EXHIBIT 10.19
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of June 22, 1995, by and among NORTH AMERICAN TECHNOLOGIES GROUP, INC.,
a Delaware corporation ("NATK"), NATK SUB, INC., a Texas corporation and wholly-
owned subsidiary of NATK ("Sub"), INDUSTRIAL PIPE FITTINGS, INC., a Texas
corporation ("IPF"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III ("▇▇▇▇▇")
and ▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇;" collectively, ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇ sometimes
being referred to herein as the "Shareholders").
Recitals
The parties hereto wish to provide for the merger of IPF with and into the
Sub on the terms and conditions set forth in this Agreement, and certain other
matters as described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
MERGE OF IPF WITH AND INTO SUB AND RELATED MATTERS
1.1 The Merger (a) Upon the terms and conditions of this Agreement, at
the Effective Time (as defined herein), IPF shall be merged with and into the
Sub (the "Merger'') in accordance with the provisions of the Texas Business
Corporation Act (the "TBCA"), and the separate corporate existence of IPF shall
cease and the Sub shall continue as the surviving corporation under the laws of
the State of Texas with the corporate name, "INDUSTRIAL PIPE FITTINGS, INC." (as
the corporation surviving the Merger, the "Surviving Corporation").
(b) The Merger shall become effective as of the issuance of a certificate
of merger (the "Certificate of Merger") by the Secretary of State of Texas in
accordance with Article 5.05 of the TBCA, following filing with the Secretary of
State of Texas of articles of merger, substantially in the form of Exhibit A,
attached hereto and made a part hereof (the "Articles of Merger"), in accordance
with the provisions of Article 5.04 of the TBCA. The Articles of Merger shall
be filed by the Sub and IPF on the Closing Date (as defined herein). The date
and time when the Merger shall become effective is referred to herein as the
"Effective Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under the laws of the State of
Texas as the Surviving Corporation;
(ii) the separate corporate existence of IPF shall cease;
(iii) all rights, title and interests to all real estate and other
property owned by Sub and by IPF shall be allocated to and vested in the
Surviving Corporation without reversion or impairment, without further act or
deed, and without any transfer or assignment having occurred, but subject to any
existing liens or other encumbrances thereon, and all liabilities and
obligations
of Sub and of IPF shall be allocated to the Surviving Corporation which shall be
the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the Merger, other than the Surviving Corporation,
shall be liable therefor;
(iv) the Articles of Incorporation of the Sub as in effect immediately
prior to the consummation of the Merger, other than the name of the Sub which
shall be changed to "INDUSTRIAL PIPE FITTINGS, INC." in connection with the
Merger, shall be the Articles of Incorporation of the Surviving Corporation,
until thereafter amended as provided by law and such Articles of Incorporation;
(v) the Bylaws of the Sub, as in effect immediately prior to the
consummation of the Merger, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws; and
(vi) the officers and directors of the Surviving Corporation shall be as
set forth below, each of which persons whose names are set forth below shall
hold the offices set forth next to her or his respective name below until her or
his respective successors shall have been elected or appointed in accordance
with the Bylaws of the Surviving Corporation or until she or he shall have
sooner been removed or shall have resigned in accordance with such Bylaws:
Name Office
---- ------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Director, President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III Vice President - Sales and Marketing
▇▇▇▇ ▇ ▇▇▇▇▇ Vice President - Operations
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Director
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Director, Secretary and Treasurer
1.2 Conversion of Stock. At the Effective Time, and without any action on
the part of the parties hereto, the shareholders of IPF or any other party:
(a) each share of common stock, par value $0.01 per share ("IPF Common
Stock"), of IPF that is issued and outstanding as of the Effective Time (other
than Dissenting Shares, as defined herein) shall, by virtue of the Merger and
without any action on the part of any holder thereof, be converted into and
represent the right to receive, and shall be exchangeable for, one thousand
(1,000) fully paid and non-assessable shares of common stock, par value $.001
per share, of NATK ("NATK Common Stock"), each of which shares of NATK Common
Stock shall be free of any mortgage, lien, pledge, charge or security interest
of any kind ("Encumbrance"), and such shares shall appear immediately thereafter
as issued and outstanding on the books and records of NATK;
(b) each share of capital stock of IPF held in treasury, if any, as of the
Effective Time shall, by virtue of the Merger, be canceled without payment of
any consideration therefor and without any conversion thereof; and
(c) each share of common stock of the Sub that is issued and outstanding
as of the Effective Time shall continue to represent one share of common stock
of the Surviving
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Corporation after the Merger, which shares shall thereafter constitute all of
the issued and outstanding shares of capital stock of the Surviving Corporation.
1.3 Merger Consideration (a) At the Effective Time, upon tendering to
the Surviving Corporation a certificate or certificates representing shares of
IPF Common Stock, the holder thereof shall be entitled to receive immediately
therefor, and NATK shall cause to be issued, a certificate or certificates
representing 1,000 shares of NATK Common Stock for each share of IPF Common
Stock tendered (or an aggregate of 1,300,000 shares of NATK Common Stock for all
of the shares of IPF Common Stock).
(b) NATK shall pay all charges and expenses, including those of any
exchange agent and the National Association of Securities Dealers, Inc., if any,
in connection with the issuance or exchange of the shares of NATK Common Stock
for IPF Common Stock in the Merger.
(c) From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of shares of IPF capital stock
(or any warrants or other rights to acquire any of the same) that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates for shares of IPF capital stock (or any warrants or other
rights to acquire any of the same) that were outstanding immediately prior to
the Effective Time are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration to be received therefor in
connection with the Merger as provided in this Agreement.
1.4 Dissenting Shares (a) Notwithstanding anything in this Agreement to
the contrary, none of the shares of IPF capital stock that are outstanding
immediately prior to the Effective Time and that are held by shareholders of IPF
who shall have filed with IPF, prior to the IPF shareholder meeting at which a
vote is to be taken with respect to a proposal to approve this Agreement, a
written objection to such proposed action, as required by Article 5.12A(1)(a) of
the TBCA in order for such shareholder to perfect the right to dissent from such
proposed action (each such shareholder being referred to herein as a "Dissenting
Shareholder" and the shares of IPF capital stock of such shareholder being
referred to as "Dissenting Shares"), shall be converted into the right to
receive, or be exchangeable for, shares of NATK Common Stock (with respect to
Dissenting Shares of IPF Common Stock), but instead, each such Dissenting
Shareholder shall be entitled to receive the fair value of such Dissenting
Shares in accordance with the provisions of Article 5.12 of the TBCA.
(b) Notwithstanding the foregoing:
(i) if any Dissenting Shareholder who has demanded payment for such
Dissenting Shareholder's Dissenting Shares withdraws such demand at any time
before payment for such Dissenting Shares, before any petition has been filed
pursuant to Article 5.12 of the TBCA asking for a finding and determination of
the fair value of such Dissenting Shares, or (with the consent of the Surviving
Corporation) after any such petition has been filed, or
(ii) if the Surviving Corporation shall terminate the Dissenting
Shareholder's rights under Article 5.12 of the TBCA, or
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(iii) if no petition asking for a finding and determination of fair value
of such Dissenting Shareholder's Dissenting Shares by a court shall have been
filed within the time provided in Article 5.12 of the TBCA, or
(iv) if, after the hearing of a petition filed pursuant to Article 5.12 of
the TBCA, the court shall determine that such Dissenting Shareholder is not
entitled to the relief provided for by such Article 5.12;
then, among other things, the right of such Dissenting Shareholder to be paid
the fair value of his Dissenting Shares shall cease and such Dissenting
Shareholder shall be entitled to receive the consideration provided for by
Article 5.13 of the TBCA.
1.5 No Further Rights or Transfers. At and after the Effective Time, the
shares of capital stock of IPF outstanding immediately prior to the Effective
Time shall cease to provide the holders thereof with any rights as a shareholder
of the Surviving Corporation, except for the right to surrender the certificate
or certificates representing such shares and to receive the consideration to be
received therefor in connection with the Merger as provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date. The closing ("Closing") of the Merger shall take place
at the offices of counsel for NATK, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, on June 28, 1995, or at such
other time and place and on such other date as NATK and IPF shall agree, but in
no event shall such date be later than July 31, 1995, unless such date is
extended by the mutual written agreement of NATK and IPF. The date of the
Closing is referred to herein as the "Closing Date."
2.2 Closing Transactions. At the Closing:
(a) each of the holders of IPF Common Stock (other than Dissenting
Shareholders) shall surrender and deliver the certificate or certificates
representing all of such shareholder's shares of IPF Common Stock. All of such
shares shall be free and clear of any Encumbrance;
(b) each of the Shareholders shall execute and deliver to NATK a copy of
that certain Shareholder Representation Letter in the form of Exhibit D,
attached hereto and made a part hereof ("Shareholder Representation Letter").
(c) NATK shall deliver to each of the holders of IPF Common Stock (other
than a Dissenting Shareholder) a certificate or certificates representing the
number of shares of NATK Common Stock as such holder is entitled to receive in
connection with the Merger;
(d) IPF, on the one hand, and each of ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇, on the
other hand, shall terminate their employment arrangements with IPF that were in
place immediately prior to the date of this Agreement;
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(e) NATK shall agree in writing with ▇▇▇▇▇▇▇ to pay (or cause to be paid)
to ▇▇▇▇▇▇▇ on or before December 31, 1995 (such payment date to be selected by
NATK), all outstanding amounts owed to ▇▇▇▇▇▇▇ by IPF with respect to any and
all loans made by ▇▇▇▇▇▇▇ to IPF (the "▇▇▇▇▇▇▇ Loans");
(f) NATK shall cancel and terminate that certain Guaranty Agreement, dated
as of March 15, 1995 (as amended to date, if any), by and between NATK and
▇▇▇▇▇▇▇, pursuant to which ▇▇▇▇▇▇▇ guaranteed to NATK certain obligations of IPF
under a promissory note (as amended to date, if any) issued by IPF in favor of
NATK in the original principal amount of $50,000, which promissory note is of
even date with such Guaranty Agreement, and NATK shall return to ▇▇▇▇▇▇▇ its
original of such Guaranty Agreement marked "CANCELED;"
(g) NATK shall fund each of the $35,000 amounts due with respect to the
non-compete provisions in the employment agreements, as amended to date on or
before the Closing (the "Employment Agreements") between NATK, on the one hand,
and each of ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇, on the other hand;
(h) Each of IPF and the Sub shall execute and deliver (either by telefax
or by overnight courier, but in either case, in accordance with the applicable
law), and file or caused to be filed with the Secretary of State of Texas on the
Closing Date, the Articles of Merger, with such amendments thereto as the
parties hereto shall deem mutually acceptable; and
(i) The Secretary of State of Texas shall issue the Certificate of Merger.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 IPF and the Shareholders. IPF and each Shareholder shall use such
party's best efforts to cause to occur all shareholder and other corporate
action necessary on behalf of any of them to effect the Merger and consummate
the other transactions contemplated hereby. Without limiting the generality of
the foregoing, each of the Shareholders agrees, subject to his review of a
prospectus referred to below delivered to him by NATK, to vote his shares of
capital stock of IPF in favor of the approval and adoption of this Agreement and
the Merger. In addition, IPF and each Shareholder shall use such party's best
efforts to obtain and furnish the information relating to IPF as NATK shall
reasonably request to be included in the prospectus referred to in the
Shareholder Representation Letter in order that the offer and sale of the shares
of NATK Common Stock to be issued in connection with the Merger shall comply
with the provisions of Rule 505 and other related provisions promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
to date (the "Securities Act").
3.2 NATK and the Sub. NATK and the Sub shall cause to occur all corporate
action necessary on behalf of either of them to effect the Merger and consummate
the other transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of IPF and the Shareholders. IPF and
each of the Shareholders represent and warrant, jointly and severally, to NATK
and the Sub as set forth on Exhibit B, attached hereto and made a part hereof.
4.2. Representations and Warranties of NATK and the Sub. NATK and the Sub
represent and warrant, jointly and severally, to IPF and each Shareholder as set
forth on Exhibit C, attached hereto and made a part hereof.
ARTICLE V
COVENANTS
5.1 Disclosure Documents. IPF and each Shareholder shall supply to NATK
the necessary information in writing, or cause the necessary information to be
supplied in writing, relating to IPF or the Shareholders for inclusion in any
documents to be filed with the Securities and Exchange Commission or any
regulatory agency in connection with the transactions contemplated by this
Agreement.
5.2 Access to Information. At all times prior to the Effective Time or the
earlier termination of this Agreement in accordance with the provisions of
Article VII, each of the parties hereto shall provide to the other parties (and
the other parties' authorized representatives) full access during normal
business hours to the premises, properties, books, records, assets, liabilities,
operations, contracts, personnel, financial information and other data and
information of or relating to such party (including without limitation all
written proprietary and trade secret information and documents, and other
written information and documents relating to intellectual property rights and
matters), and will cooperate with the other party in conducting its due
diligence investigation of such party.
5.3 Confidentiality. (a) Confidentiality of NATK-Related Information.
With respect to information concerning NATK or the Sub that is made available to
IPF pursuant to the provisions of Section 5.2, each of the Shareholders and IPF
agrees that such party shall hold such information in strict confidence, shall
not use such information except for the sole purpose of evaluating the Merger
and the related transactions and shall not disseminate or disclose any of such
information other than to IPF's directors, officers, employees, shareholders,
affiliates, agents and representatives who need to know such information for the
sole purpose of evaluating the Merger and the related transactions (each of whom
shall be informed in writing by IPF of the confidential nature of such
information and directed by IPF in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Article VII, all such information, all copies thereof and all information
prepared by IPF, any Shareholder or any other party related to IPF or any
Shareholder based upon the same, shall immediately be returned to NATK upon
NATK's request; provided, however, that one copy of all such material may be
retained by IPF's outside legal counsel for purposes only of resolving any
disputes under this Agreement. The above limitations on use, dissemination and
disclosure shall not apply to information that (i) is learned by IPF or a
Shareholder (other than ▇▇▇▇▇▇▇) from a third party
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entitled to disclose it; (ii) becomes known publicly other than through IPF, any
Shareholder or any party who received the same through IPF or any Shareholder;
(iii) is required by law or court order to be disclosed by IPF or a Shareholder;
or (iv) is disclosed with the express prior written consent thereto of NATK. IPF
and each Shareholder shall undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the provisions of this paragraph (a).
(b) Confidentiality of IPF-Related Information. With respect to
information concerning IPF that is made available to NATK or the Sub pursuant to
the provisions of Section 5.2, NATK and the Sub jointly and severally agree that
they shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Merger and the related
transactions and shall not disseminate or disclose any of such information other
than to their directors, officers, employees, shareholders, affiliates, agents
and representatives who need to know such information for the sole purpose of
evaluating the Merger and the related transactions (each of whom shall be
informed in writing by NATK or the Sub, as appropriate, of the confidential
nature of such information and directed by such party in writing to treat such
information confidentially). If this Agreement is terminated pursuant to the
provisions of Article VII, NATK and the Sub jointly and severally agree to
return immediately all such information, all copies thereof and all information
prepared by either of them based upon the same, upon IPF's request; provided,
however, that one copy of all such material may be retained by NATK's outside
legal counsel for purposes only of resolving any disputes under this Agreement.
The above limitations on use, dissemination and disclosure shall not apply to
information that (i) is learned by NATK or the Sub from a third party entitled
to disclose it; (ii) becomes known publicly other than through NATK or the Sub
or any party who received the same through either of them; (iii) is required by
law or court order to be disclosed by NATK or the Sub; or (iv) is disclosed with
the express prior written consent thereto of IPF. NATK and the Sub jointly and
severally agree to undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this paragraph (b).
(c) Nondisclosure. Neither NATK, the Sub, IPF nor any Shareholder shall
disclose to the public or to any third party the existence of this Agreement or
the transactions contemplated hereby or any other material non-public
information concerning or relating to any other party hereto, other than with
the express prior written consent of such other party, except as may be required
by law or court order or to enforce the rights of such disclosing party under
this Agreement, in which event the contents of any proposed disclosure shall be
discussed with the other party before release; provided, however, that
notwithstanding anything to the contrary contained in this Agreement, any party
hereto may disclose this Agreement to any of its directors, officers, employees,
shareholders, affiliates, agents and representatives who need to know such
information for the sole purpose of evaluating the Merger, and to any party
whose consent is required in connection with the Merger or this Agreement. The
parties anticipate issuing a mutually acceptable, joint press release announcing
the execution of this Agreement and the consummation of the Merger.
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5.4 Interim Operations. During the period from the date of this Agreement
and continuing until the Effective Time:
(a) Interim Operations of IPF. IPF and the Shareholders agree (except as
expressly contemplated by this Agreement, including any Exhibits and Schedules
hereto, or to the extent that NATK shall otherwise consent in writing, and with
respect to each Shareholder, such party's obligations under this Section 5.4(a)
shall be limited to using such party's best efforts) that:
(i) Ordinary Course. Except to the extent that either (A) IPF shall have
received the prior written consent thereto of the Chief Executive Officer of
NATK or (B) IPF shall have notified NATK of any breach of the provisions of this
clause (i) and such breach could not reasonably be expected to have a Material
Adverse Effect on IPF, IPF shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent with such business, use all reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it;
(ii) Dividends; Changes in Stock. IPF shall not and shall not propose to
(a) declare or pay any dividend on, or make other distribution in respect of,
any of its capital stock, (b) split, combine or reclassify any of its capital
stock or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of IPF or
(c) repurchase or otherwise acquire any shares of capital stock of IPF.
(iii) Issuance of Securities. IPF shall not sell, issue, authorize or
propose the sale or issuance of, or purchase or propose the purchase of, any
shares of its capital stock of any class or securities convertible into, or
rights, warrants or options to acquire, any such shares or other convertible
securities (other than the issuance of shares of IPF Common Stock upon the
exercise of conversion, if any, of currently outstanding stock options).
(iv) Governing Documents. IPF shall not amend its Articles of
Incorporation or its Bylaws.
(v) No Acquisition. IPF shall not acquire or agree to acquire by merging
or consolidation with, or by purchasing a substantial portion of the assets or
securities of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets that are material, individual
or in the aggregate, to IPF.
(vi) No Dispositions. IPF shall not sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of its assets that are
material, individually or in the aggregate, to IPF, except in the ordinary
course of business consistent with prior practice.
(vii) Indebtedness. IPF shall not incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities of
IPF or guarantee any debt securities of others other than in the ordinary course
of business consistent with prior practice (other than any indebtedness for
money borrowed from NATK). The provisions of this clause (vii) shall not
prevent IPF from incurring ordinary accounts payable for supplies, materials or
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inventory, or other customary trade payables in the ordinary course of its
business consistent with its past practice.
(viii) Benefit Plans, Etc. IPF shall not adopt or amend in any material
respect any collective bargaining agreement or Employee Benefit Plan (as defined
herein).
(ix) Executive Compensation. IPF shall not grant to any executive officer
any increase in compensation or in severance or termination pay, or enter into
any employment agreement with any executive officer.
(x) Other Actions. IPF shall not enter into any agreement or arrangement
to do any of the foregoing. IPF shall not take any action, or fail to take any
action, that is reasonably likely to result in any of the representations and
warranties of IPF set forth in this Agreement becoming untrue.
(b) Interim Operations of NATK and Sub. NATK and Sub jointly and
severally agree (except as expressly contemplated by this Agreement, including
any Exhibits and Schedules hereto, or to the extent that IPF shall otherwise
consent in writing) that:
(i) Ordinary Course. NATK shall carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such business, use all reasonable
efforts to preserve intact its present business organization (provided that such
obligation shall not relate to the officers and employees of NATK or any of its
subsidiaries including the Sub) and preserve its relationships with customers,
suppliers and others having business dealings with it. The Sub shall conduct no
business activity other than in connection with the transactions contemplated by
this Agreement in connection with the Merger.
(ii) Dividends; Changes in Stock. Neither NATK nor the Sub shall (and
shall not propose to) (a) declare or pay any dividend on, or make other
distribution in respect of, any of its capital stock or (b) split, combine or
reclassify any of its capital stock or issue, authorize or propose the issuance
of, any other securities in respect of, in lieu of or in substitution for shares
of its capital stock.
(iii) Governing Documents. Neither NATK nor the Sub shall amend its
Certificate of Incorporation (or Articles of Incorporation, with respect to the
Sub) or its Bylaws.
(iv) Other Actions. Neither NATK nor the Sub shall enter into any
agreement or arrangement to do any of the foregoing. Neither NATK nor the Sub
shall take any action, or fail to take any action, that is reasonably likely to
result in any of their representations and warranties set forth in this
Agreement becoming untrue.
Notwithstanding anything in this Section 5.4(b) to the contrary, NATK may, at
its option, borrow monies from one or more parties other than an affiliate of
NATK and/or offer or sell any of its equity or debt securities or other rights
to acquire its securities for such consideration, and upon such terms and
conditions, as NATK shall determine in its sole discretion; provided, however,
that it shall be an additional condition to the obligations of IPF and the
Shareholders to
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consummate the transactions contemplated by this Agreement that the Board of
Directors of IPF shall not have determined, in the exercise of its good faith
judgment, that any such borrowing or offer or sale of securities or such other
rights referred to in this sentence will have a Material Adverse Effect on NATK.
5.5 Consents. NATK, the Sub, IPF and each Shareholder shall cooperate and
use their best efforts to obtain, prior to the Closing Date, all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with IPF as are necessary for
the consummation of the transactions contemplated by this Agreement; provided,
however, that the parties shall not be required to seek the consent, approval or
authorization of the landlords under, or otherwise amend the written agreements
relating to, the lease agreements pursuant to which IPF leases any real or
personal property. In addition and not by way of limitation of the foregoing,
each of IPF and ▇▇▇▇▇▇▇ agrees to execute a written amendment to that certain
lease by and between ▇▇▇▇▇▇▇, as lessors, and IPF, as lessee, pursuant to which
▇▇▇▇▇▇▇ shall agree that such lease shall continue notwithstanding the Merger
and the transactions relating thereto as provided in this Agreement, and that
such Merger and other transactions shall not constitute a default under such
lease.
5.6 Filings. NATK, the Sub and IPF shall, as promptly as practicable,
make any required filings, and NATK, the Sub and IPF shall promptly make any
other required submissions, under any law, statute, order, rule or regulation
with respect to the Merger and the related transactions and shall cooperate with
each other with respect to the foregoing.
5.7 All Reasonable Efforts. Subject to the terms and conditions of this
Agreement and to the fiduciary duties and obligations of the board of directors
of NATK, the Sub and IPF, each of the parties to this Agreement shall use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, as soon as reasonably practicable, to consummating the Merger and
the other transactions contemplated by this Agreement.
5.8 Public Announcements. NATK and IPF shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Merger, this Agreement or the other transactions contemplated by
this Agreement and shall not issue any other press release or make any other
public statement relating to the same without prior consultation with the other
parties, except as may be required by law or, with respect to NATK, by
obligations pursuant to any listing agreement with an national securities
exchange.
5.9 Notification of Certain Matters. IPF and the Shareholders shall give
prompt notice to NATK, and NATK and the Sub shall give prompt notice to IPF, of
(a) the occurrence or non-occurrence of any event, the occurrence or non-
occurrence of which would cause any of its representations or warranties in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, and (b) any material failure of IPF, on the one hand, or NATK or
the Sub, on the other hand, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available to the party
receiving such notice under this Agreement.
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5.10 Expenses. Except as otherwise expressly provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated.
5.11 Officers and Directors' Insurance; Indemnification. If during the
three year-period following the Effective Time of the Merger, any person who is
or was a director of IPF or the Surviving Corporation and any person who, while
a director or officer of IPF or the Surviving Corporation, is or was serving at
the request of IPF or the Surviving Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise (a
"Director"), is, or is threatened to be, made a named defendant or respondent in
a Proceeding (as defined below) because the person is or was a Director, then
the Surviving Corporation shall indemnify such person against all judgments,
penalties (including excise and similar taxes), fines, settlements, and
reasonable expenses actually incurred by the person in connection with the
Proceeding if it is determined that the person:
(a) conducted himself in good faith;
(b) reasonably believed: (i) in the case of conduct in his official
capacity as a director of IPF or the Surviving Corporation, that his conduct was
in IPF's or the Surviving Corporation's best interests; and (ii) in all other
cases, that his conduct was at least not opposed to its best interests; and
(c) Except to the extent permitted by the next succeeding sentence, a
Director shall not be indemnified under this Section 5.11 by the Surviving
Corporation in respect of a proceeding (i) in which the person is found liable
on the basis that personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's official capacity;
or (ii) in which the person is found liable to IPF or the Surviving Corporation.
Notwithstanding the foregoing, if the person is found liable to IPF or the
Surviving Corporation or is found liable on the basis that personal benefit was
improperly received by the person, the indemnification shall be limited to
reasonable expenses actually incurred by the person in connection with the
proceeding and shall not be made in respect of any proceeding in which the
person shall have been found liable for willful or intentional misconduct in the
performance of his duty to IPF or the Surviving Corporation. As used in this
Section 5.11, (x) the term "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding and (y) the term "expenses" means includes without
limitation court costs and attorney's fees. For purposes of this Section 5.11,
IPF or the Surviving Corporation is deemed to have requested a Director to serve
an employee benefit plan whenever the performance by him of his duties to IPF or
the Surviving Corporation also imposes duties on or otherwise involves services
by him to the plan or participants or beneficiaries of the plan, and action
taken or omitted by him with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan is deemed to be for a
purpose which is not opposed to the best interests of IPF or the Surviving
Corporation.
11
Reasonable expenses incurred by a Director who was, is, or is threatened to
be made a named defendant or respondent in a proceeding shall be paid or
reimbursed (at the option of the Director) by the Surviving Corporation, in
advance of the final disposition of the proceeding and without the determination
required under this Section 5.11, after the Surviving Corporation receives a
written affirmation by the Director of his good faith belief that he has met the
standard of conduct necessary for indemnification under this Section 5.11 and a
written undertaking by or on behalf of the Director to repay the amount paid or
reimbursed if it is ultimately determined that the Director has not met the
standard or it is ultimately determined that indemnification of the director
against expenses incurred by him in connection with that Proceeding is
prohibited as provided above.
NATK hereby assumes and guarantees the timely performance of the Surviving
Corporation's obligations under this Section 5.11.
5.12. Registration Rights. (a) Conditional Right to Piggyback.
Subject to the provisions and conditions of this Section 5.12, if NATK proposes
to register shares of NATK Common Stock under the Securities Act and the
registration form to be used may be used for the registration of the shares of
NATK Common Stock to be received by the Shareholders in connection with the
Merger as provided in Section 1.2(a) of this Agreement (the "Merger Shares")
(such registration event being referred to herein as a "Piggyback
Registration"), NATK shall give prompt written notice to each of the
Shareholders and will include in such Piggyback Registration, subject to the
allocation provisions below, all Merger Shares with respect to which NATK has
received written requests (from the Shareholders owning of record such Merger
Shares) for inclusion within 20 days after NATK's mailing of such notice. The
rights granted to the Shareholders under this Section 5.12(a) shall be
exerciseable by any of them only during the period beginning six (6) months
following the Effective Time (and shall apply to any then-pending registration
statement, which registration statement NATK agrees to amend so as to permit the
Shareholders to exercise their rights as provided in this Section 5.12 if the
other conditions of this Section 5.12 are then met) and ending three (3) years
after the Effective Time.
(b) Expenses. NATK will pay the Registration Expenses (as defined below),
but the Underwriting Commissions (as defined below) will be shared by NATK and
the holders of the Merger Shares that are included in the Piggyback Registration
in proportion to any securities included on their behalf.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of NATK, and the managing
underwriters advise NATK that in their opinion the number of shares of NATK
Common Stock requested to be included in such registration exceeds the number
that can be sold in such offering, at a price reasonably related to fair value,
NATK will allocate the shares of Common Stock to be included as follows: first,
the securities NATK proposes to sell on its own behalf; and second, other shares
of NATK Common Stock (including without limitation the Merger Shares owned of
record by the Shareholders) requested by any shareholders or other parties (with
rights against NATK relating to such registration) to be included in such
registration, pro rata on the basis of the number of shares of NATK Common Stock
owned of record by the parties (other than NATK) desiring to have their shares
so included (or, at the sole option and in the discretion of NATK, any other
reasonable
12
method it deems equitable, so long as such equitable method is determined by
NATK in good faith, primarily taking into account any contractual or other legal
obligations of NATK with respect thereto).
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of NATK
Common Stock, and the managing underwriters advise NATK in writing that in their
opinion the number of shares of NATK Common Stock requested to be included in
such registration exceeds the number that can be sold in such offering, at a
price reasonably related to fair value, NATK will allocate the securities to be
included as follows: first, the shares of NATK Common Stock requested to be
included by the holders initiating such registration; and second, other shares
of NATK Common Stock (including without limitation the Merger Shares owned of
record by the Shareholders) requested by any shareholders or other parties (with
rights against NATK relating to such registration) to be included in such
registration, pro rata on the basis of the number of shares of NATK Common Stock
owned of record by the parties (other than NATK) desiring to have their shares
so included (or, at the sole option and in the discretion of NATK, any other
reasonable method it deems equitable, so long as such equitable method is
determined by NATK in good faith, primarily taking into account any contractual
or other legal obligations of NATK with respect thereto).
(e) Selection of Underwriters. In any Piggyback Registration, the
selection of investment banks(s), underwriters and manager(s), and the other
decisions regarding the underwriting arrangements and related matters for the
offering, shall be made exclusively by NATK.
(f) Registration Procedures. Whenever a Shareholder exercises its rights
under this Section 5.12 (each an "Exercising Shareholder"), NATK will, as
expeditiously as possible:
(i) furnish to each Exercising Shareholder such number of copies of the
applicable registration statement, each amendment and supplement thereto and the
prospectus included in such registration statement (including each preliminary
prospectus), and such other documents as such Exercising Shareholder may
reasonably request in order to facilitate the disposition of the Merger Shares
owned of record by such Exercising Shareholder to be included in such
registration statement;
(ii) use its best efforts to register or qualify such Merger Shares under
such other securities or blue sky laws of such jurisdictions as the managing
underwriter(s) may request; and
(iii) cause such Merger Shares to be listed or included on securities
exchanges on which shares of NATK Common Stock are then listed or included.
(g) Indemnification.
(i) NATK will indemnify, to the extent permitted by law, each Exercising
Shareholder against all losses, claims, damages, liabilities and expenses
arising out of or resulting from any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
13
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to NATK by such Exercising Shareholder
expressly for use therein or by any such Exercising Shareholder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after NATK has furnished such Exercising Shareholder with a
sufficient number of copies of the same.
(ii) In connection with any registration statement in which an Exercising
Shareholder is participating, each such Exercising Shareholder will furnish to
NATK in writing such information as is reasonably requested by NATK for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, NATK, its directors and officers and each person who controls
NATK (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in, or omitted from, information so furnished in writing
by such holder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of an Exercising Shareholder under
this subsection (g)(ii) shall be limited to an amount equal to the net proceeds
actually received by such Exercising Shareholder from the sale of such
Exercising Shareholder's Merger Shares covered by the registration statement.
(iii) Any party entitled to indemnification under this subsection (g)
will: (x) give prompt notice to the indemnifying party of any claim with
respect to which such indemnified party seeks indemnification and (y) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
An indemnifying party who is not entitled, or elects not, to assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case such
indemnifying party shall pay the fees and expenses of a sufficient number of
counsel so that such conflicts are resolved.
(h) Compliance with Underwriting Arrangements. No Shareholder may
participate in any Piggyback Registration unless such Shareholder: (i) agrees
to sell his Merger Shares on the basis provided in any underwriting arrangements
approved by NATK and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(i) Limitations on NATK's Obligations. In connection with its obligations
to register any of the Merger Shares as provided in this Section 5.12, NATK
shall have no obligation (i) to assist or cooperate in the offering or
disposition of such Merger Shares, (ii) except as expressly provided in this
Section 5.14, to indemnify any Shareholder, (iii) to obtain a commitment from an
14
underwriter relative to the sale of such Merger Shares, or (iv) to include such
Merger Shares within an underwritten offering of NATK conducted on a firm basis.
(j) Definitions. As used in this Section 5.12, (x) "Registration
Expenses" means all expenses incident to NATK's performance of or compliance
with the provisions of this Section 5.12 and the registration of any other
securities in connection therewith, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges, and fees and
disbursements of counsel for NATK and all independent certified public
accountants, underwriters (other than Underwriting Commissions) and other
persons retained by NATK in connection therewith, and (y) "Underwriting
Commissions" means all underwriting discounts or commissions relating to the
sale of securities of NATK, but excludes any expenses reimbursed to
underwriters.
(k) Limited Transferability or Assignability of Registration Rights.
Notwithstanding anything in this Section 5.12 or elsewhere in this Agreement to
the contrary, none of the rights granted to a Shareholder under this Section
5.12 shall be assignable or transferable by such Shareholder, nor shall any such
rights inure to the benefit of such Shareholder's assigns or beneficiaries or
any other party, including without limitation any subsequent beneficial or
record holder of any of the Merger Shares or any interest therein, without the
prior written consent thereto of NATK (which consent shall not be unreasonably
withheld); provided, however, that such rights may be transferred or assigned
without the prior written consent thereto of NATK to such Shareholder's spouse
or children, to any trust the sole beneficiaries of which are any of such
Shareholder's spouse or children, and upon the death of such Shareholder, to his
estate; and provided further, that such rights may not be further transferred or
assigned to any other party or parties.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to IPF's and the Shareholders' Obligations. The
obligations of IPF and the Shareholders to consummate the Merger and the other
transactions contemplated to be consummated by it at the Closing are subject to
the satisfaction (or waiver by IPF) at or prior to the Effective Time (or at
such other time prior thereto as may be expressly provided in this Agreement) of
each of the following conditions:
(a) NATK shall have entered into binding employment agreements that have
not been terminated by NATK as of the Closing with each of ▇▇▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇▇.
(b) IPF shall have had the opportunity to conduct a due diligence review
of the books, records, operations, physical plant and facilities, contracts and
other documents of NATK and nothing shall have come to its attention that would
reasonably be expected to have a Material Adverse Effect on NATK on and after
the Closing.
(c) IPF shall be satisfied that the receipt of the shares of NATK Common
Stock by the holders of IPF Common Stock in connection with the Merger is a tax-
free sale or exchange to such holders.
15
(d) The representations and warranties of NATK and the Sub set out in this
Agreement shall be true and correct in all material respects, and no fact or
circumstance shall have come to the attention of IPF that is not disclosed in
this Agreement or any document or other writing delivered by NATK to IPF prior
to the date of this Agreement that could reasonably be expected to have a
Material Adverse Effect on NATK or the consideration to be received by the
Shareholders in connection with the Merger.
(e) Each of NATK and the Sub shall have complied in a timely manner and in
all material respects with their respective covenants and agreements set out in
this Agreement.
(f) All directors', shareholders', lenders', lessors' and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured, including without limitation that this
Agreement shall have been approved by the affirmative vote of the shareholders
of IPF by the requisite vote in accordance with the TBCA.
(g) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Merger or the related transactions.
(h) The Closing shall have occurred not later than June 28, 1995, unless
such date is extended by the mutual written agreement of NATK, the Sub and IPF.
(i) Before the Closing, NATK shall have raised not less than $1 million in
cash in connection with one or more offerings of its equity or debt securities
or other rights to acquire its equity or debt securities.
6.2 Conditions to NATK's and the Sub's Obligations. The obligations of
NATK and the Sub to consummate the Merger and the other transactions
contemplated to be consummated by it at the Closing are subject to the
satisfaction (or waiver by NATK) at or prior to the Effective Time (or at such
other time prior thereto as may be expressly provided in this Agreement) of each
of the following conditions:
(a) Each of ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇ shall have entered into binding
employment agreements with NATK that have not been terminated as of the Closing
by any such person.
(b) NATK shall have had the opportunity to conduct a due diligence review
of the books, records, operations, physical plant and facilities, contracts and
other documents of IPF and nothing shall have come to its attention that would
reasonably be expected to have a Material Adverse Effect on IPF on and after the
Closing.
(c) None of the Shareholders shall have filed with IPF, prior to the time
a vote of the shareholders of IPF is taken with respect to a proposal to approve
this Agreement, a written
16
objection to such proposed action, as required by Article 5.12A(1)(a) of the
TBCA in order for such shareholder to perfect the right to dissent from such
proposed action.
(d) In addition to the other financial statements provided to NATK, not
less than four (4) days preceding the Closing Date, IPF shall have provided to
NATK a copy of the following financial statements/information relating to IPF:
An unaudited balance sheet as of a date not more than 30 days preceding the
Closing Date
An unaudited income statement for the period beginning on January 1, 1995
and ending on the date of such balance sheet
(e) NATK shall be satisfied that the acquisition of IPF pursuant to the
Merger is a tax-free transaction to NATK under the Code (as defined in this
Agreement).
(f) The representations and warranties of IPF and the Shareholders set out
in this Agreement shall be true and correct in all material respects, and no
fact or circumstance that is not disclosed in this Agreement or any document or
other writing delivered by IPF or any Shareholder to NATK prior to the date of
this Agreement shall have come to the attention of NATK that could reasonably be
expected to have a Material Adverse Effect on IPF.
(g) IPF and each Shareholder shall have complied in a timely manner and in
all material respects with their covenants and agreements set out in this
Agreement.
(h) All directors', shareholders', lenders', lessors' and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured, including without limitation that this
Agreement shall have been approved by the affirmative vote of the shareholders
of IPF by the requisite vote in accordance with the TBCA.
(i) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Merger or the related transactions.
(j) The Closing shall have occurred not later than June 28, 1995, unless
such date is extended by the mutual written agreement of NATK, the Sub and IPF.
(k) NATK shall be satisfied that the offer and issuance of the shares of
NATK Common Stock to the holders of shares of IPF Common Stock in connection
with the Merger is exempt from the registration provisions of the Securities Act
and similar provisions under applicable state securities laws.
(l) Before the Closing, NATK shall have raised not less than $1 million in
cash in connection with one or more offerings of its equity or debt securities
or other rights to acquire its equity or debt securities.
17
(m) NATK shall have received a written valuation report of an independent
appraiser selected by it to determine the fair market value of IPF, and such
written valuation report shall include a determination that the fair market
value of IPF is not less than the amount of the consideration to be paid by NATK
for the acquisition of IPF pursuant to this Agreement.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
vote of the shareholders of IPF contemplated by Section 3.1:
(a) by mutual written consent of the board of directors of NATK, the Sub
and IPF;
(b) by any of NATK, the Sub or IPF:
(i) if the Effective Time shall not have occurred on or before June 28,
1995, unless such date is extended by the mutual written agreement of the
parties NATK and IPF, and in such event, only until the date the Effective Time
has been so extended; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before that date;
or
(ii) if any court of competent jurisdiction, or any governmental body,
regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; or
(iii) if the board of directors of IPF or the Sub, in the exercise of its
fiduciary duties and after consultation with counsel, shall have withdrawn its
recommendation to such corporation's shareholders that they approve of this
Agreement.
7.2 Notice and Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
pursuant to which such termination is made, and this Agreement shall forthwith
become void and have no effect without any liability on the part of any party or
its directors, officers or shareholders, except for the provisions of this
Section 7.2 and Sections 5.3, 5.8 and 5.10, which shall survive any termination
of this Agreement. Nothing contained in this Section 7.2 shall relieve any
party from any liability for any breach of this Agreement.
7.3 Extension; Waiver. Any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of any other party under or relating to this Agreement; (b) waive any
inaccuracies in the representations or warranties by any other party; or (c)
waive compliance with any of the agreements of any other party or with any
18
conditions to its own obligations. Any agreement on the part of any other party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
7.4 Amendment and Modification. This Agreement may not be amended except
by an instrument in writing signed by all of the parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The respective
representations and warranties of the parties hereto shall not be deemed waived
or otherwise affected by any investigation made by any other party hereto. Each
representation and warranty shall continue for a period of three (3) years after
the Effective Time of the Merger. The provisions of this Section shall have no
effect upon any other obligation of the parties, whether to be performed before
or after the Effective Time.
8.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows (or at such other address or facsimile number
for a party as shall be specified by like notice):
(a) if to IPF or any Shareholder, at: with a copy to:
Industrial Pipe Fittings, Inc. ▇▇▇▇▇▇ & ▇▇▇▇▇▇
5717 ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to NATK or the Sub, at: with a copy to:
North American Technologies ▇▇▇▇▇▇▇▇ ▇. ▇▇▇
Group, Inc. 3104 Edloe, Suite 204
9818 Wilcrest Houston, Texas 77027
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Entire Agreement; Assignment. This Agreement, including all Exhibits
and Schedules hereto, (a) constitutes the entire agreement among the parties
with respect to its subject matter and supersedes all prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to such subject matter and (b) shall not be assigned by operation of law
or otherwise, provided that, subject to any approvals required by applicable
law, NATK or the Sub may assign its respective rights and obligation to any
majority-owning or
19
owned, direct or indirect, parent, subsidiary or subsidiaries of NATK, but no
such assignment shall relieve NATK or the Sub of its obligations under this
Agreement.
8.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and assigns.
Nothing in this Agreement is intended to confer on any person other than the
parties to this Agreement or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
8.5 Headings. The descriptive headings of the articles, sections,
subsections, exhibits and schedules of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
8.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
8.8 Arbitration. (a) If a dispute, controversy or claim arises between
any of the parties to this Agreement including without limitation any dispute,
controversy or claim that arises out of or relates to this Agreement, or the
breach, termination or invalidity of the Agreement, AND including but not
limited to a claim based on or arising out of a claim for tortious interference
or other tortious or statutory claims arising before, during or after
termination, and if said dispute cannot be settled through direct discussions,
the parties agree to first endeavor to settle the dispute in an amicable manner
by mediation administered by the American Arbitration Association under its
Commercial Mediation Rules, before resorting to arbitration; provided, that
nothing contained herein shall preclude any party from commencing arbitration if
said mediation is not completed within 30 days of such party requesting or
agreeing to mediation. Thereafter, any unresolved dispute, controversy or claim
arising between the parties, including without limitation any dispute,
controversy or claim that arises out of or relates to this Agreement, or breach
thereof, AND including but not limited to a claim for tortious interference or
other tortious or statutory claims arising before, during or after termination,
shall be settled by arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules (the "Rules"),
and judgment upon any award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Any mediation or arbitration hereunder shall
be pursuant to the applicable rules of the American Arbitration Association as
set out above except to the extent expressly provided otherwise in this
Agreement.
(b) The parties hereto expressly agree that any court with jurisdiction
may order the consolidation of any arbitrable dispute, controversy or claim
under this Agreement with any related arbitrable dispute, controversy or claim
not arising under this Agreement, as the court may deem necessary in the
interests of justice or efficiency or on such other grounds as the court may
deem appropriate.
20
(c) The site of the mediation and, if necessary, the arbitration shall be
in Houston, Texas, and shall take place in the offices of the American
Arbitration Association or such other place as the parties may agree.
(d) The parties agree that the federal and state courts located in ▇▇▇▇▇▇
County, Texas shall have exclusive jurisdiction over an action brought to
enforce the rights and obligations created in or arising from this agreement to
arbitrate, and each of the parties hereto irrevocably submits to the
jurisdiction of said courts. Notwithstanding the above, application may be made
by a party to any court of competent jurisdiction wherever situated for
enforcement of any judgment and the entry of whatever orders are necessary for
such enforcement.
(e) Process in any action arising out of or relating to this Agreement may
be served on any party to this Agreement anywhere in the world by delivery in
person against receipt or by registered or certified mail, return receipt
requested.
(f) Neither party nor the arbitrators may disclose the existence, content,
or results of any arbitration hereunder without the prior written consent of
both parties.
(g) The parties agree that all questions concerning the arbitrator's
jurisdiction shall be decided by the arbitrator.
(h) All fees and expenses of the arbitration (exclusive of filing fees for
claims and counterclaims) shall be borne by the parties equally. Each party
shall bear the expense of its own counsel, experts, witnesses and presentation
of proofs.
(i) This agreement to arbitrate is intended to be binding upon the
signatories hereto, their principals, successors, assigns, subsidiaries or
affiliates.
(j) The arbitrator shall determine the rights and obligations of the
parties according to the substantive laws of the State of Texas (excluding
conflicts of laws principles).
(k) The arbitrator is directed to consider any defense that all or part of
the claim is not timely by reason of laches or statute of limitations as a
preliminary issue and to render an award determining the merits of such claim
before considering the substantive merits of the arbitration claim, unless the
arbitrator determines that the merits of such claim of laches or statute of
limitations is so intertwined with the substantive merits of the arbitration
claim as to make impractical the determination of the claim of laches or
limitations as a preliminary matter.
(l) The arbitrator shall hear and determine any preliminary issue of law
asserted by a party to be dispositive of any claim, in whole or part, in the
manner of a court hearing a motion to dismiss for failure to state a claim or
for summary judgment, pursuant to such terms and procedures as the arbitrator
deems appropriate.
(m) It is the intent of the parties that, barring extraordinary
circumstances, any arbitration shall be concluded within three months of the
date the statement of claim is received by the arbitrator. Unless the parties
otherwise agree, once commenced, hearings shall be held five days a
21
week, four weeks a month, with each hearing day to being at 9:00 A.M. and to
conclude at 5:00 P.M. These time limits can be extended or altered by an
agreement by the parties or by a determination by the arbitrator that such
extension or alteration is in the interests of justice. The arbitrator shall use
his or her best efforts to issue the final award or awards within a period of
thirty days after closure of the proceedings. Failure to do so shall not be a
basis for challenging the award.
(n) The procedures to be followed in any arbitration hereunder shall be as
prescribed herein and in such directives that shall be issued by the arbitrator
following consultation with the parties. Unless otherwise agreed by the
parties, the procedures shall provide for the submission of briefs by the
parties the introduction of documents and the oral testimony of witnesses,
cross-examination of witnesses, oral arguments, the closure of the proceedings
and such other matters as the arbitrator may deem appropriate. Further, the
arbitrator shall regulate all matters relating to the conduct of the arbitration
not otherwise provided for in this Agreement or in the Rules.
(o) In the event a party, having been given notice and opportunity, shall
fail or shall refuse to appear or participate in an arbitration hereunder or in
any stage thereof, the proceedings shall nevertheless be conducted to conclusion
and final award. Any award rendered under such circumstances shall be as valid
and enforceable as if both parties had appeared and participated fully at all
stages.
(p) The parties agree that discovery shall be limited and shall be handled
expeditiously. Discovery procedures available in litigation before the courts
shall not apply in an arbitration conducted pursuant to this Agreement.
However, each party shall produce relevant and non-privileged documents or
copies thereof requested by the other parties within the time limits set and to
the extent required by order of the arbitrator. All disputes regarding
discovery shall be promptly resolved by the arbitrator.
(q) It is the intent of the parties that the testimony of witnesses be
subject to cross-examination. It is agreed that the direct testimony of a
witness may be submitted by sworn affidavit, provided that such affiant be
subject to cross-examination.
(r) Strict rules of evidence shall not apply in an arbitration conducted
pursuant to this Agreement. The parties may offer such evidence as they desire
and the arbitrator shall accept such evidence as the arbitrator deems relevant
to the issues and accord it such weight as the arbitrator deems appropriate.
(s) No witness or party may be required to waive any privilege recognized
by law.
8.9 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
22
8.10 Certain Definitions. As used herein:
(a) "affiliate" shall have the meanings ascribed to such term in Rule 12b-
2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended to date (the "Exchange Act");
(b) "business day" shall mean any day other than a Saturday, Sunday or a
day on which federally chartered financial institutions are not open for
business in the City of Houston, Texas;
(c) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(d) "Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a governmental or political
subdivision or any agency or institution thereof; and
(e) "subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which is owned
directly or indirectly, or a majority of the board of directors of which may be
elected, by such entity.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed by or on behalf of such party, all as of the date first written
above.
NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President and CEO
NATK SUB, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
23
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
INDUSTRIAL PIPE FITTINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: Vice President
Exhibit A Articles of Merger
Exhibit B Representations and Warranties of IPF and the Shareholders
Exhibit C Representations and Warranties of NATK and the Sub
Exhibit D Shareholder Representation Letter
24
EXHIBIT A
ARTICLES OF MERGER
Pursuant to the provisions of article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following articles of
merger for the purpose of effecting a merger in accordance with the provisions
of article 5.01 of the Texas Business Corporation Act.
1. A Plan of Merger, adopted in accordance with the provisions of article 5.04
of the Texas Business Corporation Act providing for the merger of INDUSTRIAL
PIPE FITTINGS, INC., a Texas corporation, with and into NATK SUB, INC., a
Texas corporation, resulting in NATK SUB, INC. being the surviving
corporation in the merger, is attached hereto as Exhibit A and is hereby
incorporated herein by reference.
2. The merger will become effective on June 30, 1995, at 5:01 p.m. in
accordance with the provisions of article 10.03 of the Texas Business
Corporation Act.
3. As to each corporation, the approval of whose shareholders is required, the
number of outstanding shares of each class or series of stock of such
corporation entitled to vote, with other shares or as a class, on the Plan
of Merger, are as follows:
Number of Number of Shares
Name of Shares Designation of Entitled to Vote as
Corporation Outstanding Class or Series a Class or Series
INDUSTRIAL PIPE
FITTINGS, INC. 1,300 Common Stock, (All shares of
par value $0.01 Common Stock
per share vote as one class)
NATK SUB,
INC. 1,000 Common Stock, (All shares of
par value $0.01 Common Stock
per share vote as one class)
4. As to each corporation, the approval of whose shareholders is required, the
number of shares, not entitled to vote only as a class, voted for and
against the Plan of Merger, respectively, and, if the shares of any class or
series are entitled to vote as a class, the number of shares of each such
class or series voted for and against the Plan of Merger, are as follows:
Name of Designation of Number of Shares
Corporation Class or Series Voted For Voted Against
INDUSTRIAL PIPE
FITTINGS, INC. Common Stock,
par value $0.01
per share 1,300 0
NATK SUB, INC. Common Stock,
par value $0.01
per share 1,000 0
Dated: June 28, 1995.
INDUSTRIAL PIPE FITTINGS, INC. NATK SUB, INC.
By: By:
--------------------------- -------------------------
Its: President Its: President
2
EXHIBIT A
TO ARTICLES OF MERGER
PLAN OF MERGER
1. Parties to the Merger. The name of each domestic corporation that is a
party to the merger is INDUSTRIAL PIPE FITTINGS, INC. and NATK SUB, INC. The
name of the domestic corporation that will survive the merger is NATK SUB, INC.
There are no other parties to the merger; there are no other parties that will
survive the merger; and there are no other entities that will be created by the
merger.
2. Terms and Conditions of the Merger.
(a) All rights, title and interests to all real estate and other property
owned by each of INDUSTRIAL PIPE FITTINGS, INC. and NATK SUB, INC. shall be
allocated to and vested in NATK SUB, INC. in connection with the merger.
(b) The name of corporation surviving the merger that is to be obligated
for the payment of the fair value of any shares held by a shareholder of either
INDUSTRIAL PIPE FITTINGS, INC. or NATK SUB, INC. who has complied with the
requirements of Article 5.12 of the Texas Business Corporation Act for the
recovery of the fair value of his or her shares is NATK SUB, INC.
(c) All other liabilities and obligations of each of INDUSTRIAL PIPE
FITTINGS, INC. and NATK SUB, INC. shall be allocated to NATK SUB, INC., as the
corporation surviving the merger.
3. Conversion of Shares. The manner and basis of converting the shares of
capital stock of each of INDUSTRIAL PIPE FITTINGS, INC. and NATK SUB, INC. in
the merger shall be as follows:
(a) Shares of Capital Stock of INDUSTRIAL PIPE FITTINGS, INC.
(i) Each share of common stock, par value $0.01 per share, of INDUSTRIAL
PIPE FITTINGS, INC. that is issued and outstanding as of the time of the merger
shall be convertible into one thousand (1,000) fully paid and non-assessable
shares of common stock, par value $.001 per share, of North American
Technologies Group, Inc., a Delaware corporation.
(ii) Each share of capital stock of INDUSTRIAL PIPE FITTINGS, INC. held in
treasury as of the time of the merger shall be canceled without payment of any
consideration therefor.
(b) Shares of Capital Stock of NATK SUB, INC.: Each share of common
stock, par value $0.01 per share, of NATK SUB, INC. that is issued and
outstanding as of the
3
time of the merger shall continue to represent one share of common stock, par
value $0.01 per share, of NATK SUB, INC., as the corporation surviving the
merger, which shall thereafter constitute all of the issued and outstanding
shares of capital stock of NATK SUB, INC., as the corporation surviving the
merger.
4. Articles of Incorporation of the Surviving Corporation. The Articles
of Incorporation of NATK SUB, INC., as in effect immediately preceding the
merger, other than the name of NATK SUB, INC., which shall be changed to
"INDUSTRIAL PIPE FITTINGS, INC." in connection with the merger, shall be the
Articles of Incorporation of the corporation surviving the merger, until
thereafter amended as provided by law and such Articles of Incorporation.
4
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
OF IPF AND THE SHAREHOLDERS
For purposes hereof, capitalized terms used herein and not otherwise
defined herein have the meanings ascribed to such terms in the Agreement.
1. Corporate Existence and Power. IPF is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas, and
has all corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted, except where
the failure to have any of the foregoing would not have a Material Adverse
Effect or would not constitute a felony. IPF is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. IPF has heretofore delivered to NATK true and complete
copies of IPF's Articles of Incorporation and Bylaws as currently in effect.
IPF has no subsidiaries.
2. Corporate Authorization. The execution, delivery and performance by
IPF of this Agreement and the consummation by IPF of the transactions
contemplated hereby are within IPF's corporate powers and, except for any
required approval by IPF's shareholders in connection with the consummation of
the Merger, have been duly authorized by all necessary corporate action. The
execution, delivery and performance by each Shareholder of this Agreement and
the consummation by such Shareholder of the transactions contemplated hereby
have been duly authorized by such Shareholder. This Agreement has been duly
executed by IPF and each of the Shareholders. The Agreement constitutes a valid
and binding agreement of the IPF and each Shareholder, enforceable in accordance
with its terms. As of the Closing all corporate action on the part of IPF and
the Shareholders required under applicable law in order to consummate the Merger
will have occurred. None of the information provided to NATK by IPF or any
Shareholder to be included in a prospectus, if any, with respect to the shares
of NATK Common Stock to be received in connection with the Merger, insofar as
such information relates to IPF or a Shareholder, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which there are made, not misleading.
3. No Contravention. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of an right or obligation or to loss or a benefit
under, any provision of the Articles of Incorporation or Bylaws of IPF or any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to IPF or any
Shareholder or any of their properties or assets, or result in the creation or
imposition of any Encumbrance on any asset of IPF or any Shareholder, except
such as is not reasonably likely to have a Material Adverse Effect or materially
and adversely affect the ability of
B-1
IPF or such Shareholder to consummate the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to IPF or any Shareholder in connection with the
execution and delivery of this Agreement by IPF or such Shareholder or the
consummation by IPF or any Shareholder of the transactions contemplated hereby,
except (i) where the failure to obtain such consent, approval, order or
authorization, or to effect such registration, declaration or filing is not
reasonably likely to have a Material Adverse Effect or materially and adversely
affect the ability of IPF, any Shareholder, NATK or the Sub to consummate the
transactions contemplated by the Agreement, and (ii) the filing of the Articles
of Merger with the Secretary of State of Texas.
4. Capitalization; ▇▇▇▇▇▇▇ Loans. The authorized capital stock of the IPF
consists solely of 1,000,000 shares of common stock, par value $0.01 per share
("IPF Common Stock"), of which 1,300 shares are issued and outstanding (such
issued and outstanding shares being referred to as the "IPF Shares"). There are
no treasury shares of capital stock of IPF, nor are there any outstanding
subscriptions, options, warrants, convertible securities, calls, commitments,
agreements or rights (contingent or otherwise) of any character to purchase or
otherwise acquired from IPF or any Shareholder any shares of, or any securities
convertible into, the capital stock of IPF. All of the IPF Shares have been
duly authorized and validly issued, are fully paid and non-assessable, were not
issued in violation of the terms of any agreement or other understanding binding
upon IPF and were issued in compliance with all applicable charter documents of
IPF and all applicable federal, state and foreign securities laws, rules and
regulations. There are, and have been, no preemptive rights with respect to the
issuance of the IPF Shares or any other capital shares of IPF. IPF does not
directly or indirectly own any stock of, or any equity or other investment
interest in, any corporation, association, partnership, joint venture or legal
entity, except bank, checking and money market accounts and other cash
equivalent investments. There are no outstanding accrued or unpaid dividends on
any of the IPF Shares. The ▇▇▇▇▇▇▇ Loan or Loans (as defined in Section 2.2(d)
of the Agreement) are in the aggregate principal amount of $______, as of
______________, and bear interest at an annual rate equal to 8%. As of March
31, 1995, the amount of outstanding principal on the ▇▇▇▇▇▇▇ Loans, together
with all accrued interest thereon, was equal to $115,583.16. There are no
other costs, fees, expenses or other amounts due or to become due with respect
to the ▇▇▇▇▇▇▇ Loan or Loans other than as provided in the preceding sentence.
5. Financial Statements.
(a) True, correct and complete copies of the following unaudited financial
statements ("Unaudited Financial Statements") of IPF have been delivered to NATK
on or before the date hereof: Balance Sheets dated December 31, 1994 and March
31, 1995, Statements of Earnings and Retained Earnings for the year ended
December 31, 1994, the two (2) months ended February 28, 1995 and the three (3)
months ended March 31, 1995, and Statement of Cash Flows for the year ended
December 31, 1994, the two (2) months ended February 28, 1995 and three (3)
months ended March 31, 1995. The financial statements referred to in the
preceding sentence as of and for the year ended December 31, 1994, were reviewed
and accompanied by a written report and accompanying Notes to Financial
Statements prepared by ▇▇▇▇▇▇▇ & Company, P.C., a copy of which written report
and Notes to Financial Statements was delivered to NATK on or
B-2
before the date hereof. In addition, true, correct and complete copies of a
Balance Sheet dated February 28, 1995 (the "February 1995 Audited Financial
Statement") of IPF, which was audited by ▇▇▇▇▇▇▇ & Company, P.C., Houston,
Texas, together with the written report (without qualification) as of the date
of such balance sheet of, and accompanying Notes to Financial Statement prepared
by, ▇▇▇▇▇▇▇ & Company, P.C., have been delivered to NATK on or before the date
hereof.
(b) The Unaudited Financial Statements and the February 1995 Audited
Statement (including without limitation all notes, comments, schedules and
supplemental data that may be contained in or annexed to such statements) are
true, accurate, complete and in accordance with the books and records of IPF and
fairly present the financial position, assets and liabilities of IPF as of the
date thereof and the results of IPF's operations and changes in IPF's financial
position or cash flows, as the case may be, for the period then ended.
6. Conflicts of Interest. Except for the lease of real property between
IPF and ▇▇▇▇▇▇▇ referred to in Section 11 of this Exhibit B, neither (a) any
past or present officer, director, employee or shareholder of IPF, nor (b) to
the knowledge of IPF or any Shareholder, any relative of any past or present
officer, director, employee, shareholder or salesperson of IPF, nor (c) to the
knowledge of IPF or any Shareholder, any corporation, partnership, trust or
other entity of which any such past or present officer, director, employee or
shareholder has a direct or indirect interest or is a director, officer,
shareholder, partner or trustee, is or has ever been a party, directly or
indirectly, to any transaction with IPF, including without limitation any
agreement or other arrangement providing for the furnishing of goods or services
by or to IPF or the sale or rental of any property from or to IPF or otherwise
requiring or contemplating any payments by or to IPF.
7. Accounts Receivable. The accounts receivable included in the Unaudited
Financial Statements (less an allowance for doubtful accounts of $14,000) will
be collected in full within 180 days of the Closing. All accounts receivable
included in the Unaudited Financial Statements are usual and normal receivables
representing ▇▇▇▇▇▇▇▇ actually made in the ordinary course of business, and
neither IPF nor any Shareholder has any knowledge of any fact, circumstance,
contingency or reason that such accounts receivable would not reasonably be
expected to be collected in the ordinary course of business.
8. Inventory and Equipment. All inventory and equipment of IPF reflected
on the Unaudited Financial Statements, and all inventory and equipment owned by
IPF as of the date hereof, (a) was acquired in accordance with the regular
business practices of IPF, (b) consists of items of a quality and quantity
useable in the ordinary course of IPF's business consistent with past practice,
subject to normal wear and tear and routine maintenance, (c) was and is valued
in conformity with generally accepted accounting principles applied on a
consistent basis and (d) conforms to all applicable laws, ordinances, codes,
rules and regulations relating thereto and to the construction, use, operation
and maintenance thereof (except for such failures to conform as do not have a
Material Adverse Effect on the IPF). No significant amount of such inventory or
equipment is obsolete or has been maintain in any manner other than in the
accordance with the regular business practices of IPF.
B-3
9. Absence of Undisclosed Liabilities.
(a) Except as disclosed on Schedule B-9 hereto, IPF is not liable for or
subject to any liability except for:
(i) those liabilities and obligations reflected on the balance sheet
included in the Unaudited Financial Statements (the "Unaudited Balance Sheet")
and not heretofore paid or discharged;
(ii) those liabilities and obligations arising in the ordinary course of
its business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Exhibit B or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities and obligations incurred, consistent with its past
practice, in the ordinary course of its business and either not required to be
shown on the Unaudited Balance Sheet or arising since the date of such Unaudited
Balance Sheet, which liabilities and obligations in the aggregate are of a
character and magnitude consistent with its past practice.
For purposes of this Section, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent or otherwise and whether
known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or
unliquidated, secured or unsecured.
(b) IPF does not provide or maintain, and is not required under applicable
law to provide or maintain, for its employees, itself or any other person any
pension, retirement, profit-sharing or other plan or policy for the benefit of
employees, itself, or any other person who is required to comply with, and IPF
is not in violation of any provision of, the federal Employees Retirement Income
Security Act of 1974, as amended ("ERISA"). Furthermore, IPF has no liability
for any dividends or distributions to any shareholder, including without
limitation any of the Shareholders, in respect of its capital shares, nor has it
redeemed, purchased or otherwise acquired any of its capital shares or agreed to
do any of the same.
10. Absence of Certain Changes. Since the date of the IPF Unaudited
Balance Sheet, and except as set forth on Schedule B-9 hereto, IPF has conducted
its business in the ordinary course consistent with past practice and there has
not been:
(a) any event, occurrence or development of a state of circumstances or
facts, including without limitation, any change in its business, operations,
assets, properties or prospects, that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of IPF or any
repurchase, redemption or other acquisition by IPF of any outstanding shares of
capital stock or other securities of, or other ownership interests in, IPF;
B-4
(c) any amendment of any term of any outstanding security of IPF;
(d) any incurrence, assumption or guarantee by IPF of any indebtedness for
borrowed money or any such indebtedness incurred, assumed or guaranteed since
the date of the Unaudited Balance Sheet, in the ordinary course of business
consistent with past practice (other than amounts borrowed from NATK);
(e) any creation or assumption by IPF of any Encumbrance on any material
asset other than in the ordinary course of business consistent with past
practice;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than loans or advances made in the ordinary
course of business consistent with past practice;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of IPF which, individually or in
the aggregate, has had or is reasonably likely to have a Material Adverse
Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by IPF relating to its assets or business (including acquisition
or disposition of any assets) or any relinquishment by IPF of any contract or
other right, in either case, material to IPF, other than transactions and
commitments in the ordinary course of business consistent with past practice and
those contemplated by the Agreement;
(i) any change in any method of accounting or accounting practice by IPF,
except for any such change required by reason of a concurrent change in
generally accepted accounting principles;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of IPF, (ii) entering into any employment (other than at
will), deferred compensation (other than severance) or other similar agreement
(or any amendment to any such exiting agreement) with any director, officer or
employee of IPF, (iii) material increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv) increase
in compensation, bonus or other benefits payable to directors, officers or
employees of IPF, other than in the ordinary course of business consistent with
past practice;
(k) any (i) labor dispute, lockout, strike, slowdown, work stoppage or
threat thereof by or with respect to any employees of IPF or (ii) activity or
proceeding by a labor union or representative thereof to organize any such
employees, to the knowledge of IPF or any Shareholder; or
(l) any sale, assignment or transfer of any of its assets or properties
except in the ordinary course of its business consistent with past practice.
11. Properties. (a) IPF currently leases real property pursuant to that
certain lease between IPF, as lessee, and ▇▇▇▇▇▇▇, as lessor, a copy of which
has been delivered to NATK on or before the date hereof. IPF does not directly
or indirectly own or lease any other real estate.
B-5
None of the leasehold interests held by IPF is subject to any Encumbrance,
except (i) liens for ad valorem taxes not yet due or being contested in good
faith; or (ii) contractual or statutory mechanics or materialmen's liens or
other statutory or common law Encumbrances relating to obligations of IPF that
are not delinquent or are being contested in good faith.
(b) IPF has not received any written notice from any governmental entity
having jurisdiction over IPF or over any of the real property leased by IPF of
any violation by IPF of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by IPF, and neither IPF nor any of the
Shareholders is aware of any such violation.
(c) Except such as has not had and is not reasonably likely to have a
Material Adverse Effect, all of the buildings leased by IPF, all furniture,
fixtures, leasehold improvements and other material items of tangible personal
property owned or used by IPF, in each case other than inventory and equipment
(which is the subject of Section 8 of this Exhibit B), are in good operating
condition and repair, subject to normal wear and tear and routine maintenance,
are useable in the regular and ordinary course of business and conform to all
applicable laws, ordinances, codes, rules and regulations relating thereto and
to the construction, use, operation and maintenance thereof (except for such
failures to conform as would not reasonably be expected to have a Material
Adverse Effect on IPF). IPF neither owns nor leases any truck or other vehicle.
12. No Contingent Liabilities. Except as set forth on the financial
statements referred to in Section 5 of this Exhibit B, normal year-end
adjustments and amounts that would be required to be set forth on the unaudited
financial statements included therein had the same been prepared in accordance
with generally accepted accounting principles, there are no contingent or other
liabilities of IPF, except for any of the same as have not had and are not
reasonably likely to have a Material Adverse Effect on IPF.
13. Litigation. There is no action, dispute, suit, investigation or
proceeding (or, to the best knowledge of IPF or any Shareholder, any basis
therefor) pending against, or to the best knowledge of IPF or any Shareholder
threatened or contemplated, against or affecting IPF or any of its properties
before any court or arbitrator or any governmental body, agency or official that
is reasonably likely to have a Material Adverse Effect or that in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the Merger or
any of the other transactions contemplated by the Agreement. Neither IPF nor
any Shareholder has any knowledge of any condition or state of facts or the
occurrence of any event that might reasonably form the basis of any proceeding
against IPF. To the knowledge of IPF and each Shareholder, IPF is not a party
to the provisions of any judgment, order, writ, injunction or decree of any
court, arbitrator or governmental or regulatory official, body or authority.
14. Taxes. IPF has filed all tax returns required to be filed by it on or
before the date hereof and has paid, or has set up an adequate reserve for the
payment of, all taxes required to be paid in respect of the periods covered by
such returns, and the IPF Unaudited Financial Statements reflect an adequate
reserve for all taxes payable by IPF accrued through the date of such financial
statements, except such non-filings, non-payments or non-reserves as are not, in
the aggregate, reasonably likely to have a Material Adverse Effect. IPF is not
delinquent in the
B-6
payment of any material tax, assessment or governmental charge. No material
deficiencies for any taxes have been proposed, asserted or assessed against IPF.
For the purposes of this Agreement, the term "tax" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes of any
nature whatsoever. Neither IPF nor any member of any affiliated or combined
group of which IPF is or has been a member has granted any extension or waiver
of the limitation period applicable to any tax returns. There are no
Encumbrances for taxes upon the assets of IPF, except Encumbrances for current
taxes not yet due or that could not reasonably be expected to have a Material
Adverse Effect. IPF will not be required under Section 481(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), to include any material
adjustment in taxable income for any period subsequent to the Merger. IPF has
delivered to NATK copies of its federal, state and local income and franchise
tax returns for its fiscal year ended December 31, 1994. IPF has not been a
United States real property holding corporation within the meanings of Section
897(c)(2) of the Code during the applicable period specified in such Section of
the Code. IPF has disclosed on its federal income tax returns all positions
taken therein that could give rise to a material liability relating to a
substantial understatement of federal income tax within the meaning of Section
6662 of the Code. IPF is not a party to any tax allocation or sharing agreement.
IPF (a) has not been a member of an affiliated group filing a consolidated
federal income tax return and (b) has no liability for the taxes of any person
(other than IPF) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
15. Material Contracts. IPF has provided NATK a list, which IPF will
confirm at the Closing, identifying each agreement, contract, lease, arrangement
or commitment to which IPF is a party (other than customer contracts) relating
to the purchase, sale or lease of real property, materials, supplies, equipment
or other goods or providing or receiving services that is not terminable upon 90
or fewer days' notice or that involves annual payments by IPF, or providing of
services by IPF the annual fair market value of which is in excess of $50,000.
All such contracts are valid and binding agreements of IPF and are in full force
and effect (other than as may be affected by defaults of parties thereto other
than IPF), and neither IPF nor, to the best knowledge of IPF or any Shareholder,
any other party thereto is in default in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment.
16. Insurance Coverage. IPF has made available to NATK true and complete
copies of all insurance policies covering the assets, business, equipment,
properties, operations, employees, officers and directors of IPF, all of which
policies are on a "claims made" ["occurrence"?] basis and are currently in full
force and effect. IPF has not received from any such insurance carrier who
provides any such policy or any other party any notice of termination or
threatened termination of any such policy, nor has it received from any party
any claim or notice of claim under or with respect to such policies. Except as
is not reasonably likely to have a Material Adverse Effect, there is no claim by
IPF pending under any of such policies as to which coverage has been questioned,
denied or disputed by the underwriters of such policies. All premiums due and
payable based upon an assumption of the loss development of known claims have
been adequately provided for on IPF's books, and IPF is otherwise in full
compliance with the terms and conditions of all such policies, except such as is
not reasonably likely to have a Material Adverse Effect.
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17. Compliance with Laws. To the best knowledge of IPF and each
Shareholder, IPF is not in violation of, and has not violated, any applicable
provisions of any laws, statues, ordinances or regulations, other than as would
not be reasonably likely to have a Material Adverse Effect or constitute a
felony. To the best of the knowledge of IPF and each Shareholder, no such laws,
statutes, ordinances or regulations require or are reasonably expected to
require capital expenditures by IPF that are reasonably likely to have a
Material Adverse Effect.
18. Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, IPF or any Shareholder to act on the behalf of IPF or any
Shareholder who might be entitled to any fee or commission from IPF, any
Shareholder, NATK or the Sub or any of their respective affiliates upon
consummation of the transactions contemplated by this Agreement.
l9. Intellectual Property. (a) IPF has made available to NATK a list of
all material inventions that are the subject of issued letters patent or an
application therefor, all trade and service marks that have been registered or
for which an application for registration is pending and all writings for which
a claim for copyright has been recorded or is pending, in each case which are
owned by and used by IPF (collectively, the "IPF Intellectual Property Rights").
(b) IPF has not been sued or charged in writing with or been a defendant
in any claim, suit, action or proceeding relating to its business involving a
claim of infringement of any patents, trademarks, service marks or copyrights.
Neither IPF nor any Shareholder has any knowledge of any other claim of
infringement in connection with the use of the IPF Intellectual Property Rights.
Neither IPF nor any Shareholder has any knowledge of any continuing infringement
by any other Person of any IPF Intellectual Property Rights. No IPF
Intellectual Property Right is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting the use thereof by IPF or
restricting the licensing thereof by IPF to any Person. IPF has not entered
into any agreement to indemnify any other Person against any charge of
infringement of any patent, trademark, service ▇▇▇▇ or copyright.
20. Employees. IPF has provided a list to NATK identifying all of the
IPF's employees, the title of each such employee, the annual compensation
payable or paid each such employee during 1994 and 1995 and the benefits each
such person is currently entitled to from or on behalf of IPF. IPF has not
entered into any written employment agreement or any oral or written consulting
agreement with any person or party.
21. Environmental Compliance. To the best of the knowledge of IPF, and
except in all cases as in the aggregate have not had and are not reasonably
likely to have a Material Adverse Effect or constitute a felony, IPF: (a) has
obtained all permits, licenses and other authorizations that are required under
federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes; (b) is in compliance with all terms and conditions of
such required permits, licenses and authorizations, and also is in compliance
with other applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
B-8
timetables contained in such laws or contained in any applicable regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder; (c) as of the date of the Agreement, is not
aware of nor has received notice of any event, condition, circumstance,
activity, practice, incident, action or plan that is reasonably likely to
interfere with or prevent continued compliance or that would give rise to any
common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from IPF's manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handing or the emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste; and (d) has
taken all actions necessary under applicable requirements of federal, state or
local laws, rules or regulations to register any products or materials required
to be registered thereunder.
22. Ownership of IPF Shares. Each of the Shareholders is the lawful owner
of record and beneficially of the number of IPF Shares set forth below, which
shares are represented by the certificate number(s) set forth below:
Shareholder Number of IPF Shares Certificate(s) Number
▇▇▇▇▇▇▇ 600 1 and 4
▇▇▇▇▇ 350 2
▇▇▇▇▇ 350 3
Total 1,300
Each of the Shareholders owns such shares shown above, free and clear of any
Encumbrance of any kind.
23. Other Shareholder Matters. Each of the Shareholders represents,
warrants and acknowledges for, with respect to and on behalf of such Shareholder
(and not for, with respect to or on behalf of any other Shareholder, and
provided that the matters in this Section 23 shall not be deemed to be joint
representations, warranties or acknowledgments of any Shareholder with respect
to another Shareholder, and shall not be deemed to be representations,
warranties or acknowledgments of IPF) that:
(a) In connection with the Merger, such Shareholder's IPF Shares will be
converted into and represent the right to receive 1,000 shares of NATK Common
Stock per share of IPF Common Stock held of record by such Shareholder and that,
at the Closing, by such Shareholder's presentation and delivery of the
certificate or certificate(s) representing such IPF Shares, such Shareholder
will have delivered and conveyed, to the extent required by applicable law, to
the Surviving Corporation the certificates representing such Shareholder's IPF
Shares in order to cause such IPF Shares to be converted into and exchangeable
for such shares of NATK Common Stock in connection with the Merger; and
(b) Such Shareholder is acquiring the shares of NATK Common Stock to be
received in connection with the Merger solely for such Shareholder and not for
any other person or party; and
B-9
(c) The shares of NATK Common Stock to be received by such Shareholder in
connection with the Merger have not been registered under the Securities Act of
1933, as amended (the "1933 Act"), or under applicable state securities laws
(together with the 1933 Act, "Securities Laws"); and
(d) The shares of NATK Common Stock to be received by such Shareholder in
connection with the Merger are not being registered under the Securities Laws in
reliance upon exemptions from applicable Securities Laws that are predicated, in
part, on the representations, warranties and agreements of such Shareholder
contained herein; and
(e) Such Shareholder's right to transfer the shares of NATK Common Stock
to be received by such Shareholder in connection with the Merger will be
restricted by such Securities Laws, and that, in addition to any other
limitations with respect thereto, neither such shares nor any interest therein
shall be sold, transferred or otherwise disposed of without registration under
applicable Securities Laws or an exemption therefrom; and
(f) Such Shareholder must bear the economic risk of an investment in the
shares of NATK Common Stock to be received by such Shareholder in connection
with the Merger for an indefinite period of time because such shares have not
been registered under applicable Securities Laws and therefore cannot be sold
unless they are subsequently registered under such Securities Laws or an
exemption from such registration is available, and that such shares must be held
indefinitely unless the transfer thereof is so registered or such an exemption
exists with respect thereto; and
(g) Such Shareholder is an experienced and sophisticated investor in
investments, including investments similar to shares of NATK Common Stock, and
such Shareholder either alone or with his purchaser representative(s), has such
knowledge and experience in financial and business matters that such Shareholder
is, either alone or together with such purchaser representative(s), capable of
evaluating the merits and risks, and has evaluated the merits and risks, of the
prospective acquisition of the shares of NATK Common Stock in the Merger and has
the capacity to protect his interests in connection with the acquisition of such
shares in the Merger; and
(h) A legend will be placed on the certificate or certificates evidencing
the shares of NATK Common Stock to be received by such Shareholder in connection
with the Merger to the effect that, among other things, the shares evidenced
thereby have not been registered under the 1933 Act and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of in the absence of
(i) an effective registration statement for such shares under the 1933 Act or
(ii) an opinion of NATK's counsel that such registration is not required.
24. Information Supplied. None of the information supplied or to be
supplied by IPF or any Shareholder insofar as it relates to IPF, a Shareholder
or the Merger, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which there are
made, not misleading.
B-10
25. Full Disclosure. There is no fact known to IPF or any Shareholder
that is not disclosed or referred to in this Agreement that could reasonably be
excepted to have a Material Adverse Effect on IPF or prevent or interfere in any
way with the ability of IPF to conduct its business after the date hereof in
substantially the same manner as such business has heretofore been conducted by
IPF. This information provided and statements made by IPF and each Shareholder
in this Agreement (including without limitation this Exhibit B) do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein, in light of the
circumstances under which they were made, misleading.
B-11
IPF SCHEDULE B-9
Exhibit B-9
Section 9. Absence of Undisclosed Liabilities
The following is Industrial Pipe Fittings, Inc. ("IPF") list of undisclosed
potential liabilities or obligations that could have a material impact on the
company should there progress further.
1. On or about December 12, ▇▇▇▇, ▇▇▇ received a letter from Poly-Cam, a
competitor in the transition fitting market, addressing the infringement of a
patent pertaining to a specific fitting that both companies are marketing. IPF
took this matter very seriously and immediately retained the law firm of Arnold,
White, & ▇▇▇▇▇▇ to represent IPF in this matter. After an extensive review, it
was determined by our attorney that in no way did we violate Poly-Cam's patent;
furthermore, ▇▇▇▇▇▇, White & ▇▇▇▇▇▇ sent a letter to Poly-Cam demanding a letter
of apology, as well as a letter to all customers of IPF where Poly-Cam
misrepresented the truth. IPF's attorneys stated that there was a potential
violation of certain Fair Trade laws as well as possible tortuous interference
by Poly-Cam. No further communication has been established with either party in
this matter. IPF believes that the situation has run its course and that no
future instances are likely to occur pertaining to this matter.
2. During the month of April, 1995, IPF was informed of a situation in
Maryland where a contractor was installing brass transition fittings for a water
works project. The contractor, ▇▇▇▇▇▇▇▇, Inc., alleged that the fittings were
defective due to leakage and therefore should be replaced under warranty. IPF
immediately had fittings sent to the company's facility for testing. After
testing approximately 40 fittings, it was determined that the fittings were
structurally fine and that perhaps the cause of the situation was due to
improper installation. IPF sent ▇▇▇▇▇▇ ▇▇▇▇▇ to the job site in Maryland to
determine the cause of the problem. While ▇▇. ▇▇▇▇▇ was installing a fitting
himself, the distributor of the fitting was videotaping the installation. It was
determined that after proper installation, the brass fitting in question was
adequate and that ▇▇▇▇▇▇▇▇ was not properly laying the pipe on a supportive bed
of stone as required by Plexco, the pipe manufacturer. Furthermore, ▇▇▇▇▇▇▇▇
tried to break the fitting with a ▇▇▇▇▇▇ ▇▇▇▇▇▇ and was unable to effect the
structural integrity of the fitting. Although IPF felt that it had gone beyond
the scope of proper service, the company offered to replace the fittings in
question at no cost to the contractor. To date, ▇▇▇▇▇▇▇▇ has not accepted this
offer. No legal action has been taken regarding this matter; however, the
potential exist for a lawsuit which could have an impact on IPF. The approximate
cost of replacing the fittings, as well as installing them could range between
$15,000.00 and $50,000.00. IPF strongly believes that it has taken every
reasonable step to resolve this situation. The company's distributor has said
that we went above and beyond what he expected and was quite pleased with our
efforts.
EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF NATK AND THE SUB
For purposes hereof, capitalized terms used herein and not otherwise
defined herein have the meanings ascribed to such terms in the Agreement.
1. Corporate Existence and Power. NATK is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and the Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Texas. Each of NATK and the
Sub has all corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where the failure to have any of the foregoing would not have a Material
Adverse Effect or would not constitute a felony. Each of NATK and the Sub is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect. NATK has heretofore
delivered to IPF true and complete copies of each of NATK's Certificate of
Incorporation, the Sub's Articles of Incorporation and NATK's and the Sub's
Bylaws as currently in effect. NATK owns all of the issued and outstanding
shares of capital stock of the Sub, and their are no other rights or obligations
of NATK or the Sub to issue any other shares of capital stock of the Sub. The
Sub has conducted no business activity other than in connection with the
transactions contemplated by this Agreement.
2. Corporate Authorization. The execution, delivery and performance by
each of NATK and the Sub of this Agreement and the consummation by each of them
of the transactions contemplated hereby are within such organization's corporate
powers and, except for any required approval by the Sub's shareholder in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. This Agreement has been duly executed by each of
NATK and the Sub, and constitutes a valid and binding agreement of NATK and the
Sub, enforceable in accordance with its terms. As of the Closing all corporate
action on the part of NATK and the Sub required under applicable law in order to
consummate the Merger will have occurred. None of the information to be
included by NATK or the Sub in the prospectus to be delivered to each of the
Shareholders in connection with the shares of NATK Common Stock to be received
by them in the Merger, insofar as such information relates to NATK or the Sub,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which there are made,
not misleading.
3. No Contravention. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated thereby will not,
conflict with or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of an right or obligation or to loss or a benefit
under, any provision of the Certificate of Incorporation of NATK, the Articles
of Incorporation of the Sub, the Bylaws of NATK or the Sub or any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to NATK, the Sub or
either of
C-1
such party's properties or assets, or result in the creation or imposition of
any Encumbrance on any asset of NATK or the Sub, except such as is not
reasonably likely to have a Material Adverse Effect or materially and adversely
affect the ability of NATK or the Sub to consummate the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to NATK or the Sub in connection with
the execution and delivery of this Agreement by either of them or the
consummation by either of them of the transactions contemplated hereby, except
(i) where the failure to obtain such consent, approval, order or authorization,
or to effect such registration, declaration or filing is not reasonably likely
to have a Material Adverse Effect or materially and adversely affect the ability
of IPF, NATK or the Sub to consummate the transactions contemplated by the
Agreement, and (ii) the filing of the Articles of Merger with the Secretary of
State of Texas.
4. Capitalization.
(a) The authorized capital stock of the NATK consists solely of 50,000,000
shares of common stock, par value $.001 per share ("NATK Common Stock"), and
10,000,000 shares of preferred stock, par value $.001 per share ("NATK Preferred
Stock"). Except as provided otherwise in the next succeeding sentence, there
are currently outstanding, or obligations to issue, not more than (i) 25,000,000
shares of NATK Common Stock, (ii) no shares of NATK Preferred Stock and (iii)
options, warrants or other rights to acquire an aggregate of not more than
6,200,000 shares of NATK Common Stock (which number of shares is subject to
certain adjustments based on a number of events), and certain written debt
obligations of NATK that may be converted by the holder or beneficiary of such
obligations into the number of shares of NATK Common Stock (which number of
shares is subject to certain adjustments based on a number of events). Schedule
C-4 hereto sets forth, to the best knowledge of management of NATK, a
reconciliation of the outstanding shares as provided on NATK's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995, and the number of shares
outstanding as of June 16, 1995, together with certain anticipated issuances or
cancellations of shares. All shares of NATK Preferred Stock that were
previously issued have been converted, prior to the date hereof, into shares of
NATK Common Stock, and such shares of Preferred Stock have been retired to
treasury. All outstanding shares of capital stock of NATK have been duly
authorized and validly issued and are fully paid and nonassessable, and upon the
issuance of the shares of NATK Common Stock to be issued in the Merger, such
shares will be duly authorized, validly issued, fully paid and nonassessable
shares of NATK Common Stock. NATK currently may issue, at or before the
Closing, up to 5,000,000 additional shares, and/or options, warrants and/or
convertible shares or debt instruments to acquire all or a portion of such
5,000,000 additional shares, of NATK Common Stock in connection with certain
financings. In addition, NATK may issue additional shares, and/or options or
warrants to acquire additional shares to Gaia Technologies, Inc., Thor Ventures,
L.C. and/or certain controlling persons of such entities in connection with a
possible acquisition of assets of such entities and related transactions
(collectively, the "Gaia/Thor Proposed Transactions").
(b) NATK has a sufficient number of its authorized but unissued shares of
NATK Common Stock to permit it to issue the number of shares of NATK Common
Stock due in connection with the Merger and the related transactions (including
without limitation the exercise
C-2
by the parties thereto of all stock option agreements, if any, entered into or
to be entered into between NATK, on the one hand, and any of ▇▇▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇▇, on the other hand), as well as all of NATK's other obligations to issue
shares of NATK Common Stock upon exercise of any option, warrant or other right
to acquire the same.
(c) To the best knowledge of NATK, all notes receivable set forth on the
financial statements of NATK included in NATK's quarterly report on Form 10-Q
for the quarter ended March 31, 1995 are collectible in full in the ordinary
course of business.
5. SEC Filings. (a) NATK has made available to IPF: (i) NATK's annual
report on Form 10-K for its fiscal year ended December 31, 1994 (the "1994 Form
10-k"), (ii) its quarterly report on Form 10-Q for its fiscal quarter ended
March 31, 1995, and (iii) all of its other reports, statements, schedules and
registration statements filed with the Securities and Exchange Commission since
January 1, 1995, but only such pre-effective amendments to such registration
statements as contain material information not fully reflected in any subsequent
amendment to such registration statements (or to any prospectus included
therein) made available to IPF. The documents referred to in the preceding
sentence are sometimes referred to herein as the "SEC Documents."
(b) As of its filing date, each such report or statement filed pursuant to
the Securities Exchange Act of 1934, as amended to date, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(c) Each such registration statement (if any) as amended or supplement if
applicable, filed pursuant to the Securities Act of 1933, as amended to date, as
of the date such statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made in the case of prospectuses, not misleading.
6. Absence of Certain Changes. Since December 31, 1994, and except as set
forth in the 1994 Form 10-k, NATK's quarterly report on Form 10-Q for the
quarter ended March 31, 1995, or on Schedule C-6 hereto, NATK has conducted its
business in the ordinary course consistent with past practice and there has not
been:
(a) any event, occurrence or development of a state of circumstances or
facts that has had or is reasonably likely to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of NATK or any
repurchase, redemption or other acquisition by NATK of any outstanding shares of
capital stock or other securities of, or other ownership interests in, NATK;
(c) any amendment of any term of any outstanding security of NATK;
C-3
(d) any incurrence, assumption or guarantee by NATK of any indebtedness
for borrowed money or any such indebtedness incurred, assumed or guaranteed
since December 31, 1994, except in the ordinary course of business consistent
with past practice;
(e) any creation or assumption by NATK or any of its subsidiaries of any
Encumbrance on any material asset other than in the ordinary course of business
consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any Person by NATK or any of its subsidiaries other than loans or
advances made in the ordinary course of business consistent with past practice,
certain transactions entered into in connection with the acquisition by NATK of
EET, Inc., a Texas corporation, a loan or loans made by NATK to IPF and certain
other loans made to officers or employees of NATK (none of which loans to
officers or employees of NATK individually is in excess of $100,000); provided,
however, that NATK may make one or more loans in connection with the Gaia/Thor
Proposed Transactions;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of NATK or any of its
subsidiaries which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect;
(h) any (i) labor dispute, lockout, strike, slowdown, work stoppage or
threat thereof by or with respect to any employees of NATK or any of its
subsidiaries, or (ii) activity or proceeding by a labor union or representative
thereof to organize any such employees, to the knowledge of NATK; or
(i) any litigation or any imposition of any tax that is not disclosed in
the documents referred to under Section 5 of this Exhibit C that is reasonably
likely to have a Material Adverse Effect on NATK, nor (to the knowledge of NATK)
has there been any claim made by the SEC or any other party relating to any such
documents referred to under Section 5 of this Exhibit C that is reasonably
likely to have a Material Adverse Effect on NATK.
7. Availability of Funds. Neither NATK nor the Sub is insolvent on the
date of this Agreement. NATK currently intends to have, and to make available,
sufficient cash, cash equivalents or immediately available financing through one
or more financing arrangements in order to pay all amounts that may be due to be
paid by or on behalf of NATK in connection with the Merger as provided in or
contemplated by this Agreement and to assure that, immediately after payment of
all such amounts, the Surviving Corporation's assets shall exceed its
liabilities, and it shall not be insolvent. There are no facts, circumstances
or events known to NATK or the Sub that would cause any amount payable or paid
as provided in the preceding sentence to constitute a fraudulent transfer under
applicable federal or state laws, rules or regulations.
8. Compliance with Laws. To the best knowledge of NATK and Sub, neither
NATK nor any of its subsidiaries is in violation of, and has not violated, any
applicable provisions of any laws, statues, ordinances or regulations, other
than as would not be reasonably likely to have a Material Adverse Effect on NATK
and its subsidiaries, taken as a whole, or constitute a felony. No such laws,
statutes, ordinances or regulations require or are reasonably expected to
require capital expenditures that are reasonably likely to have a Material
Adverse Effect on NATK and its subsidiaries, taken as a whole. Notwithstanding
the foregoing, NATK did not file a tax return for
C-4
the years 1992, 1993 or 1994, and to its knowledge, no tax is owed with respect
to any such year. In addition, NATK did not hold a stockholder's meeting during
1994 or deliver to its stockholders any documents in connection therewith that
may have been required under applicable securities laws, and does not currently
anticipate holding a stockholder's meeting in 1995.
9. Investment Banking Fees. There is no investment banker, broker, finder
or other similar intermediary which has been retained by, or is authorized by,
either NATK or the Sub to act on its behalf who might be entitled to any fee or
commission from IPF, NATK or the Sub or any of their respective affiliates upon
consummation of the transactions contemplated by this Agreement.
10. Environmental Compliance. To the best knowledge of NATK and Sub, and
except in all cases as in the aggregate have not had and are not reasonably
likely to have a Material Adverse Effect on NATK and its subsidiaries, taken as
a whole, or constitute a felony, each of NATK and each of its subsidiaries: (a)
has obtained all permits, licenses and other authorizations that are required
under federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes; (b) is in compliance with all terms and conditions of
such required permits, licenses and authorizations, and also is in compliance
with other applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any applicable regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder; (c) as of the date of the Agreement, is not aware of nor has
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan that is reasonably likely to interfere with or prevent
continued compliance or that would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
based on or resulting from NATK's or any of its subsidiaries' manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handing or the emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste; and (d) has
taken all actions necessary under applicable requirements of federal, state or
local laws, rules or regulations to register any products or materials required
to be registered thereunder.
11. Information Supplied. None of the information supplied or to be
supplied by NATK or the Sub insofar as it relates to NATK, the Sub or the
Merger, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which there are
made, not misleading.
12. Full Disclosure. There is no fact known to NATK or the Sub that is
not disclosed or referred to in this Agreement that could reasonably be excepted
to have a Material Adverse Effect on NATK or prevent or interfere in any way
with the ability of NATK to conduct its business after the date hereof in
substantially the same manner as such business has heretofore been conducted by
NATK. This information provided and statements made by NATK in this Agreement
(including without limitation this Exhibit C) do not contain any untrue
statement of a
C-5
material fact or omit to state a material fact necessary in order to make the
statements contained herein, in light of the circumstances under which they were
made, misleading.
C-6
Schedule C-4
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
Reconciliation of Outstanding Shares for March 31, 1995 Form 10-Q
June 16, 1995
Issued "New" shares per transfer agent as of April 7, 1995 23,949,244
Issued "Old" shares per transfer agent as of April 7, 1995
(1,495,531 subject to 1:15 reverse split) 99,745
----------
24,048,989
Less NAT shares to be cancelled (5,000,000)
Less GSI escrow shares to be canceled (1,625,000)
----------
Amount disclosed as issued and outstanding on 10-K 17,423,989
Less EuroScotia shares to be canceled (200,000)
Plus shares to be issued to ▇▇▇▇ Capital for services rendered 20,000
Adjustments relating to "Old" MBCC shares above
Less total amount shown (99,745)
Plus amount not owned by NATK that has not been tendered 7,024
-----------
(97,721)
Adjustments relating to Daily Mail
NAT, Inc. Common outstanding per transfer agent 12,327,092
Less amount owned by NATK (12,080,958)
-----------
Amount remaining to be tendered 246,134
Amount of shares of NATK to be received 1:2 exchange 123,070
----------
Issued and outstanding shares disclosed on Form 10-Q 17,274,338
==========
Issued shares disclosed in the equity section at March 31, 1995 17,924,338
Less treasury shares at March 31, 1995 (650,000)
----------
Issued and outstanding shares disclosed in the equity section 17,274,338
==========
Additional share information since 10Q for 3/31/95 and as of
June 16, 1995:
GSI escrow shares expected to be canceled (1,625,000)
Shares issued thru 6/14/95 in connection with equity placement 905,000
Shares expected to be issued upon closing of Thor/GAIA transaction 1,666,667
Shares to be issued for minority interest of NAEG 1,380,005
Shares to be issued to ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ 125,000
Shares to be issued to Defiglio's for interest payment 66,140
Treasury shares reserved for issuance upon the conversion of
preferred shares of subsidiary 650,000
NOTE: There are also approximately 175,000 shares that have not been issued to
two individuals which are under dispute; the Company does not believe it has an
obligation to issue these shares.
1 of 2
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
Expiration
Name Warrant # Shares Start Date Price Date
-------------------------------------------------------------------------------------------------------------------
OPTIONS
-------------------------------------------------------------------------------------------------------------------
100,000 09/01/91 1.25
100,000 04/01/92 1.25
300,000 08/01/91 1.25
300,000 01/01/93 1.25
100,000 08/01/93 1.25
100,000 06/01/92 1.25
300,000 08/01/90 1.25
20,000 04/01/93 1.25
20,000 05/01/93 1.25
50,000 01/01/94 1.25
400,000 03/31/95 2.50 03/31/04
200,000 03/31/95 2.50 03/31/04
50,000 03/31/95 2.50 03/31/02
400,000 03/31/95 2.50 03/31/04
200,000 03/31/95 2.50 03/31/04
150,000 03/31/95 2.50 03/31/04
200,000 03/31/95 2.50 03/31/04
200,000 03/31/95 2.50 03/31/04
----------------------
20,000 from MBCC acquisition
13,333 from MBCC acquisition
13,333 from MBCC acquisition
----------------------
300,000 05/22/92 1.50 11/30/97
300,000 05/22/92 2.50 11/30/97
125,000 07/31/94 2.00 07/31/96
75,000 09/23/94 0.75 09/23/99
50,000 09/22/94 1.375 09/22/96
4,086,666
30,000 no written agreement
30,000 no written agreement
25,000 no written agreement
12,500 no written agreement
30,000 no written agreement
4,214,166
-------------------------------------------------------------------------------------------------------------------
WARRANTS
-------------------------------------------------------------------------------------------------------------------
1994-01 25,000 06/27/94 2.25 06/17/96
1994-02 25,000 06/27/94 2.25 06/17/96
1994-03 25,000 06/27/94 2.25 06/17/96
1994-04 40,000 06/27/94 3.30 04/19/96
1994-05 23,000 06/27/94 3.30 06/17/96
1994-06 1,000 06/27/94 3.30 06/17/96
1994-07 1,000 06/27/94 3.30 06/17/96
1994-08 1,000 06/27/94 3.30 04/19/96
1994-09 1,000 06/27/94 3.30 04/19/96
1994-10 1,000 06/27/94 3.30 04/19/96
1994-11 1,000 06/27/94 3.30 04/19/96
1994-12 500 06/27/94 3.30 04/19/96
1994-13 500 06/27/94 3.30 04/19/96
1994-14 5,000 06/27/94 3.30 04/19/96
1994-15 600,000 12/20/94 2.00 12/19/97
1994-17 75,000 12/20/94 2.00 12/19/97
1994-18 40,000 12/20/94 2.00 12/19/97
500,000 12/20/94 2.00 12/19/97
110,000 12/20/94 2.00 12/19/97
90,000 12/20/94 2.00 12/19/97
100,000 12/20/94 2.00 12/19/97
8,000 12/20/94 2.00 12/19/97
50,000 03/07/95 1.50 12/31/99
8,000 03/07/95 1.50 12/31/99
1,000 03/07/95 1.50 12/31/99
1,000 03/07/95 1.50 12/31/99
1,000 03/07/95 1.50 12/31/99
10,000 03/07/95 1.50 12/31/99
233,060 need to verify
1,977,060
-------------------------------------------------------------------------------------------------------------------
Additional options expected to be issued in connection with Thor/GAIA
transaction:
400,000 options with a purchase price of $2.50 per share
Page 2 of 2 Pages
EXHIBIT D
FORM OF SHAREHOLDER REPRESENTATION LETTER
The undersigned party ("Shareholder") represents, warrants, acknowledges
and covenants to North American Technologies Group, Inc., a Delaware corporation
("NATK"), NATK SUB, INC., a Texas corporation ("Sub"), and Industrial Pipe
Fittings, Inc., a Texas corporation ("IPF"), that:
1. The undersigned Shareholder is the lawful owner of record and
beneficially of the number of shares set forth below of common stock, par value
$0.01 per share, of IPF (the "IPF Shares"), which IPF Shares are represented by
the certificate number(s) set forth below, and are owned by the undersigned
Shareholder free and clear of any mortgage, lien, pledge, charge or security
interest of any kind:
(please place an "X" by the appropriate line)
Shareholder Number of IPF Shares Certificate(s) Number
____ ▇▇▇▇▇▇▇ 600 1 and 4
____ ▇▇▇▇▇ 350 2
____ ▇▇▇▇▇ 350 3
2. Prior to the execution of this Shareholder Representation Letter, the
Shareholder: (i) has received a copy of that certain Prospectus, dated June __,
1995, of NATK relating to the shares of Common Stock, par value $0.001 per share
("NATK Common Stock"), of NATK to be received by the undersigned Shareholder in
connection with the merger (the "Merger") of IPF, with and into the Sub, with
Sub being the corporation surviving the Merger, which document included as
exhibits thereto, among other things, a copy of the Annual Report on Form 10-k
of NATK for the fiscal year ended December 31, 1994, and a Quarterly Report on
Form 10-Q of NATK for the fiscal quarter ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) has reviewed
such documents with such investment, financial, legal and other advisors as such
Shareholder has elected, (iii) has had an opportunity to ask questions and
receive answers from NATK regarding such documents and the documents described
therein, the shares of NATK Common Stock to be received by such Shareholder in
connection with the Merger and the terms and conditions of the Merger, (iv) has
had an opportunity to obtain any additional information and documents requested
by the undersigned Shareholder relating to the investment in the shares of NATK
Common Stock, and (iv) based on such review, has elected to approve of the
Merger Agreement (as defined in the Prospectus) and to participate in the Merger
as provided for in the Merger Agreement.
Executed this __________________, 1995.
--------------------------------------
Printed Name:
-------------------------
Agreement as to Definition of "Effective Time"
The undersigned parties agree that, for all purposes, the "Effective Time,"
as defined in Section 1.1(b) of that certain Agreement and Plan of Merger, dated
as of June 22, 1995, by and among the undersigned parties, shall be as provided
in paragraph 2 of the Articles of Merger, a copy of which is attached hereto as
Exhibit A, notwithstanding anything to the contrary contained in such Agreement
and Plan of Merger or any exhibit, schedule or attachment thereto.
Dated as of June 28, 1995
NORTH AMERICAN TECHNOLOGIES
GROUP, INC., a Delaware corporation
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
NATK SUB, INC.,
a Texas corporation
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
INDUSTRIAL PIPE FITTINGS, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Vice President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------