ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement") is made and
entered into this 21st day of October, 1996, between Valco Inc.,
a Colorado corporation ("Seller") Valco Properties, Ltd., a
Colorado limited partnership ("Subsidiary"), and Continental
Materials Corporation, a Delaware corporation ("Purchaser").
Recitals
Seller is presently engaged in the business (the
"Business") of mining, producing, selling and distributing sand,
gravel, ready-mix concrete and other aggregate materials and
products in and around Pueblo, Colorado. Subsidiary is
wholly-owned by Seller and is the owner of certain personal
property used by Seller in the business. Seller also is
presently engaged in similar activities outside of the area in
and around Pueblo, Colorado; the assets used for such other
activities, including assets used by Seller for its overall
business (including the Business), are not subject to this
Agreement.
. Seller desires to Transfer (as defined in Section 1.1)
or lease to Purchaser, and Purchaser desires to purchase or lease
from Seller: (i) all of the rights, properties and assets owned
or held by Seller or used by Seller in connection with the
conduct of the Business, other than the Excluded Assets (as
defined in Section 1.3), and (ii) all of the partnership
interests in Subsidiary, on the terms and subject to the
conditions set forth in this Agreement.
. Seller desires to delegate to Purchaser, and Purchaser
is willing to assume from Seller, the Assumed Liabilities (as
defined in Section 3.1), on the terms and subject to the
conditions set forth in this Agreement.
Agreement
. The Acquisition
. Purchase and Sale of Assets. Subject to Section 1.3
regarding the Excluded Assets and except for properties to be
leased pursuant to Section 1.2, Seller sells, transfers, grants,
conveys, assigns and delivers ("Transfers") to Purchaser, and
Purchaser purchases and accepts from Seller, the rights,
properties and assets owned by Seller and used by Seller
primarily in connection with the conduct of the Business,
including the rights, properties and assets described in this
Section 1.1 (collectively the "Assets") free and clear of any
Liens (as defined in Section 4.1(g)(i) except Permitted Liens (as
defined in Section 4.1(g)(iii)):
() Real Property. The plants and plant sites listed
or described on Exhibit 1.1(a) (collectively, the "Plants To Be
Sold" and the "Plant Sites" respectively), will be conveyed to
Purchaser by special warranty deeds, which special warranty deeds
shall convey the Plants to Be Sold and the Plant Sites, together
with certain other land to be reconveyed by Purchaser to Seller
upon completion of the Resubdivisions (as defined in Section 5.2
of this Agreement) by Purchaser, and will contain a "possibility
of reverter" clause providing that title will revert to Seller
under the circumstances described in Section 5.2(g) of this
Agreement.
(b) Personal Property. All of the partnership
interests of Subsidiary, which is the owner of the fixtures,
furnishings, furniture, equipment, motor vehicles, tools,
supplies, spare parts, computers, printers and copies of all
files, books and records reasonably necessary for the continued
conduct of the Business by Purchaser, and all other tangible
personal property owned and used by Seller primarily in
connection with the conduct of the Business, including those
items listed or described on Exhibit 1.1(b) (collectively, the
"Owned Tangible Property");
(c) Inventory All raw materials, work-in progress of
Seller relating to the Business and finished goods inventories
relating to the Business, including those items to be described
on Exhibit 1.1(c) (collectively, the "Inventory") (which Exhibit
shall include quantity and cost information for the Inventory);
(d) Contract Rights. As they relate to the Business,
all rights and incidents of interest of Seller in, to or under
all leases, licenses, agreements, purchase orders, and contracts
(including product warranty claims, rebates and indemnity or
other rights of action against any person arising out of acts,
omissions or occurrences before the Closing) (collectively, the
"Contracts"), all of which Contracts are listed or described on
Exhibit 1.1(d);
(e) Governmental Licenses, Permits and Approvals. To
the extent Transferable, all rights and incidents of interest of
Seller in, to or under all licenses, permits and authorizations
(collectively, the "Licenses") issued or requested to be issued
by any United States, state, local or other governmental entity
or municipality or any subdivision thereof or any authority,
department, commission, board, bureau, agency, court, arbitration
panel or instrumentality (collectively, "Governmental Entities")
used in connection with the conduct of the Business, including
the licenses, permits and authorizations listed or described on
Exhibit 1.1(e);
(f) Accounts Receivable. All accounts receivable
arising from the conduct of the Business, including the accounts
receivable to be listed on Exhibit 1.1(f) (the "Accounts
Receivable") (which Exhibit shall include an aging of the
Accounts Receivable); and
(g) Water Rights. All water rights (including related
stock) held in connection with the Real Property (as defined in
Section 4.1(h)(i)), including those water rights set forth on
Exhibit 1.1(g), which will be conveyed on a fee-simple
conditional basis, providing that title to such water rights will
revert to Seller under the circumstances described in Section
5.2(g).
(h) Personal Property Leases. The personal property
leases identified on the attached Exhibit 1.1(h) relating to
motor vehicles used in connection with the Business.
1.2 Lease. At the Closing, Seller, as lessor, will lease
to Purchaser, as lessee, and Purchaser will lease from Seller,
the real property described on Exhibit 1.2A (the "Mining
Properties") pursuant to a lease in the form of Exhibit 1.2B (the
"Lease").
1.3 Excluded Assets. Notwithstanding anything contained in
this Agreement to the contrary, the following rights, properties
and assets (collectively, the "Excluded Assets") will not be
included in the Assets:
(a) Cash. Cash;
(b) Property To Be Leased. The fee simple title
to the Mining Properties;
(c) Software. Any and all computer software
owned by the Business; and
(d) Other Specified Assets. Any right, property
or asset, including any asset leased by Seller pursuant to a
Contract, which is listed or described on Exhibit 1.3(d).
II. Purchase Price
2.1 Unadjusted Purchase Price. In addition to assuming the
Assumed Liabilities (as defined in Section 3.1), Purchaser will
pay for the Assets and the noncompetition covenants described in
Section 6.1(a)(viii) (the "Noncompetition Covenants") a purchase
price in the amount of (i) $5,000,000, plus (if such number is a
positive number) and minus (if such number is a negative number)
(ii) the difference between (A) the sum of the book value of the
Accounts Receivable and Inventory as of the Closing Date (as
defined in Section 6.1(a)), and (B) $720,000, subject to
adjustment as provided in Section 2.2 and as further provided in
Exhibit 2.1, as adjusted, the "Purchase Price"). For purposes of
this Section 2.1, Inventory will include only those items
normally carried as inventory by Seller under its normal,
consistently applied accounting practices.
2.2 Ad Valorem Tax Adjustment. All ad valorem, property
and real estate Taxes (as defined in Section 4.1(n)(iii)) imposed
by any taxing authority upon the Plants To Be Sold and the Plant
Sites (as defined in Section 1.1(a)) or any of the other Total
Assets (as defined in Section 3.2) will be prorated between
Seller and Purchaser as of the Closing Date based on the most
current available tax bills (such prorations to be adjusted when
final tax bills are issued by the applicable taxing authority).
All such Taxes attributable to the period up to the Closing Date,
which remain unpaid as of the Closing Date, shall be deducted
from the Purchase Price. An amount equal to the aggregate amount
of such Taxes, if any, which are attributable to the period
following the Closing Date and which have been paid by the Seller
prior to the Closing Date shall be added to the Purchase Price.
All adjustments to the Purchase Price will be calculated as of
close of business on October 20, 1996. After the Closing, Seller
shall continue to be responsible for and pay all ad valorem,
property and real estate Taxes imposed by any taxing authority
upon the Mining Properties, provided that Purchaser shall pay any
mineral production tax attributable to Purchaser's operations and
any ad valorem, property and real estate Taxes assessed against
the personal property, improvements or fixtures placed on the
Mining Properties by Purchaser during the term of the Lease.
2.3 Allocation of Purchase Price.
(a) Allocation To Assets Based Upon Relative Fair
Market Values. The aggregate Purchase Price (which shall
include, for purposes of this Section 2.3, any liabilities
assumed by the Purchaser in connection with the transactions
contemplated by this Agreement) shall be allocated among the
Assets and the Noncompetition Agreement (as defined in Section
6.1(b)(viii)) in accordance with their respective fair market
values and otherwise in accordance with the provisions of Section
1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). For those purposes, the parties agree to value the
Noncompetition Agreement at $500,000 and to allocate the Purchase
Price thereto in accordance with the provisions of this
paragraph. The allocation contemplated hereby shall be based
upon the fair market value allocations agreed upon by the parties
and set forth on Exhibit 2.3. Within 90 days after the Closing
Date, the Purchaser shall prepare and provide to the Seller
copies of Internal Revenue Service Form 8594 (together with all
exhibits and attachments thereto) (the "Asset Acquisition
Statement") which shall set forth an allocation consistent with
the values set forth on Exhibit 2.3. The Asset Acquisition
Statement shall be deemed accurate in the absence of manifest
error. If, after the Closing, events occur which, and based upon
applicable provisions of Section 1064 of the Code, require
adjustments to the Asset Acquisition Statement, the Purchaser
shall prepare and submit to the Seller as quickly as practicable
thereafter, an adjusted Asset Acquisition Statement (each an
"Adjusted Statement") which sets forth the applicable adjustments
consistent with the applicable events. The Purchaser and the
Seller expressly covenant and agree that they shall file all tax
returns and reports, including, without limitation, all U.S.
federal income tax returns, based upon and consistent with the
allocations set forth in the Asset Acquisition Statement and any
Adjusted Statement.
(b) Section 754 Election. Seller expressly
acknowledges and agrees that it has caused Subsidiary to make an
election under Code Section 754 to adjust the basis of
Subsidiary's assets in accordance with the provisions of Code
Sections 743(b). All such adjustments shall be made in
accordance with the provisions of Code Section 755 and the
applicable Treasury Regulations thereunder. The allocation
contemplated hereby shall be based upon the fair market values
agreed upon by the parties and set forth on Exhibit 2.3. Within
90 days following the Closing Date, the Purchaser shall prepare
and provide to the Seller copies of a schedule setting forth in
reasonable detail the allocations described hereunder (the
"Partnership Allocation Schedule") which allocations shall be
based upon values set forth on Exhibit 2.3. The Purchaser and
the Seller expressly covenant and agree that they shall file all
tax returns and reports, including, without limitation, all U.S.
federal income tax returns, based upon and consistent with the
allocations set forth in the Partnership Allocation Schedule.
III. Assumption of Liabilities
3.1 Assumed Liabilities. On the terms and subject to the
conditions of this Agreement, as of the Closing, Purchaser will
assume and thereafter in due course pay, perform and discharge
the following, and only the following, liabilities and
obligations of Seller (the "Assumed Liabilities"):
Liabilities under Assumed Contracts. All liabilities
and obligations of Seller arising under the terms of the
Contracts that are included in the Assets and listed or
specifically described on Exhibit 4.1(l)(i) or that, in
accordance with Section 4.1(m), are not required to be listed or
described on Exhibit 4.1(l)(i) (collectively, the "Assumed
Contracts"), but only to the extent such liabilities and
obligations arise, accrue or first become due after the Closing
Date under the terms of such Contracts; provided, however, that
Purchaser will not assume or be responsible for any such
liabilities or obligations which arise under or in relation to
any insurance policy or contract, any Employee Plan (as defined
in Section 4.1(m)(i)) or from any Contract which is not an
Assumed Contract or from any breach or default by Seller arising
prior to the Closing Date under any Contract, all of which
liabilities and obligations will constitute Retained Liabilities
(as defined in Section 3.2). Notwithstanding anything to the
contrary contained in this Agreement or any document delivered in
connection with it, Purchaser's obligations with respect to the
Assumed Liabilities will not extend beyond the extent to which
Seller was obligated with respect to them and will be subject to
Purchaser's right to contest in good faith the nature and extent
of any liability or obligation.
3.2 Retained Liabilities. Except as provided in Section
3.1 and except as provided in the Lease, Seller will retain, and
Purchaser will not assume, or be responsible or liable with
respect to, any liabilities or obligations of Seller or its
Affiliates (as defined in Section 8.14) or their respective
predecessors-in-interest, whether or not arising out of or
relating to the conduct of the Business or associated with or
arising from any of the Assets or the Mining Properties
(collectively, the "Total Assets") or any other rights,
properties or assets used in or associated with the Business at
any time, and whether fixed or contingent or known or unknown
including, by way of example and without limitation, liabilities
arising from the items on Exhibit 4.1(o), 4.1(e), 4.1(h)(vi),
4.1(k)(i), 4.1(k)(ii) and 4.1(p) (collectively "Retained
Liabilities").
IV. Representations and Warranties
4.1 Representations and Warranties of Seller. Seller
represents and warrants to Purchaser as of the date hereof as
follows:
(a) Corporate Matters. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Colorado and has the requisite corporate power
and authority to own, lease or otherwise hold the Total Assets
and to conduct the Business as presently conducted by it. Seller
is duly qualified to conduct business as a foreign corporation in
each other jurisdiction in which its ownership or lease of
property or conduct of the Business requires such qualification
under applicable law. Seller owns the Total Assets except the
Owned Tangible Property and conducts the Business directly, and
not through any other corporation, partnership or other entity.
Subsidiary owns the Owned Tangible Property. Subsidiary conducts
no business and has no liabilities.
(b) Authorization and Effect of Agreement. Seller and
Subsidiary have the requisite corporate or partnership (as
applicable) power to execute and deliver this Agreement and to
perform the transactions contemplated by this Agreement to be
performed by Seller and Subsidiary. The execution and delivery
by Seller and Subsidiary of this Agreement and the performance by
Seller and Subsidiary of the transactions contemplated by this
Agreement to be performed by Seller and Subsidiary have been duly
authorized by all necessary action on the part of Seller and
Subsidiary, Seller's and Subsidiary's board of directors,
stockholders and partners, as applicable, and, if applicable,
holders of Seller's indebtedness. This Agreement has been duly
executed and delivered by Seller and Subsidiary and, assuming the
due execution and delivery of this Agreement by Purchaser,
constitutes a valid and binding obligation of Seller and
Subsidiary enforceable in accordance with its terms.
(c) No Restrictions Against Sale of the Assets.
Except as listed or described on Exhibit 4.1(c), the execution
and delivery of this Agreement by Seller and Subsidiary does not,
and the performance by Seller and Subsidiary of the transactions
contemplated by this Agreement to be performed by them will not,
conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit
under, (i) the articles of incorporation or bylaws of Seller or
the partnership agreement of Subsidiary, (ii) any law, statute,
rule, regulation, zoning or other ordinance, order, code,
arbitration award, judgment, decree, permit or other legal
requirement of any Governmental Entity (each a "Law") and
collectively, "Laws") to which Seller, Subsidiary or any of the
Total Assets is subject, (iii) any of the Contracts or any
document or instrument to which Seller or Subsidiary or any of
the Total Assets is subject, or (iv) any of the Licenses. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required
to be obtained or made by or with respect to Seller or Subsidiary
under any applicable Law in connection with the execution and
delivery of this Agreement by Seller or Subsidiary or the
performance by Seller or Subsidiary of the transactions
contemplated by this Agreement to be performed by Seller and
Subsidiary, as applicable.
(d) Financial Statements. Attached as Exhibit 4.1(d)
are the statements of divisional operating profit and loss for
the Pueblo Division of Seller for the three years ended December
31, 1995, and for the nine month period ended September 30, 1996.
Such statements are kept by Seller for its own internal purposes,
consistently with the internal accounting practices of Seller,
are used by Seller for evaluating the operating costs of the
Pueblo Division and fairly present the divisional operating
profit and loss of the Pueblo Division consistent with the
accounting practices of Seller.
(e) Compliance with Laws. Except as described on
Exhibit 4.1(e), Seller is in compliance with all Laws in all
material respects. No fact, circumstance, condition or situation
exists which, after notice or lapse of time or both, would
constitute material noncompliance by Seller or give rise to any
material future liability of Seller with respect to any Law
heretofore or currently in effect. Except as set forth on
Exhibit 4.1(e), Seller is not required to obtain any licenses or
permits, or file any notices, applications or reports under
regulations related to any matters referred to in this Section
4.1(e) that have not been properly obtained or filed. Except as
set forth on Exhibit 4.1(e), Seller has not received notice of
any violation of any Law, or any potential liability under any
Law, relating to the operation of the Business or to any of the
Total Assets, nor, to the best of Seller's knowledge, does there
exist any such violation or potential liability. To the best of
Seller's knowledge, there does not exist any present requirement
of any applicable Law which is due to be imposed on Seller with
respect to the Business that is reasonably likely to increase in
any material respect the cost of complying with such Law.
(f) Accounts Receivable. Except as set forth on
Exhibit 4.1(f), all of the Accounts Receivable are ordinary trade
receivables that have arisen from bona fide transactions in the
ordinary course, and no payor of any Account Receivable has
provided notice to Seller concerning any claim of a defense to
payment of such Account Receivable. All of the collectible
Accounts Receivable as of the date of this Agreement are
disclosed on Exhibit 1.1(f), which Exhibit also sets forth an
accurate aging of such Accounts Receivable. Seller and Purchaser
have jointly prepared the notice to customers (with procedures to
remit amounts to Purchaser), the form of which is included in
Exhibit 4.1(f). Upon Seller's receipt of any full or partial
payments of any of the Accounts Receivable, Seller shall remit
such funds to Purchaser. Seller and Purchaser shall develop such
other procedures relating to the Accounts Receivable consistent
with normal business practices.
(g) Tangible Personal Property; Assets.
(i) The Owned Tangible Personal Property constitutes
in all material respects, all of the tangible property, other
than the Excluded Assets, used by Seller in connection with the
conduct of the Business. Subsidiary has good, marketable and
exclusive title to the Owned Tangible Personal Property, and
the Owned Tangible Personal Property is free and clear of all
liens, mortgages, claims, charges, security interests, options,
preemptive purchase rights or other encumbrances of any kind or
nature whatsoever (collectively, "Liens"). Seller (and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, as to a one percent (1%) limited partnership
interest) owns or controls all of the partnership interests of
Subsidiary free and clear of any and all Liens and has the
valid and enforceable power and unqualified right to Transfer
or cause to be transferred such partnership interests to
Purchaser
(ii) Exhibit 1.1(c) contains an accurate list of the
Inventory. Except as described in Exhibit 1.1(c), all of the
Inventory is, to the best of Seller's knowledge, usable or
saleable in the ordinary course for its intended purpose.
(iii) The delivery to Purchaser at the Closing of
the instruments of Transfer contemplated by this Agreement will
vest in Purchaser good, marketable and exclusive title to all
the partnership interests of Subsidiary and the other Assets,
free and clear of all Liens, except for (A) Liens for current
property Taxes or governmental charges or levies which are not
yet due and payable and (B) Liens listed or described on
Exhibit 4.1(g)(iii) (Liens described in the foregoing clauses
(A) and (B) being collectively referred to as "Permitted
Liens").
(h) Real Property
(i) The Plants To Be Sold, the Plant Sites and the
Mining Properties (collectively, the "Real Property")
constitute all of the real property used by Seller primarily or
exclusively in connection with the conduct of the Business.
(ii) Seller owns a good, marketable and valid fee
simple interest in the Real Property subject only to the
Permitted Exceptions (as defined in Section 6.1(a)(ii)(A)).
(iii) Except to the extent set forth on Exhibit
4.1(h)(iii), Seller has not leased or sublet, as lessor or
sublessor, and no third party is in possession of,or has the
right to use or occupy, any portion of the Real Property. The
items set forth in Exhibit 4.1(h)(iii) have not interfered with
the operations of the Business.
(iv) To the best of Seller's knowledge, the
buildings, structures, improvements, fixtures and facilities
included in the Real Property and all components thereof,
including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, water, waste water, storm water, paving and
parking equipment, systems and facilities included therein, are
adequate and sufficient for the uses to which they are put in
the conduct of the Business, but Seller makes no other warranty
or representation regarding such matters, the agreement being
that except as expressly provided herein, Purchaser will accept
such matters "as is" without warranty express or implied.
(v) To the best of Seller's knowledge, Seller has
provided to Purchaser all material information of which Seller
has possession (or which is possessed on behalf of Seller)
concerning the sand and gravel reserves of the Mining
Properties (the "Reserves").
(vi) Except as set forth in Exhibit 4.1(h)(vi),
there are no pending or, to Seller's knowledge, threatened
condemnation proceedings, lawsuits or administrative actions
relating to any parcel of Real Property (including without
limitation zoning or other land use proceedings or actions) or
other matters materially and adversely affecting the current
use, occupancy or value thereof;
(vii) The buildings and improvements located on each
parcel of Real Property are located within the boundary lines
of such parcel of Real Property;
(viii) All facilities and improvements serving or
located on the Real Property have, to Seller's knowledge,
received all material approvals of Governmental Entities
(including all material Licenses) required in connection with
the ownership or operation thereof and have been operated and
maintained in substantial accordance with all applicable Laws
including, without limitation, all applicable building codes,
zoning, subdivision and land use Laws;
(ix) There are no outstanding options or rights of
first refusal to purchase any parcel of Real Property, or any
portion thereof or interest therein;
(x) Except as described in Exhibit 4.1(h)(x), there
are no parties (other than Seller) in possession of any parcel
of Real Property;
(xi) Seller has delivered or made available to
Purchaser copies of any inspection, soil, engineering,
environmental or architectural notices, studies, reports or
plans in Seller's possession or control which relate to the
physical condition or operation of the Real Property or
recommended improvements with respect thereto; and
(xii) None of the Permitted Liens on the Real
Property will individually or in combination with any other or
others prevent or materially and adversely affect the ability
of Purchaser or any successor, assignee or transferee of
Purchaser to use and operate the affected parcel of Real
Property (including, without limitation, the extraction,
whether through surface, subsurface, or open-pit mining of the
Reserves located thereon) in the manner and scope in which such
parcel of Real Property is now being used and operated or for
the extraction, whether through surface, subsurface or open pit
mining of the Reserves located therein.
(i) Intellectual Property. There is no unresolved claim
or demand asserting a conflict with, and Seller is not
infringing on, the rights of others in connection with Seller's
use of any patents, copyrights, trademarks, trade names,
service marks, trade secrets, know-how and other proprietary
rights, whether registered or unregistered, including
applications for any of the foregoing (collectively, the
"Intellectual Property Rights"). To the best of Seller's
knowledge, no person or entity is infringing on or improperly
using the Intellectual Property Rights of Seller.
(j) Licenses and Permits.
(i) Exhibit 1.1(e) contains a true and complete list
and brief description of all of the Licenses required to
permit, in accordance with the rules and regulations of any
Governmental Entity, the continued conduct of the Business as
now conducted (or proposed to be conducted under existing
agreements), and Seller is the authorized legal holder of the
Licenses. Each of the Licenses is valid and in full force and
effect, and Seller is in compliance with all the provisions of
the Licenses in all material respects. To the best of Seller's
knowledge, no Governmental Entity has instituted any
proceedings for the cancellation, non-renewal or modification
of any of the Licenses; and Seller has no knowledge of any
reason why any of such Licenses will, upon their scheduled
expiration or as a result of the Closing, not be renewable or
reissuable in the ordinary course or will be issuable or
reissuable only with the imposition of a material condition.
(ii) Except as set forth in Exhibit 4.1(j)(ii),
Seller has no knowledge of any reason why any of the Licenses
is not assignable or will not become available to Purchaser
upon the Closing on the same terms and conditions set forth in
the existing Licenses (whether by assignment, cancellation and
reissuance, or renewal), or why any of such Licenses that are
assignable will not be Transferred to Purchaser by Seller's
delivery to Purchaser at the Closing of the instruments of
Transfer contemplated by this Agreement, and to the extent they
are assignable, will not remain effective as of the
consummation of the transactions contemplated by this
Agreement.
(k) Litigation; Decrees; Warranty Claims.
(i) Except as listed or described on Exhibit
4.1(k)(i), there are no pending or, to the best of Seller's
knowledge, threatened lawsuits, claims, administrative or other
proceedings or investigations against Seller arising out of or
relating to this Agreement or the transactions contemplated by
this Agreement or the conduct of the Business, or otherwise
pertaining to or affecting the Total Assets, and, to the best
of Seller's knowledge, there do not exist any facts or
circumstances that could reasonably be expected to give rise to
any such lawsuits, claims, proceedings or investigations.
Seller is not in default under any judgment, order or decree of
any Government Entity applicable to it or to the conduct of the
Business or the ownership or use of the Total Assets.
(ii) All claims, whether in contract or tort, for
defective or allegedly defective products or workmanship
pending or threatened against Seller and any facts and
circumstances relating to any such claim, are listed or
described on Exhibit 4.1(k)(ii).
(l) Contract Rights.
(i) Exhibit 4.1(l)(i) contains a true and complete
list of all of the Contracts relating to the Business to which
Seller is a party or by which Seller is bound or to which any
of the Total Assets are subject, other than (A) any of the
Contracts entered into with unaffiliated third parties in the
ordinary course which are not material to the conduct of the
Business, which are terminable without payment of premium or
penalty at will or upon not more than 30 days' notice, which
impose monetary obligations not in excess of $5,000 and which
impose no material non-monetary obligations and (B) Employee
Plans (as defined in Section 4.1(m)(i) on Exhibit 4.1(m)(i)).
Except as set forth on Exhibit 4.1.(l)(i), none of the
Contracts listed or described on Exhibit 4.1(l)(i) has been
amended. Seller heretofore has provided Purchaser with true,
complete and correct copies of each of the Contracts listed or
described on Exhibit 4.1(l)(i) that are written and, to the
best of Seller's knowledge, true, complete and correct written
summaries of the Contracts listed or described on Exhibit
4.1(l)(i) that are oral.
(ii) Except as set forth on Exhibit 4.1(l)(ii), (A)
Seller has performed all obligations required to be performed
by it to date under the Contracts, (B) neither Seller nor, to
the best of Seller's knowledge, any other party to any Contract
has improperly terminated or is in breach or default under such
Contract, (C) to the best of Seller's knowledge there exists no
condition or event which , after the giving of notice or lapse
of time or both, would constitute any such breach, termination
or default, (D) each of the Contracts is in full force and
effect and is a legal, binding and enforceable obligation of
Seller and, to the best of Seller's knowledge, each of the
other parties to the Contracts, (E) none of the Contracts is
presently being renegotiated, either in whole or in part and
(F) each of the Contracts, if performed by Purchaser, would not
result in a loss to Purchaser, based on Seller's actual
production costs for the twelve months ended on the date of
this Agreement and based on the quoted price set forth in, or
applicable to, the Contract.
(m) Employee Plans; Labor Relations.
(i) For purposes of this Agreement, the term
"Employee Plan" means each employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and any deferred compensation plans,
stock appreciation rights, phantom stock plans, stock option
plans and any excess benefit plans, other than a multiemployer
plan within the meaning of Section 3(37) of ERISA
("Multiemployer Plan"), sponsored or maintained by Seller, or
to which Seller contributes or is obligated to contribute, and
under which any person presently employed by Seller (an
"Employee") or formerly so employed by Seller or any of its
predecessors-in-interest (a "Former Employee") participates or
has accrued any rights, or under which Seller is liable in
respect of an Employee or a Former Employee. The terms
"Employee" and "Former Employee" include, where an Employee
Plan provides benefits for beneficiaries or dependents, the
beneficiaries and dependents of an Employee or a Former
Employee. Exhibit 4.1(m)(i) lists or describes all Employee
Plans other than Employee Plans existing or arising as a matter
of Law rather than by any of the Contracts. Seller is not
legally obligated to contribute to any Multiemployer Plan and
does not have any withdrawal liability whatsoever whether or
not yet assessed. Those Employee Plans that are employee
pension benefit plans (within the meaning of Section 3(2) of
ERISA) are intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986 ("Code"), have received a
favorable determination letter from the Internal Revenue
Service and remain qualified under the Code. Seller has not
maintained any Employee Plan in a manner that will result in
the imposition of a lien or encumbrance on any of the Total
Assets or in a liability of Purchaser with respect to such
maintenance during periods prior to the Closing Date, and
Seller does not have any direct or indirect liability
whatsoever under Title IV of ERISA (including being subject to
any statutory lien) regardless of whether as a "substantial
employer" or a "contribution sponsor" (as defined,
respectively, in Sections 4001(a)(2) and 4001 (a)(13) of ERISA.
(ii) Except as set forth on Exhibit 4.1(m)(ii), (A)
Seller is not party to or subject to any collective bargaining
agreements with respect to any Employee, (B) there is no
information or document showing any obligation to employ any
Employee after the Closing Date, or to pay any wages, benefits
or other compensation to any Employee, (C) there are no
controversies, disputes, complaints, charges, actions, suits,
or proceedings pending, or to the best of Seller's knowledge,
threatened, between Seller and any Employee (singly or
collectively) or labor union(s), (D) there have been no
judgments or other findings in the past three years relating to
any controversies, disputes, complaints, charges, actions,
suits, or proceedings between Seller and any Employee (singly
or collectively) or labor union(s), (E) no labor union or other
collective bargaining unit represents or claims to represent
any Employee, (F) to the best of Seller's knowledge, there is
no union campaign being conducted to solicit cards from
Employees to authorize a union to request a National Labor
Relations Board certification election with respect to any
Employee, (G) there have been no strikes or work stoppages of
Seller involving or affecting the Pueblo operations in the past
ten years (H) Seller has no affirmative action plans; and (I)
Seller has never had a "mass layoff" or "plant closing" as
defined by the Worker Adjustment and Retraining Notification
Act.
(n) Taxes.
(i) Seller has paid all Taxes owed by it when due,
except for circumstances in which Seller is contesting the
payment of a Tax in good faith under circumstances in which
title to or use of the Total Assets by Purchaser will not be
adversely affected (such as by the posting of a bond by
Seller), and except for Taxes as to which Seller's failure to
pay will not result in the imposition of a lien or encumbrance
on any of the Total Assets or in any obligation of Purchaser to
pay such Taxes, any such exceptions being described on Exhibit
4.1(n). Seller has timely filed all Tax returns and reports.
(ii) Seller is a United States person within the
meaning of Section 7701(a)(9) and (a)(1) of the Code. Seller
has not entered into any agreement, whether or not written, for
the payment of Tax liabilities or entitlement to refunds and
related matters with any other party.
(iii) For purposes of this Agreement, the term
"Taxes" means all federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, customs, duties, real
estate or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes.
(o) Environmental Matters.
(i) Except to the extent specified on Exhibit
4.1(o), (A) neither the Seller nor, to the best of Seller's
knowledge, any other person or entity has engaged in or
permitted any operations or activities upon, or any use or
occupancy of, all or any portion of the Real Property,
resulting in the emission, release, discharge, dumping or
disposal of any Hazardous Materials (as defined below) on or
under the Real Property, (B) to the best of Seller's knowledge,
no Hazardous Materials have migrated from the Real Property
onto or beneath other properties, and (C) to the best of
Seller's knowledge, no Hazardous Materials have migrated from
other properties onto or beneath the Real Property.
(ii) Except to the extent specified on Exhibit
4.1(o), (A) there is not, nor has there ever been, constructed,
placed, deposited, stored, disposed of or located on the Real
Property any asbestos in any form by or on behalf of Seller,
or, to the best of Seller's knowledge, any other person or
entity, (B) no underground treatment or storage tanks or gas or
oil ▇▇▇▇▇, are or have been located on the Real Property, (C)
there are no polychlorinated biphenyls (PCBs) or transformers,
capacitors or other equipment which contain dielectric fluid
containing PCBs at levels in excess of fifty parts per million
(50 ppm) constructed, placed, deposited, disposed of or located
on the Real Property, (D) the uses of and activities of Seller
on the Real Property have at all times complied in all material
respects with all Environmental Requirements (as defined
below), (E) Seller has obtained all permits necessary under
applicable Environmental Requirements to conduct the Business
at the Real Property, (F) neither the Seller nor, to the best
of Seller's knowledge, any other person or entity has received
any notice or other communication from a Governmental Entity
concerning any alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of the appropriate
authority, or any notice or other communication concerning
alleged liability for Environmental Damages (as defined below)
in connection with the Real Property, and (G) there exits no
judgment, decree, order, writ or injunction outstanding, or
litigation, action, suit, claim (including citation or
directive) or proceeding pending or, to the best of Seller's
knowledge, threatened, relating to the alleged violation of
Environmental Requirements, or from the suspected presence of
Hazardous Materials thereon or potential migration thereto.
(iii) For purposes of this Agreement, the term
"Hazardous Materials" means any substance (A) the presence of
which requires remediation under any Environmental
Requirements, and (B) which is identified as a hazardous waste
or hazardous substance under any applicable Law. "Hazardous
Materials" do not include household or ordinary commercial
products purchased by Seller ancillary to its business and
utilized for their intended use in ordinary quantities,
including without limitation janitorial and cleaning supplies,
paints, insecticides, and pesticides.
(iv) For purposes of this Agreement, the term
"Environmental Requirements" means all applicable Laws and
permits of any federal, Colorado or local Governmental Entity
in effect on or during any period prior to the Closing Date
relating to the protection of human health or the environment,
including: (A) all requirements pertaining to reporting,
licensing, permitting, investigation, and remediation of
emissions, discharges or releases of Hazardous Materials; and
(B) all requirements pertaining to the protection of the health
of employees or the public.
(v) For purposes of this Agreement, the term
"Environmental Damages" means any and all losses which are
incurred at any time as a result of (A) the existence of
Hazardous Materials, during the ownership of the Real Property
by Seller, upon or beneath the Real Property or migrating or
threatening to migrate from the Real Property, or (B) the
existence on or prior to Closing of a violation of
Environmental Requirements pertaining to the Real Property.
(p) Customers and Suppliers. Except as set forth on
Exhibit 4.1(p), Seller is not involved in any material claim or
controversy with any customer or supplier.
(q) Sufficiency of the Total Assets. The Total Assets
constitute all of the properties, assets and rights required for
the continued conduct of the Business as presently conducted,
except for the owned vehicles listed on Exhibit 4.1(q), software,
the computer system in the Rocky Ford, Colorado office, and any
other assets used in the Rocky Ford office for general, sales,
and administrative purposes in connection with the operation of
the Business and any other Excluded Assets. The ▇▇▇▇▇▇, Rancho
Colorado and Nepesta properties referred to in Exhibit 1.3(c)
have not been used in Valco's Pueblo operations and are not
included in the mineral reserve calculation performed by ▇▇▇
▇▇▇▇.
(r) Political Contributions and Other Payments.
Neither Seller nor any other person or entity acting on behalf of
Seller has, during the past five years, (i) made any payment to
any governmental official or other governmental employee or agent
(domestic or foreign) to induce the recipient or the recipient's
employer to do business with, grant favorable treatment to or
compromise or forego any claim against Seller, or (ii) made any
significant payment or conferred any benefit which, under
prevailing business practices, Seller considers or reasonably
should consider to be improper to promote or retain sales or to
help, procure or maintain good relations with suppliers.
(s) Brokers, Finders and Agents. Seller has not taken
any action that would directly or indirectly obligate Seller,
Purchaser or anyone else to anyone acting as a broker, finder,
financial advisor or in any other similar capacity in connection
with this Agreement or the transactions contemplated by this
Agreement.
(t) Certain Transfers. Except as set forth on Exhibit
4.1(t), since May 22, 1996 Seller has not transferred any of the
Total Assets (to another operation of Seller, a third party or
otherwise) except for sales of inventory in the ordinary course
of business consistent with past practice and the transfer of the
Owned Tangible Property to Subsidiary, and has conducted the
Pueblo operations in the ordinary course of business consistent
with past practice.
(u) Insurance. Up until the effective time of the
Closing hereunder, Seller has maintained insurance of the types
and amounts and on terms which are customary covering liabilities
and losses relating to the Business and the Total Assets.
(v) Effect of Disclosures. Any matter expressly set
forth in any Exhibit in this Agreement will be deemed to apply to
any relevant Exhibit attached pursuant to this Article IV, as
long as the relevance of such information to such other Exhibit
would be reasonably and clearly apparent to a person not
intimately familiar with the business, assets and operations of
the Seller. The absence of a breach of a representation or
warranty (or the expiration of the period for claims under such
representation or warranty under Section 7.1) shall not affect a
claim for a breach of another representation or warranty or any
covenant hereunder.
4.2 Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as of the date hereof as
follows:
(a) Corporate Matters. Purchaser is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Purchaser is duly qualified to
conduct business as a foreign corporation in each jurisdiction in
which its ownership or lease of property or conduct of its
business requires such qualification under applicable law.
(b) Authorization and Effect of Agreement. Purchaser
has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated by this
Agreement to be performed by Purchaser. The execution and
delivery by Purchaser of this Agreement and the performance by
Purchaser of the transactions contemplated by this Agreement to
be performed by Purchaser have been duly authorized by all
necessary action on the part of Purchaser, Purchaser's board of
directors and, if applicable, Purchaser's stockholders and
holders of Purchaser's indebtedness. This Agreement has been
duly executed and delivered by Purchaser and, assuming the due
execution and delivery of this Agreement by Seller, constitutes a
valid and binding obligation of Purchaser enforceable in
accordance with its terms.
(c) No Conflicts. The execution and delivery of this
Agreement by Purchaser does not, and the performance by Purchaser
of the transactions contemplated by this Agreement to be
performed by it will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligations or
to loss of a material benefit under, (i) the articles of
incorporation or bylaws of Purchaser, (ii) any Law or judgment,
order or award existing or entered into as of the date of this
Agreement to which Purchaser is subject, (iii) any contract to
which Purchaser is a party, or (iv) any license or permit of
Purchaser. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to
Purchaser under any applicable Law in connection with the
execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of the transactions contemplated by this
Agreement to be performed by it.
(d) Brokers, Finders and Agents. Purchaser has not
taken any action that would directly or indirectly obligate
Seller, Purchaser or anyone else to anyone acting as a broker,
finder, financial advisor or in any other similar capacity in
connection with this Agreement or the transactions contemplated
by this Agreement.
V. Covenants
5.1 Further Employee Matters.
(a) Employee Benefits. Except as set forth below,
Seller will retain all liabilities and obligations in respect of
all Employees and any future employees of Seller, including
liabilities and obligations under any Employee Plan and
applicable Laws. Seller shall be responsible for satisfying the
requirements of the Consolidated Budget Reconciliation Act of
1985 with respect to Seller's employees terminated in connection
with this Agreement and not rehired by Purchaser, if any.
Purchaser will cause each Employee and Former Employee whom it
employs at or after the Closing to be covered under Purchaser's
existing health care plan that is available for Purchaser's
employees generally, such coverage to be effective immediately
upon the employment of any such person, subject to the provisions
of the plan. Purchaser will have no liability or obligation
whatsoever under any Employee Plan, nor will Purchaser have any
obligation to provide any employee benefits to any Employees or
Former Employees, other than as set forth above.
(b) Future Employment. Purchaser acknowledges that
Seller has disclosed to Purchaser the obligation set forth in
Article II, Section 4 of the Agreement with Teamsters
Construction Workers Local Union No. 13 and in Article I, Section
D of the Agreement with Operating Engineers Local No. 9. Seller
shall terminate the employment of all Employees employed in
connection with the Business, effective the Closing Date.
Purchaser intends to offer employment from and after the Closing
to all Employees employed by Seller in connection with the
Business, on such terms and conditions as Purchaser may, in its
sole discretion, determine.
(c) Non-Solicitation By Purchaser. Purchaser agrees
not to solicit any employees of Seller not listed on Exhibit
5.1(c) or encourage any such employees to leave the employ of
Seller for a period of two (2) years from the date of this
Agreement without prior written consent of Seller.
(d) Non-Solicitation By Seller. Seller agrees not to
solicit any Employees or Former Employees hired by Purchaser in
connection with the Business, or encourage any such employees to
leave the employ of Purchaser, for a period of two (2) years from
the date of this Agreement without prior written consent of
Purchaser.
(e) Employee Information. Upon written authorization
from any Employee employed primarily in connection with the
Business, Seller will provide to Purchaser, in a timely manner,
any information or documents that Purchaser may reasonably
request with respect to any such Employee employed primarily in
connection with the Business, which relates directly to such
Employee's performance, job duties, compensation and benefits
while employed by Seller, including, but not limited to, copies
of all personnel files relating to such Employee.
5.2 Certain Real Estate Matters.
(a) Title Commitments. At least five (5) days prior
to the Closing Date, Seller will deliver to Purchaser title
insurance commitments (the "Title Commitments") on each parcel of
Real Property issued by the Title Company (as defined in Section
6.1(ii)). Each of the Title Commitments shall contain the Title
Company's commitment to provide extended coverage over the
standard printed exceptions upon satisfaction by Seller of the
Title Company's requirements with respect to providing extended
coverage.
(b) Surveys. Prior to the Closing Date, the Purchaser
and the Title Company shall have received such surveys of the
Real Property, except for the east parcel of the Mining
Properties, as are reasonably required by Purchaser (the
"Surveys"). Each of the Surveys shall be prepared by a surveyor,
engineer or surveying or engineering firm licensed in the State
of Colorado.
(c) Certain Leases. Seller will continue as Lessor
with respect to the leases set forth in Exhibit 4.1(h)(iii);
provided, however, that Seller shall terminate any of such leases
(other than the lease with the Division of Wildlife-West Lake) as
to any portion of the Property covered by such leases within
forty-five (45) days after receipt of notice from Purchaser that
Purchaser intends to mine on such property (or portion of such
property) and that the continued use of the surface of such
property (or portion of such property) is not compatible with
such mining. Seller shall insure that said leases do not
materially interfere with the Business. Upon any transfer of the
Property to Purchaser, Seller shall transfer the Property free
and clear of such leases.
(d) Subdivision. The parties acknowledge that the
Plants To Be Sold and the Plant Sites are the Concrete Batch
Plant located at ▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "Batch
Plant") and the Aggregate Crushing and Screening Plant and Batch
Plant located at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the
"Crushing Plant"). Because of the subdivision laws and
regulation of Colorado and Pueblo County, neither the property on
which the Batch Plant is located (the "Batch Plant Property") nor
the property on which the Crushing Plant is located (the
"Crushing Plant Property") can be conveyed to Purchaser unless
certain additional property located adjacent to the Batch Plant
(the "Excess Batch Plant Property") and certain additional
property located adjacent to the Crushing Plant (the "Excess
Crushing Plant Property") also is conveyed to Purchaser.
Accordingly, Seller will convey to Purchaser all of the Batch
Plant Property and the Excess Batch Plant Property by a special
warranty deed and all of the Crushing Plant Property and the
Excess Crushing Plant Property by a second special warranty deed.
Promptly after the Closing, Purchaser shall take such actions as
are reasonably necessary to subdivide the Batch Plant Property
and the Excess Batch Plant Property into a two lot subdivision
(the "Batch Plant Subdivision") and the Crushing Plant Property
and the Excess Crushing Plant Property into a second two lot
subdivision (the "Crushing Plant Subdivision. Upon completion of
the Batch Plant Subdivision and the Crushing Plant Subdivision,
which Purchaser shall use all reasonable efforts to complete
within two (2) years after the Closing Date, Purchaser shall
convey the Excess Batch Plant Property and the Excess Crushing
Plant Property to Seller by special Warranty Deed and, upon such
conveyance, the Excess Batch Plant Property and the Excess
Crushing Plant Property shall be added to the property leased to
Purchaser under the Lease. The parties acknowledge that the
Batch Plant Property is comprised of approximately acres,
the Excess Batch Plant Property is comprised of approximately
acres, the Crushing Plant Property is comprised of approximately
13 acres, and the Excess Crushing Plan Property is comprised of
approximately acres.
(e) Deed of Trust. In order to secure Purchaser's
obligation to reconvey the Excess Batch Plant Property and the
Excess Crushing Plant Property to Seller, Purchaser shall execute
and deliver to Seller at closing a deed of trust, in form and
substance acceptable to Purchaser and Seller encumbering the
Excess Batch Plant Property and the Excess Crushing Plant
Property (the "Deed of Trust"). The Deed of Trust shall provide,
among other things, that Seller may exercise its rights under the
Deed of Trust only after the Batch Plant Subdivision and the
Crushing Plant Subdivision have been completed and Purchaser has
refused, after receiving a written request from Seller, to convey
the Excess Batch Plant Property and/or the Excess Crushing Plant
Property to Seller. Except for the Deed of Trust, Purchaser will
not, without Seller's prior written consent, grant, permit or
suffer to exist any mortgage lien or similar encumbrance upon the
Excess Batch Plant Property or the Excess Crushing Plant
Property, except for liens and encumbrances caused by Seller's
actions.
(f) Option to Purchase. Contemporaneously with the
execution of this Agreement, Valco Inc. and Purchaser have
executed and delivered that certain Option to Purchase Agreement
(the "Option Agreement"), a copy of which is attached hereto as
Exhibit 5.2(f). The Option Agreement grants to Valco Inc. the
right to purchase the Batch Plant Property and the Crushing Plant
Property and the improvements then existing on the Batch Plant
Property and the Crushing Plant Property on the terms and subject
to the conditions contained in the Option Agreement in the event
the Lease is terminated by Seller as a result of a default by
Purchaser.
(g) Water Rights. The bargain and sale deed for
Seller's water rights also shall contain a possibility of
reverter which will provide that the water rights shall revert to
Seller upon the termination of the Lease, except for those water
rights attributable to or associated with the Batch Plant
Property and/or the Crushing Plant Property; provided, however,
that if the Batch Plant Property and the Crushing Plant Property
are purchased by Seller pursuant to the Option Agreement, such
water rights shall revert to or be conveyed to Seller, but the
value of such water rights shall be included in the determination
of the fair market value of the Batch Plant Property and the
Crushing Plant Property for purposes of the Option Agreement.
5.3 Certain Tax Matters.
(a) Any sales, use, transfer, vehicle transfer, stamp,
conveyance, value added or other similar Taxes that may be
imposed by any Governmental Entity, and all recording or filing
fees and notarial fees with respect to the purchase and sale of
the Assets, the lease of the Mining Properties or otherwise on
account of this Agreement or the transactions contemplated by
this Agreement, will be borne by Purchaser (and Purchaser shall
indemnify Seller therefrom); provided, however, that Seller shall
pay all Taxes that are imposed on the income or gain that Seller
realizes as a result of the transactions contemplated by this
Agreement. Seller will indemnify Purchaser against any
Liability, direct or indirect, for any Taxes (other than Taxes
prorated between Seller and Purchaser pursuant to Section 2.2)
imposed on Purchaser or on or with respect to any of the Total
Assets or the Business that are attributable to any taxable
period which ends on or prior to the Closing Date or with respect
to the allocable portion of any taxable period that includes but
does not end on the Closing Date.
(b) Seller will cause to be included in its income Tax
returns for all periods or portions thereof ending on or before
the Closing Date, all revenue and expense relating to the
operations of the Business during such periods or portions
thereof. Seller will prepare and timely file or cause to be
prepared and timely filed all such Tax returns with the
appropriate Governmental Entities. Seller will make all payments
of Tax shown to be due and owing in such Tax returns.
(c) Seller and Purchaser will (i) each provide the
other with such assistance as may reasonably be requested by any
of them in connection with the preparation of any tax return to
the extent such tax return relates to the allocation of the
Purchase Price to the Assets (including related depreciation and
amortization), audit or other examination by any taxing authority
or judicial or administrative proceedings relating to liability
for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such tax
return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of any
such audit or examination, proceeding or determination that
affects any amount required to be shown on any such tax return of
the other for any period. In addition, Seller will retain until
the applicable statutes of limitations (including any extensions)
have expired copies of all such tax returns, supporting work
schedules, and other records or information that may be relevant
to such tax returns for all tax periods or portions thereof
ending on or before or which include the Closing Date and will
not destroy or otherwise dispose of any such records (to the
extent they relate to such matters) without first providing
Purchaser with notice and a reasonable opportunity to review and
copy the same.
5.4 Transition Assistance. Seller shall provide Purchaser
with such assistance as may reasonably be requested by Purchaser
to implement and effectuate the terms hereof and the transfer of
the Business contemplated hereby including assistance to
accomplish the transfer of the Licenses to Purchaser on the same
terms and conditions currently in effect. Purchaser will
reimburse Seller for any reasonable out-of-pocket costs incurred
by Seller in connection with the foregoing.
5.5 MLRD Bond. Promptly after the Closing, Purchaser will
take all necessary steps to replace each of the bonds described
in Exhibit 5.5 (the "Bonds"), to cause Seller to be released from
all liability on the Bonds, and in any event to cause such
replacement and release to occur not later than September 19,
1997. Until the Bonds are so replaced and Seller is so released,
Purchaser will pay Seller, in advance on the first day of each
month, the sum of $225 and will indemnify Seller from any
liability arising under the Bonds after the Closing Date as a
result of the actions of Purchaser.
VI. The Closing
6.1 The Closing.
(a) The parties shall consummate the transactions
contemplated hereby ("Closing") on October 21, 1996 ("Closing
Date") as follows: The parties will execute and deliver this
Agreement, the Lease and the closing documents contemplated
hereby on October 21, 1996; provided, however, that the purchase
price adjustments for Accounts Receivable and Inventory as
provided in Section 2.1 shall be made as of the close of business
on October 20, 1996 and the delivery of the balance of the
Purchase Price shall occur on October __, 1996 as provided in
subsection (c) below (so that the parties may determine and
effectuate the adjusted Purchase Price on October __ and __, 1996
as contemplated by Article II above).
(b) Seller will deliver to Purchaser, at the expense
of Seller, the following (collectively, "Seller's Closing
Documents"):
(i) Opinion of Counsel. The opinion of Seller's
counsel, dated as of the Closing Date and addressed to
Purchaser, in substantially the form of Exhibit 6.1(b)(i).
(ii) Title Insurance. Owner's and Lessee's Policies
of Title Insurance for each item of the Plants To Be Sold, the
Plant Sites and the Mining Properties, respectively, each of
which policies (the "Title Policies") will (A) be issued by
Transnation Title Insurance Company (the "Title Company")
without any exceptions, other than the Permitted Liens and such
exceptions as are acceptable to Purchaser (the "Permitted
Exceptions"), (B) be in the amount of the market value for that
property as reasonably determined by Purchaser, (C) name
Purchaser as the insured owner or lessee of such property or
interest, and (D) insure that, as of the Closing Date, (1) in
the case of each of the Plants To Be Sold and the Plant Sites,
Purchaser is the owner of good and marketable title in fee
simple to such property or interest subject only to the
Permitted Exceptions that affect such Plants To Be Sold and the
Plant Sites, and (2) in the case of each item of the Mining
Properties, Purchaser is the owner of a good and indefeasible
leasehold estate (with reasonable specificity as to the lease
or other agreement creating such leasehold estate) in and to
such property or interest, subject only to the Permitted
Exceptions that affect such Mining Properties. Each of the
Title Policies shall contain such endorsements as Purchaser
shall reasonably request.
(iii) Lease. With respect to the Mining Properties,
a Lease, in the form of Exhibit 1.2B, duly executed by Seller
as lessor.
(iv) Transfer Documents. A special warranty deed to
the Batch Plant Property, the Excess Batch Plant Property, the
Crushing Plant Property and the Excess Crushing Plant Property,
a ▇▇▇▇ of Sale and Assignment for the Inventory, Contracts,
Licenses, Accounts Receivable, a bargain and sale deed for the
water rights as described in Section 1.1(g), an assignment of
the water rights lease with the municipality of Pueblo,
Colorado and a copy of the assignment or ▇▇▇▇ of sale from
Seller to Subsidiary of the Owned Tangible Property.
(v) FIRPTA Affidavits. Affidavits pursuant to
Section 1445(b)(2) of the Code in substantially the form of
Exhibit 6.1(b)(vi), duly executed by Seller.
(vi) Receipts. Such receipts, duly executed by
Seller, as Purchaser may reasonably request.
(vii) Noncompetition Agreement. Seller and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ shall each have entered a Noncompetition and
Non-Disclosure Agreement, in substantially the form of Exhibit
6.1(b)(viii), with Purchaser.
(viii) Tax Release. Such consents, releases and
approvals from the Colorado Department of Revenue or other
taxing authority sufficient to release Purchaser from any
Colorado, state or local, Tax obligation of Seller that arose
prior to the Closing.
(ix) Subsidiary Assignments. Assignments (executed
by Seller and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇) of the entire interest in
Subsidiary.
(c) Purchaser will deliver to Seller, at the expense
of Purchaser, the following (collectively, "Purchaser's Closing
Documents"):
(i) Payment of Purchase Price. An amount equal to
the Purchase Price by wire transfer as follows: (i) for the
transfer of funds on October 21, 1996 in the amount $5,000,000,
subject to the adjustments provided in Article II and on
Exhibit 2.1, and (ii) the balance of the Purchase Price by wire
transfer on October __, 1996 (reflecting the adjusted Purchase
Price, i.e., the Inventory and Accounts Receivable
adjustments).
(ii) Lease. With respect to the Mining Properties,
a Lease, in the form of Exhibit 1.2B, duly executed by
Purchaser, as lessee.
("Purchaser's Closing Documents" and "Seller's Closing Documents"
individually referred to as "Closing Document", collectively,
"Closing Documents").
VII. Survival and Indemnification
7.1 Survival of Representations, Warranties and Covenants.
The representations and warranties contained in Sections 4.1(n),
"Taxes" and 4.1(o), "Environmental Matters" will survive the
Closing Date and will remain operative and in full force and
effect until the expiration of the applicable statute of
limitations (giving effect to any tolling, waiver or extension
thereof). The representations and warranties contained in
Section 4.1(a), "Corporate Matters," Section 4.1(b)
"Authorization and Effect of Agreement," Section 4.1(c), "No
Restrictions Against Sale of the Assets," Section 4.1(e),
"Compliance with Laws," Sections 4.1(g)(i) and (iii), "Tangible
Personal Property; Assets," Sections 4.1(h)(ii)-(v), (vii),
(viii), (ix) and (xii) "Real Property," and the several covenants
of the parties contained in this Agreement (or in any document
delivered in connection with it) will remain operative and in
full force and effect without any time limitation, except as any
such covenant will be limited in duration by the express terms of
this Agreement. All other representations and warranties in this
Agreement will remain operative and in full force and effect for
a period of one year after the Closing Date. The representations
and warranties will not be affected or reduced as a result of any
investigation or knowledge of Purchaser; provided, however, that
prior to the Closing Purchaser shall notify Seller in writing to
the extent ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Sum, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇'▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ has actual knowledge
that Seller is in breach of any representation or warranty of
Seller contained in this Agreement; and the failure of Purchaser
to give Seller such notice shall constitute a waiver by Purchaser
of any such breach by Seller.
7.2 Indemnification by Purchaser. From and after the
Closing, Purchaser will indemnify, defend and hold Seller, its
Affiliates, and their respective directors, officers,
representatives, employees and agents harmless from and against,
and compensate and pay Seller for, any and all claims, actions,
suits, demands, assessments, judgments, losses, liabilities,
damages, costs and expenses (including interest, penalties,
attorneys' fees, accounting fees and investigation costs)
(collectively, "Liabilities") whether direct or indirect and
whether or not involving a Third Party Claim (as defined below)
resulting or arising from, relating to or incurred in connection
with: (a) any failure of Purchaser to pay, perform and discharge
any of the Assumed Liabilities, (b) any breach of any
representation or warranty of Purchaser contained in this
Agreement or in any other document delivered by Purchaser in
connection with it, or (c) any breach of any covenant of
Purchaser contained in this Agreement or in any other document
delivered by Purchaser in connection with it.
7.3 Indemnification by Seller. From and after the Closing,
Seller will indemnify, defend and hold Purchaser, its Affiliates,
and their respective directors, officers, representatives,
employees and agents harmless from and against, and compensate
and pay Purchaser for, any and all Liabilities whether direct or
indirect and whether or not involving a Third Party Claim
resulting or arising from, relating to or incurred in connection
with: (a) any failure of Seller to pay, perform and discharge any
of the Retained Liabilities, (b) any breach of any representation
or warranty of Seller contained in this Agreement or in any other
document delivered by Seller in connection with it, (c) any
breach of any covenant of Seller contained in this Agreement or
in any other document delivered by Seller in connection with it,
(d) any failure to comply with the laws of any jurisdiction
relating to bulk transfers which may be applicable in connection
with the transactions contemplated by this Agreement, (e) the
business of Seller (including the Business) transacted prior to
the Closing Date, (f) any pre-closing use of any Total Asset, (g)
liabilities relating to environmental matters arising from the
activities of Seller or as to which Seller had knowledge at or
before the Closing, or (h) products manufactured or sold or work
performed by Seller prior to the Closing Date.
7.4 Notice of Claim; Right to Participate in and Defend
Third Party Claim.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action or
proceeding, or the imposition of any penalty or assessment by a
third party in respect of which indemnity may be sought under
this Agreement (a "Third Party Claim"), and the indemnified party
intends to seek indemnity under this Agreement, then the
indemnified party will promptly provide the indemnifying party
with prompt written notice of such Third Party Claim, but in any
event not later than 30 calendar days after receipt of such
notice of Third Party Claim. The failure by an indemnified party
to notify an indemnifying party of a Third Party Claim will not
relieve the indemnifying party of any indemnification
responsibility under this Article VII, except to the extent, if
any, that such failure prejudices the ability of the indemnifying
party to defend such Third Party Claim.
(b) The indemnifying party will have the right to
control the defense, compromise or settlement of a Third Party
Claim with its own counsel (reasonably satisfactory to the
indemnified party) if the indemnifying party delivers written
notice to the indemnified party within seven days following the
indemnifying party's receipt of notice of a Third Party Claim
from the indemnified party which either acknowledges its
obligations to indemnify the indemnified party with respect to
such Third Party Claim in accordance with this Article VII or
unqualifiedly assumes the obligation to defend any Third Party
Claim, provided, however, that the indemnifying party will not
enter into any settlement of any Third Party Claim which would
impose or create any obligation or any financial or other
liability on the part of the indemnified party if such liability
or obligation (i) requires more than the payment of a liquidated
sum or (ii) is not covered by the indemnification provided to the
indemnified party under this Agreement. In its defense,
compromise or settlement of any Third Party Claim, the
indemnifying party will timely provide the indemnified party with
such information with respect to such defense, compromise or
settlement as the indemnified party may request, and will not
assume any position or take any action that would impose an
obligation of any kind on, or restrict the actions of, the
indemnified party. The indemnified party will be entitled (at
the indemnified party's expense) to participate in, but not
control, the defense by the indemnifying party of any Third Party
Claim with its own counsel.
(c) In the event that the indemnifying party does not
undertake the defense, compromise or settlement of a Third Party
Claim in accordance with subsection (b) of this Section 7.4, the
indemnified party will have the right to control the defense or
settlement of such Third Party Claim with counsel of its
choosing; provided, however, that the indemnified party will not
settle or compromise any Third Party Claim without the
indemnifying party's prior written consent (which consent shall
not be unreasonably withheld), unless the terms of such
settlement or compromise release the indemnified party or the
indemnifying party from any and all liability with respect to the
Third Party Claim. The indemnifying party will be entitled (at
the indemnifying party's expense) to participate in the defense
of any Third Party Claim with its own counsel.
(d) The indemnified party will assert any
indemnifiable claim under this Agreement that is not a Third
Party Claim by promptly delivering notice of such claim to the
indemnifying party. If the indemnifying party does not respond
to such notice within 60 days after its receipt, it will have no
further right to contest the validity of such claim.
7.5 Basket and Deductible. No indemnified party will be
entitled to indemnification from an indemnifying party under
Sections 7.2(b) or 7.3(b) for a breach of a representation or
warranty unless and until the aggregate amount of Liabilities
with respect to which such indemnified party and its Affiliates,
and their respective directors, officers, representatives,
employees and agents, would otherwise be entitled to assert under
Section 7.2(b) or 7.3(b), whichever is applicable, exceeds
$100,000 (the "Basket Amount"). When the aggregate amount of
Liabilities exceed the Basket Amount, the indemnified party will
be entitled to indemnification for all Liabilities, including
those within the Basket Amount.
7.6 Intentionally Omitted.
7.7 Limitations. In no event shall any indemnifying party
be liable under this Agreement for breaches of representations or
warranties which, individually or in the aggregate, exceed the
Purchase Price; the remedies set forth in this Article VII
constitute the exclusive remedy by either party for breach of
contract with respect to this Agreement by the other party,
absent fraud; provided, however, that nothing in this Agreement
shall exculpate the Seller or Purchaser from any liability either
of them may have to the other or to any other person or entity
under the Lease, any other agreement or any state or federal law
arising independently from this Agreement (e.g., a statutory
right to seek contribution under an environmental law).
VIII. Miscellaneous Provisions
8.1 Notices. All notices and other communications required
or permitted under this Agreement will be in writing and, unless
otherwise provided in this Agreement, will be deemed to have been
duly given when delivered in person or when dispatched by
telegram or electronic facsimile transfer (confirmed in writing
by mail simultaneously dispatched) or one business day after
having been dispatched by a nationally recognized overnight
courier service to the appropriate party at the address specified
below.
(a) If to Purchaser or the lessee under the Lease to:
Continental Materials Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: 312/541-8089
Telephone No.: 312/▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Jenner & Block
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Seller, to:
Valco Inc.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses as any such party may from
time to time designate as to itself by like notice.
8.2 Expenses. Except as otherwise expressly provided in
this Agreement, Seller and Purchaser each will pay any expenses
incurred by it incident to this Agreement and in preparing to
consummate and consummating the transactions provided for in it.
8.3 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the parties to this Agreement
and their respective successors and assigns, but will not be
assignable or delegatable by any party without the prior written
consent of the other party; provided, however, that nothing in
this Agreement is intended to limit Purchaser's ability to (a)
assign the Lease as provided therein, or (b) transfer any of the
Total Assets following the Closing Date.
8.4 Waiver. Either Purchaser or Seller by written notice
to the other may (a) extend the time for performance of any of
the obligations or other actions of the other under this
Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any
Closing Document, (c) waive compliance with any of the conditions
or covenants of the other contained in this Agreement, or (d)
waive performance of any of the obligations of the other under
this Agreement. Except as provided in the immediately preceding
sentence, no action taken pursuant to this Agreement will be
deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this
Agreement and will not operate or be construed as a waiver of any
subsequent breach, whether of a similar or dissimilar nature.
8.5 Entire Agreement. This Agreement (including the
Exhibits) supersedes any other agreement, whether written or
oral, that may have been made or entered into by any party to
this Agreement or any of their respective Affiliates (or by any
director, officer or representative thereof) relating to the
matters contemplated by this Agreement. This Agreement
(including the Exhibits and documents contemplated hereby)
constitutes the entire agreement by and among the parties to this
Agreement and there are no agreements or commitments by or among
such parties or their Affiliates except as expressly set forth in
this Agreement.
8.6 Amendments, Supplements, Etc.. This Agreement may be
amended or supplemented at any time by additional written
agreements as may mutually be determined by Purchaser and Seller
to be necessary, desirable or expedient to further the purposes
of this Agreement, or to clarify the intention of the parties to
this Agreement.
8.7 Rights of the Parties. Except as provided in Article
VII or in Section 8.3, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give
any person or entity other than the parties to this Agreement any
rights or remedies under or by reason of this Agreement or any
transaction contemplated by this Agreement.
8.8 Further Assurances. From time to time, as and when
requested by any party to this Agreement, the other party will
execute and deliver, or cause to be executed or delivered, all
such documents and instruments as may be reasonably necessary to
consummate and fully effectuate the transactions contemplated by
this Agreement.
8.9 Bulk Sales. In consideration of the indemnity provided
by Seller under Section 7.3(d) of this Agreement, Purchaser
waives compliance by Seller with the provisions of the so-called
bulk sales law of any jurisdiction.
8.10 Transfers. Purchaser and Seller will cooperate and
take such action as may be reasonably requested by the other in
order to effect an orderly Transfer and lease of the Total Assets
and the Business with a minimum of disruption to the operations
of the Business.
8.11 Applicable Law; Jurisdiction. This Agreement and the
legal relations among the parties to this Agreement will be
governed by and construed in accordance with the substantive laws
of the State of Colorado, without giving effect to the principles
of conflict of laws thereof.
8.12 Titles and Headings. Titles and headings to Sections
in this Agreement are inserted for convenience of reference only,
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
8.13 Passage of Title and Risk of Loss. Legal title,
equitable title and risk of loss with respect to the Assets will
not pass to Purchaser until such Assets are Transferred or leased
at the Closing, which transfer, once it has occurred, will be
deemed effective for tax, accounting and other computational
purposes as of the close of business (Mountain Time) on the
Closing Date.
8.14 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all
references to Sections, Articles and Exhibits are to Section,
Articles or Exhibits of or to this Agreement, (ii) each term
defined in this Agreement has the meaning assigned to it, (iii)
each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iv) "or" is
disjunctive but not necessarily exclusive, (v) words in the
singular include the plural and vice versa, (vi) the terms
"Subsidiary" and "Affiliate" have the meanings given to those
terms in Rule 12b-2 of Regulation 12B under the Securities
Exchange Act of 1934, as amended, (vii) the phrase "liabilities
and obligations" means all such matters of any nature, whether
fixed or contingent, known or unknown, or arising under Contract,
law, equity, or otherwise, (viii) the word "including" and
similar terms following any statement will not be construed to
limit the statement to the matters listed after such word or
term, whether or not a phrase of nonlimitation such as "without
limitation" is used; and (ix) any matter disclosed in any Exhibit
of or to this Agreement by Seller will be deemed also to have
been included in any other Exhibit of or to this Agreement to the
extent such information or matter is pertinent to such other
Exhibit. All references to "$" or dollar amounts will be to
lawful currency of the United States of America.
(b) No provision of this Agreement will be interpreted
in favor of, or against, any of the parties to this Agreement by
reason of the extent to which any such party or its counsel
participated in the drafting or by reason of the extent to which
any such provision is inconsistent with any prior draft.
(c) As to any matter represented in this Agreement as
being within Seller's knowledge, to the best of Seller's
knowledge, to the knowledge or best knowledge of Seller or any
equivalent limitation, such knowledge shall be deemed to exist
only if the matter is within the actual knowledge of any officer,
director or shareholder of Seller or ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, after reasonable
inquiry of the employees of Seller who have within their job
responsibilities the duty to monitor such matter.
8.15 Execution in Counterparts. This Agreement may be
executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one
and the same agreement.
8.16 Remedies Not Exclusive. Subject to Section 7.7, no
remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy and
each remedy will be cumulative and will be in addition to every
other remedy given under this Agreement or hereafter existing at
law or in equity or by statute or otherwise. The election of any
one or more remedies will not constitute a waiver of the right to
pursue other available remedies.
The parties to this Agreement have executed this agreement
the day and year first above written.
VALCO PROPERTIES, LTD. VALCO INC.
By:_____________________ By:_________________________
Name: Name:
Title: Title:
CONTINENTAL MATERIALS CORPORATION
By:_________________________
Name:
Title:
