EXHIBIT 2.8
ASSET PURCHASE AGREEMENT
dated as of
April 24, 2004
among
TSL ACQUISITION CORP.
AMCON DISTRIBUTING COMPANY
and
TRINITY SPRINGS, LTD.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated April 24, 2004
("Agreement Date"), by and among TSL Acquisition Corp., a Delaware
corporation ("Buyer"); AMCON Distributing Company, a Delaware
corporation ("AMCON"); and Trinity Springs, Ltd., an Idaho corporation
("Seller").
RECITALS
A. Seller desires and intends to sell substantially all of its
Assets (but excluding the Excluded Assets) at the price and on the
terms and conditions herein set forth.
B. Buyer desires and intends to purchase substantially all the
Assets (but excluding the Excluded Assets) and to assume certain of
the liabilities relating to the Assets, at the price and on the terms
and conditions herein set forth.
The parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
1.1 DEFINITIONS
(a) In addition to any other terms defined in this Agreement, the
terms (and variations thereof) set forth in Appendix A (which is
incorporated herein by reference) shall have the meanings specified or
referred to in Appendix A.
(b) Accounting Terms and Determinations. Unless otherwise
specified herein (including Appendix A), all accounting terms used
herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
ARTICLE 2
SALE AND TRANSFER OF ASSETS; ISSUANCE OF STOCK; CLOSING
2.1 ASSETS TO BE SOLD; ISSUANCE OF SELLER STOCK
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, but effective as of the Effective Time,
Seller shall sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase and acquire from Seller, free and clear of any
Encumbrances other than Permitted Encumbrances, all of Seller's right,
title and interest in and to all of Seller's property and assets,
real, personal or mixed, tangible and intangible, of every kind and
description, wherever located, including the following (but excluding
the Excluded Assets):
(a) all Real Property and Real Property Leases, including the Real
Property and Real Property Leases described in Schedules 3.6 and 3.7;
(b) all Tangible Personal Property, including those items described
in Schedule 2.1(b);
(c) all Inventories;
(d) all Seller Contracts, including those listed in Schedule
3.18(a), and all outstanding offers or solicitations made by or to
Seller to enter into any Contract;
(e) all Governmental Authorizations and all pending applications
therefor or renewals thereof, in each case to the extent transferable
to Buyer, including those listed in Schedule 3.15(b);
(f) all data and Records related to the operations of Seller,
including client and customer lists and Records, referral sources,
research and development reports and Records, production reports and
Records, service and warranty Records, equipment logs, operating
guides and manuals, copies of financial and accounting Records,
creative materials, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and
Records and, subject to Legal Requirements, copies of all personnel
Records and other Records;
(g) all of the intangible rights and property of Seller, including
Intellectual Property Assets, going concern value, goodwill,
telephone, telecopy and e-mail addresses and listings and those items
listed in Schedules 3.23(b), 3.23(b)(i), 3.23(c), 3.23(d), 3.23(e),
and 3.23(f).
(h) all insurance benefits, including rights and proceeds, arising
from or relating to the Assets or the Assumed Liabilities prior to the
Effective Time, unless expended in accordance with this Agreement;
(i) all claims of Seller against third parties relating to the
Assets, whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
noncontingent, including all such claims listed in Schedule 2.1(I);
(j) all of Seller's Water Rights; and
(k) all rights of Seller relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect thereof
that are not excluded under Section 2.2(f).
All of the property and assets to be transferred to Buyer hereunder
are herein referred to collectively as the "Assets." Notwithstanding
the foregoing, the transfer of the Assets pursuant to this Agreement
shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to
Section 2.3(a).
2.2 EXCLUDED ASSETS
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following assets of Seller
(collectively, the "Excluded Assets") are not part of the sale and
purchase contemplated hereunder, are excluded from the Assets and
shall remain the property of Seller after the Closing:
(a) all cash, cash equivalents and short-term investments;
(b) all Accounts Receivable;
(c) all rights in connection with and assets of the Employee
Plans;
(d) all minute books, stock Records and corporate seals;
(e) the shares of capital stock of Seller held in treasury;
(f) those rights relating to deposits and prepaid expenses and
claims for refunds and rights to offset in respect thereof listed in
Schedule 2.2(f);
(g) all insurance policies and rights thereunder (except to the
extent specified in Sections 2.1(h) and 2.1(I));
(h) all of the Seller Contracts listed in Schedule 2.2(h);
(i) all personnel Records and other Records (including the
financial and accounting Records) that Seller is required by law to
retain in its possession;
(j) all claims for refund of Taxes and other governmental charges
of whatever nature;
(k) all rights of Seller under this Agreement, the Seller Voting
Agreement, the Buyer Shareholder Agreement, the ▇▇▇▇ of Sale, the
Assignment and Assumption Agreement, the Three Year Note, the Ten Year
Note, the Security Agreement, the Deed(s) of Trust and the Guaranty;
and
(l) the assets of Seller listed in Schedule 2.2(l).
2.3 LIABILITIES
(a) Assumed Liabilities. On the Closing Date, but effective as of
the Effective Time, Buyer shall assume and agree to discharge only the
following Liabilities of Seller (the "Assumed Liabilities"):
(i) the ▇▇▇▇▇▇▇ Debt;
(ii) any Liability arising after the Effective Time under the
Seller Contracts and the Real Property Leases assumed by Buyer or any
Seller Contract or Real Property Lease Contract included in the Assets
that is entered into by Seller after the date hereof in accordance
with the provisions of this Agreement (other than any Liability
arising out of or relating to a Breach that occurred before the
Effective Time);
(iii) the liabilities of Seller listed on Schedule
2.3(a)(iii);
(iv) any liability arising after the Effective Time under
Government Authorizations, Legal Requirements and insurance policies
which are assumed by Buyer.
(b) Retained Liabilities. The Retained Liabilities shall remain
the sole responsibility of and shall be retained, paid, performed and
discharged solely by Seller. "Retained Liabilities" shall mean every
Liability of Seller other than the Assumed Liabilities.
2.4 CONSIDERATION
The consideration to be paid by Buyer to Seller for the Assets (the
"Purchase Price") will be:
(a) One Million Dollars ($1,000,000.00), to be paid at Closing by
wire transfer to the account specified by Seller in a writing
delivered to Buyer at least three (3) Business Days before the Closing
Date;
(b) Five Hundred Thousand Dollars ($500,000.00), to be paid at
Closing by delivery of the Three Year Note;
(c) Two Million Eight Hundred Twenty-eight Thousand Four Hundred
Forty Dollars ($2,828,440), to be paid at Closing by delivery of the
Ten Year Note;
(d) Seller's laid-in cost for the merchantable finished goods and
usable raw materials included in the Assets, to be paid in accordance
with Section 2.8;
(e) the book value of the current assets included in the Assets,
to be paid in accordance with Section 2.8;
(f) the assumption of the Assumed Liabilities, to be paid at
Closing by delivery of the Assignment and Assumption Agreement;
(g) such number of shares of Buyer's common stock, par value of
$.01 per share (the "Buyer Common Stock"), as shall equal, upon
issuance, fifteen percent (15%) of the issued and outstanding shares
of Buyer Common Stock on a fully diluted basis following and after
giving effect to AMCON's capital contribution described in
Section 8.4. The shares of Buyer Common Stock issued to Seller
pursuant to this Section 2.4(g) shall be free and clear of
Encumbrances and shall be subject to the terms and provisions set
forth in a shareholder agreement in the form of Exhibit B (the "Buyer
Shareholder Agreement") to be entered into by Buyer, AMCON and Seller
at the Closing; and
(h) the Water Royalty to be paid in accordance with Section 11.1.
2.5 ALLOCATION
The Purchase Price shall be allocated in accordance with Schedule 2.5.
After the Closing, the parties shall make consistent use of the
allocation, fair market value and useful lives specified in Schedule
2.5 for all Tax purposes and in all filings, declarations and reports
with the IRS in respect thereof, including the reports required to be
filed under Section 1060 of the Code. Buyer shall prepare and deliver
IRS Form 8594 to Seller within fifteen (15) days prior to the Closing
Date to be filed with the IRS. In any Proceeding related to the
determination of any Tax, neither Buyer nor Seller shall contend or
represent that such allocation is not a correct allocation.
2.6 CLOSING
The purchase and sale of the Assets and the issuance of stock provided
for in this Agreement (the "Closing") will take place at the offices
of Seller's legal counsel in Boise, Idaho commencing at 10:00 a.m.
(local time) on May 17, 2004, unless Buyer and Seller otherwise agree.
Subject to the provisions of ARTICLE 9, failure to consummate the
purchase and sale of the Assets and the issuance of stock provided for
in this Agreement on the date and time and at the place determined
pursuant to this Section 2.6 will not result in the termination of
this Agreement and will not relieve any party of any obligation under
this Agreement. In such a situation, the Closing will occur as soon
as practicable, subject to ARTICLE 9.
2.7 CLOSING OBLIGATIONS
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:
(a) Seller shall deliver to Buyer, together with funds sufficient
to pay all Taxes necessary for the transfer, filing or recording
thereof:
(i) a ▇▇▇▇ of sale for all of the Assets that are Tangible
Personal Property in the form of Exhibit C (the "▇▇▇▇ of Sale")
executed by Seller;
(ii) an assignment of all of the Assets that are intangible
personal property and of all the Real Property Leases, in the form of
Exhibit D, which assignment shall also contain Buyer's undertaking and
assumption of the Assumed Liabilities (the "Assignment and Assumption
Agreement"), executed by Seller;
(iii) for each interest in Real Property identified on
Schedule 3.6, a recordable general warranty deed or such other
appropriate document or instrument of transfer, as the case may
require, each in form and substance satisfactory to Buyer and its
counsel and executed by Seller;
(iv) assignments of all Intellectual Property Assets and
separate assignments of all Marks, Patents and Copyrights in the form
of Exhibit E executed by Seller;
(v) such other deeds, bills of sale, assignments, documents
and other instruments of transfer and conveyance as may reasonably be
requested by Buyer in connection with the Water Rights, each in form
and substance satisfactory to Buyer and its legal counsel and executed
by Seller;
(vi) such other deeds, bills of sale, assignments,
certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and
substance satisfactory to Buyer and its legal counsel and executed by
Seller;
(vii) employment agreements in the form of Exhibit F and G,
executed (unless execution and delivery thereof has been waived by
Buyer) by Seller's Chief Executive Officer and National Sales Manager
(collectively, the "Employment Agreements");
(viii) the Buyer Shareholder Agreement executed by Seller;
(ix) a certificate executed by Seller as to the accuracy of
its representations and warranties as of the date of this Agreement
and as of the Closing in accordance with Section 2.1 and as to its
compliance with and performance of its covenants and obligations to be
performed or complied with at or before the Closing in accordance with
Section 7.2; and
(x) an officer's certificate of Seller certifying, as complete
and accurate as of the Closing, attached copies of the Governing
Documents of Seller, certifying and attaching all requisite
resolutions or actions of Seller's board of directors and shareholders
approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and the change of name
contemplated by Section 5.7 and certifying to the incumbency and
signatures of the officers of Seller executing this Agreement and any
other document relating to the Contemplated Transactions and
accompanied by the requisite documents for amending the relevant
Governing Documents of Seller required to effect such change of name
in form sufficient for filing with the appropriate Governmental Body;
and
(xi) IRS Form 8594 regarding Purchase Price allocation
executed by Seller.
(b) Buyer and AMCON shall deliver to Seller:
(i) the sum of One Million Dollars ($1,000,000.00) plus eighty
percent (80%) of Seller's estimate of the Inventory and Current Assets
Purchase Price (as determined in accordance with Section 2.8(b)),
which estimate will be delivered in writing to Buyer at least five (5)
business days before the Closing Date, by wire transfer to the account
specified by Seller in a writing delivered to Buyer;
(ii) a promissory note executed by Buyer and payable to Seller
in the original principal amount of Five Hundred Thousand Dollars
($500,000), guaranteed by AMCON pursuant to the Guaranty and secured
by the Security Agreement and the Deed(s) of Trust, and in the form of
Exhibit H (the "Three Year Note");
(iii) a promissory note executed by Buyer and payable to
Seller in the original principal amount of Two Million Eight Hundred
Twenty-Eight Thousand Four Hundred Forty Dollars ($2,828,440),
guaranteed by AMCON pursuant to the Guaranty and secured by the
Security Agreement and the Mortgage, and in the form of Exhibit I (the
"Ten Year Note");
(iv) the Security Agreement executed by Buyer;
(v) the Guaranty executed by AMCON;
(vi) the Mortgage executed by Buyer;
(vii) such other security agreements, filings, documents, and
other instruments necessary to attach and perfect Seller's security
interests in the Collateral;
(viii) the Assignment and Assumption Agreement executed by
Buyer;
(ix) the Employment Agreements executed by Buyer (unless Buyer
waives the requirement for execution and delivery thereof);
(x) the Buyer Shareholder Agreement executed by Buyer and
AMCON;
(xi) a certificate representing the Buyer Common Stock issued
pursuant to Section 2.4(g)), registered in Seller's name;
(xii) a certificate executed by Buyer as to the accuracy of
its representations and warranties as of the date of this Agreement
and as of the Closing in accordance with Section 8.1 and as to its
compliance with and performance of its covenants and obligations to be
performed or complied with at or before the Closing in accordance with
Section 8.2;
(xiii) a certificate executed by AMCON as to the accuracy of
its representations and warranties as of the date of this Agreement
and as of the Closing in accordance with Section 8.1 and as to its
compliance with and performance of its covenants and obligations to be
performed or complied with at or before the Closing in accordance with
Section 8.2;
(xiv) a certificate of the Secretary of Buyer certifying, as
complete and accurate as of the Closing, attached copies of the
Governing Documents of Buyer and certifying and attaching all
requisite resolutions or actions of Buyer's board of directors
approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and certifying to the
incumbency and signatures of the officers of Buyer executing this
Agreement and any other document relating to the Contemplated
Transactions; and
(xv) a certificate of the Secretary of AMCON certifying, as
complete and accurate as of the Closing, attached copies of the
Governing Documents of Seller and certifying and attaching all
requisite resolutions or actions of AMCON's board of directors
approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and certifying to the
incumbency and signatures of the officers of AMCON executing this
Agreement and any other document relating to the Contemplated
Transactions; and
(xvi) IRS Form 8594 regarding Purchase Price allocation
executed by Buyer.
2.8 DETERMINATION OF INVENTORY AND CURRENT ASSETS
(a) The laid-in cost for the merchantable finished goods and
usable finished raw materials included in the Assets and the book
value of the current assets included in the Assets that are described
on Schedule 2.8(a) (the "Current Assets") (the sum of such laid-in
cost and book value of Current Assets is referred to herein as the
"Inventory and Current Assets Purchase Price") shall be determined in
accordance with this Section.
(b) On or before Closing, Seller shall provide Buyer an estimate
of the laid-in cost of the merchantable finished goods and usable raw
materials included in the Assets, calculated on the same basis and
applying the same accounting principles, policies and practices that
were used in preparing the Balance Sheet. Buyer shall pay eighty
percent (80%) of the estimated Inventory and Current Assets Purchase
Price to Seller at Closing as described in Section 2.7(b)(i) above.
(c) After Closing, Seller shall determine the laid-in cost of the
merchantable finished goods and usable raw materials included in the
Assets and the book value of the Current Assets as of the Effective
Time (the "Closing Inventory and Current Assets Statement") on the
same basis and applying the same accounting principles, policies and
practices that were used in preparing the Balance Sheet. Seller shall
deliver the Closing Inventory and Current Assets Statement to Buyer
within thirty (30) days following the Closing Date.
(d) If within twenty (20) days following delivery of the Closing
Inventory and Current Assets Statement Buyer has not given Seller
written notice of its objection as to the Closing Inventory and
Current Assets Statement (which notice shall state the basis of
Buyer's objection), then the Closing Inventory and Current Assets
Statement shall be binding and conclusive on the parties.
(e) If Buyer duly gives Seller such notice of objection, and if
Seller and Buyer fail to resolve the issues outstanding with respect
to the Closing Inventory and Current Assets Statement within thirty
(30) days of Buyer's receipt of Seller's objection notice, Seller and
Buyer shall submit the issues remaining in dispute to KPMG, Boise,
Idaho independent public accountants (the "Independent Accountants")
for resolution applying the principles, policies and practices
referred to in Section 2.8(b). If issues are submitted to the
Independent Accountants for resolution, (i) Seller and Buyer shall
furnish or cause to be furnished to the Independent Accountants such
work papers and other documents and information relating to the
disputed issues as the Independent Accountants may request and are
available to that party or its agents and shall be afforded the
opportunity to present to the Independent Accountants any material
relating to the disputed issues and to discuss the issues with the
Independent Accountants; (ii) the determination by the Independent
Accountants, as set forth in a notice to be delivered to both Seller
and Buyer within sixty (60) days of the submission to the Independent
Accountants of the issues remaining in dispute, shall be final,
binding and conclusive on the parties and shall be used in the
preparation of the Closing Inventory and Current Assets Statement; and
(iii) Seller and Buyer will each bear fifty percent (50%) of the fees
and costs of the Independent Accountants for such determination,
unless the Independent Accountants grant Buyer an adjustment to the
Inventory and Current Assets Purchase Price less than five percent
(5%) of the amount determined by Seller in which case, the fees and
costs of the Independent Accountants shall be borne by Buyer.
(f) Within three (3) business days after the calculation of the
Inventory and Current Assets Purchase Price becomes binding and
conclusive on the parties pursuant to this Section 2.8, Buyer shall
pay the remainder of the Inventory and Current Assets Purchase Price
to Seller by wire transfer to an account specified in writing by
Seller.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations set forth on the Schedules attached to
this Agreement (and to the extent that any exception is disclosed
pursuant to any specific Schedule, it shall be deemed to be disclosed
for any and all other provisions of this ARTICLE 3 for which its
relevance is reasonably ascertainable from its inclusion in any other
Schedule), Seller represents and warrants to Buyer and AMCON as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Schedule 3.1(a) contains a complete and accurate list of
Seller's jurisdiction of incorporation and any other jurisdictions in
which it is qualified to do business as a foreign corporation. Seller
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under the
Seller Contracts. Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of
the properties owed or used by it, or the nature conducted by it,
requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Business, prospects, results
of operations, financial condition or Assets of Seller, in the
aggregate, or any material adverse effect on Seller's Water Rights or
the Real Property, individually or in the aggregate ("Seller Material
Adverse Effect").
(b) Seller has no Subsidiary and, except as disclosed in Schedule
3.1(b), does not own any shares of capital stock or other securities
of any other Person.
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT
(a) This Agreement has been duly authorized, executed and
delivered by Seller, subject only to the receipt of the shareholder
approvals described in Sections 7.6 and 8.5, and is the legal, valid
and binding obligation of Seller, enforceable against Seller in
accordance with its terms except to the extent that enforcement
thereof may be limited by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in
equity). Seller's Board of Directors has approved this Agreement and
the Contemplated Transactions and determined that it will recommend to
the shareholders of Seller approval of the matters listed in Section
5.10. Upon the execution and delivery by Seller of each other
agreement to be executed or delivered by it at the Closing
(collectively, the "Seller Closing Documents"), each of Seller Closing
Documents will constitute the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms except
to the extent that enforcement thereof may be limited by general
principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity). Subject to the receipt of
shareholder approval, Seller has the absolute and unrestricted right,
power and authority to execute and deliver this Agreement and the
Seller Closing Documents and to perform its obligations under this
Agreement and the Seller Closing Documents, and such action has been
duly authorized by all necessary corporate action.
(b) Except as set forth in Schedule 3.2(b), neither the execution
and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) Breach (A) any provision of any of the Governing Documents
of Seller, or (B) any resolution adopted by the board of directors or
the shareholders that remains currently in effect;
(ii) Breach or give any Governmental Body or other Person the
right to prevent any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under any Legal Requirement or any
Order to which Seller or any of the Assets may be subject;
(iii) contravene, conflict with or result in a violation or
breach any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate or
modify (A) the Water Rights, or (B) any Governmental Authorization
that is held by Seller or that otherwise relates to the Assets or to
the Business, except, in the case of clause (B) hereof, any such
contravention, conflict, violation or breach that would not have a
Seller Material Adverse Effect;
(iv) INTENTIONALLY OMITTED.
(v) Breach any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or payment under, or to cancel, terminate
or modify, any Seller Contract, the occurrence of any of which would
have a Seller Material Adverse Effect; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Assets other than those
contemplated hereunder.
(c) Except as set forth in Schedule 3.2(c), Seller is not required
to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized securities of Seller that have the right to vote on the
Contemplated Transactions or any matter related thereto ("Seller
Voting Securities") consist of (i) 30,000,000 shares of common stock,
par value $.01 per share ("Seller Common Stock"), of which 2,618,572
shares are issued and outstanding, and (ii) 15,000,000 shares of
preferred stock, par value $.01 per share ("Seller Preferred Stock"),
of which 1,308,611 shares are issued and outstanding.
3.4 FINANCIAL STATEMENTS
(a) Seller has delivered to Buyer a balance sheet of Seller as at
December 31, 2003 (including the notes thereto, the "Balance Sheet"),
and the related statements of income, changes in shareholders' equity
and cash flows for the fiscal year then ended, including in each case
the notes thereto, and which have been reviewed by Balukoff, ▇▇▇▇▇▇▇▇▇
& Co., P.A. (the "Reviewing Accountant") in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. Within forty-five (45)
days after the end the first fiscal quarter in 2004, Seller will
deliver to Buyer an unaudited balance sheet of Seller as at March 31,
2004 (the "Interim Balance Sheet"), and the related unaudited
statements of income, changes in shareholders' equity, and cash flows
for the three (3) months then ended, including in each case the notes
thereto certified by Seller's chief financial officer. Such financial
statements fairly present the financial condition and the results of
operations, changes in shareholders' equity and cash flows of Seller
as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP. The financial
statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial
statements. The financial statements have been and will be prepared
from and are in accordance with the accounting Records of Seller.
(b) Except as set forth on Schedule 3.4(b), Seller maintains a
proper and adequate system of internal controls reasonably sufficient
to ensure that (i) transactions are recorded as necessary to permit
preparation of its financial statements in accordance with GAAP; (ii)
transactions are executed in accordance with management's
authorization; and (iii) access to the Seller's assets is permitted
only in accordance with management's authorization.
3.5 INTENTIONALLY OMITTED
3.6 DESCRIPTION OF OWNED REAL PROPERTY
Schedule 3.6 contains a legal description and tax parcel
identification number of all tracts, parcels and subdivided lots in
which Seller has an ownership interest.
3.7 DESCRIPTION OF LEASED REAL PROPERTY
Schedule 3.7 contains a correct street address of all buildings,
tracts, parcels and subdivided lots in which Seller has a leasehold
interest and an accurate description (by location, name of lessor,
date of Lease and term expiry date) of all Real Property Leases.
3.8 TITLE TO ASSETS; ENCUMBRANCES
(a) Seller owns good and marketable title to its respective
estates in the Real Property, free and clear of any Encumbrances
(other than Permitted Real Estate Encumbrances) which individually or
in the aggregate would have a Seller Material Adverse Effect.
(b) Seller owns good and transferable title to all of the Assets
other than the Real Property, free and clear of any Encumbrances other
than those described in Schedule 3.8(b) ("Non-Real Estate
Encumbrances"). Seller warrants to Buyer that, at the time of
Closing, all other Assets shall be free and clear of all Non-Real
Estate Encumbrances other than those identified on Schedule 3.8(b) as
acceptable to Buyer ("Permitted Non-Real Estate Encumbrances" and,
together with the Permitted Real Estate Encumbrances, "Permitted
Encumbrances").
3.9 CONDITION OF FACILITIES
Except as disclosed on Schedule 3.9:
(a) Use of the Real Property for the various purposes for which it
is presently being used is permitted as of right under all applicable
zoning legal requirements and is not subject to "permitted
nonconforming" use or structure classifications. All Improvements are
in compliance with all applicable Legal Requirements, including those
pertaining to zoning, building, and except where noncompliance would
not have a Seller Material Adverse Effect, all improvements are in
good repair and in good condition, ordinary wear and tear excepted,
and to Seller's Knowledge, are free from patent and latent defects.
No part of any Improvement encroaches on any real property not
included in the Real Property, and to Seller's Knowledge, there are no
buildings, structures, fixtures or other Improvements primarily
situated on adjoining property which encroach on any part of the Land.
The Land for each owned Facility abuts on and has direct vehicular
access to a public road or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting such Land and
comprising a part of the Real Property. To Seller's Knowledge, there
is no existing or proposed plan to modify or realign any street or
highway or any existing or proposed eminent domain proceeding that
would result in the taking of all or any part of any Facility or that
would prevent or hinder the continued use of any Facility as
heretofore used in the conduct of the business of Seller.
(b) Each item of Tangible Personal Property is in good repair and
good operating condition, ordinary wear and tear excepted, is suitable
for immediate use in the Ordinary Course of Business, is free of
patent defects, and to Seller's Knowledge, is free from latent
defects. No item of Tangible Personal Property is in need of repair
or replacement other than as part of routine maintenance in the
Ordinary Course of Business. All Tangible Personal Property used in
the Business is in the possession of Seller.
3.10 INVENTORIES
Except as disclosed on Schedule 3.10, all items included in the
Inventories consist of a quality and quantity usable and, with respect
to finished goods, saleable, in the Ordinary Course of Business of
Seller, except for obsolete items and items of below-standard quality
and net of reserves set forth on the Balance Sheet and Interim Balance
Sheet. Seller is not in possession of any inventory not owned by
Seller, including goods already sold. All of the Inventories have
been valued at the lower of cost or net realizable value on a first
in, first out basis. The quantities of each item of Inventories
(whether raw materials, work-in-process or finished goods) are not
excessive but are reasonable in the present circumstances of Seller.
3.11 NO UNDISCLOSED LIABILITIES
Except as set forth in Schedule 3.11 or Schedule 3.18(c), Seller has
no Liability, except for (a) Liabilities reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet, (b) current
Liabilities incurred in the Ordinary Course of Business of Seller
since the date of the Interim Balance Sheet, and (c) Liabilities that
would not have a Seller Material Adverse Effect.
3.12 TAXES
Except as set forth in Schedule 3.12, Seller has filed or caused to be
filed on a timely basis all Tax Returns and all reports with respect
to Taxes that are or were required to be filed pursuant to applicable
Legal Requirements. All Tax Returns and reports filed by Seller are
true, correct and complete. Seller has paid, or made provision for
the payment of, all Taxes that have or may have become due for all
periods covered by the Tax Returns or otherwise, or pursuant to any
assessment received by Seller, except such Taxes, if any, as are
listed in Schedule 3.12 and are being contested in good faith and as
to which adequate reserves (determined in accordance with GAAP) have
been provided in the Balance Sheet and the Interim Balance Sheet. No
claim has ever been made or is expected to be made by any Governmental
Body in a jurisdiction where Seller does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in connection with any
failure (or alleged failure) to pay any Tax, and Seller has no
Knowledge of any basis for assertion of any claims attributable to
Taxes which, if adversely determined, would result in any such
Encumbrance.
3.13 NO MATERIAL ADVERSE CHANGE
Except as disclosed on Schedule 3.13, since the date of the Interim
Balance Sheet, there has not been any Seller Material Adverse Effect.
3.14 EMPLOYEE BENEFITS
Set forth in Schedule 3.14 is a true and complete list of all
"employee benefit plans" as defined by Section 3(3) of ERISA,
material specified fringe benefit plans as defined in Section 6039D of
the Code, and material other bonus, incentive-compensation, deferred-
compensation, profit-sharing, stock-option, stock-appreciation-right,
stock-bonus, stock-purchase, employee-stock-ownership, savings,
severance, change-in-control, supplemental-unemployment, layoff,
salary-continuation, retirement, pension, health, life-insurance,
disability, accident, group-insurance, vacation, holiday or sick-leave
plans that are maintained or contributed to by Seller (collectively,
the "Employee Plans"). Seller has delivered to Buyer a copy of each
Employee Plan. Neither Seller nor any other corporation or trade or
business controlled by, controlling or under common control with
Seller (within the meaning of Section 414 of the Code or Section
4001(a)(14) or 4001(b) of ERISA) ("ERISA Affiliate"), maintains,
sponsors, contributes to, or otherwise participated in, or had any
liability to or with respect to any employee pension plan subject to
Title IV or Section 302 of ERISA or Section 412 of the Code.
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Schedule 3.15(a):
(i) Seller is in compliance with each Legal Requirement that
is applicable to it or to the conduct or operation of the Business or
the ownership of the Assets, except to the extent that noncompliance
would not have a Seller Material Adverse Effect;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a
violation by Seller of, or a failure on the part of Seller to comply
with, any Legal Requirement or (B) may give rise to any obligation on
the part of Seller to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature, except where such
violation, failure or obligation would not have a Seller Material
Adverse Effect; and
(iii) to Seller's Knowledge, Seller has not received at any
time since January 1, 2002, any notice or other written or oral
communication from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement or (B) any actual,
alleged, possible or potential obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Schedule 3.15(b) contains a complete and accurate list of each
Governmental Authorization that is held by Seller or that otherwise
relates to the Business or the Assets. Each Governmental
Authorization listed or required to be listed in Schedule 3.15(b) is
valid and in full force and effect. Except as set forth in Schedule
3.15(b):
(i) Seller is in material compliance with all of the terms and
requirements of each Governmental Authorization identified or required
to be identified in Schedule 3.15(b);
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.15(b) or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Schedule 3.15(b), except where any
such violation, failure to comply or result would not have a Seller
Material Adverse Effect;
(iii)to Seller's Knowledge, Seller has not received, at any
time since January 1, 2002, any notice or other written or oral
communication from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible or potential violation of or failure
to comply with any term or requirement of any Governmental
Authorization or (B) any actual, proposed, possible or potential
revocation, withdrawal, suspension, cancellation, termination of or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.15(b) have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies.
3.16 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Schedule 3.16(a), there is no pending
or, to Seller's Knowledge, threatened Proceeding:
(i) by or against Seller or that otherwise relates to or may
affect the Business or the Assets; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Seller, no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis
for the commencement of any such Proceeding, except where such event
would not reasonably be likely to have a Seller Material Adverse
Effect. Seller has delivered to Buyer copies of all pleadings,
correspondence and other documents relating to each Proceeding listed
in Schedule 3.16(a). There are no Proceedings listed or required to
be listed in Schedule 3.16(a) that could have a Seller Material
Adverse Effect.
(b) Except as set forth in Schedule 3.16(b), there is no Order to
which Seller, the Business or the Assets are subject.
(c) Except as set forth in Schedule 3.16(c):
(i) Seller is in compliance with all of the terms and
requirements of each Order to which it, the Business or the Assets are
subject, except where any noncompliance would not have a Seller
Material Adverse Effect;
(ii) no event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice
or lapse of time) a violation of or failure to comply with any term or
requirement of any Order to which Seller, the Business or the Assets
are subject, except where such failure would not have a Seller
Material Adverse Effect; and
(iii) to Seller's Knowledge, Seller has not received, at any
time since January 1, 2002, any notice or other written or oral
communication from any Governmental Body or any other Person regarding
any actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which Seller or
the Assets are or have been subject.
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Schedule 3.17, since the date of the Interim
Balance Sheet, Seller has conducted the Business only in the Ordinary
Course of Business and there has not been any:
(a) adoption of, amendment to or increase in the payments to or
benefits under, any Employee Plan;
(b) damage to or destruction or loss of any material Asset,
whether or not covered by insurance;
(c) entry into, termination of or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative,
joint venture, credit or similar Contract to which Seller is a party,
or (ii) any Contract or transaction involving a total remaining
commitment by Seller of at least $50,000;
(d) sale (other than sales of Inventories in the Ordinary Course
of Business), lease or other disposition of any material Asset or
material property of Seller (including the Intellectual Property
Assets) or the creation of any Encumbrance on any Asset;
(e) cancellation or waiver of any claims or rights with a value to
Seller in excess of $50,000;
(f) written indication by any customer or supplier of an intention
to discontinue or change the terms of its relationship with Seller;
(g) written material change in the accounting methods used by
Seller; or
(h) Contract by Seller to do any of the foregoing.
3.18 CONTRACTS; NO DEFAULTS
(a) Schedule 3.18(a) contains an accurate and complete list, and
Seller has delivered to Buyer accurate and complete copies, of:
(i) each Seller Contract that involves performance of services
or delivery of goods or materials by Seller of an amount or value in
excess of $50,000;
(ii) each Seller Contract that involves performance of
services or delivery of goods or materials to Seller of an amount or
value in excess of $50,000;
(iii) each Seller Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts
of Seller in excess of $50,000;
(iv) each Seller Contract affecting in any material respect
the ownership of, leasing of, title to, use of or any leasehold or
other interest in any real or personal property (except personal
property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $50,000 and
with a term of less than one year);
(v) each Seller Contract with any labor union or other
employee representative of a group of employees relating to wages,
hours and other conditions of employment;
(vi) each Seller Contract (however named) involving a sharing
of profits, losses, costs or liabilities by Seller with any other
Person;
(vii) each Seller Contract containing covenants that in any
way purport to restrict Seller's business activity or limit the
freedom of Seller to engage in any line of business or to compete with
any Person;
(viii) each Seller Contract providing for payments to or by
any Person based on sales, purchases or profits, other than direct
payments for goods;
(ix) each power of attorney of Seller that is currently
effective and outstanding;
(x) each Seller Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by Seller to be responsible for consequential damages;
(xi) each Seller Contract for capital expenditures in excess
of $50,000;
(xii) each Seller Contract not denominated in U.S. dollars;
(xiii) each written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by Seller
other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.18(b):
(i) each Contract identified or required to be identified in
Schedule 3.18(a) and which is to be assigned to or assumed by Buyer
under this Agreement is in full force and effect and is valid and
enforceable against Seller and, to Seller's Knowledge, the parties
thereto in accordance with its terms; and
(ii) each Contract identified or required to be identified in
Schedule 3.18(a) and which is being assigned to or assumed by Buyer is
assignable by Seller to Buyer without the consent of any other Person.
(c) Except as set forth in Schedule 3.18(c):
(i) Seller is in material compliance with all applicable terms
and requirements of each Seller Contract which is being assumed by
Buyer;
(ii) each other Person that has any obligation or liability
under any Seller Contract which is being assigned to Buyer is in
material compliance with all applicable terms and requirements of such
Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with or
result in a Breach of, or give Seller or other Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or payment under, or to cancel, terminate
or modify, any Seller Contract that is being assigned to or assumed by
Buyer, except where such event would not have a Seller Material
Adverse Effect;
(iv) no event has occurred or circumstance exists under or by
virtue of any Contract that (with or without notice or lapse of time)
would cause the creation of any Encumbrance affecting any of the
Assets; and
(v) to Seller's Knowledge, Seller has not given to or received
from any other Person, at any time since January 2, 2002, any notice
or other written or oral communication regarding any actual, alleged,
possible or potential violation or Breach of, or default under, any
Contract which is being assigned to or assumed by Buyer.
(d) There are no renegotiations of, or outstanding rights to
renegotiate, any material amounts paid or payable to Seller under
current or completed Contracts with any Person having the contractual
or statutory right to demand or require such renegotiation and no such
Person has made written demand for such renegotiation.
(e) Each Contract relating to the sale, design, manufacture or
provision of products or services by Seller has been entered into in
the Ordinary Course of Business of Seller and has been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or
would be in violation of any Legal Requirement that would have a
Seller Material Adverse Effect.
3.19 INSURANCE
(a) Seller has delivered to Buyer:
(i) accurate and complete copies of all policies of insurance
to which Seller is a party or under which Seller is covered; and
(ii) any statement by the Reviewing Accountant or any
consultant or risk management advisor with regard to the adequacy of
Seller's coverage or of the reserves for claims.
(b) Schedule 3.19(b) describes:
(i) any self-insurance arrangement by or affecting Seller,
including any reserves established thereunder;
(ii) any Contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk to which Seller is
a party or which involves the Business; and
(iii) all obligations of Seller to provide insurance coverage
to Third Parties (for example, under Leases or service agreements) and
identifies the policy under which such coverage is provided.
3.20 ENVIRONMENTAL MATTERS
Except as disclosed in Schedule 3.20 or in the Phase I environmental
assessment to be performed by Buyer and/or AMCON's agent:
(a) Seller is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable under, any
Environmental Law. Seller has no basis to expect, nor has Seller or
any other Person for whose conduct Seller is or may be held to be
responsible received, any actual or threatened order, notice or other
communication from (i) any Governmental Body or private citizen acting
in the public interest or (ii) the current or prior owner or operator
of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental, Health
and Safety Liabilities with respect to any Facility or other property
or asset (whether real, personal or mixed) in which Seller has or had
an interest, or with respect to any property or Facility at or to
which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used or processed by Seller or any other Person
for whose conduct it is or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(b) There are no pending or, to the Knowledge of Seller,
threatened claims, Encumbrances, or other restrictions of any nature
resulting from any Environmental, Health and Safety Liabilities or
arising under or pursuant to any Environmental Law with respect to or
affecting any Facility or any other property or asset (whether real,
personal or mixed) in which Seller has or had an interest.
(c) Seller does not have any Knowledge of or any basis to expect,
nor has any of them, or any other Person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry,
notice, Order, summons, warning or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to undertake or
bear the cost of any Environmental, Health and Safety Liabilities with
respect to any Facility or property or asset (whether real, personal
or mixed) in which Seller has or had an interest, or with respect to
any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by
Seller or any other Person for whose conduct it is or may be held
responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(d) Neither Seller nor any other Person for whose conduct it is or
may be held responsible has any Environmental, Health and Safety
Liabilities with respect to any Facility or, to the Knowledge of
Seller, with respect to any other property or asset (whether real,
personal or mixed) in which Seller (or any predecessor) has or had an
interest or at any property geologically or hydrologically adjoining
any Facility or any such other property or asset.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, aboveground or underground storage tanks, landfills, land
deposits, dumps, equipment (whether movable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facility or such
adjoining property, or incorporated into any structure therein or
thereon. Neither Seller nor any Person for whose conduct it is or may
be held responsible, or to the Knowledge of Seller, any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to any Facility or any other property or assets
(whether real, personal or mixed) in which Seller has or had an
interest except in full compliance with all applicable Environmental
Laws.
(f) There has been no Release or, to the Knowledge of Seller,
Threat of Release, of any Hazardous Materials at or from any Facility
or at any other location where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or
processed from or by any Facility, or from any other property or asset
(whether real, personal or mixed) in which Seller has or had an
interest, or to the Knowledge of Seller any geologically or
hydrologically adjoining property, whether by Seller or any other
Person.
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
compliance, by Seller or any other Person for whose conduct it is or
may be held responsible, with Environmental Laws.
3.21 EMPLOYEES
(a) Schedule 3.21(a) contains a true and complete list of the
following information for each employee of Seller, including each
employee on leave of absence or layoff status: employer; name; job
title; date of hiring or engagement; date of commencement of
employment or engagement; current compensation paid or payable; sick
and vacation leave that is accrued but unused; and service credited
for purposes of vesting and eligibility to participate under any
Employee Plan, or any other employee or director benefit plan.
(b) Schedule 3.21(b) contains a true and complete list of the
following information for each independent contractor currently
performing services for Seller or that has performed services for
Seller during the six (6) month period prior to the Agreement Date:
independent contractor name; work performed or being performed;
compensation arrangement.
(c) To the Knowledge of Seller, no officer, director, agent,
employee, consultant, or contractor of Seller is bound by any Contract
that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor (i) to engage in or continue or
perform any conduct, activity, duties or practice relating to the
business of Seller or (ii) to assign to Seller or to any other Person
any rights to any invention, improvement, or discovery. To Seller's
Knowledge, no current employee of Seller is a party to, or is
otherwise bound by, any Contract that in any way adversely affected,
affects, or will affect the ability of Seller or Buyer to conduct the
Business.
3.22 LABOR DISPUTES; COMPLIANCE
(a) Seller has complied with all Legal Requirements relating to
employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, and collective bargaining, the payment of social security
and similar Taxes and occupational safety and health except where any
noncompliance would not have a Seller Material Adverse Effect. Seller
is not liable for the payment of any Taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
(b) Except as disclosed in Schedule 3.22(b) Seller has not been,
and is not now, a party to any collective bargaining agreement or
other labor contract; (ii) since January 1, 2002, there has not been,
there is not presently pending or existing, and to Seller's Knowledge
there is not threatened, any strike, slowdown, picketing, work
stoppage or employee grievance process involving Seller; (iii) to
Seller's Knowledge no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute;
(iv) there is not pending or, to Seller's Knowledge, threatened
against or affecting Seller any Proceeding relating to the alleged
violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed with the
National Labor Relations Board or any comparable Governmental Body,
and to Seller's Knowledge there is no organizational activity or other
labor dispute against or affecting Seller or the Facilities; (v) no
application or petition for an election of or for certification of a
collective bargaining agent is pending; (vi) no grievance or
arbitration Proceeding exists that might have an adverse effect upon
Seller or the conduct of its business; (vii) there is no lockout of
any employees by Seller, and no such action is contemplated by Seller;
and (viii) to Seller's Knowledge there has been no charge of
discrimination filed against or threatened against Seller with the
Equal Employment Opportunity Commission or similar Governmental Body.
3.23 INTELLECTUAL PROPERTY ASSETS
(a) The term "Intellectual Property Assets" means all intellectual
property owned or licensed (as licensor or licensee) by Seller in
which Seller has a proprietary interest, including:
(i) Seller's name, all assumed fictional business names, trade
names, registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(ii) all patents, patent applications and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all registered and unregistered copyrights in both
published works and unpublished works (collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential or proprietary
information, customer lists, technical information, data, process
technology, plans, drawings and blue prints (collectively, "Trade
Secrets"); and
(v) all rights in internet web sites and internet domain names
presently used by Seller (collectively "Net Names").
(b) Schedule 3.23(b) contains a complete and accurate list and
Seller has delivered to Buyer accurate and complete copies, of all
Seller Contracts relating to the Intellectual Property Assets, except
for any license implied by the sale of a product and perpetual, paid-
up licenses for commonly available Software programs with a value of
less than $5,000 under which Seller is the licensee. There are no
outstanding or, to Seller's Knowledge, threatened disputes or
disagreements with respect to any such Contract.
(i) To Seller's Knowledge, Seller is the owner or licensee of
all right, title and interest in and to each of the Intellectual
Property Assets, free and clear of all Encumbrances, and, to Seller's
Knowledge, has the right to use without payment to a Third Party all
of the Intellectual Property Assets, other than in respect of licenses
listed in Schedule 3.23(b)(I).
(c) Patents.
(i) Schedule 3.23(c) contains a complete and accurate list of
all Patents.
(ii) All of the issued Patents are currently in compliance in
all material respects with formal legal requirements (including
payment of filing, examination and maintenance fees and proofs of
working or use), to Seller's Knowledge, are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling
due within ninety (90) days after the Closing Date.
(iii) To Seller's Knowledge, no Patent is involved in any
interference, reissue, reexamination, or opposition Proceeding. To
Seller's Knowledge, there is no potentially interfering patent or
patent application of any Third Party.
(iv) Except as set forth in Schedule 3.23(c), to Seller's
Knowledge (A) no Patent is infringed or has been challenged or
threatened in any way and (B) none of the products manufactured or
sold, nor any process or know-how used, by Seller infringes or is
alleged to infringe any patent or other proprietary right of any other
Person.
(d) Marks.
(i) Schedule 3.23(d) contains a complete and accurate list of
all Marks.
(ii) All Marks registered with the United States Patent and
Trademark Office are currently in material compliance with all formal
Legal Requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), and
to Seller's Knowledge, are valid and enforceable and are not subject
to any maintenance fees or taxes or actions falling due within ninety
(90) days after the Closing Date.
(iii) Except as disclosed on Schedule 3.23(d), to Seller's
Knowledge, no ▇▇▇▇ is involved in any opposition, invalidation or
cancellation Proceeding and, to Seller's Knowledge, no such action is
threatened with respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially
interfering trademark or trademark application of any other Person.
(v) To Seller's Knowledge, no ▇▇▇▇ is infringed or has been
challenged or threatened in any way. To Seller's Knowledge, none of
the Marks used by Seller infringes or is alleged to infringe any trade
name, trademark or service ▇▇▇▇ of any other Person.
(vi) To Seller's Knowledge, all products and materials
containing a registered ▇▇▇▇ ▇▇▇▇ the proper federal registration
notice where permitted by law.
(e) Copyrights.
(i) Schedule 3.23(e) contains a complete and accurate list of
all Copyrights.
(ii) All of the registered Copyrights are currently in
material compliance with formal Legal Requirements, and to Seller's
Knowledge, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90)
days after the date of Closing.
(iii) To Seller's Knowledge, no Copyright is infringed or has
been challenged or threatened in any way. To Seller's Knowledge, none
of the subject matter of any of the Copyrights infringes or is alleged
to infringe any copyright of any Third Party or is a derivative work
based upon the work of any other Person.
(f) Net Names.
(i) Schedule 3.23(f) contains a complete and accurate list of
all Net Names.
(ii) All Net Names have been registered in the name of Seller
and are in material compliance with all formal Legal Requirements.
(iii) To Seller's Knowledge, no Net Name is involved in any
dispute, opposition, invalidation or cancellation Proceeding and, to
Seller's Knowledge, no such action is threatened with respect to any
Net Name.
(iv) To Seller's Knowledge, there is no domain name
application pending of any other person which would or would
potentially interfere with or infringe any Net Name.
(v) To Seller's Knowledge, no Net Name is infringed or has
been challenged, interfered with or threatened in any way. To
Seller's Knowledge, no Net Name infringes, interferes with or is
alleged to interfere with or infringe the trademark, copyright or
domain name of any other Person.
3.24 RELATIONSHIPS WITH RELATED PERSONS
Except as disclosed in Schedule 3.24, neither Seller nor any Related
Person of Seller has, or since January 1, 2002, has had, any interest
in any property (whether real, personal or mixed and whether tangible
or intangible) used in or pertaining to Seller's business. Neither
Seller nor any nor any Related Person of Seller owns, or since
January 1, 2002, has owned, of record or as a beneficial owner, an
equity interest or any other financial or profit interest in any
Person that has (a) had business dealings or a material financial
interest in any transaction with Seller other than business dealings
or transactions disclosed in Schedule 3.24 or transactions incident to
employment relationships, each of which has been conducted in the
Ordinary Course of Business with Seller at substantially prevailing
market prices and on substantially prevailing market terms or (b)
engaged in competition with Seller with respect to any line of the
products or services of Seller (a "Competing Business") in any market
presently served by Seller, except for ownership of less than one
percent (1%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Schedule 3.24,
neither Seller nor any Related Person of Seller is a party to any
Contract with, or has any claim or right against, Seller.
3.25 BROKERS OR FINDERS
Neither Seller nor any of its Representatives have incurred any
obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payments in
connection with the sale of Seller's business or the Assets or the
Contemplated Transactions, except for Seller's arrangements with
Mayfair Associates, LLC, and Seller shall be solely responsible for
the payment and discharge of all such obligations to Mayfair
Associates, LLC.
3.26 INVESTMENT INTENT
Seller is acquiring the Buyer Common Stock to be issued to it pursuant
to Section 2.4(g) for investment for its own account and not on behalf
of other Persons and not with a view to or for resale,
fractionalization, division, or distribution thereof, or the grant of
any participation therein, and it has no present intent of
distributing or selling to any other Person such shares of Buyer
Common Stock or granting any participation therein. Seller
understands that the Buyer Common Stock has not been registered under
the Securities Act or any applicable state securities act by reason of
a specified exemption from the registration provisions of the
Securities Act and applicable state securities laws, which may depend
upon, among other things, the bona fide nature of Seller's investment
intent as expressed herein. Seller is an "accredited investor" (as
defined in Rule 501(a) of Regulation D under the Securities Act) and
has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in
the Buyer Common Stock, and it is able to bear the economic risk of
such an investment. Seller is aware that the certificate evidencing
the shares of Buyer Common Stock will contain a conspicuous legend
referencing the transfer restrictions imposed by the securities laws
and by the terms of the Buyer Shareholder Agreement, and Seller agrees
that a stock transfer order may be placed on the transfer books
maintained with respect to the Buyer Common Stock which gives effect
to the transfer restrictions described above.
3.27 WATER RIGHTS
(a) Seller has good and marketable title to Seller's Water Rights.
Seller has not placed any Encumbrances on the Seller's Water Rights
and does not have any Knowledge of any other Encumbrances on Seller's
Water Rights.
(b) To Seller's Knowledge, any applicable requirements have been
met for filing a claim in the Snake River Basin Adjudication with
respect to each of Seller's Water Rights. To Seller's Knowledge,
Seller has completed any additional applicable required steps to
protect, preserve and defend all its interest in Seller's Water Rights
in the SRBA.
(c) Except with respect to uncontested claims for Seller's Water
Rights in the Snake River Basin Adjudication, Seller has no Knowledge
of any claims, actions, suits, arbitrations, proceedings, or
investigations by or before any court or arbitration body, any
governmental, administrative or regulatory agency, or any other body,
pending or threatened against, effecting or relating to the Seller's
Water Rights, nor is Seller aware of any basis for such claim, action,
suit, arbitration, proceeding or investigation.
(d) The description of Seller's Water Rights set forth in each
permit, license and partial decree (if any) is valid and correct in
all material respects.
(e) To Seller's Knowledge, none of Seller's Water Rights has been
forfeited or abandoned, and each has been placed to continual
beneficial use by the Seller and/or its predecessor in interest (if
any) and has never been subject to a continuous five-year period of
non-use except as such non-use is excused and exempt from forfeiture
under Idaho statute, such as by placing the Water Right in an
appropriate water bank.
3.28 DISCLOSURE
No representation or warranty or other statement made by Seller in
this Agreement, the certificates delivered pursuant to Section 2.7(a)
or otherwise in connection with the Contemplated Transactions contains
any untrue statement or omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made,
not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND AMCON
Subject to the limitations set forth on the Schedules attached to this
Agreement (and to the extent that any exception is disclosed pursuant
to any specific Schedule, it shall be deemed to be disclosed for any
and all other provisions of this ARTICLE 4 for which its relevance is
reasonably ascertainable from its inclusion in any other Schedule),
Buyer and AMCON jointly and severally represent and warrant to Seller
as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate
power and authority to conduct its business as it is now conducted.
AMCON is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate
power and authority to conduct its business as it is now conducted.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms except to the extent that enforcement thereof may be limited by
general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity). Upon the execution
and delivery by Buyer of the Assignment and Assumption Agreement, the
Employment Agreements, the Three Year Note, the Ten Year Note, the
Security Agreement, the Buyer Shareholder Agreement, the Seller Voting
Agreement and each other agreement to be executed or delivered by
Buyer at Closing (collectively, the "Buyer Closing Documents"), each
of the Buyer Closing Documents will constitute the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance
with its respective terms except to the extent that enforcement
thereof may be limited by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in
equity). Buyer has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and the Buyer Closing
Documents and to perform its obligations under this Agreement and the
Buyer Closing Documents, and such action has been duly authorized by
all necessary corporate action.
(b) This Agreement constitutes the legal, valid and binding
obligation of AMCON, enforceable against AMCON in accordance with its
terms except to the extent that enforcement thereof may be limited by
general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity). Upon the execution
and delivery by AMCON of the Guaranty, Buyer Shareholder Agreement and
each other agreement to be executed or delivered by AMCON at Closing
(collectively, the "AMCON Closing Documents"), each of the AMCON
Closing Documents will constitute the legal, valid and binding
obligation of AMCON, enforceable against AMCON in accordance with its
respective terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting enforcement of
creditors' rights generally, and by general principles of equity
(regardless of whether enforcement is considered in a proceeding at
law or in equity). AMCON has the absolute and unrestricted right,
power and authority to execute and deliver this Agreement and the
AMCON Closing Documents and to perform its obligations under this
Agreement and the AMCON Closing Documents, and such action has been
duly authorized by all necessary corporate action.
(c) Neither the execution and delivery of this Agreement by Buyer
or AMCON nor the consummation or performance of any of the
Contemplated Transactions by Buyer or AMCON will give any Person the
right to prevent, delay or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's or AMCON's Governing Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of Buyer or AMCON;
(iii) any Legal Requirement or Order to which Buyer or AMCON
may be subject; or
(iv) any Contract to which Buyer or AMCON is a party or by
which Buyer or AMCON may be bound.
Neither Buyer nor AMCON will be required to obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS
(a) Except as set forth in Schedule 4.3, there is no pending or,
to Buyer's or AMCON's Knowledge, threatened Proceeding:
(i) by or against Buyer or AMCON or that otherwise relates to
or may affect its business; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Buyer or AMCON, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve
as a basis for the commencement of any such Proceeding, except where
such event would not reasonably be likely to have a material adverse
effect on the business prospects, results of operations, financial
condition or assets of Buyer and AMCON, taken as a whole (a "Buyer
Material Adverse Effect"). Buyer or AMCON has delivered to Seller
copies of all pleadings, correspondence and other documents relating
to each Proceeding listed in Schedule 4.3. There are no Proceedings
listed or required to be listed in Schedule 4.3 that could have a
Buyer Material Adverse Effect.
(b) Except as set forth in Schedule 4.3, there is no Order to
which Buyer or AMCON, the business of AMCON or their respective assets
are subject.
(c) Except as set forth in Schedule 4.3:
(i) Buyer and AMCON are in compliance with all of the terms
and requirements of each Order to which they or their respective
assets are or have been subject, except where any noncompliance would
not have a Buyer Material Adverse Effect;
(ii) no event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice
or lapse of time) a violation of or failure to comply with any term or
requirement of any Order to which Buyer or AMCON or the Assets are
subject except where such failure would not have a Buyer Material
Adverse Effect; and
(iii) to Buyer's Knowledge, Buyer has not received, at any
time since January 1, 2002, any notice or other written or oral
communication from any Governmental Body or any other Person regarding
any actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which Buyer or
AMCON or their respective assets are or have been subject.
4.4 BROKERS OR FINDERS
Neither Buyer nor AMCON nor any of their Representatives have incurred
any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in
connection with the Contemplated Transactions, except for AMCON and
Buyer's arrangements with Cybus Capital, and Seller and AMCON shall be
solely responsible for the payment and discharge of all such
obligations to Cybus Capital.
4.5 CAPITALIZATION
(a) The authorized equity securities of AMCON consist of
15,000,000 shares of AMCON Common Stock, $0.01 par value per share
("AMCON Common Stock"), and 1,000,000 shares of preferred stock, $0.01
par value per share ("AMCON Preferred Stock"). At the close of
business on the date hereof, (i) 3,169,154 shares of AMCON Common
Stock were issued and outstanding, (ii) stock options to purchase an
aggregate of 311,650 shares of AMCON Common Stock were issued and
outstanding (the "AMCON Stock Options"), (iii) no shares of AMCON
Common Stock were held in its treasury and (iii) no shares of AMCON
Preferred Stock were issued and outstanding. All outstanding shares
of capital stock of AMCON have been duly authorized and validly issued
and are fully paid and nonassessable. AMCON is currently considering
making a private placement, which may occur prior to the Closing, of
up to $10 million of common stock, preferred stock convertible into
common stock, or subordinated notes convertible into common stock, the
purchasers of which may include officers and directors of AMCON and
the issuance of which will be conditioned upon receipt of an opinion
from ▇▇▇▇▇ Brothers Valuation Advisers, Inc. (or another valuation
expert) that the terms of such issuance are fair to AMCON's
stockholders from a financial point of view.
(b) As of the date hereof, except (i) as set forth in this Section
4.5 and (ii) the one-for-six reverse stock split described in AMCON's
proxy statement dated March 3, 2004 which will become effective on or
about May 11, 2004 if stockholder approval thereof is obtained (the
"Reverse Stock Split"), there are no outstanding (x) shares of capital
stock or other voting securities of AMCON, (y) securities of AMCON
convertible into or exchangeable for shares of capital stock or voting
securities of AMCON, or (z) options or other rights to acquire from
AMCON, and no obligation of AMCON to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of AMCON (the items in clauses (x), (y) and
(z) being referred to collectively as the "AMCON Securities"). Except
for the Reverse Stock Split, there are no outstanding obligations of
AMCON or any Subsidiary of AMCON to repurchase, redeem or otherwise
acquire any AMCON Securities. There are no outstanding contractual
obligations of AMCON to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other
Person other than in the ordinary course of business consistent with
past practice. There are no stockholder agreements, voting trusts or
other agreements or understandings to which AMCON is a party, or of
which AMCON is aware, relating to voting, registration or disposition
of any shares of capital stock of AMCON or granting to any person or
group of persons the right to elect, or to designate or nominate for
election, a director to the board of directors of AMCON.
(c) The authorized capital stock of Buyer consists of 200,000
shares of Buyer Common Stock. 94,440 shares of Buyer Common Stock are
issued and outstanding, and no shares of Buyer Common Stock are held
in its treasury. All outstanding shares of capital stock of Buyer
have been duly authorized and validly issued and are fully paid and
nonassessable.
(d) As of the date hereof, there are no outstanding (i) shares of
capital stock or other voting securities of Buyer, (ii) securities of
Buyer convertible into or exchangeable for shares of capital stock or
voting securities of Buyer, or (iii) options or other rights to
acquire from Buyer, and no obligation of Buyer to issue, any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Buyer (the
items in clauses (i), (ii) and (iii) being referred to collectively as
the "Buyer Securities"). There are not outstanding obligations of
Buyer or any Subsidiary of Buyer to repurchase, redeem or otherwise
acquire any Buyer Securities. There are not outstanding contractual
obligations of Buyer to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other
Person other than in the ordinary course of business consistent with
past practice. There are not stockholder agreements, voting trusts or
other agreements or understandings to which Buyer is a party, or of
which Buyer is aware, relating to voting, registration or disposition
of any shares of capital stock of Buyer or granting to any person or
group of persons the right to elect, or to designate or nominate for
election, a director to the board of directors of Buyer.
4.6 AMCON SEC DOCUMENTS
(a) AMCON has made available to Seller the AMCON SEC Documents.
AMCON has timely filed all reports, filings, registration statements
and other documents required to be filed by it with the SEC since
January 1, 2002. No Subsidiary of AMCON is required to file any form,
report, registration statement or prospectus or other document with
the SEC.
(b) As of its filing date, each AMCON SEC Document complied as to
form in all material respects with the applicable requirements of the
Securities Act and/or the Exchange Act, as the case may be and the
rules and regulations thereunder.
(c) No AMCON SEC Document contained, as of its filing date, any
untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
No AMCON SEC Document, as amended or supplemented, if applicable,
filed pursuant to the Securities Act contained, as of the date such
document or amendment became effective, any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(d) Each of the consolidated balance sheet of AMCON included in or
incorporated by reference into the AMCON SEC Documents (including the
related notes and schedules) fairly present the consolidated financial
position of AMCON and its Subsidiaries as of its date (subject, in the
case of unaudited statements, to normal year-end audit adjustments
which are not reasonably expected to be material in amount or effect),
and each of the consolidated statements of income, retained earnings
and cash flows of AMCON included in or incorporated by reference into
AMCON SEC Documents (including any related notes and schedules) fairly
present the results of operations, retained earnings or cash flows, as
the case may be, of AMCON and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which are not reasonably expected to be
material in amount or effect). The financial statements of AMCON,
including the notes thereto, included in or incorporated by reference
into the AMCON SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, and
have been prepared in accordance with GAAP (except as may be indicated
in the notes thereto). Since January 1, 2002, there has been no
material change in AMCON's accounting methods or principles except as
described in the notes to such AMCON financial statements.
4.7 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth on Schedule 4.7, since December 31, 2003,
(a) neither Buyer nor AMCON have suffered any Buyer Material Adverse
Effect; (b) AMCON has conducted its business only in the Ordinary
Course of Business; and (c) neither Buyer nor AMCON has entered into
any transactions that would be required to be disclosed by AMCON in
its Form 10K for the year ended September 30, 2004.
4.8 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) each AMCON and Buyer is in material compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of
its business or the ownership of any of its assets;
(b) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
material violation by Buyer and/or AMCON of, or a material failure on
the part of Buyer and/or AMCON to comply with, any Legal Requirement
or (B) may give rise to any obligation on the part of Buyer and/or
AMCON to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature, except where any other such event would
have a Buyer Material Adverse Effect; and
(c) to the Knowledge of Buyer and AMCON, neither Buyer nor AMCON
has received, at any time since January 1, 2002, any notice or other
written or oral communication from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement or (B)
any actual, alleged, possible or potential obligation on the part of
Buyer or AMCON to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
ARTICLE 5
COVENANTS OF SELLER PRIOR TO CLOSING
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, and upon
reasonable advance notice received from Buyer, Seller shall (a) afford
Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer Group") full and free access,
during regular business hours, to Seller's personnel, properties,
Contracts, Governmental Authorizations, books and Records and other
documents and data, such rights of access to be exercised in a manner
that does not unreasonably interfere with the operations of Seller;
(b) furnish Buyer Group with copies of all such Contracts,
Governmental Authorizations, books and Records and other existing
documents and data as Buyer may reasonably request; (c) furnish Buyer
Group with such additional financial, operating and other relevant
data and information as Buyer may reasonably request; and (d)
otherwise cooperate and assist, to the extent reasonably requested by
Buyer, with Buyer's investigation of the properties, assets and
financial condition related to Seller. In addition, Buyer shall have
the right to have the Real Property and Tangible Personal Property
inspected by Buyer Group, at Buyer's sole cost and expense, for
purposes of determining the physical condition and legal
characteristics of the Real Property and Tangible Personal Property.
In the event subsurface or other destructive testing is recommended by
any of Buyer Group, Buyer shall be permitted to have the same
performed with the prior written consent of Seller, which consent
shall not be unreasonably withheld.
5.2 OPERATION OF THE BUSINESS OF SELLER
Between the date of this Agreement and the Closing, Seller shall:
(a) conduct its business only in the Ordinary Course of Business;
(b) except as otherwise directed by Buyer in writing, and without
making any commitment on Buyer's behalf, use its Best Efforts to
preserve intact its current business organization, keep available the
services of its officers, employees and agents and maintain its
relations and good will with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships
with it;
(c) confer with Buyer prior to implementing operational decisions
of a material nature outside the Ordinary Course of Business;
(d) otherwise report periodically to Buyer concerning the status
of its business, operations and finances;
(e) make no material changes in management personnel without prior
consultation with Buyer;
(f) maintain the Assets in the Ordinary Course of Business;
(g) keep in full force and effect, without amendment, all material
rights relating to Seller's business, other than in the Ordinary
Course of Business;
(h) comply in all material respects with all Legal Requirements
and contractual obligations applicable to the operations of Seller's
business;
(i) continue in full force and effect the insurance coverage under
the policies set forth in Schedule 3.19(b) or substantially equivalent
policies;
(j) except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or
terminate any Employee Plan without the express written consent of
Buyer;
(k) cooperate with Buyer and assist Buyer in identifying the
Governmental Authorizations required by Buyer to operate the business
from and after the Closing Date and either transferring existing
Governmental Authorizations of Seller to Buyer, where permissible, or
obtaining new Governmental Authorizations for Buyer;
(l) take all reasonable steps to claim, protect, preserve and
defend all material interest in its Water Rights in the SRBA;
(m) upon request from time to time, execute and deliver all
documents, testify in any Proceedings and do all other acts that may
be reasonably necessary or desirable in the reasonable opinion of
Buyer to consummate the Contemplated Transactions, all without further
consideration;
(n) maintain all books and Records of Seller relating to the
Business in the Ordinary Course of Business; and
(o) not increase any bonuses, salaries or other compensation to
any officer or employee or enter into any employment, or similar
contract with any officer or employee.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted herein, between the date of
this Agreement and the Closing Date, Seller shall not, without the
prior written Consent of Buyer, (a) take any affirmative action, or
fail to take any reasonable action within its control, as a result of
which any of the changes or events listed in Sections 3.13 or 3.17
would be likely to occur in any material respect; (b) make any
modification to any material Contract or Governmental Authorization,
except in the Ordinary Course of Business; (c) allow the levels of raw
materials, supplies or other materials included in the Inventories to
vary materially from the levels customarily maintained, except for
increases in business activities in the Ordinary Course of Business;
or (d) enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to the Assets, the
Business or the Assumed Liabilities.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller
shall make all filings required by Legal Requirements to be made by it
in order to consummate the Contemplated Transactions. Seller also
shall cooperate with Buyer and its Representatives with respect to all
filings that Buyer elects to make or, pursuant to Legal Requirements,
shall be required to make in connection with the Contemplated
Transactions. Seller also shall use its Best Efforts (both prior and
subsequent to Closing) to obtain all Consents required for the
assignment of the Seller Contacts to Buyer, including all Material
Consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing, Seller shall
promptly notify Buyer in writing if Seller becomes aware of any fact
or condition that causes or constitutes a Breach of any of Seller's
representations and warranties in any material respect. During the
same period, Seller also shall promptly notify Buyer of the occurrence
of any Breach of any covenant of Seller in this ARTICLE 5 or of the
occurrence of any event that may make the satisfaction of the
conditions in ARTICLE 7 impossible or unlikely.
5.6 BEST EFFORTS
Seller shall use its Best Efforts to cause the conditions in ARTICLE 7
to be satisfied.
5.7 CHANGE OF NAME
On or before the Closing Date (or subsequent to the Closing Date if
requested by Buyer), Seller shall (a) amend its Governing Documents
and take all other actions necessary to change its name to one
sufficiently dissimilar to Seller's present name, in Buyer's judgment,
to avoid confusion and (b) take all actions requested by Buyer to
enable Buyer to change its name to Seller's present name (if Buyer so
elects).
5.8 PAYMENT OF LIABILITIES
Except as otherwise expressed herein, Seller shall pay or otherwise
satisfy in the Ordinary Course of Business all of its Liabilities and
obligations. Buyer and Seller hereby waive compliance with the bulk-
transfer provisions of the Uniform Commercial Code (or any similar
law) ("Bulk Sales Laws") in connection with the Contemplated
Transactions.
5.9 CURRENT EVIDENCE OF TITLE
(a) As soon as is reasonably possible, and in no event later than
ten (10) Business Days after the date of this Agreement, Seller shall
furnish to Buyer, at Seller's and Buyer's equal expense, for each
parcel, tract or subdivided land lot of Real Property:
(i) from Guaranty Title, Inc. as agent for Commonwealth Land
Title Insurance Company (the "Title Insurer"):
(A) title commitments issued by the Title Insurer to
insure title to all Land, Improvements, insurable Appurtenances, if
any, in the amount of that portion of the Purchase Price allocated to
the Real Property, as specified in Schedule 2.5, covering such Real
Property, naming Buyer as the proposed insured and having an effective
date after the date of this Agreement, wherein the Title Insurer shall
agree to issue an ALTA 1992 form extended owner's policy of title
insurance endorsed to deleted exclusions for creditors rights and with
all standard preprinted exceptions deleted (each a "Title
Commitment"); and
(B) complete and legible copies of all recorded documents
listed as Schedule B-1 matters to be terminated or satisfied in order
to issue the policy described in the Title Commitment or as special
Schedule B-2 exceptions thereunder (the "Recorded Documents"); and
(ii) a survey of the Real Property made after the date of this
Agreement by a land surveyor licensed by the state in which the
Facility is located and bearing a certificate, signed and sealed by
the surveyor, certifying to Buyer and the Title Insurer that:
(A) such survey was made (1) in accordance with current
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys," jointly established and adopted by ALTA and ACSM, and
includes Items 1-4, 6, 7(a), 7(b)(1), 7(c), 8-11 and 13 of Table A
thereof, and (2) pursuant to the required Accuracy Standards as
adopted by ALTA and ACSM and in effect on the date of said
certificate; and
(B) such survey reflects the locations of all building
lines, easements and areas affected by any Recorded Documents
affecting such Real Property as disclosed in the Title Commitment
(identified by issuer, commitment number, and an effective date after
the date hereof) as well as any encroachments onto the Real Property
or by the Improvements onto any easement area or adjoining property
(each a "Survey"); and
(b) Each Title Commitment shall include the Title Insurer's
requirements for issuing its title policy, which requirements shall be
met by Seller on or before the Closing Date (including those
requirements that must be met by releasing or satisfying monetary
Encumbrances, but excluding Encumbrances that will remain after
Closing and those requirements that are to be met solely by Buyer).
(c) If any of the following shall occur (collectively, a "Title
Objection"):
(i) any Title Commitment or other evidence of title or search
of the appropriate real estate records discloses that any party other
than Seller has title to the insured estate covered by the Title
Commitment;
(ii) any title exception is disclosed in Schedule B to any
Title Commitment that is not one that Seller specifies when delivering
the Title Commitment to Buyer as one that Seller will cause to be
deleted from the Title Commitment concurrently with the Closing,
including (A) any exceptions that pertain to Encumbrances securing any
loans that do not constitute an Assumed Liability and (B) any
exceptions that Buyer reasonably believes could have a Seller Material
Adverse Effect; or
(iii) any Survey discloses any matter that Buyer reasonably
believes could have a Seller Material Adverse Effect;
then Buyer shall notify Seller in writing ("Buyer's Notice") of such
matters within ten (10) business days after date of receipt of all of
the Title Commitment, Survey and copies of Recorded Documents for the
Facility covered thereby.
(d) The parties hereto shall work together in good faith to cure
any Title Objections. Any Title Objection that the Title Insurer is
willing to insure over on terms acceptable to Seller and Buyer is
herein referred to as an "Insured Exception." The Insured Exceptions,
together with any title exception or matters disclosed by the Survey
not objected to by Buyer in the manner aforesaid shall be deemed to be
acceptable to Buyer (the "Permitted Real Estate Encumbrances").
5.10 SHAREHOLDERS MEETING
Seller will take all action necessary in accordance with and subject
to applicable law and Seller's Governing Documents to convene a
meeting of the holders of Seller's capital stock entitled to vote with
respect to the matters set forth herein, as soon as practicable after
the date of this Agreement to consider and vote upon (a) the adoption
and approval of this Agreement, and (b) the sale of substantially all
of the assets of Seller pursuant to this Agreement. The
recommendation of the Board of Directors of Seller that Seller's
shareholders approve the items listed in this Section 5.10 shall be
included and delivered to Seller's shareholders in connection with any
notice, proxy statement or other communication given or provided to
Seller's shareholders in connection with such meeting. Seller shall
cause the record date for purposes of determining the shareholders
entitled to notice and right to vote on the matters to be presented to
the shareholders at such meeting to be the same as the Agreement Date.
5.11 OFFICE LEASE
Seller currently occupies office space at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇. Seller has represented and warranted to Buyer that
the office lease is on a month-to-month basis at a rental rate of
$4,000 per month and that Seller will have the option (but not an
obligation) to purchase the office space on or about October 31, 2004
at a price equal to the lessor's cost (including costs for tenant
improvements). Seller will use its Best Efforts prior to the Closing
(and thereafter if required) to cause the office lease to be placed in
written form, consistent with the current terms as herein recited (and
subject to Buyer's right of review and reasonable approval) and to be
assigned to Buyer at Closing.
5.12 PROMOTIONAL AND MARKETING MATERIALS PREPARED BY THIRD PARTIES
Seller will use its Best Efforts prior to the Closing (and thereafter
if required) to obtain the assignment of all Copyrights in
promotional, marketing and similar materials prepared for Seller which
were prepared by third parties, including without limitation any such
materials prepared by ▇▇▇▇▇ ▇▇▇▇▇▇▇ of Ram Design or by Express
Printing (or any graphic designer engaged or employed by it).
ARTICLE 6
COVENANTS OF BUYER PRIOR TO CLOSING
6.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, and upon
reasonable advance notice received from Seller, Buyer or AMCON shall
(a) afford Seller and its Representatives and prospective lenders and
their Representatives (collectively, "Seller Group") access of a type
that is customary for a publicly-held company engaging in a similar
transaction, during regular business hours, to Buyer or AMCON's
personnel, properties, Contracts, Governmental Authorizations, books
and Records and other documents and data, such rights of access to be
exercised in a manner that does not unreasonably interfere with the
operations of Buyer or AMCON and that is consistent with the Legal
Requirements applicable to AMCON; (b) furnish Seller Group with copies
of all such Contracts, Governmental Authorizations, books and Records
and other existing documents and data as Seller may reasonably
request; (c) furnish Seller Group with such additional financial,
operating and other relevant data and information as Seller may
reasonably request; and (d) otherwise cooperate and assist, to the
extent reasonably requested by Seller.
6.2 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Buyer
shall make, or cause to be made, all filings required by Legal
Requirements to be made by it to consummate the Contemplated
Transactions. Buyer also shall cooperate, and cause its Related
Persons to cooperate, with Seller (a) with respect to all filings
Seller shall be required by Legal Requirements to make and (b) in
obtaining all Consents identified in Schedule 3.2(c), provided,
however, that Buyer shall not be required to dispose of or make any
change to its business, expend any material funds or incur any other
burden in order to comply with this Section 6.2. Between the date of
this Agreement and the Closing, Buyer or AMCON shall promptly notify
Seller in writing if Buyer or AMCON becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer or
AMCON's representations and warranties made as of the date of this
Agreement. During the same period, Buyer or AMCON also shall promptly
notify Seller of the occurrence of any Breach of any covenant of Buyer
or AMCON in this ARTICLE 6 or of the occurrence of any event that may
make the satisfaction of the conditions in ARTICLE 8 impossible or
unlikely.
6.3 BEST EFFORTS
Buyer shall use its Best Efforts to cause the conditions in ARTICLE 8
to be satisfied.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Assets and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Seller contained in ARTICLE 3 of
this Agreement shall be true and correct to the extent that any
inaccuracy therein would not result in a Seller Material Adverse
Effect as of the date hereof and as of the Closing as though made as
of such time (where all such representations and warranties shall be
read without regard to any materiality limitations, including Seller
Material Adverse Effect qualifications), except to the extent such
representations and warranties expressly relate to an earlier date, in
which case such representations shall be true and correct to the
extent that any inaccuracy therein would not result in a Seller
Material Adverse Effect as of such earlier date (where all such
representations and warranties shall be read without regard to any
materiality limitations, including Seller Material Adverse Effect
qualifications).
7.2 SELLER'S PERFORMANCE
All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been duly performed
and complied with, except where the failure to so perform shall not
have a Seller Material Adverse Effect.
7.3 CONSENTS
Each of the Consents identified in Schedule 7.3 (the "Material
Consents") shall have been obtained and shall be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Seller shall have caused the documents and instruments required by
Section 2.7(a) and the following additional documents to be delivered
(or tendered subject only to Closing) to Buyer:
(a) an opinion of ▇▇▇▇▇▇▇ Coie, dated the Closing Date, in the
form of Exhibit M; and
(b) releases of all material Encumbrances on the Assets, other
than Permitted Encumbrances, including releases of each mortgage of
record and reconveyances of each deed of trust with respect to each
parcel of real property included in the Assets.
7.5 TITLE INSURANCE
Buyer shall have received the Title Commitments as described in
Section 5.9, dated the Closing Date, in an aggregate amount equal to
the amount of the Purchase Price allocated to the Real Property,
amending the effective date to the date and time of recordation of the
deed transferring title to the Real Property to Buyer with no
exception for the gap between closing and recordation, deleting or
insuring over Title Objections as required pursuant to Section 5.9.
7.6 SHAREHOLDER APPROVAL
Each of the items described in Section 5.10 to be submitted to the
shareholders of Seller at a shareholders meeting shall have been
approved by the requisite vote of the holders of Seller's capital
stock.
7.7 ASSIGNMENT OF BUREAU CONTRACT
Seller shall have obtained from the United States Bureau of
Reclamation ("Bureau") the Bureau's consent in writing to the
assignment to Buyer of Seller's interest in the Bureau Contract.
7.8 NO PROCEEDINGS
Since the date of this Agreement, there shall not have been commenced
or threatened against Buyer, AMCON or against any Related Person of
Buyer or AMCON, any Proceeding that, if decided adversely, could
reasonably be expected to have a Seller Material Adverse Effect (a)
involving any challenge to, or seeking Damages or other relief in
connection with, any of the Contemplated Transactions or (b) that may
have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with any of the
Contemplated Transactions.
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Seller in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Buyer contained in ARTICLE 4 of
this Agreement shall be true and correct to the extent that any
inaccuracy therein would not result in a Buyer Material Adverse Effect
as of the date hereof and as of the Closing as though made as of such
time (where all such representations and warranties shall be read
without regard to any materiality limitations, including Buyer
Material Adverse Effect qualifications), except to the extent such
representations and warranties expressly relate to an earlier date, in
which case such representations shall be true and correct to the
extent that any inaccuracy therein would not result in a Buyer
Material Adverse Effect as of such earlier date (where all such
representations and warranties shall be read without regard to any
materiality limitations, including Buyer Material Adverse Effect
qualifications).
8.2 BUYER'S PERFORMANCE
All of the covenants and obligations that Buyer and AMCON are required
to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been performed and
complied with, except where the failure to so perform shall not have a
Buyer Material Adverse Effect.
8.3 ADDITIONAL DOCUMENTS
Buyer and AMCON shall have caused the documents and instruments
required by Section 2.7(b) and an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP, dated the Closing Date, in the form of Exhibit N, to be delivered
(or tendered subject only to Closing) to Seller.
8.4 CAPITAL CONTRIBUTION TO BUYER
AMCON shall have made a capital contribution to Buyer in an amount not
less than $500,000, and Seller shall have received reasonable evidence
of such capital contribution.
8.5 SHAREHOLDER APPROVAL
Each of the items described in Section 5.10 to be submitted to the
shareholders of Seller at a shareholders meeting shall have been
approved by the requisite vote of the holders of Seller's capital
stock.
8.6 NO PROCEEDINGS
Since the date of this Agreement, there shall not have been commenced
or threatened against Seller or against any Related Person of Seller,
any Proceeding that, if decided adversely, could reasonably be
expected to have a Buyer Material Adverse Effect (a) involving any
challenge to, or seeking Damages or other relief in connection with,
any of the Contemplated Transactions or (b) that may have the effect
of preventing, delaying, making illegal, imposing limitations or
conditions on or otherwise interfering with any of the Contemplated
Transactions.
ARTICLE 9
TERMINATION
9.1 TERMINATION EVENTS
By notice given prior to or at the Closing, subject to Section 9.2,
this Agreement may be terminated as follows:
(a) by Buyer and AMCON if a Breach of any provision of this
Agreement has been committed by Seller, where such Breach has had a
Seller Material Adverse Effect, and such Breach has not been waived by
Buyer and AMCON or cured by Seller within thirty (30) days after
Seller's receipt of written notice of such Breach by AMCON or Buyer;
(b) by Seller if a Breach of any provision of this Agreement has
been committed by Buyer or AMCON, where such Breach has had a Buyer
Material Adverse Effect, and such Breach has not been waived by Seller
or cured by Buyer and/or AMCON within thirty (30) days after Buyer's
or AMCON's receipt of written notice of such Breach by Seller;
(c) by Buyer or AMCON if any condition in ARTICLE 7 has not been
satisfied as of the date specified for Closing in the first sentence
of Section 2.6 or if satisfaction of such a condition by such date is
or becomes impossible (other than through the failure of Buyer or
AMCON to comply with its obligations under this Agreement), and Buyer
has not waived such condition on or before such date, provided,
however, that neither Buyer nor AMCON may exercise such right of
termination prior to the date determined pursuant to Section 9.1(f)
(i.e., May 17, 2004 or May 31, 2004, if applicable);
(d) by Seller if any condition in ARTICLE 8 has not been satisfied
as of the date specified for Closing in the first sentence of Section
2.6 or if satisfaction of such a condition by such date is or becomes
impossible (other than through the failure of Seller to comply with
their obligations under this Agreement), and Seller has not waived
such condition on or before such date, provided, however, that Seller
may not exercise such right of termination prior to the date
determined pursuant to Section 9.1(g) (i.e., May 17, 2004 or May 31,
2004, if applicable);
(e) by the consent of Buyer, AMCON and Seller;
(f) by Buyer or AMCON if the Closing has not occurred on or before
May 17, 2004 (but such date shall be extended to May 31, 2004 if the
Closing has not occurred because the conditions set forth in Section
7.7 have not been satisfied or waived by Buyer) or such later date as
the parties may agree upon, unless Buyer or AMCON is in Breach of this
Agreement where such Breach has had a Buyer Material Adverse Effect;
or
(g) by Seller if the Closing has not occurred on or before May 17,
2004 (but such date shall be extended to May 31, 2004 if the Closing
has not occurred because the conditions set forth in Section 7.7 have
not been satisfied or waived by Buyer) or such later date as the
parties may agree upon, unless the Seller is in Breach of this
Agreement where such Breach has had a Seller Material Adverse Effect.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and
the exercise of such right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1,
all obligations of the parties under this Agreement will terminate,
provided, however, that, if this Agreement is terminated because of a
Breach of this Agreement by the nonterminating party or because one or
more of the conditions to the terminating party's obligations under
this Agreement is not satisfied as a result of the party's failure to
comply with its obligations under this Agreement, the terminating
party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE 10
ADDITIONAL COVENANTS
10.1 EMPLOYEES AND EMPLOYEE BENEFITS
(a) Information on Active Employees. For the purpose of this
Agreement, the term "Active Employees" shall mean all employees
employed on the Closing Date by Seller for its business who are:
(i) bargaining unit employees currently covered by a
collective bargaining agreement, or
(ii) employed exclusively in Seller's business as currently
conducted, including employees on temporary leave of absence,
including family medical leave, military leave, temporary disability
or sick leave, but excluding employees on long-term disability leave.
(b) Salaries and Benefits.
(i) Seller shall be responsible for (A) the payment of all
wages and other remuneration due to Active Employees with respect to
their services as employees of Seller through the close of business on
the Closing Date, including all vacation pay earned prior to the
Closing Date; and (B) the payment of any termination or severance
payments.
(c) Buyer agrees to make an offer of employment to each Active
Employee at substantially the same salary and wage rate as reflected
on Schedule 3.21(a). Each Active Employee who accepts such offer and
becomes employed by Buyer is referred to as a "Continuing Active
Employee". Continuing Active Employees will have the right to
participate in any and all Buyer and/or AMCON benefits plans to the
same extent as any similarly situated employee of Buyer and/or AMCON,
with waivers to preexisting conditions, but subject to limitations set
by insurers and beyond Buyer's or AMCON's reasonable control. Buyer
and/or AMCON Shall take all action necessary to cause the period of
service of continuing Active Employees with the Seller to be counted
as service for Buyer and AMCON and their affiliates for purposes of
determining eligibility and vesting under the benefit plans of Buyer
and AMCON and for determining benefits under the vacation, short-term
disability and severance, plans or programs, if any, of Buyer and
AMCON. With respect to any plan that is a "welfare benefit plan" (as
defined in Section 3(1) of ERISA) that was maintained by Seller as of
the Closing that is subject to Section 4980B of the Code and any
applicable state statutes mandating health insurance continuation
coverage (such coverage "COBRA Coverage"), Buyer agrees to provide the
applicable continuation coverage for any employee of Seller who is, as
of the Closing, (1) entitled to such COBRA Coverage as a result of a
qualifying event (as defined in Code Section 4980B) that occurs
because of the transaction consummated by this Agreement, or (2)
currently receiving or eligible COBRA Coverage under a Seller welfare
plan.
10.2 PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER
Seller shall pay in a timely manner all transfer Taxes resulting from
or payable in connection with the sale of the Assets pursuant to this
Agreement, regardless of the Person on whom such Taxes are imposed by
Legal Requirements.
10.3 ASSISTANCE IN PROCEEDINGS
Both parties will cooperate with the other and its counsel in the
contest or defense of, and make available its personnel and provide
any testimony and access to its books and Records in connection with,
any Proceeding involving or relating to (a) any Contemplated
Transaction or (b) any action, activity, circumstance, condition,
conduct, event, fact, failure to act, incident, occurrence, plan,
practice, situation, status or transaction on or before the Closing
Date involving Seller or the Business.
10.4 NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT
(a) Noncompetition. Subject to Section 11.2, during the
Restricted Period, Seller shall not, anywhere in the United States
directly or indirectly invest in, own, manage, operate, finance,
control, advise, render services to or guarantee the obligations of
any Person engaged in or planning to become engaged in a business
whose products, services or activities compete, in whole or in part,
with the products or services offered by Buyer, or activities engaged
in by Buyer, at any time during the Restricted Period (a "Post-Closing
Competing Business"), provided, however, that Seller may purchase or
otherwise acquire up to (but not more than) five percent (5%) of any
class of the securities of any Person (but may not otherwise
participate in the activities of such Person) if such securities are
listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Exchange Act. For this purpose,
the "Restricted Period" shall mean the period commencing on the
Closing Date and continuing thereafter until the earlier to occur of
either: (i) the fifth (5th) anniversary of the Closing Date, or (ii)
the date on which Seller obtains the ownership or possession of the
Collateral as a result of its foreclosure of its lien or security
interests in the Collateral following a default by Buyer pursuant to
the terms of the Three Year Note, the Ten Year Note, the Security
Agreement or the Mortgage.
(b) Nonsolicitation. During the Restricted Period, Seller shall
not, directly or indirectly on behalf of a Post-Closing Competing
Business:
(i) solicit the business of any Person who is a customer of
Buyer;
(ii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other business relation of Buyer to cease doing business
with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer;
(iii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other business relation of Seller on the Closing Date to
cease doing business with Buyer, to deal with any competitor of Buyer
or in any way interfere with its relationship with Buyer; or
(iv) hire, retain or attempt to hire or retain any employee
or independent contractor of Buyer or in any way interfere with the
relationship between Buyer and any of its employees or independent
contractors.
(c) Nondisparagement. After the Closing Date, neither party
hereto will disparage the other party or any of its shareholders,
directors, officers, employees or agents.
(d) Modification of Covenant. If a final judgment of a court or
tribunal of competent jurisdiction determines that any term or
provision contained in Section 10.4(a) through (c) is invalid or
unenforceable, then the parties agree that the court or tribunal will
have the power to reduce the scope, duration or geographic area of the
term or provision, to delete specific words or phrases or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision. This Section 10.4 will be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
This Section 10.4 is reasonable and necessary to protect and preserve
Buyer's legitimate business interests and the value of the Assets and
to prevent any unfair advantage conferred on Seller.
10.5 RETENTION OF AND ACCESS TO RECORDS
After the Closing Date, Buyer shall retain for a period consistent
with Buyer's record-retention policies and practices, and as required
under applicable law to Seller and Buyer, those Records of Seller
delivered to Buyer. Buyer also shall provide Seller and their
Representatives reasonable access thereto, during normal business
hours and upon prior written notice, for any reasonable business
purpose specified by Seller in such notice. After the Closing Date,
Seller shall provide Buyer and its Representatives reasonable access
to Records that are Excluded Assets, during normal business hours and
upon reasonable prior written notice, for any reasonable business
purpose specified by Buyer in such notice.
10.6 FURTHER ASSURANCES
Prior and subsequent to the Closing, the parties shall cooperate
reasonably with each other and with their respective Representatives
in connection with any steps required to be taken as part of their
respective obligations under this Agreement, and shall (a) furnish
upon request to each other such further information; (b) execute and
deliver to each other such other documents; and (c) do such other acts
and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the
Contemplated Transactions.
10.7 COLLECTION OF ACCOUNTS RECEIVABLE
At the Closing, Seller shall provide Buyer with a list of its Accounts
Receivable as of the Closing Date, including the name, address and
amount owed by each Accounts Receivable debtor and the related invoice
numbers and other information appropriate to the collection of
Seller's Accounts Receivable (the "Accounts Statement"). After the
Closing Date, Buyer shall use its Best Efforts to collect for the
benefit of Seller the Accounts Receivable listed on the Accounts
Statement, but shall not be obligated to commence any Proceeding or
retain the services of any third party (e.g., collection agency,
attorney, etc.) to collect any of Seller's Accounts Receivable, and
shall not offer any discount on any of Seller's Accounts Receivable
without the prior consent of Seller. Within ten (10) days from the
last day of each month, Buyer shall pay to Seller ninety-eight percent
(98%) of Seller's Accounts Receivable collected by Buyer during the
month, retaining two percent (2%) of Seller's Accounts Receivable
collected by Buyer as a fee for reimbursement of Buyer's time and
effort in effecting such collections. Upon reasonable advance notice
during normal business hours, Seller may inspect the books and records
of Buyer relating to Buyer's collection of Seller's Accounts
Receivable. During the first ninety (90) days after Closing, Seller
shall not attempt to collect (and will not commence any Proceeding to
collect) any of its Accounts Receivable without the prior consent of
Buyer. If following the Closing Buyer receives any payment or
remittance from a debtor reflected on the Accounts Statement and which
debtor is also a continuing customer of Buyer, then such collection
shall first be allocated to the amounts owing from the debtor on the
Account Statement and thereafter any excess amounts to such debtor's
account with Buyer.
10.8 PARADISE LODGE
(a) After the Closing Date, Seller, upon reasonable advance
written notice to Buyer, may use Paradise Lodge provided its use does
not interfere with the business operations of Buyer or AMCON. The fee
charged to Seller by Buyer for such use will be a reasonable daily fee
(as established and adjusted from time to time by Buyer), but such fee
will not exceed the lowest fee then in effect for use of Paradise
Lodge by any third party for a use unrelated to Buyer's business.
Seller's use of Paradise Lodge will be subject to such reasonable
rules, regulations and safety requirements as may be established from
time to time by Buyer.
(b) Buyer and/or AMCON agree to honor all future reservations
made prior to the Closing Date upon the terms made at the time of
booking and is described on Schedule 10.8(b).
(c) Notwithstanding the foregoing, Buyer or AMCON shall have the
right to sell the Paradise Lodge to a third-party, subject to a right
of first offer in favor of Seller, in which case, upon the
consummation of the sale to such unrelated third party, the rights
afforded in this Section 10.8 shall terminate if such third party
purchaser is not an affiliate of Buyer. If Buyer shall determine that
it desires to sell Paradise Lodge, it shall first offer to sell such
property to Seller, and provide Seller with a written notice ("Offer
Notice") regarding the price and general terms of sale on which the
property will be sold. Seller shall have thirty (30) days after the
date of receiving such Offer Notice from Buyer to provide Seller's
binding commitment to Buyer to purchase such property at the price and
on the terms described in the Offer Notice ("Acceptance Notice"). If
Seller does not provide the Acceptance Notice within thirty (30) days
of receipt of the Offer Notice, Buyer may proceed to sell Paradise
Lodge at the same price and on the same general terms as indicated in
the Offer Notice. If Buyer determines that it will offer Paradise
Lodge or desires to accept any offer from a third party for Paradise
Lodge at a lower price or at terms that are materially more favorable
than that offered to Seller pursuant to the Offer Notice, then
Seller's right of first offer shall again apply, and Buyer must offer
the property to Seller at such revised price and on such revised terms
in accordance with the provisions of this Section 10.8.
10.9 RESTRICTION ON SELLER DISSOLUTION AND DISTRIBUTIONS
In order to ensure that the vote by Seller's shareholders with respect
to the matters specified in Section 5.10 of this Agreement or any
other matter related thereto does not constitute an "offer" or "sale"
(as those terms are defined in Rule 145 under the Securities Act of
1933) of any security of Buyer or AMCON to be issued or delivered
pursuant to this Agreement or the Buyer Shareholder Agreement, Seller
(a) agrees not to (i) dissolve Seller, (ii) make a pro rata or similar
distribution of any such securities to the Seller's shareholders,
(iii) have the Seller's board of directors adopt a resolution or take
any other action that is inconsistent with clauses (i) or (ii), in
each case within one year period following the Closing, and (b)
represents and warrants that there is no pre-existing plan providing
for the distribution of any such securities at any time prior to the
first (1st) anniversary of the Closing.
ARTICLE 11
USE OF WATER FROM SOURCE ASSET
11.1 WATER ROYALTY
(a) As additional consideration for the sale, transfer,
assignment and conveyance to Buyer of the Source Asset and the other
Assets, after the Closing in perpetuity, Buyer shall pay Seller a
royalty of $.03 per liter of water that is extracted by Buyer or its
affiliates or any Person acting through rights granted by Buyer or its
affiliates from the Source Asset or any other Water Rights, existing
now or in the future, on the Real Property or any Appurtenances
thereto ("Trinity Water Rights"), or any adjacent properties from
which Trinity Water Rights source water can be extracted for any
commercial purposes, including, without limitation, sales, marketing,
promotional purposes or any other commercial use (the "Water
Royalty"). Notwithstanding the foregoing, for purposes of calculating
the Water Royalty, a "commercial use" will not include such incidental
items as use of water from the Trinity Water Rights for purposes of
providing heat for buildings, swimming pool or spa uses, domestic
uses, water used by the Paradise Homeowners Association or members
thereof (other than Buyer or its affiliates), uses for irrigation and
sewer facilities, incidental industrial uses in Buyer's facility or
spillage during the bottling process in the Ordinary Course of
Business. Payment of the Water Royalty shall be guaranteed by AMCON
pursuant to the Guaranty and shall be secured by the Collateral
(including the Trinity Water Rights) pursuant to the Security
Agreement and the Mortgage. The total Water Royalty for the twelve
(12) month period beginning on the Closing Date shall be a minimum of
$206,400 and the total Water Royalty for each subsequent twelve month
period beginning on an anniversary of the Closing Date shall be a
minimum of $288,000. Buyer shall pay the Water Royalty for each
quarter of the applicable twelve month period within thirty (30) days
of the end of the quarter, with the balance, if any, of the Water
Royalty required to satisfy the minimum Water Royalty requirements of
this Section 11.1, payable at the time the Water Royalty for the
fourth quarter of the twelve (12) month period is paid. During the
five (5) year period commencing on the Closing Date, Seller may elect
to receive any Water Royalty payment in shares of AMCON Common Stock,
up to an aggregate of 250,000 (or if the Reverse Stock Split is
consummated, 41,666 shares, in each case, subject to adjustment for
other stock splits, reverse stock splits, stock dividends,
subdivisions, reclassifications or similar transactions by AMCON after
the date hereof) shares of AMCON Common Stock, by giving Buyer and
AMCON written notice of its election to be paid in AMCON Common Stock
at least thirty (30) days before the applicable Water Royalty payment
date, and the execution and delivery by Seller of a Subscription
Agreement substantially in the form attached hereto as Exhibit O. The
number of shares of AMCON Common Stock to be issued to Seller as
payment for the Water Royalty pursuant to Seller's election shall
equal the Water Royalty payable on the payment date divided by the
average closing price of AMCON Common Stock as quoted by the American
Stock Exchange (or other securities exchange on which AMCON Stock may
be listed if no longer listed on the American Stock Exchange as
applicable) for the thirty (30) consecutive trading days ending on the
trading day immediately preceding the date of Seller's election.
(b) Buyer shall, and shall cause its Affiliates to, keep
accurate, complete and current records relating to the extraction of
water from the Source Asset or any other applicable Water Rights for
purposes of calculating the Water Royalty. Upon reasonable advance
notice and during normal business hours, Seller and its agents shall
be entitled to examine and/or audit the books and records of Buyer and
its Affiliates in order to determine the Water Royalty payable for any
previous period. Buyer shall, and shall cause its Affiliates to,
fully cooperate with Seller and its agents, including by promptly
making all of their books and records available to Seller and/or its
agents and by causing their personnel to meet with and answer
questions posed by Seller and its agents. If Seller determines there
was an underpayment of the Water Royalty for any period, it shall
deliver written notice of such determination to Buyer (which notice
shall specify the amount of such underpayment and the basis of
Seller's determination) (the "Payment Notice"). If within twenty (20)
days following Seller's delivery of a Payment Notice to Buyer, Buyer
has not objected to the amount of the underpayment set forth in the
Payment Notice in writing (which notice shall state the basis of
Buyer's objection), the amount of the underpayment set forth in the
Payment Notice shall be binding and conclusive on the parties and
Buyer shall promptly pay the amount of the underpayment set forth in
the Payment Notice to Seller. If Buyer has delivered to Seller its
written objection to the amount of the underpayment within such twenty
(20) day period, the parties shall attempt to resolve this dispute in
good faith in the same manner as the resolution of disputes relating
to the calculation of the Inventory and Current Assets Purchase Price
pursuant to Section 2.8 of this Agreement.
(c) Buyer shall have the right to terminate Buyer's obligations
to pay the Water Royalty hereunder pursuant to the terms and
provisions of this Section 11.1(c) (Buyer's right to so terminate
being referred to as "Buyer's Termination Right").
(i) As used in this Section 11.1(c), the following terms
shall have the following meaning:
(A) "Buyer Appraiser's FMV" means the Fair Market Value
as determined by Buyer's appraiser (who shall be independent) and as
set forth in Buyer's Exercise Notice.
(B) "Buyer's Exercise Notice" means the notice given by
Buyer exercising Buyer's Termination Right pursuant to clause (ii)
below.
(C) "Buyer's Exercise Date" means the date the Buyer's
Exercise Notice is given.
(D) "Fair Market Value" means the fair market value of
the future revenue stream of the Water Royalty determined as of the
date specified in Buyer's Exercise Notice and determined as provided
in clause (ix) below.
(E) "Independent Appraiser" means the third party
independent appraiser selected pursuant to clause (vii)(A) below.
(F) "Independent Appraiser's FMV" means the Fair Market
Value determined by the Independent Appraiser pursuant to clause
(vii)(B) below.
(G) "Seller's Objection Notice" means a notice given by
Seller pursuant to clause (iii) below that it is objecting to the
Buyer Appraiser's FMV.
(H) "Termination Payment" means the amount determined
pursuant to this Section 11(b) that Buyer shall pay to Seller if Buyer
elects to exercise Buyer's Termination Right.
(ii) At any time after the tenth anniversary of the Closing
Date, and following or concurrent with the sale by Buyer of all of the
Trinity Water Rights to an unaffiliated, bona fide third party, either
directly or indirectly, or in connection with the sale of Buyer's
business to an unaffiliated bona fide third party (a "Disposition
Transaction"), Buyer shall notify Seller that Buyer is exercising
Buyer's Termination Right under this Section 11.1(c). Such notice
shall be accompanied by the report of an independent appraiser setting
forth such appraiser's opinion as to the Fair Market Value as of a
date specified in such notice, such date to be within ten (10) days
prior to Buyer's Exercise Date. Buyer shall not be entitled to
transfer the Trinity Water Rights in part to any third party.
(iii) Seller shall have the right to object to Buyer
Appraiser's FMV by notifying Buyer of such objection, such Seller's
Objection Notice to be given within thirty (30) days of Seller's
receipt of Buyer's notice.
(iv) If no Seller's Objection Notice is given within such
thirty (30) day period or if Seller waives its right to object, then
the amount of the Termination Payment shall be equal to the amount of
Buyer Appraiser's FMV, and Buyer shall pay to Seller in cash such
Termination Payment within five (5) days after the later of (A)
expiration of such thirty (30) day period, or (B) the consummation of
such Disposition Transaction by Buyer; provided that, the Water
Royalty shall continue to be paid by Buyer to Seller until the
Termination Payment has been made.
(v) In the event Seller gives a Seller's Objection Notice,
Seller shall, within forty-five (45) days after the date such Seller's
Objection Notice is given, provide to Buyer a report of an independent
appraiser setting forth such appraiser's opinion as to the Fair Market
Value (the "Seller Appraiser's FMV"). Failure to so provide Buyer
such Seller Appraiser's FMV shall be deemed acceptance of Buyer
Appraiser's FMV, and the provisions of clause (iv) above shall apply.
(vi) In the event that the amount of Buyer Appraiser's FMV is
at least 90% of the amount of Seller Appraiser's FMV, then the
Termination Payment shall be equal to the average of Buyer Appraiser's
FMV and Seller Appraiser's FMV, and such Termination Payment shall be
paid by Buyer to Seller in cash within five (5) days after the later
of (A) the date the Buyer is provided Seller Appraiser's FMV as
provided in clause (v) above, or (B) the consummation of the
Disposition Transaction by Buyer; provided that, the Water Royalty
shall continue to be paid by Buyer to Seller until the Termination
Payment has been made.
(vii) In the event that Buyer Appraiser's FMV is less than 90%
of Seller Appraiser's FMV, then a third appraisal of the Fair Market
Value shall be made pursuant to the following:
(A) Buyer and Seller shall discuss the selection of an
independent appraiser to determine such Fair Market Value. In the
event a determination of such independent appraiser is not agreed upon
within thirty (30) days after Buyer is provided Seller Appraiser's FMV
as provided in clause (v) above, then a nationally recognized
independent public accounting firm that has not been an auditor of or
engaged by either Buyer or Seller or any affiliate of Buyer or Seller
within the prior three (3) years shall be selected by mutual agreement
of Buyer and Seller, or if no such agreement is reached, then by the
largest (measured by number of employees and partners) of such
nationally recognized firms.
(B) The independent appraiser shall, within a period
of sixty (60) days after its acceptance of such engagement, make a
determination of the Fair Market Value, and such determination shall
be provided, together with a written report supporting such
determination, to each of Buyer and Seller.
(C) In the event the Independent Appraiser's FMV is
equal to or greater than Seller Appraiser's FMV, then the Termination
Payment shall be equal to the Seller Appraiser's FMV. In the event
the Independent Appraiser's FMV is equal to or less than the Buyer
Appraiser's FMV, then the Termination Payment shall be equal to the
Buyer Appraiser's FMV. In the event the Independent Appraiser's FMV
is more than Buyer Appraiser's FMV and less than Seller Appraiser's
FMV, the Termination Payment shall be the average of the Buyer
Appraiser's FMV and the Seller Appraiser's FMV.
(D) Buyer shall make payment to Seller of the
Termination Payment within five (5) days after the later of (A) the
date Buyer receives the Independent Appraiser's FMV, or (B) the
consummation of the Disposition Transaction by Buyer; provided that,
the Water Royalty shall continue to be paid by Buyer to Seller until
the Termination Payment has been made.
(viii) All costs incurred under this Section 11.1(c) shall be
borne by the party incurring such costs, except that the costs of the
Independent Appraiser shall be borne equally by Buyer and Seller.
(ix) In determining the Fair Market Value, the appraiser(s)
shall base its/their determination on historical Royalty Payments made
by Buyer for a reasonable period prior to the Termination Date,
hypothetical Royalty Payments based on future growth and reasonable
assumptions with respect to the calculation of the present value of
the future cash flow represented by such hypothetical Royalty
Payments, each consistent with reasonable good faith estimates and in
accordance with customary discounted cash flow valuation
methodologies.
(x) Notwithstanding anything to the contrary provided in
this Section 11.1(c), the minimum amount for the Termination Payment
under this Section 11.1(c) shall be $5 million, so that in the event
the amount of the Termination Payment otherwise determined pursuant to
the preceding provisions is less than $5 million, then the amount of
the Termination Payment shall be $5 million.
(xi) Upon payment by Buyer of the Termination Payment as
provided herein, all of Buyer's obligations with respect to payment of
the Water Royalty shall thereupon cease.
11.2 DEVELOPMENT OF PRODUCTS FOR ALTERNATIVE USES
Seller may, at its sole discretion and cost, conduct research
regarding possible commercially feasible uses of water from the Source
Asset for non-beverage uses (an "Alternative Use"). Buyer will allow
Seller to obtain a reasonable quantity of water from the Source Asset
to be used solely for purposes of such research, provided that the
costs of extracting and shipping such water shall be borne solely by
Seller. If Seller's research indicates a Alternative Use that Seller
believes to be commercially feasible, it will present such information
to Buyer. Buyer, as the owner of the Assets, shall have the sole
right to extract, bottle, market and sell water from the Source Asset
for any Alternative Use, and Buyer shall not be required to market any
product derived from the research conducted by Seller, but may do so
if Buyer determines, in its sole discretion, that such product
presents a desirable commercial opportunity. In the event that Buyer
sells water from the Source Asset for an Alternative Use that is
derived from the research conducted by Seller, Buyer shall pay to
Seller a royalty equal to ten percent (10%) of Buyer's "Net Sales" of
the water from the Source Asset sold for such Alternative Uses, which
royalty shall be to the exclusion of the Water Royalty. For this
purpose, "Net Sales" shall mean the gross amount of the invoice
rendered to a customer for a sale, less deductions for taxes imposed
on such sale (whether in the form of sales, use, excise or similar
taxes, but excluding income taxes), import or export fees or tariffs,
freight allowances or costs, cash discounts, returns, credits for
defective or non-conforming goods, refunds and uncollectible amounts.
ARTICLE 12
INDEMNIFICATION; REMEDIES
12.1 SURVIVAL
All representations, warranties, covenants and obligations in this
Agreement, the certificates delivered pursuant to Section 2.7 and any
other certificate or document delivered pursuant to this Agreement
shall survive the Closing and the consummation of the Contemplated
Transactions until six (6) months after the completion of the audit
for Buyer's calendar year ending September 30, 2004, but in any event,
not to exceed fifteen (15) months from the Closing Date, other than
the representations contained in Section 3.12 which shall survive
until the expiration of the applicable statute of limitations period
(the "Expiration Date"); (b) Buyer's and Seller's respective
obligations contained in ARTICLES 11 and 12 of this Agreement which
shall survive for the specified periods set forth in each section
contained in such articles; and (c) Buyer's, Seller's and AMCON's
respective rights and obligations contained in the Three Year Note,
the Ten Year Note, the Security Agreement, the Guaranty and Mortgage
which shall survive for the specified periods set forth in each
respective document, subject to Section 12.7.
12.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLER
Seller will indemnify and hold harmless Buyer, and its
Representatives, shareholders, subsidiaries and Related Persons
(collectively, the "Buyer Indemnified Persons"), and will reimburse
the Buyer Indemnified Persons for any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable
attorneys' fees and expenses) whether or not involving a Third-Party
Claim, net of the discounted present value (using a ten percent
discount rate) of any Tax benefit that would be received by a company
with sufficient taxable income to deduct any loss or expense caused by
the event giving rise to an indemnification claim and net of the
discounted present value (using a ten percent discount rate) of any
insurance proceeds actually collected (collectively, such net amount
is referred to herein as "Damages"), arising from or in connection
with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement, and the certificates delivered pursuant to Section
2.7 (for this purpose, each such certificate will be deemed to have
stated that Seller's representations and warranties in this Agreement
fulfill the requirements of Section 7.1 as of the Closing Date as if
made on the Closing Date, unless the certificate expressly states that
the matters disclosed in a supplement have caused a condition
specified in Section 7.1 not to be satisfied), (v) any transfer
instrument or (vi) any other certificate, document, writing or
instrument delivered by Seller pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Seller in this
Agreement or in any other certificate, document, writing or instrument
delivered by Seller pursuant to this Agreement;
(c) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to
have been made, by any Person with Seller (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions;
(d) any failure to pay when due any Retained Liabilities.
12.3 INDEMNIFICATION AND REIMBURSEMENT BY BUYER AND AMCON
Buyer and AMCON jointly and severally will indemnify and hold harmless
Seller, and will reimburse Seller, for any Damages (as defined in
Section 12.2) arising from or in connection with:
(a) any Breach of any representation or warranty made by Buyer or
AMCON in this Agreement, and the certificates delivered pursuant to
Section 2.7 (for this purpose, each such certificate will be deemed to
have stated that Buyer's and/or AMCON's representations and warranties
in this Agreement fulfill the requirements of Section 8.1 as of the
Closing Date as if made on the Closing Date, unless the certificate
expressly states that the matters disclosed in a supplement have
caused a condition specified in Section 8.1 not to be satisfied), (v)
any transfer instrument or (vi) any other certificate, document,
writing or instrument delivered by Buyer or AMCON pursuant to this
Agreement;
(b) any Breach of any covenant or obligation of Buyer or AMCON in
this Agreement or in any other certificate, document, writing or
instrument delivered by Buyer or AMCON pursuant to this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer or
AMCON (or any Person acting on Buyer's or AMCON's behalf) in
connection with any of the Contemplated Transactions; or
(d) any liability arising out of the ownership or operation of the
Assets after the Effective Time or any Assumed Liabilities; provided,
however, that AMCON's Guaranty with respect to the Water Royalty shall
in no event exceed five million dollars ($5,000,000) in the aggregate.
12.4 LIMITATIONS ON AMOUNT--SELLER
Seller shall have no liability (for indemnification or otherwise) with
respect to claims under Section 12.2, other than liability arising
from any willful Breach of the obligations described in Section
12.2(b):
(a) (i) for any individual claim for which Damages are less than
Five Thousand Dollars ($5,000.00), and (ii) until the aggregate of all
other Damages with respect to claims (exceeding Five Thousand Dollars
($5,000) under Section 12.2 exceeds One Hundred Fifty Thousand Dollars
($150,000.00) and then only for the amount by which such other Damages
exceed One Hundred Fifty Thousand Dollars ($150,000.00);
(b) for Damages in excess of (i) Nine Million Dollars
($9,000,000.00) for claims related to the Seller's Water Rights, or
(ii) Two Million Seven Hundred Thousand Dollars ($2,700,000.00) with
respect to all other claims;
(c) for consequential damages consisting of business interruption
or lost profits, or with respect to punitive damages;
(d) to the extent that Buyer or AMCON had Knowledge of the facts
and/or circumstances giving rise to the claim on or prior to the
Closing; or
(e) to the extent that the subject matter of the claim is covered
by Title Insurance.
12.5 LIMITATIONS ON AMOUNT--BUYER AND AMCON
Except as expressed elsewhere herein, neither Buyer nor AMCON will
have any liability (for indemnification or otherwise) with respect to
claims under Section 12.3, other than liability arising from any
willful Breach of the obligations described in Section 12.3(b):
(a) (i) for any individual claim for which Damages are less than
Five Thousand Dollars ($5,000.00), and (ii) until the aggregate of all
other Damages with respect to claims (exceeding Five Thousand Dollars
($5,000.00) under Section 12.3 exceeds One Hundred Fifty Thousand
Dollars ($150,000.00) and then only for the amount by which such other
Damages exceed One Hundred Fifty Thousand Dollars ($150,000.00);
(b) for Damages in excess of Two Million Seven Hundred Thousand
Dollars ($2,700,000.00) with respect to all claims (except as
discussed below);
(c) for consequential damages consisting of business interruption
or lost profits, or with respect to punitive damages; or
(d) to the extent that Seller had Knowledge of the facts and/or
circumstances giving rise to the claim on or prior to the Closing;
Notwithstanding anything to the contrary contained in this Agreement
or any other agreement, the limitations to liability of AMCON/Buyer
set forth in this Section 12.5 shall not apply to any claims for
Damages made by Seller against Buyer and/or AMCON relating to the
failure of either such party to satisfy any payment obligation under
Section 11.1 of this Agreement, the Three Year Note, the Ten Year
Note, the Security Agreement, the Mortgage or the Guaranty.
12.6 TIME LIMITATIONS
(a) If the Closing occurs, Seller will only have liability (for
indemnification or otherwise) with respect to any Breach of this
Agreement or otherwise if Buyer or AMCON notify Seller of a claim on
or before the Expiration Date (or in the case of a claim under Section
3.12 of this Agreement, notify Seller of a claim on or before the
expiration of the applicable statute of limitations period)specifying
the factual basis of the claim in reasonable detail to the extent then
known by Buyer and AMCON, other than claims relating to Seller's
breach of any of its obligations under ARTICLES 10, 11 or 12 of this
Agreement, which claims may be made against Seller until the
expiration of Seller's obligations under each section contained in
such articles.
(b) If the Closing occurs, Buyer and AMCON will have liability
(for indemnification or otherwise) only if on or before the Expiration
Date Seller notifies Buyer of a claim specifying the factual basis of
the claim in reasonable detail to the extent then known by Seller,
other than claims relating to Buyer's and/or AMCON's breach of any of
their respective obligations contained in ARTICLES 10, 11 or 12 of
this Agreement or any of their respective obligations under the Three
Year Note, the Ten Year Note, the Security Agreement, the Mortgage or
the Guaranty, which claims may be made against Buyer and/or AMCON
until the expiration of Buyer's and/or AMCON's respective obligations
contained under each such section or such agreement, as the case may
be.
12.7 RIGHT OF SETOFF
Upon notice to Seller of Buyer's adjudicated claim (which is final,
binding and conclusive on the parties to such claim and not subject to
appeal), Buyer may set off any amount to which it may be entitled
under this ARTICLE 12 against amounts otherwise payable as a Water
Royalty or under the Three Year Note or the Ten Year Note. The
exercise of such right of setoff by Buyer in accordance with the
provisions of this Section 12.7 will not constitute an event of
default with respect to payment of the Water Royalty or under the
Three Year Note or the Ten Year Note or any instrument securing the
Water Royalty, the Three Year Note or the Ten Year Note. Neither the
exercise of, nor the failure to exercise, such right of setoff will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
12.8 THIRD-PARTY CLAIMS
(a) Promptly after receipt by a Person entitled to indemnity
under Section 12.2 or 12.3 (an "Indemnified Person") of notice of the
assertion of a Third-Party Claim against it, such Indemnified Person
shall give notice to the Person obligated to indemnify under such
Section (an "Indemnifying Person") of the assertion of such Third-
Party Claim, provided that the failure to notify the Indemnifying
Person will not relieve the Indemnifying Person of any liability that
it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party
Claim is prejudiced by the Indemnified Person's failure to give such
notice.
(b) If an Indemnified Person gives notice to the Indemnifying
Person pursuant to Section 12.8 of the assertion of a Third-Party
Claim, the Indemnifying Person shall be entitled to participate in the
defense of such Third-Party Claim and, to the extent that it wishes
(unless (i) the Indemnifying Person is also a Person against whom the
Third-Party Claim is made and the Indemnified Person determines in
good faith that joint representation would be inappropriate or (ii)
the Indemnifying Person fails to provide reasonable assurance to the
Indemnified Person of its financial capacity to defend such Third-
Party Claim and provide indemnification with respect to such Third-
Party Claim), to assume the defense of such Third-Party Claim with
counsel satisfactory to the Indemnified Person. After notice from the
Indemnifying Person to the Indemnified Person of its election to
assume the defense of such Third-Party Claim, the Indemnifying Person
shall not, so long as it diligently conducts such defense, be liable
to the Indemnified Person under this ARTICLE 12 for any fees of other
counsel or any other expenses with respect to the defense of such
Third-Party Claim, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Third-Party
Claim, other than reasonable costs of investigation. If the
Indemnifying Person assumes the defense of a Third-Party Claim, (i)
such assumption will conclusively establish for purposes of this
Agreement that the claims made in that Third-Party Claim are within
the scope of and subject to indemnification, and (ii) no compromise or
settlement of such Third-Party Claims may be effected by the
Indemnifying Person without the Indemnified Person's Consent unless
(A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person; (B) the sole
relief provided is monetary damages that are paid in full by the
Indemnifying Person; and (C) the Indemnified Person shall have no
liability with respect to any compromise or settlement of such Third-
Party Claims effected without its Consent.
(c) Notwithstanding the provisions of Section 13.4, Seller and
each Shareholder hereby consents to the nonexclusive jurisdiction of
any court in which a Proceeding in respect of a Third-Party Claim is
brought against any Buyer Indemnified Person for purposes of any claim
that a Buyer Indemnified Person may have under this Agreement with
respect to such Proceeding or the matters alleged therein and agree
that process may be served on Seller with respect to such a claim
anywhere in the world.
(d) With respect to any Third-Party Claim subject to
indemnification under this ARTICLE 12: (i) both the Indemnified Person
and the Indemnifying Person, as the case may be, shall keep the other
Person fully informed of the status of such Third-Party Claim and any
related Proceedings at all stages thereof where such Person is not
represented by its own counsel, and (ii) the parties agree (each at
its own expense) to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with
each other in order to ensure the proper and adequate defense of any
Third-Party Claim.
(e) With respect to any Third-Party Claim subject to
indemnification under this ARTICLE 12, the parties agree to cooperate
in such a manner as to preserve in full (to the extent possible
consistent with applicable law, legal process and rules of procedure)
the confidentiality of all confidential information and the attorney-
client and work-product privileges. In connection therewith, each
party agrees that: (i) it will use its Best Efforts, in respect of any
Third-Party Claim in which it has assumed or participated in the
defense, to avoid production of confidential information (consistent
with applicable law, legal process and rules of procedure), and (ii)
all communications between any party hereto and counsel responsible
for or participating in the defense of any Third-Party Claim shall, to
the extent possible (consistent with applicable law, legal process and
rules of procedure), be made so as to preserve any applicable
attorney-client or work-product privilege.
12.9 OTHER CLAIMS
A claim for indemnification for any matter not involving a Third-Party
Claim may be asserted by notice to the party from whom indemnification
is sought and shall be paid promptly after such notice unless
contested in good faith.
12.10 EXCLUSIVE REMEDIES
The indemnification remedies set forth in this ARTICLE 12 with respect
to the matters addressed by Sections 12.2 or 12.3 shall constitute the
sole and exclusive remedies of the parties hereto; (b) the only legal
action which may be asserted by any party with respect to the matters
addressed by Sections 12.2 or 12.3 shall be a contract action to
enforce, or to recover damages thereof; and (c) without limiting the
generality of subparagraph (b), no legal action sounding in tort or
strict liability may be maintained by any party with respect to the
matters addressed by Sections 12.2 or 12.3.
12.11 EXCLUSION OF QUALIFICATIONS FOR MATERIALITY AND MATERIAL
ADVERSE EFFECT
For purposes of this ARTICLE 12, the determination of whether a claim
exists under Section 12.2 or Section 12.3, or determining the amount
of Damages with respect to such claim, shall be made without regard to
any materiality qualification, including any reference to a Seller
Material Adverse Effect or Buyer Material Adverse Effect.
ARTICLE 13
GENERAL PROVISIONS
13.1 EXPENSES
Except as otherwise provided in this Agreement, each party to this
Agreement will bear its respective fees and expenses incurred in
connection with the preparation, negotiation, execution and
performance of this Agreement and the Contemplated Transactions,
including all fees and expense of its Representatives; provided that
Seller and Buyer shall share equally all costs with respect to the
items to be delivered pursuant to Section 5.9 hereof and the premiums
for the Title Policy. If this Agreement is terminated, the obligation
of each party to pay its own fees and expenses will be subject to any
rights of such party arising from a Breach of this Agreement by
another party.
13.2 PUBLIC ANNOUNCEMENTS
Any public announcement, press release or similar publicity with
respect to this Agreement or the Contemplated Transactions will be
issued, if at all, at such time and in such manner as Seller, Buyer
and AMCON jointly determine unless required by applicable law or legal
process. Except with the prior consent of the other party or as
permitted by this Agreement or as required by applicable law or legal
process, no party shall disclose to any Person (a) the fact that any
confidential information of Seller has been disclosed to Buyer or
AMCON or their Representatives, that Buyer or AMCON or their
Representatives have inspected any portion of the confidential
information of Seller, that any confidential information of Buyer or
AMCON has been disclosed to Seller, or its Representatives or that
Seller, or its Representatives have inspected any portion of the
confidential information of Buyer or (b) any information about the
Contemplated Transactions, including the status of such discussions or
negotiations, the execution of any documents (including this
Agreement) or any of the terms of the Contemplated Transactions or the
related documents (including this Agreement). Seller, Buyer and AMCON
will consult with one another concerning the means by which Seller's
employees, customers, suppliers and others having dealings with Seller
will be informed of the Contemplated Transactions, and Buyer and AMCON
will have the right to be present for any such communication.
13.3 NOTICES
All notices, Consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed
given to a party when (a) delivered to the appropriate address by hand
or by nationally recognized overnight courier service (costs prepaid);
(b) sent by facsimile with confirmation of transmission by the
transmitting equipment; or (c) received or rejected by the addressee,
if sent by certified mail, return receipt requested, in each case to
the following addresses, or facsimile numbers and marked to the
attention of the person (by name or title) designated below (or to
such other address, facsimile number, address or person as a party may
designate by notice to the other parties):
Seller:
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax no.: (▇▇▇) ▇▇▇-▇▇▇▇
with a mandatory copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Coie LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax no.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer and AMCON:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board
AMCON Distributing Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax no.: (▇▇▇) ▇▇▇-▇▇▇▇
with a mandatory copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax no.: (▇▇▇) ▇▇▇-▇▇▇▇
13.4 JURISDICTION; SERVICE OF PROCESS
Any Proceeding arising out of or relating to this Agreement or any
Contemplated Transaction may be brought in either (a) the courts of
the State of Idaho, County of ▇▇▇▇▇▇, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Idaho, or (b) the courts of the State of Nebraska, County of ▇▇▇▇▇▇▇,
or, if it has or can acquire jurisdiction, in the United States
District Court for the District of Nebraska, and each of the parties
irrevocably submits to the jurisdiction of each such court in any such
Proceeding, waives any objection it may now or hereafter have to venue
or to convenience of forum, and agrees that all claims in respect of
the Proceeding may be heard and determined in any such court. The
parties agree that either or both of them may file a copy of this
paragraph with any court as written evidence of the knowing, voluntary
and bargained agreement between the parties irrevocably to waive any
objections to venue or to convenience of forum. Process in any
Proceeding referred to in the first sentence of this section may be
served on any party anywhere in the world.
13.5 ENFORCEMENT OF AGREEMENT
Seller acknowledges and agrees that Buyer would be irreparably damaged
if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any Breach of this
Agreement by Seller could not be adequately compensated in all cases
by monetary damages alone. Accordingly, in addition to any other
right or remedy to which Buyer may be entitled, at law or in equity,
it shall be entitled to enforce any provision of this Agreement by a
decree of specific performance and to temporary, preliminary and
permanent injunctive relief to prevent Breaches or threatened Breaches
of any of the provisions of this Agreement, without posting any bond
or other undertaking.
13.6 WAIVER; REMEDIES CUMULATIVE
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither any failure nor any delay by
any party in exercising any right, power or privilege under this
Agreement or any of the documents referred to in this Agreement will
operate as a waiver of such right, power or privilege, and no single
or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right
arising out of this Agreement or any of the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by
a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
13.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements, whether written or
oral, between the parties with respect to its subject matter
(including any letter of intent and any confidentiality agreement
between Buyer and/or AMCON and Seller) and constitutes (along with the
Appendices, Schedules, Exhibits and other documents delivered pursuant
to this Agreement) a complete and exclusive statement of the terms of
the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented, or otherwise modified
except by a written agreement executed by the party to be charged with
the amendment.
13.8 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of
the other parties, except that Buyer may assign any of its rights and
delegate any of its obligations under this Agreement to AMCON or any
Subsidiary of AMCON or Buyer and may collaterally assign its rights
hereunder to any financial institution providing financing in
connection with the Contemplated Transactions. Subject to the
preceding sentence, this Agreement will apply to, be binding in all
respects upon and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under
or with respect to this Agreement or any provision of this Agreement,
except such rights as shall inure to a successor or permitted assignee
pursuant to this Section 13.8.
13.9 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this
Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.
13.10 CONSTRUCTION
The headings of Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or
interpretation. All references to "Articles," "Sections" and
"Schedules" refer to the corresponding Articles, Sections and
Schedules of this Agreement.
13.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
13.12 GOVERNING LAW
This Agreement will be governed by and construed under the laws of the
State of Idaho without regard to conflicts-of-laws principles that
would require the application of any other law.
13.13 EXECUTION OF AGREEMENT
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all
of which, when taken together, will be deemed to constitute one and
the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective
execution and delivery of this Agreement as to the parties and may be
used in lieu of the original Agreement for all purposes. Signatures of
the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
[SIGNATURE PAGE ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TSL ACQUISITION CORP.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board
and Chief Executive Officer
AMCON DISTRIBUTING COMPANY
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board
and Principal Executive Officer
TRINITY SPRINGS, LTD.
By: ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief
Executive Officer
APPENDIX A
Definitions
For purposes of the Agreement, the following terms and variations
thereof have the meanings specified or referred to in this Appendix A:
"Accounts Receivable"--(a) all trade accounts receivable and other
rights to payment from customers of Seller and the full benefit of all
security for such accounts or rights to payment, including all trade
accounts receivable representing amounts receivable in respect of
goods shipped or products sold or services rendered to customers of
Seller, (b) all other accounts or notes receivable of Seller and the
full benefit of all security for such accounts or notes and (c) any
claim, remedy or other right related to any of the foregoing.
"Active Employees"--as defined in Section 10.1.
"Agreement" as defined in the Preamble to this Agreement.
"Agreement Date" as defined in the Preamble to this Agreement.
"Alternative Use"--as defined in Section 11.2.
"AMCON Closing Documents"--as defined in Section 4.2(b).
"AMCON Common Stock"--as defined in Section 4.5(a).
"AMCON Preferred Stock"--as defined in Section 4.5(a).
"AMCON SEC Documents" means all documents required to be filed with
the SEC by AMCON, including without limitation, (i) AMCON's annual
report on Form 10-K for its fiscal year ended September 30, ▇▇▇▇ (▇▇▇
"▇▇▇▇▇ ▇▇-▇"), (▇▇) AMCON's quarterly reports on Form 10-Q for its
fiscal quarter ended December 31, 2003, and (iii) all other reports,
filings, registration statements and other documents filed by it with
the SEC since September 30, 2003.
"AMCON Securities"--as defined in Section 4.5(b).
"AMCON Stock Options"--as defined in Section 4.5(a).
"Appurtenances"--all privileges, rights, easements, hereditaments and
appurtenances belonging to or for the benefit of the Land, including
all easements appurtenant to and for the benefit of any Land (a
"Dominant Parcel") for, and as the primary means of access between,
the Dominant Parcel and a public way, or for any other use upon which
lawful use of the Dominant Parcel for the purposes for which it is
presently being used is dependent, and all rights existing in and to
any streets, alleys, passages and other rights-of-way included thereon
or adjacent thereto (before or after vacation thereof) and vaults
beneath any such streets.
"Assets"--as defined in Section 2.1.
"Assignment and Assumption Agreement"--as defined in Section
2.7(a)(ii).
"Assumed Liabilities"--as defined in Section 2.3.
"Balance Sheet"--as defined in Section 3.4.
"Best Efforts"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that
result as expeditiously as possible, provided, however, that a Person
required to use Best Efforts under this Agreement will not be thereby
required to take actions that would result in a material adverse
change in the benefits to such Person of this Agreement and the
Contemplated Transactions or to dispose of or make any change to its
business, expend any material funds or incur any other material
burden.
"▇▇▇▇ of Sale"--as defined in Section 2.7(a)(i).
"Breach"--any breach of, or any inaccuracy in, any material
representation or warranty or any breach of, or failure to perform or
comply with any material covenant or material obligation, in or of
this Agreement or any other Contract, or any event which with the
passing of time or the giving of notice, or both, would constitute
such a breach, inaccuracy or failure.
"Bulk Sales Laws"--as defined in Section 5.8.
"Bureau Contract"--the Industrial Water Service Contract (Contract No.
2-07-10-W0943) dated August 24, 1992 between the United States and
Seller.
"Business"--the business, operations and activities of Seller relating
to its bottled and mineral water services and products including but
not limited to the research, development, manufacture, use, marketing,
promotion, sale, and distribution thereof. Without limiting the
foregoing, "Business" shall include the operation of the Assets.
"Business Day"--any day other than (a) Saturday or Sunday or (b) any
other day on which banks in Idaho are permitted or required to be
closed.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer Closing Documents"--as defined in Section 4.2(a).
"Buyer Common Stock"--as defined in Section 2.4(g).
"Buyer Group"--as defined in Section 5.1.
"Buyer Indemnified Persons"--as defined in Section 12.2.
"Buyer Material Adverse Effect"--as defined in Section 4.3.
"Buyer Shareholder Agreement"--as defined in Section 2.4(g).
"Buyer's Termination Right"--as defined in Section 11.1(c).
"Closing"--as defined in Section 2.6.
"Closing Date"--the date on which the Closing actually takes place.
"Closing Inventory and Current Assets Statement"--as defined in
Section 2.8(c).
"Code"--the Internal Revenue Code of 1986, as amended.
"Collateral" the Assets, but excluding the Inventory and Accounts
Receivable, together with all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor, and
all proceeds, products, offspring, rents, issues, profits and returns
of and from any of the Collateral described herein and, to the extent
not otherwise included, all payments under any insurance policy or
payments (whether or not Seller is the loss payee thereof), and any
indemnity, warranty or guaranty, payable by reason of loss or damage
to or otherwise with respect to any of the foregoing Collateral. .
"Competing Business"--as defined in Section 3.24.
"Consent"--any approval, consent, ratification, waiver or other
authorization.
"Contemplated Transactions"--all of the transactions contemplated by
this Agreement.
"Contract"--any agreement, contract, Lease, consensual obligation,
promise or undertaking (whether written or oral and whether express or
implied), whether or not legally binding.
"Copyrights"--as defined in Section 3.23(a)(iii).
"Current Assets"--as defined in Section 2.8.
"Damages"--as defined in Section 12.2.
"Effective Time"--the time at which the Closing is consummated.
"Employee Plans"--as defined in Section 3.14.
"Employment Agreement"--as defined in Section 2.7(a)(vii).
"Encumbrance"--any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge,
security interest, mortgage, right of way, easement, encroachment,
servitude, right of first option, right of first refusal or similar
restriction, including any restriction on use, voting (in the case of
any security or equity interest), transfer, receipt of income or
exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking
water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural
resource.
"Environmental, Health and Safety Liabilities"--any cost, damages,
expense, liability, obligation or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law,
including those consisting of or relating to:
(a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, occupational safety and
health and regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
remedial or inspection cost or expense arising under any Environmental
Law or Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any cleanup, removal, containment or other
remediation or response actions ("Cleanup") required by any
Environmental Law or Occupational Safety and Health Law (whether or
not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective or remedial measure required
under any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(CERCLA).
"Environmental Law"--any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees or the public of
intended or actual Releases of pollutants or hazardous substances or
materials, violations of discharge limits or other prohibitions and
the commencement of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the Release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, package and
used so that they do not present unreasonable risks to human health or
the Environment when used or disposed of;
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released, preventing
the Threat of Release or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974.
"Exchange Act"--the Securities Exchange Act of 1934, as amended.
"Excluded Assets"--as defined in Section 2.2.
"Expiration Date"--as defined in Section 12.1.
"Facilities"--any real property, leasehold or other interest in real
property currently owned or operated by Seller, including the Tangible
Personal Property used or operated by Seller at the respective
locations of the Real Property specified in Sections 3.6 and 3.7.
Notwithstanding the foregoing, for purposes of the definitions of
"Hazardous Activity" and "Remedial Action" and Section 3.20,
"Facilities" shall mean any real property, leasehold or other interest
in real property currently or formerly owned or operated by Seller,
including the Tangible Personal Property used or operated by Seller at
the respective locations of the Real Property specified in Sections
3.6 and 3.7.
"GAAP"--generally accepted accounting principles for financial
reporting in the United States, applied on a basis consistent with the
basis on which the Balance Sheet and the other financial statements
referred to in Section 3.4 were prepared.
"Governing Documents"--with respect to any particular entity, (a) if a
corporation, the articles or certificate of incorporation and the
bylaws; (b) if a general partnership, the partnership agreement and
any statement of partnership; (c) if a limited partnership, the
limited partnership agreement and the certificate of limited
partnership; (d) if a limited liability company, the articles of
organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection
with the creation, formation or organization of the Person; (f) all
equityholders' agreements, voting agreements, voting trust agreements,
joint venture agreements, registration rights agreements or other
agreements or documents relating to the organization, management or
operation of any Person or relating to the rights, duties and
obligations of the equityholders of any Person; and (g) any amendment
or supplement to any of the foregoing.
"Governmental Authorization"--any Consent, license, registration or
permit issued, granted, given or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, borough, village, district
or other jurisdiction;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court,
tribunal or other entity exercising governmental or quasi-governmental
powers);
(d) multinational organization or body;
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory
or taxing authority or power; or
(f) official of any of the foregoing.
"Guaranty"--the AMCON Guaranty and Suretyship Agreement to be entered
into as a condition of this Agreement in the form attached hereto as
Exhibit J wherein AMCON guarantees the payments to be made to Seller
under the terms of the Three Year Note and the Ten Year Note and in
relation to the Water Royalty.
"▇▇▇▇▇▇▇ Debt"--Seller's commitment to pay to Hay Idaho Ltd. Co. an
aggregate amount of $148,856.52, which amount is required to be paid
to Guaranty Title, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, in three (3) equal, annual payments of $49,654.84 (such
payments are due on the 2nd of January of 2005, 2006 and 2007). Such
commitment assumed by Buyer hereunder was incurred by Seller pursuant
to, and therefore remains governed by the terms of, that certain
Promissory Note, dated January 18, 2002, in which Seller promised to
pay Hay Idaho Ltd. Co. the principal sum of $193,000.00 with interest
at the rate of 9% per annum.
"Hazardous Activity"--the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment or
use (including any withdrawal or other use of groundwater) of
Hazardous Material in, on, under, about or from any of the Facilities
or any part thereof into the Environment and any other act, business,
operation or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm, to persons or property on or off
the Facilities.
"Hazardous Material"--any substance, material or waste which is or
will foreseeably be regulated by any Governmental Body, including any
material, substance or waste which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of Environmental Law, and
including petroleum, petroleum products, asbestos, presumed asbestos-
containing material or asbestos-containing material, urea formaldehyde
and polychlorinated biphenyls.
"Improvements"--all buildings, structures, fixtures and improvements
located on the Land or included in the Assets, including those under
construction.
"Indemnified Person"--as defined in Section 12.8(a).
"Indemnifying Person"--as defined in Section 12.8(a).
"Independent Accountants"--as defined in Section 2.8(e).
"Intellectual Property Assets"--as defined in Section 3.23(a).
"Interim Balance Sheet"--as defined in Section 3.4.
"Inventories"--all inventories of Seller, wherever located, including
all finished goods, work in process, raw materials, spare parts and
all other materials and supplies to be used or consumed by Seller in
the production of finished goods.
"IRS"--the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have Knowledge of a
particular fact or other matter if that individual is actually aware
of that fact or matter. A Person (other than an individual) will be
deemed to have Knowledge of a particular fact or other matter if any
individual who is serving as an officer of that Person has, or at any
time had, Knowledge of that fact or other matter.
"Land"--all parcels and tracts of land in which Seller has an
ownership interest.
"Lease"--any Real Property Lease or any lease or rental agreement,
license, right to use or installment and conditional sale agreement to
which Seller is a party and any other Seller Contract pertaining to
the leasing or use of any Tangible Personal Property.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance,
principle of common law, code, regulation, statute or treaty.
"Liability"--with respect to any Person, any liability or obligation
of such Person of any kind, character or description, whether known or
unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory,
determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.
"Marks"--as defined in Section 3.23(a)(i).
"Material Consents"--as defined in Section 7.3.
"Mortgage"--the Mortgage to be entered into as a condition of this
Agreement in the recordable form attached hereto as Exhibit L granting
Seller a first priority security in the Real Property and the Real
Property Leases and the Water Rights.
"Net Names"--as defined in Section 3.23(a)(v).
"Non-Real Estate Encumbrances"--as defined in Section 3.8(b).
"Net Sales"--as defined in Section 11.2.
"Occupational Safety and Health Law"--any Legal Requirement designed
to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, including the Occupational
Safety and Health Act, and any program, whether governmental or
private (such as those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and
healthful working conditions.
"Order"--any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if
that action:
(a) is consistent in nature, scope and magnitude with the past
practices of such Person and is taken in the ordinary course of the
normal, day-to-day operations of such Person;
(b) does not require authorization by the board of directors or
shareholders of such Person (or by any Person or group of Persons
exercising similar authority) and does not require any other separate
or special authorization of any nature; and
(c) is similar in nature, scope and magnitude to actions
customarily taken, without any separate or special authorization, in
the ordinary course of the normal, day-to-day operations of other
Persons that are in the same line of business as such Person.
"Patents"--as defined in Section 3.23(a)(ii).
"Payment Notice"--as defined in Section 11.1(b).
"Permitted Encumbrances"--as defined in Section 3.8(b).
"Permitted Non-Real Estate Encumbrances"--as defined in Section
3.8(b).
"Permitted Real Estate Encumbrances"--as defined in Section 5.9(d).
"Person"--an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture or other
entity or a Governmental Body.
"Post Closing Competing Business"--as defined in Section 10.4(a).
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial
or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Purchase Price"--as defined in Section 2.4.
"Real Property"--the Land and Improvements and all Appurtenances
thereto and any Ground Lease Property.
"Real Property Lease"--any Ground Lease or Space Lease.
"Record"--information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in
perceivable form.
"Recorded Documents"--as defined in Section 5.9(a)(i)(B).
"Related Person"--
With respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any
one or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
individual's Family serves as a director, officer, partner, executor
or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest; and
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) "control" (including
"controlling," "controlled by," and "under common control with") means
the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise,
and shall be construed as such term is used in the rules promulgated
under the Securities Act; (b) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any lineal
descendants of such person, and (iv) any other natural person who
resides with such individual; and (c) "Material Interest" means direct
or indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests
representing at least twenty percent (20%) of the outstanding voting
power of a Person or equity securities or other equity interests
representing at least twenty percent (20%) of the outstanding equity
securities or equity interests in a Person.
"Release"--any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the Environment or into or out of any
property.
"Remedial Action"--all actions, including any capital expenditures,
required or voluntarily undertaken (a) to clean up, remove, treat or
in any other way address any Hazardous Material or other substance;
(b) to prevent the Release or Threat of Release or to minimize the
further Release of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or
welfare or the Environment; (c) to perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (d) to bring
all Facilities and the operations conducted thereon into compliance
with Environmental Laws and environmental Governmental Authorizations.
"Representative"--with respect to a particular Person, any director,
officer, manager, agent, consultant, advisor, accountant, financial
advisor, legal counsel or other representative of that Person.
"Reviewing Accountant"--as defined in Section 3.4.
"Restricted Period"--as defined in Section 10.4(a).
"Retained Liabilities"--as defined in Section 2.3(b).
"Reverse Stock Split" --as defined in Section 4.5(b).
"SEC"--the United States Securities and Exchange Commission.
"Securities Act"--the Securities Act of 1933 as amended.
"Security Agreement"--the Security Agreement to be entered into as a
condition of this Agreement in the form attached hereto as Exhibit K
granting Seller a first priority security interest in the Collateral
other than Real Property.
"Seller"--as defined in the first paragraph of this Agreement.
"Seller Contract"--any Contract (a) under which Seller has or may
acquire any rights or benefits; (b) under which Seller has or may
become subject to any obligation or liability; or (c) by which Seller
or any of the assets owned or used by Seller is or may become bound;
provided, however, that the Seller Contracts shall not include any
Contract (i) under which Seller has incurred any right or obligation
or its assets have become bound in connection with any indebtedness
for borrowed money or other extension of credit to Seller (whether
pursuant to any promissory note, credit facility, security agreement,
mortgage, or otherwise), (ii) which provides any guaranty of or
agreement to provide security or collateral in support of the
obligation of any third party, (iii) that is a written or oral
Contract of employment, or (iv) under which Seller maintains or has
maintained any Employee Plan.
"Seller Closing Documents"--as defined in Section 3.2(a).
"Seller Material Adverse Effect"--as defined in Section 3.1(a).
"Seller's Water Rights"--all Water Rights or interests therein owned
by Seller including but not limited to (a) those Water Rights
represented by water right numbers 63-4327, 63-8206, 63-8207, 63-
11051, 63-27144 and 63-11439, (b) any and all interests Seller holds
in Water Rights associated with Paradise Lodge and/or Paradise
Subdivision, including those held in the name of Paradise Homeowners'
Association, and (c) the Bureau Contract.
"Seller Voting Agreement"--the Voting agreement dated _______________,
2004, entered into by and among AMCON and certain of Seller's
shareholders representing a majority of the issued and outstanding
voting capital stock of Seller.
"Source Asset"--the Water Right represented by Water Right Permit No.
63-11439 (including any license that is issued with respect to such
Water Right) and all rights to sell, market, distribute, bottle,
remove, transport or otherwise make use of the water from the Source
Asset.
"Space Lease"--any lease or rental agreement pertaining to the
occupancy of any improved space.
"SRBA" or "Snake River Basin Adjudication"--the Snake River Basin
Adjudication, Fifth Judicial District, in the State of Idaho, in and for
the County of Twin Falls, Case No. 39576.
"Subsidiary"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its
Subsidiaries.
"Survey"--as defined in Section 5.9(a)(ii)(B).
"Tangible Personal Property"--all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials,
vehicles and other items of tangible personal property (other than
Inventories) of every kind owned or leased by Seller (wherever located
and whether or not carried on Seller's books), together with any
express or implied warranty by the manufacturers or sellers or lessors
of any item or component part thereof and all maintenance records and
other documents relating thereto.
"Tax"--any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property,
environmental, windfall profit, customs, vehicle, airplane, boat,
vessel or other title or registration, capital stock, franchise,
employees' income withholding, foreign or domestic withholding, social
security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind
whatsoever and any interest, penalty, addition or additional amount
thereon imposed, assessed or collected by or under the authority of
any Governmental Body or payable under any tax-sharing agreement or
any other Contract.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or
other document or information filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or
enforcement of or compliance with any Legal Requirement relating to
any Tax.
"Ten Year Note"--as defined in Section 2.7(b)(iii).
"Third Party"--a Person that is not a party to this Agreement.
"Threat of Release"--a reasonable likelihood of a Release that may
require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Three Year Note"--as defined in Section 2.7(b)(ii).
"Title Commitment"--as defined in Section 5.9(a)(i)(A).
"Title Insurer"--as defined in Section 5.9(a)(i).
"Title Objection"--as defined in Section 5.9(c).
"Trade Secrets"--as defined in Section 3.23(a)(iv).
"Trinity Water Right"--as defined in Section 11.1(a).
"Water Right"--any and all rights to the use or control of water. The
term shall be construed broadly to include, without limitation, rights
to natural flow water, ground water, spring water, waste water,
seepage, return flow, water of indeterminate origin, stored water,
water recovered from an aquifer storage and recovery project, the
right to store water, the right to store water in an aquifer storage
and recovery project, the right to recharge water into an aquifer. It
includes permits and licenses issued by the Idaho Department of Water
Resources. It includes all water rights or similar entitlements
reflected in any court decree (including any partial decree of the
Snake River Basin Adjudication) confirming the right or entitlement.
It also includes claims or entitlements (whether or not filed with a
court or the Department) based on having placed water to beneficial
use. It includes storage entitlements, whether by contract or
otherwise. It includes entitlements to the use of water based on
contract with the owner or acquirer of a water right (including
rental, lease, sale, purchase, exchange, subordination, or mitigation
agreement). It includes all ditch or canal company shares or other
entitlements to receive water from any ditch or canal company,
irrigation district or any other water delivery entity. It includes
all ditch rights, easements or rights-of-way associated with any
irrigation or other water delivery ditch, canal, lateral or pipeline.
"Water Royalty"--as defined in Section 11.1.
ARTICLE 1 DEFINITIONS AND USAGE 1
1.1 DEFINITIONS 1
ARTICLE 2 SALE AND TRANSFER OF ASSETS; ISSUANCE OF STOCK; CLOSING 1
2.1 ASSETS TO BE SOLD; ISSUANCE OF SELLER STOCK 1
2.2 EXCLUDED ASSETS 2
2.3 LIABILITIES 3
2.4 CONSIDERATION 4
2.5 ALLOCATION 5
2.6 CLOSING 5
2.7 CLOSING OBLIGATIONS 5
2.8 DETERMINATION OF INVENTORY AND CURRENT ASSETS 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER 9
3.1 ORGANIZATION AND GOOD STANDING 9
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT 10
3.3 CAPITALIZATION 11
3.4 FINANCIAL STATEMENTS 11
3.5 INTENTIONALLY OMITTED 12
3.6 DESCRIPTION OF OWNED REAL PROPERTY 12
3.7 DESCRIPTION OF LEASED REAL PROPERTY 12
3.8 TITLE TO ASSETS; ENCUMBRANCES 12
3.9 CONDITION OF FACILITIES 12
3.10 INVENTORIES 13
3.11 NO UNDISCLOSED LIABILITIES 13
3.12 TAXES 13
3.13 NO MATERIAL ADVERSE CHANGE 14
3.14 EMPLOYEE BENEFITS 14
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS 14
3.16 LEGAL PROCEEDINGS; ORDERS 15
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS 16
3.18 CONTRACTS; NO DEFAULTS 17
3.19 INSURANCE 19
3.20 ENVIRONMENTAL MATTERS 20
3.21 EMPLOYEES 21
3.22 LABOR DISPUTES; COMPLIANCE 22
3.23 INTELLECTUAL PROPERTY ASSETS 22
3.24 RELATIONSHIPS WITH RELATED PERSONS 25
3.25 BROKERS OR FINDERS 25
3.26 INVESTMENT INTENT 25
3.27 WATER RIGHTS 26
3.28 DISCLOSURE 26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER AND AMCON 27
4.1 ORGANIZATION AND GOOD STANDING 27
4.2 AUTHORITY; NO CONFLICT 27
4.3 CERTAIN PROCEEDINGS 28
4.5 CAPITALIZATION 29
4.6 AMCON SEC DOCUMENTS 31
4.7 ABSENCE OF CERTAIN CHANGES AND EVENTS 31
4.8 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS 32
ARTICLE 5 COVENANTS OF SELLER PRIOR TO CLOSING 32
5.1 ACCESS AND INVESTIGATION 32
5.2 OPERATION OF THE BUSINESS OF SELLER 33
5.3 NEGATIVE COVENANT 34
5.4 REQUIRED APPROVALS 34
5.5 NOTIFICATION 34
5.6 BEST EFFORTS 34
5.7 CHANGE OF NAME 35
5.8 PAYMENT OF LIABILITIES 35
5.9 CURRENT EVIDENCE OF TITLE 35
5.10 SHAREHOLDERS MEETING 36
5.11 OFFICE LEASE 37
5.12 PROMOTIONAL AND MARKETING MATERIALS PREPARED
BY THIRD PARTIES 37
ARTICLE 6 COVENANTS OF BUYER PRIOR TO CLOSING 37
6.1 ACCESS AND INVESTIGATION 37
6.2 REQUIRED APPROVALS 38
6.3 BEST EFFORTS 38
ARTICLE 7 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE 38
7.1 ACCURACY OF REPRESENTATIONS 38
7.2 SELLER'S PERFORMANCE 39
7.3 CONSENTS 39
7.4 ADDITIONAL DOCUMENTS 39
7.5 TITLE INSURANCE 39
7.6 SHAREHOLDER APPROVAL 39
7.7 ASSIGNMENT OF BUREAU CONTRACT 39
7.8 NO PROCEEDINGS 40
ARTICLE 8 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE 40
8.1 ACCURACY OF REPRESENTATIONS 40
8.2 BUYER'S PERFORMANCE 40
8.3 ADDITIONAL DOCUMENTS 40
8.4 CAPITAL CONTRIBUTION TO BUYER 40
8.5 SHAREHOLDER APPROVAL 41
8.6 NO PROCEEDINGS 41
ARTICLE 9 TERMINATION 41
9.1 TERMINATION EVENTS 41
9.2 EFFECT OF TERMINATION 42
ARTICLE 10 ADDITIONAL COVENANTS 42
10.1 EMPLOYEES AND EMPLOYEE BENEFITS 42
10.2 PAYMENT OF ALL TAXES RESULTING
FROM SALE OF ASSETS BY SELLER 43
10.3 ASSISTANCE IN PROCEEDINGS 43
10.4 NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT 43
10.5 RETENTION OF AND ACCESS TO RECORDS 45
10.6 FURTHER ASSURANCES 45
10.7 COLLECTION OF ACCOUNTS RECEIVABLE 45
10.8 PARADISE LODGE 46
10.9 RESTRICTION ON SELLER DISSOLUTION AND DISTRIBUTIONS 46
ARTICLE 11 USE OF WATER FROM SOURCE ASSET 47
11.1 WATER ROYALTY 47
11.2 DEVELOPMENT OF PRODUCTS FOR ALTERNATIVE USES 51
ARTICLE 12 INDEMNIFICATION; REMEDIES 52
12.1 SURVIVAL 52
12.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLER 52
12.3 INDEMNIFICATION AND REIMBURSEMENT BY BUYER AND AMCON 53
12.4 LIMITATIONS ON AMOUNT--SELLER 53
12.5 LIMITATIONS ON AMOUNT--BUYER AND AMCON 54
12.6 TIME LIMITATIONS 54
12.7 RIGHT OF SETOFF 55
12.8 THIRD-PARTY CLAIMS 55
12.9 OTHER CLAIMS 57
12.10 EXCLUSIVE REMEDIES 57
12.11 EXCLUSION OF QUALIFICATIONS FOR MATERIALITY
AND MATERIAL ADVERSE EFFECT 57
ARTICLE 13 GENERAL PROVISIONS 57
13.1 EXPENSES 57
13.2 PUBLIC ANNOUNCEMENTS 57
13.3 NOTICES 58
13.4 JURISDICTION; SERVICE OF PROCESS 59
13.5 ENFORCEMENT OF AGREEMENT 59
13.6 WAIVER; REMEDIES CUMULATIVE 60
13.7 ENTIRE AGREEMENT AND MODIFICATION 60
13.8 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS 60
13.9 SEVERABILITY 60
13.10 CONSTRUCTION 61
13.11 TIME OF ESSENCE 61
13.12 GOVERNING LAW 61
13.13 EXECUTION OF AGREEMENT 61
APPENDICES
Appendix A Definitions
SCHEDULES
Schedule 2.1(b) Tangible Personal Property
Schedule 2.1(i) Claims Against Third Parties
Schedule 2.2(f) Retained Deposits and Prepaid Expenses
Schedule 2.2(h) Excluded Contracts
Schedule 2.2(l) Other Excluded Assets
Schedule 2.3(a) (iii) Seller Liabilities
Schedule 2.5 Purchase Price Allocation
Schedule 2.8(a) Current Assets
Schedule 3.1(a) Qualification
Schedule 3.1(b) Subsidiaries and Capital Stock Owned
Schedule 3.2(b) Conflicts
Schedule 3.2(c) Seller Consents
Schedule 3.4(b) Financial Information
Schedule 3.6 Owned Real Property
Schedule 3.7 Leased Real Property
Schedule 3.8(b) Non-Real Estate Encumbrances
Schedule 3.9 Condition of Facilities
Schedule 3.10 Inventories
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12 Contested Taxes
Schedule 3.13 Material Adverse Changes
Schedule 3.14 Employee Benefit Plan
Schedule 3.15(a) Compliance with Legal Requirements
Schedule 3.15(b) Governmental Authorizations
Schedule 3.16(a) Legal Proceedings
Schedule 3.16(b) Orders
Schedule 3.16(c) Compliance with Orders
Schedule 3.17 Certain Changes and Events
Schedule 3.18(a) Seller Contracts
Schedule 3.18(b) Contract Exceptions
Schedule 3.18(c) Compliance with Contracts
Schedule 3.19(b) Self-Insurance
Schedule 3.20 Environmental Matters
Schedule 3.21(a) Employees
Schedule 3.21(b) Independent Contractors
Schedule 3.22(b) Collective Bargaining Agreements
Schedule 3.23(b) Contracts Relating to Intellectual Property Assets
Schedule 3.23(b)(i) Intellectual Property Licenses
Schedule 3.23(c) Patents
Schedule 3.23(d) Marks
Schedule 3.23(e) Copyrights
Schedule 3.23(f) Net Names
Schedule 3.24 Relationships with Related Persons
Schedule 4.3 Pleadings
Schedule 4.7 AMCON Events
Schedule 7.3 Material Consents
Schedule 10.8(b)Paradise Lodge Bookings
EXHIBITS
Exhibit A Seller Voting Agreement
Exhibit B Buyer Shareholder Agreement
Exhibit C ▇▇▇▇ of Sale
Exhibit D Assignment and Assumption Agreement
Exhibit E Assignment of Marks, Patents and Copyrights
Exhibit F CEO Employment Agreement
Exhibit G National Sales Manager Employment Agreement
Exhibit H Three Year Note
Exhibit I Ten Year Note
Exhibit J Guaranty
Exhibit K Security Agreement
Exhibit L Mortgage
Exhibit M ▇▇▇▇▇▇▇ Coie Opinion Letter
Exhibit N ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Opinion Letter
Exhibit O AMCON Subscription Agreement