Exhibit 10.4
POWER PLANT AGGREGATES OF IOWA, INC.
STOCK PURCHASE AGREEMENT
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, III, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, and T. S. "▇▇▇▇▇" ▇▇▇▇▇▇▇ (herein collectively called
"Sellers") and JTM Industries, Inc. (hereinafter called "Buyer") hereby agree as
follows:
1. SELLERS: Sellers represent and warrant that Sellers own or will on
the Closing Date own all of the issued stock (hereinafter "Shares")
in Power Plant Aggregate of Iowa, Inc., an Iowa corporation
(hereinafter called "Company"). As used herein, "Company" includes
Midwest Fly Ash & Materials, Inc. (hereinafter called "MWFA"), a
wholly owned subsidiary of Company and the only subsidiary of the
Company.
2. SALE: Subject to the conditions and upon the terms and provisions
set forth in this Stock Purchase Agreement, Buyer agrees to purchase
from Sellers, and Sellers agree to sell to Buyer, the Shares, free
and clear of any and all claims, liens, security interests, rights
or encumbrances. The consideration to be paid in connection with the
acquisition shall be $6,000,000 (Six Million Dollars) $100,000 of
which has been received as a good faith deposit, for the stock of
Company, plus or minus additional cash (not to exceed $500,000) in
an amount equal to the working capital of the Company on the Closing
Date. Exhibit A will set forth the calculations of the purchase
price. The working capital shall be defined as the amount of current
assets less current liabilities (including liabilities for taxes
through the Closing). The purchase price will be paid by wire to the
Sellers to an account designated by Sellers. At Closing, the Company
will have no debts or liabilities that have not been assumed by
Sellers (including interest payable) or any intercompany accounts,
affiliate accounts, or any obligations for taxes. In order to
provide collateral for open tax years, Buyer is hereby granted the
right to offset any monies owed to Sellers under the consultation
agreement attached hereto as Exhibit D against any taxes determined
by the IRS to be delinquent and unpaid and which are not under
protest, appeal, or review by Sellers. If Sellers are in compliance
with the terms of this Agreement and Closing does not occur, the
$100,000 deposit referenced above will be forfeited by Buyer and
retained by Sellers.
3. CLOSING DATE: The closing (herein called the "Closing") of the
principal transaction herein provided for shall take place at 10:00
a.m. on March 20, 1998, at the offices of Heidman, Redmond,
Fredregill, Patterson, Plaza & ▇▇▇▇▇▇▇, L.L.P., or at such other
time and place as may be agreed upon by Buyer and Sellers in
writing.
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The date and time at which the Closing is to occur is herein
sometimes referred to as the "Closing Date".
4. TRANSACTION AT CLOSING: At the Closing, the following transactions
shall be effected:
a. Shares: Sellers shall deliver to Buyer certificates
representing all the Shares, in marketable form and without
restrictions. Each of the stock certificates representing the
Shares shall be duly endorsed to Buyer, or accompanied by a
duly executed stock power in form sufficient to permit
transfer of the Shares to Buyer.
b. Payment: The remaining purchase price, as shown on Exhibit A,
shall be paid by wire at the Closing.
c. Dividends: All dividends now due or to become due on the
Shares shall belong to and be collectable by Buyer.
d. Corporate Status: Sellers shall deliver to Buyer a certificate
of good standing as to Company from the State of Iowa, and
certificates from duly constituted authorities of each other
state in which the Company (including subsidiaries) does
business, stating that the Company (or the subsidiary) is duly
qualified and admitted in good standing in each such state.
e. Assets Removed from Company: Only the cash in the accounts of
Company and MWFA, and the assets relevant to the continued
business and operation of MWFA shall remain in the Company and
MWFA at the time of the transfer. The net of current assets
less current liabilities will be treated as cash. Equipment
related to the rock crushing operations(RAP), accounts
receivable from RAP, life insurance policies and their cash
values, leasehold improvements, building and related land,
memberships, and miscellaneous equipment and other items shall
be transferred from Company and MWFA to the Sellers' designee
prior to the Closing, based upon a disclosure list to be shown
as Exhibit B. Any tax payable as a result of such transfers,
pursuant to IRC ss. 336(a) or any other applicable provision,
shall be calculated and treated as a current liability of the
Company that has the effect of reducing its working capital.
f. Short Term Lease: Sellers will deliver a short term lease of
Company's existing corporate offices in Sioux City, Iowa to
Buyer for a term no longer than thirty (30) days after closing
with no rent to be paid.
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g. Resignations of Officers and Directors: Resignations of all
current officers and directors of Company and MWFA, effective
as of the Closing Date.
h. Opinion of Counsel: Buyer shall have received the opinion of
Heidman, Redmond, Fredregill, Patterson, Plaza & ▇▇▇▇▇▇▇,
L.L.P., counsel to the Company in connection with this
Agreement, dated the Closing Date, substantially in the form
attached as Exhibit C.
i. Consultation Agreement: Sellers shall deliver to Buyer a
Consultation and Royalty Agreement substantially in the form
of Exhibit D executed by Sellers.
j. Officers Certificate: Buyer shall deliver to Sellers a
certificate, dated the Closing Date and executed by the
president or vice-president of Buyer substantially in the form
of Exhibit E.
k. Opinion of Counsel: The Sellers shall receive the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel of the Buyer in connection
with this Agreement, dated the Closing Date, substantially in
the form of Exhibit F.
l. Officers Certificates: Sellers shall have delivered to Buyer a
certificate dated the Closing Date and executed by the
president of a vice president of Company substantially in the
form of Exhibit G, and a certificate from the chief financial
officer of Company substantially in the form of Exhibit H.
m. Good Standing Certificates: Buyer shall have delivered to
Sellers (i) a copy of Buyer's certificate of incorporation,
including all amendments thereto, certified by the Secretary
of State of the State of Texas, and (b) a certificate from the
Texas Secretary of State to the effect that Buyer is in good
standing or subsisting in such jurisdiction, listing all
charter documents of Buyer on file.
n. Employees: Buyer shall have reached agreements with key
Company employees on terms reasonably satisfactory to Buyer.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS: Sellers
represent, warrant, and covenant, jointly and severally, to Buyer,
as of the date of this Stock Purchase Agreement that all of the
following are true, accurate, and complete statements in all
respects:
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a. Corporate Standing: Company is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Iowa with full power and authority:
i) To own and operate its assets, properties and business;
ii) To conduct its business as the same is now being
conducted; and
iii) To conduct its business in each jurisdiction where the
nature of its business or ownership of properties
requires such qualification, excepting only instances in
which a failure to qualify is not material.
b. Capitalization: The Company has only authorized a single class
of common stock (and no other stock or securities), of which
230 Shares are issued and outstanding, all of which are owned
by Sellers. MWFA has authorized a single class of common stock
which 50 shares are issued and outstanding and are owned by
Company. There are no outstanding options, warrants, calls,
subscriptions, commitments, agreements or other rights to
purchase or dispose of Company or MWFA common stock or other
securities which are, or may at any time be, convertible into
stock or other securities in Company or MWFA.
c. Title to Shares: Sellers on the Closing Date will:
i) Be the record owner of the Shares, and
ii) Have good and marketable title to all Shares, free and
clear of any and all claims, rights, encumbrances,
restrictions, rights of first refusal or options, and
iii) Have the full right, power and authority to sell, assign
and transfer the Shares so that as a result of the
Closing, Buyer shall be the absolute owner of the
Shares, free and clear of all liens, claims, security
interests, redemption rights, charges, options,
restrictions and any other encumbrances.
d. No Violation, Breach, Etc.: The performance of this Stock
Purchase Agreement will not:
i) Violate any provision of the Company's or MWFA's
Articles of Incorporation or Bylaws, or
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ii) Result in a breach or constitute a default under (or an
event which with notice or lapse of time would become a
default) any agreement, indenture, mortgage, lease, or
other obligation or instrument to which the Company, or
the Sellers are subject or a party. By execution hereof
the Sellers waive the terms of their existing
Stockholder Agreement, or
iii) Require the consent, approval or action of, or filing
with or notice to, any governmental or regulatory
authority.
e. Legal, Binding and Valid Obligation: This Stock Purchase
Agreement has been duly executed and delivered by Sellers and
constitutes the legal, binding and valid obligation of
Sellers, enforceable in accordance with its terms (subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws
affecting the enforcement of creditor's rights generally and
to possible limitations on the availability of equitable
remedies including specific performance).
f. Compliance with Laws, Etc.: Company is in compliance with all
material and applicable laws, regulations, ordinances, and
rules of each local, state and federal government or
administrative body having jurisdiction over the Company and
its business.
g. Litigation, Claims, Etc.: Except as set forth on Exhibit I,
there are no proceedings, actions, litigations, judgments or
claims of any nature whatsoever against the Company pending
before any government or any administrative forum or before
any court or, to the best of Sellers' knowledge, threatened
against the Company and Sellers do not know of any basis for
any such proceedings, actions, litigations, judgments or
claims involving or affecting the Company or its business.
h. Officers and Directors: The officers and directors of Company
and of MWFA are the persons listed on Exhibit J.
i. Financial Condition: Sellers have provided to Buyer audited
consolidated financial statements for Company and MWFA for the
fiscal years ending March 31, 1997, 1996 and 1995 and
unaudited financial statements for the nine months ending
December 31, 1997. Sellers further represent that the combined
operating revenue for all operations (including RAP) for the
fiscal period 1997 exceeded $6,900,000 (6.9 Million Dollars).
A restated EBIT for a fiscal year 1997, when certain expenses
not likely to be incurred by Buyer and profits (or losses) of
RAP operations are removed,
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would be in excess of $1,000,000 (1 Million Dollars). These
financials (herein "Financial Statements"):
i) Fairly present the Company's financial condition and
operations as of and through the respective dates and
periods therein delineated, and the results of Company's
operations and changes in financial position for the
periods then ended, and
ii) Have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
As of the Closing Date, no material adverse change in the
financial condition or operations of the Company will have
occurred from that shown on the December 31, 1997 financial
statements. The parties acknowledge that the Mid-America
contract with Company expires May 1, 1998.
j. Liabilities: Except as set forth in Exhibit K, or except to
the extent reflected or reserved against in the Financial
Statements, the Company has incurred no debts, liabilities or
obligations of any nature, whether accrued, absolute, known or
unknown, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities or obligations
on account of taxes or other governmental charges, or
penalties, interest or fines thereon or in respect thereof,
except those in the aggregate, are not material to the
Company. Buyer and Sellers acknowledge that debts, liabilities
or obligations unknown by Sellers on the Closing Date which
total less than $30,000 in the aggregate are deemed
non-material.
k. Absence of Changes: Except as described on Exhibit L, between
January 1, 1998, and the Closing Date, Company has not:
i) Declared or paid any dividend or made any other
distribution on, or in respect to, shares of its common
stock or redeemed or purchased any shares of its common
stock;
ii) Increased the compensation or the rate of compensation
or commissions payable, or to become payable to Sellers,
any director or officer, or caused:
a) Any general increase in the compensation or in the
rate of compensation payable or to become payable
to employees, or
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b) Any payment of any bonus, profit-sharing or other
extraordinary compensation to any Sellers or
employees;
iii) Made any change in the accounting methods or practices
followed by the Company, wrote-up or down any assets, or
changed any depreciation or amortization policies or
rates theretofore adopted;
iv) Increased any debt, obligation or liability (whether
accrued, absolute or contingent, whether or not
presently outstanding);
v) Sold, assigned, licensed, leased, abandoned, mortgaged,
pledged or subjected to any lien, security interest or
other charges or encumbrances or otherwise disposed of,
other than in the ordinary course of business, any
machinery, equipment, operating properties or other
assets, tangible or intangible;
vi) Issued, sold, purchased or acquired any shares of its
stock, warranties, options, notes, or other corporate
securities, or borrowed any money or guaranteed or
become surety on any obligation;
vii) Discharged or satisfied any lien or encumbrance, or paid
any obligation or liability (absolute or contingent)
other than current liabilities;
viii) Used less than its best efforts to preserve the goodwill
of its suppliers, distributors, and customers;
ix) Adopted or amended any collective bargaining, bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan,
agreement, trust, fund or arrangement for the benefit of
employees;
x) Adopted any shareholder or board of director resolutions
taking action out of the ordinary course, except for
resolutions with respect to the transactions
contemplated by this Stock Purchase Agreement or
reasonably related thereto;
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(xi) Suffered any physical damage, destruction or other
casualty loss (whether or not covered by insurance)
affecting any of the Assets of the Company in an
aggregate amount exceeding $25,000;
(xii) Made any purchase of any assets from any person or
entity, or disposed of, or incurred a lien on, any
Company assets, other than acquisitions or dispositions
of inventory in the ordinary course of business
consistent with past practice;
(xiii) Entered into, amended, modified, terminated (partial or
complete) or granted a waiver under or gave any consent
with respect to (i) any Contract which is required (or
had it been in effect on the date hereof would have been
required) to be disclosed in Exhibit N, (ii) any license
held by Company, or (iii) any intellectual property
rights owned by the Company;
(xiv) Made any capital expenditures or commitments for
additions to property, plant or equipment of Company
constituting capital assets in an aggregate amount
exceeding $10,000;
(xv) Commenced, terminated or changed any line of business of
Company;
xvi) Loaned money or property to, or engaged in any other
transaction with, any officer, shareholder, director,
employee, consultant or agent, or any affiliate or any
shareholder, officer or director; or
xvii) Entered into any transactions other than in the ordinary
course of business, or agreed to do or to engaging any
of the foregoing.
l. Title to Properties: Exhibit M contains a list of all real and
personal property of Company. Company has good and marketable
title to, and complete right to possession of, all of its real
and personal properties, tangible and intangible:
i) Reflected in its books and records and in the Financial
Statements,
ii) Used in the operation of its ordinary business
activities, or
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iii) In possession of Company at any time during the period
beginning January 1, 1998 and ending on the Closing
Date, free and clear of all security interests, liens,
encumbrances, mortgages, pledges, equities, charges,
security interests, title retention agreements,
assessments, covenants, restrictions, liabilities and
other burdens of every nature, except unpaid, current
(not delinquent) taxes of record, all as set forth on
Exhibit M.
m. Contracts, Leases, Etc.: Set forth on Exhibit N is a list of
all:
i) Contracts, agreements, or commitments involving payments
of receipts of more than $100 in the case of any single
contract, agreement or commitment, or $500 in the
aggregate,
ii) Leases with respect to any real or personal property,
iii) Agreements and/or licenses with or from any federal,
state, municipal or foreign government or agency, and
iv) Indentures, agreements, notes, mortgages, guarantees or
other writings which evidence or relate to the borrowing
of money or indebtedness by the Company.
All items described in Exhibit N are valid, binding and in
full force and effect; and true and complete copies of all
written agreements shall be delivered to Buyer prior to
Closing.
n. Taxes: Company has filed all federal, state and local tax
returns required to be filed, such returns are complete and
correct, and all taxes shown by such returns or claimed by any
taxing authority to be due and payable have been paid,
including all income, payroll, sales and employment tax
returns. Except to the extent that provisions therefor are
specifically reflected on the Financial Statements, there are
no federal, state or local tax liabilities due or which will
become due for any period commencing prior to the date of the
Financial Statements. Sellers shall have complete access to
all tax records for purposes of making copies and addressing
any audit or other tax return.
No taxing authority is now asserting or threatening to assert
against Company any deficiency, claim or liability for
additional taxes or any adjustment of taxes, and there is no
reasonable basis for any such assertion of which Sellers
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should reasonably be aware. No issues have been raised in any
examination by any taxing authority with respect to Company
which, by application of similar principles, reasonably could
be expected to result in a proposed deficiency for any other
period not so examined. The federal income tax returns of
Company disclose (in accordance with Section 6662(d)(2)(B) of
the Internal Revenue Code ("Code")) all positions taken
therein that could give rise to a substantial understatement
of federal income tax within the meaning of Section 6662(d) of
the Code. No claim has been made by any taxing authority in a
jurisdiction in which the Company does not file tax returns
that it is or may be subject to taxation by that jurisdiction.
Exhibit O lists all federal, state, local and foreign income
Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after March 31, 1995, indicates
those Tax Returns, if any, that have been audited, and
indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Buyer complete and correct
copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination
reports and statements of deficiencies assessed against or
agreed to by, Company since March 31, 1995. There are no liens
for taxes upon the assets of Company. Company is not (i) a
party to or bound by any obligations under any tax sharing,
tax indemnity or similar agreement or arrangement, (ii)
subject to any election under Sections 338(e) or 341(f) of the
Code or the regulations thereunder, (iii) required to make, or
reasonably expects that it might have to make, any adjustment
under Section 481 of the Code (or any comparable provision of
state, local or foreign law) by reason of a change in
accounting method or otherwise, (iv) subject to any agreement
or arrangement that could result separately or in the
aggregate in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code, (v) and at no
time has ever been, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the
Code, (vi) a party to any "safe harbor lease" that is subject
to the provisions of Section 168(f)(8) of the Internal Revenue
Code as in effect prior to the Tax Reform Act of 1986 or to
any "long-term contract" within the meaning of Section 460 of
the Code, (vii) a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal
income tax purposes, or (viii) nor are they a member of any
affiliated, consolidated, combined, unitary or similar group
for any tax purpose except for the consolidated return of
Company.
o. Insurance: Set forth as Exhibit P, which is attached hereto
and by this reference incorporated herein, is a true and
accurate schedule setting forth all insurance policies
maintained by Company on its properties, assets, business and
personnel; all of said insurance policies are in full force
and effect, and all premiums due thereon have been paid, or
the unpaid
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amounts thereof shall be reflected in the Financial Statements
(and listed prior to Closing), and Company has received no
notice of cancellation of such policies. Company has
maintained since 1994 and is now maintaining with financially
responsible insurance companies amounts and coverages of
insurance against risk and losses reasonably prudent for its
business; said policies shall be maintained in full force and
effect up to and including the date of the Closing.
p. Employee Benefit Plans and Labor Matters: The Company has
entered into, and is not otherwise a party (either directly or
indirectly) to, any deferred compensation plans, profit
sharing plans, pension plans, insurance plans, employee bonus
compensation plans, or any other employee benefit plans, or to
any collective bargaining agreement except those shown on
Exhibit Q. Except as disclosed on Exhibit Q:
i) each benefit plan, and the administration thereof,
complies, and has at all times complied, with the
requirements of all applicable law, including ERISA and
the Code, and each benefit plan intended to qualify
under Section 401(a) of the Code has at all times since
its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its
adoption been tax-exempt under Section 501(a) of the
Code;
ii) no benefit plan has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA
or Section 412 of the Code;
iii) no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or
MWFA under Title IV of ERISA to any party with respect
to any benefit plan, or with respect to any other plan
presently or heretofore maintained or contributed to by
any ERISA affiliate;
iv) the "amount of unfunded benefit liabilities" within the
meaning of Section 4001(a)(18) of ERISA does not exceed
zero with respect to any benefit plan subject to Title
IV of ERISA;
v) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any benefit
plan or any plan maintained by an ERISA affiliate since
the effective date of said Section 4043;
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vi) no benefit plan is a multi employer plan within the
meaning of Section 3(37) of ERISA;
vii) neither the Company, MWFA, nor any ERISA affiliate has
incurred any liability for any tax imposed under Section
4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA;
viii) no benefit under any benefit plan, including, without
limitation, any severance or parachute payment plan or
agreement, will be established or become accelerated,
vested or payable by reason of any transaction
contemplated under this Agreement;
ix) no tax has been incurred under Section 511 of the Code
with respect to any benefit plan (or trust or other
funding vehicle pursuant thereto);
x) no benefit plan provides health or death benefit
coverage beyond the termination of an employee's
employment, except as required by Part 6 of Subtitle B
of Title I of ERISA or Section 4980B of the Code or any
state laws requiring continuation of benefits coverage
following termination of employment;
xi) no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan
activities) have been brought or, to the knowledge of
Sellers, threatened against or with respect to any
benefit plan and there are not facts or circumstances
known to Sellers that could reasonably be expected to
give rise to any such suit, action or other litigation;
and
xii) all contributions to benefit plans that were required to
be made under such benefit plans have been made, and all
benefits accrued under any unfunded benefit plan have
been paid, accrued or otherwise adequately reserved in
accordance with GAAP, and the Company and MWFA have
performed all material obligations required to be
performed under all benefit plans.
q. Access to Books, Records, Equipment: Between the date hereof
and the Closing, Sellers shall cause the Company to allow
Buyer and its representatives, including Ernst & Young, LLP,
during normal business hours at Company's places of business,
free and full access to the Company's books, records,
documents, employees, minute books, buildings, equipment, and
properties, and to furnish all such information concerning the
Company's
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affairs as Buyer may request, from time to time, all subject
to the executed confidentiality agreement. The minute all
books and similar records contain a true and complete record
of all actions of the directors and stockholders of the
Company and of MWFA and are true and accurate.
r. Notice of Certain Events; Best Efforts: Promptly upon the
occurrence of, or promptly upon their becoming aware of the
impending or threatened occurrence of, any event which would
cause or constitute any breach of any of Sellers'
representation, warranties, covenants, agreements or
conditions contained in this Agreement, Sellers shall give
detailed written notice thereof to Buyer, and Sellers shall
use their best efforts to prevent or promptly remedy the same.
s. Further Assurances: Sellers shall promptly and duly execute
and deliver to Buyer such further documents and assurances and
take such further action as Buyer may from time to time
reasonably request in order to carry out more effectively the
intent and purpose of this Agreement and to establish and
protect the rights and remedies created or intended to be
created in favor of Buyer and/or Company and MWFA. Such
assurances shall include the execution and delivery of
management representation letters by appropriate officers of
the Company to Ernst & Young, LLP, with respect to the two
most recent fiscal years, and copies of the Company's legal
response letters to auditors for the same period.
t. Intellectual Property Rights: The Company has interests in or
uses only the intellectual property described in Exhibit R.
The Company either has all right, title and interest in or a
valid and binding license to use such intellectual property.
No other intellectual property is used in or necessary to the
conduct of the business of the Company. All registrations,
pending applications, registered rights and executed
agreements related to intellectual property are listed in
Exhibit R. Except as disclosed therein, (i) the Company has
the right to use the intellectual property described therein,
(ii) all registrations on behalf of the Company with and
applications to governmental or regulatory authorities in
respect of such intellectual property are valid and in full
force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions
by the Company to maintain their validity or effectiveness,
(iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no
restrictions on the direct or indirect transfer of any
License, or any interest therein, held by the Company in
respect of such intellectual property, (v) the Sellers have
delivered, or have caused the Company to
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deliver, to Buyer prior to the execution of this Agreement
documentation with respect to any invention, process, design,
computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate
and complete and sufficient in detail and content to identify
and explain such invention, process, design, computer program
or other know-how or trade secret, (vi) the Sellers and the
Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets,
(vii) neither any Seller nor the Company is or has received
any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under
any License to use such intellectual property and (viii)
neither any Seller nor the Company has any knowledge that such
intellectual property is being infringed by any other person.
To the knowledge of each Seller and the Company, the Company
is not infringing any intellectual property of any person or
entity, and no litigation is pending and no claim has been
made or, to the knowledge of any Seller or of the Company, has
been threatened to such effect.
u. Disclosure: The representations and warranties contained in
this Agreement, and the statements contained in the exhibits
and in the certificates, lists and other writings furnished to
Buyer pursuant to any provision of this Agreement (including
the Financial Statements), when taken together, do not contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements herein
and therein, in the light of the circumstances under which
they were made, not misleading.
v. Environmental Matters:
i) The Company and MWFA have obtained and hold all
necessary Environmental Permits.
ii) Except as disclosed on Exhibit S:
(a) Company and MWFA are, and at all times have been,
in full compliance with, and have not been and are
not in violation of or liable under, any
environmental law. Neither any Seller not the
Company nor MWFA has any basis to expect, nor has
any of them or any other person for whose conduct
it may be held to be responsible received, any
actual or threatened order, notice, or other
communication from any governmental body, or the
current or prior owner or operator of any assets,
of any actual or potential violation or failure to
comply with any environmental law, or of any
actual or threatened obligation
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to undertake or bear the cost of any environmental
liabilities with respect to any of the properties
or assets (whether real, personal, or mixed) in
which the Company or MWFA has had an interest, or
with respect to any property at or to which
hazardous materials were generated, manufactured,
refined, transferred, imported, used, or processed
by the Company or MWFA 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 any
Seller, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any
environmental liabilities or arising under or
pursuant to any environmental law, with respect to
or affecting any of the properties and assets
(whether real, personal, or mixed) in which
Company or MWFA has or had an interest.
(c) Neither any Seller nor the Company has knowledge
of or any basis to expect, nor has any of them or
any other person for whose conduct they are or may
be held responsible received any citation,
directive, inquiry, notice, order, summons,
warning, or other communications that relates to
Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any
Environmental, Health, and Safety Liabilities with
respect to any of its facilities or any other
assets in which the Company had an interest, or
with respect to any facility to which Hazardous
Materials generated, manufactured, refined,
transferred, imported, used, or processed by any
Seller, the Company, or any other person for whose
conduct it or they are or may be held responsible,
have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Neither the Company nor any other person for whose
conduct it may be held responsible, has any
Environmental, Health, and Safety Liabilities with
respect to the Facilities or with respect to any
other assets (whether real, personal, or mixed) in
which Company (or any
15
predecessor thereof), has or had an interest, or
at any property geologically or hydrologically
adjoining the facilities or any such assets.
iii) There are no hazardous materials present on or in the
environment at Company's and MWFA's properties 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 property or such adjoining property, or
incorporated into any structure therein or thereon.
Neither the Company, MWFA, nor any other person for
whose conduct it may be held responsible, has permitted
or conducted, or is aware of, any hazardous activity
conducted with respect to the property or any other
properties or assets (whether real, personal, or mixed)
in which Company or MWFA has or had an interest except
in full compliance with all applicable environmental
laws.
iv) There has been no release or, to the knowledge of any
Seller, any threat of release of any hazardous materials
at or from the property or at any other locations where
any hazardous materials were generated, manufactured,
refined, transferred, produced, imported, used, or
processed from or by the property, or from or by any
other properties and assets (whether real, personal, or
mixed) in which the Company and MWFA has or had an
interest, or any geologically or hydrologically
adjoining property.
v) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests,
and monitoring possessed or initiated by any Seller or
the Company pertaining to hazardous materials or
hazardous activities in, on, or under the property, or
concerning compliance by any Seller, the Company, MWFA,
or any other person for whose conduct it or they are or
may be held responsible, with environmental laws.
vi) There are no liens arising under or pursuant to any
environmental law on any real property owned or leased
and there are no facts, circumstances, or conditions
that could reasonably be expected to restrict, encumber,
or result in the imposition of special conditions that
could reasonably be expected to restrict, encumber, or
result in the imposition of special conditions under any
16
environmental law with respect to the ownership,
occupancy, development, use, or transferability of any
real property.
vii) There are no underground storage tanks, active or
abandoned, polychlorinated biphenyl containing
equipment, or asbestos containing material, at any real
property.
viii) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses
conducted by, on behalf of, or which are in the
possession of any Seller or the Company or MWFA with
respect to any asset of or property that is adjacent to,
an asset of the Company or MWFA which have not been
delivered to Buyer prior to execution of this Agreement.
w. Other Negotiations; Brokers: No Seller (nor any investment
banker, financial advisor, attorney, accountant or other
person retained by or acting for or on behalf of any Seller)
has entered into any agreement or had any discussions with any
third party regarding any transaction involving the Company
which could result in any party hereto being subject to any
claim for liability to said third party as a result of
entering into this Agreement or consummating the transactions
contemplated hereby.
6. REPRESENTATIONS AND WARRANTIES OF BUYER: Buyer represents and
warrants that:
a. Organization: Buyer is a duly organized corporation in good
standing with the State of Texas;
b. Authority: Buyer has obtained all necessary corporate approval
(or will have done so by Closing) to complete this
transaction;
c. Securities Laws: Buyer has taken all necessary action with
respect to this transaction required by securities laws;
d. Further Assurances: Buyer shall promptly and duly execute and
deliver to Sellers such further documents and assurances and
take such further action as Sellers may from time to time
reasonably request in order to carry out more effectively the
intent and purpose of this Agreement and to establish and
protect the rights and remedies created or intended to be
created in favor of Sellers.
17
e. Other Negotiations; Brokers: Buyer and no investment banker,
financial advisor, attorney, accountant or other person
retained by or acting for or on behalf of Buyer has entered
into any agreement or had any discussions with any third party
regarding any transaction involving the Company which could
result in any party hereto being subject to any claim for
liability to said third party as a result of entering into
this Agreement or consummating the transactions contemplated
hereby.
7 REPRESENTATIONS, WARRANTIES, AND COVENANTS:
a. Accuracy; Survival: The representations, warranties, and
covenants, made by Sellers and Buyer herein shall be true and
correct in all respects on, and as of, the Closing Date with
the same force and effect as though all such representations
and warranties had been made on and as of the Closing Date and
the covenants required by this Stock Purchase Agreement to be
performed and complied with by Sellers on or prior to the
Closing shall have been duly performed or complied with. All
representations, warranties and covenants shall survive the
Closing, unless otherwise provided herein.
b. Non-Compete:
(i) For a period of five (5) years from the Closing Date,
except as requested by Buyer or furnished pursuant to
Exhibit D, no Seller, alone or in conjunction with any
other person, or directly or indirectly through his or
her present or future affiliates, will directly or
indirectly own, manage, operate, join, have a financial
interest in, control or participate in the ownership,
management, operation or control of, or use or permit
his or her name to be used in connection with, or be
otherwise connected in any manner with, (A) any business
or enterprise engaged in the design, development,
manufacture, distribution or sale of any products, or
the provision of any services, which the Company was
designing, developing, manufacturing, distributing,
selling or providing at any time subsequent to December
31, 1996 up to and including the Closing Date, or (B)
any business which is similar to the business of
disposing or selling coal combustion by-products or
competitive with the business carried on or planned by
Company at any time subsequent to December 31, 1996 up
to and including the Closing Date, provided that the
foregoing restriction shall not be construed to prohibit
the ownership, in the aggregate, of not more than two
percent (2%) of any class of securities of any
corporation which is engaged in any of the businesses or
enterprises described in clauses (A) and (B) above,
having a class of securities registered pursuant to the
18
Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on
any national exchange or in the over-the-counter market.
(ii) For a period of five (5) years from the Closing Date, no
Seller shall directly or indirectly, or through an
affiliate, (A) influence any individual who was an
employee or consultant of the Company at any time during
the time any Seller was an indirect or direct owner of
securities of the Company, to terminate his or her
employment or consulting relationship with the Company,
(B) interfere in any other way with the employment, or
other relationship, of any employee or consultant of the
Company or (C) cause or attempt to cause or participate
in any way in any discussion or negotiation concerning
(X) any client, customer or supplier of the Company or
(Y) any prospective client, customer or supplier of the
Company from engaging in business with the Company.
(iii) Each Seller agrees that Buyer's remedies at law for any
breach or threat of breach by it of any of the
provisions of this Section 7.b will be inadequate, and
that, in addition to any other remedy to which Buyer may
be entitled at law or in equity, Buyer shall be entitled
to a temporary or permanent injunction or injunctions or
temporary restraining orders or orders to prevent
breaches of the provisions of this Section 7.b and to
enforce specifically the terms and provisions hereof, in
each case without the need to post any security or bond.
Nothing herein contained shall be construed as
prohibiting Buyer from pursuing, in addition, any other
remedies available to it for such breach or threatened
breach. A waiver by the Buyer of any breach of any
provision hereof shall not operate or be construed as a
waiver of a breach of any other provisions of this
Agreement or of any subsequent breach thereof.
(iv) The parties hereto consider the restrictions contained
in this Section 7.b hereof to be reasonable for the
purpose of preserving the goodwill, proprietary rights
and going concern value of Company, but if a final
judicial determination is made by a court having
jurisdiction that the time or territory or any other
restriction contained in this Section 7.b is an
unenforceable restriction on the Sellers' activities,
the provisions of this Section 7.b shall not be rendered
void but shall be deemed amended to apply as to such
maximum time and territory and to such other extent as
such court
19
may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that
any restriction contained in this Section 7.b or any
remedy provided herein is unenforceable, and such
restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the
enforceability of any of the other restrictions
contained therein or the availability of any other
remedy. The provisions of this Section 7.b shall in no
respect limit or otherwise affect the Sellers
obligations under other agreements with the Company.
8. TERMINATION:
a. Termination Events: This Agreement may, by notice given prior
to or at the Closing, be terminated:
i) by either Buyer or by Sellers if a material breach of
any provision of this Agreement has been committed by
the other party and such breach has not been waived;
ii) (i) by Buyer if any of the conditions contained in this
Agreement to be performed by Sellers 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 Sellers, if any of the contained in this
Agreement to be performed by Buyer 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 a Seller to comply with his or
her obligations under this Agreement) and Sellers have
not waived such condition on or before the Closing Date;
iii) by mutual consent of Buyer and Sellers; or
iv) by Buyer or by Sellers if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its
obligations under this Agreement) on or before April 30,
1998, or such later date as the parties may agree upon.
b. Effect of Termination: Each party's right of termination under
Section 8.a 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
20
8.a, all further obligations of the parties under this
Agreement will terminate, except that the obligations in
Sections 10.a, 10.k and 18 will survive; provided, however,
that if this Agreement is terminated by a party because of a
breach of the Agreement by the other party or because one or
more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal
remedies (including specific performance) will survive such
termination unimpaired.
9. WAIVERS: Either Buyer or Sellers may, by written notice to the other
party hereto, extend the time for performance of any of the
obligations or other actions of the other parties under this
Agreement, or waive any inaccuracies in this representations and
warranties of the other contained in this Agreement or in any
documents delivered pursuant to this Agreement, or waive compliance
with any of the conditions or covenants of the other contained in
this Agreement, or waive or modify performance of any of the
obligations of the other parties under this Agreement, which written
notice must delineate with specificity, such waiver. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation or
action by or on behalf of any party, shall constitute a waiver by
any party taking such action of compliance with any representations,
warranties, covenants or agreements set forth in this Agreement. The
waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision.
10. MISCELLANEOUS: Buyer and Sellers hereby agree to the following
miscellaneous provisions:
a. Cost; Expenses: Buyer and Sellers shall each bear their own
respective costs and expenses incurred in connection with this
Stock Purchase Agreement, including, but not limited to
attorney and accountant fees. Seller shall be solely
responsible for any sales, stock transfer or other transfer
taxes related to the consummation or the principal transaction
contemplated by this Stock Purchase Agreement. Buyer will be
responsible for all compliance costs and expenses related to
its public registration. Notwithstanding anything herein or
contained in any other agreement, neither Sellers nor Buyer
makes any representation that may be relied upon by any third
party.
21
b. Notices: Any notice or other communication required or
permitted by any provision of this Agreement shall be in
writing and shall be deemed to have been given or served for
all purposes:
i) When delivered by hand or sent by facsimile; or
ii) When delivered by prepaid nationally recognized courier
service; or
iii) If sent by certified mail, postage prepaid, return
receipt requested, when 3 days have elapsed after such
mailing:
To Buyer:
JTM, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax - (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax - (▇▇▇) ▇▇▇-▇▇▇▇
To Sellers:
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax - (▇▇▇) ▇▇▇-▇▇▇▇
22
or such other address as any of the parties hereto shall have
designated in writing for notices in accordance with this
paragraph.
c. Successors and Assigns: This Stock Purchase Agreement shall
inure to the benefit of, and be binding upon, the parties
hereto and their respective heirs, successors and assigns. No
assignment by Buyer may be made without the prior written
consent of Sellers, except to an affiliate of Buyer. Any
Seller may assign his rights hereunder, but no such assignment
shall diminish his liabilities or commitments contained
herein.
d. Entire Agreement: This Agreement (including the exhibits
hereto) sets forth the entire understanding and agreement of
the parties hereto with respect to the subject matters covered
hereby and supersedes all prior or contemporaneous agreements,
arrangements, letters of intent or communications, whether
oral or written in form. This Agreement is made in fulfillment
of a Letter of Understanding dated February 20, 1998.
e. Amendments: This Agreement shall not be modified or amended
except by written agreement executed by the parties hereto.
f. Counterparts: This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the
same agreement.
g. Governing Law: This Agreement shall be governed by and
construed in accordance with the laws of the State of Iowa.
h. Partial Invalidity: If any provision of this Agreement shall
be or become illegal, invalid or unenforceable in whole or in
part, the remaining provisions of this Agreement shall
nevertheless be deemed valid, binding, subsisting and
enforceable.
i. Delay; Partial Exercise: No failure or delay by any party
hereto in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
j. Authority: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Shall be authorized to act on
behalf of all Sellers with respect to any election, notice or
other matter concerning this Agreement, and through the
Closing Buyer may rely on any
23
written statement from him as having been authorized by all
Sellers, even though not confirmed by the other Sellers.
k. Confidentiality: Buyer and each of the Sellers will hold in
strict confidence from any person or entity all documents and
information concerning the other party hereto furnished to it
by or on behalf of the other party in connection with this
Agreement or the transactions contemplated hereby, except to
the extent the disclosing party can demonstrate that such
documents or information was (1) previously known by the party
receiving such documents or information, (2) in the public
domain (either prior to or after the furnishing of such
documents or information hereunder) through no fault of such
receiving party or (3) later acquired by the receiving party
from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to
keep such documents and information confidential. Such
covenant of confidentiality will remain in effect unless a
party is compelled to disclose by judicial or administrative
process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of governmental or regulatory authorities) or by other
requirements of law.
11. INDEMNIFICATION:
a. Each of the Sellers, jointly and severally, will indemnify the
Company. Buyer and their respective stockholders (other than
Sellers) and the officers, directors, employees, agents and
affiliates of each of them in respect of and hold each of them
harmless from and against, any and all losses suffered,
incurred or sustained by any of them or to which any of them
becomes subject, resulting from, arising out of relating to
any misrepresentation or breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the a
part of any Sellers contained in this Agreement (including,
without limitation, any certificate delivered in connection
herewith or therewith).
b. Buyer will indemnify each of the Sellers in respect of, and
hold him or her harmless from and against, any and all losses
suffered, incurred or sustained by him or her or to which he
or she becomes subject, resulting from, arising out of or
relating to any misrepresentation or breach of warranty or
nonfulfillment of or failure to perform any covenant or
agreement on the part of Buyer contained in this Agreement
(including, without limitation, any certificate delivered in
connection herewith or therewith).
c. Notwithstanding anything in this Agreement to the contrary,
Sellers' obligations, including taxes and penalties and paid
costs of defense
24
under this indemnity agreement shall be limited and, if
finally determined to be owed, to $2,500,000, except that
Seller's obligations related in any way to assets transferred
by the Company to Sellers, pursuant to Section 4.e, income tax
liabilities with respect to the Company's short year ending on
the Closing Date, and any willful, intentional or fraudulent
act, are not limited.
12. METHOD OF ASSERTING CLAIMS: All claims for indemnification will be
asserted and resolved as follows:
a. In order for a party to be entitled to any indemnification
arising out of or involving a claim or demand made by any
person not a party to this Agreement against the indemnified
party (a "Third Party Claim"), the indemnified party shall
deliver a claim notice to the indemnifying party promptly
after receipt by such indemnified party of written notice of
the Third Party Claim; provided, that failure to give such
Claim Notice shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall
have been actually prejudiced as a result of such failure.
b. If a Third Party Claim is made against an indemnified party,
the indemnifying party shall be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the indemnifying party, which
counsel must be reasonably satisfactory to the indemnified
party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection
with the defense thereof, but shall continue to pay for any
expenses of investigation or any loss suffered. If the
indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. If (i) the
indemnifying party shall not assume the defense of a Third
Party Claim with counsel satisfactory to the indemnified party
within five business days of any claim notice, or (ii) legal
counsel for the indemnified party notifies the indemnifying
party that there are or may be legal defenses available to the
indemnifying party or to other indemnified parties which are
different from or additional to those available to the
indemnified party, which, if the indemnified party and the
indemnifying party were to be represented by the same counsel,
would constitute a conflict of interest for such counsel or
prejudice prosecution of the defenses available to such
indemnified party, or (iii) if the indemnifying party shall
assume the defense
25
of a Third Party Claim and fail to diligently prosecute such
defense, then in each such case the indemnified party, by
notice to the indemnifying party, may employ its own counsel
and control the defense of the Third Party Claim and the
indemnifying party shall be liable for the reasonable fees,
charges and disbursements of counsel employed by the
indemnified party, and the indemnified party shall be promptly
reimbursed for any such fees, charges and disbursements, as
and when incurred. Whether the indemnifying party or the
indemnified party control the defense of any Third Party
Claim, the parties hereto shall cooperate in the defense
thereof. Such cooperation shall include the retention and
provision to the counsel of the controlling party of records
and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually
convenient basis to provide additional information and
explanation or any material provided hereunder. The
indemnifying party shall have the right to settle, compromise
or discharge a Third Party Claim (other than any such Third
Party Claim in which criminal conduct is alleged) without the
indemnified party's consent if such settlement, compromise or
discharge (i) constitutes a complete and unconditional
discharge and release of the indemnified party, and (ii)
provides for no relief other than the payment of monetary
damage and such monetary damages are paid in full by the
indemnifying party.
c. In the event either party should have a claim that does not
involve a Third Party Claim, the indemnified party shall
promptly deliver an indemnity notice to the indemnifying
party. The failure by any indemnified party to give the
indemnity notice shall not impair such party's rights
hereunder except to the extent that an indemnifying party
demonstrates that it has been prejudiced thereby. If the
indemnifying party notifies the indemnified party that it does
not dispute the claim described in such indemnity notice or
fails to notify the indemnified party within thirty (30) days
whether the indemnifying party disputes the claim described in
such indemnity notice, the loss in the amount specified in the
indemnity notice will be conclusively deemed a liability of
the indemnifying party and the indemnifying party shall pay
the amount of such loss to the indemnified party on demand. If
the indemnifying party has timely disputed its liability with
respect to such claim, the indemnifying party and the
indemnified party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within thirty (30) days, such dispute shall be
resolved as provided herein and by law.
13. ALLOCATION OF TAX LIABILITY:
a. In the case of taxes with respect to or payable by the Company
with respect to a period that includes but does not end on the
Closing Date, the allocation of such taxes between the
pre-closing period and the post-
26
closing period shall be made on the basis of an interim
closing of the books of the Company and MWFA as of the close
of business on the Closing Date. In the case of (i) franchise
taxes based on capitalization, debt or shares of stock
authorized, issue or outstanding and (ii) ad valorem taxes, in
either situation attributable to any taxable period that
includes but does not end on the Closing Date, the portion of
such taxes attributable to the pre-closing period shall be the
amount of such taxes for the entire taxable period, multiplied
by a fraction the numerator of which is the number of days in
such taxable period ending on and including the Closing Date
and the denominator of which is the entire number of days in
such taxable period; provided, that if any company asset is
sold or otherwise transferred prior to the Closing Date, then
ad valorem taxes pertaining to such property, asset or other
right shall be attributed entirely to the pre-closing period.
b. Except to the extent a reserve for taxes is reflected on the
Financial Statements, the Sellers shall be responsible for and
pay and shall indemnify and hold harmless Buyer and the
Company and MWFA with respect to (i) any and all taxes imposed
on any of the Company, or for which the Company is liable with
respect to any periods ending on or before the Closing Date;
provided, that in the case of any adjustment to any item of
loss or expense for any such years, which gives rise to
corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually
realized by the Company (other than upon liquidation of the
Company) including by reason of any increase in a net
operating loss, the Sellers' obligations shall be limited to
the amount of interest (computed at the appropriate statutory
rates) and penalties actually paid to the appropriate taxing
authorities by the Company as a result of such timing
differences in the case of audit adjustments, or at a rate of
eight percent (8%) per annum in the case of other adjustments,
(ii) without duplication (subject to the same proviso), all
taxes arising out of a breach of the representations,
warranties or covenants contained herein, (iii) any tax
liability resulting from any ongoing state audits that exceed,
in the aggregate, any reserve therefore set forth on the
Financial Statements, and (iv) any reasonable out-of-pocket
costs or expenses with respect to taxes indemnified hereunder.
c. From and after the Closing Date, Buyer shall cause the Company
and MWFA to prepare, or cause to be prepared, and shall file,
or cause to be filed, all reports and returns of the Company
required to be filed. Buyer shall cause the Company and MWFA
to pay the appropriate taxing authorities the taxes shown to
be due and payable on all tax returns of the Company filed
after the Closing Date, concurrent with the filing of such tax
27
returns. Tax returns of the Company and MWFA for a period
ending on or before the Closing Date shall be prepared on a
basis consistent with the tax returns filed by the Company for
previous taxable periods, subject to the requirements of
applicable law.
14. TAX CONTESTS:
a. If any taxing authority or other person asserts a tax claim,
then the party hereto first receiving notice of such tax claim
shall promptly provide written notice thereof to the other
parties hereto. Such notice shall specify in reasonable detail
the basis for such tax claim and shall include a copy of any
relevant correspondence received from the taxing authority or
other person.
b. If, within 30 calendar days after any Seller receives or
delivers, as the case may be, notice of a tax claim, Sellers
provide to the Buyer an election notice, Sellers shall defend
or prosecute, at their sole cost, expense and risk, such tax
claim by all appropriate proceedings, which proceedings shall
be defended or prosecuted diligently by Sellers to a final
determination; provided, that Sellers shall not, without the
prior written consent of the Company and MWFA, enter into any
compromise or settlement of such tax claim that would result
in any tax detriment to the Company and MWFA. So long as
Sellers are defending or prosecuting a tax claim, with respect
to the Company and MWFA, the Company and MWFA shall provide or
cause to be provided to Sellers any information reasonably
requested by Sellers relating to such tax claim and shall
otherwise cooperate with Sellers and their representatives in
good faith in order to contest effectively such tax claim.
Sellers shall inform the Company and MWFA of all developments
and events relating to such tax claim (including, without
limitation, providing copies of written materials relating to
such tax claim) and the Company and MWFA or its authorized
representatives shall be entitled, at their expense, to
attend, but not to participate in or control, all conferences,
meetings and proceedings relating to such tax claim.
c. If, with respect to any tax claim, Sellers fail to deliver an
election notice within the period provided in Section 13.04(b)
or, after delivery of such election notice, Sellers fail
diligently to defend or prosecute such tax claim to a final
determination, then the Company and MWFA shall at any time
thereafter have the right (but not the obligation) to defend
or prosecute, at the sole cost, expense and risk of Sellers,
such tax claim. The Company and MWFA shall have full control
of such defense or prosecution and such proceedings, including
any settlement or compromise thereof. If requested, the
Sellers shall cooperate in good faith with the Company and
MWFA and its authorized representatives in order to contest
effectively such
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tax claim. Sellers may attend, but not participate in or
control, any defense, prosecution, settlement or compromise of
any tax claim pursuant to this paragraph, and shall bear their
own costs and expenses with respect thereto.
d. In the case of any tax claim that is defended or prosecuted to
a final determination by Sellers, Sellers shall pay to the
appropriate tax indemnitees, the full amount of any tax
arising or resulting from such tax claim within five business
days after such final determination. In the case of any tax
claim that is defended or prosecuted to a final determination
by the Company and MWFA pursuant to the terms of Section
13.04, Sellers shall pay to the appropriate indemnified party,
together with any associated costs that have not theretofore
been paid by Sellers to the Company and MWFA, within five
business days after such final determination. In the case of
any tax claim not covered by the two preceding sentences,
Sellers shall pay to the Company and MWFA in immediately
available funds the full amount of any tax arising or
resulting from such tax claim (calculated after taking into
account any actual reduction in the current liability for
taxes of such tax indemnitee for tax arising out of or
resulting from such payment or such tax claim), together with
any associated costs that have not theretofore been paid by
Sellers to the Company and MWFA, at least five business days
before the date payment of such tax is due from any tax
indemnitee.
e. Notwithstanding anything contained in this Section 13 to the
contrary, the rights of Sellers to defend or prosecute, or to
control the defense or prosecution of, any tax claim shall be
no greater than those rights that the Company and MWFA would
have to defend or prosecute, or to control the defense or
prosecution of, such tax claim.
15. COOPERATION REGARDING TAX MATTERS: Each party hereto shall provide
to the other parties hereto and Company and MWFA such cooperation
and information as any of them reasonably may request related to the
filing of any tax return, amended tax return or claim for refund,
determining a liability for taxes or a right to refund of taxes or
in conducting any audit or other proceeding in respect to taxes.
Such cooperation and information shall include providing copies of
all relevant portions of relevant tax returns, together with
relevant accompanying schedules, workpapers and relevant documents
relating to rulings or other determinations by taxing authorities
and relevant records concerning the ownership and tax basis of
property, which any such party may possess. Each party shall make
its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so
provided. Subject to the
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preceding sentence, each party required to file tax returns pursuant
to this paragraph 13 shall bear all costs of filing such tax
returns.
16. PAYMENT OF TRANSFER TAXES AND FEES: Sellers shall pay all sales,
use, transfer, stamp, documentary or similar taxes imposed upon or
arising out of or in connection with the transactions effected
pursuant to this Agreement.
17. OTHER TAX COVENANTS:
a. Without the prior written consent of Buyer, no Seller shall,
to the extent it may affect or relate to the Company or MWFA,
make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax
accounting, file any amended tax return, enter into any method
of tax accounting, enter into any closing agreement, settle
any tax claim, assessment or proposed assessment, surrender
any right to claim a tax refund, consent to any extension or
waiver of the limitation period applicable to any tax claim or
assessment or take or omit to take any other action, if any
such action or omission would have the effect of increasing
any post-closing tax liability of the Buyer, of the Company or
MWFA unless required by applicable law.
b. Without the prior written consent of Sellers, neither the
Buyer nor the Company or MWFA shall, to the extent it may
affect or relate to the Company or MWFA, make or change any
tax election, file any amended tax return, enter into any
closing agreement, settle any tax claim, assessment or
proposed assessment, surrender any right to claim a tax
refund, consent to any extension or waiver of the limitation
period applicable to any tax claim or assessment or take or
omit to take any other action, if any such action or omission
would affect a pre-closing period, unless required by
applicable law.
c. So long as any books, records and files retained by any Seller
relating to the business of the Company or MWFA or the books,
records and files delivered to the control of the Buyer
pursuant to this Agreement to the extent they relate to the
operations of the Company or MWFA prior to the Closing Date,
remain in existence and are available, each party (at its own
expense) shall have the right upon prior notice to inspect and
to make copies of the same at any time during business hours
for any proper purpose. The Buyer and the Sellers shall use
reasonable efforts not to destroy or all the destruction of
any such books, records, and files without first providing 60
days written notice of intention to destroy to the other, and
allowing such other party to take possession of such records.
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18. MEDIATION: In the event there is a dispute under the Agreement, the
disagreeing parties shall meet with one another and diligently
attempt to resolve their disagreements. If they are unable to do so,
then upon request of either party to the dispute made within twenty
(20) days of the failure of negotiations, they will mediate the
dispute, utilizing an impartial mediator pursuant to the rules of
the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the
mediation is not successful, or if no mediation has been elected,
then any party to the dispute may file a legal action in any court
of competent jurisdiction to resolve the dispute.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the _______ day of March, 1998.
SELLERS: BUYER:
JTM INDUSTRIES, INC.
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