STOCK EXCHANGE
AGREEMENT
▇▇▇▇▇, Inc.
(Company)
American Resources and Development Company
(Buyer)
July 9, 1998
(Date)
TABLE OF CONTENTS
1. DEFINITIONS ........................................................... 1
"Acquired Companies" ..................................................... 1
"Adjustment Amount" ...................................................... 1
"Applicable Contract" .................................................... 1
"Asking Price" ........................................................... 1
"Average Asking Price" ................................................... 2
"Balance Sheet" .......................................................... 2
"Best Efforts" ........................................................... 2
"Breach" ................................................................. 2
"Buyer" .................................................................. 2
"Closing" ................................................................ 2
"Closing Date" ........................................................... 2
"Company" ................................................................ 2
"Consent" ................................................................ 2
"Contemplated Transactions" .............................................. 2
"Contract" ............................................................... 3
"Damages" ................................................................ 3
"Disclosure Letter" ...................................................... 3
"Employment Agreements" .................................................. 3
"Encumbrance" ............................................................ 3
"Environment" ............................................................ 3
"Environmental, Health, and Safety Liabilities" .......................... 3
"Environmental Law" ...................................................... 4
"ERISA" .................................................................. 4
"Facilities" ............................................................. 5
"Fiscal Year" ............................................................ 5
"Governmental Authorization" ............................................. 5
"Governmental Body" ...................................................... 5
"Hazardous Activity" ..................................................... 5
"Hazardous Materials" ................................................... 5
"Intellectual Property Assets" ........................................... 5
"IRC" .................................................................... 6
"IRS" .................................................................... 6
"Knowledge" .............................................................. 6
"Legal Requirement" ...................................................... 6
"Net Income" ............................................................. 6
"Occupational Safety and Health Law" ..................................... 6
"Order" .................................................................. 6
"Ordinary Course of Business" ............................................ 6
"Organizational Documents" ............................................... 7
"Person" ................................................................. 7
"Proceeding" ............................................................. 7
"Related Person" ......................................................... 7
"Release" ................................................................ 8
"Representative" ......................................................... 8
"Securities Act" ......................................................... 8
"Seller" ................................................................. 8
"Seller's Release" ....................................................... 8
"Shares" ................................................................. 8
"Subsidiary" ............................................................. 8
"Tax Return" ............................................................. 9
"Threat of Release" ...................................................... 9
"Threatened" ............................................................. 9
2. SALE AND TRANSFER OF SHARES; CLOSING .................................. 9
2.1 Shares ............................................................ 9
2.2 Purchase Price .................................................... 9
2.3 Additional Consideration .......................................... 9
2.4 Loan Commitment ................................................... 10
2.5 Closing ........................................................... 11
2.6 Closing Obligations ............................................... 11
3. REPRESENTATIONS AND WARRANTIES OF SELLER .............................. 12
3.1 Organization and Good Standing .................................... 12
3.2 Authority; No Conflict ............................................ 12
3.3 Capitalization .................................................... 13
3.4 Financial Statements .............................................. 13
3.5 Books and Records ................................................. 13
3.6 Title to Properties; Encumbrances ................................. 14
3.7 Condition and Sufficiency of Assets ............................... 14
3.8 Accounts Receivable ............................................... 14
3.9 Inventory ......................................................... 15
3.10 No Undisclosed Liabilities ........................................ 15
3.11 Taxes ............................................................. 15
3.12 No Material Adverse Change ........................................ 16
3.13 Employee Benefits ................................................. 16
3.14 Compliance with Legal Requirements; Governmental Authorizations ... 16
3.15 Legal Proceedings; Orders ......................................... 18
3.16 Absence of Certain Changes and Events ............................. 19
3.17 Contracts; No Defaults ............................................ 20
3.18 Insurance ......................................................... 22
3.19 Environmental Matters ............................................. 23
3.20 Employees ......................................................... 25
3.21 Labor Relations; Compliance ....................................... 26
3.22 Intellectual Property ............................................. 26
3.23 Certain Payments .................................................. 29
3.24 Disclosure ........................................................ 29
3.25 Relationships with Related Persons ................................ 30
3.26 Brokers or Finders ................................................ 30
4. REPRESENTATIONS AND WARRANTIES OF BUYER ............................... 30
4.1 Organization and Good Standing .................................... 30
4.2 Authority; No Conflict ............................................ 30
4.3 Investment Intent ................................................. 31
4.4 Certain Proceedings ............................................... 31
4.5 SEC Filings ....................................................... 31
4.6 Brokers or Finders ................................................ 31
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE ............................. 32
5.1 Access and Investigation .......................................... 32
5.2 Operation of the Businesses of the Acquired Companies ............. 32
5.3 Negative Covenant ................................................. 32
5.4 Required Approvals ................................................ 32
5.5 Notification ...................................................... 33
5.6 Payment of Indebtedness by Related Persons ........................ 33
5.7 No Negotiation .................................................... 33
5.8 Best Efforts ...................................................... 33
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE .............................. 33
6.1 Approvals of Governmental Bodies .................................. 33
6.2 Best Efforts ...................................................... 33
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE ................... 34
7.1 Accuracy of Representations ....................................... 34
7.2 Seller's Performance .............................................. 34
7.3 Consents .......................................................... 34
7.4 Additional Documents .............................................. 34
7.5 No Proceedings .................................................... 34
7.6 No Claim Regarding Stock Ownership or Sale Proceeds ............... 35
7.7 No Prohibition .................................................... 35
8. CONDITIONS PRECEDENT TO SELLER OBLIGATION TO CLOSE .................... 35
8.1 Accuracy of Representations ....................................... 35
8.2 Buyer's Performance ............................................... 35
8.3 Consents .......................................................... 35
8.4 Additional Documents .............................................. 35
8.5 No Injunction ..................................................... 36
9. TERMINATION ........................................................... 36
9.1 Termination Events ................................................ 36
9.2 Effect of Termination ............................................. 36
10. INDEMNIFICATION; REMEDIES ............................................ 36
10.1 Survival; Right to Indemnification Not Affected by Knowledge ...... 36
10.2 Indemnification and Payment of Damages by Seller .................. 37
10.3 Indemnification and Payment of Damages by Buyer ................... 38
10.4 Time Limitations .................................................. 38
10.5 Limitations on Amount--Seller ..................................... 38
10.6 Limitations on Amount--Buyer ...................................... 38
10.7 Procedure for Indemnification--Third Party Claims ................. 39
10.8 Procedure for Indemnification--Other Claims ....................... 40
11. GENERAL PROVISIONS ................................................... 40
11.1 Expenses .......................................................... 40
11.2 Public Announcements .............................................. 40
11.3 Confidentiality ................................................... 40
11.4 Notices ........................................................... 41
11.5 Jurisdiction; Service of Process .................................. 41
11.6 Further Assurances ................................................ 41
11.7 Waiver ............................................................ 41
11.8 Entire Agreement and Modification ................................. 42
11.9 Disclosure Letter ................................................. 42
11.10 Assignments, Successors, and No Third-Party Rights ................ 42
11.11 Severability ..................................................... 42
11.12 Section Headings, Construction .................................... 42
11.13 Time of Essence .................................................. 42
11.14 Governing Law ..................................................... 43
11.15 Counterparts ...................................................... 43
The following exhibits are available to the Commission upon request
EXHIBITS
Exhibit 1 - Disclosure Letter
Exhibit 2 - Employment Agreement
Exhibit 3 - Release
Exhibit 4 - Investment Letter
Exhibit 5 - Loan Agreement
Exhibit 6 - Promissory Note
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement ("Agreement") is made as of July 23,
1998, by and between American Resources and Development Company, a Utah
corporation ("Buyer"), and ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase one hundred
percent (100%) of the issued and outstanding shares (the "Shares") of capital
stock of ▇▇▇▇▇, Inc., a Connecticut corporation (the "Company"), for the
consideration and on the terms set forth in this Agreement and pursuant to the
provisions of section 368 (a) (1) (B) of the IRC.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Applicable Contract"--any Contract (a) under which any Acquired Company has or
may acquire any rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability, or (c) by which any Acquired Company or
any of the assets owned or used by it is or may become bound.
"Asking Price"--The closing Asking Price of Buyer's common stock for any day
shall be the last reported sale price or, in case no such reported sale takes
place on such day, the average of the asked prices for such day, in each case
(1) on the principal national securities exchange on which the shares of common
stock are listed or to which such shares are admitted to trading or (2) if the
common stock is not listed or admitted to trading on a national securities
exchange, in the over-the-counter market as reported by NASDAQ or any comparable
system or (3) if the common stock is not listed on NASDAQ or a comparable system
as furnished by two members of NASDAQ selected from time to time in good faith
by the Board of Directors of Buyer for that purpose. In the absence of all of
the foregoing, or if for any other reason the current asking price per share
cannot be determined pursuant to the foregoing provisions of this paragraph, the
asking market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of the Buyer.
1
"Average Asking Price"--"Average asking price" of Buyer's common stock shall be
the average of the daily closing asking prices for the six month period ending
on the last full trading day on the exchange or market specified in the
succeeding sentence prior to March 31, 1999. The closing Asking Price of Buyer's
common stock for any day shall be the last reported sale price or, in case no
such reported sale takes place on such day, the average of the asked prices for
such day, in each case (1) on the principal national securities exchange on
which the shares of common stock are listed or to which such shares are admitted
to trading or (2) if the common stock is not listed or admitted to trading on a
national securities exchange, in the over-the-counter market as reported by
NASDAQ or any comparable system or (3) if the common stock is not listed on
NASDAQ or a comparable system as furnished by two members of NASDAQ selected
from time to time in good faith by the Board of Directors of Buyer for that
purpose. In the absence of all of the foregoing, or if for any other reason the
current asking price per share cannot be determined pursuant to the foregoing
provisions of this paragraph, the asking market price per share shall be the
fair market value thereof as determined in good faith by the Board of Directors
of the Buyer.
"Balance Sheet"--as defined in Section 3.4.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes place.
"Company"--as defined in the Recitals of this Agreement.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
2
(b) the execution, delivery, and performance of the
Employment Agreement and the Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages"--as defined in Section 10.2.
"Disclosure Letter"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"Employment Agreement"--as defined in Section 2.4(a)(iii).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances
or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or
inspection costs and expenses arising under Environmental
Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response
3
actions ("Cleanup") required by applicable Environmental
Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or
hazardous substances or materials, violations of discharge
limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that
are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil,
or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean
up or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the
Environment, or permitting self-appointed representatives
of the public interest to recover for injuries done to
public assets.
4
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Facilities"--any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
"GAAP" -- generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"Governmental Authorization"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Materials"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets"--as defined in Section 3.22.
5
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Net Income"--Audited annual net income after interest and depreciation, but
before taxes have been deducted.
"Occupational Safety and Health Law"--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of
Persons exercising similar authority) [and is not required
to be specifically authorized by the parent company (if
any) of such Person]; and
6
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons
exercising similar authority), in the ordinary course of
the normal day-to-day operations of other Persons that are
in the same line of business as such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation and
the bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such
individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the
aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a
director, officer, partner, executor, or trustee (or in a
similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly under common control with such specified
Person;
(b) any Person that holds a Material Interest in such
specified Person;
7
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a
similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"Representative"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Shares"--as defined in the Recitals of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
8
"Tax Return"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will exchange and transfer the Shares to Buyer, and Buyer will acquire
the Shares from Sellers.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be the
issuance of 213,333 shares of common stock of Buyer. On or before July 15, 1999,
if the Average Asking Price of Buyer's common stock is not equal to or greater
than $5.00, Buyer shall issue to Seller additional shares of common stock equal
to 32,000 shares issued to him pursuant to this Section 2.2 multiplied by 5 and
divided by the Average Asking Price less the 32,000 shares issued to such Seller
pursuant to this Section 2.2.
2.3 ADDITIONAL CONSIDERATION
In addition to the shares of stock issued to Sellers at Closing,
Sellers shall have the right for a three year period to receive additional
shares of common stock of Buyer based upon the Net Income of the Company for
each of the three Fiscal Years ended March 31, 2001. Such additional shares
shall be issued on or before July 15 of each applicable year in accordance with
the following provisions:
(a) If the Net Income of the Company for the fiscal year ended
March 31, 1999 is $27,167 or greater, Sellers shall be
issued a number of Buyer's common shares equal to 142,222
multiplied by the Net Income of the Company for such
period, divided by $81,500.
9
(b) If the Net Income of the Company for the two year period
ending March 31, 2000 is $278,333 or greater, Sellers
shall be issued a number of Buyer's common shares equal to
284,444 multiplied by the Net Income of the company for
such period, divided by $835,500, minus the number of
shares issued pursuant to Section 2.3(a).
(c) If the Net Income of the Company for the three year period
ending March 31, 2001 is $778,233 or greater, Sellers
shall be issued a number of Buyer's common shares equal to
400,000 multiplied by the Net Income of the Company for
such period, divided by $2,334,700, minus the number of
shares issued pursuant to Sections 2.3(a) and (b),
provided, however, the total number of Buyer's common
shares to be issued to Sellers pursuant to Section 2.3(a),
(b) and (c) (without considering any increase as a result
of Section 2.3(d)), shall not exceed 426,667 shares.
(d) The number of Buyer's common shares issued pursuant to
Sections 2.3(a), (b) and (c) shall be increased, but not
decreased by multiplying the number of shares to be issued
by $5.00 and dividing by the Average Asking Price of
Buyer's common stock.
2.4 LOAN COMMITMENTS
Buyer and Sellers acknowledge that Buyer has loaned $40,000 to the
Company as of the date of this Agreement. In addition, Buyer has agreed to loan
an additional $200,000 to the Company pursuant to the following schedule:.
At Closing: $ 75,000
On or Before August 31, 1998: $125,000
Buyer shall also provide for a letter of credit for up to $200,000 for the
Company to make blank purchases.
These loans and lease amount shall be evidenced by a Loan Agreement and
Promissory Note to be signed at the Closing. Interest on funds loaned to the
Company shall accrue at eight percent. Interest on the loan shall be paid
quarterly and all interest and principal shall be due and payable on or before
July 31, 2001, all as provided in the Loan Agreement and Promissory Note.
10
2.5 CLOSING
The exchange of shares (the "Closing") provided for in this Agreement
will take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇, 1270 Eagle Gate Tower,
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, at 9:30 a.m. (local time) on
July 23, 1998 or at such other time and place as the parties may agree. Subject
to the provisions of Section 9, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section 2.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
2.6 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers),
with signatures guaranteed by a commercial bank or
by a member firm of the New York Stock Exchange,
for transfer to Buyer;
(ii) a release in the form of Exhibit 2.7(a)(ii)
executed by Seller (collectively, "Sellers'
Releases");
(iii) an employment agreement in the form of Exhibit
22.7(a)(iii), executed by ▇▇▇▇▇▇ ▇▇▇▇▇ and the
Company ("Employment Agreement");
(iv) an investment letter in the form of Exhibit
2.7(a)(iv), executed by Seller (collectively, the
"Investment Letters").
(v) a certificate executed by Seller representing and
warranting to Buyer that each of Seller's
representations and warranties in this Agreement
was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date (giving
full effect to any supplements to the Disclosure
Letter that were delivered by Sellers to Buyer
prior to the Closing Date in accordance with
Section ( 5.5); and
(b) Buyer will deliver to Sellers:
(i) certificates for common stock in Buyer totalling
213,333 shares of common stock; and
(ii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate,
each of Buyer's representations and warranties in
this Agreement was accurate in all respects as of
the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the
Closing Date.
11
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Seller has delivered to Buyer copies of the Organizational documents of
each Acquired Company, as currently in effect.
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in
which it is authorized to do business, and its
capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired
Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own
or use, and to perform all its obligations under
Applicable Contracts. Each Acquired Company is duly
qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Seller have delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as
currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in
accordance with its terms. Upon the execution and delivery
by Seller of the Subscription Agreement, Investment
Letter, Loan Agreement, Promissory Note and Employment
Agreement, and the Sellers' Releases (collectively, the
"Sellers' Closing Documents"), the Sellers' Closing
Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in
accordance with their respective terms. Seller have the
absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the
Seller' Closing Documents and to perform their obligations
under this Agreement and the Seller' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational
Documents of the Acquired Companies, or (B) any
resolution adopted by the board of directors or the
stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement or any
Order to which any Acquired Company or Seller, or
any of the assets owned or used by any Acquired
Company, may be subject;
12
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any
Acquired Company or that otherwise relates to the
business of, or any of the assets owned or used by,
any Acquired Company;
(iv) cause Buyer or any Acquired Company to become
subject to, or to become liable for the payment of,
any Tax;
(v) cause any of the assets owned by any Acquired
Company to be reassessed or revalued by any taxing
authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any 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 Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the
assets owned or used by any Acquired Company.
Neither Seller nor Acquired Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions. (c) Seller are acquiring the common shares for their
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of ______
shares of common stock, par value per share, of which __________ shares are
issued and outstanding and constitute the Shares. Seller are and will be on the
Closing Date the record and beneficial owners and holders of the Shares, free
and clear of all Encumbrances. With the exception of the Shares (which are owned
by Seller), all of the outstanding equity securities and other securities of
each Acquired Company are owned of record and beneficially by one or more of the
Acquired Companies, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS
Seller have delivered to Buyer: (a) unaudited consolidated balance
sheets of the Acquired Companies as at March 31, 1998 (the "Balance Sheet").
Such Balance Sheet presents the financial condition of the Acquired Company as
at the respective date of such Balance Sheet.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Acquired Companies, all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Acquired Companies contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the
Boards of Directors of the Acquired Companies, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Acquired Companies.
13
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
The Acquired Companies own (with good and marketable title in the case
of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own located in the
facilities owned or operated by the Acquired Companies or reflected as owned in
the books and records of the Acquired Companies, including all of the properties
and assets reflected in the Balance Sheet and all of the properties and assets
purchased or otherwise acquired by the Acquired Companies since the date of the
Balance Sheet in the Ordinary Course of Business and consistent with past
practice. All material properties and assets reflected in the Balance Sheet are
free and clear of all Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of any Acquired Company, and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. All buildings, plants, and structures owned by the Acquired
Companies lie wholly within the boundaries of the real property owned by the
Acquired Companies and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Acquired
Companies are structurally sound, are in good operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Acquired
Companies are sufficient for the continued conduct of the Acquired Companies'
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on
the Balance Sheet or on the accounting records of the Acquired Companies as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the Accounts Receivable as of the Closing Date than the
reserve reflected in the Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
14
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether or not reflected in
the Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date, as the case may be. All inventories
not written off have been priced at the lower of cost or net realizable value on
a first in, first out basis. The quantities of each item of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed
all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a
member of a group of corporations, pursuant to applicable
Legal Requirements. The Acquired Companies have paid, or
made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by
Seller or any Acquired Company.
(b) Neither Seller nor any Acquired Company has given or been
requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other
Person) of any statute of limitations relating to the
payment of Taxes of any Acquired Company or for which any
Acquired Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of each Acquired Company are
adequate (determined in accordance with GAAP) and are at
least equal to that Acquired Company's liability for
Taxes. There exists no proposed tax assessment against any
Acquired Company.
(d) All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true,
correct, and complete. There is no tax sharing agreement
that will require any payment by any Acquired Company
after the date of this Agreement.
15
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by an Acquired Company or an ERISA Affiliate of an Acquired
Company.
"Company Plan" means all Plans of which an Acquired Company or an ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has participated. All
references to Plans are to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of any Acquired
Company or any ERISA Affiliate of an Acquired Company.
"ERISA Affiliate" means, with respect to an Acquired Company, any other person
that, together with the Company, would be treated as a single employer under IRC
ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or customary
practices, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the requirements
of IRC ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of ERISA,
29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(1).
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with
each Legal Requirement that is or was applicable to
it or to the conduct or operation of its business
or the ownership or use of any of its assets;
16
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may
constitute or result in a violation by any Acquired
Company of, or a failure on the part of any
Acquired Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation
on the part of any Acquired Company to undertake,
or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) no Acquired Company has received, at any time since
December 31, 1996, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible,
or potential obligation on the part of any Acquired
Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is
held by any Acquired Company or that otherwise relates to
the business of, or to any of the assets owned or used by,
any Acquired Company. Each Governmental Authorization
listed or required to be listed in Part 3.14 of the
Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with
all of the terms and requirements of each
Governmental Authorization identified or required
to be identified in Part 3.14 of the Disclosure
Letter;
(ii) no event has occurred or circumstance exists that
may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a
violation of or a failure to comply with any term
or requirement of any Governmental Authorization
listed or required to be listed in Part 3.14 of the
Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization
listed or required to be listed in Part 3.14 of the
Disclosure Letter;
(iii) no Acquired Company has received, at any time since
December 31, 1996, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential
violation of or failure to comply with any term or
requirement of any Governmental Authorization, or
(B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental
Authorization; and
17
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations
listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and
all other filings required to have been made with
respect to such Governmental Authorizations have
been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses and
to permit the Acquired Companies to own and use their assets in the manner in
which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against any Acquired
Company or that otherwise relates to or may affect
the business of, or any of the assets owned or used
by, any Acquired Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated
Transactions.
To the Knowledge of Seller and the Acquired Companies, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Seller have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired
Companies, or any of the assets owned or used by
any Acquired Company, is subject;
(ii) no Seller is subject to any Order that relates to
the business of, or any of the assets owned or used
by, any Acquired Company; and
(iii) to the Knowledge of Seller and the Acquired
Companies, no officer, director, agent, or employee
of any Acquired Company is subject to any Order
that prohibits such officer, director, agent, or
employee from engaging in or continuing any
conduct, activity, or practice relating to the
business of any Acquired Company.
18
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with
all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it,
is or has been subject;
(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice
or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to
which any Acquired Company, or any of the assets
owned or used by any Acquired Company, is subject;
and
(iii) no Acquired Company has received, at any time since
December 31, 1996, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation
of, or failure to comply with, any term or
requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any
Acquired Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the
date of the Balance Sheet, the Acquired Companies have conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to
purchase shares of capital stock of any Acquired Company;
issuance of any security convertible into such capital
stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by any
Acquired Company of any shares of any such capital stock;
or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any
stockholder, director, officer, or (except in the Ordinary
Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of any Acquired
Company;
(e) damage to or destruction or loss of any asset or property
of any Acquired Company, whether or not covered by
insurance, materially and adversely affecting the
properties, assets, business, financial condition, or
prospects of the Acquired Companies, taken as a whole;
19
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer,
sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Company
of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or
property of any Acquired Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any
material asset or property of any Acquired Company,
including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any
Acquired Company; or
(j) agreement, whether oral or written, by any Acquired
Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Seller have delivered to Buyer true
and complete copies, of:
(i) each Applicable Contract that involves performance
of services or delivery of goods or materials by
one or more Acquired Companies of an amount or
value in excess of $10,000;
(ii) each Applicable Contract that involves performance
of services or delivery of goods or materials to
one or more Acquired Companies of an amount or
value in excess of $10,000;
(iii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that
involves expenditures or receipts of one or more
Acquired Companies in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and
other Applicable Contract affecting the ownership
of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property
(except personal property leases and installment
and conditional sales agreements having a value per
item or aggregate payments of less than $5,000 and
with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks,
copyrights, or other intellectual property,
including agreements with current or former
employees, consultants, or contractors regarding
the appropriation or the non-disclosure of any of
the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of
employees;
20
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a
sharing of profits, losses, costs, or liabilities
by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business
activity of any Acquired Company or any Affiliate
of an Acquired Company or limit the freedom of any
Acquired Company or any Affiliate of an Acquired
Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or
provides for an express undertaking by any Acquired
Company to be responsible for consequential
damages;
(xii) each Applicable Contract for capital expenditures
in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual
performance extended by any Acquired Company other
than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the
foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Acquired Companies under the
Contracts, and the Acquired Companies' office where details relating to the
Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) no Seller (and no Related Person of either Seller)
has or may acquire any rights under, and no Seller
has or may become subject to any obligation or
liability under, any Contract that relates to the
business of, or any of the assets owned or used by,
any Acquired Company; and
(ii) to the Knowledge of Seller and the Acquired
Companies, no officer, director, agent, employee,
consultant, or contractor of any Acquired Company
is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice
relating to the business of any Acquired Company,
or (B) assign to any Acquired Company or to any
other Person any rights to any invention,
improvement, or discovery.
21
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be
identified in Part 3.17(a) of the Disclosure Letter is in
full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with
all applicable terms and requirements of each
Contract under which such Acquired Company has or
had any obligation or liability or by which such
Acquired Company or any of the assets owned or used
by such Acquired Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which an
Acquired Company has or had any rights is, and at
all times since December 31, 1996 has been, in full
compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may
contravene, conflict with, or result in a violation
or breach of, or give any Acquired Company or 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 Applicable Contract; and
(iv) no Acquired Company has given to or received from
any other Person, at any time since December 31,
1996, any notice or other communication (whether
oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or
default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts
paid or payable to any Acquired Company under current or
completed Contracts with any Person and, to the Knowledge
of Seller and the Acquired Companies, no such Person has
made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Acquired
Companies have been entered into in the Ordinary Course of
Business and have been entered into without the commission
of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or
would be in violation of any Legal Requirement.
3.18 INSURANCE
(a) Seller have delivered to Buyer:
(i) true and complete copies of all policies of
insurance to which any Acquired Company is a party
or under which any Acquired Company, or any
director of any Acquired Company, is or has been
covered at any time within the three years
preceding the date of this Agreement; (ii) true and
complete copies of all pending applications for
policies of insurance; and
22
(b) Except as set forth on Part 3.18(b) of the Disclosure
Letter:
(i) All policies to which any Acquired Company is a
party or that provide coverage to either Seller,
any Acquired Company, or any director or officer of
an Acquired Company:
(A) are valid, outstanding, and enforceable; (B)
are issued by an insurer that is financially
sound and reputable;
(C) taken together, to Seller' knowledge, provide
adequate insurance coverage for the assets
and the operations of the Acquired Companies
for all risks normally insured against by a
Person carrying on the same business or
businesses as the Acquired Companies;
(D) to Seller' knowledge, are sufficient for
compliance with all Legal Requirements and
Contracts to which any Acquired Company is a
party or by which any of them is bound;
(E) will continue in full force and effect
following the consummation of the
Contemplated Transactions; and
F) do not provide for any retrospective premium
adjustment or other experienced-based
liability on the part of any Acquired
Company.
(ii) No Seller or Acquired Company has received (A) any
refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication
that any insurance policy is no longer in full
force or effect or will not be renewed or that the
issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due,
and have otherwise performed all of their
respective obligations, under each policy to which
any Acquired Company is a party or that provides
coverage to any Acquired Company or director
thereof.
(iv) The Acquired Companies have given notice to the
insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times has been, in
full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. No
Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they
are or may be held to be responsible received, any actual
or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law,
or of any actual or Threatened obligation to undertake or
23
bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has had an
interest, or with respect to any property or Facility at
or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or
processed by Seller, any Acquired Company, or any other
Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Seller and
the Acquired Companies, Threatened claims, Encumbrances,
or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other
properties and assets (whether real, personal, or mixed)
in which Seller or any Acquired Company has or had an
interest.
(c) No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they
are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller or any Acquired
Company had an interest, or with respect to any property
or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or
processed by Seller, any Acquired Company, or any other
Person for whose conduct they are or may be held
responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(d) No Seller or Acquired Company, or any other Person for
whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect
to the Facilities or, to the Knowledge of Seller and the
Acquired Companies, with respect to any other properties
and assets (whether real, personal, or mixed) in which
Seller or any Acquired Company (or any predecessor), has
or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other
property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either
temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure
therein or thereon. No Seller, Acquired Company, any other
Person for whose conduct they are or may be held
responsible, or to the Knowledge of Seller and the
Acquired Companies, any other Person, has permitted or
24
conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in
which Seller or any Acquired Company has or had an
interest except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of Seller
and the Acquired Companies, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any
other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or
from or by any other properties and assets (whether real,
personal, or mixed) in which Seller or any Acquired
Company has or had an interest, or to the Knowledge of
Seller and the Acquired Companies any geologically or
hydrologically adjoining property, whether by Seller, any
Acquired Company, or any other Person.
(g) Seller have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Seller or any
Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or
concerning compliance by Seller, any Acquired Company, or
any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each
employee or director of the Acquired Companies, including
each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or
payable and any change in compensation since December 31,
1997; vacation accrued; and service credited for purposes
of vesting and eligibility to participate under any
Acquired Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance
pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director
Plan.
(b) No employee or director of any Acquired Company is a party
to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between
such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely
affects or will affect (I) the performance of his duties
as an employee or director of the Acquired Companies, or
(ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with
Seller or the Acquired Companies by any such employee or
director. To Seller' Knowledge, no director, officer, or
other key employee of any Acquired Company intends to
terminate his employment with such Acquired Company.
(c) Part 3.20 of the Disclosure Letter also contains a
complete and accurate list of the following information
for each retired employee or director of the Acquired
Companies, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension
benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and
other benefits.
25
3.21 LABOR RELATIONS; COMPLIANCE
Since December 31, 1997, no Acquired Company has been or is a party to
any collective bargaining or other labor Contract. Since December 31, 1997,
there has not been, there is not presently pending or existing, and to Seller'
Knowledge there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
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
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Seller'
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment f social security and similar taxes, occupational safety and health,
and plant closing. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the name "Pacific Print", all fictional business
names, trading names, registered and unregistered
trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights
in Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by any Acquired
Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains
a complete and accurate list and summary description,
including any royalties paid or received by the Acquired
Companies, of all Contracts relating to the Intellectual
Property Assets to which any Acquired Company is a party
or by which any Acquired Company is bound, except for any
license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs
with a value of less than $5,000 under which an Acquired
Company is the licensee. There are no outstanding and, to
Seller' Knowledge, no Threatened disputes or disagreements
with respect to any such agreement.
26
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those
necessary for the operation of the Acquired
Companies' businesses as they are currently
conducted or as reflected in the business plan
given to Buyer. One or more of the Acquired
Companies is the owner of all right, title, and
interest in and to each of the Intellectual
Property Assets, free and clear of all liens,
security interests, charges, encumbrances,
equities, and other adverse claims, and has the
right to use without payment to a third party all
of the Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the
Disclosure Letter, all former and current employees
of each Acquired Company have executed written
Contracts with one or more of the Acquired
Companies that assign to one or more of the
Acquired Companies all rights to any inventions,
improvements, discoveries, or information relating
to the business of any Acquired Company. No
employee of any Acquired Company has entered into
any Contract that restricts or limits in any way
the scope or type of work in which the employee may
be engaged or requires the employee to transfer,
assign, or disclose information concerning his work
to anyone other than one or more of the Acquired
Companies.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains
a complete and accurate list and summary
description of all atents. One or more of the
Acquired Companies is the owner of all right,
title, and interest in and to each of the Patents,
free and clear of all liens, security interests,
charges, encumbrances, entities, and other adverse
claims.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements
(including payment of filing, examination, and
maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition
proceeding. To Seller' Knowledge, there is no
potentially interfering patent or patent
application of any third party.
(iv) No Patent is infringed or, to Seller' Knowledge,
has been challenged or threatened in any way. None
of the products manufactured and sold, nor any
process or know-how used, by any Acquired Company
infringes or is alleged to infringe any patent or
other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents
have been marked with the proper patent notice.
27
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a
complete and accurate list and summary description
of all Marks. One or more of the Acquired Companies
is the owner of all right, title, and interest in
and to each of the Marks, free and clear of all
liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are
currently in compliance with all formal legal
requirements (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are
valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) No ▇▇▇▇ has been or is now involved in any
opposition, invalidation, or cancellation and, to
Seller' Knowledge, no such action is Threatened
with the respect to any of the Marks.
(iv) To Seller' Knowledge, there is no potentially
interfering trademark or trademark application of
any third party.
(v) Except as set forth in Part 3.22(e)(v) of the
Disclosure Letter, no ▇▇▇▇ is infringed or, to
Seller' Knowledge, has been challenged or
threatened in any way. None of the Marks used by
any Acquired Company infringes or is alleged to
infringe any trade name, trademark, or service ▇▇▇▇
of any third party.
(vi) All products and materials containing a ▇▇▇▇ ▇▇▇▇
the proper federal registration notice where
permitted by law.
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a
complete and accurate list and summary description
of all Copyrights. One or more of the Acquired
Companies is the owner of all right, title, and
interest in and to each of the Copyrights, free and
clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal
requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or
actions falling due within ninety days after the
date of Closing.
(iii) No Copyright is infringed or, to Seller' Knowledge,
has been challenged or threatened in any way. None
of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright
of any third party or is a derivative work based on
the work of a third party.
28
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and
content to identify and explain it and to allow its
full and proper use without reliance on the
knowledge or memory of any individual.
(ii) Seller and the Acquired Companies have taken all
reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.
(iii) One or more of the Acquired Companies has good
title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge
or literature, and, to Seller' Knowledge, have not
been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of
the Acquired Companies) or to the detriment of the
Acquired Companies. No Trade Secret is subject to
any adverse claim or has been challenged or
threatened in any way.
3.23 CERTAIN PAYMENTS
Since December 31, 1996, no Acquired Company or director, officer,
agent, or employee of any Acquired Company, or to Seller' Knowledge any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies.
3.24 DISCLOSURE
(a) No representation or warranty of Seller in this Agreement
and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were
made, not misleading.
(b) No notice given pursuant to Section 5.5 6.5 will contain
any untrue statement or omit to state a material fact
necessary to make the statements therein or in this
Agreement, in light of the circumstances in which they
were made, not misleading.
(c) There is no fact known to either any Seller that has
specific application to either any Seller or any Acquired
Company (other than general economic or industry
conditions) and that materially adversely affects or, as
far as Seller can reasonably foresee, materially
threatens, the assets, business, prospects, financial
condition, or results of operations of the Acquired
Companies (on a consolidated basis) that has not been set
forth in this Agreement or the Disclosure Letter.
29
3.25 RELATIONSHIPS WITH RELATED PERSONS
No Seller or any Related Person of Seller or of any Acquired Company
has, or since [the first day of the next to last completed fiscal year of the
Acquired Companies] has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses. No Seller or any Related Person of Seller or
of any Acquired Company is, or since the first day of the next to last completed
fiscal year of the Acquired Companies has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with any Acquired Company, or (ii) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "Competing Business") in any market presently served by such
Acquired Company except for less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Part 3.25 of
the Disclosure Letter, no Seller or any Related Person of Seller or of any
Acquired Company is a party to any Contract with, or has any claim or right
against, any Acquired Company.
3.26 BROKERS OR FINDERS
Seller and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Utah.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in
accordance with its terms. Upon the execution and delivery
by Buyer of the Purchase Price (the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute
the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform
its obligations under this Agreement and the Buyer's
Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated
Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational
Documents of the Buyer, or (B) any resolution
adopted by the board of directors of the
stockholders of Buyer;
30
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental body or other Person
the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement of any
Order to which Buyer or Seller, or any of the
assets owned or used by Buyer, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by Buyer or
that otherwise relates to the business of, or any
of the assets owned or used by Buyer;
(iv) cause Buyer or any Acquired Company to become
subject to, or to become liable for the payment of,
any Tax;
(v) cause any of the assets owned by any Buyer to be
reassessed or revalued by any taxing authority or
other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any 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 material contract of Buyer; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the
assets owned or used by Buyer.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view
to their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions. To
Buyer's Knowledge, no such Proceeding has been Threatened.
4.5 SEC FILINGS
Buyer has furnished Seller with copies of all Forms 10-KSB and Forms
10-QSB, which have been filed for all periods since December 31, 1996. All such
documents, as amended, do not contain any untrue statements nor do they omit to
state any statement necessary to make the statements made not misleading. All
such documents, as amended, comply with all applicable rules and regulations of
the United States Securities and Exchange Commission.
4.6 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Seller harmless from any such payment alleged to be due by or
through Buyer as a result of the action of Buyer or its officers or agents.
31
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to each Acquired
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business;
(b) use his Best Efforts to preserve intact the current
business organization of such Acquired Company, keep
available the services of the current officers, employees,
and agents of such Acquired Company, and maintain the
relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having
business relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of such
Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Seller will not, and will cause
each Acquired Company not to, without the prior written consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller
will, and will cause each Acquired Company to, make all filings required by
Legal Requirements to be made by them in order to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Seller will, and will cause each Acquired
Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.2 (including taking all actions requested by
Buyer to cause early termination of any applicable waiting period under the HSR
Act).
32
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller
will promptly notify Buyer in writing if such Seller or any Acquired Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Seller' representations and warranties as of the date of this Agreement,
or if such Seller or any Acquired Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Seller will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Seller in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Seller will cause all
indebtedness owed to an Acquired Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause each Acquired Company and each of
their Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Seller will
use their Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer
will, and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with Seller with respect
to all filings that Seller are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Seller in
obtaining all consents identified in Part 3.2 of the Disclosure Letter; provided
that this Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
33
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Seller' representations and warranties in this
Agreement (considered collectively), and each of these
representations and warranties (considered individually),
must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to
the Disclosure Letter.
(b) Each of Seller' representations and warranties in Sections
3.3, 3.4, 3.12, and 3.24, must have been accurate in all
respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made
on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller are
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed
and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.6 must have been delivered, and each of the other
covenants and obligations in Sections 5.4 and 5.8 must
have been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in subpart b of Part 3.2 of the
Disclosure Letter, and each Consent identified in Schedule 4.2, must have been
obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) such documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Seller'
representations and warranties, (ii) evidencing the
performance by any Seller of, or the compliance by any
Seller with, any covenant or obligation required to be
performed or complied with by such Seller, (iii)
evidencing the satisfaction of any condition referred to
in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated
Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
34
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller' obligation to exchange the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been performed and
complied with in all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.7.
8.3 CONSENTS
Each of the Consents identified in Subpart b of Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Seller:
(a) such documents as Seller may reasonably request for the
purpose of (i) evidencing the accuracy of any
representation or warranty of Buyer, (ii) evidencing the
performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or
complied with by Buyer, (iii) evidencing the satisfaction
of any condition referred to in this Section 8, or (iv)
otherwise facilitating the consummation of any of the
Contemplated Transactions.
35
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Seller to Buyer, and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) By either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the
other party and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7
has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer
to comply with. its obligations under this
Agreement) and Buyer has not waived such condition
on or before the Closing Date; or
(ii) by Seller, if any of the conditions in Section 8
has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of
Seller to comply with their obligations under this
Agreement) and Seller have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its
obligations under this Agreement) on or before August 31,
1998, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
36
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller, will indemnify and hold harmless Buyer, the Acquired Companies,
and their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Seller them in this Agreement (without giving effect to
any supplement to the Disclosure Letter), the Disclosure
Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by Seller them
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
Seller them in this Agreement as if such representation or
warranty were made on and as of the Closing Date without
giving effect to any supplement to the Disclosure Letter,
other than any such Breach that is disclosed in a
supplement to the Disclosure Letter and is expressly
identified in the certificate delivered pursuant to
Section 2.7(a)(v) as having caused the condition specified
in Section 7.1 not to be satisfied;
(c) any Breach by either Seller of any covenant or obligation
of such Seller in this Agreement;
(d) any product shipped or manufactured by, or any services
provided by, any Acquired Company prior to the Closing
Date;
(e) any matter disclosed in parts 3.15 of the Disclosure
Letter; or
(f) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement
or understanding alleged to have been made by any such
Person with Seller or any Acquired Company (or any Person
acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
37
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller, and will pay to Seller
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.4 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or
before March 31, 1999 Buyer notifies Seller of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before March 31, 1999 Seller notify Buyer of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Seller.
10.5 LIMITATIONS ON AMOUNT--SELLER
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), clause (b) or, to the extent
relating to any failure to perform or comply prior to the Closing Date, clause
(c) of Section 10.2 until the total of all Damages with respect to such matters
exceeds $5,000, and then only for the amount by which such Damages exceed
$5,000. Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (d) of Section 10.2 until the total
of all Damages with respect to such matters exceeds $5,000, and then only for
the amount by which such Damages exceed $5,000. However, this Section 10.5 will
not apply to any Breach of any of Seller's representations and warranties of
which Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Seller of any
covenant or obligation, and Seller, will be liable for all Damages with respect
to such Breaches.
10.6 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or (b) of Section 10.4 until the
total of all Damages with respect to such matters exceeds $5,000, and then only
for the amount by which such Damages exceed $5,000. However, this Section 10.6
will not apply to any Breach of any of Buyer's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect to
such Breaches.
38
10.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 10.2 or 10.4, of notice of the commencement of any
Proceeding against it, such indemnified party will, if a
claim is to be made against an indemnifying party under
such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced
by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.7(a) is
brought against an indemnified party and it gives notice
to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i)
the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance
to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such
Proceeding with counsel satisfactory to the indemnified
party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of
other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively
established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims
that may be made against the indemnified party, and (B)
the sole relief provided is monetary damages that are paid
in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to
any compromise or settlement of such claims effected
without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any
compromise or settlement effected by the indemnified
party.
39
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or
its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under
this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination
of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be
unreasonably withheld).
(d) Seller hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an
Indemnified Person may have under this Agreement with
respect to such Proceeding or the matters alleged therein,
and agree that process may be served on Seller with
respect to such a claim anywhere in the world.
10.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Unless consented to by Buyer in
advance or required by Legal Requirements, prior to the Closing Seller shall,
and shall cause the Acquired Companies to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Seller and Buyer will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Seller will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Acquired Companies to maintain
in confidence, and not use to the detriment of another party or an Acquired
Company any written, oral, or other information obtained in confidence from
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
40
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: ▇▇▇▇▇, Inc.
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Clubroom ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With Copy To: ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile #: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: American Resources and Development Company
Attention: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Utah, County of Salt Lake, or, if it has
or can acquire jurisdiction, in the United States District Court for the Central
District of Utah, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
41
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Seller dated March 16, 1998) and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the
representations and warranties in the Section of the
Agreement to which they expressly relate and not to any
other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure
Letter (other than an exception expressly set forth as
such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, which consent will not be unreasonably
withheld, except that Buyer may assign any of its rights under this Agreement to
any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
42
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Utah
without regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer: American Resources and Development Company
/s/ Will ▇▇▇▇▇▇▇▇▇
------------------------------
(Will ▇▇▇▇▇▇▇▇▇, President)
Seller:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
(▇▇▇▇▇▇ ▇▇▇▇▇)
43