STOCK PURCHASE
AGREEMENT
Print Works, Inc.
(Company)
American Resources and Development Corporation
(Buyer)
May 30, 1998
Date
TABLE OF CONTENTS
1. DEFINITIONS.............................................................1
"Acquired Companies".......................................................1
"Adjustment Amount"........................................................1
"Applicable Contract"......................................................1
"Balance Sheet"............................................................1
"Best Efforts".............................................................1
"Breach"...................................................................1
"Buyer"....................................................................1
"Closing"..................................................................1
"Closing Date".............................................................2
"Company"..................................................................2
"Consent"..................................................................2
"Contemplated Transactions"................................................2
"Contract".................................................................2
"Damages"..................................................................2
"Disclosure Letter"........................................................2
"Employment Agreements"....................................................2
"Encumbrance"..............................................................2
"Environment"..............................................................2
"Environmental, Health, and
Safety Liabilities"......................................................2
"Environmental Law"........................................................3
"ERISA"....................................................................4
"Facilities".............................................................. 4
"GAAP".....................................................................4
"Governmental Authorization"...............................................4
"Governmental Body"........................................................4
"Hazardous Activity".......................................................4
"Hazardous Materials"......................................................5
"Intellectual Property Assets".............................................5
"IRC"......................................................................5
"IRS" ..................................................................5
"Knowledge"................................................................5
"Legal Requirement"........................................................5
"Occupational Safety and
Health Law"..............................................................5
"Order"....................................................................6
"Ordinary Course of Business"..............................................6
"Organizational Documents".................................................6
"Person"...................................................................6
"Proceeding"...............................................................6
"Related Person"...........................................................6
"Release"..................................................................7
"Representative"...........................................................7
"Securities Act"...........................................................7
"Sellers"..................................................................7
"Sellers' Releases"........................................................7
"Shares"...................................................................8
"Subsidiary"...............................................................8
"Tax Return"...............................................................8
"Threat of Release"........................................................8
"Threatened"...............................................................8
2. SALE AND TRANSFER OF SHARES; CLOSING....................................8
2.1 Shares..............................................................8
2.2 Purchase Price......................................................8
2.3 Closing.............................................................9
2.4 Closing Obligations.................................................9
3. REPRESENTATIONS AND WARRANTIES OF SELLERS..............................10
3.1 Organization and Good Standing.....................................10
3.2 Authority; No Conflict.............................................10
3.3 Capitalization.....................................................12
3.4 Financial Statements...............................................12
3.5 Books and Records..................................................13
3.6 Title to Properties; Encumbrances..................................13
3.7 Condition and Sufficiency of Assets................................14
3.8 Accounts Receivable................................................14
3.9 Inventory..........................................................15
3.10 No Undisclosed Liabilities.........................................15
3.11 Taxes..............................................................15
3.12 No Material Adverse Change.........................................16
3.13 Employee Benefits..................................................16
3.14 Compliance with Legal Requirements;
Governmental Authorizations......................................17
3.15 Legal Proceedings; Orders..........................................19
3.16 Absence of Certain Changes and Events............................. 20
3.17 Contracts; No Defaults............................................ 21
3.18 Insurance..........................................................24
3.19 Environmental Matters............................................. 25
3.20 Employees..........................................................27
3.21 Labor Relations; Compliance....................................... 28
3.22 Intellectual Property............................................. 28
3.23 Certain Payments.................................................. 32
3.24 Disclosure........................................................ 32
3.25 Relationships with Related Persons................................ 32
3.26 Brokers or Finders................................................ 33
4. REPRESENTATIONS AND WARRANTIES OF BUYER............................... 33
4.1 Organization and Good Standing.................................... 33
4.2 Authority; No Conflict............................................ 33
4.3 Investment Intent................................................. 34
4.4 Certain Proceedings............................................... 34
4.5 SEC Filings........................................................34
4.6 Brokers or Finders................................................ 34
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE............................ 34
5.1 Access and Investigation.......................................... 34
5.2 Operation of the Businesses
of the Acquired Companies....................................... 35
5.3 Negative Covenant................................................. 35
5.4 Required Approvals................................................ 35
5.5 Notification...................................................... 36
5.6 Payment of Indebtedness by Related Persons........................ 36
5.7 No Negotiation.................................................... 36
5.8 Best Efforts...................................................... 36
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.............................. 37
6.1 Approvals of Governmental Bodies.................................. 37
6.2 Best Efforts...................................................... 37
7. CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE................................................. 37
7.1 Accuracy of Representations....................................... 37
7.2 Sellers' Performance.............................................. 37
7.3 Consents.......................................................... 38
7.4 Additional Documents.............................................. 38
7.5 No Proceedings.................................................... 38
7.6 No Claim Regarding Stock Ownership or
Sale Proceeds................................................... 38
7.7 No Prohibition.................................................... 39
8. CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE.................................................. 39
8.1 Accuracy of Representations....................................... 39
8.2 Buyer's Performance............................................... 39
8.3 Consents.......................................................... 39
8.4 Additional Documents.............................................. 39
8.5 No Injunction..................................................... 40
9. TERMINATION........................................................... 40
9.1 Termination Events................................................ 40
9.2 Effect of Termination............................................. 40
10. INDEMNIFICATION; REMEDIES............................................ 41
10.1 Survival; Right to Indemnification
Not Affected by Knowledge...................................... 41
10.2 Indemnification and Payment of
Damages by Sellers............................................. 41
10.3 Indemnification and Payment
of Damages by Buyer............................................ 42
10.4 Time Limitations.................................................. 42
10.5 Limitations on Amount--Sellers.................................... 43
10.6 Limitations on Amount--Buyer...................................... 43
10.7 Procedure for Indemnification--
Third Party Claims............................................. 43
10.8 Procedure for Indemnification--
Other Claims................................................... 44
11. GENERAL PROVISIONS................................................... 45
11.1 Expenses.......................................................... 45
11.2 Public Announcements.............................................. 45
11.3 Confidentiality................................................... 45
11.4 Notices........................................................... 45
11.5 Jurisdiction; Service of Process.................................. 46
11.6 Further Assurances................................................ 47
11.7 Waiver............................................................ 47
11.8 Entire Agreement and Modification................................. 47
11.9 Disclosure Letter................................................. 47
11.10 Assignments, Successors, and
No Third-Party Rights......................................... 48
11.11 Severability...................................................... 48
11.12 Section Headings, Construction.................................... 48
11.13 Time of Essence................................................... 48
11.14 Governing Law..................................................... 48
11.15 Counterparts...................................................... 49
SCHEDULES
Schedule A Sellers Information........................................... 51
SCHEDULE A
SELLERS
Name Address # of Shares of Shares of Share Potential
PPW Owned ARDCO Stock to in Contingent
be Issued at Stock
Closing
--------------- -------- -------------- -------------- ---------------
Xxxxxxx Xxxxxx 26,922 64,953 64,953
Xxxx Xxxxxx 34,000 82,030 82,030
Xxxxxxxx Xxxxxx 1,000 2,413 2,413
Xxxxx Xxxxxx 1,000 2,413 2,413
Xxxx Xxxxx 7,600 18,336 18,336
Xxxxxxx Xxxxxxx 8,500 20,508 20,508
Xxxxxxx Xxxxxxx 4,000 9,651 9,651
Xxxxxx Xxxxxxxx 3,500 8,444 8,444
Xxxxxx Xxxxxxxx 3,000 7,238 7,238
Xxxx Xxxxx 833 2,010 2,010
Xxxxx Xxxxx 500 1,206 1,206
Xxxxx Xxxxx 2,166 5,226 5,226
Xxxxxx Xxxxxxx 2,405 5,802 5,802
Xxxxx Xxxxxxxx 1,000 2,413 2,413
Xxxxxx Xxxxxxxx 1,628 3,928 3,928
Xxxx Xxxxx 1,000 2,413 2,413
The following EXHIBITS to the Print Works, Inc. Stock Purchase Agreement are
omitted and will be provided to the Commission upon request.
Exhibit 1 Disclosure Letter
Exhibit 2 Employment Agreement
Exhibit 3 Release Agreement
Exhibit 4 Investment Letter
Exhibit 5 Loan Agreement
Exhibit 6 Security Agreement
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is executed as of May 30, 1998, to
be effective as of April 1, 1998, by and between American Resources and
Development Corporation, a Utah corporation ("Buyer"), and those individuals set
forth on Schedule A attached hereto (each such individual hereinafter referred
to as "Seller" and collectively as "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, not less than eighty
percent (80%) and up to one hundred percent (100%) of the issued and outstanding
shares (the "Shares") of capital stock of Print Works, Inc., a Utah corporation
(the "Company"), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Applicable Contract"--any Contract (a) under which any Acquired Company
has or may acquire any rights, (b) under which any Acquired Company has or
may become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is or may become
bound.
"Asking Price"--The closing Asking Price of Buyer's common stock for any
day shall he the last reported sale price or, in case no such reported sale
takes place on such day, the average of the asked prices for such day, in
each case (1) on the principal national securities exchange on which the
shares of common stock are listed or to which such shares are admitted to
trading or (2) if the common stock is not listed or admitted to trading on
a national securities exchange, in the over-the-counter market as reported
by NASDAQ or any comparable system or (3) if the common stock is not listed
on NASDAQ or a comparable system as furnished by two members of NASDAQ
selected from time to time in good faith by the Board of Directors of Buyer
for that purpose. In the absence of all of the foregoing, or if for any
other reason the current asking price per share cannot be determined
pursuant to the foregoing provisions of this paragraph, the asking market
price per share shall be the fair market value thereof as determined in
good faith by the Board of Directors of the Buyer.
"Average Asking Price"--"Average asking price" of Buyer's common stock
shall be the average of the daily closing asking prices for the six month
period ending on the last full trading day on the exchange or market
specified in the succeeding sentence prior to March31, 1999. The closing
Asking Price of Buyer's common stock for any day shall be the last reported
sale price or, in case no such reported sale takes place on such day, the
average of the asked prices for such day, in each case (1) on the principal
national securities exchange on which the shares of common stock are listed
or to which such shares are admitted to trading or (2) if the common stock
is not listed or admitted to trading on a national securities exchange, in
the over-the-counter market as reported by NASDAQ or any comparable system
or (3) if the common stock is not listed on NASDAQ or a comparable system
as furnished by two members of NASDAQ selected from time to time in good
faith by the Board of Directors of Buyer for that purpose. In the absence
of all of the foregoing, or if for any other reason the current asking
price per share cannot be determined pursuant to the foregoing provisions
of this paragraph, the asking market price per share shall he the fair
market value thereof as determined in good faith by the Board of Directors
of the Buyer.
"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 ensure that such result is
achieved as expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant
to this Agreement will be deemed to have occurred if there is or has been
(a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other
provision, or (b) any claim (by any Person) or other occurrence or
circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision, and the term "Breach"
means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes
place.
"Company"--as defined in the Recitals of this Agreement.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
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(b) the execution, delivery, and performance of the Employment
Agreements, the Noncompetition Agreements, and the Sellers'
Releases;
(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages"--as defined in Section 11.2.
"Disclosure Letter"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"Employment Agreements"--as defined in Section 2.4(a)(iii).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins,
and wetlands), 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 Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety
and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational Safety
and Health Law;
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(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable 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, investigative, or remedial
measures required under 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, 42 U.S.C. ss. 9601 et seq., as
amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other
prohibitions and of the commencements 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, packaged, 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
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(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 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities"--any real property, leaseholds, or other interests currently
or formerly owned or operated by any Acquired Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization 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, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"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 Materials in, on,
under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business, operation, or thing that
5
increases the danger, or risk of danger, or poses an unreasonable risk of
harm to persons or property on or off the Facilities, or that may affect
the value of the Facilities or the Acquired Companies.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof
or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"Intellectual Property Assets" --as defined in Section 3.22.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
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:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other 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, or who
has at any time served, as a director, officer, partner, executor, or
trustee of such Person (or in any similar capacity) has, or at any time
had, Knowledge of such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"Net Income"--Audited annual net income after interest and depreciation,
but before taxes have been deducted.
"Non-Management Sellers"--all Sellers except for Xxxxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxxx Xxxxxx and Xxxxx Xxxxxx.
6
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any 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:
(a) such action is consistent 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) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority) [and is not required to be
specifically authorized by the parent company (if any) of such
Person]; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), 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.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (C)
the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar document
adopted or filed in connection with the creation, formation, or
organization of a Person; and (e) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
7
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or 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;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes
(I) the individual, (ii) the individual's spouse and former spouses, (iii)
any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural
person who resides with such individual, and (b) "Material Interest" means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 10% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least
10% of the outstanding equity securities or equity interests in a Person.
8
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment,
whether intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of
such Person, including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Shares"--as defined in the Recitals of this Agreement.
"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; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, 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.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may
result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
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2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares
from Sellers.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be the issuance of
517,564 shares of common stock of Buyer. The common stock shall be issued to
Sellers in the amounts set forth on Schedule A hereof. A portion of the Purchase
Price shall be paid at the Closing (258,782 shares) and a portion (258,782
shares) shall be contingent and paid pursuant to Section 2.3. On or before July
15, 1999, if the Average Asking Price of Buyer's common stock is not equal to or
greater than $5.00, Sellers shall be issued additional shares of common stock
equal to the number of shares previously issued to them pursuant to this Section
2.2 multiplied by 5 and divided by the Average Asking Price less the shares
previously issued to such Seller pursuant to this Section 2.2.
2.3 CONTINGENT CONSIDERATION
In addition to the shares of stock issued to Sellers at Closing, Sellers shall
have the right for a three year period to receive additional shares of common
stock of Buyer based upon the Net Income of the Company for each of the three
Fiscal Years ended March 31, 2001. Such additional shares shall be issued on or
before July 15 of each applicable year in accordance with the following
provisions:
(a)If the Net Income of the Company for the fiscal year ended March 31,
1999 is $179,400 or greater, Sellers shall he issued a number of
Buyer's common shares equal to 86,261 multiplied by the Net Income of
the Company for such period, divided by $538,200.
(b)If the Net Income of the Company for the two year period ending March
31, 2000 is $448,500 or greater, Sellers shall he issued a number of
Buyer's common shares equal to 172,521 multiplied by the Net Income of
the company for such period, divided by $1,345,500, minus the number of
shares issued pursuant to Section 2.3(a).
(c)If the Net Income of the Company for the three year period ending March
31, 2001 is $806,400 or greater, Sellers shall be issued a number of
Buyer's common shares equal to 258,782 multiplied by the Net Income of
the Company for such period, divided by $2,419,200, minus the number of
shares issued pursuant to Sections 2.3(a) and (b), provided, however,
the total number of Buyer's common shares to be issued to Sellers
pursuant to Section 2.3(a), (1,)and (c) (without considering any
increase as a result of Section 2.3(d)), shall not exceed 258,782
shares.
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(d)The number of Buyer's common shares issued pursuant to Sections 2.3(a),
(b) and (c) shall be increased, but not decreased by multiplying the
number of shares to he issued by $5.00 and dividing by the Average
Asking Price of Buyer's common stock. The total number of shares
issuable to Sellers pursuant to Sections 2.3(a), (b) and (c) shall not
exceed 862,607.
2.4 LENDING COMMITMENTS
Buyer and Sellers acknowledge that Buyer has loaned $445,000 to the Company as
of the date of this Agreement.
These loans shall be evidenced by a Loan Agreement and Promissory Note to be
signed at the Closing. Such Loan Agreement and Promissory Note shall be in the
form of exhibits 5 and 6 attached to this Agreement. Interest on fluids loaned
to the Company shall accrue at eight percent. Interest on the loan shall be paid
quarterly and all interest and principal shall be due and payable on or before
April 30, 2001, all as provided in the Loan Agreement and Promissory Note.
2.5 CLOSING
The exchange of shares (the "Closing") provided for in this Agreement will take
place at the offices of Xxxxx Xxxxxxxxx & Xxxx, 1270 Eagle Gate Tower, 00 Xxxx
Xxxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, at 9:30 a.m. (local time) on June 9,
1998 or at such other time and place as the parties may agree. The parties agree
that the acquisition of the Shares shall be deemed to have occurred and shall be
effective as of April 1, 1998. Subject to the provisions of Section 10, failure
to consummate the purchase and sale provided for in this Agreement on the date
and time and at the place determined pursuant to this Section 2.3 will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.6 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank or by a member firm of the New
York Stock Exchange, for transfer to Buyer;
(ii) releases in the form of Exhibit 3 executed by Sellers
(collectively, "Sellers' Releases");
(iii) an employment agreement in the form of Exhibit 2, executed by
Xxxxxxx Xxxxxx ("Employment Agreement");
(iv) Subscription Agreements in the form of Exhibit 7 executed by
Sellers (collectively, the "Subscription Agreements");
11
(v) investment letters in the form of Exhibit 4, executed by
Sellers (collectively, the "Investment Letters"); and
(vi) a certificate executed by Sellers representing and warranting
to Buyer that each of Sellers' representations and warranties
in this Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date (giving full
effect to any supplements to the Disclosure Letter that were
delivered by Sellers to Buyer prior to the Closing Date in
accordance with Section 6.5); and
(vii) a Loan agreement and Promissory Note in the form of Exhibits 6
and 7, executed by the Company and guaranteed by certain
Sellers (the "Loan Agreement"); and
(b)Buyer will deliver to Sellers:
(i) certificates for common stock in Buyer totalling 258,782
shares of common stock; and
(ii) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate
in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on
the Closing Date;
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate list
for each Acquired Company of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). Each Acquired
Company 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
Applicable Contracts. Each Acquired Company 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 owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
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(b) Sellers have delivered to Buyer copies of the Organizational Documents
of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms. Upon
the execution and delivery by Sellers of the Employment Agreements, the
Sellers' Releases, and the Noncompetition Agreements (collectively, the
"Sellers' Closing Documents"), the Sellers' Closing Documents will
constitute the legal, valid, and binding obligations of Sellers,
enforceable against Sellers in accordance with their respective terms.
Sellers have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement and the
Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, 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) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of
directors or the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement
or any Order to which any Acquired Company or Sellers, or any
of the assets owned or used by any Acquired Company, may be
subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by any
Acquired Company or that otherwise relates to the business of,
or any of the assets owned or used by, any Acquired Company;
(iv) cause Buyer or any Acquired Company to become subject to, or
to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired Company to be
reassessed or revalued by any taxing authority or other
Governmental Body;
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(vi) contravene, conflict with, or result in a violation or breach
of 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 to cancel, terminate, or
modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by any
Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or Acquired
Company is or will be 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.
(c) Sellers are acquiring the common shares for their own account and not
with a view to their distribution within the meaning of Section 2(11)
of the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Acquired Company consist of ________
shares of common stock, ______ par value per share, of which 108,182 shares are
issued and outstanding and constitute the Shares. Sellers are and will be on the
Closing Date the record and beneficial owners and holders of the Shares, free
and clear of all Encumbrances. Sellers own the number of shares set forth
opposite their name on Schedule A. With the exception of the Shares (which are
owned by Sellers), all of the outstanding equity securities and other securities
of each Acquired Company are owned of record and beneficially by one or more of
the Acquired Companies, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited consolidated balance sheets of
the Acquired Companies as at March 31, 1998 (the "Balance Sheet") and the
related unaudited consolidated statements of income. Such financial statements
14
and notes fairly present the financial condition and the results of operations
as at the respective dates of and for the periods referred to in such financial
statements, subject, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); 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. No financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Buyer, are complete
and correct and have been maintained in accordance with sound business practices
including the maintenance of an adequate system of internal controls. The minute
books of the Acquired Companies contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Acquired Companies,
and no meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by any Acquired
Company. Sellers have delivered or made available to Buyer copies of the deeds
and other instruments (as recorded) by which the Acquired Companies acquired
such real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Sellers or the Acquired
Companies and relating to such property or interests. The Acquired Companies own
(with good and marketable title in the case of real property, subject only to
the matters permitted by the following sentence) all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities owned or operated by the Acquired
Companies or reflected as owned in the books and records of the Acquired
Companies, including all of the properties and assets reflected in the Balance
Sheet (except for assets held under capitalized leases disclosed or not required
to be disclosed in Part 3.6 of the Disclosure Letter and personal property sold
since the date of the Balance Sheet, as the case may be, in the Ordinary Course
of Business), and all of the properties and assets purchased or otherwise
acquired by the Acquired Companies since the date of the Balance Sheet (except
for personal property acquired and sold since the date of the Balance Sheet in
the Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
15
and short-term investments) are listed in Part 3.6 of the Disclosure Letter. All
material properties and assets reflected in the Balance Sheet are free and clear
of all Encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (C) liens for current taxes
not yet due, and (d) with respect to real property, (I) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of any Acquired Company, and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. All buildings, plants, and structures owned by the Acquired
Companies lie wholly within the boundaries of the real property owned by the
Acquired Companies and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Acquired Companies are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures, and equipment of the Acquired Companies
are sufficient for the continued conduct of the Acquired Companies' businesses
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or on the accounting records of the Acquired Companies as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
16
greater percentage of the Accounts Receivable as of the Closing Date than the
reserve reflected in the Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet, consists of a quality and quantity usable and salable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or net realizable value on a
first in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed all Tax
Returns that are or were required to be filed by or with respect to any of
them, either separately or as a member of a group of corporations, pursuant
to applicable Legal Requirements. The Acquired Companies have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Sellers or any Acquired Company, except such Taxes, if any, as
are listed in Part 3.11 of the Disclosure Letter 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.
17
(b) Except as described in Part 3.11 of the Disclosure Letter, no
Seller or Acquired Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of
Taxes of any Acquired Company or for which any Acquired Company may be
liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in
accordance with GAAP) and are at least equal to that Acquired Company's
liability for Taxes. There exists no proposed tax assessment against any
Acquired Company except as disclosed in the Balance Sheet or in Part 3.11
of the Disclosure Letter.
(d) All Tax Returns filed by (or that include on a consolidated basis)
any Acquired Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by any Acquired Company
after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the meanings
set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by an Acquired Company or an ERISA Affiliate of an
Acquired Company.
"Company Plan" means all Plans of which an Acquired Company or an ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has
participated. All references to Plans are to Company Plans unless the
context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of any Acquired
Company or any ERISA Affiliate of an Acquired Company.
"ERISA Affiliate" means, with respect to an Acquired Company, any other
person that, together with the Company, would be treated as a single
employer under IRC ss. 414.
18
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations
include consulting agreements under which the compensation paid does not
depend upon the amount of service rendered, sabbatical policies, severance
payment policies, and fringe benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. ss. 1301 et seq., other
than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(1).
(b) Part 3.13 of the Disclosure Letter contains a complete and accurate
list of all Company Plans, Company Other Benefit Obligations, and
Company VEBAs, and identifies as such all Company Plans that are (A)
defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans,
or (D) Multi-Employer Plans.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
19
(i) each Acquired Company is, and at all times since December 31,
1996 has been, in full compliance with each Legal Requirement
that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets;
(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 any Acquired Company of, or a failure on the
part of any Acquired Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the
part of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature;
and
(iii) no Acquired Company has received, at any time since December
31, 1996, any notice or other communication (whether oral or
written) 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 any Acquired Company to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired
Company or that otherwise relates to the business of, or to any of the
assets owned or used by, any Acquired Company. Each Governmental
Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter is valid and in full force and effect. Except as set
forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since December 31,
1996 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or
required to be identified in Part 3.14 of the Disclosure
Letter;
(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 Part 3.14 of
the Disclosure Letter, 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 Part 3.14 of
the Disclosure Letter;
(iii) no Acquired Company has received, at any time since December
31, 1996, any notice or other communication (whether oral or
written) 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,
20
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 Part 3.14 of the Disclosure Letter 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.
The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
(i) that has been commenced by or against any Acquired Company or
that otherwise relates to or may affect the business of, or
any of the assets owned or used by, any Acquired Company; 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 Sellers and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is
subject;
21
(ii) no Seller is subject to any Order that relates to the business
of, or any of the assets owned or used by, any Acquired
Company; and
(iii) to the Knowledge of Sellers and the Acquired Companies, no
officer, director, agent, or employee of any Acquired Company
is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of any Acquired
Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since December 31,
1996 has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
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 any Acquired Company, or any
of the assets owned or used by any Acquired Company, is
subject; and
(iii) no Acquired Company has received, at any time since December
31, 1996, any notice or other communication (whether oral or
written) 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 any Acquired Company, or any
of the assets owned or used by any Acquired Company, is or has
been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the
Balance Sheet, the Acquired Companies have conducted their businesses only in
the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock
of any Acquired Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares
of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
22
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except
in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial
condition, or prospects of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by or to any
Acquired Company of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any
Acquired Company or mortgage, pledge, or imposition of any lien or
other encumbrance on any material asset or property of any Acquired
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any Acquired Company;
or
(j) agreement, whether oral or written, by any Acquired Company to do any
of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate
list, and Sellers have delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $10,000;
23
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more Acquired
Companies of an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or
receipts of one or more Acquired Companies in excess of
$10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Applicable Contract affecting 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 $5,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs,
or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired
Company or any Affiliate of an Acquired Company or limit the
freedom of any Acquired Company or any Affiliate of an
Acquired Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
24
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an
express undertaking by any Acquired Company to be responsible
for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
$10,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended
by any Acquired Company other than in the Ordinary Course of
Business; and
(iv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Acquired Companies under the Contracts, and the
Acquired Companies' office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) no Seller (and no Related Person of either Seller) has or may
acquire any rights under, and no Seller has or may become
subject to any obligation or liability under, any Contract
that relates to the business of, or any of the assets owned or
used by, any Acquired Company; and
(ii) to the Knowledge of Sellers and the Acquired Companies, no
officer, director, agent, employee, consultant, or contractor
of any Acquired Company is bound by any Contract that purports
to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(C) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is, and at all times since December 31,
1996 has been, in full compliance with all applicable terms
and requirements of each Contract under which such Acquired
25
Company has or had any obligation or liability or by which
such Acquired Company or any of the assets owned or used by
such Acquired Company is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which an Acquired Company has or had
any rights is, and at all times since December 31, 1996 has
been, in full 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 violation or breach of, or give any
Acquired Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person, at any time since December 31, 1996, any notice or
other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach
of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed Contracts with any Person
and, to the Knowledge of Sellers and the Acquired Companies, no such
Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Acquired Companies have been entered
into in the Ordinary Course of Business and have 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.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is or has
been covered at any time within the three years preceding the
date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
26
(iii) any statement by the auditor of any Acquired Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Except as set forth on Part 3.18(b) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that
provide coverage to either Seller, any Acquired Company, or
any director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Acquired
Companies for all risks normally insured against by a
Person carrying on the same business or businesses as
the Acquired Companies;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which any Acquired
Company is a party or by which any of them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on
the part of any Acquired Company.
(ii) No Seller or Acquired Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or
any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer
of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under
each policy to which any Acquired Company is a party or that
provides coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer of all
claims that may be insured thereby.
27
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) Each Acquired Company 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. No Seller or Acquired Company has any basis to
expect, nor has any of them or any other Person for whose conduct they
are 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 of
the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company has 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 Sellers, any Acquired Company, or any
other Person for whose conduct they are or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and the Acquired
Companies, 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 of the Facilities or any other properties
and assets (whether real, personal, or mixed) in which Sellers or any
Acquired Company has or had an interest.
(c) No Seller or Acquired Company has 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 of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company had an
interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by Sellers, any Acquired Company, or any
other Person for whose conduct they are or may be held responsible,
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) No Seller or Acquired Company, or any other Person for whose conduct
they are or may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or, to the Knowledge
of Sellers and the Acquired Companies, with respect to any other
properties and assets (whether real, personal, or mixed) in which
Sellers or any Acquired Company (or any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
28
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above
or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either
temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or
incorporated into any structure therein or thereon. No Seller, Acquired
Company, any other Person for whose conduct they are or may be held
responsible, or to the Knowledge of Sellers and the Acquired Companies,
any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Sellers or any Acquired Company 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 Sellers and the
Acquired Companies, Threat of Release, of any Hazardous Materials at or
from the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in
which Sellers or any Acquired Company has or had an interest, or to the
Knowledge of Sellers and the Acquired Companies any geologically or
hydrologically adjoining property, whether by Sellers, any Acquired
Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or any Acquired Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by Sellers, any Acquired Company, or any other
Person for whose conduct they are or may be held responsible, with
Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the
Acquired Companies, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation paid or
payable and any change in compensation since December 31, 1997;
vacation accrued; and service credited for purposes of vesting and
eligibility to participate under any Acquired Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance
pay, insurance, medical, welfare, or vacation plan, other Employee
Pension Benefit Plan or Employee Welfare Benefit Plan, or any other
employee benefit plan or any Director Plan.
29
(b) No employee or director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (I)
the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to
conduct its business, including any Proprietary Rights Agreement with
Sellers or the Acquired Companies by any such employee or director. To
Sellers' Knowledge, no director, officer, or other key employee of any
Acquired Company intends to terminate his employment with such Acquired
Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or
director of the Acquired Companies, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension
benefit, pension option election, retiree medical insurance coverage,
retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since December 31, 1997, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since December 31, 1997, there
has not been, there is not presently pending or existing, and to Sellers'
Knowledge there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
30
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) the name "Pacific Print", all fictional business names,
trading 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 copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets"); owned, used, or licensed by any Acquired
Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties paid
or received by the Acquired Companies, of all Contracts relating to the
Intellectual Property Assets to which any Acquired Company is a party
or by which any Acquired Company is bound, 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 an Acquired Company is the licensee. There are no
outstanding and, to Sellers' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for
the operation of the Acquired Companies' businesses as they
are currently conducted or as reflected in the business plan
given to Buyer. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a
third party all of the Intellectual Property Assets.
31
(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter,
all former and current employees of each Acquired Company have
executed written Contracts with one or more of the Acquired
Companies that assign to one or more of the Acquired Companies
all rights to any inventions, improvements, discoveries, or
information relating to the business of any Acquired Company.
No employee of any Acquired Company has entered into any
Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the
employee to transfer, assign, or disclose information
concerning his work to anyone other than one or more of the
Acquired Companies.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a complete and
accurate list and summary description of all Patents. One or
more of the Acquired Companies is the owner of all right,
title, and interest in and to each of the Patents, free and
clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims.
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Sellers'
Knowledge, there is no potentially interfering patent or
patent application of any third party.
(iv) No Patent is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the products
manufactured and sold, nor any process or know-how used, by
any Acquired Company infringes or is alleged to infringe any
patent or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have been
marked with the proper patent notice.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks. One or
more of the Acquired Companies is the owner of all right,
title, and interest in and to each of the Marks, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
32
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with
all formal legal requirements (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to Sellers' Knowledge, no
such action is Threatened with the respect to any of the
Marks.
(iv) To Sellers' Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the Marks used by
any Acquired Company infringes or is alleged to infringe any
trade name, trademark, or service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a complete and
accurate list and summary description of all Copyrights. One
or more of the Acquired Companies is the owner of all right,
title, and interest in and to each of the Copyrights, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the date
of Closing.
(iii) No Copyright is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. 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 on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked with
the proper copyright notice.
33
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation relating
to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or
memory of any individual.
(ii) Sellers and the Acquired Companies have taken all reasonable
precautions to protect the secrecy, confidentiality, and value
of their Trade Secrets.
(iii) One or more of the Acquired Companies has good title and an
absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public
knowledge or literature, and, to Sellers' Knowledge, have not
been used, divulged, or appropriated either for the benefit of
any Person (other than one or more of the Acquired Companies)
or to the detriment of the Acquired Companies. No Trade Secret
is subject to any adverse claim or has been challenged or
threatened in any way.
3.23 CERTAIN PAYMENTS
Since December 31, 1996, no Acquired Company or director, officer, agent, or
employee of any Acquired Company, or to Sellers' Knowledge any other Person
associated with or acting for or on behalf of any Acquired Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (I) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of any Acquired Company or any Affiliate of an
Acquired Company, or (iv) in violation of any Legal Requirement, (b) established
or maintained any fund or asset that has not been recorded in the books and
records of the Acquired Companies.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
34
(c) There is no fact known to either Seller that has specific application
to either Seller or any Acquired Company (other than general economic
or industry conditions) and that materially adversely affects or, as
far as Sellers can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or results of
operations of the Acquired Companies (on a consolidated basis) that has
not been set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
No Seller or any Related Person of Sellers or of any Acquired Company has, or
since [the first day of the next to last completed fiscal year of the Acquired
Companies] has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. No Seller or any Related Person of Sellers or of any
Acquired Company is, or since the first day of the next to last completed fiscal
year of the Acquired Companies has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(I) had business dealings or a material financial interest in any transaction
with any Acquired Company, or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company except for less than one percent 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 Part 3.25 of the Disclosure
Letter, no Seller or any Related Person of Sellers or of any Acquired Company is
a party to any Contract with, or has any claim or right against, any Acquired
Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF NON-MANAGEMENT SELLERS
Non-Management Sellers, represent and warrant to Buyer as follows:
4.1 AUTHORITY: NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Sellers, enforceable against Sellers in accordance with its
terms. Upon the execution and delivery by Sellers of the
Subscription Agreement, Investment Letter, and the Sellers'
Releases (collectively, the Non-Management Sellers' Closing
Documents"), the Non-Management Sellers' Closing Documents will
constitute the legal, valid, and binding obligations of Sellers,
enforceable against Sellers in accordance with their respective
terms. Sellers have the absolute and unrestricted right, power,
35
authority, and capacity to execute and deliver this Agreement and
the Non-Management Sellers' Closing Documents and to perform their
obligations under this Agreement and the Non-Management Sellers'
Closing Documents.
(b) Sellers are acquiring the common shares for their own account and
not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.2 OWNERSHIP OF SHARES
Each Seller is and will be on the Closing Date the record and beneficial owner
and holder of the Shares to be exchanged by him, free and clear of all
Encumbrances. Each Seller owns the number of shares set opposite his name on
Schedule A. No legend or other reference to any purported Encumbrance appears
upon Seller's certificate representing the Shares.
4.3 DISCLOSURE
(a) To the knowledge of Seller, no representation or warranty of
Sellers in this Agreement omits to state a material fact necessary
to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) To the knowledge of Seller, no notice given pursuant to Section 6.5
will contain any untrue statement or omit to state a material fact
necessary to make the statements therein or in this Agreement, in
light of the circumstances in which they were made, not misleading.
(c) To the knowledge of Seller, there is no fact known to any Seller
that has specific application to any Seller or any Acquired Company
(other than general economic or industry conditions) and that
materially adversely affects or, as far as Seller can reasonably
foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Acquired
Companies (on a consolidated basis) that has not been set forth in
this Agreement or the Disclosure Letter.
4.4 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this agreement.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
36
5.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Utah.
5.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Purchase Price, and the
Employment Agreements, (collectively, the "Buyer's Closing Documents"),
the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and
the Buyer's Closing Documents and to perform its obligations under this
Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer 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 Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject;
or
(iv) any Contract to which Buyer is a party or by which Buyer may
be bound. Except as set forth in Schedule 4.2, Buyer is not
and will not 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.
5.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
5.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
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5.5 SEC FILINGS
Buyer has furnished Sellers with copies of Form 10-K and Forms 10-Q for all
period since March 31, 1997. All such documents do not contain any untrue
statements nor do they omit to state any statement necessary to make the
statements made not misleading. All such documents comply with all applicable
rules and regulations of the United States Securities and Exchange Commission.
5.6 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
6. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
6.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to each Acquired Company's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
6.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company,
and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such Acquired Company;
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(c) confer with Buyer concerning operational matters of a material nature;
and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company.
6.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Sellers will not, and will cause each
Acquired Company not to, without the prior written consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
6.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Sellers will, and will cause each Acquired
Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.2 (including taking all actions requested by
Buyer to cause early termination of any applicable waiting period under the HSR
Act).
6.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Acquired Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Sellers' representations and warranties as of the date of this Agreement, or if
such Seller or any Acquired Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Sellers in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
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6.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
6.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of any Acquired Company, or any of the capital stock of any
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving any Acquired Company.
6.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use their
Best Efforts to cause the conditions in Sections 8 and 9 to be satisfied.
7. COVENANTS OF BUYER PRIOR TO CLOSING DATE
7.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Related Person to, cooperate with Sellers with respect to all filings
that Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Letter; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
7.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 8 and 9 to be satisfied.
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8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares 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):
8.1 ACCURACY OF REPRESENTATIONS
(a) All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on
the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
(b) Each of Sellers' representations and warranties in Sections 3.3, 3.4,
3.12, 3.24, 4.1, and 4.2 must have been accurate in all respects as of
the date of this Agreement, and must be accurate in all respects as of
the Closing Date as if made on the Closing Date, without giving effect
to any supplement to the Disclosure Letter.
8.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers 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), must have been duly performed
and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in
Sections 6.4 and 6.8 must have been performed and complied with in all
respects.
8.3 CONSENTS
Each of the Consents identified in subpart b of Part 3.2 of the Disclosure
Letter, and each Consent identified in Schedule 5.2, must have been obtained and
must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) such documents as Buyer may reasonably request for the purpose of (i)
evidencing the accuracy of any of Sellers' representations and warranties,
(ii) evidencing the performance by any Seller of, or the compliance by any
Seller with, any covenant or obligation required to be performed or
complied with by such Seller, (iii) evidencing the satisfaction of any
condition referred to in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
41
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (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, or otherwise interfering with
any of the Contemplated Transactions.
8.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Purchase Price payable for the Shares.
8.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
9. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers 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 Sellers, in whole or in part):
9.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
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9.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer 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), must have been performed and complied with
in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4.
9.3 CONSENTS
Each of the Consents identified in Subpart b of Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
9.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) such documents as Sellers may reasonably request for the purpose of (I)
evidencing the accuracy of any representation or warranty of Buyer,
(ii) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied
with by Buyer, (iii) evidencing the satisfaction of any condition
referred to in this Section 8, or (iv) otherwise facilitating the
consummation of any of the Contemplated Transactions.
9.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
9.6 TAX FREE EXCHANGE
The exchange of Shares pursuant to this Agreement is subject to Sellers
owning not less than eighty percent (80)%) of the Shares of the Company
exchanging their Shares pursuant to this Agreement.
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10. TERMINATION
10.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach
has not been waived;
(b) (i) by Buyer if any of the conditions in Section 8 has not been
satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by
Sellers, if any of the conditions in Section 9 has not been satisfied
of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers to comply
with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before
June 30, 1998, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 10.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 10.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
12.1 and 12.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
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11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(v), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in this
Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure
Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Sellers in this
Agreement as if such representation or warranty were made on and as of
the Closing Date without giving effect to any supplement to the
Disclosure Letter, other than any such Breach that is disclosed in a
supplement to the Disclosure Letter and is expressly identified in the
certificate delivered pursuant to Section 2.4(a)(v) as having caused
the condition specified in Section 8.1 not to be satisfied;
(c) any Breach by either Seller of any covenant or obligation of such
Seller in this Agreement;
45
(d) any product shipped or manufactured by, or any services provided by,
any Acquired Company prior to the Closing Date;
(e) any matter disclosed in part 3.15 or 3.19 of the Disclosure Letter; or
(f) 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 any such Person with either Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any
of the Contemplated Transactions.
The remedies provided in this Section 11.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (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 any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
11.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or before March 31,
1999 Buyer notifies Sellers of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before December 31, 1997 Sellers notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Sellers.
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11.5 LIMITATIONS ON AMOUNT--SELLERS
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in clause (a), clause (b) or, to the extent relating to
any failure to perform or comply prior to the Closing Date, clause (c) of
Section 10.2 until the total of all Damages with respect to such matters exceeds
$50,000, and then only for the amount by which such Damages exceed $50,000.
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in clause (d) of Section 10.2 until the total of all
Damages with respect to such matters exceeds $50,000, and then only for the
amount by which such Damages exceed $50,000. However, this Section 11.6 will not
apply to any Breach of any of Sellers' representations and warranties of which
either Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by either Seller
of any covenant or obligation, and Sellers will be jointly and severally liable
for all Damages with respect to such Breaches.
11.6 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 11.4 until the total of
all Damages with respect to such matters exceeds $50,000, and then only for the
amount by which such Damages exceed $50,000. However, this Section 11.7 will not
apply to any Breach of any of Buyer's representations and warranties of which
Buyer had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.
11.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 11.2 or
11.4, of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying
party of the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of
such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 11.8(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless
the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (I) the indemnifying party is
also a party to such Proceeding and the indemnified party determines in
good faith that joint representation would be inappropriate, or (ii)
the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel satisfactory to the
47
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this
Section 11 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (I) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of
such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend, compromise,
or settle such Proceeding, but the indemnifying party will not be bound
by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an 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 Sellers with respect
to such a claim anywhere in the world.
11.8 PROCEDURE FOR INDEMNIFICATION--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.
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12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement 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 Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Sellers and Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
12.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Sellers will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any written, oral, or other information obtained in confidence from another
party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request.
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12.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Sellers: c/o Xx. Xxxxxxx Xxxxxx
Attention: 0000 X.X. 000xx
Xxxxxxx, Xxxxxx 00000
Facsimile #: (000) 000-0000
Buyer: American Resources And Development Corporation
Attention: Xxxx Xxxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile #: (000) 000-0000
12.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Utah, County of Salt Lake, or, if it has or can
acquire jurisdiction, in the United States District Court for the Central
District of Utah, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
12.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to 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
documents referred to in this Agreement.
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12.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or 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 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 such 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.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Letter of Intent between Buyer and Sellers
dated December 26, 1997) and constitutes (along with the documents referred to
in 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 except by a written agreement executed by the party to be
charged with the amendment.
12.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the
Section of the Agreement to which they expressly relate and not to any
other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with
respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which consent will not be unreasonably
withheld, except that Buyer may assign any of its rights under this Agreement to
any Subsidiary of Buyer. 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
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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. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.11 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.
12.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
12.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Utah without regard
to conflicts of laws principles.
12.15 COUNTERPARTS
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.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
Buyer: American Resources and Development Corporation
By: /s/ Xxxx Xxxxxx
------------------------
(Xxxx Xxxxxx, President)
Sellers:
/s/ Xxxxxxx Xxxxxx
----------------
Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxx /s/ Xxxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx --------------- ------------------
------------------ Xxxx Xxxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxx
------------------
Xxxxxxx Xxxxxxx
/s/Xxxxxx Xxxxxxxx /s/Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxx ---------------- ------------------
------------------ Xxxxxx Xxxxxxxx Xxxxxx Xxxxxxx
Xxxx Xxxxx
/s/Xxxxx Xxxxx /s/Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxxx ---------------- ------------------
------------------ Xxxxx Xxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxxx
/s/Xxxxx Xxxxxxxx /s/Xxxxxx Xxxxxxxx
---------------- ------------------
Xxxxx Xxxxxxxx Xxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxx
------------------
Xxxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
/s/ Xxxxxxxxx Xxxx ----------------
------------------ Xxxxxxx Xxxxx
Xxxxxxxxx Xxxx
/s/Xxxx XxXxxxxx /s/Xxxxxx Xxxx
/s/ Xxx Xxx ----------------- -----------------
----------------- Xxxx XxXxxxxx Xxxxxx Xxxx
Xxx Xxx
53
