of the Company, to attend, but not to
participate in or control, all conferences, meetings and proceedings relating to
such Tax Claim.
7.4.3 If, with respect to any Tax Claim, the Sellers fails to
deliver an Election Notice to the Company within the period provided in Section
7.4.2 or, after delivery of such Election Notice to the Company, the Sellers
fail diligently to defend or prosecute such Tax Claim to a Final Determination,
then the Company shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and risk of the
Sellers, such Tax Claim. The Company shall have full control of such defense or
prosecution and such proceedings, including any settlement or compromise
thereof. If requested by the Company, the Sellers shall cooperate in good faith
with the Company and its authorized representatives in order to contest
effectively such Tax Claim. The Sellers may attend, but not participate in or
control, any defense, prosecution, settlement or compromise of any Tax Claim
controlled by the Company pursuant to this Section 7.4.3, and shall bear their
own costs and expenses with respect thereto. In the case of any Tax Claim that
is defended or prosecuted by the Company pursuant to this Section 7.4.3, the
Company shall, from time to time, be entitled to receive current payments from
the Sellers with respect to costs and expenses incurred by the Company in
connection with such defense or prosecution (including, without limitation,
reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as
a result of receiving a payment from the Sellers pursuant to this Section 7.4)
(collectively "Associated Costs").
7.4.4 In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4,
the Sellers shall pay to the appropriate Tax Indemnitees, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim within five Business Days after such Final Determination. In the case of
any Tax Claim that is defended or prosecuted to a Final Determination by the
Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the
appropriate Tax Indemnitee, in immediately available funds, the full amount of
any Tax arising or resulting from such Tax Claim, together with any Associated
Costs that have not theretofore been paid by the Sellers to the Company, within
five Business Days after such Final Determination. In the case of any Tax Claim
not covered by the two preceding sentences, the Sellers shall pay to the
Company, in immediately available funds, the full amount of any Tax arising or
resulting from such Tax Claim (calculated after taking into account any actual
reduction in the current liability for Taxes of such Tax Indemnitee for Tax
arising out of or resulting from such payment or such Tax Claim), together with
any Associated Costs that have not theretofore been paid by the Sellers to the
Company, at least five Business Days before the date payment of such Tax is due
from any Tax Indemnitee.
7.4.5 Notwithstanding anything contained in this Article VII
to the contrary, the rights of the Sellers under this Section 7.4 to defend or
prosecute, or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.5 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules, workpapers and relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.6 Payment of Transfer Taxes and Fees. The Sellers shall pay all
sales, use, transfer, stamp, documentary or similar Taxes imposed upon or
arising out of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the
Company and their Affiliates with respect to such Taxes. The Sellers shall file
all necessary documentation and Tax Returns with respect to such Taxes and
provide to Purchaser copies of all such Tax Returns.
7.7 Other Tax Covenants.
7.7.1 Without the prior written consent of Purchaser, neither
the Sellers nor any Affiliate of any the Sellers shall, to the extent it may
affect or relate to the Company, make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
7.7.2 Without the prior written consent of the Sellers,
neither the Purchaser nor the Company shall, to the extent it may affect or
relate to the Company, make or change any tax election, file any amended Tax
Return, enter into any closing Agreement, settle any Tax claim, assessment or
proposed assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would affect a Pre-Closing Tax Period, unless required by applicable
law.
7.7.3 So long as any books, records and files retained by the
Sellers or and his Affiliates relating to the business of the Company or the
books, records and files delivered to the control of the Purchaser pursuant to
this Agreement to the extent they relate to the operations of the Company prior
to the Closing Date, remain in existence and are available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any time during business hours for any proper purpose. The
Purchaser and the Sellers and their respective Affiliates shall use reasonable
efforts not to destroy or allow the destruction of any such books, records and
files without first providing 60 days= written notice of intention to destroy to
the other, and allowing such other party to take possession of such records.
7.8 Conflict. In the event of a conflict between the provisions of
Sections 7.3 through 7.7 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
8 DEFINITIONS
8.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly owning, owned by, controlling, controlled by or
under common control with, that Person, (b) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person.
"Agreement" means this Purchase Agreement, the Exhibits and
the Disclosure Schedule and the certificates delivered in connection herewith,
as the same may be amended from time to time in accordance with the terms
hereof.
"Assets" of any Person means all assets and properties of
every kind, nature, character and description, including, but not limited to,
the Real Property, goodwill and other tangibles, operated, owned or leased by
such Person, including cash and cash equivalents, investments, accounts and
notes receivable, chattel paper, documents, instruments, real estate, equipment,
inventory, goods and intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.4.3.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time been made
by the Company or under which any employee, former employee or director of the
Company or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Claim Notice" means written notification pursuant to Section
7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought
by an Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them
in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital
of this Agreement (and shall include all predecessors and subsidiaries of the
Company).
"Contract" means any agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of the Company and the Sellers, and the schedules
delivered by or on behalf of Purchaser, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the
Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge
their indemnity obligation under this Agreement with respect to such Tax Claim
and (ii) the Sellers elect to contest, and to control the defense or prosecution
of, such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater,
drinking water supply, stream sediments, or land, including soil, land surface
or subsurface strata, all fish, wildlife, biota and all other environmental
medium or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law and consisting of or relating to (i) any
environmental, health or safety matters or conditions (including on-site or
off-site contamination, occupational safety and health, and regulation of
chemical substances or products); (ii) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law; (iii) financial responsibility under
Environmental Law for clean-up costs or corrective action, including any
investigation, clean-up, removal, containment, or other remediation or response
actions required by Environmental Law (whether or not such clean-up has been
required or requested by any governmental body or any other Person) and for any
natural resource damages; or (iv) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law. The terms
"removal," "remedial," and "response action" include the types of activities
covered by the United States Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. Section 9601 et seq., as amended (CERCLA).
"Environmental Law" means all federal, state, local and
foreign environmental, health and safety laws, common law orders, decrees,
judgments, codes and ordinances and all rules and regulations promulgated
thereunder, civil or criminal, including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consent or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by the Company.
"Final Determination" means (i) a decision, judgment, decree
or other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" has the meaning ascribed to it in
Section 2.8.
"GAAP" means generally accepted accounting principles of the
United States, consistently applied.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Hazardous Activity" means the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"Hazardous Material" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (ii) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (iii) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases, (v) long term debt and (vi) in the nature
of guarantees of the obligations described in clauses (i) through (v) above of
any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to
Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in
Section 2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses, including without limitation, interest,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include all fees and expenses, such as fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Owned Real Property" has the meaning ascribed to it in
Section 2.15.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion
thereof beginning after the Closing Date. If a taxable period begins on or
before the Closing Date and ends after the Closing Date, then the portion of the
taxable period that begins on the day following the Closing Date shall
constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion
thereof that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section
1.2.
"Purchased Stock" has the meaning ascribed to it on the first
page of this Agreement.
"Purchaser" has the meaning ascribed to it in the first
paragraph of this Agreement.
"Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in
Section 2.15.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them
on the first page of this Agreement.
"Subsidiary" means any Person in which another Person,
directly or indirectly through Subsidiaries or otherwise, beneficially owns at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof. Unless the
context otherwise requires a different interpretation, references to a
"Subsidiary" mean a Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, the Company and other
Indemnified Parties specified in Section 7.1 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
7.2.
8.2 Interpretation of Agreement.
8.2.1 Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the word "including" does
not imply any limitation to the item or matter mentioned; and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
8.2.2 When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person or any similar phrase, means the
actual knowledge of such Person or the actual knowledge of Xx. Xxxxxx Xxxxxxx,
General Manager of the Company and/or Xx. Xxxxx Xxxxxx, Plant Manager of the
Company.
ARTICLE IX
9 MISCELLANEOUS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or mailed by prepaid first class certified mail, return receipt
requested, or sent by prepaid courier, to the parties at the following
addresses:
If to Purchaser, to:
ISG Resources, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
Xxxx X. Xxxxxx Copy To: Xxxxxx X. Xxxxxxxx, Esq.
#1 Sea Cove Xxxx Xxxxxxxx & Xxxxxxxx
Xxxxxxx Xxxxx, XX 00000 0000 Xxxxx Xxxxxxxx
Xxxxx Xxx, XX 00000
Xxxxxx X. Xxxxxx Copy To: Xxxxxx X. Xxxxxx, Esq.
0000 Xx Xxxxxx Xxxxxxx, Xxxxxxxxx & Xxxxxx, XXX
Xxxxxxxx, XX 00000 00000 Xxxx Xxxx Xxxxxx
Xxxxx 000, Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, the Sellers will pay all
expenses relating hereto of the Company incurred in respect of the period prior
to the Closing.
9.4 Confidentiality. Purchaser and the Sellers will hold in strict
confidence from any Person (other than its Affiliates or representatives) all
documents and information concerning the other party hereto or any of its
Affiliates furnished to it by or on behalf of the other party in connection with
this Agreement or the transactions contemplated hereby, except to the extent the
disclosing party can demonstrate that such documents or information was (a)
previously known by the party receiving such documents or information, (b) in
the public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential. Such covenant of
confidentiality will remain in effect unless a party is compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental or Regulatory Authorities) or by other requirements of Law.
9.5 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.1, such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
9.6 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Purchaser or the Sellers shall execute and
deliver to the other party such other documents and instruments, provide such
materials and information and take such other actions as the other party may
reasonably request to consummate the transactions contemplated by this
Agreement.
9.7 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.8 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.9 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
California.
9.14 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
Operative Agreement.
9.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.16 Disclosure Schedule. The Disclosure in the Disclosure Schedule
must relate to the representations and warranties in the Section of the
Agreement to which they expressly relate except to the extent that the relevance
to such other representations and warranties is manifest on the face of the
Disclosure Schedule.
ARTICLE X
10 MEDIATION
In the event there is a dispute under this Agreement, the disagreeing
parties shall meet with one another and diligently attempt to resolve their
disagreements. If they are unable to do so, then upon request of either party to
the dispute made within twenty (20) days of the failure of negotiations, they
will mediate the dispute, utilizing an impartial mediator pursuant to the rules
of the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the mediation
is not successful, or if no mediation has been elected, then any party to the
dispute may file a legal action in any court of competent jurisdiction to
resolve the dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
____________________
By:_________________
Its:________________
SELLERS
XXXX X. XXXXXX, AS TRUSTEE OF THE XXXX XXXXX XXXXXX
REVOCABLE INTERVIVOS TRUST, u/d/t OCTOBER 19, 1990
_______________
Xxxx X. Xxxxxx
As Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos
Trust, u/d/t October 19, 1990
XXXXXX X. XXXXXX,
AS TRUSTEE OF THE XXXXXXX TRUST
____________________
Xxxxxx X. Xxxxxx
As Trustee of the Xxxxxxx Trust
Exhibit A
Description of Real Property
See attached.
Exhibit B
Sellers' Certificate
Exhibit B-1
Sellers' Officers' Certificate
I, the undersigned, the President of Xxxxx X. Xxxxxxx, Inc. and United
Terrazzo Supply Co., Inc. (collectively the "Company"), both California
corporations,, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to
Section 5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement")
between Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable
Intervivos Trust, u/d/t October 19, 1990, and Xxxxxx X. Xxxxxx, as Trustee of
the Xxxxxxx Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation
("Buyer"). Unless otherwise indicated herein, capitalized terms used in this
Certificate shall have the same meanings given to them in the Agreement.
2. Attached hereto as Exhibit B-1-a is a correct and complete copy of
the Articles of Incorporation of the Company, as in effect on the date hereof.
3. Attached hereto as Exhibit B-1-b is a correct and complete copy of
the By-Laws of the Company, as in effect on the date hereof.
4. Attached hereto as Exhibit B-1-c is a correct and complete copy of
the Certificates of Good Standing of the Company, as in effect on the date
hereof.
5. Attached hereto as Exhibit B-1-d is a schedule of persons that have
been duly elected (or appointed) or qualified, and/or that have acted, as
officers of the Company (to and including the date hereof), each holding the
respective offices set forth opposite their names; and the signatures set forth
on Exhibit B-1-d opposite their names are the genuine signatures of such
officers executing the Agreement and any other agreements or documents on behalf
of the Company in connection with the Closing under the Agreement.
6. Each of the representations and warranties made by the Sellers in
the Agreement are true and correct in all material respects as of the date of
the Agreement, and there has occurred no material adverse change in the business
or financial condition of the Company between June 30, 1999 and the Closing
Date.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
_____________________________
By: Xxxx X. Xxxxxx, President
Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc.
EXHIBIT B-1-d
Name Title Signature
Xxxx X. Xxxxxx President, ____________
CFO and Director
Xxxxxx X. Xxxxxx Vice President ____________
and Director
Xxxxxxxx Xxxxxx Roman Secretary ____________
and Director
Exhibit B
Sellers' Certificate
Exhibit B-2
Chief Financial Officer's Certificate
I, the undersigned, the Chief Financial Officer of Xxxxx X. Xxxxxxx,
Inc. and United Terrazzo Supply Co., Inc. (collectively the "Company"), both
California corporations, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between
Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos
Trust, u/d/t October 19, 1990 and Xxxxxx X. Xxxxxx, as Trustee of the Xxxxxxx
Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer").
Unless otherwise indicated herein, capitalized terms used in this Certificate
shall have the same meanings given to them in the Agreement.
2. I am familiar with the Company's finances and capitalization.
3. The Company has provided the Purchaser with the Financial Statements as
provided in the Agreement.
4. The Financial Statements accurately present the Company's financial condition
and the results of operations, changes in stockholders' equity and cash flow of
the Company as of and through the respective dates and periods therein
delineated, and the results of the Company's operations and changes in financial
position for the periods then ended, and have been prepared in accordance with
GAAP, applied on a consistent basis.
5. As of the Closing Date, no material adverse change in the financial condition
or operations of the Company will have occurred from that shown on the Financial
Statements.
6. The authorized capital structure of Xxxxx X. Xxxxxxx, Inc. consists of 25,000
shares of voting common stock with a par value of $1.00 per share of which
12,296 shares are issued and outstanding. Xxxx Xxxxx Xxxxxx, as Trustee of the
Xxxx Xxxxx Xxxxxx Revocable Intervivos Trust, u/d/t October 19, 1990 owns 6,764
shares of Xxxxx X. Xxxxxxx, Inc. and Xxxxxx X. Xxxxxx, Trustee of the Xxxxxxx
Trust owns 5,532 shares of Xxxxx X. Xxxxxxx, Inc. The authorized capital
structure of United Terrazzo Supply Co., Inc. consists of 800 shares of voting
common stock with a par value of $250 per share of which 16 shares are issued
and outstanding. Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx
Revocable Intervivos Trust, u/d/t October 19, 1990 owns 8 shares of United
Terrazzo Supply Co., Inc. and Xxxxxx X. Xxxxxx, Trustee of the Xxxxxxx Trust
owns 8 shares of United Terrazzo Supply Co., Inc.
7. There are no outstanding options, warrants, calls, subscriptions,
commitments, agreements or other rights to purchase or dispose of Company common
stock or other securities which are, or may at any time be, convertible into
stock or other securities in the Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
_________________________
By: Xxxx X. Xxxxxx, CFO
Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc.
Exhibit C
Sellers' Counsel's Opinion
Opinion of Counsel to Sellers
On Ferruzzo & Ferruzzo Leterhead
March 27, 2000
Xxxxx X. Xxxxxxx, Esq.
Sr. Vice President and General Counsel
ISG Resources, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Re: The Purchase of the Capital Stock of Xxxxx X. Xxxxxxx, Inc. and
United Terrazzo Supply, Inc. by ISG Resources, Inc.
Dear Xx. Xxxxxxx:
We have acted as counsel to Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx
Xxxxxx Revocable Intervivos Trust, u/d/t October 19, 1990 (sometimes referred to
herein as "Seller"), Xxxxx X. Xxxxxxx, Inc., and United Terrazzo Supply Co.,
Inc., both California corporations, in connection with the Purchase Agreement
dated October 26, 1999 (the "Agreement") between the Seller, Xxxxxx X. Xxxxxx,
as Trustee of the Xxxxxxx Trust, and ISG Resources, Inc., a Utah corporation
("Buyer"). This is the opinion contemplated by Section 5.1.9 of the Agreement.
All capitalized terms used in this opinion without definition have the
respective meanings given to them in the Agreement or the Accord referred to
below.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord; and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United Sates and the Law of the State of
California.
We note that various issues concerning the Xxxxxxx Trust are addressed in the
opinion of Xxxxxx X. Xxxxxx, Esq., of the Law Firm of Xxxxxx, Lassleben &
Xxxxxx, LLP, attached hereto, and we express no opinion with respect to those
matters.
The opinions hereafter expressed are subject to the following further
qualifications and exceptions:
1. Stock Certificate Nos. 5 and 7 of United Terrazzo Supply Co., Inc. were
issued to X. Xxxxxxxxx and Sons. Stock Certificate No. 5 was redeemed by
the Corporation on November 1, 1964. Stock Certificate No. 7 was issued on
October 26, 1962, and also redeemed by the Corporation on November 1, 1964.
We are unable to trace any authorized issue beyond the initial 12 shares
and, therefore, offer no opinion relating to the issuance of the shares
reflected by Stock Certificate Nos. 5 and 7.
2. Shares issued to Xxxx X. Xxxxxx are reflected by Certificate Nos. 6 and 8.
The original certificates are in the stock book but are not endorsed back
over to the Corporation. As such, we offer no opinion as to the owner of
those shares.
Based on the foregoing, our opinion is as follows:
1. The Agreement is enforceable against the Seller.
2. The authorized capital structure of Xxxxx X. Xxxxxxx, Inc. consists of
25,000 shares of voting common stock with a par value of $1 per share, of
which 12,296 shares are issued and outstanding. Xxxx X. Xxxxxx owns 6,764
shares of Xxxxx X. Xxxxxxx, Inc.
3. The authorized capital structure of United Terrazzo Supply Co., Inc.
consists of 800 shares of voting common stock with a par value of $250 per
share, of which 16 shares are issued and outstanding. Xxxx X. Xxxxxx owns 8
shares of United Terrazzo Supply Co., Inc.
4. Both Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc. are
corporations duly organized, validly existing and in good standing under
the laws of the State of California, with full corporate power and
authority to own its properties and to engage in its business as presently
conducted or contemplated. All of the outstanding shares of capital stock
of both Xxxxx X. Xxxxxxx, Inc. and United Terrazzo Supply Co., Inc. have
been duly authorized and validly issued and are fully paid and
non-assessable, and were not issued in violation of the preemptive rights
of any Person.
5. Neither the execution and delivery of the Agreement nor the consummation of
any or all of the related transactions (a) violates any provision of the
certificate of incorporation or bylaws (or other governing instrument) of
either Xxxxx X. Xxxxxxx, Inc. or United Terrazzo Supply Co., Inc.
6. No consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Authority is required in connection
with the execution, delivery and performance of the Agreement or the
consummation of any related transaction(s).
7. We hereby confirm to you that, except as set forth in the Disclosure
Schedule, we have no actual knowledge of any Actions or Proceedings by or
before any court or Governmental Authority pending or overtly threatened
against or involving Xxxxx X. Xxxxxxx, Inc., or United Terrazzo Supply Co.,
Inc., or that questions or challenges the validity of the Agreement or any
action taken or to be taken by Xxxxx X. Xxxxxxx, Inc., or United Terrazzo
Supply Co., Inc., pursuant to the Agreement or in connection with any
related transactions. To our actual knowledge, neither Xxxxx X. Xxxxxxx,
Inc., nor United Terrazzo Supply Co., Inc. is subject to any judgment,
order or decree having prospective effect.
The Accord is changed for purposes of this Opinion Letter pursuant to '21 of the
Accord as follows:
1. The Primary Lawyer Group shall include all lawyers presently at our firm
who have given substantive attention to the affairs of the Seller, Xxxxx X.
Xxxxxxx, Inc., and/or United Terrazzo Supply Co., Inc., since 1992.
2. Accord '19(e) is deleted.
We understand that ISG Resources, Inc. is receiving a copy of this opinion in
connection with the purchase of stock and real property contemplated by the
Agreement and agree that ISG Resources, Inc. may rely on this opinion.
Very truly yours,
FERRUZZO & FERRUZZO
By
XXXXXX X. XXXXXXXX
ds
cc: Xxxx X. Xxxxxx
Xxxxxx Xxxxxx, Esq.
Exhibit D
Purchaser's Officer's Certificate
I, the undersigned, the Sr. Vice President, General Counsel and
Secretary of ISG Resources, Inc., a Utah corporation (the "Purchaser"), do
hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
5.2.5 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between
Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos
Trust, u/d/t October 19, 1990 and Xxxxxx X. Xxxxxx, as Trustee of the Xxxxxxx
Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer").
Unless otherwise indicated herein, capitalized terms used in this Certificate
shall have the same meanings given to them in the Agreement.
2. Each of the representations and warranties made by the Purchaser in the
Agreement are true and correct in all material respects as of the date of the
Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
ISG RESOURCES, INC.
_______________________
By: Xxxxx X. Xxxxxxx
Its: Sr. Vice President, General
Counsel and Secretary
Exhibit E
Purchaser's Counsel's Opinion
March 27, 2000
Xxx. Xxxx X. Xxxxxx
#0 Xxx Xxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Xxx. Xxxxxx X. Xxxxxx
0000 Xx Xxxxxx
Xxxxxxxx, XX 00000
Ladies:
I am Sr. Vice President and General Counsel of ISG Resources, Inc., a
Utah corporation ("Purchaser") and have acted as counsel to Purchaser in
connection with the Purchase Agreement dated October 26, 1999 (the "Agreement")
between Xxxx Xxxxx Xxxxxx, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable
Intervivos Trust, u/d/t October 19, 1990 and Xxxxxx X. Xxxxxx, as Trustee of the
Xxxxxxx Trust (collectively the "Sellers") and the Purchaser. This is the
opinion contemplated by Section 5.2.6 of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement or the Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the laws of the United States.
Based on the foregoing, my opinion is as follows:
1. The Agreement is enforceable against the Purchaser.
2. Neither the execution and delivery of the Agreement nor the performance of
the Purchaser's obligations thereunder (a) violates any provision of the
certificate of incorporation or bylaws (or other governing instrument) of the
Purchaser, (b) breaches or constitutes a default (or an event that, with notice
or lapse of time or both, would constitute a default) under any agreement or
commitment to which the Purchaser is party or (c) violates any statute, law,
regulation or rule, or any judgment, decree or order of any court or
Governmental Authority applicable to the Purchaser.
Sincerely,
Xxxxx X. Xxxxxxx
BAH/hs
cc: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq.
Disclosure Schedule
THE DISCLOSURE SCHEDULE OF
XXXXX X. XXXXXXX, INC. AND UNITED TERRAZZO SUPPLY CO., INC.
The Disclosure Schedule of XXXXX X. XXXXXXX, INC. and UNITED TERRAZZO SUPPLY
CO., INC. (both sometimes referred to as the "Company") has been prepared and is
being delivered by the Sellers pursuant to that certain Stock Purchase Agreement
dated as of the 26th day of October, 1999, by and among ISG RESOURCES, INC.,
XXXX XXXXX XXXXXX, as Trustee of the Xxxx Xxxxx Xxxxxx Revocable Intervivos
Trust, u/d/t October 19, 1990 and XXXXXX X. XXXXXX, Trustee of the Xxxxxxx
Family Trust (the "Agreement"). Pursuant to Section 9.16 of the Agreement, any
disclosure in this Disclosure Schedule, and in any supplement hereto, shall
relate to the Section of the Agreement to which it refers, except to the extent
that the relevance to such other section is manifest on the face of the
Disclosure Schedule. Any capitalized terms set forth in any Section of this
Disclosure Schedule and not otherwise defined shall have the meaning ascribed to
it in the Agreement.
SECTION 2.4
Lines of Business the Company is Participating
1. Building materials
2. Blending
3. Packaging sales of cement
4. Aggregates
5. Divider strip
6. Grinding and polishing machines
7. Grinding and polishing stones
8. Cleaners and sealers
SECTION 2.6
Consents
None.
SECTION 2.8
Exceptions to GAAP
1. The attorney fees and costs and accountant fees with respect to this
transaction have been paid by the Company and expensed without any
allocation between Shareholder and the Company.
2. The Financial Statements do not accrue vacation or sick leave for
employees.
SECTION 2.9
Changes Since June 30, 1999
1. The Company has not had any adverse material effects when reviewed as a
whole, expenses have increased in some areas and decreased in others.
2. The Company's top ten accounts are listed in Schedule 2.24.1.
3. The Company has disposed of 3 tanks (2 large and 1 small) that were beyond
the end of their useful lives.
4. There has been changes in compensation for 3 employees (Xxxx Xxxxxx, Truck
Driver, Xxxx Xxxxx, Shop Xxxxxxx, and Xxxxx Xxxxxx, Plant Xxxxxxx). There
are no other raises planned or promised.
5. In connection with increased Medical plan (Kaiser) costs, the Company has
decided not to increase employee contributions to the cost of this plan.
SECTION 2.10
Undisclosed Liabilities
The Company makes no representation or warranty with respect to any computer
hardware or software and its ability to recognize the year 2000.
SECTION 2.11
Taxes
None.
SECTION 2.12
Legal Proceedings
1. The Casmalia Disposal Site (see Section 2.23.2).
2. Notice to Comply dated February 8, 1996, issued by the South Coast Air
Quality Management District, attached hereto (see Section 2.13).
3. Failure to have a permit to operate air pressure tank since expiration of
prior permit (see Section 2.13).
4. In 1995 the Company was informed that another company was using the name
Xxxxxxx Building Supply, Inc. A cease and desist letter was sent by the
Company. A response was sent June 27, 1995 whereby Xxxxxxx Building Supply,
Inc. alleged it had the exclusive right to use such name. The Company has
been informed that Xxxxxxx Building Supply, Inc. is now out of business.
SECTION 2.13
Compliance With Laws
1. The Company has not maintained an Injury Illness Prevention Program, but
will have one in place at the time of Closing.
2. The Company has not maintained a Hazardous Communications Program, but will
have one in place at the time of Closing.
3. The Company has not had a valid permit to operate its Air Pressure Tank.
The Company has applied for a renewal. Attached hereto is a copy of the
prior permit.
4. In 1996, the Company received a Notice to Comply from the South Coast Air
Quality Management District to "submit an application for cement blending
station." An application was immediately filed and the appropriate fees
paid; however, no permit was ever issued. The Company has contacted the
A.Q.M.D., who is processing the application.
5. The Company's Employee Handbook is out of date.
SECTION 2.14
Employee Benefit Plans
Salaried employees - Medical, the company pays 80%
Paid Vacations
Paid Holidays
5 days paid sick leave
Hourly employees - Medical, the company pays 80%
Paid Vacations
Paid Holidays
The medical plan is with Kaiser
SECTION 2.15
Owned Real Property and Leased Real Property
The Company owns no real property. The property which the Company occupies is
owned by the Stockholders, Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxx. We do not have a
lease, but are on a month-to-month rental. The amount of the rental is $8,666
per month and is paid in the following manner:
$2,000 from United Terrazzo:
$ 1,000 to Xxxx Xxxxxx
$ 1,000 to Xxxxxx Xxxxxx, Trustee
$6,666 from Xxxxx X. Xxxxxxx:
$ 3,000 to Xxxxxx Xxxxxx, Trustee
$ 3,666 to Xxxx Xxxxxx
The amount paid to the owners from Xxxxx X. Xxxxxxx is being taken out of the
AAA.
SECTION 2.15.2
Real Property Liens
Storm drain easement
Chevron pipeline easement
Those set forth in the Preliminary Title Report issued by Chicago Title
Insurance Company.
SECTION 2.15.3
Exceptions to Enforceability of Leases
None.
SECTION 2.15.5
Real Property Condition
The building was built prior to 1978 and, as such, may contain asbestos
containing materials, lead-based paint, and other products now considered
hazardous.
SECTION 2.16
Personal Property Liens
None.
SECTION 2.17
Intellectual Property
None.
SECTION 2.18.1
Contracts
At-will employment contracts.
Toll Manufacturing Agreement.
Packaging Agreement with CTS Cement Manufacturing.
SECTION 2.18.2
Default Notices
None.
SECTION 2.18.3
Materially Adverse Contracts
None.
SECTION 2.19
Licenses
1. Permit to Operate Liquified Petroleum Gas Tank
2. Permit to Operate Air Pressure Tank (see Section 2.13)
3. Permit to Operate Cement Blending Station (see Section 2.13)
4. City of La Mirada Business Licenses for United Terrazzo Supply Co., Inc.
and Xxxxx X. Xxxxxxx, Inc.
5. California State Board of Equalization Seller=s Permit
6. Permits Issued by the South Coast Air Quality Management District listed on
the attached APermit Renewals@ letter.
SECTION 2.20
Insurance
Xxxxxxx Parent Insurance Package/Auto/Workers' Comp #CCP56373901 claim auto
96-97 amount $ 346.00.
No other claims in this time period since 1/01/96.
Health insurance with Kaiser.
SECTION 2.23.2
Environmental Matters
We have a letter of final closure for underground tank removal.
Unsettled claim for soil that was sent to the Casmalia site in 1987. The Company
has paid $62,500 to have this dirt hauled and remediated. The Company exercised
a settlement option as set forth in the Casmalia Disposal Site Administrative
Order,U.S. EPA Docket No. 99-02(a), and sent in the sum of $77,983 as
settlement.
See Section 2.15.5.
See Section 2.13.
SECTION 2.24.1
Customers
COMPANY TYPE OF BUSINESS YTD % OF
SALES SALES
------- --------------- -------- --------
CORR01 TERRAZZO $ 203,277.68 11.1
HOCK01 POOL PLASTERING $ 118,956.56 6.5
CHEM01 BLENDS $ 114,599.78 6.3
WEST06 BLENDS $ 111,412.03 6.1
SCOF01 FLY ASH $ 103,770.55 5.7
PACI03 BLOCK WALLS $ 83,311.44 4.6
PAYN01 TERRAZZO $ 77,043.50 4.2
ADVA02 TERRAZZO $ 73,888.10 4.0
MOLI01 TERRAZZO $ 53,158.34 2.9
ASSO01 TERRAZZO $ 40,581.95 2.2
SECTION 2.24.2
Suppliers
California Portland Cement
Manhattan American
Lehigh Cement
Riverside Cement
Oglebay Norton Sand
Fribel International
Heritage Glass
Tesco Products
Atlas Abrasives
Specialty Minerals
SECTION 2.25
Accounts Receivable
None.
SECTION 2.28
Bank Accounts
Cerritos Valley Bank (000) 000-0000
00000 Xxxxxxxxx Xxxx.
Xxxxxxx, Xx 00000-0000
Xxxxx X. Xxxxxxx, Inc. Checking Account #001005154
United Terrazzo Supply Checking Account #001010859
Signors on the above: Xxxx Xxxxxx
Xxxxxx Xxxxxxx
Xxxxxxxx Xxxxx
United Terrazzo Money Market Account #0000000
Signors on the above: Xxxx Xxxxxx
Xxxxx Xxxxx
