EXHIBIT 10.13
DEPOSIT AGREEMENT
BETWEEN
SEVEN PEAKS MINING, INC.
AND
ATLAS CORPORATION
October 2, 1998
DEPOSIT AGREEMENT
THIS AGREEMENT is entered into on the 2nd day of October, 1998, by and
between Seven Peaks Mining, Inc., a Kentucky corporation ("Seven Peaks"), and
Atlas Corporation, a Delaware corporation ("Atlas").
This agreement (the "Agreement") sets out the terms and conditions upon
which Seven Peaks will make or will cause a direct or indirect wholly-owned
subsidiary to make an offer (the "Offer") on substantially the terms summarized
in Schedule "A" forming part of this Agreement, for all of the issued and
outstanding common shares (the "Cornerstone Shares") of Cornerstone Industrial
Minerals Corporation, an Ontario corporation ("Cornerstone") (Atlas is the
majority shareholder and Manager of Cornerstone).
This Agreement also sets out the terms and conditions of the agreement by
Atlas not to solicit expressions of interest for or encourage competing offers
for the Cornerstone Shares presently owned beneficially and of record by Atlas
(the "Atlas Securities") and to deposit irrevocably and unconditionally under
the Offer all of the Atlas Securities, and sets out the obligations and
commitments of Atlas in connection therewith.
This Agreement also sets out the understanding and acknowledgment of Seven
Peaks that Atlas filed on September 22, 1998, a petition seeking protection
under Chapter 11 of the United States Bankruptcy Code, and that all agreements,
promises and provisions contained in this Agreement are subject to the
requirements of the Bankruptcy Code and Orders of the Bankruptcy Court having
jurisdiction over Atlas' petition in bankruptcy.
NOW THEREFORE, in consideration of the foregoing premises and the promises
and covenants herein made, together with other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the U.S. Securities Exchange Act of 1934, as amended.
"Cornerstone Financial Statements" means the audited financial statements
of Cornerstone as at and for the year ended December 31, 1997 and the
unaudited interim financial statements of Cornerstone as at and for the six
months ended June 30, 1998;
"Cornerstone Debt" means that certain indebtedness from Cornerstone to
Atlas as evidenced by that certain Stock Purchase Agreement between Atlas
and Cornerstone dated December 13, 1996, and the Cornerstone Financial
Statements.
"Cornerstone Shares" means all of the issued and outstanding common shares
of Cornerstone Industrial Minerals Corporation, an Ontario corporation.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended.
"Bankruptcy Case" means the case to be established in the United States
Bankruptcy Court for the District of Colorado upon the filing of Atlas'
petition for protection under chapter 11 of the Bankruptcy Code.
"Confidential Information" has the meaning set forth in paragraph 13 below.
"CUSA" means Cornerstone Industrial Minerals Corporation, U.S.A., an Oregon
corporation formerly known as Atlas Perlite, Inc.. CUSA is a wholly-owned
subsidiary of Cornerstone.
"DIP Agreement" means the Agreement for Debtor In Possession Financing
filed in the Bankruptcy Case.
"Environmental Costs" means any clean-up costs, remediation, removal, or
other response costs, legal expenses (including reasonable attorneys'
fees), investigation costs (including reasonable fees of consultants,
counsel and other experts in connection with any environmental
investigation or testing), losses, liabilities, obligations, payments,
fines, penalties (civil and criminal) and damages.
"Environmental Law" means any federal, state, provincial, regional,
territorial, municipal, local or foreign statute, code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license,
judgment, order, writ, decree, injunction or other authorization, relating
to:
(1) emissions, discharges, releases or threatened releases of Hazardous
Substances into the natural or human environment, including, without
limitation, air, soil, sediments, land surface or subsurface, surface
water, ground water, buildings or facilities, treatment works,
drainage systems or septic systems; or
(2) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Substances; or
(3) mining or mined land reclamation; or
(4) otherwise relating to the pollution or protection of health or safety
or the environment, solid waste
handling, treatment or disposal or operation or reclamation of mines.
"Hazardous Substances" means (i) hazardous materials, pollutants,
contaminants, constituents, toxic substances, hazardous wastes and
hazardous substances as those terms are defined in the following statutes
and their implementing regulations: the Hazardous Materials Transportation
Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery
------
Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive Environmental Response,
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Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act 42 U.S.C. (S) 1906 et seq., the Clean Water Act, 333
------
U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. (S)
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2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et seq., (ii)
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petroleum, including crude oil and any fractions thereof, (iii) natural
gas, synthetic gas and any mixtures thereof, (iv) asbestos and/or asbestos-
containing materials, (v) PCBs, or PCB-containing materials or fluids, (vi)
any other substance with respect to which any federal, state or local
agency or other governmental entity may require either an environmental
investigation or an environmental remediation, and (vii) any other
hazardous or noxious substance, material, pollutant or solid or liquid
waste that is required by, or forms the basis of liability under, any
environmental law.
"▇▇▇▇▇▇ Facility" means that facility for storing and shipping perlite
located in Henley, Oregon, on land leased by CUSA.
"Operating Permits" means all permits necessary for mining and processing
operations for the Project.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or
political subdivision thereof).
"Process Plant" means the plant for processing perlite ore located on the
Process Plant Land.
"Process Plant Land" means the land described in Schedule "B" covering
approximately 26 acres in the northern outskirts of Lakeview, Oregon which
includes approximately 700 feet of dedicated rail siding upon which a
process plant is located for processing perlite ore mined from the ▇▇▇▇▇▇
▇▇▇▇ Property.
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"Project" means, collectively, the Process Plant, the Process Plant Land,
the ▇▇▇▇▇▇ Facility, and the ▇▇▇▇▇▇ ▇▇▇▇ Property.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"▇▇▇▇▇▇ ▇▇▇▇ Property" means the land described in Schedule "B" consisting
of 45 unpatented lode mining claims located in Lake County, Oregon.
2. The Offer, Purchase and Sale of Cornerstone Shares.
(1) Offer. Seven Peaks shall make the Offer for 100% of the Cornerstone
Shares as soon as possible after all regulatory and court approvals
are obtained, including the approval of the U.S. Bankruptcy Court and
in any event, within [10] days of receipt of approval of the U.S.
Bankruptcy Court. Seven Peaks covenants and agrees to use all
reasonable efforts and to fully cooperate with Atlas to obtain the
requisite regulatory and court approvals in order for the Offer to be
made as provided for herein.
(2) Conditions Precedent. Notwithstanding Paragraph 2(a), Seven Peaks
shall not be required to make the Offer (and Seven Peaks may, without
prejudice to any other rights, by written notice to Atlas, terminate
this Agreement) if:
(1) prior to the making of the Offer, (i) any act, action, suit or
proceedings shall have been taken before or by any domestic or
foreign court or tribunal or governmental agency or other
regulatory authority or administrative agency or commission by
any elected or appointed public official or person in Canada or
elsewhere, whether or not having the force of law, or (ii) any
law, regulation, rule or policy shall have been proposed,
enacted, promulgated or applied:
(1) to cease trade, enjoin, prohibit or impose material
limitations or conditions on the purchase by or the sale to
Seven Peaks of 100% of the Cornerstone Shares or the right
of Seven Peaks to own or exercise full rights of ownership
of 100% of the Cornerstone Shares, or
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(2) which, in the sole judgment of Seven Peaks, acting
reasonably in the circumstances, if the Offer were
consummated, would materially and adversely affect
Cornerstone and its subsidiaries considered on a
consolidated basis,
provided, however, that Seven Peaks shall not be required to make the
Offer as a result of any act, action, suit or proceeding taken by a
Person only if such act, action, suit or proceeding shall have been
resolved in favor of such Person as evidenced by an order, ruling or
decision by any domestic or foreign court or tribunal or government
agency or other regulatory authority or administrative agency or
commission in Canada or elsewhere having jurisdiction in respect of
Seven Peaks or the Offer, or if, in the opinion of counsel to Seven
Peaks, acting reasonably, there is a reasonable risk that such act,
action, suit or proceeding will be so resolved in favor of such
Person;
(2) at the time Seven Peaks proposes to make the Offer, there exists
any prohibition at law against Seven Peaks making the Offer or
taking up and paying for 100% of the Cornerstone Shares under the
Offer;
(3) except as previously disclosed in writing to Seven Peaks or
except with the prior written approval of Seven Peaks, which
approval will not be unreasonably withheld, subsequent to the
date of this Agreement and prior to the making of the Offer,
Cornerstone or any subsidiary of Cornerstone, shall have
authorized or proposed, or shall have entered into any agreement,
arrangement or understanding with respect to:
(1) any take-over bid (other than the Offer), merger,
amalgamation, plan of arrangement, reorganization or other
business combination;
(2) any acquisition or disposition of assets or securities in an
amount exceeding $50,000;
(3) any change in its capitalization including, but not limited
to, any increase in its consolidated borrowings to an amount
exceeding $50,000;
(4) any capital expenditures in an amount exceeding $50,000;
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(5) declaring or paying any dividend or declaring, authorizing
or making any distribution of or on any of its securities
whether payable in cash, securities or other property other
than (A) regular cash dividends in amounts fixed by their
terms or consistent with past practice or (B) any dividend
or distribution by a subsidiary of Cornerstone to
Cornerstone;
(6) entering into, modifying or terminating any agreements or
arrangements with its officers or employees except (A) as
disclosed in writing to and acknowledged by Seven Peaks
prior to the date of this Agreement, or (B) agreements or
arrangements (other than agreements or arrangements in
respect of share options or other rights or entitlements to
acquire authorized and unissued Shares or relating to
severance or termination or other rights related to a change
of control) in the ordinary course of business and
consistent with past practice;
(7) any release or relinquishment not in the ordinary course of
business of any material contractual rights;
(8) the amendment of its articles or by-laws, or the issuance or
purchase or other acquisition of any shares of its capital
or any class of securities convertible into, or rights,
warrants or options to acquire, any such shares or other
convertible securities;
(9) agreeing or committing to the guarantee of payment of any
indebtedness;
(10) instituting, canceling or modifying any pension plans or
other employee benefit arrangements;
(11) any other change in the business, operations, affairs,
assets, capitalization, financial condition, licenses,
permits, rights or privileges, whether contractual or
otherwise, of Cornerstone or any of its subsidiaries
considered on a consolidated basis which, in the sole
judgement of Seven Peaks, acting reasonably in the
circumstances, could individually or in the aggregate, have
a material adverse effect either on the value of Cornerstone
and its subsidiaries considered on
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a consolidated basis or on the value of the Cornerstone
Shares to Seven Peaks;
(4) either Atlas or Cornerstone, prior to making the Offer,
shall not have given Seven Peaks and its authorized agents
reasonable ongoing access, upon reasonable notice to Atlas
or Cornerstone, to all of Cornerstone's and its affiliates'
personnel, assets, properties, books, records, agreements
and commitments and, on terms mutually agreed by Seven Peaks
and Cornerstone, to customers, and officers of Cornerstone,
and shall not have reasonably co-operated with Seven Peaks
and any such authorized agents in their due diligence
investigations and furnished such persons with all material
information with respect to Cornerstone and its subsidiaries
and their ongoing operations and activities as Seven Peaks
or such authorized agents may have reasonably requested,
provided that Seven Peaks shall designate an individual or
individuals to co-ordinate such access and further provided
that Seven Peaks shall not unreasonably disrupt the normal
business operations of Atlas or Cornerstone or its
subsidiaries;
(5) there shall have occurred or arisen (or there shall have
been generally disclosed or discovered, if not previously
disclosed in writing to Seven Peaks), any change (or any
condition, event or development involving a prospective
change) in the business, operations, affairs, assets,
liabilities (including any contingent liabilities that may
arise through outstanding, pending or threatened litigation
or otherwise), capitalization, financial condition,
licenses, permits, rights or privileges, whether contractual
or otherwise, or prospects of Cornerstone or any of its
subsidiaries considered on a consolidated basis which, in
the sole judgment of Seven Peaks, acting reasonably in the
circumstances, has or may have a material adverse effect
either on the value of Cornerstone and its subsidiaries
considered on a consolidated basis or on the value of the
Shares to Seven Peaks;
(6) in the course of its due diligence investigations, prior to
September 30, 1998, Seven Peaks shall have become aware of
any fact or facts which in the aggregate, in its sole
discretion, acting reasonably, have or may have a material
adverse effect either on the value of Cornerstone and its
subsidiaries considered on a consolidated basis or
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on the value of the Cornerstone Shares to Seven Peaks;
(7) Cornerstone and its subsidiaries shall not have taken all
steps reasonably requested by Seven Peaks in connection with
the Offer, including, without limitation, any steps required
to meet regulatory requirements, provided that such steps
would not have any material adverse consequences to the
holders of Cornerstone Shares or to Cornerstone or any of
its subsidiaries if the Offer was not completed;
(8) any representation or warranty of Atlas in this Agreement
shall not have been, as of the date made, true and correct
in all material respects, or Atlas or Cornerstone shall not
have performed in all material respects any of their
respective covenants or complied with any of their
respective agreements to be performed and complied with by
it under this Agreement;
(9) at the time the Offer is made, the board of directors of
Cornerstone shall not have announced that they are
recommending that holders of the Cornerstone Shares accept
the Offer, it being understood that, if practicable, it
would be desirable for Cornerstone to mail the required
Directors' Circular simultaneously with the Offer, provided
that Seven Peaks has provided full particulars of the Offer
and all such additional information as is required to be
contained in a takeover bid circular not less than 15 days
prior to the date the Offer is to be made.
The foregoing conditions are for the sole benefit of Seven Peaks and may be
waived by Seven Peaks in whole or in part at any time and shall be deemed
to have been waived by it by the making of the Offer.
3. Deposit and Closing of the Atlas Securities.
(1) Deposit. Prior to making the Offer, the Atlas Securities will have
been placed in a third party escrow account (subject to a reasonable
escrow agreement to be prepared by counsel for both Parties) pursuant
to the DIP Agreement. Atlas hereby irrevocably and unconditionally
agrees that as soon as practicable after the Offer is made, it will
comply immediately with the escrow instructions regarding to deposit
under the terms of the Offer all of the Atlas Securities (the
"Deposited
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Shares"), together with a duly completed and executed letter of
transmittal (which letter shall include the instructions set forth in
paragraph 3(c) below), and, in any event, on or before the fifth
business day after the date of the Offer. Atlas hereby irrevocably and
unconditionally agrees not to withdraw or take any action to withdraw
any of the Deposited Shares deposited under the Offer notwithstanding
any statutory rights or other rights under the terms of the Offer or
otherwise which it might have, unless ordered otherwise in the
Bankruptcy Case, or unless this Agreement is terminated in accordance
with its terms prior to the taking up of the Deposited Shares under
the Offer.
(2) Taking Up and Closing. If the conditions precedent set forth in
paragraph 2(b) of this Agreement are satisfied or waived by Seven
Peaks such that the Offer is made, and the conditions contained in the
Offer are satisfied or waived, then within 10 days after the expiry of
the Offer, Seven Peaks will take up and pay for all of the Cornerstone
Shares under the Offer (the "Closing").
(3) Distribution to Atlas.
(1) Atlas shall direct the transfer agent that the amount payable to
Atlas under the Offer for the Atlas Securities (the "Purchase
Price") shall be distributed as follows:
(A) The sum of US$350,000.00 of the Purchase Price will be
placed in an interest bearing third party escrow account
(subject to a reasonable escrow agreement to be prepared by
counsel for both Parties) pending resolution of the
litigation between Cornerstone and ▇▇▇▇▇ Machinery. Seven
Peaks will cause Cornerstone to assign to Atlas as of the
Closing all of Cornerstone's rights and obligations in the
▇▇▇▇▇ litigation. Atlas will use its reasonable best efforts
to either litigate toward judgment or dismissal, or to
negotiate a settlement of that litigation, but will not
execute any settlement agreement until obtaining the written
approval of Seven Peaks (which will not be unreasonably
withheld). Seven Peaks will cooperate with Atlas in this
process as reasonably requested by Atlas, pursuant to
paragraph 10(c) hereof. Upon judgment, dismissal or
settlement, the escrowed funds shall first be used to
satisfy obligations to ▇▇▇▇▇, and the balance shall be
9
distributed to Atlas, provided that if ▇▇▇▇▇ is entitled to
more than US $350,000 the excess shall be paid by Atlas, and
if ▇▇▇▇▇ is required to pay damages all such damages shall
be for Atlas' account.
(B) The sum of US$84,000.00 of the Purchase Price will be placed
in an interest bearing third party escrow account (subject
to a reasonable escrow agreement to be prepared by counsel
for both Parties) pending resolution of the Canadian goods
and services tax audit. Atlas will use its best efforts to
negotiate a reduction of that liability, but will not
execute any settlement agreement until obtaining the written
approval of Seven Peaks (which will not be unreasonably
withheld). Upon resolution, the escrowed funds shall first
be used to satisfy the tax obligations, and the balance
shall be distributed to Atlas.
(C) The outstanding balance of financing provided by Seven Peaks
to Atlas, including principal and interest, under the DIP
Agreement shall be deducted from the amount of the Purchase
Price payable to Atlas and such deduction shall be paid to
Seven Peaks.
(D) The following portions of the Purchase Price will be placed
in a third party escrow account unless previously paid
(subject to a reasonable escrow agreement to be prepared by
counsel for both Parties):
the sum of US$107,029.00 to pay the then existing penalties
under the agreement between CUSA and ▇▇▇▇▇▇▇▇▇ World
Industries,
the sum of US$30,000.00 to pay the existing debt owed by
Cornerstone to C&C Logging, Inc. under its Perlite Haulage
Contract with Cornerstone,
the sum of US$129,000.00 of the Purchase Price to pay the
commission due to Monarch Financial Corporation, and
the sum of US$37,500 of the Purchase Price to pay ▇▇▇▇▇▇
▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇▇ pay if he does not remain an employee of
CUSA after Closing.
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If Seven Peaks is able to negotiate a lesser amount payable to
either ▇▇▇▇▇▇▇▇▇ or C&C, one half of the savings will be
distributed to Atlas and one half to Seven Peaks. If the amount
payable to Monarch is less than $129,000, the balance will be
distributed to Atlas. If ▇▇. ▇▇▇▇▇▇ remains an employee of CUSA
after Closing the amount escrowed for his severance shall be
distributed to Atlas.
(2) Atlas shall direct the transfer agent that disbursement of the
Purchase Price under 3(c)(i) above shall not occur until:
(A) Atlas and Seven Peaks certify to the transfer agent that
they have adjusted the amount of Cornerstone's debt to Atlas
(the "Cornerstone Debt") such that the total amount paid by
Seven Peaks for acquiring all of the Cornerstone Shares,
plus the Cornerstone Debt, equals Four Million Dollars
(U.S.); and that after such adjustment, the Cornerstone Debt
has been further credited or debited as follows:
Atlas and Seven Peaks will review the amount of the accounts
payable (except those set out in subparagraph 3(c)(i) above
and except expenses incurred by Cornerstone in connection
with the Offer) and accounts receivable plus cash of CUSA
(without regard, however to any recoupable royalty accounts,
which shall remain the property of CUSA)--if the liabilities
(other than those hereinbefore excluded) exceed the
receivables and cash, the excess will be credited against
(subtracted from) the amount of the adjusted Cornerstone
Debt, if the opposite occurs (receivables and cash exceed
liabilities), the difference will be debited against (added
to) the amount of the adjusted Cornerstone Debt. All
inventory at the Process Plant and the ▇▇▇▇▇▇ Facility shall
remain the property of CUSA; and
(B) Seven Peaks has certified that Atlas has delivered to Seven
Peaks the written resignations of the officers and directors
of Cornerstone either nominated by Atlas or securing a dual
role as either an officer or director of Cornerstone and
Atlas, and a written quitclaim deed conveying to Seven Peaks
the gross proceeds royalty previously
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reserved by Atlas in Atlas' December 13, 1996 Stock Purchase
Agreement with Cornerstone.
4. Representations of and Warranties Concerning the Transaction.
(1) Representations and Warranties of Atlas. Atlas represents and warrants
to Seven Peaks, subject to confirmation of this Agreement and any
orders entered in the Bankruptcy Case, that the statements contained
in this subparagraph 4(a) are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing (as
though made then and as though the Closing were substituted for the
date of this Agreement throughout this subparagraph 4(a)):
(1) Organization of Atlas. Atlas is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Delaware.
(2) Authorization of Transaction. Atlas has full corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement has been duty
authorized, executed and delivered by Atlas and constitutes the
valid and legally binding obligation of Atlas, enforceable in
accordance with its terms and conditions, subject to: (A)
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally; (B) the
qualification that equitable remedies, including without
limitation, specific performance and injunction, may be granted
only in the discretion of a court of competent jurisdiction; and
(C) the qualification that rights to indemnity may be limited by
applicable law.
(3) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will violate (A) any provision of the Articles of
Incorporation or Bylaws of Atlas; (B) any provision of law; (C)
any order of any court or other agency of government; (D) any
provision of any indenture, agreement or other instrument to
which Atlas, Cornerstone or CUSA is a party or by which the
Project is bound; or (E) be in conflict with, result in a breach
of or constitute (with due notice and lapse of time) a default
under any such indenture, agreement or other instrument. To the
knowledge of Atlas, there is no law, rule or regulation, nor is
there any judgment, decree or
12
order of any court or governmental authority binding on Atlas,
Cornerstone or CUSA which would be contravened by the execution,
delivery, performance or enforcement of this Agreement or any
instrument or agreement required hereunder.
(4) Brokers' Fees. Atlas has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which
Seven Peaks could become liable or obligated except as set forth
in subparagraph 3(c)(i), above.
(5) Atlas Securities. Atlas holds of record and owns beneficially all
of the Atlas Securities, free and clear of any restrictions on
transfer (other than restrictions under applicable securities
laws), taxes, security interests, options, warrants, purchase
rights, contracts, commitments, equities, claims or demands
(except as contemplated by the DIP Agreement) and no voting
trust, proxy, or other agreement or understanding exists with
respect to the voting of the Atlas Securities.
(2) Representations and Warranties of Seven Peaks. Seven Peaks represents
and warrants to Atlas that the statements contained in this paragraph
4(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing (as though made then
and as though the Closing were substituted for the date of this
Agreement throughout this paragraph 4(b)) and will remain correct and
complete until such time as Atlas has received all of the
consideration to which it is entitled hereunder as set forth in
paragraph 3:
(1) Organization of Seven Peaks. Seven Peaks is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Kentucky.
(2) Authorization of Transaction. Seven Peaks has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by Seven Peaks and constitutes
the valid and legally binding obligation of Seven Peaks,
enforceable in accordance with its terms and conditions, subject
to: (A) bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally
(B) the qualification
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that equitable remedies, including, without limitation, specific
performance and injunction, may be granted only in the discretion
of a court of competent jurisdiction; and (C) the qualification
that rights to indemnity may be limited by applicable law.
(3) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will violate (A) the charter or bylaws of Seven Peaks;
(B) any provision of law; (C) any order of any court or other
agency of government; (D) any provision of any indenture,
agreement or other instrument to which Seven Peaks is a party or
by which its properties or assets are bound; or (E) be in
conflict with, result in a breach of or constitute (with due
notice and lapse of time) a default under any such indenture,
agreement or other instrument. To the knowledge of Seven Peaks,
there is no law, rule or regulation, nor is there any judgment,
decree or order of any court or governmental authority binding on
Seven Peaks which would be contravened by the execution,
delivery, performance or enforcement of this Agreement or any
instrument or agreement required hereunder.
(4) Brokers' Fees. Seven Peaks has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for
which Atlas could become liable or obligated.
5. Pre-Offer Representations and Warranties Concerning Cornerstone. Atlas, in
its capacity as a 61% shareholder of Cornerstone, represents and warrants
to Seven Peaks that the statements contained in this paragraph 5 are
correct and complete as of the date of this Agreement and will be correct
and complete as of the date of the Offer (as though made then and as though
the date of the Offer were substituted for the date of this Agreement
throughout this paragraph 5):
(1) Employees. Cornerstone has no employees.
(2) Subsidiaries. Cornerstone has no Subsidiaries except CUSA.
(3) Business Activities. Cornerstone has conducted no business activity
other than the ownership of CUSA since November 1995.
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(4) Cornerstone Financial Statements. The Cornerstone Financial
Statements:
(1) have been prepared in accordance with Canadian generally
accepted accounting principles, applied on a basis
consistent with that of the preceding periods;
(2) are complete and accurate in all material respects;
(3) accurately disclose the assets, liabilities (whether
accrued, absolute, contingent or otherwise) and financial
condition of Cornerstone and the results of the operations
of Cornerstone, as at the dates thereof and for the periods
covered thereby;
(4) reflect all proper accruals as at the dates thereof and for
the periods covered thereby of all amounts which, though not
payable until a time after the end of the relevant period,
are attributable to activities undertaken during, that
period; and
(5) contain or reflect adequate reserves for all liabilities and
obligations of Cornerstone of any nature, whether absolute,
contingent or otherwise, matured or unmatured, as at the
date thereof
No information has become available to Cornerstone that would render
the Cornerstone Financial Statements incomplete or inaccurate. There
have been no significant changes in Cornerstone's financial condition
since June 30, 1998 as reflected in the Cornerstone Financial
Statements.
(5) Consents, Approvals. No consent, approval, license, order,
authorization, regulation or declaration of, or filing with, any
governmental authority or other Person is required by Atlas,
Cornerstone or CUSA, in connection with (a) the Closing or (b) the
execution and delivery by Atlas of this Agreement or the other
documents to be delivered by Atlas to Seven Peaks hereunder or (c) the
observance and performance by Atlas of its obligations under this
Agreement or such other documents.
(6) Non-Arm's Length Transaction. There does not exist any agreement,
understanding or commitment giving rise to any
15
material obligations, financial or otherwise, on the part of
Cornerstone to Atlas or any of its affiliates (or any associates or
insiders of any of the foregoing), other than the Cornerstone Debt.
(7) Absence of Certain Changes or Events. To the best knowledge of Atlas,
since September 15, 1998 and except as publicly disclosed, Cornerstone
has conducted its business only in, and has not taken any actions
except in, the ordinary course of business and in a manner consistent
with past practice and has preserved substantially intact the business
organization and relationships of Cornerstone and, since such date,
there has not been any change in the working capital, assets,
financial condition, results of operation, cash flows, business,
liabilities or prospects of Cornerstone and its subsidiaries, taken as
a whole, having a material adverse effect.
6. Closing Representations and Warranties Concerning Cornerstone. Atlas, in
its capacity as a 61% shareholder of Cornerstone, represents and warrants
to Seven Peaks that the statements contained in this paragraph 6 are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing (as though made then and as though the
Closing were substituted for the date of this Agreement throughout this
paragraph 6):
(1) Organization, Qualification, and Corporate Power. Cornerstone is a
corporation duly organized, validly existing, and in good standing
under the laws of the Province of Ontario. Cornerstone is duly
authorized to conduct business and is in good standing under the laws
of the Province of Ontario. Cornerstone has the corporate power and
authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. No proceedings have been
taken or authorized by Cornerstone or, to the best of Atlas's
knowledge, any other Person, with respect to the bankruptcy,
insolvency, liquidation, dissolution or winding up of Cornerstone or
with respect to any amalgamation, merger, consolidation, arrangement
or reorganization relating to Cornerstone.
(2) Capitalization. The Cornerstone Shares are the only issued and
outstanding equity securities of Cornerstone and the Cornerstone
Shares have been duly authorized, are validly issued, fully paid, and
nonassessable. No Person has any agreement or any option, right or
privilege capable of becoming an agreement for the purchase,
16
subscription or issuance of any securities of Cornerstone or any
securities convertible into or exchangeable for securities of
Cornerstone, except (as disclosed on Schedule 5(b)) for options to
directors and officers of Cornerstone to purchase 475,200 shares at
C$0.15, however, Atlas shall request of each holder of such options
that they voluntarily cancel and return their options to Atlas prior
to Closing.
(3) Brokers' Fees. Cornerstone does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(4) Environmental Compliance. To the knowledge of Atlas, there are no
conditions or activities at or on the Project or elsewhere which would
result in a violation of or liability under applicable Environmental
Laws or result in Environmental Costs to Cornerstone, except for such
matters as would not have a material adverse effect on the Project
taken as a whole. To the knowledge of Atlas, there have been issued
under applicable Environmental Laws no notices of violation or consent
orders to which Cornerstone or the Project are subject, except for
such matters as would not have a material adverse effect on the
Project taken as a whole. There are no pending or, to the knowledge of
Atlas, threatened proceedings by or before any court or other
governmental authority against Cornerstone with respect to its
operation or ownership of the Project alleged to be, or have been, in
violation of, under, any Environmental Law, except for such matters as
would not have a material adverse effect on the Project taken as a
whole
7. Pre-Offer Representations and Warranties Concerning CUSA. Atlas, in its
capacity as a 61% shareholder in Cornerstone, represents and warrants to
Seven Peaks that the statements contained in this paragraph 7 are correct
and complete as of the date of this Agreement and will be correct and
complete as of the date of the Offer (as though made then and as though the
date of the Offer were substituted for the date of this Agreement
throughout this paragraph 7):
(1) Royalties. Except as set forth in Schedule 6(a), to Atlas's knowledge
there are no royalties or other burdens on production affecting the
▇▇▇▇▇▇ ▇▇▇▇ Property.
(2) Title to Claims. Except as disclosed in the "Title Report" of February
9, 1996 prepared for Atlas by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, to Atlas's
knowledge, as to the unpatented mining claims comprising the ▇▇▇▇▇▇
▇▇▇▇
17
Property (the "Claims") subject to the paramount title of the United
States:
(1) CUSA is in exclusive possession thereof, and except as
disclosed herein, the Claims are free and clear of all
liens, encumbrances or other burdens on production or claims
of third parties arising by, through or under CUSA;
(2) since CUSA acquired the Claims, assessment work, intended in
good faith to satisfy the requirements of state and federal
laws and regulations and generally regarded in the mining
industry as sufficient, for all assessment years up to and
including the assessment year ending September 1, 1992, was
timely performed on or for the benefit of the Claims and
affidavits evidencing such work were timely recorded;
(3) since CUSA acquired the Claims, claim rental and maintenance
fees required to be paid under federal law in lieu of the
performance of assessment work, in order to maintain the
Claims commencing with the assessment year ending on
September 1, 1993 and through the assessment year ending on
September 1, 1999, have been timely and properly paid, and
affidavits or other notices evidencing such payments and
required under federal or state laws or regulations have
been timely and properly filed or recorded;
(4) since CUSA acquired the Claims, all filings with the Bureau
of Land Management with respect to the Claims which are
required under the Federal Land Policy and Management Act of
1976 have been timely and properly made, and
(5) there are no actions or administrative or other proceedings
pending or threatened against or affecting the Claims.
Nothing herein shall be deemed a representation that any of
the Claims contain a discovery of valuable minerals.
(3) Title to Assets. Except as otherwise set forth or contemplated in the
Title Report, or as disclosed herein, CUSA has good and marketable
title to all of its assets (including, without limiting the generality
of the foregoing, the Process Plant Land), free and clear of all
18
liens, encumbrances or claims of third parties except for taxes due
but not yet payable.
(4) Material Contracts and Commitments. True and correct copies of all
contracts, agreements, mortgages, indentures and leases (including
equipment leases) to which CUSA is a party (collectively the
"Contracts") have been provided by Atlas to Seven Peaks prior to the
date hereof. To Atlas's knowledge, except as disclosed herein, CUSA
has performed all material obligations required to be performed by it
under the Contracts and is not in default, and will not be in default
as a result of the consummation of the transactions contemplated
herein, under any Contract or any license, judgment, injunction,
decree, order, determination, restriction, or other instrument to
which it is subject in connection with the Project, except for such
matters as would not have a material effect on the Project taken as a
whole.
(5) Litigation and Claims. To the knowledge of Atlas, other than matters
affecting the U.S. mining industry as a whole, there are no actions,
suits or proceedings pending or threatened against or affecting the
Project, including any actions, suits, or proceedings being prosecuted
by any federal, state, or local department, commission, board, bureau,
agency, or instrumentality. To the knowledge of Atlas, CUSA is not in
any material default with respect to, or subject to, any order, writ,
injunction, judgment or decree of any court or any federal, state or
local department, commission, board, bureau, agency or instrumentality
which relates to the Project.
(6) Consents. CUSA has obtained all consents, approvals, authorizations,
declarations, or filing required by any federal, state, local, or
other authority, or any lenders, lessors, creditors, and other third
parties in connection with the consummation of the transactions
contemplated hereby.
(7) Taxes. CUSA, so long as it has been in possession of the Project, has
duly and timely filed, in correct form, all federal, state and local
income, excise, property and other tax returns, reports or statements
required to be filed by it with respect to the Project and has fully
paid all taxes, fees, assessments, penalties, and interest due in
respect of any such returns, reports, or statements, except for such
matters as would not have a material adverse effect on the Project
taken as a whole.
19
(8) Undisclosed Liabilities. CUSA has no liabilities (whether accrued,
absolute, contingent or otherwise, matured or unmatured) of any kind
except:
(1) liabilities disclosed or provided for in the Cornerstone
Financial Statements; and
(2) liabilities incurred in the ordinary course of business since
June 30, 1998, which are consistent with past practice, are not,
in the aggregate, material and adverse to CUSA or the Project and
do not violate any covenant contained in this Agreement or
constitute a breach of any representation or warranty made in or
pursuant to this Agreement.
(9) Absence of Changes. Since June 30, 1998:
(1) CUSA has conducted its business in the ordinary course, has not
incurred any debt, obligation or liability out of the ordinary
course of business or of an unusual or extraordinary nature and
has used its best efforts to preserve its business and assets;
(2) there has not been any change in the condition of CUSA's business
or assets other than changes in the ordinary course of business,
and such changes have not, either individually or in the
aggregate, been materially adverse and have not had nor may they
be reasonably expected to have, either before or after Closing, a
material adverse effect on the condition of CUSA's business or
assets;
(3) to Atlas's knowledge, there has not been any change in, or
creation of, any applicable law, any termination, amendment or
revocation of any licence or any damage, destruction, loss, labor
dispute or other event, development or condition of any character
(whether or not covered by insurance) which has had, or could
have, a material adverse affect on CUSA's business or assets; and
(4) there has not been any change in the accounting principles,
policies, practices or procedures of CUSA or their application to
CUSA.
20
(10) Absence of Unusual Transactions. Since June 30, 1998 CUSA has not:
(1) transferred, assigned, sold or otherwise disposed of any of
its assets or canceled any debts or claims other than in the
ordinary course of business;
(2) incurred or assumed any obligation or liability (fixed or
contingent) other than obligations or liabilities included
in the Cornerstone Financial Statements and obligations and
liabilities incurred since June 30, 1998 in the ordinary
course of business;
(3) settled any liability, claim, dispute, proceedings, suit or
appeal pending against it or against any of its assets;
(4) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than
liabilities included in the Cornerstone Financial Statements
and liabilities incurred since June 30, 1998;
(5) made any material change with respect to any method of
management operation or accounting in respect of its
business;
(6) waived or omitted to take any action in respect of any
rights of substantial value or entered into any commitment
or transaction if such loss, rights, commitment or
transaction is or would be material in relation to its
assets or business;
(7) created any encumbrance on any of its assets or suffered or
permitted any such encumbrance that has arisen on its assets
since that date to remain;
(8) modified, amended or terminated any contract, agreement or
arrangement to which it is or was a party, or waived or
released any right which it has or had, other than in the
ordinary course of its business;
(9) incurred any debt, liability or obligation for borrowed
money, or incurred any other debt,
21
liability or obligation except in the ordinary course of its
business;
(10) issued or sold any securities or issued, granted or
delivered any right, option or other commitment for the
issuance of any securities;
(11) declared or paid any dividend or other distribution in
respect of any shares in its capital or purchased or
redeemed any such shares;
(12) modified, amended or terminated any contract, agreement or
arrangement to which it is or was a party, or waived or
released any right which it has or had, other than in the
ordinary course of its business; or
(13) authorized or agreed or otherwise become committed to do any
of the foregoing.
(11) Absence of Guarantees. CUSA has not given nor agreed to give, and is
not a party to or bound by, any guarantee of indebtedness or other
obligations of third parties nor any other commitment by which CUSA
is, or is contingently, responsible for such indebtedness or other
obligations.
(12) Restrictions on Business. CUSA is not a party to any agreement, lease,
mortgage, security document, obligation or instrument, or subject to
any restriction in its articles, by-laws or its directors' or
shareholders' resolutions or subject to any restriction imposed by any
governmental authority or subject to any applicable law or order which
could materially restrict or interfere with the conduct of its
business or its use of assets or which could materially limit or
restrict or otherwise adversely affect the shares or the assets or
business of CUSA, other than statutory provisions and restrictions of
general application to its business.
(13) Conditions of Assets. All material tangible assets of CUSA, other than
the Process Plant, are in good working condition and good repair,
ordinary wear and tear excepted, and comply with all standards and
requirements of all applicable governmental authorities. Both parties
acknowledge that the Process Plant is not in good working condition,
that Seven Peaks has fully inspected the Process Plant, that Seven
Peaks accepts the Process Plant
22
"As-is, Where-is, and with all faults," and that the foregoing
sentence shall not apply to the Process Plant.
(14) Insurance. CUSA is insured by reputable insurers against liability,
loss and damage in such amounts and against such risks as are
customarily carried and insured against by owners of comparable
businesses, properties and assets, and such insurance coverage will be
continued in full force and effect to and including the Closing. True
and complete copies of all of the most recent inspection reports, if
any, received from insurance underwriters as to the condition of the
assets and the business have been delivered to Seven Peaks. CUSA is
not in default with respect to any of the provisions contained in any
such insurance policy and there are no current claims that have not
been settled or finally determined. All such policies of insurance are
in full force and effect and CUSA is not in default, whether as to the
payment of premium or otherwise, under the terms of any such policy.
(15) No Expropriation. CUSA has not received any notice of expropriation of
all or any of its assets and CUSA is not aware of any expropriation
proceeding pending or threatened against or affecting its assets nor
of any discussions or negotiations which could lead to any such
expropriation.
(16) Government Grants. There are no contracts or agreements relating to
grants or other forms of assistance, including loans with interest at
below market rates, received by CUSA from any governmental authority.
(17) Restrictive Covenants. CUSA is not a party to or bound or affected by
any commitment, agreement or document which limits the freedom of CUSA
to compete in any line of business, transfer or move any of its assets
or operations or which does or could adversely affect the business
practices, operations or conditions of CUSA after the Closing.
(18) Books and Records. Atlas has made available to Seven Peaks all books
and records of or relating to CUSA. Such books and records fairly and
correctly set out and disclose in all respects the financial position
of CUSA in accordance with good business practice and all financial
transactions relating to CUSA have been accurately recorded in such
books and records. The books and records,
23
(1) accurately reflect the basis for the financial condition of
CUSA shown in the Cornerstone Financial Statements; and
(2) together with all disclosures made in this Agreement or in
the schedules hereto, present fairly the financial condition
of CUSA as of and to the date hereof.
No information, records or systems pertaining to the operation or
administration of CUSA are in the possession of, recorded, stored,
maintained by or otherwise dependent on any other person. Atlas has
disclosed the existence of and made available for review by Seven
Peaks all the books and records.
(19) No Joint Venture Interests. CUSA has not nor has it agreed to become,
a partner, member, owner, proprietor or equity investor of or in any
partnership, joint venture co-tenancy or other similar jointly-owned
business undertakings or to acquire or lease any other business
operation and does not have any other significant investment interests
in any similar business owned or controlled by any third party.
(20) Bank Accounts. The name of each bank or other depository in which
Cornerstone or CUSA maintains any bank account, trust account or
safety deposit box has been delivered to Seven Peaks, along with the
names of all persons authorized to draw thereon or who have access
thereto.
8. Closing Representations and Warranties Concerning CUSA. Atlas, in its
capacity as a 61% shareholder in Cornerstone, represents and warrants to
Seven Peaks that the statements contained in this paragraph 8 are correct
and complete as of the date of this Agreement and will be correct and
complete as of the Closing (as though made then and as though the Closing
were substituted for the date of this Agreement throughout this paragraph
8):
(1) Permits and Licenses. A list of all currently active material permits,
licenses, consents, approvals, authorizations, and qualifications
obtained by CUSA in connection with its operations on the ▇▇▇▇▇▇ ▇▇▇▇
Property as of the date of this Agreement, true and correct copies of
each of which have been made available to Seven Peaks, is set forth on
Schedule 6(b)(i); the only other permits, licenses, consents,
approvals, authorizations and qualifications required in order to
operate the Project in the normal course of business are set forth in
Schedule 6(b)(ii). To Atlas's knowledge,
24
CUSA's ownership and operation of the ▇▇▇▇▇▇ ▇▇▇▇ Property is not in
violation of and has resulted in no liability (other than liability
for compliance with existing permits and laws, including but not
limited to performance of reclamation) under any statute, rule or
regulation of any governmental authority applicable to the ▇▇▇▇▇▇
▇▇▇▇ Property, other than violations or liability, if any, which have
not resulted and would not be reasonably expected to result in any
material loss or liability.
(2) Environmental Compliance. To the knowledge of Atlas, there are no
conditions or activities at or on the Project which would result in a
violation of or liability under applicable Environmental Laws or
result in Environmental Costs to CUSA, except for such matters as
would not have a material adverse effect on the Project taken as a
whole. To the knowledge of Atlas, there have been issued under
applicable Environmental Laws no notices of violation or consent
orders to which CUSA (with respect to its operations at the Project)
or the Project are subject, except for such matters as would not have
a material adverse effect on the Project taken as a whole. There are
no pending or, to the knowledge of Atlas, threatened proceedings by or
before any court or other governmental authority against CUSA with
respect to its operation or ownership of the Project alleged to be, or
have been, in violation of, under, any Environmental Law, except for
such matters as would not have a material adverse effect on the
Project taken as a whole.
(3) Legality. To the knowledge of Atlas, CUSA's operations on the Project
have been conducted in material compliance with applicable laws,
rules, ordinances and other governmental regulations, including,
without limitation, those relating to zoning, condemnation, mining,
reclamation, environmental matters, equal employment, and federal.
state, or local health and safety laws, rules, and regulations, except
for such violations as would not materially adversely affect the
Project.
9. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(1) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions
contemplated by this Agreement, including obtaining approval of this
Agreement in the Bankruptcy Case.
25
(2) Notices and Consents. Each of the Parties will (and Atlas will use its
reasonable best efforts cause Cornerstone and CUSA to) give any
notices to, make any filings with, and use its reasonable best efforts
to obtain any required authorizations, consents, and approvals of
governments and governmental agencies in connection with the
transactions contemplated by this Agreement.
(3) Operation of Business. Atlas, in its capacity as a 61% shareholder of
Cornerstone, will use its reasonable best efforts not to cause or
permit Cornerstone or CUSA to engage in any practice, take any action,
or enter into any transaction outside the ordinary course of business
of Cornerstone or CUSA consistent with the past practice and custom of
Cornerstone or CUSA.
(4) Full Access for Due Diligence. Atlas, in its capacity as a 61%
shareholder of Cornerstone, will use its reasonable best efforts to
cause Cornerstone and CUSA to permit Seven Peaks and its
Representatives to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of
Cornerstone and CUSA, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or
pertaining to Cornerstone and CUSA, which may relate, in the good
faith judgment of Seven Peaks, to the titles held by Cornerstone and
CUSA and to its properties, to the financial condition of Cornerstone
and CUSA, to environmental matters related to Cornerstone and CUSA and
its properties, and to the ore reserve calculations of Cornerstone and
CUSA. Seven Peaks and Atlas hereby acknowledge and agree that Atlas
makes no representation or warranty as to the reliability, accuracy or
completeness of any of the information or data referred to in this
paragraph. Seven Peaks (and its Representatives) will treat and hold
as Confidential Information any and all information received from
Atlas, Cornerstone and CUSA and their Representatives in the course of
the review contemplated by this paragraph.
(5) Exclusivity. Unless and until this Agreement is terminated prior to
the Cornerstone Shares being taken up under paragraph 3(b) or until
Seven Peaks withdraws the Offer, Atlas will not (and will use its
reasonable best efforts to not cause or permit Cornerstone and CUSA
to) solicit, initiate, or encourage the submission of any proposal or
offer from any Person relating to the acquisition of all or
substantially all of the capital
26
stock or assets of Cornerstone and CUSA (including any acquisition
structured as a merger, consolidation or share exchange), unless such
proposal or offer pertains to Atlas as a whole and is made subject to
this Agreement.
10. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(1) General. In case at any time after the Offer is made any further
action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution
and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification hereunder).
(2) Corporate Records. As soon as practicable after the Cornerstone Shares
are taken up, Atlas shall deliver to Seven Peaks all corporate records
of Cornerstone and CUSA which are maintained by Atlas or its agents or
Affiliates provided that Seven Peaks and Atlas shall coordinate and
agree upon a mutually acceptable schedule for the assembly and
delivery of such documents; thereafter, Seven Peaks shall afford Atlas
reasonable access to such documents upon reasonable notice and during
regular business hours.
(3) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any third party action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
involving Cornerstone or CUSA, the other Party shall cooperate
(without subpoena) with it and its counsel in the defense or contest,
make available its personnel, and provide such testimony and access to
its books, records and properties as shall be necessary in connection
with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor hereunder).
11. Survival of Representations and Warranties. The representations and
warranties of Seven Peaks and Atlas contained herein shall survive the
Closing for a period of two years.
27
12. Termination.
(1) Termination of Agreement by the Parties. The Parties may terminate
this Agreement as provided below:
(1) Seven Peaks and Atlas may terminate this Agreement by mutual
written consent at any time prior to the Closing; or
(2) Seven Peaks may terminate this Agreement by giving written notice
to Atlas at any time prior to the Closing in the event Atlas has
breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Seven Peaks
has notified Atlas of the breach, and Atlas has not disputed the
existence or nature of such breach or such breach has not been
cured by the Automatic Termination Date; or
(3) Atlas may terminate this Agreement by giving written notice to
Seven Peaks at any time prior to the Closing in the event Seven
Peaks has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
Atlas has notified Seven Peaks of the breach, and Seven Peaks has
not disputed the existence or nature of such breach or such
breach has not been cured by the Automatic Termination Date.
(2) Automatic Termination. This Agreement shall automatically terminate,
without further action on the part of either Party in the event that:
(1) the Offer has not been made on or before December 31, 1998;
(2) the Offer does not substantially conform with the description in
Schedule A;
(3) Cornerstone Shares deposited under the Offer (including the Atlas
Securities) have not, for any reason whatsoever (other than that
all the terms and conditions of the Offer have not been complied
with or waived by Seven Peaks), been taken up and paid for on or
before the expiry of ten days after the expiry of the Offer.
(4) Closing has not occurred within 90 days after the Offer is made.
28
(3) Effect of Termination. If either Party terminates this Agreement (or
if it terminates automatically) pursuant to this paragraph all rights
and obligations of the Parties hereunder shall terminate without any
liability of either Party to the other Party except for any liability
of any Party then in breach, and Seven Peaks shall have only the
rights and Atlas the obligations set forth in the DIP Agreement;
however, if Seven Peaks terminates this Agreement without cause after
90% of the Cornerstone Shares have been deposited under the Offer,
Atlas shall be entitled to retain the first $250,000.00 provided by
Seven Peaks under the DIP Agreement, plus interest thereon, with any
remaining advances under the DIP Agreement refunded to Seven Peaks as
provided in the DIP Agreement.
13. Confidentiality. Seven Peaks acknowledges that any and all information
concerning the businesses, properties and affairs of Atlas which is
disclosed to Seven Peaks or its Representatives by Atlas or its
Representatives or by Cornerstone or its Representatives, or which is
discovered by Seven Peaks or its Representatives in the course of its due
diligence constitutes the unique, proprietary and confidential information
of Atlas (collectively "Confidential Information"). Notwithstanding the
foregoing, however, "Confidential Information" shall not include any
information or data which is in, or becomes a part of, the public domain by
any means other than the breach by Seven Peaks or its Representatives of
the obligations hereunder. Until the earlier to occur of the Closing or the
second anniversary of the Termination of this Agreement pursuant to
paragraph 12 hereof Seven Peaks shall maintain all Confidential Information
disclosed to or received by it pursuant to this Agreement in confidence and
shall not disclose the same to any third party unless required to do so by
court order or by law, in which case Seven Peaks shall notify Atlas, in
writing, prior to making such disclosure and shall cooperate with Atlas to
preserve and protect the confidentiality of the Confidential Information to
the fullest extent possible. Additionally, except as specifically
contemplated by this Agreement, Seven Peaks shall not utilize any
Confidential Information for its own benefit or for the benefit of any
other party. If this Agreement is terminated, for any reason whatsoever,
Seven Peaks and its Representatives will return to Atlas all tangible
embodiments (and all copies) of the Confidential Information which are in
their possession.
14. Miscellaneous.
29
(1) Disclosure of Information Concerning Cornerstone and CUSA. Atlas has
instructed its representatives, and to the extent it is able to do so
the representatives of Cornerstone and CUSA to answer questions
concerning the businesses, affairs, operations and properties of CUSA
which are addressed to them by Seven Peaks and its Representatives
during the course of the due diligence conducted by Seven Peaks.
Additionally, Atlas has instructed its Representatives and the
Representatives of Cornerstone and CUSA to provide to Seven Peaks and
its Representatives copies of documents requested by Seven Peaks and
its Representatives in the course of the due diligence conducted by
Seven Peaks and to otherwise cooperate with and assist Seven Peaks and
its Representatives in such due diligence efforts. The Parties
acknowledge and agree that all such information and documents are
Confidential Information.
(2) Press Releases and Public Announcements. Neither Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior
written approval of the other Party; provided, however, that either
Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party
prior to making the disclosure) or if such disclosure is made pursuant
to the requirements of the U.S. Bankruptcy Code or a court order in
the Bankruptcy Case.
(3) Entire Agreement. This Agreement (including the DIP Agreement and the
Schedules referred to herein) constitutes the entire agreement among
the Parties and their Affiliates in regard to the subject matter
hereof and supersedes any prior understandings, agreements, or
representations (specifically including the Confidentiality Agreement
of August 26, 1998) by or among the Parties or their Affiliates,
written or oral, to the extent they relate in any way to the subject
matter hereof.
(4) Succession anti Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party.
30
(5) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(6) Headings. The paragraph headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(7) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if sent by prepaid overnight courier or transmitted by
telecopier addressed to the intended recipient as set forth below:
If to Atlas:
Atlas Corporation
Republic Plaza, Suite 3050
▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to :
▇▇▇▇▇▇ Sender, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Sender & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seven Peaks:
Seven Peaks Mining, Inc.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Any notice, request, demand, claim, or other communication hereunder sent to the
intended recipient at the address set forth above shall be deemed to have been
duly given on the business day following the day upon which it is given to the
courier or on the day (or the next business day if such day is not a business
day) upon which it is telecopied. Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(8) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Colorado.
(9) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by Seven Peaks and Atlas. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(10) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(11) Expenses. Each of Seven Peaks and Atlas will bear its own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(12) Currency. All dollar amounts contained herein are expressed in lawful
currency of the United States of America except as specifically set
forth herein.
(13) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement in the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed
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as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference
to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word "Including" shall mean
including without limitation.
(14) Incorporation of Schedules. The Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof.
(15) Arbitration of Disputes.
(1) Unresolved Disputes. Any disagreement or dispute arising out of
or relating to this Agreement, its existence, interpretation,
performance or enforcement (including but not limited to the
existence of a default) not resolved by the Parties within fifty
(50) days after the date on which one party notifies the other of
any such disagreement or dispute shall be settled by arbitration
in accordance with this paragraph.
(2) Rules. Matters subject to arbitration shall be settled by
arbitration before one disinterested person who shall
arbitrate the dispute in Denver, Colorado, in accordance
with the commercial arbitration rules of the American
Arbitration Association in effect at the time of
arbitration. In the event of a conflict between those
commercial arbitration rules and this paragraph, this
paragraph shall control. The judgment of the arbitrator as
to such matters shall be binding upon the parties to this
Agreement, and judgment upon any award rendered by the
arbitrator may be entered in any court having jurisdiction
under the provision of the Colorado Revised Statutes
pertaining to arbitration and award as they may be amended
from time to time.
(3) Demand. To demand arbitration any party (the "demanding
party") shall give written notice to the other party (the
"responding party"). Such notice shall specify the nature of
the issues in dispute, the amount involved, and the remedy
requested. Within twenty (20) days of the receipt of the
notice, the responding
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party shall answer the demand in writing, specifying the
issues that party disputes. The parties shall thereupon each
select one arbitrator, who shall be qualified by skill and
experience in the subject matter under dispute. Within
fifteen (15) days thereafter, the two party appointed
arbitrators shall jointly select the disinterested person
arbitrator who shall be similarly qualified.
(4) Proceedings. Within twenty (20) days after the third arbitrator
has been selected or appointed, each party to the dispute shall
submit to the arbitrator a written statement of its position as
to the matter being arbitrated, including its position on the
necessity for discovery or a formal hearing. The arbitrator
shall, within fifteen (15) days after submission of statements,
establish a schedule for the arbitration proceedings and issues
orders relating to the conduct of such proceedings, governing,
among other matters, the extent and nature of any discovery to be
allowed and the necessity of a formal hearing. If a hearing is
held, the arbitrator shall issue a decision as to the resolution
of the dispute within fifteen (15) days after the hearing. All
costs, expenses and fees, plus reasonable attorneys' fees, shall
be recoverable by or paid to the substantially prevailing party
in any dispute resolved by arbitration.
15. Nothing contained in this Agreement shall require Atlas to request any
director or officer of Cornerstone to take any action or to refrain from
taking any action as a director or officer of Cornerstone or to act
otherwise than in accordance with such person's fiduciary duties as a
director and/or officer of Cornerstone. For greater certainty, nothing
contained herein will prevent Cornerstone from: (i) responding as required
by applicable law to any unsolicited expression of interest, proposal or
offer, (ii) making such disclosure which in the judgment of the board of
directors of Cornerstone upon the advice of counsel is required by law to
the extent required to satisfy the fiduciary obligations of the members of
such board of directors, or (iii) withdrawing or modifying any
recommendation or otherwise fulfilling the fiduciary duties of the members
of the board of directors of Cornerstone (including the Atlas
representatives thereon) to Cornerstone and its shareholders in relation to
the transaction if to do so would, in the opinion of the board of directors
of Cornerstone (upon the advice of counsel), be a proper exercise of such
directors' fiduciary duties.
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16. THIS AGREEMENT AND ATLAS' CONSUMMATION OF THE TRANSACTION CONTEMPLATED
HEREIN ARE SUBJECT TO APPROVAL OF THE U.S. BANKRUPTCY COURT FOR THE
DISTRICT OF COLORADO
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives upon the date first herein
written.
SEVEN PEAKS MINING, INC.
By: ___________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
ATLAS CORPORATION
By: ___________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
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