1
Exhibit 99
STOCK PURCHASE AGREEMENT
between
HECLA MINING COMPANY
and
IMERYS USA, INC.
February 27, 2001
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TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE
1.1 Purchase of Stock
1.2 Closing
1.3 Execution and Delivery of Closing Documents
1.4 Settlement of Intercompany Accounts and Transfer of Cash
ARTICLE 2 ADJUSTMENTS TO PURCHASE PRICE
2.1 Balance Sheet
2.2 Post-Closing Adjustments
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Good Standing
3.2 Authorization and Validity
3.3 No Conflict
3.4 Purchase for Investment
3.5 Investigation by Purchaser
3.6 Finder's Fee
3.7 Financing
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization and Good Standing of Seller
4.2 Authorization and Validity
4.3 No Conflict
4.4 Organization and Good Standing of Subsidiaries
4.5 Capitalization
4.6 Corporate and Other Records
4.7 Financial Statements
4.8 Absence of Undisclosed Liabilities
4.9 Absence of Certain Changes
4.10 Material Contracts
4.11 Leases and Concessions
4.12 Real Estate; Encumbrances
4.13 Environmental
4.14 Patents, Trademarks and Trade Names
4.15 Litigation; Compliance with Law
4.16 Tax Matters
4.17 Employee Benefit Plans
4.18 Labor
4.19 Inventory
4.20 Employees
4.21 Major Customers and Suppliers
4.22 Accounts Receivable
4.23 Finder's Fee
4.24 Title to Assets
4.25 Accounts
4.26 Related Parties
4.27 Ability to Perform Obligations
4.28 Charitable Commitments
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4.29 Defective Pricing
4.30 Insurance
4.31 Product Warranty Liabilities
4.32 Equipment
4.33 Y2K
4.34 Commercial Bribery
4.35 Actions Regarding Employees
4.36 Reclamation Liabilities
4.37 Reserve Estimates
4.38 Compliance with the Immigration Laws
4.39 Representations Not Misleading
4.40 Copies Accurate
4.41 Definition of Knowledge
ARTICLE 5 SELLER'S AND PURCHASER'S PRE-CLOSING COVENANTS
5.1 Business Operations
5.2 Access
5.3 Material Change
5.4 Governmental Approvals
5.5 Exclusivity
5.6 Certain Audited Financial Statements
5.7 Purchaser's Obligations
5.8 Joint Obligations
5.9 Deliveries of Information; Consultations
5.10 Supplemental Disclosure
5.11 Payoff of Indebtedness and Release of Liens
5.12 Employment of ▇▇▇▇▇▇▇
ARTICLE 6 PURCHASER'S CONDITIONS PRECEDENT
6.1 Representations and Warranties
6.2 Covenants
6.3 No Injunction
6.4 No Material Adverse Change
6.5 HSR Act; Exon-▇▇▇▇▇▇
6.6 Consents
6.7 Opinion of Seller's Counsel
6.8 2000 Review
6.9 Stock Purchases
ARTICLE 7 SELLER'S CONDITIONS PRECEDENT
7.1 Representations and Warranties
7.2 Covenants
7.3 No Injunction
7.4 HSR Act; Exon-▇▇▇▇▇▇
7.5 Opinion of Purchaser's Counsel
ARTICLE 8 CLOSING DOCUMENTS
8.1 Form of Documents
8.2 Purchaser's Deliveries
8.3 Seller's Deliveries
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ARTICLE 9 POST-CLOSING AGREEMENTS
9.1 Post-Closing Agreements
9.2 Inspection of Records
9.3 Use of Trademarks
9.4 Back-Up
9.5 Payments of Accounts Receivable
9.6 Third Party Claims
9.7 Non-Solicitation
9.8 Confidentiality
9.9 Non-Compete
9.10 Specific Performance
9.11 Retention Bonuses
9.12 Intentionally Omitted
9.13 Retirement Plans
9.14 Claims under Welfare Plans
9.15 Hecla Name
9.16 Releases/Collateral
9.17 Technology Support
9.18 Tax Support Services
ARTICLE 10 TAXES
10.1 In General
10.2 Reporting and Payment of Taxes
10.3 Certain Unpaid Taxes
10.4 Allocations Relating To Taxes
10.5 Refunds and Credits
10.6 Cooperation; Audits
ARTICLE 11 INDEMNIFICATION
11.1 Indemnification by Seller
11.2 Indemnification by Purchaser
11.3 Exclusive Nature of Remedies
11.4 Cooperation
11.5 Subrogation
11.6 Third Party Claims other than Taxes and Environmental Matters
11.7 Environmental Claims
11.8 Characterization of Indemnity Payments
11.9 Representations at Closing
ARTICLE 12 TERMINATION
12.1 Termination
12.2 Effect of Termination
12.3 Option Not To Purchase Certain Stock
ARTICLE 13 MISCELLANEOUS
13.1 Fees
13.2 Publicity
13.3 Amendments
13.4 Assignment
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13.5 Non-Waiver
13.6 Binding Effect; Benefit
13.7 Notice
13.8 Entire Agreement
13.9 Costs, Expenses and Legal Fees
13.10 Severability
13.11 Survival of Representations and Warranties
13.12 Governing Law and Venue
13.13 Captions
13.14 Counterparts
13.15 Number and Gender
13.16 Facsimile Transmissions
13.17 Further Assurances
13.18 No Admissions
13.19 Dollars
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of February 27, 2001, is between
Hecla Mining Company, a Delaware corporation ("Seller"), and IMERYS USA, Inc., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Kentucky-Tennessee Clay Company, a Delaware corporation ("▇-▇
▇▇▇▇"), K-T Feldspar Corporation, a North Carolina corporation ("K-T Feldspar"),
and Southeastern Land Resources Corp., a Delaware corporation ("Southeastern"
and collectively with ▇-▇ ▇▇▇▇ and K-T Feldspar, the "U.S. Subsidiaries") are
each wholly owned subsidiaries of Seller. Hecla de Brasil Empreendimentos de
Participacoes Ltda., a Brazilian sociedade civil por quotas de responsibilidade
limitada ("Hecla Brazil"), is entirely owned by Seller except for one share
owned by ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ pursuant to the requirements of Brazilian law. ▇-▇
▇▇▇▇ de Mexico, S.A. de C.V., a Mexican sociedad anonima de capital variable
("K-T Mexico"), is entirely owned by ▇-▇ ▇▇▇▇ except for one share owned by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the requirements of Mexican law. Recursos Minerales
del Norte, S.A. de C.V., a Mexican sociedad anonima de capital variable
("Recursos"), is entirely owned by K-T Mexico except for one share owned by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the requirements of Mexican law. ▇▇▇▇▇ de Caxias
Mineracao Ltda. ("▇▇▇▇▇") and Mineracao Hecla do Brasil, Ltda. ("Mineracao
Hecla"), each a Brazilian sociedade comercial por quotas de responsibilidade
limitada, are entirely owned by Hecla Brazil except for one share of ▇▇▇▇▇ and
one hundred shares of Mineracao Hecla owned by ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ pursuant to
the requirements of Brazilian law. The minority owners of each of Hecla Brazil,
K-T Mexico, Recursos, ▇▇▇▇▇, and Mineracao Hecla are hereinafter referred to as
the "Incidental Owners." ▇-▇ ▇▇▇▇, K-T Feldspar, Southeastern, Hecla Brazil, K-
T Mexico, Recursos, ▇▇▇▇▇ and Mineracao Hecla are hereinafter jointly referred
to as "the Subsidiaries" and individually as a "Subsidiary." The business of
the Subsidiaries is hereinafter referred to as the "Business."
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, 100% of
the issued and outstanding shares of capital stock of each of the U.S.
Subsidiaries, as well as all of the issued and outstanding shares of capital
stock or quotas of Hecla Brazil owned by Seller (together, the "Stock"), and
Purchaser desires to acquire, or cause its designees to acquire all shares or
quotas (as the case may be) of Hecla Brazil, K-T Mexico, Recursos, ▇▇▇▇▇ and
Mineracao Hecla owned by the Incidental Owners.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants contained herein, and on the terms and subject to the conditions
set forth herein, the parties to this Agreement, intending to be legally bound,
agree as follows:
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ARTICLE 1
PURCHASE AND SALE
1.1 Purchase of Stock.
(a) On the terms and subject to the conditions set forth herein,
at the Closing (as defined below), Seller shall sell and deliver to
Purchaser, and Purchaser shall purchase from Seller, the Stock. Seller
shall sell the Stock to Purchaser, free and clear of all options, proxies,
voting trusts, voting agreements, judgments, pledges, charges, escrows,
rights of first refusal or first offer, mortgages, indentures, claims,
transfer restrictions, liens, equities, security interests and other
similar encumbrances (collectively, "Claims"). The purchase price for the
Stock (the "Purchase Price") shall be Sixty-Two Million Five Hundred
Thousand Dollars ($62,500,000), plus or minus (as the case may be) the
Purchase Price Adjustment.
(b) On the Closing Date (as defined below), all Intercompany
Accounts shall be paid in full or eliminated as set forth in Section 1.4
and Purchaser shall pay $62,500,000, either (i) less (the "Holdback") Four
Hundred Thousand Dollars ($400,000) (the "Holdback Amount") if the
Estimated Purchase Price Adjustment is zero, or (ii) as adjusted up or down
(depending on whether the Estimated Purchase Price Adjustment is a positive
or negative number) by the Estimated Purchase Price Adjustment, to Seller
in exchange for the Stock. Each payment of any portion of the Purchase
Price shall be made by wire transfer of immediately available funds to an
account of Seller or to accounts designated by it at a bank or banks
designated in writing by Seller which designation shall be made at least
three (3) business days before the scheduled payment date. Seller shall
prepare in cooperation with Purchaser and present to Purchaser by March 15,
2001 a good faith estimate of what the "Closing Date Working Capital" would
be if the Closing Date were as of February 28, 2001 (the "February Working
Capital"). The "Estimated Purchase Price Adjustment" as used herein means
the February Working Capital minus Eleven Million One Hundred Fifty Nine
Thousand Dollars ($11,159,000). If Seller and Purchaser cannot agree to
the Estimated Closing Date Working Capital in writing on or before the
third day prior to the Closing Date, the Estimated Purchase Price
Adjustment shall be Zero Dollars ($0). If Seller and Purchaser agree to
the February Working Capital, then there shall be no Holdback Amount.
1.2 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m., Chicago, Illinois
time, at the offices of ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLC, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ on the third business day (or, in the event the waiting period
applicable to
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the transactions contemplated under the HSR Act is terminated prior to its
natural expiration, the fifth business day) following the first date on which
all of the conditions in Articles 6 and 7 have been waived in writing or
satisfied, or such other date as may be agreed upon by Seller and Purchaser in
writing, subject, however, in each case to Article 12. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date." The parties
agree to use their commercially reasonable best efforts to cause the Closing
Date to occur at the earliest practicable time.
1.3 Execution and Delivery of Closing Documents. At the Closing, the
parties shall execute and deliver each document, agreement and instrument
required by this Agreement to be so executed and delivered as provided in
Article 8.
1.4 Settlement of Intercompany Accounts and Transfer of Cash. Seller shall
cause all amounts owing from time to time under the Intercompany Accounts
(whether by or in favor of the Subsidiaries) to be settled prior to the Closing
Date and all cash of the Subsidiaries remaining after such settlement shall be
transferred to Seller. As used herein, the term "Intercompany Accounts" shall
mean those accounts maintained by Seller and Seller's Affiliates, on the one
hand, and the Subsidiaries, on the other hand, in accordance with their
customary practices in the ordinary course of business, in which there are
reflected or recorded the amounts owed by Seller or any of its Affiliates to any
of the Subsidiaries, or by any of the Subsidiaries to Seller or any of its
Affiliates, attributable to intercompany transactions (including, without
limitation, charges for data processing, payroll and employee benefits services,
corporate office overhead, legal and/or audit services, insurance, loans and
advances by any of the Subsidiaries to Seller or any of its Affiliates, and
loans and advances by Seller or any of its Affiliates to any of the
Subsidiaries). Seller shall contribute to the capital of the appropriate
Subsidiaries all net intercompany indebtedness owed by any of the Subsidiaries
to Seller or any of its Affiliates and all cash, if any, held in accounts of the
Subsidiaries after such contributions shall be transferred to the Seller as of
the Closing Date. As used herein: (i) an "Affiliate" is any Person which
controls another Person, which such other Person controls, or which is under
common control with another Person (except that, for the purposes of this
Agreement, the Subsidiaries shall not be deemed to be Affiliates of Seller);
(ii) "Control" means the power, direct or indirect, to direct or cause the
direction of the management and policies of a Person through voting securities,
contract or otherwise; and (iii) "Person" means an individual, any type of
business entity (including a corporation, joint-stock company, partnership or
limited liability company), any other type of legal entity (including a trust),
or any governmental agency or instrumentality.
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ARTICLE 2
ADJUSTMENTS TO PURCHASE PRICE
2.1 Balance Sheet.
(a) As promptly as practicable after the Closing Date, Purchaser
shall prepare and deliver to Seller a proposed combined balance sheet of
the Subsidiaries as of the close of business on the Closing Date ("Proposed
Balance Sheet"), in accordance with this Section 2.1. The Proposed Balance
Sheet shall reflect the effects of the capital contributions required to be
made pursuant to Section 1.4, shall not reflect refinancings or equity
adjustments occurring on the Closing Date or Taxes to be paid by Seller
under Section 10.2 and shall be prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied by Purchaser in a
manner consistent with the accounting principles and practices applied by
Seller in the preparation of the Financial Statements, with such
adjustments thereto, if any, as are expressly set forth in this
paragraph (a). Seller shall be permitted to have a representative present
and participating in Purchaser's preparation of the Proposed Balance Sheet.
Notwithstanding, or without limitation, as the case may be, of the
foregoing, the parties and Arbitrating Accountants, if applicable, shall
use the following procedures or principles in the preparation and
determination of the Proposed Balance Sheet and Final Balance Sheet: (i)
reserves and accruals shall be determined as if the date of the Proposed
Balance Sheet was the last day of the fiscal year, and shall include pro
rata accruals for accrued salaries, wages, bonuses, vacation pay, utilities
and like items; (ii) intercompany profit in inventory shall be disregarded;
(iii) the settled Intercompany Accounts and cash of the Subsidiaries shall
be excluded; (iv) to the extent any sums are required to be converted to
United States Currency, the rate of exchange utilized by Seller in
accordance with past practice (which is based upon exchange rates stated in
The Wall Street Journal) shall be employed; (v) inventories shall be
determined from Seller's physical count observed by Purchaser and taking
place on the previous month-end inventory and adjusted by production and
sales as of the day prior to the Closing Date, and valued at the lower of
cost or net realizable value, with cost being determined using the average
cost methods heretofore used by ▇-▇ ▇▇▇▇ and K-T Feldspar; (vi) subjective
judgments of Seller as of December 31, 2000 (e.g., as to reserves for bad
debt or litigation) shall not be altered absent a material event or change
in circumstance concerning the particular matter; and (vii) Southeastern's
approximately $233,000 "pre-AFE" capitalized project development shall not
be classified as a current asset. Inventories in stockpiles shall be
determined from surveys of such stockpiles
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conducted through the process the Subsidiaries have used in the past.
Seller shall make available to Purchaser the books, records, and personnel
of the Subsidiaries (if not yet delivered to Purchaser) which Purchaser
reasonably requires in order to prepare and deliver the Proposed Balance
Sheet. Purchaser and Seller shall, throughout the entire period from the
date of this Agreement to the date of the deliveries required by this
Section 2.1, meet and discuss any and all financial and business matters
relating to such process and the preparation of the Proposed Balance Sheet,
and Purchaser shall make available its work papers for confidential
inspection and review by Seller and Seller's accountants. Purchaser shall
deliver the Proposed Balance Sheet within twenty (20) days after the
Closing Date. The date of delivery of the Proposed Balance Sheet to Seller
is referred to herein as the "Delivery Date."
(b) Seller shall have twenty (20) days after the Delivery Date
(the "Dispute Period") to dispute any of the elements of or amounts
reflected on the Proposed Balance Sheet and affecting the calculation of
the Purchase Price (a "Dispute"). Except as to any item on the Proposed
Balance Sheet as to which Seller gives written notice of a Dispute within
the Dispute Period to Purchaser (a "Dispute Notice"), the Proposed Balance
Sheet shall be deemed to have been accepted and agreed to by Seller in the
form in which it was delivered to Seller, and shall be final and binding
upon the parties hereto. If Seller has a Dispute, Seller shall give
Purchaser a Dispute Notice within the Dispute Period, setting forth in
reasonable detail the elements and amounts with which it disagrees.
Purchaser acknowledges and agrees that it has reviewed and is familiar with
Seller's policies, methodologies and past practices regarding the accrual
for reclamation obligations and that the Proposed Balance Sheet and Final
Balance Sheet shall be prepared utilizing such methodology. Accordingly,
Purchaser shall not assert, as a basis of any dispute with any elements of
or amounts reflected on the Proposed Balance Sheet, the accrual for
reclamation reflected on the Proposed Balance Sheet provided such amount
was determined according to GAAP and consistently with Seller's accrual
policies and past practices and no material change in circumstances at a
particular reclamation site has occurred since the date of this Agreement.
Within twenty (20) days after delivery of such Dispute Notice, the parties
hereto shall attempt to resolve such Dispute and agree in writing upon the
final content of the disputed Proposed Balance Sheet.
(c) If Purchaser and Seller are unable to resolve any Dispute
within the twenty (20) day period after Purchaser's receipt of a Dispute
Notice, Seller and Purchaser shall promptly jointly engage the Chicago
office of KPMG International (the "Arbitrating Accountant") as arbitrator,
so long as KPMG International has not performed
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accounting, tax or auditing services from such office for Purchaser,
Seller, or any of their affiliates during the past three years. If KPMG
International is unable or unwilling to serve as Arbitrating Accountant,
the Arbitrating Accountant shall be a nationally recognized accounting firm
selected promptly by agreement of Purchaser and Seller or, if they are
unable to agree, by lot. The choice by lot shall be between two accounting
firms which have not performed accounting, tax, or auditing services for
the Purchaser, Seller, or any of their Affiliates during the past three
years, one of which eligible firms shall be chosen by each Seller's and
Purchaser's respective accountants, who shall jointly conduct such lottery.
In connection with the resolution of any Dispute, the Arbitrating
Accountant shall have confidential access to all documents, records, work
papers, facilities and personnel necessary to perform its function as
arbitrator. The Arbitrating Accountant's function shall be to conform the
Proposed Balance Sheet to the requirements of Section 2.1. The Arbitrating
Accountant shall allow Purchaser and Seller to present their respective
positions regarding the Dispute and shall thereafter as promptly as
possible provide the parties hereto a written determination of the Dispute,
such written determination shall be final and binding upon the parties
hereto, and judgment may be entered on the award. The Arbitrating
Accountant shall promptly, and in any event within sixty (60) calendar days
after the date of its appointment, render its decision on the question in
writing and finalize the Proposed Balance Sheet. The Arbitrating
Accountant may, at its discretion, conduct a conference concerning the
Dispute, at which conference each party shall have the right to present
additional documents, materials and other information and to have present
its advisors, counsel and accountants. In connection with such process,
there shall be no other hearings or any oral examinations, testimony,
depositions, discovery or other similar proceedings. The Arbitrating
Accountant shall determine the proportion of its fees and expenses to be
paid by each of Seller and Purchaser, based on the degree to which the
Arbitrating Accountant has accepted the positions of the respective
parties.
(d) After the Proposed Balance Sheet has been prepared and any
related adjustments have been made and all Disputes resolved as provided
herein, all adjustments, if any, so agreed to by the parties or required by
the Arbitrating Accountant to be made with respect to the Proposed Balance
Sheet shall be made. The Proposed Balance Sheet, as so revised by any such
adjustments, is hereinafter referred to as the "Final Balance Sheet."
2.2 Post-Closing Adjustments.
(a) The "Purchase Price Adjustment" is defined as the Closing
Date Working Capital minus Eleven Million
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One Hundred Fifty Nine Thousand Dollars ($11,159,000). The Holdback, if
any, shall be terminated and Purchaser shall promptly pay Seller or Seller
shall promptly pay Purchaser an amount such that Seller shall have received
and Purchaser shall have paid (including through any Estimated Purchase
Price Adjustment and allocation of any Holdback, as the case may be) the
Purchase Price.
(b) The term "Closing Date Working Capital" means an amount
equal to (i) the total combined current assets of the Subsidiaries as shown
on the Final Balance Sheet excluding cash, less (ii) the total combined
current liabilities, current accrued expenses and current reserves of the
Subsidiaries as shown on the Final Balance Sheet, excluding accrued defined
benefit plan obligations.
(c) Any payment or determination which is required to be made
under Section 2.2(a) shall be made on the date which is three (3) business
days after the Final Balance Sheet has become final, or on such other date
or at such other time or place as Seller and Purchaser shall agree in
writing (such date and time is hereinafter referred to as the "Post-Closing
Payment Date"). All payments required to be made under this Section 2.2(b)
on the Post-Closing Payment Date shall be made either through release to
one party or allocated to both parties, as appropriate, of the Holdback
Amount, if applicable, or by wire transfer of immediately available funds
to an account of recipient at a bank designated in writing by the recipient
at least three (3) business days before the Post-Closing Payment Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that:
3.1 Organization and Good Standing.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of Delaware, with all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions and perform the obligations (including post-closing obligations
such as indemnification obligations arising hereunder) contemplated hereby.
3.2 Authorization and Validity.
The execution, delivery and performance of this Agreement by Purchaser, and
the consummation of the transactions contemplated hereby, have been duly
authorized by Purchaser. This Agreement has been duly executed and delivered by
Purchaser and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as may be
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limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies or public
policy limitations (including as to the enforceability of indemnification
provisions).
3.3 No Conflict.
Neither the execution and delivery of this Agreement by Purchaser nor the
consummation by Purchaser of the transactions contemplated hereby will (a)
conflict with or result in a breach of any provisions of the charter or by-laws
of Purchaser, (b) violate, conflict with or result in a breach of any material
contract, agreement or other commitment or obligation to which Purchaser is a
party or by which Purchaser is bound, (c) violate or conflict with any judgment,
decree, order, regulation or rule of any court or governmental authority or any
statute or law applicable to Purchaser, or (d) except for the filings,
approvals, consents and authorizations required under the HSR Act, Exon-▇▇▇▇▇▇
and any applicable foreign anti-trust acts, require that Purchaser obtain any
consent, approval or authorization of, or make any declaration, filing or
registration with, any governmental or regulatory authority (other than those
approvals, authorizations, declarations, filings or registrations which have
been or will be obtained, waived (in writing) or made prior to the Closing).
3.4 Purchase for Investment
Purchaser is an accredited investor, as defined in Regulation D promulgated
under the Securities Act of 1933 and the rules and regulations thereunder, as
amended from time to time (the "Securities Act"). The Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to distribution. As of the date hereof, Purchaser has not entered into any
agreement or negotiations to transfer the Stock or the assets of the
Subsidiaries to any non-affiliated party. Purchaser will refrain from
transferring or otherwise disposing of any of the Stock or any interest therein
in such a manner as to cause Seller to be in violation of the registration
requirements of the Securities Act or applicable state securities or blue sky
laws.
3.5 Investigation by Purchaser. Purchaser has conducted its own
independent review and analysis of the assets, business, properties, operations
and financial condition of the Subsidiaries and acknowledges that Purchaser has
been provided access to the properties, premises and books and records of the
Subsidiaries for this purpose and has been offered an opportunity to discuss the
foregoing with Seller and the Subsidiaries in connection with the
representations made by Seller herein. Purchaser acknowledges that any
estimates, forecasts, or projections furnished or made available to it
concerning the Seller or the Subsidiaries or any of them (including, but not
limited to, the contents of the confidential offering memorandum
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circulated by Warrior, a division of Standard Bank London Limited) on their
properties, business, or assets have not been prepared in accordance with GAAP
or standards applicable under the Securities Act, reflect numerous assumptions,
and are subject to material risks and uncertainties. Purchaser acknowledges
that actual results may vary, perhaps materially. Variances that may occur
between the date hereof and the Closing Date may result in Purchaser's right to
terminate this Agreement only as expressly provided herein. In entering into
this Agreement, Purchaser has relied solely upon its own investigation and
analysis based upon the information so provided and the representations,
warranties and covenants of Seller contained in this Agreement. Furthermore,
Purchaser:
(a) acknowledges that, except for the express representations
and warranties set forth in this Agreement (including the Schedules),
neither Seller nor the Subsidiaries nor any of their respective Affiliates,
officers, directors or employees has made any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to Purchaser or its agents or
representatives in connection with the transactions contemplated by this
Agreement;
(b) understands that the Stock has not been registered under the
Securities Act; and
(c) agrees, to the fullest extent permitted by law, that except
as otherwise set forth in this Agreement, none of Seller nor the
Subsidiaries or any of their respective Affiliates, officers, directors or
employees shall have any liability or responsibility whatsoever to
Purchaser on the basis of any information provided or made available, or
statements made, to Purchaser or its representatives or agents in
connection with the transactions contemplated by this Agreement.
3.6 Finder's Fee. Purchaser has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated by this Agreement.
3.7 Financing. Purchaser has cash resources and/or financing sources
available to it reasonably sufficient to consummate the transactions
contemplated by this Agreement. Purchaser is now, and at Closing will be,
financially capable of performing all of its post-closing obligations hereunder,
including the ability to fully perform its indemnification obligations.
Purchaser is now, and at Closing will be, able to pay its debts as they become
due.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants that:
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4.1 Organization and Good Standing of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, with all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions and perform the
obligations (including post-closing obligations such as indemnification
obligations arising hereunder) contemplated hereby.
4.2 Authorization and Validity. The execution, delivery and performance
of this Agreement by Seller, and the consummation of the transactions
contemplated hereby, have been duly authorized by Seller's board of directors,
and approval of such transactions is not required by the stockholders of Seller
or by any other third party in order to transfer the Stock (except third party
consent from Standard Bank London Limited and other third parties referenced in
Schedule 6.6 or another Schedule attached hereto). This Agreement has been duly
executed and delivered by a duly authorized officer of Seller and constitutes
the legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
(ii) equitable considerations, or (iii) public policy limitations (including as
to the enforceability of indemnification provisions).
4.3 No Conflict. Except as disclosed in Schedule 4.3, neither the
execution and delivery of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby will (a) conflict with or result
in a breach of any provision of the charter or bylaws of Seller, (b) conflict
with or result in a breach of any provision of the charter, bylaws or other
organizational documents of any of the Subsidiaries, (c) violate, conflict with
or result in a breach of any material contract, agreement or other commitment or
obligation to which Seller is a party or by which Seller is bound, including any
agreement which exists or existed between Seller and Zemex U.S. Corporation
relating to or arising from that certain agreement dated as of November 17, 2000
(the "Zemex Agreement"), (d) violate or conflict with any judgment, decree,
order, regulation or rule of any court or governmental authority or any statute
or law or arbitration award applicable to Seller or any of the Subsidiaries, or
(e) require that Seller or any of the Subsidiaries obtain any consent, approval
or authorization of, or make any declaration, filing or registration with, any
governmental or regulatory authority (other than those approvals,
authorizations, declarations, filings or registrations which have been or will
be obtained or made prior to the Closing), except in cases of (c) and (d) for
such violations, conflicts or breaches that individually or in the aggregate,
are not reasonably expected to have a Material Adverse Effect, and except in the
case of (e) for such consents, approvals, authorizations, declarations, filings
or registrations which have been or will be obtained or made prior to Closing,
or, if not made or obtained,
16
are not individually or in the aggregate, reasonably expected to have a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
any event, change, or effect which is materially adverse to the financial
condition, business as currently conducted, assets (including intangible
assets), liabilities, or operations of the Subsidiaries taken as a whole;
provided however that a "Material Adverse Effect" shall not be deemed to arise
from the impact on the Subsidiaries of (i) effects arising from the consummation
or proposed consummation of the transactions contemplated by this Agreement or
resulting from actions arising from compliance by any party with the provisions
of this Agreement or any judgment, decree, order, regulation or rule of any
court or governmental authority entered or promulgated in connection with such
transactions (other than as gives rise to a right of Purchaser to terminate
pursuant to Section 12.1(e)) or (ii) any effect that arises out of or results
from the past, present or future condition of the general economy or financial
markets (including, without limitation, such factors affecting the economy in
general as energy costs and availability, interest rates and credit
availability, housing starts, medical and health insurance expenses, weather,
and consumer confidence).
4.4 Organization and Good Standing of Subsidiaries.
(a) ▇-▇ ▇▇▇▇ is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to carry on the business in which
it is engaged and to own and lease the properties it owns and leases. ▇-▇
▇▇▇▇ is duly qualified and licensed to do business and is in good standing
in all jurisdictions where the nature of its business makes such
qualification necessary, except where the failure to be so qualified or
licensed is not reasonably expected to have a Material Adverse Effect. The
jurisdictions in which ▇-▇ ▇▇▇▇ is qualified as a foreign corporation are
listed on Schedule 4.4. Except as disclosed in Schedule 4.4, ▇-▇ ▇▇▇▇ does
not own, directly or indirectly, any of the capital stock of any other
corporation or any equity, profit sharing, participation or other interest
in any corporation, partnership, joint venture or other entity.
(b) K-T Feldspar is a corporation duly organized, validly
existing and in good standing under the laws of the State of North
Carolina, with all requisite corporate power and authority to carry on the
business in which it is engaged and to own and lease the properties it owns
and leases. K-T Feldspar is duly qualified and licensed to do business and
is in good standing in all jurisdictions where the nature of its business
makes such qualification necessary, except where the failure to be so
qualified or licensed is not reasonably expected to have a Material Adverse
Effect. The jurisdictions in which K-T Feldspar is
17
qualified as a foreign corporation are listed on Schedule 4.4. K-T
Feldspar does not own, directly or indirectly, any of the capital stock of
any other corporation or any equity, profit sharing, participation or other
interest in any corporation, partnership, joint venture or other entity.
(c) Southeastern is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
all requisite corporate power and authority to carry on the business in
which it is engaged and to own and lease the properties it owns and leases.
Southeastern is duly qualified and licensed to do business and is in good
standing in all jurisdictions where the nature of its business makes such
qualification necessary, except where the failure to be so qualified or
licensed is not reasonably expected to have a Material Adverse Effect. The
jurisdictions in which Southeastern is qualified as a foreign corporation
are listed on Schedule 4.4. Except as disclosed in Schedule 4.4,
Southeastern does not own, directly or indirectly, any of the capital stock
of any other corporation or any equity, profit sharing, participation or
other interest in any corporation, partnership, joint venture or other
entity. Southeastern has no business operations and no employees.
(d) Hecla Brazil is a sociedade civil por quotas de
responsibilidade limitada duly organized, validly existing and in good
standing under the laws of Brazil, with all requisite power and authority
to carry on the business in which it is engaged and to own and lease the
properties it owns and leases. Hecla Brazil is duly qualified and licensed
to do business and is in good standing in all jurisdictions where the
nature of its business makes such qualification necessary, except where the
failure to be so qualified or licensed is not reasonably expected to have a
Material Adverse Effect. The jurisdictions in which Hecla Brazil is
qualified as a foreign civil limited liability quota company are listed on
Schedule 4.4. Except as disclosed in Schedule 4.4, Hecla Brazil does not
own, directly or indirectly, any of the capital stock of any other
corporation or any equity, profit sharing, participation or other interest
in any corporation, partnership, joint venture or other entity.
(e) K-T Mexico is a sociedad anonima de capital variable duly
organized, validly existing and in good standing under the laws of Mexico,
with all requisite corporate power and authority to carry on the business
in which it is engaged and to own and lease the properties it owns and
leases. K-T Mexico is duly qualified and licensed to do business and is in
good standing in all jurisdictions where the nature of its business makes
such qualification necessary, except where the failure to be so qualified
or licensed is not reasonably expected to have a Material Adverse Effect.
Except as disclosed in Schedule 4.4, K-T
18
Mexico does not own, directly or indirectly, any of the capital stock of
any other corporation or any equity, profit sharing, participation or other
interest in any corporation, partnership, joint venture or other entity.
(f) Recursos is a sociedad anonima de capital variable duly
organized, validly existing and in good standing under the laws of Mexico,
with all requisite corporate power and authority to carry on the business
in which it is engaged and to own and lease the properties it owns and
leases. Recursos is duly qualified and licensed to do business and is in
good standing in all jurisdictions where the nature of its business makes
such qualification necessary, except where the failure to be so qualified
or licensed is not reasonably expected to have a Material Adverse Effect.
Except as disclosed in Schedule 4.4, Recursos does not own, directly or
indirectly, any of the capital stock of any other corporation or any
equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
(g) ▇▇▇▇▇ is a sociedade comercial por quotas de
responsibilidade limitada duly organized, validly existing and in good
standing under the laws of Brazil, with all requisite power and authority
to carry on the business in which it is engaged and to own and lease the
properties it owns and leases. ▇▇▇▇▇ is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of
its business makes such qualification necessary, except where the failure
to be so qualified or licensed is not reasonably expected to have a
Material Adverse Effect. The jurisdictions in which ▇▇▇▇▇ is qualified as
a foreign commercial limited liability quota company are listed on Schedule
4.4. Except as disclosed in Schedule 4.4, ▇▇▇▇▇ does not own, directly or
indirectly, any of the capital stock of any other corporation or any
equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
(h) Mineracao Hecla is a sociedade comercial por quotas de
responsibilidade limitada duly organized, validly existing and in good
standing under the laws of Brazil, with all requisite power and authority
to carry on the business in which it is engaged and to own and lease the
properties it owns and leases. Mineracao Hecla is duly qualified and
licensed to do business and is in good standing in all jurisdictions where
the nature of its business makes such qualification necessary, except where
the failure to be so qualified or licensed is not reasonably expected to
have a Material Adverse Effect. The jurisdictions in which Mineracao Hecla
is qualified as a foreign commercial limited liability quota company are
listed on Schedule 4.4. Except as disclosed in Schedule 4.4, Mineracao
Hecla does not own, directly or indirectly, any of the capital stock of any
other corporation or any equity, profit sharing, participation or other
interest in any corporation, partnership, joint venture or other entity.
19
4.5 Capitalization.
(a) The authorized capital stock of ▇-▇ ▇▇▇▇ consists of 150,000
shares of common stock, no par value, of which 147,641 shares are issued
and outstanding. All of the issued and outstanding shares of the common
stock of ▇-▇ ▇▇▇▇ have been duly authorized and validly issued and are
fully paid and nonassessable. No shares of the common stock of ▇-▇ ▇▇▇▇
are held in ▇-▇ ▇▇▇▇'▇ treasury or have been issued or disposed of in
violation of the rights of ▇-▇ ▇▇▇▇'▇ current or former shareholders.
(b) The authorized capital stock of K-T Feldspar consists of
300,000 shares of common stock, no par value, of which 100 shares are
issued and outstanding. All of the issued and outstanding shares of the
common stock have been duly authorized and validly issued and are fully
paid and nonassessable, and no shares of the common stock are held in K-T
Feldspar's treasury or have been issued or disposed of in violation of the
rights of K-T Feldspar's current or former shareholders.
(c) The authorized capital stock of Southeastern consists of
1,000 shares of common stock, $1.00 par value, of which 1000 shares are
issued and outstanding. All of the issued and outstanding shares of the
common stock have been duly authorized and validly issued and are fully
paid and nonassessable. No shares of the common stock are held in
Southeastern's treasury or have been issued or disposed of in violation of
the rights of Southeastern's current or former stockholders.
(d) The authorized capital stock of Hecla Brazil consists of
1,926,865 quotas, R$1 par value, all of which have been issued and are
outstanding. All of the issued and outstanding quotas of Hecla Brazil have
been duly authorized and validly issued and are fully paid and
nonassessable. No quotas have been issued or disposed of in violation of
any rights of Hecla Brazil's current or former quotaholders.
(e) The authorized capital stock of K-T Mexico consists of
17,000 shares of Series A stock, having a value of fifty-one thousand nuevo
pesos (N$51,000), and 9,605,787 shares of Series B stock, having a value of
twenty eight million eight hundred seventeen thousand three hundred sixty-
one nuevo pesos (N$28,817,361). All of the authorized shares of stock of
each class of K-T Mexico have been issued and are outstanding. All of the
issued and outstanding shares of the stock of K-T Mexico have been duly
authorized and validly issued and are fully paid and nonassessable. No
shares of the stock of K-T Mexico have been issued or disposed of in
violation of any rights of K-T Mexico's current or former shareholders.
20
(f) The authorized capital stock of Recursos consists of 1,000
shares of Series A stock, having a value of ten thousand nuevo pesos
(N$10,000), all of which shares have been issued and are outstanding. All
of the issued and outstanding shares of the stock of Recursos have been
duly authorized and validly issued and are fully paid and nonassessable.
No shares of the stock of Recursos have been issued or disposed of in
violation of any rights of Recursos' current or former shareholders.
(g) The authorized capital stock of ▇▇▇▇▇ consists of 1,000
quotas, R$1 par value, all of which have been issued and are outstanding.
All of the issued and outstanding quotas of ▇▇▇▇▇ have been duly authorized
and validly issued and are fully paid and nonassessable. No quotas of
▇▇▇▇▇ have been issued or disposed of in violation of any rights of ▇▇▇▇▇'▇
current or former quotaholders.
(h) The authorized capital stock of Mineracao Hecla consists of
2,100 quotas, R$1 par value, all of which are issued and outstanding. All
of the issued and outstanding quotas of Mineracao Hecla have been duly
authorized and validly issued and are fully paid and nonassessable. No
quotas of Mineracao Hecla have been issued or disposed of in violation of
any rights of Mineracao Hecla's current or former quotaholders.
(i) Except as disclosed in Schedule 4.5, Seller is the lawful
record and beneficial owner of all of the shares of Stock, and except as
disclosed in Schedule 4.5, the Stock is free and clear of all Claims.
(j) Except as disclosed in Schedule 4.5, ▇-▇ ▇▇▇▇ is the lawful
record and beneficial owner of all of the outstanding shares of capital
stock of K-T Mexico, and except as disclosed in Schedule 4.5, such shares
are free and clear of all Claims.
(k) Except as disclosed in Schedule 4.5, K-T Mexico is the
lawful record and beneficial owner of all of the outstanding shares of
capital stock of Recursos, and except as disclosed in Schedule 4.5, such
shares are free and clear of all Claims.
(l) Except as disclosed in Schedule 4.5, Hecla Brazil is the
lawful record and beneficial owner of all of the outstanding quotas of
▇▇▇▇▇, and except as disclosed in Schedule 4.5, such quotas are free and
clear of all Claims.
(m) Except as disclosed in Schedule 4.5, Hecla Brazil is the
lawful record and beneficial owner of all of the outstanding quotas of
Mineracao Hecla, and except as disclosed in Schedule 4.5, such quotas are
free and clear of all Claims.
21
(n) Each of Seller and each of the Subsidiaries has the sole
right to vote or direct the voting of the shares or quotas (as the case may
be) of Stock owned by it, at its discretion, on any matter submitted to a
vote of the stockholders of ▇-▇ ▇▇▇▇ and quotaholders of Hecla Brazil. ▇-▇
▇▇▇▇ has the sole right to vote or direct the voting of the shares of
capital stock of K-T Mexico owned by it, at its discretion, on any matter
submitted to a vote of K-T Mexico's stockholders. K-T Mexico has the sole
right to vote or direct the voting of the shares of Recursos owned by it,
at its discretion, on any matter submitted to a vote of Recursos'
stockholders. Hecla Brazil has the sole right to vote or direct the voting
of the quotas of ▇▇▇▇▇ and Mineracao Hecla owned by it, in each case at its
discretion, on any matter submitted to a vote of such entities' respective
quotaholders. There are no voting trusts, voting agreements, proxies,
shareholder agreements or other arrangements relating to the Stock or the
capital stock or quotas of any of the Subsidiaries. No dividends,
mandatory or otherwise, are, or on the Closing Date will be, outstanding or
due on any of the Stock.
(o) The delivery at the Closing of the certificates representing
the shares of Stock, duly endorsed or accompanied by duly executed stock
▇▇▇▇▇▇, ▇▇▇▇ transfer to Purchaser good and indefeasible title to such
Stock, free and clear of all Claims. The delivery at the Closing of the
shares or quotas (as the case may be) of Hecla Brazil, K-T Mexico,
Recursos, ▇▇▇▇▇ and Mineracao Hecla, owned at the date hereof by the
Incidental Owners, duly endorsed for transfer in accordance with the laws
of Mexico or Brazil (as the case may be), will transfer to Purchaser or the
third party designated by Purchaser in accordance with Section 8.3(g) good
and indefeasible title to such shares or quotas (as the case may be), free
and clear of all Claims.
(p) There is no outstanding subscription, contract, convertible
or exchangeable security, option, warrant, call or other right obligating
any the Subsidiaries or any other Person to issue, sell, exchange or
otherwise dispose of, or to purchase, redeem or otherwise acquire, shares
of or securities convertible into or exchangeable for, capital stock or
quotas of any of the Subsidiaries. No dividends are due or outstanding by
any Subsidiary.
4.6 Corporate and Other Records. The copies of the Articles or
Certificates of Incorporation, the Bylaws and other corporate organizational
documents, including, all amendments thereto, of each of the Subsidiaries that
have been delivered to Purchaser are true, correct and complete copies. To the
knowledge of the Seller, the minutes and other corporate record books of the
Subsidiaries, copies of which have been delivered or made available to
Purchaser, contain materially accurate minutes of all meetings of and accurate
consents to all actions taken without meetings by the board of directors or
governing body (and
22
any committees thereof) and stockholders or quotaholders, as the case may be, of
each of the Subsidiaries since December 31, 1990. Seller has provided to
Purchaser due diligence information as reasonably requested by Purchaser prior
to the execution hereof regarding Seller and the Subsidiaries with reasonable
care and in good faith and such information is accurate in all material
respects.
4.7 Financial Statements.
(a) The Seller has attached as Schedule 4.7(a) the combined
balance sheets of the Subsidiaries as of December 31, 2000 (the "Balance
Sheet"), December 31, 1999 and December 31, 1998, and the combined
statements of income, retained earnings and cash flows of the Subsidiaries
for the years ended December 31, 2000, December 31, 1999 and December 31,
1998, together with separate unaudited balance sheets of each of K-T
Feldspar and Southeastern as of December 31, 2000, and separate statements
of income, retained earnings and cash flows of K-T Feldspar and
Southeastern for the year ended December 31, 2000 (such financial
statements are hereinafter referred to collectively as the "Financial
Statements"). The Seller has attached as Schedule 4.7(b) hereto the
audited combined balance sheets of all of the Subsidiaries except K-T
Feldspar and Southeastern (the "Audited Subsidiaries") as of December 31,
2000 and the combined statements of income, retained earnings and cash
flows of the Audited Subsidiaries for the year ended December 31, 2000
(such financial statements along with the financial statements delivered to
Purchaser pursuant to Section 5.6 are hereinafter referred to collectively
as the "Audited Financial Statements"). The Audited Financial Statements
have been or will be at Closing subjected to audit and/or review procedures
in connection with the audit of Seller's consolidated financial statements
by PricewaterhouseCoopers LLP ("PWC"), certified public accountants, and
have been or will be at Closing prepared in accordance with GAAP,
consistently applied (except for the absence of notes and federal tax
accruals). The Financial Statements present fairly the combined financial
position of the Subsidiaries as of December 31, 2000, December 31, 1999 and
December 31, 1998 and the combined results of operations and cash flows of
the Subsidiaries for the years then ended.
(b) The Subsidiaries' respective books, accounts and records
are, and have been, maintained in their usual, regular and ordinary manner,
in accordance with generally accepted accounting practices, and all
transactions to which any of the Subsidiaries is or has been a party are
fairly reflected therein.
23
(c) Seller has furnished to Purchaser complete and correct
copies of such portions as relate to the Subsidiaries of all attorneys'
responses to audit inquiry letters and all management letters from Seller's
independent certified public accountants for the fiscal year 2000 of
Seller.
4.8 Absence of Undisclosed Liabilities. None of the Subsidiaries has any
material obligation or liability of any nature whatsoever (direct or indirect,
matured or unmatured, absolute, accrued, contingent or otherwise), which would
be required by GAAP as consistently applied to be provided or reserved against
on a balance sheet (all the foregoing herein collectively being referred to as
the "Liabilities") except for:
(a) Liabilities provided for or reserved against in the Balance
Sheet;
(b) Liabilities which have been incurred by the Subsidiaries
subsequent to December 31, 2000 in the ordinary course of the Subsidiaries'
respective businesses and consistent with past practice;
(c) Liabilities under the executory portion of any Contract by
which any of the Subsidiaries is bound and which was entered into in the
ordinary course of the Subsidiaries' respective businesses and consistent
with past practice;
(d) Liabilities under the executory portion of Permits and
Environmental Permits issued to, or entered into by, the Subsidiaries in
the ordinary course of business; and
(e) Liabilities arising in respect of federal income taxes not
accrued at the U.S. Subsidiaries as a result of such Subsidiary's inclusion
in Seller's consolidated federal income tax returns.
Except for reclamation bonds and indemnification obligations set forth in
contracts or leases incurred in the ordinary course of business, no Subsidiary
is directly or indirectly liable, by guarantee, indemnity or otherwise, upon or
with respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds with respect to, or obligated to guarantee or
assume, any Liability for any Person other than another Subsidiary. The
Subsidiaries have no Indebtedness. For the purposes of this Agreement,
"Indebtedness" shall mean, for any Person, (a) all indebtedness or other
obligations of such Person for borrowed money and (b) all obligations under
leases that are recorded as capital leases in respect of which such Person is
liable as lessee.
24
4.9 Absence of Certain Changes. Since December 31, 2000, except as set
forth in Schedule 4.9 and except as permitted under Section 5.3:
(a) There has not been, nor to the knowledge of Seller has any
of the Subsidiaries been threatened with, any adverse change in the assets,
liabilities, business as currently conducted, properties, operations, or
financial condition of the Subsidiaries, which has had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(b) None of the Subsidiaries has suffered any casualty loss or
substantial interruption in use (whether or not covered by insurance) on
account of fire, flood, riot, strike or other hazard or act of God, other
than customary or recurring interruptions in use typically associated with
seasonality and weather conditions;
(c) No material liability or material obligation of any nature
(whether absolute, accrued, contingent or otherwise) of any of the
Subsidiaries (considered as a whole) has been incurred except in the
ordinary course of business, consistent with past practice, and the
Subsidiaries have not increased, or experienced any significant change in
assumptions underlying or methods of calculating, any bad debt, contingency
or other reserve;
(d) No liability or obligation (whether absolute, accrued,
contingent or otherwise) of any of the Subsidiaries which is material to
the Subsidiaries taken as a whole has been paid, discharged or satisfied
other than by payment, discharge or satisfaction in the ordinary course of
business;
(e) Except in the ordinary course of business, consistent with
past practice, none of the Subsidiaries has permitted or allowed any of
such assets or properties to be subjected to any Claims, except Permitted
Liens ;
(f) None of the Subsidiaries has canceled or waived any Claims
or rights of value or sold, transferred, distributed or otherwise disposed
of any assets or properties (real, personal or mixed, tangible or
intangible) except, in each case, in the ordinary course of business,
consistent with past practice;
(g) None of the Subsidiaries has disposed of or permitted to
lapse any rights to the use of any Intellectual Property (as defined in
Section 4.14), or disposed of or disclosed to any Person not bound to
maintain its confidentiality any trade secret, formula, process or knowhow
not theretofore a matter of public knowledge;
25
(h) Except as granted in the ordinary course of business
consistent with past practice or as required under collective bargaining
agreements, none of the Subsidiaries has granted or incurred any obligation
for any increase in the compensation of officers, directors or employees,
whether now or hereafter payable, including any such increase pursuant to
any option, bonus, stock purchase, pension, profit sharing, deferred
compensation, retirement payment or other plan, arrangement, contract or
commitment, and none of the Subsidiaries has employed any additional
executive or management personnel having an annual salary (in each case) in
excess of $50,000, or terminated any such personnel having an annual salary
(in each case) in excess of $50,000;
(i) None of the Subsidiaries has made any change in any method
of accounting or accounting practice, principle or policy, whether or not
required by GAAP;
(j) None of the Subsidiaries has written off any asset as
unusable, uncollectible or obsolete or for any other reason, or written up
the value of any asset, or determined as collectible any Accounts
Receivable or any portion thereof which were previously considered
uncollectible, which asset is material to the Subsidiaries taken as a
whole;
(k) None of the Subsidiaries has made or suffered any material
change in the conduct or nature of any aspect of the businesses of the
Subsidiaries (considered as a whole), other than changes made in the
ordinary course of business and changes which did not have a Material
Adverse Effect;
(l) None of the Subsidiaries has made (or committed to make)
capital expenditures in an amount which exceeds $100,000 for any item or
$350,000 in the aggregate (for all capital expenditures of the
Subsidiaries, taken as a whole);
(m) None of the Subsidiaries has paid (or delayed payment of)
payables, collected (or delayed collection of) receivables or waived any
rights, which rights are material to the Subsidiaries taken as a whole, in
each case other than in the ordinary course of business consistent with
past practice;
(n) None of the Subsidiaries has borrowed any money, or issued
any bonds, debentures, notes or other corporate securities, including
without limitation, those evidencing borrowed money;
(o) None of the Subsidiaries has paid (or been paid by) any
Related Party, or charged (or been charged by) any Related Party, for (A)
goods sold or services rendered
26
by or to any of the Subsidiaries, or (B) corporate overhead expenses,
management fees, legal or accounting fees, capital charges, or similar
charges or expenses on a basis which is either materially more or
materially less favorable to the Subsidiaries taken as a whole than the
basis which would be employed by a party which is not a Related Party;
(p) None of the Subsidiaries has paid or incurred any management
or consulting fees, or engaged any consultants, other than in the ordinary
course of business consistent with past practice;
(q) None of the Subsidiaries has issued or sold any securities
of any class or amended any provision of its Certificates or Articles of
Incorporation, Bylaws or other organizational documents;
(r) Except as required pursuant to Section 1.4, none of the
Subsidiaries has paid, declared or set aside any dividend or other
distribution on its securities of any class or purchased, exchanged or
redeemed any of its securities of any class;
(s) None of the Subsidiaries has experienced an adverse change
in the aggregate amount of trade receivables of the Subsidiaries or the
aging thereof which is material to the Subsidiaries taken as a whole, or a
change in the level of the Inventory which is material to the Subsidiaries
taken as a whole;
(t) None of the Subsidiaries has entered into any transaction
not enumerated above other than in the usual and ordinary course of
business in accordance with past practices; and
(u) None of the Subsidiaries has agreed, whether in writing or
not, to do any of the foregoing.
4.10 Material Contracts. Except as set forth on Schedule 4.32, Schedule
4.10, Schedule 4.14, Schedule 4.17 or Schedule 4.18, none of the Subsidiaries
is a party to or bound by any currently effective:
(a) commitment, obligation, agreement or contract with respect
to any sales agent, broker or distributor not cancelable without penalty
upon notice of 60 days or less pursuant to which any Subsidiary must pay
commissions or other compensation in connection with the sale of such
Subsidiary's respective products;
(b) employment contract (or any other form of contract) with any
officer, consultant, director or employee with a term exceeding one year or
requiring any of the Subsidiaries to pay severance pay, deferred
compensation, retention bonuses or so-called "sale bonuses";
27
(c) plan, arrangement or contract providing for options,
bonuses, stock purchases, deferred compensation, stock appreciation rights,
medical or dental benefits, or similar arrangements;
(d) restrictive covenants or agreements with any former
employees, officers, consultants, directors or stockholders of any of the
Subsidiaries;
(e) joint venture or other commitment, obligation, agreement or
contract involving the sharing of profits, information or technology or any
contract or agreement restricting any of the Subsidiaries or any
Subsidiary's employees or otherwise limiting their freedom to compete in
any line of business or with any Person or from otherwise carrying on its
business;
(f) outstanding guaranty, subordination or other similar type of
commitment, obligation, agreement or contract, whether or not entered into
in the ordinary course of business;
(g) outstanding power of attorney empowering any person, company
or other organization to act on behalf of the Subsidiary (other than powers
of attorney in the ordinary course of business in Mexico and Brazil to
perform ministerial and non-material acts);
(h) management, consulting or employment contract or collective
bargaining agreement or other labor union agreement;
(i) agreement or order for the purchase of Inventory, Equipment
or other materials having a price under any such agreement or order in
excess of $25,000;
(j) agreement restricting in any manner any of the Subsidiaries'
right to sell to or purchase from any other Person, the right of any other
Person to compete with such Subsidiary, or the ability of such Person to
employ any of the Subsidiaries' respective employees;
(k) agreement between any Subsidiary, on the one hand, and
Seller or any of its Affiliates, or any other Related Parties, on the other
hand;
(l) agreement for the advertisement, display, or promotion of
any of the Subsidiaries' respective products or services in excess of
$25,000 which cannot be canceled by the applicable Subsidiary without
payment or penalty upon notice of sixty (60) days or less;
(m) service, supply, equipment rental, or security agreement
affecting any of the Subsidiaries' respective assets where the annual
service charge is in excess of $25,000 and has an unexpired term as of the
Closing Date in excess of sixty (60) days;
28
(n) agreement or order for the sale of goods or the performance
of services sold or performed by the applicable Subsidiary which can not be
performed within the time limits or on the other terms therein provided or,
when actually performed, would result in an obligation (contractual or
otherwise) to pay damages or penalties;
(o) performance, bid or completion bond, or surety or
indemnification agreement;
(p) requirements contract;
(q) loan or credit agreement, pledge agreement, note, security
agreement, mortgage, debenture, indenture, factoring agreement or letter of
credit;
(r) contract with any railroad or other transportation company
which provides for the expenditure of more than $25,000 annually;
(s) agreement for the purchase, sale or removal (as the case may
be) of electricity, gas, water, telephone, coal, sewage, or other utility
service in excess of $50,000 annually;
(t) material governmental order or directive;
(u) agreement for the treatment or disposal of Hazardous
Substances;
(v) agreement or arrangement not specifically enumerated above
concerning or which provides for the receipt or expenditure of more than
$50,000, except agreements for the purchase or sale of goods or rendering
of services entered into by the Subsidiaries in the ordinary course of
business; or
(w) any other commitments, obligations, contracts or agreements
in excess of $10,000 individually or $50,000 in the aggregate not made in
the ordinary course of business.
All of the foregoing contracts, leases, agreements and other instruments
referred to in this Section 4.10, and all of the other contracts, leases,
agreements and other instruments referred to in this Agreement (including,
without limitation, the Personal Property Leases, the Real Property Leases, the
Mineral Leases and the Intellectual Property Licenses), are referred to
collectively as the "Contracts". Except as set forth in any Schedule hereto:
(i) all of the Contracts are in full force and effect and are valid and
enforceable against the Subsidiaries parties thereto and, to the Seller's
knowledge, the other parties thereto, in accordance with their terms, except as
may be limited by (A) applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally, (B) equitable
29
considerations, or (C) public policy limitations (including as to the
enforceability of indemnification provisions); (ii) the applicable Subsidiary is
in material compliance with all terms and requirements of each Contract and, to
the Seller's knowledge, each other Person that is a party to a Contract is in
material compliance with the terms and requirements of such Contract; (iii) to
Seller's knowledge no event has occurred or circumstance exists that (with or
without notice or lapse of time) is reasonably expected to contravene, conflict
with or result in a material violation or breach of, or give any Subsidiary or
any other Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate or modify
any Contract; (iv) there are no renegotiations or, to Seller's knowledge,
attempts to renegotiate or outstanding rights to negotiate any material amount
to be paid or payable to or by any Subsidiary under any Contract other than in
the ordinary course of business and, to Seller's knowledge, no Person has made a
written demand for such renegotiation; and (v) none of the Subsidiaries has
released or waived any of its material rights under any Contract, except, with
respect to the matters enumerated in clauses (i)-(v), both inclusive, as is not,
individually or in the aggregate, reasonably expected to have a Material Adverse
Effect. Except as set forth in Schedule 4.10, none of the Subsidiaries is a
party to, or bound by, any unexpired, undischarged or unsatisfied Contract,
under the terms of which the execution, delivery and performance by Seller of
this Agreement and the consummation of the transactions contemplated hereby will
require a consent, approval, or notice or will result in a breach, lapse,
cancellation, right to terminate, default or acceleration of any right or
obligation or result in a Claim on any of the assets of the Subsidiaries, except
for breaches, lapses, cancellations, terminations, defaults, accelerations and
Claims which are not, individually or in the aggregate, reasonably expected to
have a Material Adverse Effect.
4.11 Leases and Concessions.
(a) Schedule 4.11(a) is a complete and accurate list of all
material leases (excluding Mineral Leases) and other agreements under which
any Subsidiary is a lessee of or holds or operates any property, real or
personal, owned by any other Person. The Subsidiary identified in Schedule
4.11(a) is the owner of the leasehold estates or other rights and interests
purported to be granted by such leases and agreements, in each case free
and clear of any Claims, except as set forth in Schedule 4.11(a) and except
for Permitted Liens. The leases of personal property under which any
Subsidiary is the lessee are referred to herein as the "Personal Property
Leases." The leases of real property (other than Mineral Leases) under
which a Subsidiary is the lessee are referred to herein as the "Real
Property Leases," and the real property leased thereunder is referred to
herein as the "Leased Premises."
30
(b) Schedule 4.11(b) is a complete and accurate list of all
leases, subleases, assignments of leases, licenses, mineral concessions and
other agreements granting to any Subsidiary the right of, and for which the
Subsidiary is currently actively engaged in, mining, extracting and
removing kaolin or ball clay, feldspar or other economically mineable
minerals or for which the Subsidiaries currently operate a manufacturing or
processing plant. Such leases, subleases, assignments of leases, mineral
concessions and other agreements are referred to herein collectively as the
"Mineral Leases," and the real property subject thereto is referred to
herein as the "Leased Mining Properties." Each Subsidiary identified in
Schedule 4.11(b) is the owner of the leasehold estate or other rights and
interests purported to be granted by the Mineral Leases, in each case free
and clear of any Claims, except as set forth in such Mineral Leases or in
Schedule 4.11(b), and except for Permitted Liens. The copies of the
Mineral Leases made available to Purchaser during the investigation
described in Section 3.5 are true, correct and complete copies of the same
as in effect on the date of this Agreement.
(c) Except as set forth on Schedule 4.11(c)(i), (i) all
royalties and all rent currently due and payable under the Mineral Leases
have been paid in full and (ii) the term of all Mineral Leases whose
original terms have heretofore expired has been renewed or extended in
accordance with the terms of such Mineral Leases.
4.12 Real Estate; Encumbrances.
(a) Schedule 4.12(a) is a complete and accurate list of real
property owned by each Subsidiary, by name of tract, date of conveyance to
such Subsidiary, and area (in approximate square feet/meters or number of
acres). Such real property is referred to herein as the "Real Estate".
The copies of the deeds to the Real Estate made available to Purchaser
during the investigation described in Section 3.5 are true and correct
copies of all instruments conveying to the applicable Subsidiary all Real
Estate owned by such Subsidiary. Except as set forth on Schedule 4.12(a),
such Subsidiary has good and marketable fee simple title (or its
equivalent, if any, under the laws of jurisdictions other than the United
States in which any of the Real Estate is located) to the surface estate
and the mineral estate of the Real Estate, subject to no Claims other than
Permitted Liens.
(b) Schedule 4.12(b) identifies the parcels of Real Estate or
Leased Mining Properties on which any of the Subsidiaries currently operate
a manufacturing or processing plant (collectively the "Plant Properties",
such plants being referred to herein as the "Plants"), and the parcels of
Real Estate which any of the Subsidiaries currently use for the purpose of
mining, extracting and removing kaolin,
31
ball clay, feldspar or other economically mineable minerals (the "Owned
Mining Properties"). The term "Plant Properties" is not intended to
include and does not include locations (such as Aiken or ▇▇▇▇▇▇▇▇) used for
storage or sporadic or occasional processing on other than a currently
active and continuous basis. Schedule 4.12(b) also identifies the Leased
Mining Properties which any of the Subsidiaries currently use for the
purpose of mining, extracting and removing ball clay, kaolin, feldspar or
other economically mineable minerals. The Owned Mining Properties and the
Leased Mining Properties are referred to herein collectively as the "Mining
Properties".
(c) Except as set forth on Schedule 4.9, Schedule 4.11(a),
Schedule 4.11(b), Schedule 4.12(a), or Schedule 4.12(b), the Real Estate:
(i) constitutes substantially all real property and improvements owned by
the Subsidiaries and used in the conduct of their respective businesses;
(ii) to the Seller's knowledge, is not in possession of any adverse
possessors; and (iii) is not subject to any leases or tenancies of any
kind. As to each of the Plant Properties, to Seller's knowledge, (i) no
Plant Property is used in a manner which violates any applicable zoning
ordinances or other laws or regulations; and (ii) the Plant Properties are
served by all water, sewer, electrical, telephone, drainage and other
utilities required for the normal current operations of the business of the
Subsidiaries; and (iii) the Plant Properties require no work or
improvements in excess of $150,000 in the aggregate to bring them into
compliance in all material respects with any applicable law or regulation,
and are in operating condition and functional repair sufficient for the
Subsidiaries to conduct their business as currently conducted.
(d) To the Seller's knowledge, none of the utility companies
serving any of the Plant Properties has overtly threatened any of the
Subsidiaries in writing with any reduction in service since December 31,
1999.
(e) The Plant Properties have access to railroad main lines over
side tracks. Neither Seller nor any Subsidiary has received written
notice, and Seller has no knowledge that any of the Subsidiaries is in
violation of any railroad side track agreements pertaining to such side
tracks, all of which are, to Seller's knowledge, in full force in effect
and none of the Subsidiaries is in default thereunder.
(f) Other than by another Subsidiary, none of the Plant
Properties or Mining Properties are operated as joint mines or facilities
with any Person. Neither Seller nor any of its Affiliates own or operate
any facility or property which is necessary to the operation or business of
any of the Subsidiaries.
32
(g) There are no challenges or appeals pending regarding the
amount of the real estate Taxes on, or the assessed valuation of, any of
the Real Estate or to Seller's knowledge, the Leased Premises and Leased
Mining Properties, and no special arrangements or agreements exist with any
governmental authority with respect to the Real Estate or, to Seller's
knowledge, the Leased Premises (the representations and warranties
contained in this paragraph (g) shall not be deemed to be breached by any
prospective general increase in real estate Tax rates or assessments).
(h) To Seller's knowledge, there is no pending or threatened
condemnation or other eminent domain proceedings with respect to any
portion of the Real Estate, the Leased Premises, or the Leased Mining
Properties.
(i) To Seller's knowledge, there is no pending or threatened Tax
assessment (in addition to the normal, annual general real estate Tax
assessment) with respect to any portion of the Real Estate or, to the
extent Seller is liable for payment therefor, the Leased Premises or the
Leased Mining Properties.
(j) To Seller's knowledge: (i) none of the Real Estate, Leased
Premises or Leased Mining Properties (collectively, the "Properties") has
ever been used as a sanctioned modern cemetery; (ii) none of the Properties
has been identified by any authoritative governmental entity of applicable
jurisdiction as having significant archeological artifacts or historical
buildings or structures; and (iii) there is no unique habitat or
significant concentration of threatened or endangered species of (A)
animal, under federal or state law (or regulations or interpretations
thereof) on any of the Properties, or (B) plant under federal or state law
(or regulations or interpretations thereof) on any of the Properties.
Except as set forth in Schedule 4.13, to Seller's knowledge, no Person
residing within one mile of any of the Properties has, within the past
year, complained in writing to any of the Subsidiaries or to any
governmental authority about the alleged conduct of the operations of the
Subsidiaries thereat.
(k) The Mining Properties have access to public roads which is
sufficient to permit mining activities to take place as currently
conducted.
(l) Except for the Properties, neither Seller nor any of its
Affiliates owns or leases any real property in the geographic areas in
which the Subsidiaries currently operate which, to Seller's knowledge,
contains non-incidental reserves of ball clay, kaolin or feldspar which are
feasible to commercially mine.
(m) Other than as disclosed on Schedule 4.9, all capital
improvements and expansions which have been planned
33
to be made to the Plant owned by K-T Mexico have been made, and such Plant,
as so improved, is operating in accordance with the specifications
therefor. Other than as disclosed on Schedule 4.9, all such improvements
and expansions have been paid for in full prior to the date hereof, and all
warranties of contractors and subcontractors who were engaged in connection
with the construction of such improvements and expansions and which are in
favor of K-T Mexico are in full force and effect. K-T Mexico is in
possession of "as built" plans and specifications for such Plant, as so
improved.
(n) The agreements listed on Schedule 4.12(n) are the only
agreements providing for any royalty or other fee or amount payable for any
period after the Closing Date on the production or severance of kaolin,
ball clay, feldspar or other minerals mined from any of the Owned Mining
Properties.
4.13 Environmental.
Except as listed in Schedule 4.13:
(a) The Subsidiaries are in material compliance with applicable
Environmental Laws (including as a result of so called "grandfather
provisions" specified therein) and Environmental Permits, and are in
material compliance with applicable Health and Safety Laws, except in each
case to the extent such failure is not reasonably expected to have a
Material Adverse Effect.
(b) The Subsidiaries possess all material Environmental Permits
which are required for the operation of their respective businesses as now
being conducted, including the possession of such Environmental Permits
permitted as a result of so called "grandfather provisions" specified
therein, except to the extent such failure is not reasonably expected to
have a Material Adverse Effect.
(c) None of the Subsidiaries has received any written
communication alleging that any Subsidiary currently is not or was not
since January 1, 1995, in compliance with applicable Environmental Laws or
Environmental Permits
(d) There is no Environmental Claim pending or, to Seller's
knowledge, threatened, against any of the Subsidiaries.
(e) None of the Subsidiaries has received any written
communication alleging that any of the Properties is currently listed on
the National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") or any comparable state or foreign list.
34
(f) None of the Subsidiaries has received any written notice
from any Person with respect to any Off-Site Facility, of potential or
actual liability or a written request for information from any Person under
or relating to CERCLA or any comparable state or local law.
(g) There are currently no Hazardous Substances used, generated,
treated, stored, transported, disposed of, or handled by the Subsidiaries
at any of the Properties except in material compliance with applicable
Environmental Laws or Environmental Permits. Furthermore, there have not
been any Hazardous Substances historically used, generated, treated,
stored, transported, disposed of, or handled by the Subsidiaries in
violation of Environmental Laws in effect at the time such use, generation,
treatment, storage, transportation, disposal or handling occurred. To
Seller's knowledge there are no Hazardous Substances existing on, under or
about any of the Properties in violation of, or prohibited by, any
Environmental Laws.
(h) There are no underground storage tanks located on the
Properties. All underground storage tanks previously located at the
Properties and not present thereat as of the date hereof were removed in
accordance with all Environmental Laws in effect at the time of such
removal.
(i) For the purposes of this Agreement:
(1) "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, Claims, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging
potential liability (including potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from:
(A) the presence, or release into the environment, of any Hazardous
Substance at any location, whether or not owned by any of the Subsidiaries;
or (B) circumstances forming the basis of any violation or alleged
violation, of any Environmental Law; or (C) any and all claims by any
Person seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or Release of
any Hazardous Substances.
(2) "Environmental Laws" shall mean all federal, state,
local or foreign statutes, laws, rules, ordinances, codes, rule of common
law, regulations, judgments and orders (including any so-called
"grandfather provisions" specified therein) relating to protection of human
health or the environment (including ambient air, surface water, ground
water, drinking water, wildlife, plants, land surface or subsurface strata
and applicable
35
mine reclamation), including laws and regulations relating to Releases or
threatened Releases of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances (except as otherwise
specifically provided in Sections 4.13(g) and 4.13(h) herein).
(3) "Environmental Permits" shall mean all environmental,
health, safety and applicable mining permits, licenses, registrations, and
governmental approvals and authorizations, whether issued or granted by a
U.S. or foreign national, state, local or municipal governmental authority.
(4) "Facility" means any facility as defined in CERCLA.
(5) "Hazardous Substances" shall mean: (A) any petroleum,
petroleum products, radioactive materials, urea formaldehyde foam
insulation, asbestos (whether friable or not), transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls (PCBs) and radon gas; and (B) any chemicals,
materials or substances which are now or ever have been 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 other words of similar
import, under any Environmental Law.
(6) "Health and Safety Laws" means any federal, state,
foreign or local law, statute, ordinance, regulation or rule of common law
primarily pertaining to the worker safety or workplace conditions
(including, without limitation, the Occupational Safety and Health Act).
(7) "Off-site Facility" shall mean any Facility (as defined
in CERCLA) which is not presently owned, leased or occupied by any of the
Subsidiaries.
(8) "Release" shall mean any release, spill, emission,
emptying, leaking, injection, deposit, disposal, discharge, dispersal,
leaching, pumping, pouring, or migration into the atmosphere, soil, surface
water, groundwater or property.
4.14 Patents, Trademarks and Trade Names.
(a) Schedule 4.14 contains a true and correct list of the
Intellectual Property used or contemplated for use by any Subsidiary in the
conduct of the Business, including an indication whether the Intellectual
Property is
36
owned or licensed. Except as provided in Schedule 4.14, each Subsidiary
owns, or has the sole and exclusive right to use, all Intellectual Property
used in or necessary for the conduct of its business substantially as it is
now conducted, and the consummation of the transactions contemplated hereby
will not alter or impair the use of any such rights by the Subsidiaries in
any respect. No claim is pending and, to the knowledge of the Seller, no
infringement claim or any other claims have been asserted during the past
five years, or, to the knowledge of Seller, is threatened by any Person
against any Subsidiary or the use by any of the Subsidiaries of, or
challenging or questioning the validity, enforceability or effectiveness
of, any Intellectual Property used by any of the Subsidiaries, or any
Intellectual Property Licenses related thereto, and the Seller does not
know of any valid basis for any such claim. To the knowledge of the
Seller, the use of such Intellectual Property by each of the Subsidiaries
is not in violation of and does not infringe any patent, trademark, trade
name, copyright, technology, knowhow or process or other proprietary or
trade rights of any third party. No use by any Subsidiary of any
Intellectual Property licensed to it violates the terms of any Intellectual
Property License. Except as set forth on Schedule 4.14, no Subsidiary
manufactures products which are the subject of any Intellectual Property
owned by or licensed from third parties. No royalties or fees are payable
by any Subsidiary to anyone for use of the Intellectual Property which
would result in an annual payment by any Subsidiary to anyone in excess of
$5,000.
(b) Schedule 4.14 sets forth a complete and accurate list of all
U.S. and foreign copyright registrations, copyright applications, patents
and patent applications, trademark and service ▇▇▇▇ registrations
(including Internet domain name registrations), trademark and service ▇▇▇▇
applications and material unregistered trademarks and service marks
included within the Intellectual Property.
(c) Except with respect to unregistered trademarks and service
marks, each owner listed on Schedule 4.14 is listed in the records of the
appropriate governmental entity as the sole owner of record of the
Intellectual Property.
(d) Schedule 4.14 lists all Software which is owned
("Proprietary Software") or licensed, leased or otherwise used by any of
the Subsidiaries (other than "off-the-shelf" Software), and identifies
which Software is owned, licensed, leased or otherwise used, as the case
may be.
37
(e) Schedule 4.14 sets forth a complete and accurate list of all
agreements (other than agreements with respect to "off-the-shelf" Software)
between any of the Subsidiaries, on the one hand, and any Person, on the
other hand, granting any right to use or practice any rights under any of
the Intellectual Property owned either by any of the Subsidiaries or by any
other Person (collectively, "Intellectual Property Licenses").
(f) None of the Subsidiaries has received notice of any claims,
and, to Seller's knowledge, there are no pending claims, of any Persons
relating to the scope, ownership or use of any of the Intellectual
Property.
(g) Each copyright registration, patent and registered trademark
and application therefor listed on Schedule 4.14 is in proper form, not
disclaimed and has been duly maintained, including the submission of all
necessary filings in accordance with the legal and administrative
requirements of the appropriate jurisdictions.
(h) None of the Subsidiaries has licensed or sublicensed its
rights in any of the Intellectual Property or received or granted any such
rights, other than pursuant to Intellectual Property Licenses.
(i) All Proprietary Software set forth in Schedule 4.14 was
either developed (a) by employees of the Subsidiaries within the scope of
their employment; or (b) by independent contractors who have assigned their
right to the Subsidiaries pursuant to written agreements.
(j) As used herein (x) "Intellectual Property" means all
intellectual property rights of the Subsidiaries or used by the
Subsidiaries in the conduct of their business, including, without
limitation, all patents, trademarks, designs, service marks, copyrights,
Internet domain names and web sites, trade or business names, trade dress
and slogans (and all registrations of any of the foregoing, and all
applications for registration thereof), Software, and all goodwill and
confidential or proprietary information associated with such intellectual
property rights, and (y) "Software" means any and all (i) computer
programs, including any and all software implementation of algorithms,
models and methodologies whether in source code or object code, (ii)
databases and computations, including any and all data and collections of
data, (iii) all documentation, including user manuals and training
materials, relating to any of the foregoing, and (iv) the content and
information contained in any Web site, provided, however, that neither
Intellectual Property nor Software shall include any off-the-shelf,
shrinkwrapped licensed, or standardized software, program, or similar
material (including documentation therefor) generally commercially
available, nor any rights whatsoever in the name "Hecla" or any similar or
derivative name.
38
4.15 Litigation; Compliance with Law.
(a) Except as set forth in Schedule 4.15, (i) none of the
Subsidiaries is engaged in or a party to, and to the knowledge of the
Seller none of them is threatened with, any material claim, controversy,
legal action or other proceeding, whether or not before any federal, state,
municipal, or other governmental department, commission, board, bureau or
other court or administrative agency, whether domestic or foreign; (ii)
none of the Subsidiaries has been charged at any time during the last five
years with, and, to Seller's knowledge, is not under investigation with
respect to, any violation of any material provision of federal, state,
municipal, foreign or other applicable law or administrative regulation;
and (iii) none of the Subsidiaries is a party to or subject to any
judgment, decree or substantive order entered in any lawsuit or proceeding
brought by any governmental or regulatory authority or by any other Person,
whether domestic or foreign.
(b) To Seller's knowledge, there are no facts which, if known by
a potential claimant or governmental authority, would give rise to a claim
or proceeding which, individually or in the aggregate, is reasonably
expected to have a Material Adverse Effect or inhibit the consummation of
the transaction contemplated by this Agreement.
(c) The Subsidiaries are in compliance in all material respects
with each decree, order, writ, judgment or arbitration award, or law,
statute, or regulation of or agreement with, or Permit from, any federal,
state, local, foreign or other governmental authority (or to which the
properties, assets, personnel or business activities of the Subsidiaries
are subject), including laws, statutes and regulations relating to equal
employment opportunities, fair employment practices, wages, hours,
benefits, collective bargaining, payment of social security and similar
Taxes, occupational safety and health, plant closings, sexual harassment,
and sex, race, religious and age discrimination. Since December 31, 1996,
none of the Subsidiaries has received from any governmental authority any
written notification with respect to possible noncompliance of any material
decree, order, writ, judgment or arbitration award or law, statute, or
regulation. Notwithstanding the foregoing, no representation or warranty
is made by this paragraph (c) with respect to laws, rules and regulations
relating to the environment (which are exclusively provided for in Section
4.13 hereof).
(d) The Subsidiaries possess all material licenses, permits,
registrations and governmental approvals ("Permits") which are required in
order for the Subsidiaries to conduct their businesses as presently
39
conducted. It is understood and agreed that the foregoing definition and
the foregoing representation and warranty does not apply to Environmental
Permits or environmental matters which are the subject of Section 4.13
hereof. There are currently no material violations of any Permits, and
except as identified in Schedule 4.15(d), no Permits terminate or require
the consent of any third party upon the consummation of the transactions
contemplated by this Agreement. K-T de Mexico has two concessions validly
issued by the NWC to use and exploit national underground waters for
industrial purposes, each for a volume of 72,000 cubic meters annually.
For purposes of this section the term "NWC" means the National Water
Commission, the federal agency in Mexico with the full statutory and
regulatory authority to authorize through a concession the use of water
sources (including underground waters).
(e) On or prior to the date hereof, Seller shall have filed an
appropriate pleading in Hecla Mining Company v. Zemex Corporation, which it
filed on January 22, 2001 in the U.S. District Court of the Northern
District of Illinois (Chicago) (Civil Docket No.: 01-CV-405), to remove its
demand for specific performance of that certain Stock Purchase Agreement
dated November 17, 2000 between Seller and Zemex U.S. Corporation, and
Seller shall use its commercially reasonable best efforts to have such
motion granted promptly.
4.16 Tax Matters.
(a) Except as set forth in Schedule 4.16, all Tax Returns of
every kind that are due (after giving effect to any extended due date) to
have been filed by or on behalf of any of the Subsidiaries in accordance
with applicable law have been duly and timely filed, or to the extent not
timely filed, all applicable penalties and interest have been paid or
accrued on the Financial Statements. Such Tax Returns are correct in all
material respects. Each Subsidiary has paid all Taxes required to be paid.
Each Subsidiary has paid, or made provision for the payment of, all Taxes
shown to be due on such Tax Returns or otherwise, or pursuant to any
assessment received by any of the Subsidiaries. The amounts so paid or
reserved have been and are adequate to pay all Taxes of every kind
whatsoever, including interest and penalties, due and payable by the
Subsidiaries. No material deficiencies for any Taxes have been asserted
or, to Seller's knowledge, threatened, and, to Seller's knowledge, no audit
of any Tax Returns is currently underway or threatened. There are no
outstanding agreements by any Subsidiary for the extension of time for the
assessment of any Tax. Schedule 4.16 sets forth, with respect to income
and franchise Taxes, (i) the taxable years of the Subsidiaries as to which
the respective statutes of limitations with respect to Taxes have not
expired, and (ii)
40
with respect to such taxable years sets forth those years for which
examinations have been completed, those years for which examinations are
presently being conducted, those years for which examinations have not been
initiated, and those years for which required Tax Returns have not yet been
filed.
(b) None of the Subsidiaries is a party to or bound by (nor will
any of the Subsidiaries become a party to or bound by) any tax indemnity,
tax sharing or tax allocation agreement.
(c) Except for the affiliated group of which Seller is the
common parent, none of the Subsidiaries has been a member of an affiliated
group of corporations since December 31, 1990, within the meaning of
Section 1504 of the Code.
(d) None of the Subsidiaries has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or
agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law) apply to any
disposition of any asset owned by it.
(e) None of the Subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately
or in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code.
(f) Seller is not a person other than a United States person
within the meaning of the Code and the transaction contemplated hereby is
not subject to the withholding provisions of Section 3406 or subchapter A
of Chapter 3 of the Code.
(g) None of the Subsidiaries has made a deemed dividend election
under Regulations Section 1.1502-32(f)(2) or a consent dividend election
under section 565 of the Code.
(h) As used in this Agreement, the following terms shall have
the following meanings:
(1) the term "Taxes" means all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service
use, value added, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or
other taxes, fees, assessments or charges of any kind whatever, together
with any interest and any penalties, additions to tax or additional amounts
with respect thereto, and the term "Tax" means any one of the foregoing
Taxes;
41
(2) the term "Tax Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Tax Return" means any one of the foregoing Tax
Returns; and
(3) the term "Code" means the Internal Revenue Code of
1986, as amended. All citations to the Code, or to the Treasury
Regulations promulgated thereunder, shall include any amendments or any
substitute or successor provisions thereto.
4.17 Employee Benefit Plans.
(a) Neither the U.S. Subsidiaries nor any affiliate of the U.S.
Subsidiaries as determined under Code Section 414(b), (c), (m) or (o)
("ERISA Affiliate," provided that no non-U.S. affiliate shall be included
within the meaning of ERISA Affiliate under this Agreement) maintains,
administers, contributes or has any liability with respect to any: (i)
employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) ("Plan"),
including any multiemployer plan as defined in Section 3(37) of ERISA
("Multiemployer Plan"); (ii) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) ("Welfare Plan"); or (iii) bonus, deferred
compensation, stock purchase, stock option, severance, salary continuation,
vacation, sick leave, fringe benefit, incentive, insurance, welfare or
similar plan or arrangement ("Employee Benefit Plan"), for the benefit of
employees of the U.S. Subsidiaries or any ERISA Affiliate, other than those
Plans, Welfare Plans and Employee Benefit Plans described in Schedule 4.17.
Except as required by Section 4980B of the Code, Part 6 of Subtitle B of
Title I of ERISA or applicable state law, neither the U.S. Subsidiaries nor
any ERISA Affiliate (on behalf of the U.S. Subsidiaries or any ERISA
Affiliate) has promised any former employee or other individual not
employed by the U.S. Subsidiaries or any ERISA Affiliate, medical or life
insurance coverage or other welfare benefit and neither the U.S.
Subsidiaries nor any ERISA Affiliate maintains or contributes (on behalf of
the U.S. Subsidiaries or any ERISA Affiliate) to any plan or arrangement
providing medical or life insurance benefits to former employees of the
U.S. Subsidiaries or any ERISA Affiliate or their dependents, other than
benefits provided in the event of disability and conversion privileges.
Each Plan, Welfare Plan and Employee Benefit Plan (each, a "Benefit Plan")
is described in Schedule 4.17.
(b) Except as disclosed in Schedule 4.17, each Benefit Plan
complies, in form and operation, in all material respects, with all
applicable statutes, laws and regulations, including ERISA and the Code.
42
(c) Except as disclosed in Schedule 4.17, the funds available as
of the Closing Date under each Benefit Plan which is a defined benefit
pension plan equals or exceeds the Projected Benefit Obligation (as defined
in Financial Accounting Standard No. 87), of each such plan as of the
Closing Date, using the actuarial assumptions used by Seller's actuary for
plan funding purposes for the 2000 plan year, as evidenced by the actuarial
report prepared by ▇▇▇▇ & ▇▇▇▇▇▇ for each such plan prior to February 22,
2001, and a discount rate of 7% per year.
(d) Any Plan that is intended to qualify under Section 401(a) of
the Code meets (or the time has not expired during which such Plan may be
amended to meet) in all material respects all requirements for
qualification under Section 401(a) of the Code and the regulations
thereunder, and Seller has provided, or shall prior to Closing provide,
Purchaser with a copy of the most recent favorable determination letter
issued by the Internal Revenue Service ("IRS") concerning the Plan's
qualification. Each such Benefit Plan has been administered in all
material respects in accordance with its terms and the applicable
provisions of ERISA and the Code and the regulations thereunder and all
other applicable laws and no matter exists which would adversely affect the
qualified tax-exempt status of such Benefit Plan and any related trust.
(e) All reports and information relating to each such Benefit
Plan required to be filed with any governmental entity have been accurately
and timely filed except to the extent the failure to do so, individually or
in the aggregate, is not reasonably expected to have a Material Adverse
Effect; all reports and information relating to each such Benefit Plan
required to be disclosed or provided to participants or their beneficiaries
have been timely disclosed or provided except to the extent the failure to
do so, individually or in the aggregate, is not reasonably expected to have
a Material Adverse Effect; each trust related to any Benefit Plan which is
a voluntary employee beneficiary association pursuant to Section 501(c)(9)
of the Code has received a favorable determination letter from the Internal
Revenue Service with respect to its tax-exempt status, and nothing has
occurred since the date of such letter that has or is likely to adversely
affect such qualification or exemption. To Seller's knowledge, no
fiduciary of any Benefit Plan has committed a breach of any responsibility
or obligation imposed upon fiduciaries under Title I of ERISA with respect
to such Benefit Plan. The annual reports and actuarial statements
furnished to Purchaser fully and accurately set forth the financial and
actuarial condition of each Benefit Plan and each trust funding any Benefit
Plan.
43
(f) There has been delivered to Purchaser, or shall be delivered
to Purchaser prior to Closing, with respect to each Benefit Plan, the
following: a true, complete and correct copy of the annual report (if
required under ERISA) with respect to each such Benefit Plan for the last
three years (including all schedules and attachments); a true, complete and
correct copy of the summary plan description, together with each summary of
material modifications, required under ERISA with respect to such Benefit
Plan; all material employee communications relating to such Benefit Plan; a
true, complete and correct copy of such Benefit Plan; all trust agreements,
insurance contracts, accounts or other documents which establish the
funding vehicle for any Benefit Plan and the latest financial statements
thereof; and true, complete and correct copies of any investment management
agreements, administrative services contracts, or other agreements and
documents relating to the ongoing administration and investment of any
Benefit Plan.
(g) There are no actions, suits, proceedings, investigations or
hearings pending with respect to any Benefit Plan, or to Seller's
knowledge any claims (other than routine claims for benefits arising in the
ordinary course of any Benefit Plan) threatened against or with respect to
any Benefit Plan or any fiduciary or assets thereof, and, to Seller's
knowledge, there are no facts which could reasonably give rise to any such
actions, suits, proceedings, investigations, hearings or claims.
(h) Each Welfare Plan which is a group health plan (within the
meaning of Section 5000(b)(1) of the Code) complies with and has been
maintained and operated in accordance with each of the requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA or
any other similar state or local law. Schedule 4.17 sets forth the
individuals with rights to continuation coverage under Section 4980B of the
Code or Part 6 of Subtitle B of Title I or ERISA or similar state or local
law, including those individuals within the applicable election period.
(i) None of the U.S. Subsidiaries or any ERISA Affiliate will
incur any liability under any Benefit Plan solely on account of the
consummation of the transaction contemplated hereby, alone or together with
any other event. Each Benefit Plan is terminable and may be amended to
prospectively decrease the level of any benefit thereunder at the
discretion of the U.S. Subsidiaries or any ERISA Affiliate subject to the
terms thereof and of any collective bargaining agreement. No Benefit Plan
has any provision which could increase or accelerate benefits or any
provision which could increase liability as a result of the transaction
contemplated hereby, alone or together with any other event. Neither the
U.S. Subsidiaries nor any ERISA Affiliate nor any officer, director, agent
or employee of
44
the U.S. Subsidiaries or any ERISA Affiliate has made any oral or written
statement regarding any Benefit Plan which could result in liability in
excess of that set forth in the Benefit Plan.
(j) No withdrawals have occurred so as to cause any Plan to
become subject to the provisions of Section 4063 of ERISA, nor have the
U.S. Subsidiaries or any ERISA Affiliate ceased making contributions to any
Plan subject to Section 4064(a) of ERISA to which the U.S. Subsidiaries or
any ERISA Affiliate made contributions during the six (6) years prior to
the date hereof, nor ceased operations at any facility so as to become
subject to Section 4062(e) of ERISA. No amendment to any Plan has been
adopted for which security is required under Section 401(a)(29) of the
Code. Neither the U.S. Subsidiaries nor any ERISA Affiliate has incurred
or suffered to exist any "accumulated funding deficiency" (as defined in
Section 302 of ERISA) whether or not waived by the IRS, involving any Plan
subject to Section 412 of the Code or Part 3 of Subtitle B of Title I of
ERISA. There is currently no active filing by the U.S. Subsidiaries or any
ERISA Affiliate with the PBGC (and no proceeding has been commenced by the
PBGC and no condition exists and no event has occurred that could
constitute grounds for the termination of any Plan by the PBGC) to
terminate any Plan which is subject to Title IV of ERISA and which has been
maintained or funded, in whole or in part, by the U.S. Subsidiaries or any
ERISA Affiliate.
(k) Neither the U.S. Subsidiaries nor any ERISA Affiliate has
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC")
as a result of the voluntary or involuntary termination of any Plan which
is subject to Title IV of ERISA. There is currently no active filing by
the U.S. Subsidiaries or any ERISA Affiliate with the PBGC (and no
proceeding has been commenced by the PBGC) to terminate any Plan which is
subject to Title IV of ERISA and which has been maintained or funded, in
whole or in part, by the U.S. Subsidiaries or any ERISA Affiliate.
(l) Neither any Benefit Plan fiduciary nor any Benefit Plan has
engaged in any transaction in violation of Section 406 of ERISA or any
"prohibited transaction" (as defined in Section 4975(c)(1) of the Code) and
there has been no "reportable event" (as defined in Section 4043 of ERISA)
with respect to any Plan. Neither the U.S. Subsidiaries nor any ERISA
Affiliate has failed to make any contributions or to pay any amounts due
and owing as required by the terms of any Benefit Plan or collective
bargaining agreement or ERISA or any other applicable law. Full payment has
been made of all amounts which the U.S. Subsidiaries or any ERISA Affiliate
is required or committed to pay to the Benefit Plans as of December 31,
2000.
(m) Neither the U.S. Subsidiaries nor any ERISA Affiliate
contributes or has ever contributed to a Multiemployer Plan.
45
(n) Each employee benefit plan relating to employees of the
Subsidiaries employed outside of the United States is in compliance in all
material respects with all requirements of law applicable thereto and the
respective requirements of the governing documents of such plan. Each
employee benefit plan relating to employees of the Subsidiaries employed
outside the United States is funded in accordance with, and the assets
thereof are held by a person authorized to hold such assets under,
applicable law and regulation and the governing documents of such plan.
(o) Each Subsidiary outside the United States has paid in due
course and satisfied all of its obligations with respect to social
security, pension funds, insurance, severance claims, workers housing,
profit-sharing and other payments due under applicable Mexican or Brazilian
law with respect to employees.
4.18 Labor.
(a) Except as disclosed in Schedule 4.18 or Schedule 4.10, none
of the Subsidiaries is a party to, or bound by, any collective bargaining
agreement with a labor union or labor organization. There is no unfair
labor practice or labor arbitration proceeding pending or, to Seller's
knowledge, threatened against any Subsidiary relating to its business,
except for such proceedings which are not, individually or in the
aggregate, reasonably expected to have a Material Adverse Effect.
(b) To Seller's knowledge, no employee of any of the
Subsidiaries is a party to, or is otherwise bound by, any agreement,
including any confidentiality, noncompetition or proprietary rights
agreements between such employee and any other Person that materially and
adversely affects or is reasonably expected to materially and adversely
affect: (A) the performance of that employee's duties as an employee of
any Subsidiary; or (B) the ability of the Subsidiaries to conduct their
respective businesses following the Closing. Except as identified on
Schedule 4.18, to Seller's knowledge, no officer or key employee of any of
the Subsidiaries has made an express indication that he or she intends to
terminate employment with such Subsidiary; provided, however, that
knowledge of Seller shall not include for purposes of this sentence the
knowledge of any officer, employee or agent of any Subsidiary of his or her
own intention to terminate his or her employment with any Subsidiary which
has not been communicated to any other knowledge party of Seller.
(c) Except as disclosed on Schedule 4.18, since December 31,
2000 there has not been, there is not presently pending or existing, and,
to Seller's knowledge, there is not threatened, (A) any material strike,
slowdown,
46
picketing, work stoppage or employee grievance process; (B) any material
charge, grievance proceeding or other claim against or affecting any of the
Subsidiaries relating to the alleged violation of any law pertaining to
labor relations or employment matters, including any charge or complaint
filed by an employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission or any comparable governmental
authority, (C) any union organizational activity or other labor or
employment dispute against or affecting any of the Subsidiaries or (D) any
application for certification of a collective bargaining agent. Except as
disclosed on Schedule 4.18, during the period of January 1, 1998 through
December 31, 2000 there was no pending or existing, and, to the Seller's
knowledge, was not threatened (A) any material strike, slowdown, picketing,
work stoppage or employee grievance process; (B) any material charge,
grievance proceeding or other claim against or affecting any of the
Subsidiaries relating to the alleged violation of any law pertaining to
labor relations or employment matters, including any charge or complaint
filed by an employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission or any comparable governmental
authority; (C) any union organizational activity or other labor or
employment dispute against or affecting any of the Subsidiaries; or (D) any
application for certification of a collective bargaining agent. To
Seller's knowledge, no event has occurred or circumstances exist that is
reasonably expected to provide the basis for any work stoppage or other
labor dispute with respect to any of the Subsidiaries. There is no lockout
of any employees of any of the Subsidiaries and no such action is
contemplated by any of the Subsidiaries.
(d) Except as disclosed on Schedule 4.18, no employee of any of
the Subsidiaries has any claim against such Subsidiary or any other
Subsidiary (whether under law, any employment agreement or otherwise) on
account of or for: (A) overtime pay, other than overtime pay for the
current payroll period, (B) wages or salaries, other than wages or salaries
for the current payroll period, or (C) vacations, sick leave, time off or
pay in lieu of vacation, sick leave or time off, other than vacation, sick
leave or time off (or pay in lieu thereof) earned in the twelve month
period immediately prior to the date of this Agreement.
(e) The Subsidiaries have made all required payments to the
relevant unemployment compensation reserve accounts with the appropriate
governmental departments with respect to the employees of the Subsidiaries
and such accounts have positive balances.
(f) Except as disclosed on Schedule 4.18, the employment of each
of the Subsidiaries' respective employees is terminable at will without
cost, penalty, severance obligation or other termination or post-
termination
47
obligation to the applicable Subsidiary (as the case may be) except for
payments required under the Benefit Plans, the payment of accrued salaries
or wages and vacation pay, and payments required under applicable law. No
employee or former employee has any right to be rehired by any of the
Subsidiaries prior such Subsidiary's hiring a Person not previously
employed by such Subsidiary.
(g) No Subsidiary outside the United States has granted or has
committed to grant any of its employees benefits greater than those
established under the Federal Labor Law of Mexico, or the Brazilian Labor
Code, as applicable, or under other statutes applicable in Mexico and
Brazil, unless disclosed on Schedule 4.18.
4.19 Inventory. Except as disclosed on Schedule 4.19: (i) all inventory
of the Subsidiaries which is held for sale or resale, including raw materials,
work in process, finished goods, spare parts wherever located (collectively,
"Inventory"), consists of items of a quantity and quality historically useable
and/or saleable in the normal course of business, except for items of obsolete
and slow-moving material and materials which are below standard quality, all of
which have been written down on the Financial Statements to estimated net
realizable value on an item by item basis; and (ii) with the exception of items
of below standard quality which have been written down to their estimated net
realizable value, the Inventory is free from material defects in materials
and/or workmanship. The product mix of the Inventory and the raw materials and
work in process necessary to convert to finished goods is not materially out of
balance in relation to the Subsidiaries' customary experience and reasonable
business judgment. The Inventory is not excessive in kind or amount, or slow
moving, in light of the business of the Subsidiaries done or expected to be
done; (iii) all Inventory reflected in the Financial Statements is valued at the
lower of cost or net realizable value, with cost determined on an average cost
basis and; (iv) no Subsidiary is under any liability or obligation with respect
to the return of Inventory in the possession of wholesalers, retailers, or other
customers which is not reserved against in the Financial Statements in
accordance with GAAP. Schedule 4.19 identifies the locations at which Inventory
is maintained and the types and approximate quantities and grades of such
Inventory by location.
4.20 Employees. Schedule 4.20 contains a complete and accurate list of the
following information for each employee of each Subsidiary, including each
employee on leave of absence or layoff status: name, job title, and current
rate of compensation. Schedule 4.20 also contains a complete and accurate list
of any retired employee or director of any Subsidiary, or their dependents,
receiving or scheduled to receive in the future any supplemental pension
benefits (other than pursuant to the Hecla Salaried Employees' Retirement Plan),
retiree medical insurance coverage, or retiree life insurance coverage, and the
amounts of such benefits.
48
4.21 Major Customers and Suppliers. Schedule 4.21 is a complete and
accurate list of (i) the twenty largest customers of the Subsidiaries (taken as
a whole) for the year ended December 31, 2000, in dollar amount of sales by the
Subsidiaries to such customer (each, a "Significant Customer"), and (ii) the
three largest suppliers to the Subsidiaries (taken as a whole) for the year
ended December 31, 2000, in dollar amount of purchases by the Subsidiaries of
goods or services (each, a "Significant Supplier"). No Subsidiary is engaged in
any dispute with a Significant Customer or Significant Supplier. Seller has no
knowledge that a Significant Customer intends to terminate its business
relationship with any Subsidiary or to limit or alter its business relationship
with any Subsidiary in any material respect. Seller has no knowledge of any
intention by a Significant Supplier to terminate its business relationship with
any Subsidiary or to limit or alter its business relationship with any
Subsidiary in any material respect.
4.22 Accounts Receivable. All accounts receivable of the Subsidiaries that
are reflected on the Balance Sheet or on the accounting records of the
Subsidiaries as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from bona fide sales
actually made or services actually performed in the ordinary course of business,
and to Seller's knowledge none of the Accounts Receivable is subject to any
counterclaim or setoff. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible, using
normal collection practices, net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Subsidiaries as of the Closing Date
(which reserves are calculated consistent with past practice). Except as set
forth on Schedule 4.22, none of the Subsidiaries has any outstanding sales on
consignment, sales on approval, sales on return or guaranteed sales.
4.23 Finder's Fee. Except for fees that may be payable by Seller to
Warrior, a division of Standard Bank London Limited, neither Seller nor any of
the Subsidiaries has incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
4.24 Title to Assets. Except as set forth on Schedule 4.24, the
Subsidiaries have good and valid title to their respective assets, free and
clear of any Claims, except for the following liens ("Permitted Liens"): (i)
statutory liens for Taxes not yet due; (ii) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for sums
not yet due; (iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (iv) liens arising from obligations under
operating leases; and (v) as related to the Properties only, easements,
covenants, conditions and restrictions (including, without limitation, building
and use restrictions) of record which do not
49
materially interfere with the use of such property as currently being conducted
by the applicable Subsidiary. Except as set forth in Schedule 4.24, no
unreleased mortgage, trust deed, chattel mortgage, security agreement, financing
statement or other instrument encumbering any of the Subsidiaries' respective
assets has been recorded, filed, executed or delivered. Other than defining
Permitted Liens, this Section 4.24 shall not apply with respect to title to the
Real Estate (which is governed exclusively by Section 4.12) or the Intellectual
Property (which is governed exclusively by Section 4.14).
4.25 Accounts. Schedule 4.25 contains a list showing:
(a) the name of each bank, safe deposit company or other
financial institution in which any of the Subsidiaries has an account, lock
box or safe deposit box;
(b) the names of all Persons authorized to draw thereon or to
have access thereto and the names of all Persons, if any, holding powers of
attorney relating thereto from any of the Subsidiaries; and
(c) all instruments or agreements to which any of the
Subsidiaries is a party as an endorser, surety or guarantor, other than
checks endorsed for collection or deposit in the ordinary course of
business.
4.26 Related Parties. Schedule 4.26 describes each: (i) business
relationship (excluding employee compensation and other ordinary incidents of
employment) between (x) any of the Subsidiaries, and (y) Seller or any present
or post-December 31, 1997 officer, director, or Affiliate of Seller, any present
or post-December 31, 1997 known spouse, ancestor or descendant of any of the
aforementioned Persons or any known trust or other similar entity for the
benefit of any of the foregoing Persons or any Affiliate of any such Persons
(all such Persons and trusts encompassed by this clause (y) being sometimes
collectively referred to herein as the "Related Parties" and individually as a
"Related Party"), provided, however, that for purposes of Seller's disclosures
with respect to the representations and warranties in this Article 4, none of
the Subsidiaries shall be deemed to be a Related Party with respect to any other
Subsidiary; (ii) transaction occurring since December 31, 1997 between any of
the Subsidiaries and any Related Party; and (iii) amount owing by or to any of
the Related Parties (other than pursuant to Section 1.4 of this Agreement),
respectively, to or from any of the Subsidiaries as of the date of this
Agreement. No property or interest in any property (including, without
limitation, designs and drawings concerning products or machinery) which relates
to and is or will be necessary or useful in the present operation of the
Subsidiaries' respective businesses, is presently owned by or leased or licensed
by or to any Related Party.
50
Neither Seller nor to Seller's knowledge any Affiliate has an interest,
directly or indirectly, in any business, corporate or otherwise, which is in
competition with the Subsidiaries' respective businesses, except for ownership,
in the aggregate, of not more than five percent (5%) of any class of securities
of a publicly traded entity with respect to which neither Seller nor any such
Affiliate participates in any way in the management, operation or control of
such entity.
4.27 Ability to Perform Obligations. Seller is now, and at Closing will
be, financially capable of performing all of its post-closing obligations
hereunder, including the ability to fully perform its indemnification
obligations. Seller is now, and at Closing will be, able to pay its debts as
they become due.
4.28 Charitable Commitments. None of the Subsidiaries has any unsatisfied
community or charitable pledges, contributions or commitments in excess of
$25,000 in the aggregate.
4.29 Defective Pricing. None of the Subsidiaries is subject to any
liability, or claim therefor, for or with respect to price adjustment under any
contract with the U.S. Government or any agency thereof, including any liability
for defective pricing.
4.30 Insurance. Schedule 4.30 contains a true and correct list and
description (including policy owners, coverages, deductibles and expiration
dates) of all insurance policies which are owned by any of the Subsidiaries or
which name any of the Subsidiaries as an insured (or loss payee), including
without limitation those which pertain to the Subsidiaries' respective assets,
employees or operations. All such insurance policies are in full force and
effect and neither Seller nor any of the Subsidiaries has received notice of
cancellation of any such insurance policies. In the three (3) year period
ending on the date hereof, neither Seller nor any of the Subsidiaries has
received any written notice from, or on behalf of, any insurance carrier
relating to or involving an increase in insurance rates (except to the extent
that insurance risks may be increased for all similarly situated risks) or non-
renewal of a policy, or requiring or suggesting material alteration of any of
the Subsidiaries' respective assets, purchase of additional equipment, or
material modification of any of the Subsidiaries' respective methods of doing
business. The Subsidiaries shall be entitled to seek recovery under all such
insurance policies held by the Subsidiaries.
4.31 Product Warranty Liabilities. None of the Subsidiaries has made any
oral or written warranties with respect to the quality or absence of defects of
its products or services which they respectively have sold or performed which
are in force as of the date hereof, except for those warranties which are
described in Schedule 4.31. Except as disclosed in Schedule 4.31, there are no
material claims pending or, to Seller's knowledge, threatened against any of the
Subsidiaries with respect to the
51
quality of or absence of defects in such products or services. Schedule 4.31
sets forth a summary, which is accurate in all material respects, of all returns
of defective products during the period beginning January 1, 1997 and ending on
the date hereof, and all credits and allowances for defective products given to
customers during said period, and said summary in each case accurately describes
the defect which resulted in the return, allowance or credit. Seller has no
knowledge that the percentage of products sold and services performed by any of
the Subsidiaries for which warranties are presently in effect and for which
warranty adjustments can be expected during unexpired warranty periods which
extend beyond the Closing Date will be higher than the percentage of such
products and services which the Subsidiaries have sold and performed for which
warranty adjustments have been required in the past. Except as disclosed in
Schedule 4.31, none of the Subsidiaries has paid or been required to pay direct,
incidental, or consequential damages to any Person in connection with any of
such products or services at any time during the six (6) year period preceding
the date hereof.
4.32 Equipment. The furniture, fixtures, vehicles, machinery, shelving,
racks, equipment, tools, dies, molds, jigs, fixtures and other tangible personal
property (other than Inventory) owned or leased by any of the Subsidiaries and
used in their respective operations (collectively, the "Equipment") constitutes
all tangible personal property reasonably necessary in the ordinary course of
business in order for the Subsidiaries to conduct their respective businesses as
they have been conducted in the past. All Equipment is in operating condition
and functional repair (ordinary wear and tear excepted) and any agreements
related to the lease of Equipment are accounted for as operating leases, not
capital leases. Schedule 4.32 contains a complete list of all leased Equipment
with a cost in excess of $10,000 per year.
4.33 Y2K. To the Seller's knowledge, all of the computer hardware and
Software used by the Subsidiaries in the conduct of their respective businesses
(including those related to their respective facilities, equipment,
manufacturing processes, quality control activities, accounting and bookkeeping,
records and record keeping activities) are Year 2000 Compliant. "Year 2000
Compliant" means the ability of the hardware and Software systems to be able to
accurately process date and time data (including calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations.
4.34 Commercial Bribery. To the Seller's knowledge, none of the
Subsidiaries, nor any of their respective former or current officers, directors,
employees, agents or representatives has made, directly or indirectly, with
respect to any of the Subsidiaries, or their respective business activities, any
bribes or kickbacks, illegal political contributions, payments from
52
corporate funds not recorded on the books and records of any of the Subsidiaries
(as the case may be), payments from corporate funds to governmental officials,
in their individual capacities, for the purpose of affecting their action or the
action of the government they represent, to obtain favorable treatment in
securing business or licenses or to obtain special concessions, or illegal
payments from corporate funds to obtain or retain business. Without limiting
the generality of the foregoing, none of the Subsidiaries has directly or
indirectly made or agreed to make (whether or not said payment is lawful) any
payment to obtain, or with respect to, sales other than usual and regular
compensation to its employees and sales representatives with respect to such
sales.
4.35 Actions Regarding Employees. None of the Subsidiaries nor Seller has
taken any actions (other than pre-existing agreements with employees referenced
in Schedule 4.10 and the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby) which were calculated to
dissuade any present employees, representatives or agents of any of the
Subsidiaries from continuing an association with such Subsidiary after the
Closing, but Seller gives Purchaser no assurance as to the continuation of any
such relationship post-Closing.
4.36 Reclamation Liabilities. Schedule 4.36 describes all obligations as
of September 30, 2000 of any of the Subsidiaries to reclaim any land heretofore
mined by any of them or any of their predecessors, Seller's reasonable opinion
as to the cost of such reclamation, the basis for calculation of such cost, the
document, instrument, law, rule or regulation under which such obligation
arises, and all deposits, bonds, letters of credit or other security devices
outstanding with respect to all such obligations not scheduled in Schedule 4.10.
4.37 Reserve Estimates. Schedule 4.37 lists certain estimates of
geological ball clay, kaolin and feldspar reserves of the Subsidiaries as of
December 31, 1999. Those estimates were prepared by the Subsidiaries in good
faith in the ordinary course of business in accordance with methodologies
generally accepted in the ball clay, kaolin and feldspar mining industries.
Seller has no knowledge that any of such estimates is overstated in any material
respect, except that such reserves and methodologies may be based on market
prices, costs, interest rates, and other factors known within or applicable to
the mining industry which fluctuate from time to time and may have been or be
affected thereby. Purchaser acknowledges that the Subsidiaries' mining
operations incurred in the ordinary course consistent with past practice since
December 31, 1999 have reduced such reserves.
4.38 Compliance with the Immigration Laws. Each Subsidiary is in material
compliance with and has not violated the terms and provisions of the Immigration
Reform and Control Act of 1986, and
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all related regulations thereunder ("Immigration Laws"). No Subsidiary has been
the subject of any inspection or investigation relating to its compliance with
or violation of the Immigration Laws, nor has it been warned, fined or otherwise
penalized by reason of any failure to comply with the Immigration Laws, nor is
any such proceeding pending or, to the knowledge of Seller, threatened.
4.39 Representations Not Misleading. The representations and warranties of
Seller in this Agreement, and all representations, warranties and statements of
Seller or the Subsidiaries contained in any schedule, financial statement or
exhibit, delivered pursuant hereto considered in the aggregate, do not omit to
state a material fact necessary in order to make the representations, warranties
or statements contained herein or therein not misleading in light of the
circumstances under which they were made, provided, however, it is not the
intention of the parties that this Section 4.39 obviate the qualifications and
dollar limitations of the other sections of this Article 4. Furthermore, the
information and access provided to Purchaser as described in Section 3.5 has
been provided and prepared with reasonable care and in good faith by the Seller,
and such information is accurate in all material respects.
4.40 Copies Accurate. Seller has delivered or made available to Purchaser
complete and accurate copies of all documents requested by Purchaser pursuant to
this Agreement, and all documents referred to in any of the Schedules to this
Agreement.
4.41 Definition of Knowledge. For the purposes of this Article 4, the
knowledge of Seller shall be deemed to mean, and be limited to, the actual
knowledge of any of the chief executive officer, chief operating officer, chief
financial officer, general counsel, corporate environmental manager, human
resources manager, tax manager, chief geologist and corporate safety manager of
Seller or any of the Subsidiaries, and the plant managers of the Plants, in each
case after reasonable inquiry.
ARTICLE 5
SELLER'S AND PURCHASER'S PRE-CLOSING COVENANTS
The Seller and Purchaser agree that on or prior to Closing:
5.1 Business Operations.
(a) From the date of this Agreement until the Closing Date,
Seller shall cause each of the Subsidiaries to conduct their business only
in the ordinary course of business consistent with past and current
practices, except that Subsidiaries may take all other action necessary or
advisable pursuant to the terms of this Agreement. Seller shall cause the
Subsidiaries to use their commercially
54
reasonable efforts to maintain and preserve the business organization and
goodwill of the Subsidiaries intact, to retain the services of their key
officers and employees and to retain their present customers and suppliers
so that they will be available to Purchaser after the Closing.
(b) Seller shall cause the Subsidiaries to maintain the
insurance policies required to be listed in Schedule 4.30 in full force and
effect. If any of the said policies shall expire, Seller shall cause the
applicable Subsidiary to use reasonable efforts to renew or replace the
same prior to the expiration of the expiring policies with policies from a
reputable insurance carrier with a "Best's Rating" equal to or better than
that of the existing carrier, containing insurance coverage in the same or
greater amount than the existing policies in substantially the same form
and substance as the existing policies.
(c) Seller shall use its commercially reasonable efforts (and
Purchaser shall cooperate with Seller) to obtain or to cause the
Subsidiaries to obtain all consents required for the consummation of the
transactions contemplated hereby under or with respect to, any Contract,
Intellectual Property License, Permit or Environmental Permit which is
required to be scheduled pursuant to Schedule 4.10, Schedule 4.13, Schedule
4.14 and Schedule 4.15.
5.2 Access. From the date of this Agreement until the Closing Date, Seller
shall cause the Subsidiaries to permit Purchaser and its authorized
representatives full access to, and make available for inspection, upon prior 24
hour notice and during reasonable business hours (or as otherwise agreed between
the parties), the business of the Subsidiaries, including the employees,
customers, lenders and suppliers of the Subsidiaries, and furnish Purchaser all
documents, records and information relating thereto and with respect to the
affairs of the Subsidiaries as Purchaser and its representatives may reasonably
request, all for the sole purpose of permitting Purchaser to become familiar
with the business and assets and liabilities of the Subsidiaries. The right of
access described in the preceding sentence will include, without limitation, the
right of entry on the Properties for the purpose of conducting test drilling of
the Subsidiaries' mineral reserves and to conduct a Phase I Environmental Site
Assessment ("ESA"), including specific review of the water rights of each
Subsidiary outside the United States (each at Purchaser's sole risk and
expense). Notwithstanding the foregoing, Purchaser shall not, without the prior
written consent of the Seller, contact or otherwise communicate with any
customer of Seller, a Subsidiary or any of their Affiliates; provided, however,
that Purchaser may contact or communicate with such customers that are also
customers of Purchaser so long as (i) Purchaser does not during such contact or
communication discuss the terms, conditions, existence or any other aspect of
this Agreement or the transactions contemplated
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thereby, including the impending availability of Seller's products or services,
or (ii) a representative of Seller is provided reasonable prior notice of (which
notice need not be written) and afforded a reasonable opportunity to participate
in such contact or communication. Any additional Phase II environmental
investigative work performed prior to the Closing Date shall be performed only
upon prior written agreement of the parties. The Purchaser agrees that it shall
conduct the activities specified in this paragraph in a manner that does not
unreasonably interfere with the Subsidiaries' business activities at the
Properties and in a manner that minimizes disturbance to the existing condition
of the Properties. Purchaser agrees that it, its agents, employees,
consultants, invitees, or permittees will present proper credentials when
seeking access to the Properties and shall comply with all applicable safety and
environmental laws and regulations when performing the activities contemplated
herein. Following the activities specified herein, Purchaser shall restore the
Properties to their original condition and shall remove all equipment, tools or
other property brought onto the Properties. Any unreasonable disturbance to the
Properties as a result of the work contemplated herein will be promptly
corrected by the Purchaser and/or its agents, employees, consultants, invitees,
or permittees. Prior to Closing, Purchaser, and/or its agents, employees,
consultants, invitees, or permittees, shall not disclose, and shall maintain as
confidential, all information obtained as a result of the work contemplated
herein and the results of the Phase I ESA or additional Phase II environmental
investigation performed prior to the Closing Date to any other Person
(including, without limitation, any federal, state, or local governmental
agencies, without the prior written consent of Seller (unless required by law to
do so), and during the period from the Closing until the fifth anniversary of
the Closing Date, Purchaser and/or its agents, employees, consultants, invitees,
or permittees shall not make such disclosures without providing Seller 15 days'
prior written notice (unless required by law to do so)).
5.3 Material Change. Except as set forth in Schedule 5.3, without the
prior written consent of Purchaser, and without limiting the generality of any
other provision of this Agreement, from the date hereof until the Closing Date,
Seller shall cause the Subsidiaries not to:
(1) amend the Subsidiaries' respective Certificates of
Incorporation or bylaws (or comparable documents);
(2) make any change in any Subsidiary's authorized capital
stock, or issue any shares of stock or other equity securities of any class
or issue or become a party to any subscriptions, warrants, rights, options,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other equity securities
of any Subsidiary, or grant any stock appreciation or similar rights;
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(3) make any payment or distributions to its employees,
officers or directors except such amounts as constitute currently effective
compensation for services rendered or reimbursement for reasonable ordinary
and necessary out-of-pocket business expenses;
(4) hire any new employee who shall have, or terminate the
employment of any employee who has, an annual salary in excess of $50,000;
(5) incur or commit to incur any capital expenditures not
set forth in Schedule 4.9 in excess of $50,000 in the aggregate other than
repairing and maintenance in the ordinary course of business consistent
with past practice;
(6) do any act or omit to do any act, or permit any act or
omission to occur, which will cause a breach by any of the Subsidiaries of
any of the Contracts;
(7) institute or amend any employee benefit program or
fringe benefit program with respect to the employees of any of the
Subsidiaries;
(8) enter into or modify any written employment agreement
with any Person;
(9) prepay any of its material obligations except in the
ordinary course of business consistent with past practice;
(10) incur, assume or guarantee any indebtedness;
(11) directly or indirectly, enter into or assume any
Contract other than in the ordinary course of business in accordance with
past practices;
(12) increase the compensation payable to any employee,
except in the ordinary course of business consistent with past practice,
and except as required pursuant to collective bargaining agreements;
(13) incur or commit to incur any management or consulting
fee;
(14) sell, transfer or otherwise dispose of any asset or
property, except for sales of Inventory in the usual and ordinary course of
business and except for application of cash in payment of the Subsidiaries'
respective liabilities in the usual and ordinary course of business;
(15) amend, terminate or give notice of termination with
respect to any existing Contract to which any of the Subsidiaries is a
party, or waive any of the Subsidiaries' respective material rights other
than in the ordinary course of business consistent with past practice;
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(16) pay, declare, accrue or set aside any dividends or any
other distributions (except pursuant to Section 1.4 of this Agreement), or
purchase, exchange or redeem any of its securities of any class;
(17) except as expressly permitted hereunder, enter into any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or rendering of services), directly or indirectly,
with, or make any payment to, or incur any liability to, any Affiliate or
Related Party;
(18) make any election with respect to Taxes;
(19) make any change in any method of accounting or
accounting principle, practice, or policy of any Subsidiary or make any act
or omission inconsistent with past practice or outside of the ordinary
course of business, which has the effect of increasing the cash or the
trade accounts payables of any Subsidiary at the Closing or as of the
Closing Date, whether through change in practice with respect to the timing
of payment of trade accounts payable, the timing of collection of accounts
receivable, the rate of purchase of inventory or otherwise, or offer any
discounts for the early payment of outstanding accounts receivable other
than in the ordinary course of business consistent with past practice; or
(20) incur any obligation or liabilities of any nature other
than items incurred in the ordinary course of business consistent with past
practice, or increase (or experience any change in the assumptions
underlying or the methods of calculating) any bad debt, contingency, or
other reserve, other than in the ordinary course of business consistent
with past practice.
5.4 Governmental Approvals.
(a) As promptly as practicable following the execution and
delivery of this Agreement but in any event within ten (10) business days
after the date hereof, the Seller and the Purchaser (and Purchaser's
affiliates) shall make all filings, notifications, reports, submissions and
the like as may be reasonably required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). As promptly as
practicable thereafter, Seller shall cooperate in making and execute or
make all filings reasonably requested by Purchaser under the Exon-▇▇▇▇▇▇
Act ("Exon-▇▇▇▇▇▇") and under other applicable laws (including, but not
limited to, the antitrust or business combination notification or similar
provisions of Mexico and Brazil), to obtain such governmental approvals or
endure such waiting periods as may be required in connection with this
Agreement and the transactions contemplated hereby, and
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Purchaser and Seller shall each use their commercially reasonable best
efforts to obtain such approvals as promptly as practicable following the
execution and delivery of this Agreement. Each such party shall furnish to
each other party upon its request all such information and assistance as
such other party may reasonably request in connection with such filings or
submissions. Each such party shall also provide to the other parties
hereto copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party or any of
its representatives, on the one hand, and any governmental authority, on
the other, with respect to this Agreement and the transactions contemplated
hereby; provided, however, that notwithstanding anything to the contrary in
this Agreement, Purchaser shall not and shall not be required or ordered to
furnish or deliver to Seller or its affiliates copies of any filings made
by Purchaser or its affiliates pursuant to this Section 5.4. Purchaser
shall be responsible for all filing fees required under this Section 5.4.
(b) As promptly as practicable following the execution and
delivery hereof but in any event prior to the Closing Date, Seller and
Purchaser shall make all filings and submissions as may be reasonably
required to obtain such third party governmental approvals, consents,
licenses, waivers, authorizations or orders as may be required in
connection with this Agreement and the transactions contemplated hereby,
and each such party shall use its commercially reasonable best efforts to
obtain such third party governmental approvals, consents, licenses,
waivers, authorizations or orders as promptly as practicable following the
date hereof. Each such party shall use their commercially reasonable
efforts to lift, remove or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate
the transactions contemplated hereby and to defend vigorously any
litigation seeking to enjoin, prevent or delay the consummation of the
transactions contemplated hereby or seeking material changes.
(c) Notwithstanding anything to the contrary in this Agreement,
the parties hereto agree that nothing in this Section 5.4 shall require, or
be construed to require, Purchaser, in connection with the receipt of any
regulatory approval or the removal or rescission of any injunction or other
order, to proffer to, or agree to (i) sell or hold separate and agree to
sell or to discontinue to use or limit, before or after the Closing, any
assets, businesses, or interest in any assets or businesses of Purchaser,
its subsidiaries, or any of the Subsidiaries (or to consent to any sale, or
agreement to sell, or discontinuance or limitation by any Subsidiary of any
of its assets or businesses) or (ii) any conditions relating to, or changes
or restriction in, the operations of any such assets or businesses.
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5.5 Exclusivity. From the date hereof until the Closing or until this
Agreement is terminated or abandoned as provided in Section 12.1, the Seller
shall not, directly or indirectly solicit or initiate discussions concerning, or
enter into negotiations with, or furnish any information that is not publicly
available to, any Person or group concerning, any proposal for a merger, sale of
assets, sale of shares of stock or securities or other takeover or business
combination transaction involving any of the Subsidiaries (other than with
respect to a transaction involving the Seller as an entirety or substantially as
an entirety; if Seller enters into any agreement for such a transaction prior to
Closing, Seller or its legal successor shall be bound by this Agreement), and
the Seller will instruct its and each of the Subsidiaries' respective officers,
directors, advisors and other financial and legal representatives and
consultants not to take any action contrary to the foregoing provision of this
sentence, provided that nothing in this Agreement shall prevent furnishing such
information as may be required in connection with the Zemex Dispute.
5.6 Certain Audited Financial Statements. Seller shall cooperate with
Purchaser in obtaining, at Purchaser's expense, reviewed financial statements of
each of K-T Feldspar and Southeastern for the year ended December 31, 2000. The
audited financial statements of the Subsidiaries (excluding K-T Feldspar and
Southeastern) and the reviewed financial statements of K-T Feldspar and
Southeastern delivered hereunder shall be accompanied by corresponding opinions
of PWC subject only to standard exceptions and qualifications (including without
limitation a qualification as to the absence of federal tax accruals).
5.7 Purchaser's Obligations. Purchaser agrees to continue to be bound by
that certain Confidentiality Agreement dated as of June 5, 2000 between Imerys,
S.A. and Seller (the "Confidentiality Agreement").
5.8 Joint Obligations. The following shall apply with equal force to
Seller, on the one hand, and Purchaser, on the other hand:
(a) Each of the parties hereto shall use its commercially
reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to
consummate the transaction contemplated hereby as soon as practicable.
(b) Each party shall promptly give the other party written
notice of the existence or occurrence of any condition which would make any
representation or warranty herein contained of either party untrue or which
is reasonably expected to prevent the consummation of the transactions
contemplated hereby.
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(c) No party shall intentionally perform any act which, if
performed, or omit to perform any act which, if omitted to be performed,
would prevent or excuse the performance of this Agreement by any party
hereto or which would result in any representation or warranty herein
contained of said party being untrue in any material respect as if
originally made on and as of the Closing Date.
5.9 Deliveries of Information; Consultations. From time to time prior to
the Closing Date:
(a) Seller shall furnish promptly to Purchaser: (i) all separate
monthly financial statements of the Subsidiaries (as prepared by the
Subsidiaries in accordance with their normal accounting procedures)
promptly after such financial statements are available; (ii) all other
material information concerning the operations, properties, financial
condition and personnel of the Subsidiaries as Purchaser may reasonably
request (including work papers related to the Audited Financial
Statements); (iii) updated financial information of Seller (to the extent
it is publicly available or affects Seller's ability to transfer the Stock,
free and clear of all Claims); (iv) verbal information as to whether Seller
reasonably expects to comply with Section 6.1 as of the Closing Date; and
(v) the status of all pending silicosis, dioxin or other material
litigation, including the Zemex Dispute.
(b) Seller shall confer and consult with representatives of
Purchaser on a regular and frequent basis to report on operational matters
of the Subsidiaries, provided such conferences and consultations do not
materially interfere with the operation of the Subsidiaries.
(c) Seller shall notify Purchaser immediately: (i) of any
Acquisition Proposal; (ii) of any inquiry received by Seller or any of its
Affiliates from any Person concerning an Acquisition Proposal; (iii) of any
request from any Person for confidential information concerning any of the
Subsidiaries, or both; and (iv) if any Person seeks to initiate or continue
any discussions or negotiations with Seller or any of its Affiliates
concerning a Competing Transaction or an Acquisition Proposal. For the
purposes of this Agreement, (x), "Acquisition Proposal" shall mean any
inquiry, proposal or offer relating to a Competing Transaction, and (y)
"Competing Transaction" shall mean any or all of the following, other than
the transactions contemplated hereby: (i) a sale, transfer or other
disposition of all or substantially all of the assets of any of the
Subsidiaries in a single transaction or a series of related transactions;
(ii) a sale, transfer or assignment of more than 50% of the outstanding
shares of capital stock of any of the Subsidiaries (including by means of a
merger); or (iii) a public announcement of a proposal, plan, intention or
agreement to do any of the foregoing.
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5.10 Supplemental Disclosure. Seller shall be permitted hereunder and
shall have the continuing obligation up to and including the Closing Date to
supplement promptly or amend the Schedules with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or listed in a Schedule; provided,
however, that for the purpose of the rights and obligations of the parties
hereunder, any such supplemental disclosure shall not be deemed to have been
disclosed as of the date of this Agreement unless so agreed to in writing by
Purchaser.
5.11 Payoff of Indebtedness and Release of Liens. Prior to or
contemporaneously with the Closing, Seller shall, or shall cause the
Subsidiaries to, pay off any Indebtedness of the Subsidiaries, to have all
Intercompany Accounts settled in full, and cause all Claims on the Stock of any
Subsidiary (other than Permitted Liens) related to such Indebtedness to be fully
released by the holders thereof.
5.12 Employment of ▇▇▇▇▇▇▇. Purchaser shall negotiate in good faith with
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ the terms under which ▇▇. ▇▇▇▇▇▇▇'▇ employment shall continue
with the Subsidiaries. Seller shall cooperate with Purchaser during such
negotiations between Purchaser and ▇▇. ▇▇▇▇▇▇▇ and keep ▇▇. ▇▇▇▇▇▇▇ employed in
his current capacity with the Subsidiaries from the date hereof until the
earlier of the Closing Date or the termination of this Agreement.
ARTICLE 6
PURCHASER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment at or prior to the Closing of
each of the following conditions:
6.1 Representations and Warranties. Each of the representations and
warranties of Seller contained herein (as they may have been supplemented
pursuant to Section 5.10) shall have been true and correct in all material
respects when made and shall be true and correct in all material respects as of
the Closing as if originally made on the Closing Date (other than any such
representations or warranties given as of a specific date, which shall be true
and correct in all material respects as of such date), except as affected by the
transactions contemplated or permitted hereby.
6.2 Covenants. Seller shall have performed and complied in all material
respects with all covenants or conditions required by this Agreement to be
performed and complied with by it prior to the Closing (including, without
limitation, all obligations which Seller would be required to perform at the
Closing if the transactions contemplated hereby were consummated).
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6.3 No Injunction. No court or governmental or regulatory authority of
competent jurisdiction shall have entered an order which enjoins the carrying
out of the transaction contemplated by this Agreement nor shall any bona fide
third party not an Affiliate of Purchaser have pending in a court of applicable
jurisdiction, on the basis of a bona fide, non-frivolous claim, a petition for
an order enjoining the carrying out of the transactions contemplated by this
Agreement.
6.4 No Material Adverse Change. During the period from December 31, 2000
to the Closing Date, there shall not have occurred, and there shall not exist on
the Closing Date, any condition or fact which has, or is reasonably expected to
result in, a Material Adverse Effect.
6.5 HSR Act. The waiting period applicable to the transactions
contemplated hereby under the HSR Act shall have expired or been terminated
without any requirement to sell, separate or divest any assets, business, or
interests in any assets or businesses of Purchaser, its subsidiaries or any of
the Subsidiaries.
6.6 Consents. All of the consents referred to in Schedule 6.6 shall have
been obtained (without cost to Purchaser or any of the Subsidiaries in excess of
the normal and customary cost associated therewith) or, to the extent the
Permits and Environmental Permits held by any of the Subsidiaries would
terminate upon a change of control of any of the Subsidiaries, Purchaser shall
have either obtained licenses and permits on substantially the same terms as
such Permits and Environmental Permits, or shall have obtained binding
commitments from the applicable governmental authorities to issue such licenses
and permits to such Subsidiaries following the Closing.
6.7 Opinion of Seller's Counsel. Seller shall have delivered to Purchaser
the written opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., in substantially the form of
Exhibit A attached hereto, and the written opinion of ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLC,
counsel to Seller, in substantially the form of Exhibit B attached hereto, each
dated as of the Closing Date (it being understood that each such opinion may
rely on the opinion of the other and on the opinions of local counsels as to
certain matters).
6.8 2000 Review. PWC shall have delivered to Purchaser a balance sheet of
each of K-T Feldspar and Southeastern as of December 31, 2000 and combined
statements of income, retained earnings and cash flows of K-T Feldspar and
Southeastern for the year then ended as described in Section 5.6.
6.9 Stock Purchases. Prior to or contemporaneously with the Closing, the
Incidental Owners shall sell and Purchaser or a designee thereof shall purchase
all of the shares of capital stock of the Subsidiaries owned by such Incidental
Owners free and clear of any Claims for a purchase price of One Dollar (U.S.
$1.00) per share, which consideration shall be acknowledged as sufficient by
such Incidental Owner.
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ARTICLE 7
SELLER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Seller, the obligations of the Seller
hereunder are subject to fulfillment at or prior to the Closing of each of the
following conditions:
7.1 Representations and Warranties. Each of the representations and
warranties of Purchaser contained herein shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing as if originally made as of the Closing Date (other
than any such representations and warranties given as of a specific date, which
shall be true and correct in all material respects as of such date), except as
affected by the transactions contemplated or permitted hereby.
7.2 Covenants. Purchaser shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement to
be performed and complied with by it prior to the Closing (including, without
limitation, all obligations which Purchaser would be required to perform at the
Closing if the transactions contemplated hereby were consummated).
7.3 No Injunction. No court or governmental or regulatory authority of
competent jurisdiction shall have entered an order which enjoins the carrying
out of the transactions contemplated by this Agreement nor shall any bona fide
third party not an Affiliate of any of the Subsidiaries have pending in a court
of applicable jurisdiction, on the basis of a bona fide, non-frivolous claim, a
petition for an order enjoining the carrying out of the transactions
contemplated by this Agreement.
7.4 HSR Act. The waiting period applicable to the transactions
contemplated hereby under the HSR Act shall have expired or been terminated.
7.5 Opinion of Purchaser's Counsel. Purchaser shall have delivered to
Seller the written opinion of ▇▇▇▇▇▇ & Bird, counsel for Purchaser, dated as of
the Closing Date, in substantially the form of Exhibit C attached hereto.
ARTICLE 8
COSING DOCUMENTS
8.1 Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article 8.
All documents which Seller and Incidental Owners shall deliver shall be in form
and substance reasonably satisfactory to Purchaser and Purchaser's counsel. All
documents which Purchaser shall deliver shall be in form and substance
reasonably satisfactory to Seller and Seller's counsel.
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8.2 Purchaser's Deliveries. Subject to the fulfillment or written waiver
of the conditions set forth in Article 6, Purchaser shall execute and/or deliver
to Seller all of the following:
(a) the Purchase Price, minus the Holdback Amount or as adjusted
(as the case may be) by the Estimated Purchase Price Adjustment;
(b) a certified copy of Purchaser's Certificate of Incorporation
and by-laws;
(c) a certificate of good standing of Purchaser, issued not
earlier than thirty (30) days prior to the Closing Date by the Secretary of
State of Delaware.
(d) an incumbency and specimen signature certificate with
respect to the officers of Purchaser executing this Agreement, and any
other document delivered hereunder, on behalf of Purchaser;
(e) a certified copy of resolutions of Purchaser's board of
directors, authorizing the execution, delivery and performance of this
Agreement, and any other document delivered by Purchaser hereunder;
(f) a closing certificate executed by the Chief Executive
Officer of Purchaser (or any other officer of Purchaser specifically
authorized to do so), on behalf of Purchaser, to the effect that the
conditions set forth in Sections 7.1 and 7.2 have been satisfied, all in
such reasonable detail as the Seller and its counsel shall reasonably
request, and that all documents to be executed and delivered by Purchaser
at the Closing have been executed by duly authorized officers of Purchaser;
and
(g) without limitation by the specific enumeration of the
foregoing, all other documents reasonably required from Purchaser to
consummate the transaction contemplated hereby.
8.3 Seller's Deliveries. Subject to the fulfillment or written waiver of
the conditions set forth in Article 7, Seller, or, as the case may be, the
Incidental Owners, shall execute or deliver to Purchaser all of the following:
(a) a certified copy of the Certificate of Incorporation
(certified within one hundred twenty (120) days prior to the Closing Date
by the Secretary of such Subsidiary's state or jurisdiction of
incorporation) and by-laws, or comparable documents (certified as of the
Closing Date by the Secretary of such Subsidiary), with respect to each of
the Subsidiaries;
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(b) certificates of good standing issued not earlier than thirty
(30) days prior to the Closing Date (i) with respect to ▇-▇ ▇▇▇▇, by the
Secretaries of State of Delaware, Kentucky, Tennessee, Mississippi, South
Carolina and Georgia; and (ii) with respect to K-T Feldspar, by the
Secretaries of State of North Carolina and Tennessee.
(c) to the extent documents of such type are reasonably
available, a notary public certificate of good standing of K-T Mexico and
Recursos issued not earlier than thirty (30) days prior to the Closing Date
by Mexican authorities;
(d) to the extent documents of such type are reasonably
available, notary public certificates of good standing of Hecla Brazil,
▇▇▇▇▇, and Mineracao Hecla issued not earlier than thirty (30) days prior
to the Closing Date by Brazilian authorities;
(e) an incumbency and specimen signature certificate with
respect to the officers of the U.S. Subsidiaries executing any document
delivered by the U.S. Subsidiaries hereunder or in connection with the
transaction contemplated hereby, on behalf of the U.S. Subsidiaries;
(f) an incumbency and specimen signature certificate with
respect to the officers of Seller executing this Agreement or any document
delivered by Seller hereunder or in connection with the transaction
contemplated hereby, on behalf of Seller;
(g) certificates representing all Stock, duly endorsed in blank
or with duly executed stock powers attached, and certificates representing
the shares or quotas (as the case may be) of the Subsidiaries which are
owned by the Incidental Owners, endorsed in favor of such Persons as
Purchaser shall specify by written notice delivered to Seller prior to the
Closing;
(h) a closing certificate duly executed by the Chief Executive
Officer of Seller, on behalf of Seller, to the effect that the conditions
set forth in Sections 6.1 and 6.2 have been satisfied, all in such
reasonable detail as the Purchaser and its counsel shall reasonably
request, and that all documents to be executed and delivered by Seller at
the Closing have been executed by duly authorized officers of Seller;
(i) the written resignations, effective as of the Closing Date,
of such of the directors and officers of the Subsidiaries as are designated
by Purchaser no later than ten (10) days prior thereto;
(j) physical possession of all records, tangible assets,
licenses, policies, Contracts, plans or other
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instruments owned by or pertaining to the Subsidiaries which are in the
possession of Seller it being understood that presence at the Real Estate
or Leased Premises of such materials shall be deemed to constitute delivery
hereunder;
(k) all consents obtained pursuant to Section 5.1(c) and 6.6;
(l) the minute books, stock records and other corporate
governance books and records of the Subsidiaries, it being understood that
presence at the Real Estate or Leased Premises of such materials shall be
deemed to constitute delivery hereunder;
(m) ▇▇▇-▇, ▇▇▇-▇, Federal and State tax lien, bankruptcy and
seven (7) year judgment searches with respect to ▇-▇ ▇▇▇▇, for the States
of Kentucky, Tennessee, South Carolina, Mississippi and Georgia, and the
counties thereof in which a portion of the business of ▇-▇ ▇▇▇▇ is
conducted, and with respect to K-T Feldspar, for the State of North
Carolina, and the counties thereof in which a portion of the business of K-
T Feldspar is conducted and patent, trademark and copyright searches with
respect to ▇-▇ ▇▇▇▇ and K-T Feldspar, and comparable Mexican searches with
respect to K-T Mexico (to the extent documents of such type are reasonably
available) all prepared by search companies reasonably satisfactory to
Purchaser, and dated not earlier than forty-five (45) days prior to the
Closing Date;
(n) owner's title insurance policies (ALTA Owner's Policy Form B
(rev. 1992)) with respect to the Properties identified on Schedule 4.12(b),
insuring ▇-▇ ▇▇▇▇ or K-T Feldspar, as the case may be, and issued as of the
Closing Date by title insurance companies reasonably satisfactory to
Purchaser, in the amounts of $5,000,000 with respect to the Properties
located in Kentucky, Tennessee, Mississippi and North Carolina and
$5,000,000 with respect to the Properties located in South Carolina and
Georgia, showing fee simple title thereto to be vested in ▇-▇ ▇▇▇▇ or K-T
Feldspar, as the case may be, subject in each case only to the general
exceptions contained in such policies and Permitted Liens (other than
fixture filings in favor of Standard Bank London Limited), with extended
coverage over such general exceptions as may be insured over without a
current survey and a nonimputation endorsement, and to the extent
available, a zoning endorsement in the form of ALTA endorsement Form 3.0, a
tie-in endorsement, a last dollar endorsement, an owner's comprehensive
endorsement, and subdivision, survey, access, tax parcel, creditors' rights
and utility facilities endorsements. The cost of such title insurance
(including both premiums and title investigation charges) shall be payable
in equal shares by Seller and Purchaser;
(o) a certification duly executed by Seller that Seller is not a
foreign person, in the form provided in Treasury Regulation 1.1445-
2(b)(2)(iii)A;
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(p) a pay-off letter, accompanied by wire transfer instructions,
from Standard Bank London Limited, setting forth the amount necessary to
satisfy Seller's indebtedness to such lender as of the Closing Date, and
containing the commitment of said lender to terminate all financing
statements and/or mortgages in favor of such lender covering any assets of
any of the Subsidiaries upon receipt of payment in full of such amount;
(q) a notice of this transaction (as prepared by Purchaser and
reviewed by Seller), to be given to employees of each of the Subsidiaries,
in form and substance reasonably satisfactory to Purchaser and Seller;
(r) a notice of this transaction (as prepared by Purchaser and
reviewed by Seller), to be given to customers and suppliers of each of the
Subsidiaries, in form and substance reasonably satisfactory to Purchaser
and Seller;
(s) a release from Seller and its Affiliates, on the one hand,
and each of the Subsidiaries, on the other hand, whereby Seller and its
affiliates release all claims of every kind which it may have prior to or
as a result of the Closing against the Subsidiaries, except for those
claims arising under Article 11 of this Agreement;
(t) to the extent assignable, an assignment of all of Seller's
rights under all confidentiality agreements which Seller shall have
executed in connection with the proposed sale of the Subsidiaries; and
(u) without limitation by the specific enumeration of the
foregoing, all other documents reasonably required from Seller to
consummate the transaction contemplated hereby.
ARTICLE 9
POST-CLOSING AGREEMENTS
9.1 Post-Closing Agreements. From and after the Closing, the parties
shall have the respective rights and obligations which are set forth in the
remainder of this Article 9.
9.2 Inspection of Records. Seller, on the one hand, and Purchaser, on the
other hand, and their respective Affiliates, shall each retain and make their
respective books and records (including expired insurance policies and work
papers in the possession of their respective accountants) with respect to the
Subsidiaries available for inspection by the other party, or by its duly
accredited representatives, for reasonable business purposes at all reasonable
times during normal business hours, for a seven (7) year period after the
Closing Date, with respect to all transactions of any of the Subsidiaries
occurring prior to and relating to the Closing, and the historical financial
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condition, assets, liabilities, operations and cash flows of the Subsidiaries,
provided such right of inspection shall not obligate any party or entity to
waive, violate, or jeopardize attorney/client privilege or similar privileges.
As used in this Section 9.2, the right of inspection includes the right to make
extracts or copies. The representatives of a party inspecting the records of
the other party shall be reasonably satisfactory to the other party.
9.3 Use of Trademarks. Seller shall not use and shall not license or
permit any third party to use, any name, slogan, logo or trademark which is
identical, or confusingly similar to any of the names or trademarks included in
the Intellectual Property.
9.4 Back-Up. Seller shall, at Purchaser's request, furnish complete
detailed back-up material with respect to any of the Subsidiaries, the past
financial statements of any of the Subsidiaries, and the Financial Statements
and the Audited Financial Statements as are in Seller's possession or are
reasonably available to Seller.
9.5 Payments of Accounts Receivable. In the event Seller shall receive
any instruments of payment of any of the accounts receivable of any of the
Subsidiaries, Seller shall forthwith deliver such instruments to Purchaser,
endorsed where necessary, without recourse, in favor of Purchaser. In the event
Purchaser shall receive any instruments of payment of any amount owing Seller,
Purchaser shall forthwith deliver such instruments to Seller, endorsed where
necessary, without recourse, in favor of Purchaser.
9.6 Third Party Claims. The parties shall cooperate with each other and
give each other access to information, documents and personnel as reasonably
required with respect to the defense of any claims or litigation made or
commenced by third parties subsequent to the Closing Date which are not subject
to the indemnification provisions contained in Article 11, provided that the
party requesting cooperation shall reimburse the other party for the other
party's reasonable out-of-pocket costs and expenses of furnishing such
cooperation.
9.7 Non-Solicitation. From and after the Closing and until the second
anniversary of the Closing Date, Seller shall not, and shall cause its
Affiliates to not, directly or indirectly, as a partner, stockholder,
proprietor, consultant, joint venturer, investor or in any other capacity, hire
or solicit to perform services (as an employee, consultant or otherwise) any
Persons who are then current employees of any of the Subsidiaries or take any
actions which are intended to persuade any employee of the Subsidiaries to
terminate his or her association with the Subsidiaries.
General solicitations of employment published in a journal, newspaper,
electronic database, website, or internet posting or
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other publication of general circulation and not specifically directed towards
employees of the Subsidiaries, as the case may be ("General Solicitations"), and
hiring of Persons responding to such General Solicitations (including, without
limitation, employees of the Subsidiaries), shall not be deemed to constitute
solicitation for purposes of this Section 9.7 and any hires in response to such
General Solicitations shall not violate the provisions of this Section 9.7.
9.8 Confidentiality. From and after the Closing, Seller and its
Affiliates shall keep confidential and not disclose to any other Person or use
for their own benefit or the benefit of any other Person, any information
regarding the Subsidiaries. The obligation of Seller and its Affiliates under
this Section 9.8 shall not apply to information which: (i) is or becomes
generally available to the public without breach of the commitment provided for
in this Section 9.8, (ii) is required to be disclosed by law, order or
regulation of a court or tribunal or government authority, or (iii) is required
in connection with litigation relating to the Zemex Agreement or a Zemex
Dispute; provided, however, that in the case of any proceeding before any court
or other tribunal (other than a proceeding described in clause (iii)), Seller
shall notify Purchaser as early as reasonably practicable prior to disclosure to
allow Purchaser to take appropriate measures to preserve the confidentiality of
such information.
9.9 Non-Compete.
From and after the Closing and until the fifth anniversary of the Closing
Date, Seller shall not and shall cause its Affiliates to not, directly or
indirectly, as a partner, stockholder, proprietor, consultant, joint venturer or
in any other capacity:
(a) engage in, or own, manage, operate or control, or
participate in the ownership, management, operation or control of, any
business or entity which engages anywhere in North America or Mexico in the
business of (A) mining, processing or distributing ball clay, feldspar or
kaolin other than incidental to other mining activities, (B) the
manufacture of ceramic bodies, or (C) manufacturing or selling any products
for distribution to any customers of the Subsidiaries on the Closing Date
which products compete, directly or indirectly with the Business; provided,
however, that nothing herein shall prohibit Seller and its Affiliates from
owning, in the aggregate, not more than five percent (5%) of any class of
securities of a publicly traded entity in any of the foregoing lines of
business so long as neither Seller nor any of its Affiliates participates
in any way in the management, operation or control of such entity; or
(b) solicit any customer of any of the Subsidiaries to purchase
products or services which are regularly supplied by any of the
Subsidiaries as of the Closing Date.
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9.10 Specific Performance. Seller acknowledges that, given the nature of
the business of the Subsidiaries, the covenants contained in Sections 9.7, 9.8,
and 9.9 contain reasonable limitations as to time, geographical area and scope
of activity to be restrained, and do not impose a greater restraint than is
necessary to protect and preserve for the benefit of Purchaser the goodwill of
the Subsidiaries and to protect the legitimate business interests of Purchaser.
If, however, any portion of Sections 9.7, 9.8, and 9.9 is determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too long a period of time or over too large a geographic area or by reason
of its being too extensive in any other respect or for any other reason, it will
be interpreted to extend only over the longest period of time for which it may
be enforceable and/or over the largest geographical area as to which it may be
enforceable and/or to the maximum extent in all other aspects as to which it may
be enforceable, all as determined by such court and in such action. Seller
agrees that Purchaser's remedies at law for any breach or threat of breach by
Seller of the provisions of Sections 9.7, 9.8, and 9.9 will be inadequate, and
that Purchaser shall be entitled to an injunction or injunctions, without the
necessity for the posting of a bond or other collateral security, to prevent
breaches of the provisions of Sections 9.7, 9.8 and 9.9 and to enforce
specifically the terms and provisions hereof.
9.11 Retention Bonuses. Seller shall pay when due, or promptly reimburse
the applicable Subsidiary for, all retention or "sale" bonuses under agreements
in existence as of the Closing Date and which bonuses are payable solely by
virtue of the Closing to employees of any of the Subsidiaries, it being
understood that Seller shall have no liability for any cost, payment, damage,
expense, or bonus arising due to a combination of the Closing and any other
fact, circumstance, or event (e.g., termination by employer or employee or
reduction in responsibilities, title or compensation, including any reduction of
responsibility that automatically occurs as a consequence of the Closing).
9.12 Intentionally Omitted.
9.13 Retirement Plans. The Kentucky-Tennessee Clay Company Hourly
Employees' Pension Plan has been, and will remain, sponsored and maintained by
▇-▇ ▇▇▇▇ for the benefit of its eligible hourly employees and the K-T Feldspar
Corporation Hourly Employee Pension Plan has been, and will remain, sponsored
and maintained by K-T Feldspar for the benefit of its eligible hourly employees.
Salaried employees of ▇-▇ ▇▇▇▇ and K-T Feldspar have been covered under Seller's
Hecla Mining Company Retirement Plan ("Seller's Retirement Plan"). Seller shall
fully vest all affected salaried employees of ▇-▇ ▇▇▇▇ and K-T Feldspar under
Seller's Retirement Plan as of the Closing Date. Purchaser, ▇-▇ ▇▇▇▇ and K-T
Feldspar shall establish such new retirement programs as are considered
desirable to cover salaried employees
71
of ▇-▇ ▇▇▇▇ and K-T Feldspar with respect to future retirement benefit accruals
on and after the Closing Date. It is the intent of Purchaser and Seller to
apportion the assets and liabilities of Seller's Retirement Plan in accordance
with and subject to the following provisions of this Section 9.13.
(a) It is the intent of Purchaser and Seller to apportion
the liabilities and assets of Seller's Retirement Plan to provide for
a transfer to Purchaser's Retirement Plan (as defined below) of
liabilities as of the Closing Date, and a transfer of assets within
ninety (90) days of the Closing Date in an amount equal to the
liabilities for retirement benefits of employees who are employees of
▇-▇ ▇▇▇▇ and K-T Feldspar immediately after the Closing Date as
measured by the Projected Benefit Obligation (as defined in Statement
of Financial Accounting Standards #87), plus the Hourly Plan
Underfunding Amount as defined in (d) below. The determination of the
Projected Benefit Obligation shall be made using the actuarial
assumptions used by Seller's actuary for plan funding purposes for the
2000 plan year, as evidenced by the actuarial report prepared by ▇▇▇▇
& ▇▇▇▇▇▇ and dated June 22, 2000 and a discount rate of 7% per year.
Purchaser shall establish or shall cause ▇-▇ ▇▇▇▇ and K-T Feldspar,
either jointly or separately, to establish a retirement plan
("Purchaser's Retirement Plan") which shall be equal in all material
respects to Seller's Retirement Plan with respect to benefits accrued
as of Closing Date, including optional forms of benefits. Purchaser's
Retirement Plan will assume the liability for benefits accrued under
Seller's Retirement Plan prior to the Closing Date with respect to
employees who are employed by ▇-▇ ▇▇▇▇ and K-T Feldspar immediately
after the Closing Date, contingent upon the receipt of the transferred
assets as provided herein. Such amount to be transferred as of the
Closing Date shall accrue interest at a rate of 7% per annum from the
Closing Date until the date of transfer, and shall be reduced by the
amount of any benefit payments (plus interest at 7%) made to or on
behalf of covered employees after the Closing Date and prior to the
date of transfer. In the event that Seller's Retirement Plan does not
transfer the full amount specified herein, by reason of Section 414(l)
of the Internal Revenue Code, or any regulations or interpretations
thereunder, or by reason of any other law or regulation, or for any
other reason, Seller shall pay to Purchaser the difference between the
transfer amount specified herein and the amount actually transferred.
(b) The amount of transferred assets as described above may
be transferred in cash or in kind, to the extent a transfer in kind is
approved by
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Purchaser. As soon as practicable following the Closing Date, but not
later than fifteen (15) days following the Closing Date, Seller and
Purchaser shall each file Forms 5310-A, to the extent not excepted
from such filing requirement by applicable regulations, in respect of
Seller's Retirement Plan in the case of Seller, and Purchaser's
Retirement Plan in the case of Purchaser, and shall provide the other
party a copy thereof; provided, however, that the proposed transfer
date referenced in the Forms 5310-A shall not be interpreted to change
any provision of this Section 9.13. The actuarial calculations
required hereunder shall be provided by Seller and performed by ▇▇▇▇ &
▇▇▇▇▇▇ ("Seller's Actuary") using the actual employee data for each
plan on the Closing Date. No later than fifteen (15) days following
the Closing Date, Seller shall provide to Purchaser a copy of the
report of Seller's Actuary embodying the results of such calculation,
and any participant data and other information needed to duplicate and
confirm the calculations of the Seller's Actuary. An actuary
designated by Purchaser shall, at Purchaser's expense, be entitled to
confirm the accuracy of the calculations of the Seller's Actuary. In
the event of a disagreement between said actuaries, the actuaries
shall attempt to settle such disagreement. If the Seller's Actuary
and the Purchaser's actuary are unable to settle their disagreement
within forty-five (45) days following the Closing Date, the
disagreement shall be settled by a third independent actuary agreed to
by Seller and Purchaser, provided that such third actuary shall be
limited to an amount not less than the transfer amount determined by
the Seller's Actuary and not more than the amount determined by the
Purchaser's actuary and further provided that such disagreement shall
be settled no later than ninety (90) days following the Closing Date.
Seller and Purchaser shall each pay one-half of the fee charged by any
such third actuary. Seller and Purchaser shall cause any required
advance notification to the IRS regarding transfers of plan assets to
be made and shall cooperate to secure any approval by any government
agency which is required by law for a transfer of assets and
liabilities for benefits from Seller's Retirement Plan to Purchaser's
Retirement Plan.
(c) Purchaser shall be entitled to receive from Seller,
within a reasonable time after the Closing Date and at all times
thereafter, such pertinent data and information that Purchaser may
reasonably require (including, but not limited to, participant and
beneficiary records) to implement the requirements of this Section
9.13, to administer Purchaser's Retirement Plan and to respond to any
claims, audits or examinations. Seller and Purchaser shall cooperate
73
with each other in all respects relating to this Section 9.13 and,
except as otherwise set forth, shall each pay their respective
expenses arising from the obligations undertaken by each pursuant to
this Section 9.13.
(d) For purposes of this Section 9.13, the term "Hourly
Plan Underfunding Amount" shall be the excess, if any, of the sum of
the Projected Benefit Obligation of the Kentucky-Tennessee Clay
Company Hourly Employees' Pension Plan and the Projected Benefit
Obligation of the K-T Feldspar Corporation Hourly Employee Pension
Plan (the "Hourly Plans") over the total fair value of the assets of
the Hourly Plans as of the Closing Date. The Projected Benefit
Obligation of each plan shall be determined as of the Closing Date in
accordance with Statement of Financial Accounting Standards # 87 using
the actuarial assumptions used by the Seller's Actuary for funding
purposes for each such plan for the 2000 plan year as evidenced by the
actuarial reports prepared by ▇▇▇▇ & ▇▇▇▇▇▇ and dated August 18, 2000
and May 1, 2000 respectively, and a discount rate of 7% per year.
9.14 Claims under Welfare Plans. Seller shall reimburse Purchaser for all
liabilities of any of the Subsidiaries under the Welfare Plans in regard to any
claims submitted on behalf of employees or former employees, or their eligible
dependents, of any of the Subsidiaries, or of Seller or any Affiliate of Seller,
with respect to illnesses or injuries which have occurred or are in existence on
or prior to the Closing Date (including IBNR claims) in each case for the
portion thereof which pertains to the period ending on the Closing Date,
regardless of when the claim is made; provided, however, that Seller shall have
no liability or obligation under this Section 9.14 except to the extent the
aggregate of such claims and liabilities shall exceed the reserve therefor on
the Final Balance Sheet. Purchaser shall provide (or shall cause the third-
party administrator administering such Welfare Plans to provide) monthly
statements to Seller, setting forth in detail all claims and payments made under
such Welfare Plans during such month on account of illnesses or injuries in
existence or occurring prior to the Closing Date.
9.15 Hecla Name. Purchaser shall promptly take all action necessary or
advisable to change the names of Hecla Brazil and Mineracao Hecla to delete the
name of "Hecla" therefrom and to remove all reference to "Hecla" from their and
their Affiliates' logos, letterheads, doing business designations and
qualifications, and its other assets, properties, equipment, and documentation,
and filings. Purchaser acknowledges that Seller shall retain all worldwide
rights to the trademark, trade name, and corporate name of "Hecla".
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9.16 Releases/Collateral. Purchaser shall take all appropriate and
reasonable actions to cause Seller and each of its Affiliates to be released, as
soon as reasonably practicable after the Closing (but for those listed on
Schedule 9.16, in no event longer than sixty (60) days from the Closing Date and
for others, sixty (60) days after Purchaser is notified or becomes aware of the
existence of such guaranty, collateral or other obligations), from all guaranty,
collateral or other obligations entered into by Seller or any of such Affiliates
in connection with a deposit, bond, letter of credit or other security device
(including, without limitation, any equipment leases) provided or maintained by
or on behalf of any Subsidiary with respect to reclamation or other obligations,
and Purchaser shall take all actions necessary or appropriate to ensure that
Seller or such Affiliate promptly receives any deposit, collateral, or other
assets made available as a result of such release, provided that if any such
release or return is not commercially possible, Purchaser shall, instead,
provide to Seller or its Affiliate, as the case may be, its corresponding
guaranty (which shall be deemed an obligation of Purchaser hereunder) and back-
to-back collateral for such non-returned deposit, collateral or other assets.
9.17 Technology Support. Seller shall provide telephone support consistent
with its current operating support, to Purchaser in connection with the
operation of the Jonas & ▇▇▇▇▇▇▇▇ business system software and Seller shall
allow Purchaser the right to use the Jonas & ▇▇▇▇▇▇▇▇ business system software,
and the Dynacom terminal emulation package, each as currently configured and
currently used by the Subsidiaries and which is licensed in the name of Seller.
Such operating support shall be provided for the earlier to occur of (a) twelve
(12) months following the Closing Date, (b) the date Purchaser purchases and
implements a suitable replacement for such Software or (c) 60 days following the
date Seller notifies Purchaser that it is committed to purchase and implement a
replacement for such software.
9.18 Tax Support Services. After the Closing Date at a cost equal to
$75.00 per hour, plus out-of-pocket costs, Seller shall provide Purchaser with
all tax support services substantially similar to those historically provided by
Seller to the Subsidiaries prior to or on the Closing Date in connection with
the preparation of the first federal and state income and franchise tax filings
of Purchaser including the Subsidiaries with Purchaser's tax returns (or of the
Subsidiaries individually (if certain tax filings are made at the subsidiary
level)).
ARTICLE 10
TAXES
10.1 In General. This Article 10 shall govern the obligation of the
parties with respect to Taxes.
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10.2 Reporting and Payment of Taxes. For all taxable periods of the U.S.
Subsidiaries ending on or prior to the Closing Date, (i) the parties shall cause
the U.S. Subsidiaries to join in Seller's consolidated federal income Tax
Returns and, in jurisdictions requiring or permitting combined reporting with
Seller or any of its Affiliates, to join in combined income Tax Returns for such
jurisdictions, in accordance with current practices, and Seller shall pay the
Taxes required to be paid in respect of such Tax Returns, (ii) Seller shall
cause the Subsidiaries to file all other income Tax Returns to the extent such
returns are required to be filed (taking into account any extensions) on or
before the Closing Date and pay the Taxes required to be paid in respect of such
Tax Returns, and (iii) Purchaser shall cause the Subsidiaries to file all other
state income Tax Returns required to be filed on or after the Closing Date and
pay the Taxes required to be paid in respect of such Tax Returns. Purchaser
shall cause the Subsidiaries to file separate, combined or consolidated income
Tax Returns, or shall include the Subsidiaries in its combined or consolidated
income Tax Returns, for all Tax periods ending after the Closing Date and shall
pay or cause to be paid all Taxes required to be paid in respect of such Tax
Returns. Seller shall cause to be filed all other Tax Returns required to be
filed (taking into account any extensions) by Seller on behalf of any of the
Subsidiaries on or before the Closing Date, and shall pay or cause to be paid
all Taxes required to be paid in respect of such Tax Returns, and Purchaser
shall cause to be filed all other Tax Returns required to be filed by, or on
behalf of, any of the Subsidiaries and shall pay or cause to be paid all Taxes
shown to be due thereon. All Tax Returns referred to in this Section 10.2 shall
be filed in a timely manner and in proper form. Purchaser shall prepare and
provide Seller with copies of each Tax Return (or the relevant portions thereof)
reflecting any obligations with respect to any taxable period of any of the
Subsidiaries which begins before and ends after the Closing Date ("Straddle
Periods") at least thirty (30) days prior to the due date for filing such
return, and Seller shall have the right to review and to grant or withhold
approval of such Tax Returns (which approval shall not unreasonably be
withheld). Purchaser and Seller shall attempt in good faith mutually to resolve
any disagreements regarding such Tax Returns prior to the due date for filing
thereof.
10.3 Certain Unpaid Taxes. To the extent an accrual on the Final Balance
Sheet with respect to the Taxes for the portions of Straddle Periods ending on
the Closing Date exceeds the amount of Taxes paid by the Subsidiaries on account
of such Straddle Period Taxes with respect to such period, as the case may be,
Purchaser shall cause the applicable Subsidiary, as appropriate, to refund the
excess to Seller. To the extent such accrual is less than the amount of such
Taxes paid by the applicable Subsidiary, Seller shall reimburse the applicable
Subsidiary for the deficiency. Any such refund or reimbursement shall be paid
concurrently with the filing of the related return relating to such Straddle
Period Taxes or reflecting the effect of the Tax Election (as the case may be).
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10.4 Allocations Relating To Taxes. Responsibilities for Taxes shall be
allocated between Seller and Purchaser as follows:
(a) For federal income Tax purposes, the taxable year of the
Subsidiaries shall end as of the close of the Closing Date and, with
respect to all other Taxes, Seller and Purchaser will, unless prohibited by
applicable law, close the taxable period of the Subsidiaries as of the
close of the Closing Date. Neither Seller nor Purchaser shall take any
position inconsistent with the preceding sentence on any Tax Return.
(b) Any allocation of income or deductions required to determine
any Taxes attributable to any Straddle Period shall be made by means of an
interim closing of the books and records of the Subsidiaries as of the
close of the Closing Date, provided that exemptions, allowances, deductions
(including, without limitation, depreciation and amortization deductions)
or any Taxes (such as property, sales or similar Taxes) that are calculated
on an annual or periodic basis shall be allocated between the period ending
on the Closing Date and the period after the Closing Date in proportion to
the number of days in each such period, excluding any impact of the Tax
Election. Any disagreements regarding the allocations shall be promptly
resolved in an arbitration conducted by the Arbitrating Accountant, whose
decision shall be binding on the parties.
(c) Any transaction occurring outside the ordinary course of
business and not caused by Seller or its Affiliates on the Closing Date
after the Closing, except with respect to the Tax Election, shall be
treated as occurring on the day following the Closing Date.
10.5 Refunds and Credits. Seller shall be entitled to any refunds or
credits for any income Taxes for periods for which Seller is responsible
pursuant to this Article 10 or for which Seller must indemnify Purchaser
pursuant to Article 11. Purchaser shall be entitled to any refunds of or
credits for any income Taxes for periods for which Purchaser is responsible
under this Article 10. Refunds for Straddle Periods shall be equitably divided
between the parties in accordance with the principles in this Article 10.
10.6 Cooperation; Audits. Seller and Purchaser agree that:
(a) After the Closing Date, Seller and Purchaser shall cooperate
fully with each other regarding Tax matters and shall make available to the
other as reasonably requested all information, records and documents
relating to Taxes governed by this Agreement until the expiration of the
applicable statute of limitations or extension thereof or at the conclusion
of all audits, appeals or litigation with respect to Taxes relating to the
Subsidiaries for such period;
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(b) if Purchaser or any of the Subsidiaries shall receive
written notice from an appropriate taxing authority of any pending
examination, claims, settlements, proposed adjustments or related matters
with respect to Taxes of any of the Subsidiaries that could affect Seller
or any of its Affiliates, or if Seller or any of its Affiliates receives
written notice from an appropriate taxing authority of any such matters
that could affect Purchaser or any of the Subsidiaries, the party receiving
such notice shall notify in writing the potentially affected party within
ten (10) business days thereafter. The failure of any party to give the
notice required by this paragraph (b) shall not impair the party's rights
under this Agreement or impose any liabilities on such party except to the
extent the other party demonstrates that it has been prejudiced thereby;
(c) Seller shall have the right, at its expense, to control,
conduct, compromise and settle any contest relating to any liability for
Taxes for which Seller is solely responsible pursuant to this Article 10.
If Purchaser does not consent to such compromise or settlement, however,
Seller may turn over control of such contest to Purchaser, and Seller's
liability for Taxes with respect to the items subject to the contest shall,
in such case, be limited to the amount for which Seller would have been
liable under such compromise or settlement;
(d) Purchaser shall have the sole right to represent the
interests of any of the Subsidiaries in all other Tax audits or
administrative or court proceedings;
(e) Seller shall not (unless believed required by law) file or
amend any Tax Return or claim for refund or credit for taxable periods
ending on or before the Closing Date to the extent that adverse
consequences as to Purchaser or any of the Subsidiaries would result
without Purchaser's written consent, which shall not unreasonably be
withheld. Purchaser undertakes that neither it nor any of its Affiliates
shall file or amend any tax return or claim for refund or credit, or settle
or compromise any matter, for taxable periods ending after the Closing Date
to the extent adverse consequences to Seller would result without Seller's
written consent, which consent shall not unreasonably be withheld.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by Seller.
(a) Seller shall indemnify Purchaser and hold Purchaser harmless
from any losses, damages, diminution of value of assets or properties,
liabilities, demands, claims, actions or causes of action, regulatory,
legislative or
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judicial proceedings or investigations, assessments, levies, fines,
penalties, costs and expenses whatsoever (including, without limitation,
reasonable attorneys' and expert witness fees and litigation expenses, cost
of investigation and defense, and expenses incurred in connection with any
product recall and testing expenses) incurred or suffered by Purchaser, the
Subsidiaries and their respective agents, representatives, employees,
officers, directors, shareholders, controlling persons and affiliates
(together with the additional matters described in paragraph (b) hereof,
"Damages") from any of the following:
(1) Any inaccuracy in any representation or warranty by the
Seller contained in this Agreement or in any reaffirmation thereof in any
closing document delivered by Seller pursuant to the provisions of this
Agreement, whether or not involving a Third Party Claim, provided that in
determining whether an inaccuracy exists in Section 4.3(c), 4.4, 4.10,
4.13(a), 4.13(b), 4.17(e), and 4.18 for purposes of this Section 11.1(a)(1)
only, any exception in such Sections or subsections, as the case may be,
for the defined term "Material Adverse Effect" shall be disregarded, but
any use of the undefined term "material" or "materiality" shall continue to
apply.
(2) Any breach of or failure to perform any covenant or
agreement by the Seller contained in this Agreement or in any closing
document delivered by Seller pursuant to the provisions of this Agreement;
(3) Taxes which are unpaid as of the Closing Date and which
are imposed upon any of the Subsidiaries with respect to (i) any taxable
period ending on or before the Closing Date for which a tax return shall be
filed by Seller pursuant to Section 10.2 ("Pre-Closing Periods"), and (ii)
Taxes imposed on any of the Subsidiaries pursuant to and solely by reason
of Treasury Regulations Section 1.1502-6 (or any comparable provision under
state, local, or foreign law or regulation imposing several liability upon
members of a consolidated, combined, affiliated or unitary group) for any
Pre-Closing Period; provided, however, that clause (ii) shall apply only
with respect to such Taxes for which Seller or its Affiliates are also
liable;
(4) Taxes resulting from Taxes imposed on any of the
Subsidiaries with respect to the portion of any Straddle Period ending on
the Closing Date (except to the extent of the excess of the amount
reflected on the Final Balance Sheet over any amounts refunded to Seller by
Purchaser pursuant to Section 10.3);
(5) Without being limited by subparagraph (1) of this
Section 11.1(a) and without regard to the fact that any one or more of the
items referred to in this Section 11.1(a)(5) may be disclosed in any of the
Schedules
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to this Agreement or in any documents included or referred to herein, any
action or failure to act in violation of any applicable ERISA provision, in
whole or in part, and any liabilities incurred, on or prior to the Closing
Date with respect to any Benefit Plan which any of the Subsidiaries or
Seller or any ERISA Affiliate has at any time maintained or administered or
to which any of the Subsidiaries or Seller or any ERISA Affiliate has at
any time contributed, other than any underfunding in any funded Benefit
Plans that would be offset as provided in Section 9.13;
(6) Without being limited by subparagraph (1) of this
Section 11.1(a), and without regard to the fact that any one or more of the
items reflected in this Section 11.1(a)(6) may be disclosed in the
Schedules to this Agreement or in any document included or referred to
herein, any liability or obligation of the Subsidiaries under any
Environmental Law resulting from or arising out of:
a. any generation, transportation, storage, treatment
or Release of any Hazardous Substances giving rise to liability
under any Environmental Law occurring on or prior to the Closing
Date (including without limitation those that allegedly result
in, or result in, any Release or treatment of Hazardous
Substances after the Closing Date) at (x) any of the Properties
or (y) any Offsite Facility which received Hazardous Substances
from any of the Subsidiaries prior to the Closing Date,
regardless of when liability is asserted;
b. any discharges to or from storm, ground or surface
waters or wetlands, and any air emissions or pollution giving
rise to liability under any Environmental Law, which result from
or are caused by activities, events, conditions or occurrences at
any of the Properties prior to the Closing Date;
c. the exposure of and resulting consequences to any
Persons, including, without limitation, employees of any of the
Subsidiaries, to any Hazardous Substances created, generated,
processed, handled or originating on or prior to the Closing Date
at any of the Properties giving rise to liability under any
Environmental Law; or
d. without limiting the generality of any of the
foregoing provisions of this subparagraph (6), any Environmental
Claim as a result of activities, events, conditions or
occurrences at any of the Properties prior to the Closing Date;
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(7) Without being limited by subparagraph (1) of this
Section 11.1 (a) and without regard to the fact that any one or more of the
items referred to in this Section 11.1(a)(7) may be disclosed in any of the
Schedules to this Agreement or in any documents included or referred to
therein or may be otherwise known to Purchaser at the date of this
Agreement or on the Closing Date, any claim or liability for personal
injury, property damage or economic loss or other Damages of any kind
whatsoever arising out of (A) dioxin being or having been present in
kaolin, feldspar or ball clay mined, processed, manufactured or sold by the
Subsidiaries or the exposure of Persons to such dioxin or silica, which
result from or are caused by activities, events, conditions or occurrences
arising prior to the Closing Date, regardless of when liability is
asserted, or (B) employee health and safety matters referenced in Schedule
11.1(a)(7), in each case which result from or are caused by activities,
events, conditions or occurrences arising as indicated in Schedule
11.1(a)(7) regardless of when liability is asserted;
(8) Any claims or liability asserted against the
Subsidiaries in respect of payments received by any of them from OCF prior
to its filing of a petition under Chapter 11 of the Bankruptcy Code; and
(9) Any Damages asserted against, or paid, suffered or
incurred by, the Purchaser (provided the Purchaser may not compromise or
settle a claim without the consent of Seller) and resulting from, based
upon, or arising out of (i) any dispute or agreement (or termination of any
agreement ) between Seller or any of its affiliates (including the
Subsidiaries) and Zemex U.S. Corporation or any of its affiliates arising
from the Zemex Agreement or (ii) any dispute or litigation between the
Purchaser or any of its affiliates and Zemex U.S. Corporation or any of its
affiliates related to negotiations, discussions, or agreements involving
any potential acquisition by the Purchaser of any assets directly or
indirectly owned by Seller that were the subject of the Zemex Agreement
(other than any alleged negotiations or agreements by or on behalf of
Purchaser or its affiliates with Zemex U.S. Corporation or any of its
affiliates or agents) (a "Zemex Dispute"). For purposes of this
subsection, "Damages" shall include, but not be limited to, reasonable
attorneys' fees incurred in responding to discovery requests or responding
to any form of discovery or appearances at trial, travel costs and costs
related to individual legal representation of any officer of a Purchaser
required to appear in U.S. courts for matters described herein, including
in connection with the existing lawsuit described in Section 4.15(e)
hereof.
(10) (A) Past, present or future Third Party Claims arising
out of, or in any way connected with, the ownership of any mineral interest
by said third party (other
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than the right to receive royalty payments) pursuant to any grant or
reservation in the prior instruments described on Schedule 11.1(a)(10)
hereto, and (B) any Damages incurred by Purchaser arising out of the matter
described in Schedule 4.11(c)(i).
(b) For the purposes of this Agreement, Damages shall include,
without limitation: (i) reasonable attorneys', accountants',
investigators', consultants' and experts' fees and expenses, sustained or
incurred in connection with the defense or investigation of any Third Party
Claim; (ii) expenses (computed on an after-Tax basis) reasonably incurred
to compensate employees for any costs or ramifications associated with
compliance with (or lack of compliance with) the requirements of Section
401(a) or 401(k) of the Code; and (iii) costs and expenses reasonably
incurred and necessary to bring the Subsidiaries' respective assets and
business into compliance with Environmental Laws taking into account any
existing grandfather provisions (and which non-compliance occurred prior to
the Closing Date) including, without limitation:
(1) costs and expenses associated with all filings, court
orders, awards or directives issued in connection with such compliance;
(2) costs and expenses incurred for the protection of any
of the Subsidiaries, their respective employees, members of the public and
the environment, and for the prevention of harm to any of the Subsidiaries,
their respective employees, members of the public and the environment;
(3) costs and expenses resulting from the loss of use of
any Real Property or Leased Premises, including, without limitation, moving
and relocation costs;
(4) costs and expenses of additions to and modifications of
the Equipment and the Leased Premises;
(5) costs of sampling, monitoring or other testing programs
and laboratory equipment; and
(6) all legal, engineering and consulting fees and expenses
related to any of the foregoing.
(c) Seller shall not be responsible to Purchaser with respect to
any losses, liabilities, damages or expenses as to which Purchaser is
otherwise entitled to indemnification pursuant to Section 11.1 (exclusive
of Sections 11.1(a)(2), 11.1(a)(3), 11.1(a)(4), 11.1(a)(5), 11.1(a)(7), and
11.1(a)(9) thereof) unless and until (i) the aggregate amount (taking into
account the $10,000 baskets in the following subsection (ii)) of such
losses, liabilities, damages and expenses incurred by Purchaser exceeds
Three
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Hundred Fifty Thousand Dollars ($350,000) and then only with respect to the
amount that in the aggregate is in excess of Three Hundred Fifty Thousand
Dollars ($350,000), and (ii) the amount of any one, individual loss,
liability, damage or expense incurred by Purchaser exceeds Ten Thousand
Dollars ($10,000).
(d) Any claim for indemnification by Purchaser under Section
11.1 (a) shall be asserted by written notice to Seller within the
appropriate Claim Period. Any matters as to which a claim has been
asserted under Section 11.1(a) within the Claim Period and which are
pending or unresolved before the end of the Claim Period shall continue to
be covered by Section 11.1(a) until finally terminated or resolved. For
the purposes of this Agreement, the relevant "Claim Period" with respect to
any claim for indemnification pursuant to this Section 11.1 shall be the
following:
(1) With respect to any claim under Section 11.1(a)(1)
(other than with respect to a breach of Sections 4.1, 4.2, 4.3 (except
subparagraph 4.3(c)), 4.4, 4.5, 4.11, 4.12(a), 4.13, 4.15, 4.16, 4.17,
4.23, 4.24, 4.34 and 4.36), the Claim Period shall be the period commencing
on the Closing Date and ending on the last day of the eighteenth full
calendar month following the Closing Date.
(2) With respect to any claim under Section 11.1(a)(1) with
regard to a breach of Section 4.16 or 4.17 or any claim under Sections
11.1(a)(3), (4) or (5), the Claim Period shall be the period commencing on
the Closing Date and ending on the date which is six months after the
expiration of the underlying statutes of limitation.
(3) With respect to any claim under Section 11.1(a)(1) with
regard to a breach of Sections 4.11, 4.13, 4.15, 4.34 and 4.36, the Claim
Period shall be the period commencing on the Closing Date and ending on the
date which is three years after the Closing Date.
(4) With respect to any claim under Section 11.1(a)(6), the
Claim Period shall be the period commencing on the Closing Date and ending
on the date which is five years after the Closing Date.
(5) With regard to any claim under Section 11.1(a)(1) with
regard to a breach of Sections 4.1, 4.2, 4.3 (except subparagraph 4.3(c)),
4.4, 4.5, 4.12(a), 4.23 or 4.24, or with regard to a claim under Section
11.1(a)(7), 11.1(a)(8) or 11.1(a)(9) and 11.1(a)(10), the Claim Period
shall be the period commencing on the Closing Date and shall continue
thereafter without limitation, provided any such claim shall be made no
later than six months after discovery thereof by Purchaser.
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(e) Notwithstanding any provision in this Agreement to the
contrary, the maximum aggregate liability of Seller with respect to claims
made pursuant to Sections 11.1 (other than Sections 11.1(a)(2), 11.1(a)(3),
11.1(a)(4), 11.1(a)(5), 11.1(a)(7), 11.1(a)(8) and 11.1(a)(9) hereof)
shall be 30% of the Purchase Price. The maximum aggregate liability of
Seller with respect to claims made pursuant to the remaining provisions of
Section 11.1(a) shall not exceed the amount by which (x) the Purchase Price
exceeds (y) all amounts paid by Seller pursuant to the preceding sentence.
In addition, Seller shall not be liable with respect to:
(1) any contingent, speculative, non-quantifiable or
punitive damages, or any consequential, incidental or special damages not
directly resulting from the inaccuracy or breach (by way of example, the
failure of title to equipment or mineral properties would entitle Purchaser
to damages for the value of the equipment or mineral properties, plus
reasonable attorneys' fees and expenses if applicable, but not the
speculative future profits that might have been earned by the equipment or
mineral properties);
(2) any losses, damages, liabilities or expenses with
respect to which Purchaser had a reasonable opportunity, but failed, in
good faith to mitigate its loss including but not limited to, its failure
(other than with respect to Environmental Indemnification Claims) to use
commercially reasonable best efforts to assert non-insurance contractual
rights and its failure to use commercially reasonable best efforts to
recover under a policy of insurance, it being understood that this
provision shall not obligate Purchaser to purchase any insurance coverage
it does not currently have; or
(3) except as set forth in Section 11.1(a)(10), title to
Real Estate, to the extent Seller has delivered title insurance policies
(or commitments therefor) conforming to the requirements of Section 8.3(n);
or
(4) any losses, damages, liabilities or expenses to the
extent arising from or caused by actions taken by Purchaser or its
Affiliates or their respective officers, directors or employees after the
Closing.
(f)
(1) Purchaser shall not be entitled to indemnification for
Damages with regard to any matter set forth in Section 11.1(a), until
such time as the cumulative amount for such Damages exceeds the amount
of reserves, if any, specifically allocated for such matter as set
forth in the Final Balance Sheet.
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(2) Damages sustained or incurred arising out of any
misrepresentations or breaches for which indemnification is provided
under Section 11.1(a)(1) shall be determined without regard to any
qualification or exception relating to materiality or Material Adverse
Effect contained in any such representation or warranty giving rise to
the Claim for indemnity hereunder.
(g) In the event that Purchaser makes a claim for
indemnification under Section 11.1(a), Purchaser agrees to give Seller
reasonable access to the books, records and employees of Purchaser and the
Subsidiaries in connection with the matters for which indemnification is
sought to the extent that Seller reasonably deems such access to be
necessary in connection with their rights and obligations under this
Article 11.
(h) For the purposes of this Agreement, "Third Party Claim"
shall mean any claim, action, suit, proceeding or like matter asserted or
threatened by a party other than the parties hereto, their Affiliates, and
each of their successors and permitted assigns, against any Indemnified
Party as to which any Indemnified Party is subject, and which claim is
reasonably expected to be subject to a party's obligations of
indemnification hereunder.
(i) For the purposes of clarification, any losses, damages,
diminution of value of assets or properties, liabilities, demands, claims,
actions or causes of action, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, fines, penalties, costs
and expenses which have been incurred or suffered by any of the
Subsidiaries and arise out of a state of facts constituting a breach of a
representation and warranty of Seller shall give rise to an obligation of
Seller to indemnify Purchaser pursuant to the provisions of Section 11.1(a)
shall constitute Damages, and shall be deemed to have been suffered by
Purchaser, provided, however, that Purchaser and Subsidiaries may not both
collect for such Damages. Similarly, Purchaser may collect Damages only
once for the impact of a given breach on Purchaser, the Subsidiaries, and
their respective agents, representatives, employees, directors,
shareholders, controllers, persons, and affiliates.
11.2 Indemnification by Purchaser.
(a) Purchaser agrees to indemnify and hold harmless Seller, its
directors, officers, employees, agents, and Affiliates from any loss,
damage, diminution of value of assets or properties, liability and expense
whatsoever (including, without limitation, reasonable attorneys' and expert
witness fees and litigation expenses) resulting to Seller, its directors,
officers, employees, agents, and Affiliates from:
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(1) Any inaccuracy in any representation or warranty by
Purchaser contained in this Agreement (other than in Section 3.1 or 3.2) or
in any closing document delivered by Purchaser pursuant to the provisions
of this Agreement, whether or not involving a Third Party Claim;
(2) Any inaccuracy in any representation or warranty by
Purchaser contained in Sections 3.1 and 3.2, whether or not involving a
Third Party Claim;
(3) Any breach of any covenant or agreement by Purchaser
contained in this Agreement or in any closing document delivered by
Purchaser pursuant to the provisions of this Agreement; or
(4) any acts or omissions of Purchaser or any of the
Subsidiaries or the operation of their respective businesses or assets for
any period after the Closing Date, except for any Damages against which
Purchaser is entitled to indemnification pursuant to Section 11.1 hereof.
(5) any claim by OCF (or any receiver or trustee in
bankruptcy for OCF) for any return of the settlement payment pursuant to
that certain settlement agreement between ▇-▇ ▇▇▇▇ and OCF dated November
17, 2000 and previously supplied to Purchaser due to a breach after the
Closing Date of ▇-▇ ▇▇▇▇'▇ supply contract for kaolin to OCF's Jackson,
Tennessee plant dated March 16, 1998, which contract has previously been
supplied to Purchaser.
(b) Any claim for indemnification by Seller under Section 11.2
(a)(1), shall be asserted by written notice to Purchaser within two (2)
years after the Closing Date. Any matters as to which a claim has been
asserted under Section 11.2(a)(1) within two (2) years after the Closing
Date and which are pending or unresolved as of the date which is two (2)
years after the Closing Date shall continue to be covered by Section
11.2(a)(1) until finally terminated or resolved. With regard to any other
claim under Section 11.2, any claim for indemnification by Seller shall be
asserted after the Closing Date without limitation.
(c) Purchaser shall not be responsible to Seller with respect to
any losses, liabilities, damages or expenses as to which Seller is
otherwise entitled to indemnification pursuant to Section 11.2(a)(1) unless
and until (i) the aggregate amount (taking into account the $10,000 baskets
in the following subsection (ii)) of such losses, liabilities, damages and
expenses incurred by Seller exceeds Three Hundred Fifty Thousand Dollars
($350,000) and then only with respect to the amount that in the aggregate
is in excess of Three Hundred Fifty Thousand Dollars ($350,000), and (ii)
the amount of any one, individual loss, liability, damage or expense
incurred by Seller exceeds Ten Thousand Dollars ($10,000).
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11.3 Exclusive Nature of Remedies. Except for the remedy of specific
performance and other equitable remedies and except to the extent that any of
the parties shall have engaged in fraud or a willful breach of this Agreement,
if the transactions contemplated by this Agreement are consummated the rights
and remedies set forth in this Article 11 shall be the exclusive rights or
remedies available to the persons to be indemnified with respect to claims
against any of the parties hereto or any of their respective Affiliates,
officers, directors and employees for which indemnification is authorized or
provided pursuant to this Article. Such limitation shall apply notwithstanding
that such claims are asserted by a cause of action or legal theory other than
breach of contract.
11.4 Cooperation. Subject to the provisions of Sections 11.6, and 11.7,
the party who is obligated to provide indemnification hereunder (the
"Indemnifying Party") shall have the right, at its own expense, to participate
in the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.
11.5 Subrogation. The Indemnifying Party shall not be entitled to require
that any action be brought against any other Person before action is brought
against it hereunder by the Indemnified Party and shall not be subrogated to any
right of action until it has paid in full or successfully defended against the
Third Party Claim for which indemnification is sought, but upon payment or
defense shall be subrogated to any right of action, claim, contractual right, or
insurance coverage applicable to the indemnification.
11.6 Third Party Claims other than Taxes and Environmental Matters.
Forthwith following the receipt of notice of a Third Party Claim, other than a
Third Party Claim with respect to Taxes (as to which Section 10.6 shall apply)
or environmental matters (as to which Section 11.7 shall apply), the party
receiving the notice of the Third Party Claim shall (i) notify the other party
of its existence setting forth with reasonable specificity the facts and
circumstances of which such party has received notice and (ii) if the party
giving such notice is a party who is entitled to receive indemnification
hereunder (an "Indemnified Party"), specifying the basis hereunder upon which
the Indemnified Party's claim for indemnification is asserted. The Indemnified
Party may, upon reasonable notice, tender the defense of a Third Party Claim to
the Indemnifying Party. If:
(a) the defense of a Third Party Claim is so tendered and within
thirty (30) days thereafter such tender is accepted without qualification
by the Indemnifying Party; or
(b) within thirty (30) days after the date on which written
notice of a Third Party Claim has been given
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pursuant to this Section 11.6, the Indemnifying Party shall acknowledge in
writing to the Indemnified Party and without qualification its
indemnification obligations as provided in this Article 11 and assume the
defense of the Third Party Claim;
then, except as hereinafter provided, the Indemnified Party shall not, and
the Indemnifying Party shall, have the right to contest, defend, litigate or
settle such Third Party Claim. The Indemnified Party shall have the right to be
represented by counsel at its own expense in any such contest, defense,
litigation or settlement conducted by the Indemnifying Party provided that the
Indemnified Party shall be entitled to reimbursement therefor only if the
Indemnifying Party shall lose its right to contest, defend, litigate and settle
the Third Party Claim as herein provided. The Indemnifying Party shall lose its
right to defend and settle the Third Party Claim if it shall fail to diligently
contest the Third Party Claim. So long as the Indemnifying Party has not lost
its right and/or obligation to contest, defend, litigate and settle as herein
provided, the Indemnifying Party shall have the exclusive right to contest,
defend and litigate the Third Party Claim and shall have the exclusive right, in
its discretion exercised in good faith, and upon the advice of counsel, to
settle any such matter, either before or after the initiation of litigation, at
such time and upon such terms as it deems fair and reasonable, provided that at
least ten (10) days prior to any such settlement, written notice of its
intention to settle shall be given to the Indemnified Party. All expenses
(including without limitation attorneys' fees) incurred by the Indemnifying
Party in connection with the foregoing shall be paid by the Indemnifying Party.
Notwithstanding the foregoing, in connection with any settlement negotiated by
an Indemnifying Party, no Indemnified Party shall be required by an Indemnifying
Party to (x) enter into any settlement that does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the Indemnified Party
of a release from all liability in respect of such claim or litigation, (y)
enter into any settlement that attributes by its terms liability to the
Indemnified Party or (z) consent to the entry of any judgment that does not
include as a term thereof a full dismissal of the litigation or proceeding with
prejudice. No failure by an Indemnifying Party to acknowledge in writing its
indemnification obligations under this Article 11 shall relieve it of such
obligations to the extent they exist. If an Indemnified Party is entitled to
indemnification against a Third Party Claim, and the Indemnifying Party fails to
accept a tender of, or assume, the defense of a Third Party Claim pursuant to
this Section 11.6, or if, in accordance with the foregoing, the Indemnifying
Party shall lose its right to contest, defend, litigate and settle such a Third
Party Claim, the Indemnified Party shall have the right, without prejudice to
its right of indemnification hereunder, in its discretion exercised in good
faith and upon the advice of counsel, to contest, defend and litigate such Third
Party Claim, and may settle such Third Party Claim, either before or after the
initiation of litigation, at
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such time and upon such terms as the Indemnified Party deems fair and
reasonable, provided that at least ten (10) days prior to any such settlement,
written notice of its intention to settle is given to the Indemnifying Party.
If, pursuant to this Section 11.6, the Indemnified Party so contests, defends,
litigates or settles a Third Party Claim, for which it is entitled to
indemnification hereunder as hereinabove provided, the Indemnified Party shall
be reimbursed by the Indemnifying Party for the reasonable attorneys' fees and
other expenses of defending, contesting, litigating and/or settling the Third
Party Claim which are incurred from time to time, forthwith following the
presentation to the Indemnifying Party of itemized bills for said attorneys'
fees and other expenses. The failure of an Indemnified Party to notify the
Indemnifying Party of a Third Party Claim, Environmental Indemnification Claim
or any claim for indemnification for a breach of the representations and
warranties in Section 4.16 or pursuant to Section 11.1(a)(3) or 11.1(a)(4)
within the Claim Period shall not relieve the Indemnifying Party of any
liability that the Indemnifying Party may have with respect to such claim except
to the extent the Indemnifying Party is actually prejudiced by such failure.
11.7 Environmental Claims. Upon Purchaser becoming aware of the occurrence
of any event or the existence of any state of facts in respect of which
Purchaser could seek indemnification with respect to a claim for breach of any
of the representations and warranties contained in Section 4.13 or a claim for
indemnification under Section 11.1(a)(6) (an "Environmental Indemnification
Claim"):
(a) Purchaser will give to Seller prompt notice specifying in
reasonable detail the basis for such Environmental Indemnification Claim;
(b) Purchaser will promptly deliver to Seller copies of all
draft and final environmental reports, studies, surveys, test data and
reports, assessments, cost estimates and all other information available to
it or any of the Subsidiaries relating to or supporting such Environmental
Indemnification Claim;
(c) Purchaser will permit and will cause the relevant Subsidiary
to permit representatives of Seller (including advisors and consultants) to
visit and inspect from time to time any of the properties to which such
Environmental Indemnification Claim relates, and to enter on such
properties from time to time for the purpose of conducting such
environmental tests as Seller may reasonably desire with respect to such
Environmental Indemnification Claim, all during normal business hours and
at Seller's expense; and
(d) Purchaser shall exercise reasonable efforts to furnish to
Seller drafts of all proposed remediation plans prior to the date on which
they are required to be
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submitted to any applicable governmental authorities in order to give
Seller a reasonable opportunity to comment on such draft plans.
(e) With respect to any Environmental Indemnification Claim
involving proposed action by Purchaser required by any Environmental Laws
to bring a Property or any Off-Site Facility into compliance with such
Environmental Laws (a "Response Action"), Purchaser shall use a reasonable
alternative (the "Reasonable Alternative"). The "Reasonable Alternative"
shall be limited solely to that action which (A) is, in Purchaser's
reasonable judgment, necessary to achieve compliance with Environmental
Laws, (B) uses, in Purchaser's reasonable judgment, the most cost-
effective, commercially reasonable approach that complies with
Environmental Laws, and assumes the continued use of the Property as a
mining, processing or manufacturing facility, as applicable, and (C) to the
extent allowed by Environmental Laws uses institutional controls,
containment remedies or other remedies which do not require excavation and
disposal of Hazardous Substances, unless such controls, containment or
other remedy are reasonably expected to interfere with the continued use of
the Property as a mining, manufacturing or processing facility, as
applicable, or otherwise expected not to be reasonably practicable.
Purchaser may, in selecting a Reasonable Alternative, take into
consideration issues other than cost, including, but not limited to,
timing, difficulty of implementation, general acceptance of the proposed
technology and concerns expressed by interested parties; provided, however,
that Seller shall not be liable under this Agreement for any material
additional costs for a Response Action beyond the reasonably anticipated
costs of a Reasonable Alternative. In no event shall the Purchaser be
entitled to indemnity for any Response Action that exceeds applicable
clean-up levels established by or under applicable Environmental Laws. All
costs and expenses for such Response Action shall be, to the extent
possible, reasonable and customary charges in the locality in which the
Property or Off-Site Facility at issue is located and for the type and kind
of services to be rendered.
11.8 Characterization of Indemnity Payments. Purchaser and Seller agree to
treat any payment made by Seller under this Article 11 to Purchaser as an
adjustment to the Purchase Price. However, in the event the IRS determines that
any such payment constitutes taxable gain or income to Purchaser or any of the
Subsidiaries, such payment shall be increased so that the payee receives, on an
after-Tax basis, the amount which would have been received had the payment not
resulted in taxable gain or income. In case payments to Purchaser through
application to Purchaser's or the Subsidiaries' assets may be deducted for Tax
purposes, the amount of Seller's indemnification obligation shall be reduced by
the amount equal to the net saving in Taxes resulting from such deduction offer
taking into account the Tax consequences to the Purchaser of the receipt of the
indemnification payment.
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11.9 Representations at Closing. For the purposes of this Article 11, each
party shall be deemed to have remade all of its representations and warranties
contained in this Agreement at the Closing with the same effect as if originally
made at the Closing.
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be terminated and abandoned:
(a) in writing by mutual consent of the parties hereto; or
(b) by Seller, if, as of ▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ has not filed
its filings under the HSR Act and Seller has so notified Purchaser of such
termination by March 14, 2001, or by Seller, if, as of April 6, 2001, the
closing conditions set forth in Article 7 to the performance of the
obligations of the Seller shall not have been fulfilled and shall not have
been waived by Seller;
(c) by Purchaser, if, as of a date which is sixty (60) days
after the date hereof, the closing conditions set forth in Article 6 to the
performance of the obligations of Purchaser shall not have been fulfilled
and shall not have been waived by Purchaser;
(d) by Purchaser, if Purchaser is required or construed to be
required to, in connection with the receipt of any regulatory approval or
the removal or rescission of any injunction or other order, to proffer to,
or agree to (i) sell or hold separate and agree to sell or to discontinue
to use or limit, before or after the Closing, any assets, businesses, or
interest in any assets or businesses of Purchaser, its subsidiaries, or any
of the Subsidiaries other than Hecla Brazil (or to consent to any sale, or
agreement to sell, or discontinuance or limitation by any Subsidiary of any
of its assets or businesses) or (ii) any conditions relating to, or changes
or restriction in, the operations of any such assets or businesses; or
(e) by Purchaser, without regard to the accuracy or inaccuracy
of any representation and warranty of the Seller regarding the Zemex
Agreement, if any pending or threatened dispute or litigation between
Purchaser, Seller, any of their affiliates or any of their officers,
directors or representatives on the one hand and Zemex US Corporation or
any of its affiliates on the other arising out of the Zemex Dispute, in the
reasonable opinion of Purchaser, is expected to prevent or adversely affect
the consummation of the contemplated transaction, or create any material
encumbrance or restriction whatsoever relating to the ownership or
operation by Purchaser of the Subsidiaries or the Business after the
Closing Date.
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12.2 Effect of Termination. In the event of any termination or abandonment
of this Agreement pursuant to Section 12.1, no party (or any of its affiliates,
parents, officers, directors or employees) shall have any liability or further
obligation to any other party to this Agreement, except that (i) nothing herein
will relieve any party from liability for fraud or any willful breach of this
Agreement, (ii) Section 13.9 shall remain in full force and effect, (iii) the
indemnity obligations of Seller in Section 11.1(a)(9) shall remain in full force
and effect without limitation as to either the Claim Period or the maximum
aggregate liability to Seller, and also without the threshold restrictions set
forth in Section 11.1(c) hereof, and (iv) the obligations of the parties under
the Confidentiality Letter shall remain in full force and effect.
12.3 Option Not To Purchase Certain Stock. Purchaser may, in its sole
discretion, by providing written notice to Seller prior to or at the Closing,
elect not to purchase any of the shares of capital stock of the Subsidiaries;
provided, however, that no adjustment for such election shall be made to the
Purchase Price. If Purchaser makes such election, this Agreement shall remain
in full force and effect except that the shares of capital stock designated in
such written election shall not be sold by Seller or purchased by Purchaser
hereunder, and the representations, warranties, covenants and agreements related
to such shares of capital stock shall no longer be applicable hereunder.
ARTICLE 13
MISCELLANEOUS
13.1 Fees. Seller shall pay all fees and expenses due to Warrior, a
division of Standard Bank London, Limited by reason of this Agreement.
13.2 Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of Seller and Purchaser. Seller and
Purchaser shall use reasonable efforts to consult with each other with respect
to the content of any such required press release or other publicity.
13.3 Amendments. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by all of the parties hereto or, in
case of an asserted waiver, signed by the party against which enforcement of the
waiver is sought.
13.4 Assignment. Neither this Agreement nor any right created hereby shall
be assignable by any party hereto, except that (i) at or prior to the Closing,
Purchaser may assign certain of its rights and delegate certain of its duties
under this Agreement to a subsidiary corporation, and (ii) after the
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Closing, Purchaser may assign its rights and delegate its duties under this
Agreement to any third party. No such assignment pursuant to (i) or (ii) above
shall relieve Purchaser of any of its liabilities under this Agreement. Seller
expressly acknowledges and agrees that any sale or transfer of all or
substantially all of its assets (whether such sale or transfer is effected by a
sale of stock of any subsidiary or sale or transfer of assets, and whether
effected in one or a series of transactions and whether such sale or transfer is
effected in a single transaction or in a series of related transactions, to a
single acquiring entity or to one or more acquiring entities under common
control with the acquiring entity) shall be at fair value in Seller's reasonable
judgment and any obligations of Seller hereunder shall continue after any merger
(if Seller is the survivor) or be assumed by any legal successor under
applicable law (if Seller is not the survivor).
13.5 Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party. A breach of any
representation, warranty or covenant shall not be affected by the fact that a
more general or more specific representation, warranty or covenant was not also
breached.
13.6 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, shall confer on any
Person other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
13.7 Notice. Any notice or communication must be in writing and given by
depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same in person, by reputable courier or by
facsimile or electronic transmission. Such notice shall be deemed received on
the date on which it is hand-delivered or otherwise confirmed to have been
received on the third business day following the date on which it is so mailed.
For purposes of notice, the addresses of the parties shall be:
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If to Seller: Hecla Mining Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLC
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: Imerys USA, Inc.
c/o Imerys, S.A.
Tour Maine-Montparnasse
▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ CEDEX 15
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇) ▇▇▇ ▇▇ ▇▇▇▇
Fax: (▇▇) ▇▇▇▇ ▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & Bird LLP
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for notice by written notice given to the
other parties in accordance with this Agreement.
13.8 Entire Agreement. This Agreement and the exhibits and schedules
hereto supersede all prior agreements and understandings relating to the subject
matter hereof, provided that the obligations of the parties under the
Confidentiality Letter shall survive the execution and delivery of this
Agreement.
13.9 Costs, Expenses and Legal Fees. Except as provided in Section
11.1(a)(9), whether or not the transactions contemplated hereby are consummated,
each party hereto shall bear its own costs and expenses (including attorneys'
fees) related to the transactions contemplated herein.
13.10 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof, and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of
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such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
13.11 Survival of Representations and Warranties. Each of the
representations, warranties, obligations, covenants and agreements of the
parties included or provided for herein shall survive the consummation of the
transactions contemplated by this Agreement, notwithstanding any investigation
heretofore or hereafter made by any of them or on behalf of any of them;
provided, however, that all claims by Purchaser against Seller pursuant to
Article 11 shall be made subject to the time limitations set forth in Section
11.1 and all claims by Seller against Purchaser pursuant to Article 11 shall be
subject to the time limitation set forth in Section 11.2.
13.12 Governing Law and Venue. THE PARTIES ACKNOWLEDGE AND AGREE THAT
THIS AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF). IF ANY
ACTION IS BROUGHT TO ENFORCE OR INTERPRET THIS AGREEMENT, EXCLUSIVE VENUE FOR
SUCH ACTION SHALL BE IN DELAWARE AND THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN WILMINGTON, DELAWARE FOR SUCH PURPOSE.
13.13 Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
13.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
13.15 Number and Gender. Whenever the context requires, references in
this Agreement to the singular number shall include the plural, the plural
number shall include the singular and words denoting gender shall include the
masculine, feminine and neuter.
13.16 Facsimile Transmissions. This Agreement and all agreements,
documents and certificates delivered pursuant to this Agreement or in connection
with the transactions consummated pursuant to this Agreement may be executed by
any party and transmitted by such party to any other party or parties by
facsimile, and any such document shall be deemed to have full force and effect
as if the facsimile signature or signatures on such documents were originals.
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13.17 Further Assurances. Any time after the Closing, Seller and
Purchaser will promptly execute, acknowledge and deliver any other assurances or
documents reasonably requested by Purchaser or Seller, as the case may be, to
satisfy or in connection with any party's obligations hereunder or to consummate
or implement the transactions and agreements contemplated hereby.
13.18 No Admissions. This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder. All
references herein to the enforceability of agreements with third parties, the
existence or non-existence of third-party rights, the absence of breaches or
defaults by third parties, or similar matters or statements, are intended only
to allocate rights and risks between the parties and were not intended to be
admissions against interests, give rise to any inference or proof of accuracy,
be admissible against any party by any non-party, or give rise to any claim or
benefit to any non-party.
13.19 Dollars. All references herein to "$" shall be U.S. ollars
unless otherwise expressly indicated N$ or R$.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto, have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SELLER HECLA MINING COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Title: Chairman and CEO
----------------------------
PURCHASER IMERYS USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------
Title: Chairman
----------------------------