SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee required]
For the Fiscal Year Ended December 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No fee required]
For the transition period from N/A to N/A
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Commission File Number
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ISG RESOURCES, INC.
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(Exact name of Registrant as specified in its charter)
Utah 87-0327982
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
136 East South Temple, Suite 1300, Salt Lake City, Utah 84111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 236-9700
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of
the Act:
10% Senior Subordinated Notes Due 2008
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ _ _ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 29, 2000 was approximately $0.
The number of shares of Common Stock outstanding on March 29, 2000 was
100 shares.
Documents Incorporated by Reference: See Item 14(a) List of Exhibits
PART I
Item 1. Business
General Development of Business
ISG Resources, Inc., a Utah corporation (the "Company"), is a wholly owned
subsidiary of Industrial Services Group, Inc. ("ISG"). ISG was formed in
September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October
14, 1997. In 1998, JTM acquired the stock of Pozzolanic Resources, Inc.
("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales
Company, d.b.a. U. S. Ash Company, together with two affiliated companies, U.S.
Stabilization, Inc. and Flo Fil Company, Inc., (collectively, "U.S. Ash"), and
Fly Ash Products, Inc. ("Fly Ash Products"). Effective January 1, 1999, JTM,
Pozzolanic, PPA, U.S. Ash, Fly Ash Products and their wholly owned subsidiaries
merged with and into the Company (the "Merger"). Pneumatic Trucking, Inc., a
wholly owned subsidiary of Michigan Ash Sales Company, was not merged into the
Company. Consequently, Pneumatic became a wholly owned subsidiary of the
Company.
On January 7, 1999, the Company acquired all of the outstanding stock of Best
Masonry and Tool Supply ("Best") for approximately $13,300,000 in cash and paid
off outstanding debt of Best totaling approximately $2,400,000.
On May 27, 1999, the Company acquired all of the outstanding stock of Mineral
Specialties, Inc. ("Specialties") for approximately $1,314,000 in cash.
On June 2, 1999, the Company acquired all of the outstanding stock of Irvine Fly
Ash, Inc. ("Irvine") for approximately $6,321,000 in cash.
On October 26, 1999, the Company acquired all of the outstanding stock of Lewis
W. Osborne, Inc. ("Osborne") and United Terrazzo Supply Co., Inc. ("Terrazzo")
for approximately $1,219,000 in cash.
On November 29, 1999, the Company sold all of the outstanding stock of Pneumatic
Trucking, Inc., a wholly owned subsidiary of the Company, for approximately
$750,000 in cash.
On December 1, 1999, the Company acquired all of the outstanding stock of Magna
Wall, Inc. ("Magna Wall") for approximately $1,542,000 in cash.
Description of Business
The Company operates two principal business segments: coal combustion product
(CCP) management and building materials manufacturing and distribution. See
Footnote 8 in the consolidated financial statements and notes thereto included
elsewhere herein for segment reporting information.
The CCP division purchases, removes and sells fly ash and other by-products of
coal combustion to producers and consumers of building materials and
construction related products throughout the United States. Based upon available
information, the Company believes it is now the largest manager and marketer of
CCPs in North America. The Company enters into long-term CCP management
contracts, primarily with coal-fired electric generating utilities. These
utilities are required to manage, or contract to manage, CCPs in accordance with
state and federal environmental regulations. In addition, the Company provides
similar materials management services for other industrial clients.
The building materials division manufactures and distributes building materials
to residential and commercial contractors, primarily in Texas, California,
Georgia and Florida. While the 1998 acquisition strategy focused on geographical
diversification of the CCP division, the 1999 acquisition strategy focused on
vertical integration into selected building products manufacturers (especially
in key geographical areas) that utilize significant amounts of CCPs as raw
materials in their products. This strategy has secured an outlet for a portion
of previously unutilized CCPs while promoting the increased use of CCPs as
components of building products in the future. Unlike most of its competitors,
the Company has dedicated significant resources to the acquisition and
development of new technologies for the use of CCPs in building products
applications.
Principal Products and their Markets by Division
- - -------------------------------------------------
CCP Division
The Company uses CCPs and other industrial materials to make products that
primarily replace manufactured or mined materials, such as portland cement,
lime, agricultural gypsum, fired lightweight aggregate, granite aggregate or
limestone. The Company's focus on CCPs and related industrial materials
development has also created a variety of applications, such as fillers in
asphalt shingles and related products, that extend beyond the traditional uses
of CCPs and related industrial materials. For purposes of this report, the
Company's CCP-related products are broken down into traditional products and
value-added products. Traditional products are those products that the Company
and its competitors within the industry historically produce with the CCPs.
Value-added products are newer products that have been developed to utilize CCPs
and related materials, which in the past were deemed waste products and usually
were sent to landfills.
The primary CCPs managed by the Company are fly ash and bottom ash. Fly ash is
the fine residue and bottom ash is the fraction composed of the heavier
particles that result from the combustion of coal. Utilities firing boilers with
coal first pulverize the coal and then blow the pulverized coal into a burning
chamber where it immediately ignites to heat the boiler tubes. The heavier
bottom ash falls to the bottom of the burning chamber while the lighter fly ash
remains suspended in the exhaust gases. Before leaving the exhaust stack, the
fly ash particles are generally removed by an electrostatic precipitator, bag
house or other method. The bottom ash is hydraulically conveyed to a collection
area, while the fly ash is pneumatically conveyed to a storage silo.
Fly ash is a pozzolan that, in the presence of water, will combine with an
activator (lime, portland cement or kiln dust) to produce a cement-like
material. It is this characteristic that allows fly ash to act as a
cost-competitive substitute for other more expensive cementitious building
materials. Concrete manufacturers can typically use fly ash as a substitute for
15% to 40% of their cement requirements, depending on the quality of the fly ash
and the proposed end-use application for the concrete. In addition to its
cost-benefit, fly ash provides greater structural strength and durability in
certain construction applications, such as road construction. Bottom ash is
utilized as an aggregate in concrete block construction and for road base
construction.
According to the American Coal Ash Association (the "ACAA"), of the
approximately 107 million tons of CCPs that were generated in the United States
during 1998, fly ash accounted for approximately 58%, bottom ash accounted for
approximately 16% and flue gas desulphurization waste ("scrubber sludge") and
boiler slag accounted for approximately 26%.
Traditional Products and Applications Traditional CCP products are industrial
materials that generally require minimal processing or additives to fulfill
their intended applications. The Company typically provides these products to
its customers directly from its clients' sites. The Company has been successful
in selling significant portions of the CCPs and other industrial materials it
manages to traditional markets (e.g., the use of fly ash as pozzolan in portland
cement concrete and the use of bottom ash as a lightweight aggregate).
The following is a brief description of the CCP division's traditional products:
Fly ash is used as (i) a pozzolan to partially replace portland cement in
ready-mix concrete and concrete products (e.g., concrete pipe); (ii) an additive
to portland cement to produce I-P cement and blended cements; (iii) an additive
in downhole cementing of oil wells; and (iv) a primary constituent in flowable
grout used to fill voids under concrete slabs and underground tank voids.
Bottom ash is used as (i) raw feed stock for the manufacture of portland cement
clinker; (ii) a lightweight aggregate for concrete and concrete block; (iii) a
filler in the manufacture of clay brick; and (iv) an aggregate in asphaltic
concrete. It can also be mixed with salt as an additive for ice and snow control
or used as backfill for pipe bedding and dry bed material.
Fluidized bed ash is used (i) for stabilization in mud drying; (ii) as a reagent
to solidify liquid wastes in petrochemical and related areas; and (iii) for soil
stabilization to create more solid foundations for vertical construction.
Scrubber sludge is used as cement stabilized road base material and can be
processed to be used in wallboard manufacture.
Boiler slag is used for a variety of applications, including roofing shingles
and cement.
Cement and lime kiln dust and related industrial minerals are used as
cementitious binders for chemical fixation/solidification of hazardous and
non-hazardous wastes, soil stabilization and chemical processes.
Value-added Products and Applications To diversify its product offerings and
ensure that it productively uses the CCPs, the Company also develops and markets
value-added products made from CCPs and related industrial materials, and it
continues to expand the breadth of markets for these products. Through its
research and development program and certain licenses, the Company has broadened
the end use market for CCPs and related industrial materials by introducing
several proprietary products made from previously non-marketable materials. The
Company sells and distributes its products to cement plants, ready-mix concrete
plants, road contractors, carpet manufacturers, roofing shingle producers, soil
stabilization firms, utility companies and waste management firms. Several of
its proprietary products have been utilized by government agencies such as the
Department of Transportation, the Federal Aviation Administration, the Army
Corps of Engineers and the U.S. Bureau of Mines.
The following is a list of the Company's value added products and applications:
Powerlite(R) is a pyrite free bottom ash which, when processed by the Company,
produces a high quality aggregate for the concrete block industry. Powerlite(R)
has exhibited superior flow characteristics, often making it more economical to
use than other aggregates. The Company has provided customers in the Atlanta,
Georgia area with more than two million tons of Powerlite(R) in the past 15
years.
SAM(TM) (Stabilized Aggregate Material) is manufactured by the Company by
combining several industrial materials received from clients and transforming
them into a well-graded replacement for natural aggregate. SAM(TM) can be used
in many other applications, such as road base, sub-base, parking areas, drainage
media and rip-rap.
Pozzalime(TM)/Envira-Cement(R) are the Company's lime-based pozzolanic materials
that contain significant moisture-reduction properties. Pozzalime(TM) and
Envira-Cement(R) have been successfully utilized in road-base construction,
road-sub-base construction, chemical fixation, soil stabilization, moisture
reduction, mud drying, pH adjustments, acid neutralization, sewage treatment and
mine reclamation.
Gypcem(R) is the Company's processed gypsum, registered and exclusively sold by
the Company, that has characteristics allowing it to be used in the manufacture
of portland cement. With considerable handling capabilities, the product is
often more economical to use than conventional mined gypsum. Under a long-term
contract with Dupont, the Company designed, constructed and currently operates
an on-site processing facility for the 100,000 tons of Gypcem(R) produced each
year.
Peanut Maker(R) is a gypsum landplaster developed by the Company for use in the
agricultural market as a soil enhancer. The Company has transformed this
previously unmarketable material into Peanut Maker(R), a beneficial-use,
value-added product. Peanut Maker(R) has been used on over 60,000 acres of
peanut crops annually for the past 10 years. It continues to be in demand
because of its high calcium content. The disassociation rate afforded by Peanut
Maker(R) makes it more effective and economical than traditional calcium
supplements. It has been a recommended source of calcium by the Virginia and
North Carolina Extension Services since its invention.
ALSIL(R)/Orbaloid(R) are industrial fillers developed by the Company from
processed client-generated materials for use in filler applications such as
roofing shingles, carpet and mat backing, and ceramic products. The Company has
two U.S. patents and one Canadian patent for the use of ALSIL(R) in roofing
shingles. The Company has secured multiple contracts with various shingle
manufacturers, with one agreement extending for the life of the customer's
manufacturing plant.
Flexbase(TM) is a mixture of fly ash and scrubber sludge which the Company
processes to form a road-base material.
Stabil-Fill(TM) is a lime-stabilized fly ash that the Company has developed and
sold for use as a fill material in lieu of natural borrow materials. The
resulting mixture is lightweight and compacts with standard construction
equipment. Applications include commercial or industrial property development,
roadway embankment and subgrade for parking lots, airport runways, golf courses
or driving ranges, and athletic fields.
Redi-Fill(TM)/Flo Fil(R) are the Company's processed fly ash and bottom ash,
sold for use as a structural fill and ready-mixed flowable fill.
In addition to these value added products, the Company uses its traditional
products for non-traditional applications. Non-traditional applications of fly
ash include: (i) use as mineral filler to replace fine aggregate in bituminous
coatings for roads (asphalt surface); (ii) use as a primary constituent in
flowable fill to backfill around in-ground pipes and structures; (iii) for
stabilization of soils with high plasticity or low load bearing abilities; (iv)
to produce a filler grade material for a variety of products; and (v) as a
binder with calcium sulfate to replace limestone road base materials.
Building Materials Division
The building materials division operates principally in Texas, California,
Georgia and Florida. Its products include standard masonry and construction
materials and supplies, as well as packaged products, many of which incorporate
technologies acquired or developed by the Company. Selected packaged products
sold today based on the Company's owned and leased technologies include:
MagnaWall One Coat Stucco
Best One Coat Stucco
Best Masonry Cement Type N
Best Scratch and Brown Stucco Cement
Best White Masonry Cement Type N
Best Masonry Cement Type S
Best Mortar Cement Type N
Best Finish Stucco
Hill Country Mortar Type N
Important Developments since Fiscal Year End
On March 2, 2000, the Company acquired directly and indirectly through ISG
Manufactured Products, Inc., a newly formed wholly owned subsidiary of the
Company, 100% of the partnership interests in Don's Building Supply L.L.P.
("Don's") for a purchase price of $6,000,000 in cash. The Company expects the
purchase price to increase or decrease within sixty days of the closing date
based on 1999 EBITDA, as defined, and working capital as of February 29, 2000.
Don's is engaged in the retail and wholesale distribution of construction
materials to residential and commercial contractors primarily in the State of
Texas.
New Product Development
New product development costs consist of scientific research and development and
market development expenditures. The Company spent $1,796,032 for the year ended
December 31, 1999 on research and development activities covering basic
scientific research and application of scientific advances to the development of
new and improved products and processes. The Company spent $370,186 for the year
ended December 31, 1999 on market development activities related to new and
improved products and processes identified during research and development
activities. The Company expenses all new product development costs when they are
incurred. The Company incurred insignificant new product development costs in
the years ended December 31, 1998 and 1997.
In an effort to maximize the percentage of products marketed to end users and
minimize the amount of materials landfilled, the Company's focused research and
development efforts have created or caused the Company to acquire the rights to
various new technologies. Three of the most promising of these new technologies
are as follows:
Dynastone(R) is a revolutionary new technology to manufacture acid and sulfate
resistant concrete pipe. This technology presents an opportunity to concrete
pipe manufacturers to reclaim sales lost to plastic pipe and to reduce pipe
production costs.
ABC Cement(R) is a technology to produce rapid setting, high strength pozzolan
type concretes using fly ash. The product transforms into a rapid set,
high-strength concrete.
ISG Cellular Concrete is a fiber reinforced, non-autoclaved cellular concrete
which utilizes large quantities of CCPs and requires low energy and capital cost
to produce. This technology produces an aerated concrete panel or block with
excellent flexural strength, insulation and flame resistance. It is ideal for
use in mass-produced housing applications.
Competitive Business Conditions
Coal is the largest indigenous fossil fuel resource in the United States, with
current U.S. annual coal production in excess of one billion tons. Approximately
80% of the coal produced is for electric power generation, and its use has grown
by almost 25% over the last decade. The combustion of coal provides
cost-effective electricity generation, but results in a high percentage of
residual material, which serves as the "raw material" for the CCP industry. The
industry manages these CCPs and related materials by developing end-use markets
for certain CCPs and providing storage and disposal services for the remainder
of such materials.
In order to sustain its position as a leader in the CCP management industry, the
Company relies on and continues to implement the following competitive
strengths:
Leading Market Position. The Company believes it is a party to more CCP
management contracts and manages more CCP tonnage than any of its competitors.
The Company has aggressively penetrated its service areas and has won contracts
based on its "one-stop" approach to CCP and other industrial materials
management services. This approach combines the Company's marketing, materials
handling and technological capabilities to lower the client's cost of managing
CCPs and other industrial materials in accordance with applicable state and
federal regulations.
Geographic Diversification. The Company believes it is the only company in the
CCP management industry with a national scope. This national scope provides the
Company with several significant competitive benefits, including mitigation of
the effects of cyclical regional economies and weather patterns. In addition,
the Company's national scope and storage capabilities will create incremental
revenue through the ability to shift products among regions to meet market
demand while minimizing transportation costs.
Value-Added Products and Services. The Company's new product development efforts
have broadened the end-use market for CCPs and other recyclable industrial
materials. The Company has successfully introduced new patented or trademarked
products made from previously non-marketable materials through proprietary
processes. These product development efforts have reduced the materials
management cost to the Company's clients and improved the Company's revenue mix
and margins.
Strong Client Relationships. At December 31, 1999, the Company had contractual
relationships with eleven of the fifteen largest coal powered electrical
utilities in the United States, based on total electricity revenues. The Company
has maintained long-term contracts with certain utilities since 1978, and
experienced a renewal or extension rate of greater than 90% since current
management completed the acquisition of JTM in 1997. The Company's clients rely
on its marketing, materials handling and technological capabilities to extend
the useful life of their landfill sites by creatively managing and marketing a
broader range of CCPs than competitors.
Source and Availability of Raw Materials
The Company's primary raw materials are CCPs. As long as the majority of
electricity generated in this country comes from the use of coal-fired
generation, the Company believes it will have an adequate supply of raw
materials.
Dependence on Limited Customers
The Company works with a large number of customers and has long-term contracts
with most such customers. The Company's core business is based on long-term
materials management contracts with power producers and industrial clients. As
of December 31, 1999, the Company had 97 materials management contracts, 25 of
which generated more than $1.0 million of annual revenues each. Typical contract
terms are from five to fifteen years. The Company is focused on serving its
current client base and plans to aggressively target additional contract
opportunities to increase both tonnage under management and revenues.
Intellectual Property
The Company owns and has obtained licenses to various domestic and foreign
patents and trademarks related to its products and processes. While these
patents and trademarks in the aggregate are important to the Company's
competitive position, no single patent or trademark is material to the Company.
The Company's license agreements generally have a duration that coincides with
the patents covered thereby.
Government Approval
None.
Effect of Existing or Probable Government Regulation
None.
Cost of Compliance with Environmental Laws
None.
Employees
The Company has a total of 633 employees, of which 601 are full-time employees.
Item 2. Properties
The Company operates its corporate headquarters in Salt Lake City, Utah in
offices leased under a three-year lease expiring in July 2001. The total amount
of leased space in the corporate headquarters is 12,202 square feet. Due to the
Company's national scope of operations, it has a number of other properties used
in its operations. The following table sets forth certain information regarding
the Company's other principal facilities as of December 31, 1999:
Lease
Location Function Ownership Termination Date
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Bay City, MI Offices Leased August 31, 2000
Kennesaw, GA Offices Leased January 31, 2004
Delle, UT Storage Silos Leased November 1, 2001
Fargo, ND Fly Ash Storage Leased Month to Month
Good Spring, PA Silo Facility Leased Month to Month
Taylorsville, GA Lab Facility Owned
Doraville, GA Terminal Facility Leased August 11, 2005
Leland, NC Transfer Facility Owned
Franklin, VA Structural Fill Owned
Clinton, TN Structural Fill Owned
Centralia, WA Storage Facility Owned
Ogden, UT Storage Facility Owned
Oregon City, OR Offices Leased Month to Month
Fresno, CA Terminal Facility Leased March 31, 2002
Allentown, PA Offices Leased February 28, 2001
Pomona, CA Rail Terminal Owned
Tukwilla, WA Offices Leased June 30, 2004
Houston, TX Offices Leased August 30, 2004
Sacramento, CA Terminal Facility Leased February 22, 2003
Stafford, TX Offices Leased April 30, 2003
Management believes its facilities are in good condition and that the facilities
are adequate for its operating needs for the foreseeable future without
significant modifications or capital investment.
Item 3. Legal Proceedings
The Company is a defendant in various lawsuits which are incidental to the
Company's business. Management, after consultation with its legal counsel,
believes that any potential liability as a result of these matters will not have
a material effect upon the Company's results of operations or financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is not publicly traded and is wholly owned by ISG.
Item 6. Selected Financial Data
The following table sets forth summary consolidated financial information of the
Company for each of the five years in the period ended December 31, 1999. Such
information was derived from the audited consolidated financial statements and
notes thereto and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and notes thereto included elsewhere herein.
The selected consolidated financial information for the periods prior to October
14, 1997 set forth below is not comparable to subsequent periods due to the
step-up in basis resulting from the acquisition of JTM by ISG in 1997.
Additionally, the 1999 and 1998 information set forth below may not be
comparable due to accounting for the 1998 and 1999 acquisitions using the
purchase method of accounting and, therefore, only including information for
each acquisition from the respective acquisition date.
<TABLE>
<CAPTION>
2 1/2 Months 9 1/2 Months
Year Ended Year Ended Ended Ended Years Ended
December 31, December 31, December 31, October 13, December 31,
1999 1998 1997 1997 1996 1995
------ ------- ------ ------ ------ -------
Statement of Income Data:
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 156,205 $ 117,293 $ 12,643 $ 51,295 $ 62,841 $ 64,986
Cost of products and services sold,
excl. depr. 108,664 80,116 9,365 40,701 52,268 51,489
Depreciation and amortization 13,091 9,141 908 5,279 2,285 2,265
Selling, general and administrative
expenses 18,962 14,145 1,256 3,633 5,667 9,692
New Product Development Costs 2,166 - - - - -
Income from Operations 13,321 13,891 1,114 1,682 2,621 1,540
Interest Expense 13,392 9,338 628 4,160 4,853 4,081
Net income (loss) before income taxes 285 4,808 517 (2,478) (2,232) (2,541)
Net income (loss) (362) 2,259 265 (3,090) (1,870) (2,096)
Balance Sheet Data:
Working capital (deficiency) 8,972 6,786 (21,648) (43,594) (45,804) (42,268)
Total assets 220,463 191,732 73,270 58,396 62,950 61,779
Total debt 133,500 110,000 - - - -
Shareholder's equity 27,162 27,524 25,265 3,623 6,713 8,033
Other Data:
Cash flows from operating activities 10,204 8,210 1,843 521 603 (1,115)
Cash flows from investing activities (33,369) (86,623) (19) (681) (3,869) (4,586)
Cash flows from financing activities 23,165 75,344 1,189 957 2,844 (4,113)
EBITDA (1) 26,768 23,287 2,054 6,961 4,906 3,805
EBITDA margin 17.1% 19.9% 16.2% 13.6% 7.8% 5.9%
Capital expenditures 8,791 8,574 19 681 4,357 4,589
Ratio of earnings to fixed charges (2) 1.02x 1.42x 1.49x 0.56x 0.68x 0.58x
Deficit of earnings to fixed charges - - - (2,478) (2,232) (2,541)
</TABLE>
(1) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA should not be considered as an
alternative to net income or any other GAAP measure of performance as an
indicator of the Company's performance or to cash flows provided by
operating, investing or financing activities as an indicator of cash flows
or a measure of liquidity. Management believes that EBITDA is a useful
adjunct to net income and other measurements under GAAP in evaluating the
Company's ability to service its debt and is a conventionally used
financial indicator. However, due to possible inconsistencies in the method
of calculating EBITDA, the EBITDA measures presented may not be comparable
to other similarly titled measures of other companies.
(2) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and that
portion of rental expense which is representative of the interest factor in
these rentals.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto of ISG Resources, Inc. and
its predecessor, JTM Industries, Inc. and other financial information appearing
elsewhere herein.
General
The Company is a manager and marketer of CCPs in North America. The Company also
manufactures and distributes building materials to residential and commercial
contractors. The Company generates revenues from marketing and distributing
products to its customers and providing materials management, engineering and
construction services to its clients. The Company was founded in 1997 upon the
acquisition of JTM by ISG (the "JTM Acquisition"). In 1998, the Company acquired
Pozzolanic, PPA, the US Ash Group and Fly Ash Products (the "1998
Acquisitions"). In 1999, the Company acquired Specialties and Irvine in the CCP
division and Best, Osborne, Terrazzo and Magna Wall in the building materials
division (the "1999 Acquisitions").
The Company's strategic objectives include the maintenance and expansion of
long-term contractual relationships with electric utilities, the increase in
product sales and applications through cross-marketing and vertical integration,
and further technological advances.
Seasonality
The Company's business is subject to seasonal fluctuation. The Company's need
for working capital accelerates moderately during the middle of the year, and
accordingly, total debt levels tend to peak in the second and third quarters,
and decline in the fourth quarter of the year. The amount of revenue generated
during the middle of the year generally depends upon a number of factors,
including the level of road and other construction using concrete, weather
conditions affecting the level of construction, general economic conditions, and
other factors beyond the Company's control.
Results of Operations
Year Ended December 31, 1999 compared to Year Ended December 31, 1998
Product Revenues. Product revenues increased to $120.3 million in 1999 from
$83.0 million in 1998, an increase of $37.3 million or 44.9%. This increase is
primarily due to three factors: (1) a full year of revenue in 1999 for the 1998
Acquisitions as compared to 1998, which only included revenue from the
respective dates of acquisition forward; (2) the revenue added by the 1999
Acquisitions; and (3) internal growth in the CCP division, primarily as a result
of price increases and value growth.
Service Revenues. Service revenues increased to $35.9 million in 1999 from $34.2
million in 1998, an increase of $1.7 million or 5.0%. This increase is primarily
due to an increase in construction related services and other disposal services.
Cost of Products Sold, Excluding Depreciation. Cost of products sold, excluding
depreciation, was $83.4 million in 1999 as compared to $51.9 million in 1998,
resulting in cost of products sold, excluding depreciation, as a percentage of
product revenues of 69.3% and 62.5% for the respective periods. The decrease in
product margins is primarily due to lower margins on product revenues derived
from the 1999 Acquisitions.
Cost of Services Sold, Excluding Depreciation. Cost of services sold, excluding
depreciation was $25.2 million in 1999 as compared to $28.2 million in 1998,
resulting in cost of services sold, excluding depreciation, as a percentage of
service revenues of 70.2% and 82.5% for the respective periods. The increase in
service margins is primarily due to three factors: (1) a change in product mix
toward higher margin construction services; (2) a decrease in sub-contracted
construction costs due to the same services being performed by personnel
employed by the Company in 1999; and (3) a decrease in disposal rail costs due
to improvements in rail car scheduling and efficiency.
Depreciation and Amortization. Depreciation and amortization was $13.1 million
in 1999 as compared to $9.1 million in 1998, an increase of $4.0 million or
44.0%. This increase is due primarily to three factors: an increase in
amortization expense of goodwill related to the 1999 Acquisitions, a full year's
amortization expense for 1998 Acquisitions, and an increase in depreciation
expense related to new acquisitions of property, plant and equipment during
1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (SG&A) increased $4.9 million or 34.8% to $19.0 million
in 1999 as compared to $14.1 million in 1998. This increase is primarily due to
four factors: (1) a full year of SG&A in 1999 for the 1998 Acquisitions as
compared to 1998, which only included SG&A from the respective dates of
acquisition forward; (2) the SG&A added by the 1999 Acquisitions; (3) severance
charges associated with the Acquisitions; and (4) an increase in sales and
marketing efforts.
New Product Development. New product development costs consist of scientific
research and development and market development expenditures. The Company spent
$1.8 million for the year ended December 31, 1999 on research and development
activities covering basic scientific research and application of scientific
advances to the development of new and improved products and processes. The
Company spent $0.4 million for the year ended December 31, 1999 on market
development activities related to promising new and improved products and
processes identified during research and development activities. The Company
incurred insignificant new product development costs in the year ended December
31, 1998.
Interest Expense. Interest expense was $13.4 million and $9.3 million in 1999
and 1998, respectively, an increase of $4.1 million or 44.1%. The increase is
due primarily to an increase in the Company's outstanding indebtedness resulting
from the 1999 Acquisitions.
Income Tax Expense. Income tax expense was $0.6 million and $2.5 million in 1999
and 1998, respectively, resulting in effective tax rates of 227.1% and 53.0%.
The increase in the effective tax rate in 1999 is primarily due to a decrease in
pre-tax income and the increase in non-deductible amortization of goodwill
recorded for the 1999 Acquisitions.
Net Income (loss). As a result of the factors discussed above, the net loss for
1999 was $0.4 million as compared to 1998 net income of $2.3 million.
<PAGE>
Fiscal Year 1998 Compared to 2 1/2 Months Ended December 31, 1997 and 9 1/2
Months Ended October 13, 1997
For purposes of discussing the results of operations, fiscal year 1998 is
compared to the period from the JTM Acquisition date to December 31, 1997 and
the period from January 1, 1997 to the JTM Acquisition date, which reflects the
results of the predecessor company.
Revenues. Revenues were $117.3 million, $12.6 million and $51.3 million in
fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months
ended October 13, 1997, respectively, resulting in average monthly revenues of
$9.8 million, $5.0 million and $5.4 million for the respective periods. The
increase in the average monthly revenues in 1998 is due primarily to the 1998
Acquisitions.
Cost of Products Sold, Excluding Depreciation. Cost of products sold, excluding
depreciation, was $51.9 million, $4.9 million and $20.7 million in fiscal year
1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended
October 13, 1997, respectively, resulting in cost of products sold, excluding
depreciation, as a percentage of product revenues of 62.5%, 68.9% and 80.8% for
the respective periods. The improvement in margins is due to two factors: (1)
change in product mix from lower margin product sold to the former parent in the
pre-acquisition period as opposed to higher margin product sold to third parties
in the post-acquisition period, and (2) price increases.
Cost of Services Sold, Excluding Depreciation. Cost of services sold, excluding
depreciation was $28.2 million, $4.5 million and $20.0 million in fiscal year
1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended
October 13, 1997, respectively, resulting in a relatively constant cost of
services sold, excluding depreciation, as a percentage of service revenues of
82.4%, 80.6% and 77.9% for the respective periods.
Depreciation and Amortization. Depreciation and amortization was $9.1 million,
$0.9 million and $5.3 million in fiscal year 1998, the 2 1/2 months ended
December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively,
resulting in average monthly depreciation and amortization of $0.8 million, $0.4
million and $0.6 million, for the respective periods. The 9 1/2 months ended
October 13, 1997 includes a $3.3 million goodwill write-off by the Company's
former parent in connection with the JTM Acquisition. Excluding this write-off,
average monthly depreciation and amortization for this period would have been
$0.2 million. The increase in average monthly depreciation and amortization for
the 2 1/2 months ended December 31, 1997 over the 9 1/2 months ended October 13,
1997, before the goodwill write-off discussed above, is due primarily to the
amortization of goodwill, contracts, patents and assembled workforce, which were
recorded at fair value upon the JTM Acquisition, as well as the accelerated
amortization rate of goodwill by the Company after its acquisition by ISG. The
increase in average monthly depreciation and amortization for fiscal year 1998
over the 2 1/2 months ended December 31, 1997 is due primarily to the
amortization of goodwill, contracts and assembled workforce, which were recorded
at fair value upon the 1998 Acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") were $14.1 million, $1.3 million and $3.6
million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9
1/2 months ended October 13, 1997, respectively. For the 9 1/2 months ended
October 13, 1997, management fees were allocated to the Company by Laidlaw based
upon the Company's share of Laidlaw's consolidated revenue. The allocated
charges may not be indicative of the expenses the Company would have incurred if
Laidlaw had not provided the services. The increase in SG&A in fiscal year 1998
is due primarily to three factors: (1) costs associated with the reorganization
of the Company (i.e., consulting, travel, employee relocation) after the 1998
Acquisitions; (2) increased sales and marketing efforts; and (3) an increase in
management incentive compensation.
Interest Expense. Interest expense was $9.3 million, $0.6 million and $4.2
million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9
1/2 months ended October 13, 1997, respectively, resulting in average monthly
interest expense of $0.8 million, $0.2 million and $0.4 million for the
respective periods. The decrease in the average monthly interest expense in the
2 1/2 months ended December 31, 1997 as compared to the 9 1/2 months ended
October 13, 1997 is due primarily to a decrease in the Company's outstanding
indebtedness resulting from the elimination of the intercompany indebtedness to
Laidlaw upon the JTM Acquisition. The increase in the average monthly interest
expense in fiscal year 1998 is due primarily to the issuance of Senior
Subordinated Notes in April 1998.
Income Tax Expense. Income tax expense was $2.5 million , $0.3 million and $0.6
million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9
1/2 months ended October 13, 1997, respectively, resulting in effective tax
rates of 53.0%, 48.8% and (24.7%). The negative effective tax rate in the 9 1/2
months ended October 13, 1997 is due primarily to the large goodwill write-off
discussed above which was not deductible for tax purposes. The increase in the
effective tax rate from the 2 1/2 months ended December 31, 1997 to fiscal year
1998 is due primarily to the increase in non-deductible amortization of goodwill
recorded upon the 1998 Acquisitions.
Net Income (Loss). As a result of the factors discussed above, net income
increased to $2.3 million and $0.3 million in fiscal year 1998 and the 2 1/2
months ended December 31, 1997, respectively, as compared to a net loss of $3.0
million in the 9 1/2 months ended October 13, 1997.
Liquidity and Capital Resources
The Company financed the JTM Acquisition, the 1998 Acquisitions and the 1999
Acquisitions through the proceeds from the issuance of $100.0 million of 10%
Senior Subordinated Notes due 2008 and borrowings on its Secured Credit
Facility. Operating and capital expenditures have been financed primarily
through cash flows from operations and borrowings under the Secured Credit
Facility.
At December 31, 1999, the Company had no cash or cash equivalents and $16.5
million available under the Secured Credit Facility. In addition, the Company
had working capital of approximately $9.0 million, an increase of $2.2 million
from December 31, 1998 due to an increase in Trade Accounts Receivable and
Inventories offset in part by an increase in Accounts Payable. Most of the
changes in Accounts Receivable, Inventory and Accounts Payable are reflective of
the acquisitions mentioned elsewhere herein.
The Company intends to make capital expenditures over the next several years
principally to construct storage, loading and processing facilities for CCPs and
to replace existing capital equipment. During 1999, capital expenditures
amounted to approximately $8.8 million. Capital expenditures made in the
ordinary course of business will be funded by cash flow from operations and
borrowings under the Secured Credit Facility.
The Company anticipates that its principal use of cash will be for working
capital requirements, debt service requirements and capital expenditures. Based
upon current and anticipated levels of operations, the Company believes that its
cash flow from operations, together with amounts available under the Secured
Credit Facility, will be adequate to meet its anticipated requirements for
working capital, capital expenditures and interest payments for the next several
years. There can be no assurance, however, that cash flow from operations will
be sufficient to service the Company's debt and the Company may be required to
refinance all or a portion of its existing debt or obtain additional financing.
These increased borrowings may result in higher interest payments. There can be
no assurance that any such refinancing would be possible or that any additional
financing could be obtained. The inability to obtain additional financing could
have a material adverse effect on the Company.
The Year 2000 Issue
In general, the Year 2000 issue relates to computers and other systems being
unable to distinguish between the years 1900 and 2000 because they use two
digits, rather than four, to define the applicable year. Systems that fail to
properly recognize such information were expected to generate erroneous data or
cause a system to fail possibly resulting in a disruption of operations. The
Company's products do not incorporate such date coding so the Company's efforts
to address the Year 2000 issue fell into the following three areas: (i) the
Company's information technology ("IT") systems; (ii) the Company's non-IT
systems (i.e., machinery, equipment and devices which utilize technology which
is "built in" such as embedded microcontrollers); and (iii) third-party
customers.
The Company worked to successfully resolve the potential impact of the Year 2000
issue on the processing of date-sensitive data by the Company's computerized
information systems. Specifically, the Company installed new accounting and
financial software and during 1999 that performed as expected with no known
glitches. The Company also acquired and installed Year 2000 compliant software
upgrades in all scales used in its operations. The Company is analyzing all
other IT and non-IT systems to determine if any other modifications or upgrades
are necessary. The amount charged to expense during the year ended December 31,
1999, as well as the amounts anticipated to be charged to expense related to the
Year 2000 computer modifications, have not been and are not expected to be
material to the Company's financial position, results of operations or cash
flows.
The Company also evaluated and took steps to resolve Year 2000 compliance issues
that may have been created by customers, suppliers and financial institutions
with whom the Company does business. Because many of the Company's suppliers are
heavily regulated utilities with mandated year 2000 compliance, the Company did
not expect these suppliers to experience problems.
The foregoing statements are based upon management's current assumptions.
However, there can be no guarantee that these assumptions have addressed all
relevant uncertainties.
New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The effective
date of SAB 101 is the second fiscal quarter ending after December 15, 1999.
This SAB clarifies proper methods of revenue recognition given certain
circumstances surrounding sales transactions. The Company continues to evaluate
the impact of SAB 101, but believes it is in compliance with the provisions of
the SAB and accordingly, does not expect SAB 101 to have a material effect on
its financial statements.
Forward-Looking Information
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and other items of this Form 10-K may
contain forward-looking statements. Such forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements may relate but not be limited to projections
of revenues, income or loss, capital expenditures, plans for growth and future
operations, financing needs, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. When used in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations", and
elsewhere in this Form 10-K the words "estimates", "expects", "anticipates",
"forecasts", "plans", "intends" and variations of such words and similar
expressions are intended to identify forward-looking statements that involve
risks and uncertainties. Future events and actual results could differ
materially from those set forth in, contemplated by or underlying the
forward-looking statements.
Item 7a. Qualitative and Quantitative Disclosures about Market Risk
In 1997, the SEC issued new rules (Item 305 of Regulation S-K) which requires
disclosure of material risks as defined by Item 305, related to market risk
sensitive financial instruments. As defined, the Company currently has market
risk sensitive instruments related to interest rates. As disclosed in Note 4 of
the audited consolidated financial statements, the Company has outstanding
long-term debt of $133,500,000 at December 31, 1999. The Company currently has
an average maturity of eight years for long-term debt, $100,000,000 of which is
at a fixed rate of 10% and $33,500,000 of which is at a rate averaging 8.1% for
the year ended December 31, 1999 as compared to 8.5% for the year ended December
31, 1998.
The Company does not have significant exposure to changing interest rates on
long-term debt because interest rates for the majority of the debt is fixed. The
Company has not undertaken any additional actions to cover interest rate market
risk and is not a party to any other interest rate market risk management
activities.
A hypothetical 10% change in market interest rates over the next year would not
impact the Company's earnings or cash flows as the interest rate on the majority
of the long-term debt is fixed. A 10% change in market interest rates would not
have a material effect on the fair value of the Company's publicly traded
long-term debt.
The Company does not purchase or hold any derivative financial instruments for
trading purposes.
Item 8. Financial Statements and Supplementary Data
The audited financial statements for the year ending December 31, 1999 are
attached hereto at pages F-1 through F-31.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company's directors and executive officers, and their respective ages and
positions with the Company, are set forth below in tabular form. Biographical
information on each person is set forth following the tabular information. There
are no family relationships between any of the Company's directors or executive
officers. The Company's board of directors is currently comprised of two
members, each of whom is elected for a term of one year. Executive officers are
chosen by and serve at the discretion of the board of directors.
Name Age Position with Company
- - ---- --- -----------------------
R Steve Creamer...... 48 Chairman of the Board and Chief Executive Officer
Raul A. Deju......... 54 President and Chief Operating Officer
J.I. Everest, II..... 43 Chief Financial Officer, Treasurer, and
Assistant Secretary
Clinton W. Pike...... 47 Executive Vice President
Brett A. Hickman..... 38 Senior Vice President, General Counsel and Secretary
Joseph M. Silvestri.. 38 Director
R Steve Creamer. Mr. Creamer is the Chairman of the Board and Chief Executive
Officer of the Company and ISG. Immediately prior to his employment with the
Company, Mr. Creamer was CEO (from 1992 to 1997) and the founder of ECDC
Environmental L.C., the largest rail-served industrial waste management facility
in North America. Prior to that, Mr. Creamer served as CEO of Creamer & Noble,
an engineering firm based in St. George, Utah. He earned a B.S. degree in Civil
and Environmental Engineering from Utah State University in 1973. Mr. Creamer is
a Professional Engineer.
Raul A. Deju. Dr. Deju is the President and Chief Operating Officer of the
Company and ISG. Dr. Deju served as a Director of Rockwell Hanford Operations
through 1981, Senior Vice President of International Technologies, Inc. through
1987 and Regional President of several subsidiaries of WMX Technologies, Inc.
through 1995. Dr. Deju served as Chairman and CEO of DGL International through
1997, and Board Chairman of Isadra, Inc. Dr. Deju has been on the Board of
Directors of various national and international WMX subsidiaries, Advanced
Sciences, Inc. and Isadra, Inc. Dr. Deju is a member of ISG's Boards of
Directors. Dr. Deju is an advisor to a committee of the U.S. Secretary of
Commerce and has served on the U.S. Environmental Protection Agency Advisory
Committee. Dr. Deju received a B.S. degree in Mathematics and Physics in 1966
and a Ph.D. degree in Engineering Geology in 1969 from the New Mexico Institute
of Mining and Technology.
J.I. Everest, II. Mr. Everest is the Chief Financial Officer, Treasurer and
Assistant Secretary of the Company and ISG. He is responsible for all financial
functions of the Company. Immediately prior to his employment with the Company,
he served as Vice President of Finance for ECDC Environmental, Inc. (from 1993
to 1997). From 1988 to 1993, Mr. Everest was Director of Financial
Analysis/Treasury of USPCI, Inc. Mr. Everest earned an M.B.A. degree (Finance
Concentration) in 1994 from the University of Texas at Austin and a B.B.A.
degree from Southern Methodist University in 1979. Mr. Everest is a C.P.A.
Clinton W. Pike. Mr. Pike is the Executive Vice President of Manufactured
Products. Since he began his service in 1990, Mr. Pike has served as Vice
President of Business Development for the Company, establishing the Business and
Product Development Program, and spearheading nontraditional business
advancement and growth through acquisitions and the development of new markets.
Prior to his service with the Company, he was Coordinator, Fuel and Ash Quality
with Georgia Power Company, where he directed a total CCP management program.
Mr. Pike earned a B.S. degree in Biology (Chemistry minor) from Georgia
Southwestern College in 1974.
Brett A. Hickman. Mr. Hickman is the Senior Vice President, General Counsel and
Secretary of the Company. From December 1993 until February 1998, Mr. Hickman
was General Counsel, Western Division of Laidlaw Environmental Services, Inc.
Prior to that, Mr. Hickman was an attorney with Davis & Lavender in Columbia,
South Carolina. Mr. Hickman earned a B.A. degree in Political Science from The
Citadel in 1983 and a J.D. degree from the University of South Carolina in 1986.
Joseph M. Silvestri. Mr. Silvestri has been a director of the Company since its
acquisition by ISG. Mr. Silvestri has been employed by Citibank Venture Capital
Ltd. (CVC) since 1990 and has served as a Vice President there since 1995. Mr.
Silvestri is a director of ISG, International Media Group, Polyfibron
Technologies, Frozen Specialties, Glenoit Mills, Euramax and Triumph Group.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder, require the Company's executive officers and
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the National Association of Securities Dealers Automated Quotations System
and to furnish the Company with copies thereof. None of the Company's executive
officers and directors and ten-percent owners of ISG own any shares in the
Company. Accordingly, no such reports have been, or need to be, filed.
<PAGE>
Item 11. Executive Compensation
The following table shows the compensation paid by the Company to its current
Chairman and Chief Executive Officer, and the Company's other most highly paid
executive officers.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Other Annual
Name and Principal Position(1) Fiscal Year Salary (2) Bonus Compensation (3)
------------------------------- ----------- --------- ------- -----------------
<S> <C> <C> <C> <C>
R Steve Creamer (4) 1999 $260,000 $34,667 $5,000
Chairman, Chief Executive Officer 1998 193,747 130,000 5,150
1997 24,231 0 0
Raul A. Deju (4) 1999 250,016 33,333 5,000
President and Chief Operating Officer 1998 182,869 121,338 5,150
1997 23,710 0 0
J.I. Everest, II (4) 1999 204,561 26,667 5,000
Chief Financial Officer, Treasurer and 1998 145,934 108,337 8,092
Assistant Secretary 1997 28,647 0 0
Clinton W. Pike 1999 166,862 65,000 5,000
Executive Vice President 1998 160,461 191,700 106,886
1997 149,255 119,492 4,374
Brett Hickman 1999 150,010 20,000 5,000
Senior Vice President, General Counsel and 1998 75,003 104,000 4,500
Secretary
</TABLE>
(1) Positions indicated were as of December 31, 1999.
(2) Includes amounts, if any, deferred by the named individual for the
period in question pursuant to Section 401(k) of the Internal Revenue
Code under the Company's 401(k) Savings Plan (the "401(k) Plan").
(3) Amounts shown under Other Annual Compensation include amounts paid by
the Company as matching and/or profit sharing contributions to the
401(k) Plan, but do not include perquisites and other personal benefits
provided to each of the named executives, the aggregate value of which
did not exceed the lesser of $50,000 or 10% of any such named
executive's annual salary and bonus.
(4) Mr. Creamer, Mr. Deju and Mr. Everest have been employed with the
Company since October 14, 1997, and the 1997 salary reflects the two
and a half months they worked for the Company in 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Company is wholly owned by ISG. The following table sets forth the number of
shares of ISG's common stock beneficially owned as of March 29, 2000, (i) by
each person who is known by the Company to own beneficially more than 5% of the
Company's common stock, (ii) by each director and director nominee, (iii) by
each of the Company's named executive officers, and (iv) by all directors,
director nominees and executive officers, as a group, as reported by each such
person.
<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership of
Common Stock Preferred Stock
------------ ---------------
Name and Address of Beneficial Owner Number of Number of
------------------------------------ Shares Percent Shares Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Citicorp Venture Capital, Ltd. (1)........................... 187,425 37.9 26,813 38.3
R Steve Creamer (2)(3)....................................... 150,266 30.4 25,351 36.2
J.I. Everest, II (3)......................................... 49,467 10.0 6,925 9.9
CCT Partners IV, LP (4)...................................... 33,075 6.7 4,732 6.8
Raul A. Deju ................................................ 45,317 9.2 2,023 2.9
Joseph M. Silvestri.......................................... 980 0.2 140 0.2
Brett A. Hickman............................................. 4,950 1.0 700 1.0
Clinton W. Pike (5).......................................... -
All directors and executive officers as a group
(6 persons) (2)(3)(5)........................................ 250,980 50.8 35,139 50.2
</TABLE>
(1) The address of Citicorp Venture Capital, Ltd. is: 399 Park Avenue, 14th
Floor, New York, NY 10043.
(2) Includes 112,700 shares owned by Mr. Creamer's adult son and three minor
children.
(3) Messrs. Creamer and Everest beneficially own shares in ISG through RACT,
Inc., a Utah corporation ("RACT"), which directly owns shares in ISG. The
business address of RACT is: 136 East South Temple, Suite 1300, Salt Lake
City, Utah 84111.
(4) The address of CCT Partners IV, LP is the same as that of Citicorp Venture
Capital, Ltd.
(5) Mr. Pike, pursuant to his employment contract, has been granted an economic
interest in one percent of all outstanding shares of the Company's stock as
of the date of his employment agreement.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
See Index to Financial Statements on page F-1.
2. Financial Statement Schedules
All financial statement schedules have been omitted because
either they are not required or the information required to be
set forth therein is included in the consolidated financial
statements or notes thereto.
3. Exhibits
<PAGE>
F-1
INDEX TO FINANCIAL STATEMENTS
ISG Resources, Inc. and Subsidiaries
Audited Consolidated Financial Statements as of December 31, 1999 and 1998 and
for the Years Ended December 31, 1999 and 1998 and the Period From October
14, 1997 to December 31, 1997:
Report of Independent Auditors............................. F-2
Consolidated Balance Sheets................................ F-3
Consolidated Statements of Operations...................... F-5
Consolidated Statements of Shareholder's Equity............ F-6
Consolidated Statements of Cash Flows...................... F-7
Notes to Consolidated Financial Statements................. F-8
JTM Industries, Inc. and Subsidiary (Predecessor to ISG Resources, Inc.)
Audited Consolidated Financial Statements for the Period From January 1, 1997 to
October 13, 1997:
Report of Independent Accountants.......................... F-22
Consolidated Statement of Loss and Accumulated Deficit..... F-23
Consolidated Statement of Cash Flows....................... F-24
Notes to Consolidated Financial Statements................. F-25
<PAGE>
F-2
Report of Independent Auditors
The Board of Directors
ISG Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of ISG Resources,
Inc. and Subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of operations, shareholder's equity and cash flows for
the years ended December 31, 1999 and 1998 and the period from October 14, 1997
to December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ISG Resources,
Inc. and Subsidiaries at December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997 in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Salt Lake City, Utah
March 3, 2000
<PAGE>
F-3
ISG Resources, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31
1999 1998
Assets
Current assets:
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $329,000 in 1999 and
$170,000 in 1998 $ 21,167,616 $ 14,975,729
Retainage receivable 176,000 660,609
Other 502,058 296,966
Deferred tax asset 316,161 251,355
Inventories 4,055,425 387,258
Other current assets 829,661 645,969
Total current assets 27,046,921 17,217,886
Property, plant and equipment:
Land and improvements 4,371,197 1,736,384
Buildings and improvements 6,839,777 3,610,621
Vehicles and other operating equipment 27,189,160 20,090,872
Furniture, fixtures and office equipment 1,161,456 494,753
39,561,590 25,932,630
Accumulated depreciation (7,893,374) (3,562,086)
31,668,216 22,370,544
Construction in progress 1,915,972 5,768,564
33,584,188 28,139,108
Other assets:
Intangible assets, net 153,952,547 140,835,640
Debt issuance costs, net 4,826,010 5,192,893
Other assets 1,052,845 346,209
Total assets $ 220,462,511 $191,731,736
----------------------------------------------================================
<PAGE>
F-4
December 31
1999 1998
-------------------------------------
Liabilities and shareholder's equity
Current liabilities:
Accounts payable $ 10,409,583 $ 4,066,487
Accrued expenses:
Payroll 1,288,732 1,801,657
Interest 2,190,471 2,106,054
Other 1,828,537 1,534,971
Income taxes payable 1,705,678 422,963
Other current liabilities 652,119 500,000
----------------- -------------
Total current liabilities 18,075,120 10,432,132
Long-term debt 133,500,000 110,000,000
Deferred tax liabilities 39,158,249 41,286,434
Payable to Industrial Services Group 643,983 -
Other liabilities 1,923,355 2,488,954
Commitments and contingencies
Shareholder's equity:
Common stock, no par in 1999 and
par value of $1 per share in 1998;
100 shares authorized, issued and
outstanding 25,000,050 100
Additional paid-in capital - 24,999,950
Retained earnings 2,161,754 2,524,166
-------------------------------------
Total shareholder's equity 27,161,804 27,524,216
-------------------------------------
Total liabilities and shareholder's equity $ 220,462,511 $191,731,736
=====================================
See accompanying notes.
<PAGE>
F-5
ISG Resources, Inc. and Subsidiaries
Consolidated Statements of Operations
Period from
October 14 to
Year ended December 31 December 31
1999 1998 1997
---------------------------------------------
Revenues:
Product revenues $ 20,319,575 $ 83,048,721 $ 7,059,063
Service revenues 35,885,697 34,243,854 5,583,981
---------------------------------------------
156,205,272 117,292,575 12,643,044
Costs and expenses:
Cost of products sold,
excluding depreciation 83,442,725 51,878,447 4,864,226
Cost of services sold,
excluding depreciation 25,221,695 28,237,385 4,500,892
Depreciation and amortization 13,091,131 9,140,938 908,619
Selling, general and
administrative expenses 18,962,157 14,144,765 1,255,680
New product development 2,166,218 - -
---------------------------------------------
142,883,926 103,401,535 11,529,417
---------------------------------------------
13,321,346 13,891,040 1,113,627
Interest income 44,100 183,113 31,286
Interest expense (13,391,944) (9,338,059) (627,704)
Miscellaneous income, net 311,675 72,386 -
---------------------------------------------
Income before income tax expense 285,177 4,808,480 517,209
Income tax expense 647,589 2,549,026 252,497
---------------------------------------------
Net income (loss) $ (362,412) $ 2,259,454 $ 264,712
=============================================
See accompanying notes.
<PAGE>
F-6
ISG Resources, Inc. and Subsidiaries
Consolidated Statements of Shareholder's Equity
Additional Total
Common Paid-In Retained Shareholder's
Stock Capital Earnings Equity
--------------------------------------------------
Balance at October 14, 1997 $100 $23,811,429 $ - 23,811,529
Cash contribution - 1,188,521 - 1,188,521
Net income - - 264,712 264,712
--------------------------------------------------
Balance at December 31, 1997 100 24,999,950 264,712 25,264,762
Net income - - 2,259,454 2,259,454
--------------------------------------------------
Balance at December 31, 1998 100 24,999,950 2,524,166 27,524,216
Change to no par value 24,999,950 (24,999,950) - -
Net loss - - (362,412) (362,412)
--------------------------------------------------
Balance at December 31, 1999 $25,000,050 $ - $ 2,161,754 $27,161,804
==================================================
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
F-7
ISG Resources, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Period from
October 14 to
Year ended December 31 December 31
1999 1998 1997
----------------------------------
Operating activities
<S> <C> <C> <C>
Net income (loss) $ (362,412)$ 2,259,454 $264,712
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 13,091,131 9,140,938 908,619
Amortization of debt issuance costs 702,032 463,585 -
Deferred income taxes (2,229,539) (1,697,407) (276,245)
Loss on sale of assets 24,168 46,513 -
Gain on sale of subsidiary (333,749) - -
Changes in operating assets and
liabilities:
Receivables (2,755,382) (1,479,648) 691,534
Inventories (1,733,832) 231,658 -
Other current and non-current assets (879,189) (91,603) (22,569)
Accounts payable 4,485,877 (606,834)(1,035,993)
Income taxes payable 1,257,583 (245,447) 528,742
Accrued expenses (929,504) 759,326 755,913
Other current and non-current
liabilities (132,821) (570,491) 28,387
----------------------------------
Net cash provided by operating activities 10,204,363 8,210,044 1,843,100
Investing activities
Purchase of businesses, net of cash acquired (24,866,989)(77,753,012) -
Proceeds from sale of subsidiary 750,000 - -
Additions to intangible assets (877,349) (691,847) -
Purchases of property, plant and equipment (8,790,870) (8,574,086) (19,491)
Proceeds from sales of property, plant
and equipment 415,994 396,399 -
-----------------------------------
Net cash used in investing activities (33,369,214)(86,622,546) (19,491)
Financing activities
Proceeds from long-term debt 127,000,000 154,000,000 -
Payments on long-term debt (103,500,000)(73,000,000) -
Debt issuance costs (335,149) (5,656,478) -
Cash contributions - - 1,188,521
----------------------------------
Net cash provided by financing activities 23,164,851 75,343,522 1,188,521
----------------------------------
Net (decrease) increase in cash and
cash equivalents - (3,068,980)3,012,130
Cash and cash equivalents at
beginning of period - 3,068,980 56,850
-----------------------------------
Cash and cash equivalents at
end of period $ - $ - $3,068,980
===================================
Cash paid for interest $ 12,605,495 $ 7,396,124 $ -
===================================
Cash paid for income taxes $ 902,123 $ 3,989,414 $ -
===================================
See accompanying notes.
</TABLE>
<PAGE>
F-8
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999
1. Basis of Presentation
ISG Resources, Inc., a Utah corporation (the "Company"), is a wholly owned
subsidiary of Industrial Services Group, Inc. ("ISG"). ISG was formed in
September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October
14, 1997. In 1998, JTM acquired the stock of Pozzolanic Resources, Inc.
("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales
Company, d.b.a. U. S. Ash Company, together with two affiliated companies, U.S.
Stabilization, Inc. and Flo Fil Company, Inc., (collectively, "U.S. Ash"), and
Fly Ash Products, Inc. ("Fly Ash Products") (collectively, the "1998
Acquisitions"). Effective January 1, 1999, JTM, Pozzolanic, PPA, U.S. Ash, Fly
Ash Products and their wholly owned subsidiaries merged with and into the
Company (the "Merger"). Pneumatic Trucking, Inc., a wholly owned subsidiary of
Michigan Ash Sales Company, was not merged into the Company. Consequently,
Pneumatic became a wholly owned subsidiary of the Company.
On January 7, 1999, the Company acquired all of the outstanding stock of Best
Masonry and Tool Supply ("Best") for approximately $13,300,000 in cash and paid
off outstanding debt of Best totaling approximately $2,400,000.
On May 27, 1999, the Company acquired all of the outstanding stock of Mineral
Specialties, Inc. ("Specialties") for approximately $1,314,000 in cash.
On June 2, 1999, the Company acquired all of the outstanding stock of Irvine Fly
Ash, Inc. ("Irvine") for approximately $6,321,000 in cash.
On October 26, 1999, the Company acquired all of the outstanding stock of Lewis
W. Osborne, Inc. ("Osborne") and United Terrazzo Supply Co., Inc. ("Terrazzo")
for approximately $1,219,000 in cash.
On December 1, 1999, the Company acquired all of the outstanding stock of Magna
Wall, Inc. ("Magna Wall") for approximately $1,542,000 in cash.
Each of the above acquisitions was accounted for under the purchase method of
accounting and, accordingly the results of operations of each acquisition have
been included in the consolidated financial statements since the respective date
of acquisition.
The purchase prices of the above acquisitions were allocated based on estimated
fair values of assets and liabilities at the respective dates of acquisition.
Goodwill resulting from the difference between the purchase prices plus
acquisition costs and the net assets of the companies acquired in 1999 totaled
approximately $20,073,000. All recorded goodwill is being amortized on a
straight-line basis over 20 to 25 years.
<PAGE>
F-9
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Basis of Presentation (continued)
The following pro forma combined financial information reflects operations as if
all of the above acquisitions and the related financing transactions had
occurred as of January 1, 1998. The pro forma combined financial information is
presented for illustrative purposes only, does not purport to be indicative of
the Company's results of operations as of the date hereof and is not necessarily
indicative of what the Company's actual results of operations would have been
had the acquisitions and the financing transactions been consummated on such
date.
Year Ended December 31
1999 1998
------------------- -------------------
Revenues $ 164,840,000 $ 155,313,000
Net loss $ (409,878) $ (1,652,000)
On November 29, 1999, the Company sold all of the outstanding stock of Pneumatic
Trucking, Inc., a wholly owned subsidiary of the Company, for approximately
$750,000 in cash. The Company recognized a gain of approximately $334,000 on
this sale which is included in miscellaneous income in the consolidated
statement of operations.
2. Description of Business and Summary of Significant Accounting Policies
Description of Business
The Company operates two principal lines of business: coal combustion product
(CCP) management and building materials manufacturing and distribution. The CCP
division purchases, removes and sells fly ash and other by-products of coal
combustion to producers and consumers of building materials and construction
related products throughout the United States. The building materials division
manufactures and distributes masonry construction materials to residential and
commercial contractors in Texas, California, Georgia and Florida.
Principles of Consolidation
These financial statements reflect the consolidated financial position and
results of operations of ISG Resources, Inc. and its wholly owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to the prior years'
amounts to conform to the current year presentation.
Revenue Recognition
Revenue from the sale of products is recognized primarily upon passage of title
to the customer, which generally coincides with physical delivery and
acceptance. CCP product revenues generally include transportation charges
associated with delivering the material.
<PAGE>
F-10
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Description of Business and Summary of Significant Accounting Policies
(continued)
Revenue Recognition (continued)
Service revenues include revenues earned under long-term contracts to dispose of
residual materials created by coal-fired power generation and revenues earned in
conjunction with certain construction-related projects, which are incidental to
the primary business. Typical long-term disposal contracts are from five to
fifteen years. Service revenues under the long-term contracts are recognized
concurrent with the removal of the material and are typically based on the
number of tons of material removed at an established price per ton. The
construction-related projects are generally billed on a time and materials
basis; therefore, the revenues and costs are recognized when the time is
incurred and the materials are used.
Cost of CCP products sold are primarily amounts paid to the utility companies to
purchase product and transportation costs of delivering the product to the
customer. Cost of services sold includes landfill fees and transportation
charges to deliver the product to the landfill. Overhead charges incurred by a
facility which generates both product and service revenues are allocated to cost
of products sold and cost of services sold based on the percentage of revenue.
Concentrations of Credit Risk
Concentrations of credit risk in accounts receivable are limited due to the
large number of customers comprising the Company's customer base throughout the
United States. No single customer provides 10 percent or more of the Company's
revenue. The Company performs ongoing credit evaluations of its customers, but
does not require collateral to support customer accounts receivable.
Historically, the Company has not had significant uncollectible accounts.
New Product Development
New product development costs consist of scientific research and development and
market development expenditures. Expenditures of $1,796,032 for the year ended
December 31, 1999 were made for research and development activities covering
basic scientific research and application of scientific advances to the
development of new and improved products and processes. Expenditures of $370,186
for the year ended December 31, 1999 were made for market development activities
related to promising new and improved products and processes identified during
research and development activities. The Company expenses all new product
development costs when they are incurred. The Company incurred no new product
development costs in the year ended December 31, 1998 or the period from October
14, 1997 to December 31, 1997.
<PAGE>
F-11
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Description of Business and Summary of Significant Accounting Policies
(continued)
Inventories
The Company accounts for inventory balances using the lower of cost or market
method on a first-in, first-out basis. Inventories consist of the following at
December 31:
1999 1998
--------------------- ---------------------
Raw materials $ 234,073 $ -
Finished goods 3,821,352 387,258
--------------------- ---------------------
$4,055,425 $ 387,258
===================== =====================
Property, Plant and Equipment
Property, plant and equipment acquired in the acquisitions described above were
recorded at estimated fair value at the dates of the respective acquisitions.
Property, plant and equipment acquired subsequent thereto, renewals and
betterments are recorded at cost. Maintenance and repairs are expensed as
incurred. Depreciation is provided over the estimated useful lives or lease
terms, if less, using the straight-line method as follows:
Land improvements 1 to 20 years
Buildings and improvements 3 to 40 years
Vehicles and other operating equipment 2 to 12 years
Furniture, fixtures and office equipment 1 to 7 years
Depreciation expense was approximately $4,996,000, $3,281,000 and $454,000 for
the years ended December 31, 1999 and 1998 and the period from October 14, 1997
to December 31, 1997, respectively.
Intangible Assets
Intangible assets consist of goodwill, contracts, patents and licenses, and
assembled workforce. Amortization expense was approximately $8,095,000,
$5,860,000 and $455,000 for the years ended December 31, 1999 and 1998 and the
period from October 14, 1997 to December 31, 1997, respectively. Amortization is
provided over the estimated period of benefit, using the straight-line method as
follows:
Goodwill 20 to 25 years
Contracts 10 to 20 years
Patents and licenses 13 to 19 years
Assembled workforce 8 years
<PAGE>
F-12
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Description of Business and Summary of Significant Accounting Policies
(continued)
Debt Issuance Costs
Debt issuance costs relate to costs incurred with the issuance of the Senior
Subordinated Notes and the Secured Credit Facility. These costs are being
amortized to interest expense over the respective lives of the debt issues on a
straight-line basis. Amortization expense was approximately $702,000, $464,000
and $0 for the years ended December 31, 1999 and 1998 and the period from
October 14, 1997 to December 31, 1997, respectively.
Income Taxes
Deferred tax assets and liabilities are provided for the future tax consequences
attributable to temporary differences between the carrying amounts of assets and
liabilities for financial statement and income tax purposes.
Fair Value of Financial Instruments
Financial instruments included in various categories within the accompanying
balance sheet consist of the following at December 31:
1999 1998
----------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------------------- ------------
Short-term assets $ 21,845,674 $ 21,845,674 $ 15,933,304 $ 15,933,304
Short-term liabilities 16,369,442 16,369,442 10,009,169 10,009,169
Long-term debt:
Senior subordinated notes 100,000,000 85,000,000 100,000,000 99,000,000
Secured credit facility 33,500,000 33,500,000 10,000,000 10,000,000
Other liabilities 1,613,393 1,255,000 2,103,856 1,531,000
The carrying value of short-term assets and liabilities approximate fair value
due to the short-term nature of the instruments. The carrying value of the
secured credit facility approximates the fair value due to the variable interest
rate features of the instrument. The fair value of the senior subordinated notes
is based on quoted market prices. The fair value of other liabilities is based
on the present value of future cash flows discounted at the Company's
incremental borrowing rate.
<PAGE>
F-13
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Description of Business and Summary of Significant Accounting Policies
(continued)
Long-lived Assets
Management evaluates the carrying value of all long-lived assets to determine
recoverability when indicators of impairment are present based generally on an
analysis of undiscounted cash flows compared to net book value. The Company also
evaluates amortization periods of assets, including goodwill and other
intangible assets, to determine if events or circumstances warrant revised
estimates of useful lives. Management believes no material impairment in the
value of long-lived assets exists at December 31, 1999.
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Intangible Assets
Intangible assets consist of the following at December 31:
1999 1998
------------------- ------------------
Goodwill $ 64,313,512 $ 44,018,454
Contracts 98,522,146 97,960,644
Patents and licenses 2,787,431 2,471,584
Assembled work force 2,700,233 2,700,233
------------------- ------------------
168,323,322 147,150,915
Less accumulated amortization (14,370,775) (6,315,275)
------------------- ------------------
$153,952,547 $140,835,640
=================== ==================
4. Long-term Debt
Secured Credit Facility
On March 4, 1998, the Company obtained a Secured Credit Facility provided by a
syndicate of banks. The Secured Credit Facility enables the Company to obtain
revolving secured loans from time to time to finance certain permitted
acquisitions, to pay fees and expenses incurred in connection with certain
acquisitions, to repay existing indebtedness, and for working capital and
general corporate purposes.
<PAGE>
F-14
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Long-term Debt (continued)
Secured Credit Facility (continued)
At the Company's option, the revolving secured loans may be maintained as (a)
Eurodollar Loans (as defined) which will bear interest at a rate equal to the
quotient obtained by dividing LIBOR (as defined) by one minus the reserve
requirement for such Eurodollar Loan, plus a margin of 250 basis points or (b)
Base Rate Loans (as defined) which will have an interest rate equal to the
higher of (i) the Bank of America prime rate and (ii) the federal funds rate
plus 0.5%, plus a margin of 125 basis points. The Company will also pay certain
fees with respect to any unused portion of the Secured Credit Facility.
The Secured Credit Facility has a term of five and one-half years from the date
of initial funding, is guaranteed by ISG and existing and future subsidiaries of
the Company (the "Guarantors"), and is secured by a first priority perfected
security interest in all of the capital stock of the Company and all of the
capital stock of each of the Guarantors, as well as certain present and future
assets and properties of the Company and any domestic subsidiaries.
The Secured Credit Facility requires the Company to maintain a maximum leverage
ratio, a minimum interest coverage ratio and minimum consolidated net worth and
certain other financial and nonfinancial covenants, all as defined within the
agreement. The Company was in compliance with all such covenants at December 31,
1999.
On April 30, 1999, the Secured Credit Facility was increased to $50,000,000 from
$35,000,000. At December 31, 1999, $33,500,000 was outstanding, with $16,500,000
unused and available, under the Secured Credit Facility.
Senior Subordinated Notes
On April 22, 1998, the Company completed a private placement of $100,000,000
aggregate principal amount of 10% Senior Subordinated Notes due 2008 (the
"Senior Subordinated Notes") to finance the 1998 Acquisitions. Interest on the
Senior Subordinated Notes is payable semi-annually on April 15 and October 15 of
each year. The Senior Subordinated Notes will mature on April 15, 2008 and are
guaranteed fully and unconditionally and on a joint and several basis by all of
the Company's existing and future restricted subsidiaries, as defined in the
indenture.
The Senior Subordinated Notes are redeemable at the option of the Company at
various times throughout the term of the Senior Subordinated Notes at redemption
prices specified in the indenture.
<PAGE>
F-15
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Long-term Debt (continued)
Senior Subordinated Notes (continued)
Upon the occurrence of a change of control or an asset sale as defined in the
indenture, the Company is required to make an offer to repurchase all or part of
the Senior Subordinated Notes at prices specified in the indenture.
The payment of principal, interest, and liquidated damages as defined in the
indenture, if any, on the Senior Subordinated Notes is subordinated in right of
payment to the prior payment of all senior indebtedness as defined in the
indenture, whether outstanding on the date of the indenture or thereafter
incurred. The indenture for the Company's Senior Subordinated Notes contains
various limitations on the incurrence of additional indebtedness, the issuance
of preferred stock, consolidations or mergers, sales of assets, and restricted
payments, including dividends, for the Company and restricted subsidiaries as
defined in the indenture.
In connection with the private placement of the Senior Subordinated Notes, the
Company entered into the Registration Rights Agreement pursuant to which the
Company was required to file an exchange offer registration statement with the
Securities and Exchange Commission which was declared effective by the
Securities and Exchange Commission on September 4, 1998.
The aggregate maturities of all long-term debt for the five years subsequent to
December 31, 1999 are as follows: $0 in 2000-2002, $33,500,000 in 2003, $0 in
2004 and $100,000,000 thereafter.
5. Employee Benefit Plan
Prior to April 1, 1998, eligible employees of the Company were able to
participate in a 401(k) savings plan (the "JTM Plan") sponsored by an affiliate
of the former owner of JTM. Under the terms of the JTM plan, the Company was
required to match employee contributions, as defined, up to 3% of the employees'
compensation. Expenses related to the JTM plan were approximately $59,000 for
the period from January 1, 1998 to March 31, 1998 and $44,000 for the period
from October 14, 1997 to December 31, 1997.
Subsequent to April 1, 1998, eligible employees of the Company may participate
in a 401(k) savings plan (the "ISG Plan") sponsored by ISG. The ISG Plan
requires the Company to match employee contributions, as defined, up to 6% of
the employees' compensation. Expenses related to the ISG Plan were approximately
$458,000 and $265,000 for the year ended December 31, 1999 and the period from
April 1, 1998 to December 31, 1998, respectively.
<PAGE>
F-16
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
Income tax expense (benefit) consists of the following:
Period from
October 14 to
Year ended December 31 December 31
1999 1998 1997
----------------------------------------------------------
Current:
U.S. Federal $ 2,150,860 $3,542,755 $ 459,626
State 726,268 703,678 69,116
----------------------------------------------------------
2,877,128 4,246,433 528,742
Deferred:
U.S. Federal (1,847,270) (1,416,129) (240,135)
State (382,269) (281,278) (36,110)
----------------------------------------------------------
(2,229,539) (1,697,407) (276,245)
Total:
U.S. Federal 303,590 2,126,626 219,491
State 343,999 422,400 33,006
----------------------------------------------------------
$647,589 $2,549,026 $ 252,497
==========================================================
Reconciliation of income tax expense at the U.S. statutory rate to the Company's
tax expense is as follows:
Period from
October 14 to
Year ended December 31 December 31
1999 1998 1997
-------------------------------------------
35% of income before income tax $ 99,812 $ 1,682,968 $ 181,023
Add:
Non-deductible goodwill 901,551 527,208 42,702
Other, net (353,774) 338,850 28,772
-------------------------------------------
$ 647,589 $ 2,549,026 $ 252,497
===========================================
<PAGE>
F-17
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
The major components of the deferred tax assets and liabilities as of December
31 are as follows:
1999 1998
--------------------------------------
Deferred Tax Assets:
Bad debt reserves $ 128,602 $ 66,572
Accruals not currently deductible for
tax purposes 362,217 307,883
--------------------------------------
Total gross deferred tax assets 490,819 374,455
Deferred Tax Liabilities:
Fixed asset basis differences 2,980,762 3,040,703
Intangible asset basis differences 36,274,790 38,363,602
Other 77,355 5,229
--------------------------------------
Total gross deferred tax liabilities 39,332,907 41,409,534
--------------------------------------
Net deferred tax liabilities $ (38,842,088) $(41,035,079)
======================================
7. Commitments and Contingencies
Lease Obligations
Certain facilities and equipment are leased under non-cancelable operating
leases, which generally have renewal terms, expiring in various years through
2006.
Future minimum payments under leases with initial terms of one year or more
consisted of the following at December 31, 1999:
2000 $ 5,006,179
2001 4,446,385
2002 3,418,469
2003 2,413,442
2004 1,203,922
Thereafter 595,361
-------------------
Total minimum lease payments $ 17,083,758
===================
Total rental expense was approximately $7,595,000 for the year ended December
31, 1999, $6,113,000 for the year ended December 31, 1998 and $1,259,000 for the
period from October 14, 1997 to December 31, 1997.
<PAGE>
F-18
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Commitments and Contingencies (continued)
Sale and Purchase Commitments
The Company's contracts with its customers and suppliers require the Company to
make minimum sales and purchases over ensuing years, approximated as follows:
Minimum Minimum
Sales Purchases
------------------------------------
2000 $ 363,000 $ 6,387,000
2001 371,000 6,911,000
2002 120,000 7,173,000
2003 120,000 3,042,000
2004 120,000 1,842,000
Thereafter - 10,174,000
------------------------------------
$ 1,094,000 $ 35,529,000
====================================
Minimum sales and purchases under contracts with minimum requirements
approximated $806,000 and $5,930,000, respectively, for the year ended December
31, 1999 and $800,000 and $4,523,000, respectively, for the year ended December
31, 1998 and $249,000 and $318,000, respectively, for the period from October
14, 1997 to December 31, 1997.
Royalty Commitments
In connection with a 1998 acquisition, the Company agreed to pay a minimum of
$500,000 per year commencing in 1999 and continuing through 2003 for royalties
related to the sale of certain Class C fly ash. The current portion of this
liability is recorded in other current liabilities and the long-term portion is
recorded in other long-term liabilities in the accompanying balance sheets.
In 1999, the Company entered into a license agreement for certain technology for
which the Company agreed to pay a minimum of $200,000 in 2001, $300,000 in 2002,
$400,000 in 2003 and $500,000 per year thereafter for as long as the license
agreement is effective. The payments are for future royalties on net sales and
sub-license or royalty revenue received related to this license and will be
expensed in the period the related revenue is recognized.
<PAGE>
F-19
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Commitments and Contingencies (continued)
Legal Proceedings
There are various legal proceedings against the Company arising in the normal
course of business. While it is not currently possible to predict or determine
the outcome of these proceedings, it is the opinion of management that the
outcome will not have a material adverse effect on the Company's results of
operations, financial position or liquidity.
Employment Agreements
The Company has employment agreements with certain of its employees. The terms
of these agreements begin to expire in 2000 with annual extensions to be
exercised by mutual consent of both parties. Without considering these
extensions, these employment agreements provide for total annual base
compensation of approximately $2,256,000 in 2000, $1,301,000 in 2001, $771,000
in 2002 and $134,000 in 2003.
Medical Insurance
Effective April 1, 1998, the Company established a self-funded medical insurance
plan for its employees with stop-loss coverage for amounts in excess of $40,000
per individual and approximately $1,530,000 in the aggregate for the current
plan period ended December 31, 1999. The Company has contracted with a
third-party administrator to assist in the payment and administration of claims.
Insurance claims are recognized as expenses when incurred, including an estimate
of costs incurred but not reported at the balance sheet dates. In the
accompanying balance sheets, $112,000 and $324,000 has been accrued as of
December 31, 1999 and 1998, respectively, related to this liability.
8. Reportable Segments
As discussed in note 2, the Company operates in two reportable segments: the CCP
division and the building materials division. The CCP division consists
primarily of three operating units that manage and market CCPs in North America.
The building materials division consists of four legal entities, Best, Osborne,
Terrazzo and Magna Wall. The Company's two reportable segments are managed
separately based on fundamental differences in their operations.
The Company evaluates performance based on profit or loss from operations before
depreciation, amortization, income taxes and interest expense (EBITDA). The
Company derives a majority of its revenues from CCP sales and the chief
operating decision makers rely on EBITDA to assess the performance of the
segments and make decisions about resources to be allocated to the segments.
Accordingly, EBITDA is included in the information reported below. Certain
expenses are maintained at the Company's corporate
<PAGE>
F-20
ISG Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Reportable Segments (continued)
headquarters and are not allocated to the segments. Such expenses primarily
include interest expense, corporate overhead costs, certain non-recurring gains
and losses and intangible asset amortization. Inter-segment sales are generally
accounted for at cost and are eliminated in consolidation.
The building materials division includes financial data for Best from January 1
through December 31, 1999, Osborne and Terrazzo for the period from October 26
to December 31, 1999 and Magna Wall for the month of December 1999. Amounts
included in the "Other" column include financial information for the Company's
corporate, R&D and other administrative business units.
The Company did not report segment information prior to the year ended December
31, 1999, as it operated in only one significant business segment prior to 1999.
Information about reportable segments, and reconciliation of such information to
the consolidated totals as of and for the year ended December 31, 1999, is as
follows:
Building Consolidated
CCP Materials Other Total
------------ -------------- ------------- ---------------
Revenue $134,631,711 $20,821,159 $ 752,402 $156,205,272
EBITDA 32,096,154 2,811,482 (8,139,384) 26,768,252
Total Assets 49,929,505 6,683,098 163,849,908 220,462,511
Expenditures for PP&E 7,520,689 350,610 919,571 8,790,870
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Segment assets reflect those
specifically attributable to the individual segments and include accounts
receivable, inventory and property, plant and equipment. All other assets are
included in the "Other" column.
9. Related Party Transactions
The Company's parent, ISG, files a consolidated income tax return including the
Company and all of its subsidiaries. As the Company records all tax payments and
receipts, a payable to ISG for $643,983 has been recorded to reflect amounts
owed to ISG relating to ISG's interest deductions included in the 1998
consolidated tax return filed in 1999.
<PAGE>
F-21
10. Subsequent Event
On March 2, 2000, the Company acquired directly and indirectly through ISG
Manufactured Products, Inc., a newly formed wholly owned subsidiary of the
Company, 100% of the partnership interests in Don's Building Supply L.L.P.
("Don's") for a purchase price of $6,000,000 in cash. The Company expects the
purchase price to increase or decrease within sixty days of the closing date
based on 1999 EBITDA, as defined, and working capital as of February 29, 2000.
Don's is engaged in the retail and wholesale distribution of construction
materials to residential and commercial contractors.
<PAGE>
F-22
Report of Independent Accountants
---------------------------------
To the Board of Directors and
Shareholders of JTM Industries, Inc:
In our opinion, the consolidated statements of loss and accumulated deficit
and cash flows for the period from January 1, 1997 to October 13, 1997
(appearing on pages F-23 through F-31 in this Form 10-K) present fairly, in
all material respects, the results of operations and cash flows of JTM
Industries, Inc. and its subsidiary for the period from January 1, 1997 to
October 13, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for the opinion expressed above.
We have not audited the consolidated financial statements of JTM
Industries, Inc. for any period subsequent to October 13, 1997.
PRICEWATERHOUSECOOPERS LLP
February 16, 1998
Charlotte, North Carolina
<PAGE>
F-23
JTM INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF LOSS AND ACCUMULATED DEFICIT
($000's omitted)
Period from
January 1 to
October 13,
1997
-------------------
Revenues:
Product revenues........................................... $ 25,613
Service revenues........................................... 25,682
-------------------
51,295
Cost of product revenues, excluding depreciation........... 20,702
Cost of service revenues, excluding depreciation........... 19,999
Depreciation and amortization.............................. 5,279
Selling, general and administrative expenses................ 3,633
-------------------
Income from operations..................................... 1,682
Intercompany interest expense.............................. 4,160
Interest expense............................................ -
-------------------
(2,478)
Income tax expense......................................... (612)
-------------------
Net loss................................................... (3,090)
Accumulated deficit - beginning of period.................. (3,966)
-------------------
Accumulated deficit - end of period....................... $ (7,056)
===================
The accompanying notes are an integral part of these financial statements.
<PAGE>
F-24
JTM INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000's omitted)
Period from
January 1 to
October 13,
1997
------------------
Net Cash Provided By (Used In):
Operating activities......................................... $ 521
Investing activities......................................... (681)
------------------
Net cash used by operating and investing activities.......... (160)
Non-cash activities.......................................... (797)
------------------
(957)
Intercompany notes payable - beginning of period............. (48,450)
------------------
Intercompany notes payable - end of period................... $ (49,407)
==================
Operating activities:
Net loss..................................................... $ (3,090)
Items not affecting cash:
Loss on disposal of fixed assets........................... 305
Depreciation and amortization.............................. 5,279
Deferred income taxes...................................... 150
Cash provided by (used in) financing working capital:
Trade and other accounts receivable........................ (1,898)
Other current assets....................................... 87
Accounts payable and accrued liabilities................... (312)
------------------
Net cash provided by operating activities.................... $ 521
==================
Investing activities:
Purchase of fixed assets..................................... $ (681)
Proceeds from sale of fixed and other assets................. -
------------------
Net cash used in investing activities........................ $ (681)
==================
Supplemental cash flow information:
Noncash transaction:
Transfers of fixed assets from parent................... $ 107
Accounts payable related to fixed assets................ -
Cash paid (received) for:
Interest................................................ $ 4,160
Income taxes to (from) parent........................... $ 462
The accompanying notes are an integral part of these financial statements.
<PAGE>
F-25
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000's Omitted)
1. Basis of Presentation of Financial Statements
These financial statements reflect the consolidated financial position
and results of operations of JTM Industries, Inc. and its subsidiary, KBK
Enterprises, Inc. ("the Company") which until October 13, 1997 was an indirect
wholly owned subsidiary of Laidlaw Inc. The Company is involved in materials
management services to coal combustion by-products (CCPs) producing utilities
and marketing products derived from CCPs, principally in the United States.
Interest expense associated with intercompany financing by the
Company's former parent, Laidlaw, Inc. ("Laidlaw"), has been charged to the
Company based on prime rate plus 2% on the average outstanding balance.
The Company is included in the consolidated tax return of Laidlaw.
Income taxes have been calculated using applicable income tax rates on a
separate return basis.
2. Summary of Significant Accounting Policies
a) Basis of Presentation
The consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the United States
and all figures are represented in U.S. dollars, as the Company's operating
assets are located in the United States.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect reported amounts of income and expenses and disclosure
of contingencies. Future events could alter such estimates in the near term.
b) Consolidation
The consolidated financial statements include the accounts of JTM
Industries, Inc. and KBK Enterprises, Inc., its subsidiary company. All
significant intercompany transactions are eliminated.
<PAGE>
F-26
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's Omitted)
2. Summary of Significant Accounting Policies (Continued)
c) Fixed assets
Fixed assets are recorded at cost. Depreciation and amortization of
other property and equipment is provided substantially on a straight-line basis
over their estimated useful lives which are as follows:
Buildings....................... 20 to 40 years
Vehicles and other.............. 3 to 15 years
The company periodically reviews the carrying values of its fixed
assets to determine whether such values are recoverable. Any resulting
write-downs are charged against income. Depreciation expense amounts to $1,191
for the period from January 1, 1997 to October 13, 1997.
d) Other assets
Goodwill is amortized on a straight-line basis over forty years. The
amount of any impairment is charged against income. During the period from
January 1, 1997 to October 13, 1997, in connection with the planned sale of the
Company, Laidlaw wrote down the assets of the Company to fair value which
resulted in a charge against goodwill of $3,300.
e) Income taxes
Deferred income taxes are provided for all significant temporary
differences arising from recognizing certain expenses and certain closure
accruals in different periods for income tax and financial reporting purposes.
f) Revenue
Material revenues are earned by marketing products created by
coal-fired power generation and related industrial materials to consumers of
building materials and construction related products. Generally, material is
obtained from coal-fired electric utilities and is immediately delivered to the
customer, eliminating the need to inventory products. Therefore, no inventory
exists at October 13, 1997. Material revenues are recognized when the material
is delivered to the customer.
<PAGE>
F-27
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's Omitted)
2. Summary of Significant Accounting Policies (Continued)
f) Revenue (continued)
Service revenues are earned under long-term contracts to dispose of
residual materials created by coal-fired power generation. Typical contract
terms are from five to fifteen years. Service revenues are recognized concurrent
with the removal of the material and are typically based on the number of tons
of material removed at an established price per ton.
Costs of product revenues primarily include amounts paid to the
utilities to purchase the product and transportation charges related to
delivering the product to the customer. Cost of service revenues primarily
include landfill fees and transportation charges related to delivering the
product to the landfill. Overhead charges incurred by a facility which generates
both product and service revenues are allocated to cost of product revenues and
cost of service revenues based on the percentage of each type of revenue to
total revenues. Cost of product revenues and cost of service revenues are
recognized concurrent with the recognition of the related revenue.
g) Concentration of Credit Risk
Concentrations of credit risk in accounts receivable are limited, due
to the large number of customers comprising the Company's customer base
throughout the United Sates. The Company performs ongoing credit evaluations of
its customers, but does not require collateral to support customer accounts
receivable. The Company establishes an allowance for doubtful accounts based on
the credit risk applicable to particular customers, historical trends, and other
relevant information.
3. Benefit Plans
Eligible employees of the Company may participate in a 401(k) savings
plan sponsored by Laidlaw. The 401(k) plan requires the Company to match
employee contributions as defined, up to 3% of the employees' compensation.
Expenses related to the 401(k) plan were approximately $294 for the period from
January 1, 1997 to October 13, 1997.
<PAGE>
F-28
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's Omitted)
4. Lease Commitments
Rental expense incurred under operating leases amounted to $4,334 for
the period from January 1, 1997 to October 13, 1997.
Rentals payable under operating leases for premises and equipment as of
October 13, 1997 are as follows:
1998........................................................... $ 4,518
1999........................................................... 3,264
2000........................................................... 1,553
2001........................................................... 1,440
2002........................................................... 753
Thereafter..................................................... 1,600
---------------
$ 13,128
===============
5. Legal proceedings
The Company has various outstanding legal matters arising from the
normal course of business. Although the final outcome cannot be predicted with
certainty, the Company believes the ultimate disposition of the matters will not
have a material impact on the Company's financial position.
6. Related party transactions
Included in the financial statements are related party transactions
between the Company and Laidlaw. These related party transactions are as
follows:
Period from
January 1 to
October 13,
1997
----------------------
Management fees................... $ 491
Administrative fees............... $ 249
Intercompany sales................ $ 2,814
Allocated insurance expense....... $ 515
Interest expense.................. $ 4,160
<PAGE>
F-29
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's Omitted)
6. Related party transactions (Continued)
Management and administrative fees have been allocated to the Company
based upon the Company's share of Laidlaw's consolidated revenue. Management and
administrative fees are charged by Laidlaw to each of its operating groups in
order to recover its general and administrative costs. The services provided by
Laidlaw include treasury, taxation and insurance. The allocated charges may not
be indicative of the expenses the Company would have incurred if Laidlaw had not
provided the services.
On May 9, 1997, all of the outstanding shares of the Company were
transferred from LESI to Laidlaw Transportation, Inc., a direct, wholly owned
subsidiary of Laidlaw.
In preparation for the disposal of the Company, certain closure
liabilities amounting to $1,650 were transferred to Laidlaw, net of the related
deferred tax asset of $578. Additionally, a long-term receivable in the amount
of $1,008, net of an allowance of $963, was transferred to Laidlaw. A deferred
tax asset of $337 related to the allowance was also transferred to Laidlaw.
7. Income taxes
The components of income tax expense for the period from January 1,
1997 to October 13, 1997 are as follows:
Current federal provision (benefit).............. $ 421
Current state provision.......................... 41
Deferred federal provision....................... 150
---------------------
Total income tax provision (benefit)............. $ 612
=====================
<PAGE>
F-30
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's Omitted)
7. Income taxes (continued)
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. Components of deferred tax liabilities and assets at October 13,
1997 are as follows:
Deferred tax assets:
Allowance for bad debts.......................... $ 142
Closure reserve.................................. 97
Other accrued liabilities........................ 91
Deferred tax liabilities:
Fixed assets..................................... (1)
--------------------
Net deferred tax assets............................ $ 329
====================
The difference between the federal statutory tax rate and the effective
tax rate on continuing operations for the period from January 1, 1997 to October
13, 1997 are as follows:
Federal statutory tax rate.............................. 35.0%
Goodwill amortization not deductible for tax purposes... (57.7%)
State income taxes...................................... (1.1%)
Other items - net....................................... (0.9%)
----------------
Effective tax rate...................................... (24.7%)
================
8. Accrued closure costs
The Company, in the normal course of its business, expends funds for
remediation of certain property. The Company does not expect these expenditures
to have a materially adverse effect on its financial condition or results of
operations, since its business is based upon compliance with environmental laws
and regulations and its services are priced accordingly. The method by which
these costs are accrued involves estimating the total site restoration costs,
determining the total volume of materials the site will hold, and accruing the
site restoration costs concurrently with the filling of the site. The total
anticipated site restoration costs are approximately $1,900.
9. Subsequent Event
On October 14, 1997, Laidlaw, Inc. sold all of the outstanding shares
of the Company for $5,817,000 in cash, a $29,000,000 senior bridge note and a
$17,500,000 9% Junior Subordinated Promissory Note due 2005.
<PAGE>
Exhibits
**2.1 Plan of Merger for January 1, 1999 Merger.
**2.2 Plan of Merger for July 31, 1999 Merger.
*3.1 Articles of Incorporation of JTM Industries, Inc.
*3.1a Articles of Amendment of Articles of Incorporation of JTM
Industries, Inc.
*3.2 By Laws of JTM Industries, Inc.
*3.3 Articles of Incorporation of KBK Enterprises, Inc.
*3.4 By Laws of KBK Enterprises, Inc.
*3.5 Articles of Incorporation of Pozzolanic Resources, Inc.
*3.6 By Laws of Pozzolanic Resources, Inc.
*3.7 Articles of Incorporation of Power Plant Aggregates of Iowa, Inc.
*3.8 By Laws of Power Plant Aggregates of Iowa, Inc.
*3.9 Articles of Incorporation of Michigan Ash Sales Company,
d.b.a. U.S. Ash Company.
*3.10 By Laws of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
*3.11 Articles of Incorporation of Flo Fil Co., Inc.
*3.12 By Laws of Flo Fil Co., Inc.
*3.13 Articles of Incorporation of U.S. Stabilization, Inc.
*3.14 By Laws of U.S. Stabilization, Inc.
*3.15 Articles of Incorporation of Fly Ash Products, Inc.
*3.16 By Laws of Fly Ash Products, Inc.
**3.17 Articles of Incorporation of ISG Resources, Inc.
**3.18 Bylaws of ISG Resources, Inc.
**3.19 Articles of Merger for ISG Resources, Inc. (1/1/99 Merger)
**3.20 Articles of Merger filed in Texas. (1/1/99 Merger)
**3.21 Articles of Merger filed in Pennsylvania. (1/1/99 Merger)
**3.22 Articles of Merger for Pozzolanic Resources, Inc. (1/1/99 Merger)
**3.23 Articles of Merger for St. Helens Investments, Inc. (1/1/99 Merger)
**3.24 Articles of Merger for Pozzolanic Northwest, Inc. (1/1/99 Merger)
**3.25 Articles of Merger for Pozzolanic Northwest Bulk Carriers, Inc.
(1/1/99 Merger)
**3.26 Articles of Merger filed in Iowa. (1/1/99 Merger)
**3.27 Articles of Merger filed in Michigan. (1/1/99 Merger)
**3.28 Articles of Merger filed in Arkansas. (1/1/99 Merger)
**3.29 Articles of Merger for ISG Resources, Inc. (1/1/99 Merger)
**3.30 Articles of Merger filed in Montana. (7/1/99 Merger)
**3.31 Articles of Merger filed in Ohio. (7/1/99 Merger)
*4.1 Indenture, dated as of April 22, 1998, by and among JTM Industries,
Inc., the Subsidiary Guarantors and U.S. Bank National Association,
as Trustee.
*5.1 Opinion and consent of Morgan, Lewis & Bockius LLP as to the
legality of the securities being registered.
*10.1 Purchase Agreement dated as of April 17, 1998 by and among JTM
Industries, Inc., the Subsidiary Guarantors and NationsBanc
Montgomery Securities LLC and CIBC Oppenheimer Corp.
*10.2 Registration Rights Agreement dated as of April 22, 1998, by and
among JTM Industries, Inc., the Subsidiary Guarantors and
NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp.
*10.3 Purchase Agreement dated as of February 27, 1998 by and among JTM
Industries, Inc., Pozzolanic Resources, Inc. and Gerald Peabody,
Penelope Peabody and Kokan Company Limited.
*10.4 Stock Purchase Agreement from Power Plant Aggregates of Iowa, Inc.
*10.5 Purchase Agreement dated as of March 1998 between JTM Industries,
Inc. and Jack Wirt.
*10.6 Purchase Agreement dated as of March 27, 1998, between JTM
Industries, Inc., Donald A. Thomas, Phyllis S. Thomas and Donald W.
Birge.
*10.7 Secured Credit Facility dated March 4, 1998 among JTM Industries,
Inc. and a syndicate of banks with NationsBank, N.A., as
administrative agent, and Canadian Imperial Bank of Commerce, as
documentation agent.
*10.8 First Amendment dated as of May 29, 1998 to the Credit Agreement
dated March 4, 1998 among JTM Industries, Inc. and a syndicate of
banks with NationsBank, N.A. as administrative agent, and Canadian
Imperial Bank of Commerce, as documentation agent.
**10.9 Stock Purchase Agreement dated January 1999, among ISG Resources,
Inc., James M. Isaac and Tommy C. Isaac.
**10.10 Purchase Agreement dated October 26, 1999, between ISG Resources,
Inc. and Mary Ellen Dentis, Trustee.
**10.11 Purchase Agreement dated November 1999, among ISG Resources, Inc.
and Bill E. Nichols, John W. Nichols and Debbie Dickie
**10.12 Stock Purchase Agreement between William Leslie & ISG Resources,
Inc.
**10.13 Partnership Regulations for Don's Building Supply, LLP.
**10.14 Employment Agreement between JTM Industries, Inc. (predecessor to
ISG Resources, Inc.) and Clinton W. Pike, Sr.
**10.14(a) Amendment to Mr. Pike's Employment Agreement.
**10.14(b) Second Amendment to Mr. Pike's Employment Agreement.
**10.15 Employment Agreement between ISG Resources, Inc. and R Steve
Creamer.
**10.16 Employment Agreement between ISG Resources, Inc. and Raul A. Deju.
**10.17 Employment Agreement between ISG Resources, Inc. and Jean I.
Everest, II.
**10.18 Employment Agreement between ISG Resources, Inc. and Brett A.
Hickman.
**10.19 Stock Purchase Agreement dated October 1999 between ISG Resources,
Inc. and WEBE Enterprises, Ltd.
**10.20 Stock Purchase Agreement dated June 2, 1999 between Koch Carbon,
Inc. and ISG Resources, Inc.
**12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
*21.1 Subsidiaries of ISG Resources, Inc.
**21.2 Subsidiaries of the Registrant (As of March 30, 2000)
*24 Powers of Attorney.
*25.1 Statement of Eligibility of U.S. Bank National Association, as
Trustee, on Form T-1.
**27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal respecting the exchange of the 10%
Senior Subordinated Notes due 2008 which have been registered
under the United States Securities Act of 1933 for 10% Senior
Subordinated Notes due 2008.
*99.2 Form of Notice of Guaranteed Delivery.
-----------
* Previously Filed.
** Filed herewith.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ISG Resources, Inc.
(Registrant)
Date: March 30, 2000 By: /s/ R Steve Creamer
--------------------------------
R Steve Creamer, Chairman and Chief Executive
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ R Steve Creamer Chairman and Chief Executive Officer March 30,2000
- - ------------------
R Steve Creamer
/s/ Raul A Deju President and Chief Operating Officer March 30,2000
- - ---------------
Raul A. Deju
/s/ J.I. Everest, II Chief Financial Officer, Treasurer and March 30,2000
- - --------------------- Assistant Secretary
J.I. Everest, II
/s/ Joseph M. Silvestri Director March 30, 2000
- - -----------------------
Joseph M. Silvestri
PLAN OF MERGER
This Plan of Merger dated November __, 1998 (the "Plan") was duly
adopted and approved by the board of directors and recommended to the
shareholders of each of the constituent corporations identified in Article I
below, pursuant to the corporate laws of each such constituent corporation's
state of incorporation.
RECITALS
WHEREAS, the respective boards of directors of each of the constituent
corporations identified in Article I below (the "Constituent Corporations") deem
it advisable and in the best interest of each such corporation and its
respective shareholders for each Constituent Corporation to be merged with and
into ISG Resources, Inc., a Utah corporation ("ISG Resources"), in the manner
contemplated herein.
WHEREAS, the respective boards of directors of each Constituent
Corporation have adopted resolutions approving this Plan and have recommended
that this Plan and the merger contemplated by this Plan be approved and adopted
by the shareholders of the respective Constituent Corporations.
PLAN
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, the Constituent Corporations agree as follows:
ARTICLE I
The name of each Constituent Corporation to the merger and its
respective state of incorporation is set forth below:
========================================== ================================
Name of Constituent Corporation State of Incorporation
------------------------------------------ --------------------------------
ISG Resources, Inc. Utah
------------------------------------------ --------------------------------
JTM Industries, Inc. Texas
------------------------------------------ --------------------------------
KBK Enterprises, Inc. Pennsylvania
------------------------------------------ --------------------------------
Pozzolanic Resources, Inc. Washington
------------------------------------------ --------------------------------
St. Helens Investments, Inc. Washington
----------------------------------------- --------------------------------
Pozzolanic Northwest, Inc. Washington
------------------------------------------ --------------------------------
Pozzolanic Northwest Bulk Carriers, Inc. Washington
------------------------------------------ --------------------------------
Power Plant Aggregates of Iowa, Inc. Iowa
------------------------------------------ --------------------------------
Midwest Fly Ash & Materials, Inc. Iowa
------------------------------------------ --------------------------------
Livestock Waste Management, Inc. Iowa
------------------------------------------ --------------------------------
Michigan Ash Sales Company Michigan
------------------------------------------ --------------------------------
U.S. Stabilization, Inc. Michigan
------------------------------------------ --------------------------------
FLO FIL Co., Inc. Michigan
------------------------------------------ --------------------------------
Fly Ash Products, Inc. Arkansas
========================================== ================================
ARTICLE II
The designation and number of outstanding shares of each class and
series of stock for each Constituent Corporation is set forth in the following
table. Each class and series identified voted on the Plan separately as a class.
========================== ================================== ==================
Number of Shares
Corporation Designation of Shares Outstanding
- - -------------------------- ---------------------------------- ------------------
ISG Resources, Inc. Common Stock 100
- - -------------------------- ---------------------------------- ------------------
JTM Industries, Inc. Common Stock 100
- - -------------------------- ---------------------------------- ------------------
KBK Enterprises, Inc. Common Stock 450
- - -------------------------- ---------------------------------- ------------------
Pozzolanic Resources, Inc. Class A Common Stock 200
Special Dividend Class C. Stock 2,900
Special Dividend Class D Stock 5,800
- - -------------------------- ---------------------------------- ------------------
St. Helens Investments, Class A Voting Common Stock 100
Inc. Class B Nonvoting Common Stock 3,000
Special Dividend Class C Stock 775,000
- - -------------------------- ---------------------------------- ------------------
Pozzolanic Northwest, Inc. Voting Common Stock 200
Nonvoting Common Stock 300
Preferred Capital A Stock 2,900
Preferred Capital B Stock 5,800
- - -------------------------- ---------------------------------- ------------------
Pozzolanic Northwest Bulk Class A Voting Common Stock 500
Carriers, Inc. Class B Regular Dividend Stock 60,000
- - -------------------------- ---------------------------------- ------------------
Power Plant Aggregates of Common Stock 230
Iowa, Inc.
- - -------------------------- ---------------------------------- ------------------
Midwest Fly Ash & Common Stock 100
Materials, Inc.
- - -------------------------- ---------------------------------- ------------------
Livestock Waste Common Stock 1
Management, Inc.
- - -------------------------- ---------------------------------- ------------------
Michigan Ash Sales Company Common Stock 1,000
- - -------------------------- ---------------------------------- ------------------
U.S. Stabilization, Inc. Common Stock 1,000
- - -------------------------- ---------------------------------- ------------------
FLO FIL Co,. Inc. Common Stock 1,000
- - -------------------------- ---------------------------------- ------------------
Fly Ash Products, Inc. Common Stock 900
========================== ================================== ==================
ARTICLE III
The Constituent Corporations shall be merged into a single corporation
by merging into and with ISG Resources, the surviving corporation, which shall
survive the merger, pursuant to the provisions of the Utah Revised Business
Corporation Act. Upon such merger the separate corporate existence of each
Constituent Corporation other than ISG Resources shall cease and ISG Resources
shall become the owner without transfer, of all rights and property of the
Constituent Corporations, and ISG Resources shall become subject to all the
debts and liabilities of the Constituent Corporations in the same manner as if
it had incurred them.
ARTICLE IV
The name of the surviving corporation shall be "ISG Resources, Inc." On
the effective date of the merger, which shall be January 1, 1999 (the "Effective
Date"), the Articles of Incorporation of ISG Resources as in effect on the
Effective Date, shall become the Articles of Incorporation of the surviving
corporation. On the Effective Date, the By-laws of ISG Resources, as in effect
on the Effective Date, shall become the By-laws of the surviving corporation.
ARTICLE V
Each of the Constituent Corporations, including ISG Resources, is a
direct or indirect wholly owned subsidiary of Industrial Services Group, Inc., a
Delaware corporation ("Industrial Services"), and the merger is being
consummated as a part of a reorganization plan for Industrial Services.
Industrial Services has waived any right to receive shares of the surviving
corporation in substitution or exchange for shares of each of the Constituent
Corporations owned directly or indirectly by Industrial Services. Accordingly,
the surviving corporation shall not issue its common stock in substitution or
exchange for any shares of common stock of any Constituent Corporation. The
shares of each Constituent Corporation, except for the shares of ISG Resources
that were owned by Industrial Services prior to the merger, shall be cancelled
on the Effective Date.
ARTICLE VI
This Plan shall be submitted to the shareholders of each of the
Constituent Corporations for their approval in the manner provided by the
applicable laws of the state of incorporation for each such Constituent
Corporation. After approval by the shareholders of each Constituent Corporation,
Articles of Merger, together with a copy of this Plan, shall be filed as
required by the applicable laws of the state of incorporation of each of the
Constituent Corporations.
ARTICLE VII
The merger may be abandoned at any time (before or after this Plan
shall have been approved by the shareholders of the Constituent Corporations)
prior to the Effective Date by any Constituent Corporation in the manner
determined by such corporation's board of directors.
ARTICLE VIII
The articles of incorporation of the corporation that is the surviving
corporation in the merger are attached to this Plan of Merger and made a part
hereof.
IN WITNESS WHEREOF, the undersigned corporations have executed this
Agreement and Plan of Merger as of the date specified above.
ISG RESOURCES, INC., KBK ENTERPRISES, INC.,
a Utah corporation a Pennsylvania corporation
By: By:
------------------------------- -----------------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
JTM INDUSTRIES, INC., POZZOLANIC RESOURCES, INC.,
a Texas corporation a Washington corporation
By: By:
-------------------------------- -----------------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
ST. HELENS INVESTMENTS, INC., MIDWEST FLYASH & MATERIALS,
a Washington corporation INC.,
an Iowa corporation
By:
------------------------------ By:
R Steve Creamer -----------------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
POZZOLANIC NORTHWEST, INC., LIVESTOCK WASTE MANAGEMENT,
a Washington corporation INC.,
an Iowa corporation
By:
------------------------------- By:
R Steve Creamer -----------------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
POZZOLANIC NORTHWEST BULK MICHIGAN ASH SALES COMPANY
CARRIERS, INC., a Michigan corporation
a Washington corporation
By:
By: ----------------------------
------------------------------------- R Steve Creamer
R Steve Creamer Chief Executive Officer
Chief Executive Officer
POZZOLANIC INT'L FISK, INC., U.S. STABILIZATION, INC.,
a Washington corporation a Michigan corporation
By: By:
---------------------------------- -----------------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
POWER PLANT AGGREGATES OF FLO FIL CO., INC.,
IOWA, INC., a Michigan corporation
an Iowa corporation
By:
By: -----------------------------
------------------------------------ R Steve Creamer
R Steve Creamer Chief Executive Officer
Chief Executive Officer
FLY ASH PRODUCTS, INC.,
an Arkansas corporation
By:
----------------------------
R Steve Creamer
Chief Executive Officer
AGREEMENT AND PLAN
OF MERGER OF
MINERAL SPECIALTIES, INC. AND
IRVINE FLY ASH, INC.
WITH AND INTO
ISG RESOURCES, INC.
This Agreement and Plan of Merger is dated July _____, 1999, by and
among ISG Resources, Inc., a Utah corporation ("ISG"), Mineral Specialties,
Inc., a Montana corporation ("Mineral"), and Irvine Fly Ash, Inc., an Ohio
corporation ("Irvine") (Mineral and Irvine) may in the alternative be referenced
individually as the "Subsidiary" or collectively as the "Subsidiaries") and is
effective on July 31, 1999 (the "Effective Date").
ISG is a corporation duly organized and existing under the laws of the
state of Utah.
Mineral is a corporation duly organized and existing under the laws of
the state of Montana, having 630 common shares, par value of $10.00 per share,
issued and outstanding.
Irvine is a corporation duly organized and existing under the laws of
the state of Ohio, having 500 common shares, par value $1.00 per share, issued
and outstanding.
WHEREAS, ISG owns each issued and outstanding share of the stock of
each Subsidiary; and
WHEREAS, the Board of Directors of ISG deems it advisable, for the
general welfare and advantage of ISG and each Subsidiary, that each Subsidiary
merge with and into ISG;
NOW THEREFORE, the parties agree, in accordance with the provisions of
the Revised Business Corporation Act of the state of Utah, the Montana Business
Corporation Act and the Ohio General Corporation Law, that each Subsidiary shall
be, and hereby is, merged with and into ISG (the "Merger"), and that the terms
and conditions of the Merger and the mode of carrying the Merger into effect and
the manner of canceling the shares of each of the Subsidiaries, shall be as set
forth.
ARTICLE I.
Corporate Existence of Surviving Corporation
Except as otherwise specifically set forth in this agreement, the
identity, existence, purposes, powers, franchises, rights and immunities of ISG
shall continue unaffected and unimpaired by the Merger, and the corporate
identity, existence, purposes, powers, franchises, rights and immunities of each
Subsidiary shall be merged into ISG and ISG shall become the "Surviving
Corporation." The organization of each Subsidiary, except insofar as it may be
continued by statute, shall cease on the Effective Date.
ARTICLE II.
Articles and Bylaws of Surviving Corporation
The Articles of Incorporation and bylaws of ISG, as they shall exist on
the Effective Date, shall be the Articles of Incorporation and bylaws of the
Surviving Corporation until they shall be amended or repealed.
ARTICLE III.
Directors and Officers of Surviving Corporation
The directors of ISG as of the Effective Date shall be the directors of
the Surviving Corporation until their successors are elected and qualified.
The officers of ISG as of the Effective Date shall be the officers of
the Surviving Corporation until their successors are appointed by the board of
directors of the Surviving Corporation.
ARTICLE IV.
Manner of Converting Shares of the Subsidiary Corporations into Shares
of the Surviving Corporation
ISG waives any right to receive shares of common stock of the Surviving
Corporation in substitution or exchange for shares of common stock of each
Subsidiary owned by ISG. Accordingly, the Surviving Corporation shall not issue
any shares in substitution or exchange for any shares of common stock of each
Subsidiary owned by ISG on the effective date of this agreement and plan. The
shares of each Subsidiary held by ISG shall be cancelled on the Effective Date.
ARTICLE V.
Miscellaneous Provisions
A. In accordance with the provisions of Section 16-10a-1104 of the Revised
Business Corporation Act of the state of Utah and applicable foreign statutes,
ISG shall not submit this agreement and plan to the respective shareholders of
the Constituent Corporations. The President of ISG shall sign, acknowledge, file
and record this agreement and plan, in accordance with the Revised Business
Corporation Act of the state of Utah, the Business Corporation Act of the state
of Montana and the General Corporation Law of the state of Ohio. This agreement
and plan shall take effect and be deemed and taken to be the agreement and act
of Merger of ISG and each Subsidiary and the Merger shall be and become
effective immediately upon the start of business on the Effective Date, every
shareholder having duly waived the mailing requirement of Section 16-10a-1104(5)
of the Business Corporation Act of the state of Utah.
B. Anything in this agreement or elsewhere to the contrary notwithstanding,
this agreement may be abandoned at any time prior to its filing and recording by
the resolution under the authority of the board of directors of ISG.
C. If at any time the Surviving Corporation shall deem or be advised that
any further assignments or assurances in law or things are necessary or
desirable to vest or to perfect or confirm, of record or otherwise, in the
Surviving Corporation the title to any property of the Subsidiaries acquired or
to be acquired by reason of or as a result of the Merger, each Subsidiary and
its proper officers and directors shall and will execute and deliver any and all
such proper deeds, assignments and assurances in law and do all things necessary
or proper so to vest, perfect or confirm title to such property in the Surviving
Corporation and otherwise to carry out the purposes of this agreement.
D. The Surviving Corporation agrees that it may be served with process in
the states of Montana and Ohio in any proceeding for enforcement of any
obligation of a Subsidiary or for enforcement of any obligation of the Surviving
Corporation arising from the Merger, and appoints the respective Secretaries of
State of the states of Montana and Ohio as its agent to accept service of
process in any such suit or other proceeding. The address to which a copy of
such process shall be mailed by said Secretary of State is 136 East South
Temple, Suite 1300, Salt Lake City, Utah 84111.
E. The Surviving Corporation shall pay all the expenses of carrying this
agreement into effect and of accomplishing the Merger.
F. For the convenience of the parties and to facilitate the filing or
recording of this agreement, any number of counterparts may be executed, and
each such executed counterpart shall be deemed to be an original instrument.
The boards of directors of ISG and the Subsidiaries have duly caused this
agreement to be signed by their President.
ISG RESOURCES, INC.
By:
-----------------------------------
Brett A. Hickman, Senior Vice President
and Secretary
IRVINE FLY ASH, INC. MINERAL SPECIALTIES, INC.
By: By:
------------------------------------ --------------------------
Brett A. Hickman, Senior Vice President Brett A. Hickman, Senior Vice
and Secretary President and Secretary
ARTICLES OF INCORPORATION
OF
ISG RESOURCES, INC.
The undersigned natural person of the age of 18 years or older, acting
as incorporator of a corporation under the Utah Revised Business Corporation Act
(as it may be amended from time to time, the "Act"), adopts the following
Articles of Incorporation for such corporation:
ARTICLE I
NAME
The name of this corporation is "ISG Resources, Inc." (the
"Corporation").
ARTICLE II
PURPOSE
The Corporation is organized to engage in any lawful act or activity
for which corporations may be organized under the Act.
ARTICLE III
AUTHORIZED CAPITAL
3.1 The total number of shares the Corporation is authorized to issue
is 10,000,000, no par value, which shall be divided into two classes as follows:
2,000,000 Preferred Shares and 8,000,000 Common Shares.
3.2 The preferences, limitations and relative rights of each class of
shares (to the extent established hereby), and the express grant of authority to
the board of directors to amend these articles of incorporation to divide the
Preferred Shares into series, to establish and modify the preferences,
limitations and relative rights of the Preferred Shares, and to otherwise make
changes affecting the capitalization of the Corporation, subject to certain
limitations and procedures and as permitted by Section 16-10a-602 of the Act,
are as follows:
A. Common Shares.
1. Each outstanding Common Share shall be entitled to
one vote on each matter to be voted on by the shareholders of the Corporation.
2. Subject to any rights that may be conferred upon any
Preferred Shares, upon dissolution the holders of Common Shares then outstanding
shall be entitled to receive the net assets of the Corporation. Such net assets
shall be divided among and paid to the holders of Common Shares, on a pro-rata
basis, according to the number of Common Shares held by them.
3. Subject to any rights that may be conferred upon any
shares of Preferred Shares, dividends may be paid on the outstanding Common
Shares if, as and when declared by the board of directors, out of funds legally
available therefor.
4. All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in the
Corporation's bylaws or in any amendment hereto or thereto shall be vested in
the Common Shares.
B. Preferred Shares. The board of directors, without
shareholder action, may amend the Corporation's articles of incorporation,
pursuant to the authority granted to the board of directors by Section
16-10a-1002(1)(e) of the Act, to do any of the following:
1. designate and determine, in whole or in part, the
preferences, limitations and relative rights, within the limits set forth in
section 16-10a-601 of the Act, of the Preferred Shares before the issuance of
any Preferred Shares;
2. create one or more series of Preferred Shares, fix
the number of shares of each such series (within the total number of authorized
Preferred Shares available for designation as a part of such series), and
designate and determine, in whole or in part, the preferences, limitations, and
relative rights of each series of Preferred Shares, within the limits set forth
in Section 16-10a-601 of the Act, all before the issuance of any shares of such
series;
3. alter or revoke the preferences, limitations and
relative rights granted to or imposed upon the Preferred Shares (before the
issuance of any Preferred Shares), or upon any wholly unissued series of
Preferred Shares; or
4. increase or decrease the number of shares
constituting any series of Preferred Shares, the number of shares of which was
originally fixed by the board of directors, either before or after the issuance
of shares of the series, provided that the number may not be decreased below the
number of shares of such series then outstanding, or increased above the total
number of authorized Preferred Shares available for designation as a part of
such series.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the Corporation
is 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111. The name of
the Corporation's initial registered agent at that address is Brett A. Hickman.
ARTICLE V
INITIAL BOARD OF DIRECTORS
The Corporation's board of directors shall consist of at least two
persons, with the precise number to be specified in accordance with the bylaws
of the Corporation. The names and addresses of the initial directors, who shall
serve until the first annual meeting of the shareholders or until their
successors are elected and have qualified are:
Joseph M. Silvestri
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
R Steve Creamer
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
ARTICLE VI
LIMITATION OF LIABILITY OF DIRECTORS
To the fullest extent permitted by the Act or any other applicable law
as now in effect or as may hereafter be amended, a director of this Corporation
shall not be personally liable to the Corporation or its shareholders for
monetary damages for any action taken or any failure to take any action as a
director. No amendment to or repeal of this Article VI shall apply to or have
any effect on the liability or alleged liability of any director of this
Corporation for or with respect to any action or failure to act by such director
occurring prior to such amendment or repeal.
ARTICLE VII
INDEMNIFICATION
7.1 The Corporation shall indemnify and advance expenses to the
directors and officers of the Corporation to the fullest extent permitted by
applicable law. Without limiting the generality of the foregoing, the
Corporation shall indemnify and advance expenses to the directors and officers
of the Corporation in all cases in which a corporation may indemnify and advance
expenses to a director or officer under sections 16-10a-902 and 16-10a-904,
respectively, of the Act. The Corporation shall consider and act expeditiously
as possible upon any and all requests by a director or officer for
indemnification or advancement of expenses.
7.2 The board of directors may indemnify and advance expenses to any
employee or agent of the Corporation who is not a director or officer of the
Corporation to any extent consistent with public policy, as determined by the
general or specific actions of the board of directors.
7.3 By action of the board of directors, notwithstanding any interest
of the directors in such action, the Corporation may purchase and maintain
liability insurance on behalf of a person who is or was a director, officer,
employee, fiduciary or agent of the Corporation, against any liability asserted
against or incurred by such person in that capacity or arising from such
person's status as a director, officer, employee, fiduciary or agent, whether or
not the Corporation would have the power to indemnify such person under the
applicable provisions of the Act.
7.4 No amendment to or repeal of this Article VII shall affect the
right of any of the Corporation's directors, officers, employees or agents to
indemnification for any liability or alleged liability for or with respect to
any action or failure to take any action by such person occurring prior to such
amendment or repeal.
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
William R. Gray 201 South Main, Suite 1800
Salt Lake City, UT 84111
DATED this ____ day of July, 1998.
------------------------------
William R. Gray, Incorporator
ACKNOWLEDGEMENT OF REGISTERED AGENT
The undersigned hereby accepts and acknowledges appointment as initial
registered agent of the Corporation named above.
Brett A. Hickman
BYLAWS OF
ISG RESOURCES, INC.
Adopted by Resolution dated September 30, 1998
ARTICLE I
OFFICES
1.1 Business Offices. The principal office of the corporation shall be
located in Salt Lake City, Utah. The corporation may have such other offices,
either within or without Utah, as the board of directors may designate or as the
business of the corporation may require from time to time.
1.2 Registered Office. The registered office of the corporation
required to be kept by the Utah Revised Business Corporation Act (as it may be
amended from time to time, the Act) shall be located within the State of Utah
and may be, but need not be, identical with the principal office. The address of
the registered office may be changed from time to time.
ARTICLE II
SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders shall be
held on such date and time as shall be fixed by the board of directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the state of Utah, such meeting shall be held on the next
succeeding business day.
2.2 Special Meetings. Special meetings of the shareholders, for an
purpose or purposes described in the meeting notice, may be called by the
president or by the board of directors, and shall be called by the president at
the written request of the holders of shares representing at least 10% of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
2.3 Place of Meeting. The board of directors may designate any place,
either within or without the State of Utah, as the place of meeting for any
annual or any special meeting of the shareholders. If no designation is made by
the directors, the place of meeting shall be the principal office of the
corporation in the state of Utah.
2.4 Notice of Meeting.
(a) Content and Mailings Requirements. Written notice stating
the date, time and place of each annual or special shareholder meeting shall be
delivered no fewer than 10 nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the president, the board
of directors, or other persons calling the meeting, to each shareholder of
record entitled to vote at such meeting and to any other shareholder entitled by
the Act or the articles of incorporation to receive notice of the meeting.
Notice of special shareholder meetings shall include a description of the
purpose or purposes for which the meeting is called.
(b) Effective Date. Written notice shall be deemed to be
effective at the earlier of: (1) when mailed, if addressed to the shareholder's
address shown in the corporation's current record of shareholders; (2) when
received; (3) five days after it is mailed; or (4) on the date shown on the
return receipt if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee.
(c) Effect of Adjournment. If any shareholder meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place, if the new date, time and place is announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is or must be fixed, then notice must be given pursuant to the requirements of
this section to those persons who are shareholders as of the new record date.
2.5 Waiver of Notice.
(a) Written Waiver. A shareholder may waive any notice
required by the Act, the articles of incorporation or the bylaws, by a writing
signed by the shareholder entitled to the notice, which is delivered to the
corporation (either before or after the date and time stated in the notice) for
inclusion in the minutes or filing with the corporate records.
(b) Attendance at Meetings. A shareholder's attendance at a
meeting: (1) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and (2) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
2.6 Record Date.
(a) Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any distribution, or in order to
make a determination of shareholders for any other proper purpose, the board of
directors may fix in advance a date as the record date. Such record date shall
not be more than 70 days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no record date
is so fixed by the board for the determination of shareholders entitled to
notice of, or to vote at, a meeting of shareholders, the record date for
determination of such shareholders shall be at the close of business on the day
before the first notice is delivered to shareholders. If no record date is fixed
by the board for the determination of shareholders entitled to receive a
distribution, the record date shall be the date the board authorizes the
distribution. If no record date is fixed by the board for the determination of
shareholders entitled to take action without a meeting, the record date shall be
the date the first shareholder signs a consent.
(b) Effect of Adjournment. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the board of directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
2.7 Shareholder List. After fixing a record date for a shareholders'
meeting, the corporation shall prepare a list of the names of its shareholders
entitled to be given notice of the meeting. The list must be arranged by voting
group and within each voting group by class or series of shares, must be
alphabetical within each class or series, and must show the address of, and the
number of shares held by, each shareholder. The shareholder list must be
available for inspection by any shareholder, beginning on the earlier of ten
days before the meeting for which the list was prepared or two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting and any adjournment thereof. The list shall be
available at the corporation's principal office or at a place identified in the
meeting notice in the city where the meeting will be held.
2.8 Shareholder Quorum and Voting Requirements.
(a) Quorum. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the articles of incorporation or the Act
provide otherwise, a majority of the votes entitled to be cast on the matter by
the voting group constitutes a quorum of that voting group for action on that
matter. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(b) Voting Groups. If the articles of incorporation or the Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group. If the articles of incorporation
or the Act provide for voting by two or more voting groups on a matter, action
on that matter is taken only when voted upon by each of those voting groups
counted separately. Action may be taken by one voting group on a matter even
though no action is taken by another voting group entitled to vote on the
matter.
(c) Shareholder Action. If a quorum exists, action on a
matter, other than the election of directors, by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation or the Act require a
greater number of affirmative votes. Directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
2.9 Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy which is executed in writing by the shareholder or which is
executed by his or her duly authorized attorney-in-act. Such proxy shall be
filed with the secretary of the corporation or other person authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in the
proxy.
2.10 Voting of Shares. Unless otherwise provided in the articles of
incorporation or by applicable law, each outstanding share, regardless of class,
is entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders. Except as provided by specific court order, no shares of the
corporation owned, directly or indirectly, by a second corporation, domestic or
foreign, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting if a
majority of the shares entitled to vote for the election of directors of such
second corporation are held by the corporation. The prior sentence shall not
limit the power of the corporation to vote any shares, including its own shares,
held by it in a fiduciary capacity.
2.11 Meetings by Telecommunications. Any or all shareholders may
participate in an annual or special meeting by, or conduct the meeting through
the use of, any means of communication by which all shareholders participating
may hear each other during the meeting. A shareholder participating in a meeting
by this means is deemed to be present in person at the meeting.
2.12 Action Without a Meeting.
(a) Written Consent. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting and without prior
notice if one or more consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shareholders entitled to vote with respect to the
subject matter thereof were present and voted. Action taken under this section
has the same effect as action taken at a meeting of shareholders and may be
described as such in any document.
(b) Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (i) those shareholders
entitled to vote who have not consented in writing, and (ii) those shareholders
not entitled to vote and to whom the Act requires that notice of the proposed
action be given. Any such notice must contain or be accompanied by the same
material that is required under the Act to be sent in a notice of meeting at
which the proposed action would have been submitted to the shareholders for
action.
(c) Effective Date and Revocation of Consents. No action taken
pursuant to this section shall be effective unless all written consents on which
the corporation relies for the taking of an action are received by the
corporation within a 60-day period and not revoked. Such action is effective as
of the date the last written consent necessary to effect the action is received,
unless all of the written consents specify a later date as the effective date of
the action. If the corporation has received written consents signed by all
shareholders entitled to vote with respect to the action, the effective date of
the action may be any date that is specified in all the written consents as the
effective date of the action. Any such writing may be received by the
corporation by electronically transmitted facsimile or other form of
communication providing the corporation with a complete copy thereof, including
a copy of the signatures thereto. Any shareholder giving a written consent
pursuant to this section may revoke the consent by a signed writing describing
the action and stating that the consent is revoked, provided that such writing
is received by the corporation prior to the effective date of the action.
(d) Unanimous Consent for Election of Directors.
Notwithstanding subsection (a) of this section, directors may not be elected by
written consent unless such consent is unanimous by all shares entitled to vote
for the election of directors.
ARTICLE III
BOARD OF DIRECTORS
3.1 General Powers. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the board of directors.
3.2 Number, Tenure and Qualifications. The authorized number of
directors shall be not less than two nor more than eleven. The current number of
directors shall be within the limits specified above, as determined (or as
amended from time-to-time) by resolution adopted by the directors. Each director
shall hold office until the next annual meeting of shareholders or until the
director's earlier death, resignation or removal. However, if a director's term
expires, the director shall continue to serve until his or her successor shall
have been elected and qualified, or until there is a decrease in the number of
directors. Directors do not need to be residents of Utah or shareholders of the
corporation.
3.3 Regular Meetings. A regular meeting of the board of directors shall
be held without other notice than this bylaw immediately after, and at the same
place as, the annual meeting of shareholders, for the purpose of appointing
officers and transacting such other business as may come before the meeting. The
board of directors may provide, by resolution, the time and place for the
holding of additional regular meetings without other notice than such
resolution.
3.4 Special Meetings. Special meetings of the board of directors may be
called by or at the request of the president or any director. The person
authorized to call special meetings of the board of directors may fix any place
as the place for holding any special meeting of the board of directors.
3.5 Notice of Special Meetings. Notice of the date, time and place of
any special director meeting shall be given at least two days previously thereto
either orally or in writing. Oral notice shall be effective when communicated in
a comprehensive manner. Written notice is effective as to each director at the
earlier of: (a) when received; (b) five days after deposited in the United
States mail, addressed to the director's address shown in the records of the
corporation; or (c) the date shown on the return receipt if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the director. Any director may waive notice of any meeting before or
after the date and time of the meeting stated in the notice. Except as provided
in the next sentence, the waiver must be in writing and signed by the director
entitled to the notice. A director's attendance at or participation in a meeting
shall constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting, or promptly upon his arrival, objects to holding the
meeting or transacting business at the meeting because of lack of or defective
notice, and does not thereafter vote for or assent to action taken at the
meeting. Unless required by the articles of incorporation, neither the business
to be transacted at, nor the purpose of, any special meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
3.6 Quorum and Voting.
(a) Quorum. A majority of the number of directors prescribed
by resolution adopted pursuant to section 3.2 of these bylaws, or if no number
is prescribed, the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, unless the articles of incorporation require a greater number.
(b) Voting. The act of the majority of the directors present
at a meeting at which a quorum is present when the vote is taken shall be the
act of the board of directors unless the articles of incorporation require a
greater percentage.
(c) Presumption of Assent. A director who is present at a
meeting of the board of directors or a committee of the board of directors when
corporate action is taken is deemed to have assented to the action taken unless:
(1) the director objects at the beginning of the meeting, or promptly upon his
or her arrival, to holding or transacting business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting; (2) the
director contemporaneously requests that his or her dissent or abstention as to
any specific action be entered in the minutes of the meeting; or (3) the
director causes written notice of his or her dissent or abstention as to any
specific action be received by the presiding officer of the meeting before its
adjournment or to the corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
3.7 Meetings by Telecommunications. Any or all directors may
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
3.8 Action Without a Meeting. Any action required or permitted to be
taken by the board of directors at a meeting may be taken without a meeting if
all the directors consent to such action in writing. Action taken by written
consent is effective when the last director signs the consent, unless, prior to
such time, any director has revoked a consent by a signed writing received by
the corporation, or unless the consent specifies a different effective date. A
signed consent has the effect of an action taken at a meeting of directors and
may be described as such in any document.
3.9 Resignation. A director may resign at any time by giving a written
notice of resignation to the corporation. Such a resignation is effective when
the notice is received by the corporation unless the notice specifies a later
effective date, and the acceptance of such recognition shall not be necessary to
make it effective.
3.10 Removal. The shareholders may remove one or more directors at a
meeting called for that purpose if notice has been given that a purpose of the
meeting is such removal. The removal may be with or without cause unless the
articles of incorporation provide that directors may only be removed with cause.
If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove that
director. A director may be removed only if the number of votes cast to remove
him or her exceeds the number of votes cast not to remove him or her.
3.11 Vacancies. Unless the articles of incorporation provide otherwise,
if a vacancy occurs on the board of directors, including a vacancy resulting
from an increase in the number of directors, the shareholders may fill the
vacancy. During such time that the shareholders fail or are unable to fill such
vacancies then and until the shareholders act: (1) the board of directors may
fill the vacancy; or (2) if the directors remaining in office constitute fewer
than a quorum of the board, they may fill the vacancy by the affirmative vote of
a majority of all the directors remaining in office. If the vacant office was
held by a director elected by a voting group of shareholders: (1) if one or more
directors are elected by the same voting group, only such directors are entitled
to vote to fill the vacancy if it is filled by the directors; and (2) only the
holders of shares of that voting group are entitled to vote to fill the vacancy
if it is filled by the shareholders. A vacancy that will occur at a specific
later date (by reason of a resignation effective at a later date) may be filled
before the vacancy occurs but the new director may not take office until the
vacancy occurs.
3.12 Compensation. By resolution of the board of directors, each
director may be paid his or her expenses, if any, of attendance at each meeting
of the board of directors and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the board of directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
3.13 Committees. The board of directors may create one or more
committees and appoint members of the board of directors to serve on them. Each
committee must have two or more members, who serve at the pleasure of the board
of directors. Those sections of this Article III which govern meetings, action
without meetings, notice and waiver of notice, and quorum and voting
requirements of the board of directors, apply to committees and their members.
ARTICLE IV
OFFICERS
4.1 Number. The corporation shall have the officers designated from
time to time by the board of directors. Each of the corporation's officers shall
be appointed by the board of directors. If specifically authorized by the board
of directors, an officer may appoint one or more officers or assistant officers.
The same individual may simultaneously hold more than one office in the
corporation.
4.2 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. The designation of a specified term does not grant to the
officer any contract rights, and the board can remove the officer at any time
prior to the termination of such term. If no term is specified, the officer
shall hold office until he or she resigns, dies or until he or she is removed in
the manner provided in section 4.3 of these bylaws.
4.3 Removal. Any officer or agent may be removed by the board of
directors at any time, with or without cause. Such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Appointment
of an officer or agent shall not of itself create contract rights.
4.4 Resignation. Any officer may resign at any time, subject to any
rights or obligation under any existing contracts between the officer and the
corporation, by giving notice to the president or board of directors. An
officer's resignation shall be effective when received by the corporation,
unless the notice specifies a later effective date, and the acceptance of such
resignation shall not be necessary to make it effective.
4.5 Authority and Duties of Officers. The following provisions of this
section 4.5 describe in general terms the duties of the officers described in
subsections 4.5(a) through (e) if designated by the board of directors. This
section shall not require the corporation to have any of the officers described
below. In addition to the duties set forth below, each officer of the
corporation shall exercise such powers and perform such duties as may be
required by law and/or the board of directors.
(a) Chief Executive Officer The chief executive officer shall,
subject to the control of the board of directors, in general supervise and
control all of the business and affairs of the corporation. Unless there is a
chairman of the board, the chief executive officer shall, when present, preside
at all meetings of the shareholders and of the board of directors. The chief
executive officer may sign, with the secretary or any other proper officer of
the corporation thereunto authorized by the board of directors, certificates for
shares of the corporation and deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. In
general, the chief executive officer shall perform all duties incident to the
office of the chief executive officer and such other duties as may be prescribed
by the board of directors from time to time.
(b) President and Chief Operating Officer. The president and
chief operating officer shall, subject to the direction of the chief executive
officer and the board of directors, in general supervise and control all of the
internal, day-to-day business and affairs of the corporation. The president and
chief operating officer shall see that all orders of the chief executive officer
and resolutions of the board of directors are carried into effect as they
pertain to the day-to-day business and operations of the corporation, and, in
addition, shall have all of the powers and perform all of the duties generally
appertaining to the office of the president of the corporation. The president
and chief operating officer shall make annual reports and submit the same to the
chief executive officer and board of directors and to the shareholders at their
annual meeting, showing the condition and affairs of the corporation. He or she
shall from time to time make such recommendations to the chief executive
officer, the board of directors, and such other persons as he or she thinks
proper and shall bring before the chief executive officer and the board of
directors such information as may be required or appropriate, relating to the
business and affairs of the corporation.
(c) Vice-President. If appointed, the vice-president (or if
there is more than one, each vice-president) shall assist the chief executive
officer and the president and shall perform such duties as may be assigned to
him or her by the chief executive officer, the president or by the board of
directors. If appointed, in the absence of the president or in the event of his
death, inability or refusal to act, the vice-president (or in the event there is
more than one vice-president, the vice-presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their appointment) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president.
(d) Treasurer and Chief Financial Officer. The treasurer and
chief financial officer shall: (i) have charge and custody of and be responsible
for all funds and securities of the corporation; (ii) receive and give receipts
for moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as shall be selected by the board of directors;
and (iii) in general, perform all of the duties incident to the office of
treasurer and such other duties as from time to time may be assigned by the
chief executive officer, the president or by the board of directors. If required
by the board of directors, the treasurer and chief financial officer shall give
a bond for the faithful discharge of his or her duties in such sum and with such
surety or sureties as the board of directors shall determine.
(e) Secretary. The secretary shall: (i) keep the minutes of
the proceedings of the shareholders, the board of directors and any committees
of the board in one or more books provided for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (iii) be custodian of the corporate records; (iv) when
requested or required, authenticate any records of the corporation; (v) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (vi) sign with the president, or a
vice-president, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (vii)
have general charge of the stock transfer books of the corporation; and (viii)
in general, perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned by the chief executive
officer, the chief operating officer, the president or by the board of
directors. Assistant secretaries, if any, shall have the same duties and powers,
subject to the supervision of the secretary.
4.6 Salaries. The salaries of the officers shall be fixed from time to
time by the board of directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES
5.1 Indemnification of Directors and Officers. The corporation shall
indemnify and advance expenses to the directors and officers of the corporation
to the fullest extent permitted by applicable law. Without limiting the
generality of the foregoing, the corporation shall indemnify and advance
expenses to the directors and officers of the corporation in all cases in which
a corporation may indemnify and advance expenses to a director and officer under
sections 16-10a-902 and 16-10a-904, respectively, of the Act. The corporation
shall consider and act expeditiously as possible upon any and all requests by a
director or officer for indemnification or advancement of expenses.
5.2 Indemnification of Agents and Employees Who Are Not Directors. The
board of directors may indemnify and advance expenses to any employee or agent
of the corporation who is not a director or officer of the corporation to any
extent consistent with public policy, as determined by the general or specific
actions of the board of directors.
5.3 Insurance. By action of the board of directors, notwithstanding any
interest of the directors in such action, the corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Act.
ARTICLE VI
SHARES
6.1 Issuance of Shares. The corporation may issue the number of shares
of each class or series of shares authorized by the articles of incorporation.
The issuance or sale by the corporation of any of its authorized shares of any
class shall be made only upon authorization by the board of directors, unless
otherwise provided by statute. The board of directors may authorize the issuance
of shares for consideration consisting of any tangible or intangible property or
benefit to the corporation, including cash, promissory notes, services
performed, contracts or arrangements for services to be performed, or other
securities of the corporation. Shares shall be issued for such consideration as
shall be fixed from time to time by the board of directors.
6.2 Certificates for Shares.
(a) Content. Shares may but need not be represented by
certificates in such form as determined by the board of directors and stating on
their face, at a minimum, the name of the corporation and that it is formed
under the laws of the state of Utah, the name of the person to whom issued, and
the number and class of shares and the designation of the series, if any, the
certificate represents. Such certificates shall be signed (either manually or by
facsimile) by the president or a vice-president and by the secretary or an
assistant secretary and may be sealed with a corporate seal or a facsimile
thereof. Each certificate for shares shall be consecutively numbered or
otherwise identified.
(b) Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the board of directors to
determine variations for future series) must be summarized on the front or back
of each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the corporation will furnish the shareholder this
information on request in writing and without charge.
(c) Shareholder List. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the corporation.
(d) Transferring Shares. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates. The board of directors may authorize
the issuance of some or all of the shares of any or all of its classes or series
without certificates. Within a reasonable time after the issuance or transfer of
shares without certificates, the corporation shall send the shareholder a
written statement of the information required on certificates under section 6.2
of these bylaws.
6.4 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the person in whose name
shares stand in the books of the corporation shall be deemed by the corporation
to be the owner thereof for all purposes.
ARTICLE VII
MISCELLANEOUS
7.1 Inspection of Records by Shareholders and Directors. A shareholder
or director of a corporation is entitled to inspect and copy, during regular
business hours at the corporation's principal office, any of the records of the
corporation required to be maintained by the corporation under the Act, if such
person gives the corporation written notice of the demand at least five business
days before the date on which such a person wishes to inspect and copy. The
scope of such inspection right shall be as provided under the Act.
7.2 Corporate Seal. The board of directors may provide a corporate seal
which may be circular in form and have inscribed thereon any designation
including the name of the corporation, the state of incorporation, and the words
"Corporate Seal."
7.3 Amendments. The corporation's board of directors may amend or
repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Act reserve this
power exclusively to the shareholders in whole or part; or
(b) the shareholders, in adopting, amending or repealing a
particular bylaw, provide
expressly that the board of directors may not amend or repeal that bylaw; or
(c) the bylaw either establishes, amends or deletes a greater
shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote and
voting groups required to take action under the quorum and voting requirements
then in effect or proposed to be adopted, whichever are greater.
7.4 Fiscal Year. The fiscal year of the corporation shall be
established by the board of directors.
[End of Bylaws]
ARTICLES OF MERGER
OF
ISG RESOURCES, INC.
Pursuant to the provisions of section 16-10a-1105 of the Utah Revised
Business Corporation Act, ISG Resources, Inc., a Utah corporation (the
"Corporation"), the surviving corporation in the merger, hereby adopts and files
these Articles of Merger.
FIRST: A true and correct copy of the Plan of Merger (the "Plan") is
attached hereto and made a part hereof. Pursuant to the Plan, each constituent
corporation, will merge with and into the Corporation.
SECOND: The name and state of incorporation of each corporation which
is a party to this merger, the designation and number of outstanding shares of
each such corporation, and the number of shares voted for and against the Plan,
are set forth in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
Designation And Shares Voted Shares Voted
Number of For the Against the Plan
State of Outstanding Shares Plan
Name of Corporation Incorporation
<S> <C> <C> <C> <C>
ISG Resources, Inc. Utah 100 Common Shares 100 0
JTM Industries, Inc. Texas 100 shares of 100 0
Common Stock
KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0
Common Stock
Pozzolanic Resources, Inc. Washington 200 shares of 200 0
Class A Common Stock
2,900 shares of 2,900 0
Special Dividend
Class C Stock
5,800 shares of 5,800 0
Special Dividend
Class D Stock
St. Helens Investments, Inc. Washington 100 shares of 100 0
Class A Voting
Common Stock
3,000 shares of 3,000 0
Class B Non-Voting
Common Stock
775,000 shares of 775,000 0
Special Dividend
Class C Stock
Pozzolanic Northwest, Inc. Washington 200 shares of 200 0
Voting Common Stock
300 shares of 300 0
Non-Voting Common
Stock
2,900 shares of 2,900 0
Preferred Capital A
Stock
5,800 shares of 5,800 0
Preferred Capital B
Stock
Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0
Inc. Voting Class A
Common Stock
60,000 shares of 60,000 0
Class B Regular
Dividend Stock
Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0
Common Stock
Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0
Common Stock
Livestock Waste Management, Inc. Iowa 1 share of Common 1 0
Stock
Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0
Common Stock
U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0
Common Stock
FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0
Common Stock
Fly Ash Products, Inc. Arkansas 900 shares of 900 0
Common Stock
- - --------------------------------------- -------------------- --------------------- ----------------- ---------
</TABLE>
THIRD: The shareholders of each of the constituent corporations in the
merger unanimously approved the Plan. The designation and number of outstanding
shares of each constituent corporation, and the number of shares voted for and
against the plan by class, is set forth in the table in paragraph Second above.
FOURTH: The effective date of the merger shall be January 1, 1999.
IN WITNESS WHEREOF, the undersigned executed these Articles of Merger
on this ___ day of November, 1998.
ISG RESOURCES, INC.
By:_________________________________
R Steve Creamer
Chief Executive Officer
CERTIFICATE OF MERGER
FOR THE MERGER
OF
JTM INDUSTRIES, INC.
(a Texas corporation)
WITH AND INTO
ISG RESOURCES, INC.
(a Utah corporation)
Pursuant to the provisions of section 5.04 of the Texas Business
Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the
"Corporation"), the surviving corporation in the merger, hereby delivers these
Articles of Merger for filing on behalf of each or the undersigned corporations.
FIRST: A true and correct copy of the Plan of Merger (the "Plan") is
attached hereto and made a part hereof. Pursuant to the Plan, each constituent
corporation, will merge with and into the Corporation.
SECOND: The name and state of incorporation of each corporation which
is a party to this merger, the designation and number of outstanding shares of
each such corporation, and the number of shares voted for and against the Plan,
are set forth in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
Designation And Shares Voted Shares Voted
State of Number of For the Against the Plan
Name of Corporation Incorporation Outstanding Shares Plan
<S> <C> <C> <C> <C>
ISG Resources, Inc. Utah 100 shares of 100 0
Common Stock
JTM Industries, Inc. Texas 100 shares of 100 0
Common Stock
KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0
Common Stock
Pozzolanic Resources, Inc. Washington 200 shares of 200 0
Class A Common Stock
2,900 shares of 2,900 0
Special Dividend
Class C Stock
5,800 shares of 5,800 0
Special Dividend
Class D Stock
St. Helens Investments, Inc. Washington 100 shares of 100 0
Class A Voting
Common Stock
3,000 shares of 3,000 0
Class B Non-Voting
Common Stock
775,000 shares of 775,000 0
Special Dividend
Class C Stock
Pozzolanic Northwest, Inc. Washington 200 shares of 200 0
Voting Common Stock
300 shares of 300 0
Non-Voting Common
Stock
2,900 shares of 2,900 0
Preferred Capital A
Stock
5,800 shares of 5,800 0
Preferred Capital B
Stock
Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0
Inc. Voting Class A
Common Stock
60,000 shares of 60,000 0
Class B Regular
Dividend Stock
Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0
Common Stock
Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0
Common Stock
Livestock Waste Management, Inc. Iowa 1 share of Common 1 0
Stock
Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0
Common Stock
U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0
Common Stock
FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0
Common Stock
Fly Ash Products, Inc. Arkansas 900 shares of 900 0
Common Stock
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
</TABLE>
THIRD: The Plan has been authorized by all action required by the Act
and by its constituent documents for each domestic constituent corporation and,
for each foreign corporation, by all action required by the laws under which it
was incorporated and its constituent documents.
FOURTH: The shareholders of each of the constituent corporations in the
merger unanimously approved the Plan. The designation and number of outstanding
shares of each constituent corporation, and the number of shares voted for and
against the plan by class, is set forth in the table in paragraph Second above.
The shareholders of each domestic corporation in the merger approved the Plan by
their unanimous written consent given in accordance with section 9.10(1) of the
Act.
FIFTH: The effective date of the merger shall be January 1, 1999.
SIXTH: The Plan will be furnished by the surviving corporation, on
request and without cost, to any shareholder of any constituent corporation.
SEVENTH: ISG Resources, Inc., a Utah corporation, the surviving
corporation, hereby claims responsibility for any and all fees and franchise
taxes owed by JTM Industries, Inc. to the State of Texas.
IN WITNESS WHEREOF, the undersigned corporations have executed these
Articles of Merger on this ___ day of November, 1998.
ISG RESOURCES, INC., POZZOLANIC NORTHWEST, INC.,
a Utah corporation a Washington corporation
By: By:
------------------------------ --------------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
JTM INDUSTRIES, INC., POZZOLANIC NORTHWEST BULK
a Texas corporation CARRIERS, INC.,
a Washington corporation
By:
---------------------------- By:
R Steve Creamer --------------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
KBK ENTERPRISES, INC., POZZOLANIC INT'L FISK, INC.,
a Pennsylvania corporation a Washington corporation
By: By:
--------------------------- -------------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
POZZOLANIC RESOURCES, INC., POWER PLANT AGGREGATES OF
a Washington corporation IOWA, INC.,
an Iowa corporation
By:
-------------------------- By:
R Steve Creamer -------------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
ST. HELENS INVESTMENTS, INC., MIDWEST FLYASH & MATERIALS,
a Washington corporation INC.,
an Iowa corporation
By:
----------------------------- By:
R Steve Creamer ---------------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
LIVESTOCK WASTE MANAGEMENT,
INC.,
an Iowa corporation
By:
---------------------------
R Steve Creamer
Chief Executive Officer
MICHIGAN ASH SALES COMPANY
a Michigan corporation
By:
----------------------------
R Steve Creamer
Chief Executive Officer
U.S. STABILIZATION, INC.,
a Michigan corporation
By:
--------------------------
R Steve Creamer
Chief Executive Officer
FLO FIL CO., INC.,
a Michigan corporation
By:
--------------------------
R Steve Creamer
Chief Executive Officer
FLY ASH PRODUCTS, INC.,
an Arkansas corporation
By:
-------------------------
R Steve Creamer
Chief Executive Officer
ARTICLES FOR THE MERGER
OF
KBK ENTERPRISES, INC.
WITH AND INTO
ISG RESOURCES, INC.
Pursuant to Section 1926 of the Pennsylvania Business Corporation Law,
the undersigned corporations hereby adopt and file the following articles of
merger for the merger of KBK Enterprises, Inc., a Pennsylvania company, and the
other corporations that have executed these Articles of Merger, with and into
ISG Resources, Inc., a Utah corporation:
FIRST: The surviving corporation in the merger is ISG Resources, Inc.,
a corporation organized under the laws of the State of Utah (the
"Surviving Corporation"). The Surviving Corporation is qualified
to do business in the State of Pennsylvania and its registered
office in Pennsylvania is CT Corporation System in Philadelphia
County.
SECOND: The name and address of the registered office of each domestic
business corporation and qualified foreign business corporation,
which are parties to the merger, are:
KBK Enterprises, Inc., a Pennsylvania corporation
1635 Market Street
Philadelphia, PA 19103
Entity Number 765271
JTM Industries, Inc., a Texas corporation
qualified to do business in Pennsylvania
1635 Market Street
Philadelphia, PA 19103
THIRD: The Plan of Merger (the "Plan") is to be effective on January
1, 1999.
FOURTH: The Plan was adopted by the domestic corporation that is a
party to the merger by the unanimous vote of its stockholders in
accordance with the requirements of the Pennsylvania Business
Corporation Law. The Plan was authorized, adopted or approved, as
the case may be, by each of the foreign corporations in
accordance with the laws of the jurisdiction in which it is
incorporated.
FIFTH: The complete Plan is attached to these Articles of Merger and
is made a part hereof.
IN WITNESS WHEREOF, the undersigned corporations have adopted these
Articles of Merger on November ____, 1998.
ISG RESOURCES, INC., POZZOLANIC INT'L FISK, INC.,
a Utah corporation a Washington corporation
By: By:
------------------------ ----------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
JTM INDUSTRIES, INC., ST. HELENS INVESTMENTS, INC.,
a Texas corporation a Washington corporation
By: By:
-------------------------- ----------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
KBK ENTERPRISES, INC., POZZOLANIC NORTHWEST, INC.,
a Pennsylvania corporation a Washington corporation
By: By:
-------------------------- ----------------------
R Steve Creamer R Steve Creamer
Chief Executive Officer Chief Executive Officer
POZZOLANIC RESOURCES, INC., POZZOLANIC NORTHWEST BULK
a Washington corporation CARRIERS, INC.,
a Washington corporation
By:
-------------------------- By:
R Steve Creamer ----------------------
Chief Executive Officer R Steve Creamer
Chief Executive Officer
POWER PLANT AGGREGATES OF FLO FIL CO., INC.,
IOWA, INC., a Michigan corporation
an Iowa corporation
By:
By: ----------------------------
-------------------------- R Steve Creamer
R Steve Creamer Chief Executive Officer
Chief Executive Officer
MIDWEST FLYASH & MATERIALS, FLY ASH PRODUCTS, INC.,
INC., an Arkansas corporation
an Iowa corporation
By:
By: -------------------------------
--------------------------- R Steve Creamer
R Steve Creamer Chief Executive Officer
Chief Executive Officer
LIVESTOCK WASTE MANAGEMENT,
INC.,
an Iowa corporation
By:
---------------------------
R Steve Creamer
Chief Executive Officer
MICHIGAN ASH SALES COMPANY
a Michigan corporation
By:
--------------------------
R Steve Creamer
Chief Executive Officer
U.S. STABILIZATION, INC.,
a Michigan corporation
By:
------------------------------
R Steve Creamer
Chief Executive Officer
ARTICLES OF MERGER
FOR
POZZOLANIC RESOURCES, INC.,
(a Washington corporation)
AND
ISG RESOURCES, INC.,
(a Utah corporation)
Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the
Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah
corporation (the "Corporation"), hereby adopts and files the following Articles
of Merger as the surviving corporation to the merger of Pozzolanic Resources,
Inc., a Washington corporation, with and into the Corporation:
FIRST: The Plan of Merger (the "Plan") is attached hereto and is made
a part hereof.
SECOND: The Plan was duly approved by the shareholders of each foreign
constituent corporation in the merger pursuant to the laws of
each such corporation's state of incorporation and each domestic
constituent corporation has complied with sections 23B.11.010
through 23B.11.040 of the Act.
THIRD: The shareholders of each domestic constituent corporation
approved the Plan by their unanimous written consent in
accordance with section 23B.07.040(1)(a)(i) of the Act.
DATED as of November _____, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
--------------------------
R Steve Creamer
Chief Executive Officer
(An officer's title)
ARTICLES OF MERGER
FOR
ST. HELENS INVESTMENTS, INC.
(a Washington corporation)
AND
ISG RESOURCES, INC.,
(a Utah corporation)
Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the
Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah
corporation (the "Corporation"), hereby adopts and files the following Articles
of Merger as the surviving corporation to the merger of St. Helens Investments,
Inc. dba Pozzolanic International, a Washington corporation, with and into the
Corporation:
FIRST: The Plan of Merger (the "Plan") is attached hereto and is made
a part hereof.
SECOND: The Plan was duly approved by the shareholders of each foreign
constituent corporation in the merger pursuant to the laws of
each such corporation's state of incorporation and each domestic
constituent corporation has complied with sections 23B.11.010
through 23B.11.040.
THIRD: The shareholders of the Corporation and each domestic
constituent corporation approved the Plan by their unanimous
written consent in accordance with section 23B.07.040(1)(a)(i) of
the Act.
DATED as of November _____, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
-----------------------
R Steve Creamer
Chief Executive Officer
(An officer's title)
ARTICLES OF MERGER
FOR
POZZOLANIC NORTHWEST, INC.,
(a Washington corporation)
AND
ISG RESOURCES, INC.,
(a Utah corporation)
Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the
Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah
corporation (the "Corporation"), hereby adopts and files the following Articles
of Merger as the surviving corporation to the merger of Pozzolanic Northwest,
Inc., a Washington corporation, with and into the Corporation:
FIRST: The Plan of Merger (the "Plan") is attached hereto and is made
a part hereof.
SECOND: The Plan was duly approved by the shareholders of each foreign
constituent corporation in the merger pursuant to the laws of
each such corporation's state of incorporation and each domestic
constituent corporation has complied with sections 23B.11.010
through 23B.11.040 of the Act and has duly approved the Plan
pursuant to section 23B.11.030 of the Act.
THIRD: The shareholders of each domestic constituent corporation
approved the Plan by their unanimous written consent in
accordance with section 23B.07.040(1)(a)(i) of the Act.
DATED as of November _____, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
-----------------------------
R Steve Creamer
Chief Executive Officer
(An officer's title)
ARTICLES OF MERGER
FOR
POZZOLANIC NORTHWEST BULK CARRIERS, INC.,
(a Washington corporation)
AND
ISG RESOURCES, INC.,
(a Utah corporation)
Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the
Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah
corporation (the "Corporation"), hereby adopts and files the following Articles
of Merger as the surviving corporation to the merger of Pozzolanic Northwest
Bulk Carriers, Inc., a Washington corporation, with and into the Corporation:
FIRST: The Plan of Merger (the "Plan") is attached hereto and is made
a part hereof.
SECOND: The Plan was duly approved by the shareholders of each foreign
constituent corporation in the merger pursuant to the laws of
each such corporation's state of incorporation and each domestic
constituent corporation has complied with sections 23B.11.010
through 23B.11.040 of the Act and has duly approved the Plan
pursuant to section 23B.11.030 of the Act.
THIRD: The shareholders of each domestic constituent corporation
approved the Plan by their unanimous written consent in
accordance with section 23B.07.040(1)(a)(i) of the Act.
DATED as of November _____, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
------------------------
R Steve Creamer
Chief Executive Officer
(An officer's title)
ARTICLES OF MERGER
FOR THE MERGER
OF
POWER PLANT AGGREGATES OF IOWA, INC.
MIDWEST FLY ASH & MATERIALS, INC.
AND
LIVESTOCK WASTE MANAGEMENT, INC.
WITH AND INTO
ISG RESOURCES, INC.
Pursuant to the provisions of section 490.1105 of the Iowa Business
Corporation Act, ISG Resources, Inc., a Utah corporation (the "Corporation"),
the surviving corporation in the merger, hereby adopts and files these Articles
of Merger.
FIRST: A true and correct copy of the Plan of Merger (the "Plan") is
attached hereto and made a part hereof. Pursuant to the Plan, each constituent
corporation, will merge with and into the Corporation.
SECOND: The name and state of incorporation of each corporation which
is a party to this merger, the designation and number of outstanding shares of
each such corporation, and the number of shares voted for and against the Plan,
are set forth in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
Designation And Shares Voted Shares Voted
State of Number of For the Against the Plan
Name of Corporation Incorporation Outstanding Shares Plan
<S> <C> <C> <C> <C>
ISG Resources, Inc. Utah 100 shares of 100 0
Common Stock
JTM Industries, Inc. Texas 100 shares of 100 0
Common Stock
KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0
Common Stock
Pozzolanic Resources, Inc. Washington 200 shares of 200 0
Class A Common Stock
2,900 shares of 2,900 0
Special Dividend
Class C Stock
5,800 shares of 5,800 0
Special Dividend
Class D Stock
St. Helens Investments, Inc. Washington 100 shares of 100 0
Class A Voting
Common Stock
3,000 shares of 3,000 0
Class B Non-Voting
Common Stock
775,000 shares of 775,000 0
Special Dividend
Class C Stock
Pozzolanic Northwest, Inc. Washington 200 shares of 200 0
Voting Common Stock
300 shares of 300 0
Non-Voting Common
Stock
2,900 shares of 2,900 0
Preferred Capital A
Stock
5,800 shares of 5,800 0
Preferred Capital B
Stock
Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0
Inc. Voting Class A
Common Stock
60,000 shares of 60,000 0
Class B Regular
Dividend Stock
Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0
Common Stock
Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0
Common Stock
Livestock Waste Management, Inc. Iowa 1 share of Common 1 0
Stock
Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0
Common Stock
U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0
Common Stock
FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0
Common Stock
Fly Ash Products, Inc. Arkansas 900 shares of 900 0
Common Stock
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
</TABLE>
THIRD: The shareholders of each of the constituent corporations in the
merger unanimously approved the Plan. The designation and number of outstanding
shares of each constituent corporation, and the number of shares voted for and
against the plan by class, is set forth in the table in paragraph Second above.
FOURTH: The effective date of the merger shall be January 1, 1999.
IN WITNESS WHEREOF, the undersigned executed these Articles of Merger
on this ___ day of November, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
---------------------------
R Steve Creamer
Chief Executive Officer
CERTIFICATE OF MERGER
FOR THE MERGER
OF
FLO FIL CO., INC.,
U.S. STABILIZATION, INC.
AND
MICHIGAN ASH SALES COMPANY
WITH AND INTO
ISG RESOURCES, INC.
Pursuant to the provisions of section 450.1707 of the Michigan Business
Corporation Act, the undersigned Michigan corporations hereby execute and file
this Certificate of Merger on behalf of each corporation.
FIRST: A true and correct copy of the Plan of Merger (the "Plan") is
attached hereto and made a part hereof. Pursuant to the Plan, each constituent
corporation, will merge with and into ISG Resources, Inc., a Utah Corporation
(the "Corporation").
SECOND: The name and state of incorporation of each corporation which is a
party to this merger, the designation and number of outstanding shares of each
such corporation, and the number of shares voted for and against the Plan, are
set forth in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
Designation And Shares Voted Shares Voted
State of Number of For the Against the Plan
Name of Corporation Incorporation Outstanding Shares Plan
<S> <C> <C> <C> <C>
ISG Resources, Inc. Utah 100 shares of 100 0
Common Stock
JTM Industries, Inc. Texas 100 shares of 100 0
Common Stock
KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0
Common Stock
Pozzolanic Resources, Inc. Washington 200 shares of 200 0
Class A Common Stock
2,900 shares of 2,900 0
Special Dividend
Class C Stock
5,800 shares of 5,800 0
Special Dividend
Class D Stock
St. Helens Investments, Inc. Washington 100 shares of 100 0
Class A Voting
Common Stock
3,000 shares of 3,000 0
Class B Non-Voting
Common Stock
775,000 shares of 775,000 0
Special Dividend
Class C Stock
Pozzolanic Northwest, Inc. Washington 200 shares of 200 0
Voting Common Stock
300 shares of 300 0
Non-Voting Common
Stock
2,900 shares of 2,900 0
Preferred Capital A
Stock
5,800 shares of 5,800 0
Preferred Capital B
Stock
Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0
Inc. Voting Class A
Common Stock
60,000 shares of 60,000 0
Class B Regular
Dividend Stock
Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0
Common Stock
Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0
Common Stock
Livestock Waste Management, Inc. Iowa 1 share of Common 1 0
Stock
Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0
#005309 Common Stock
U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0
#168092 Common Stock
FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0
#394832 Common Stock
Fly Ash Products, Inc. Arkansas 900 shares of 900 0
Common Stock
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
</TABLE>
THIRD: The Plan has been adopted by the boards of directors of each
constituent corporation in accordance with section 703a, with respect to the
domestic corporations involved in the merger, and in accordance with the
respective laws of the states of incorporation of each of the other constituent
corporations.
FOURTH: The shareholders of each of the constituent corporations in the
merger unanimously approved the Plan. The designation and number of outstanding
shares of each constituent corporation, and the number of shares voted for and
against the plan by class, is set forth in the table in paragraph Second above.
Pursuant to section 703a, the shareholders of each domestic corporation in the
merger approved the Plan by their unanimous written consent as provided by
section 450.1407 of the Michigan Business Corporation Act.
FIFTH: The effective date of the merger shall be January 1, 1999.
SIXTH: The Plan will be furnished by the surviving corporation, on request
and without cost, to any shareholder of any constituent corporation.
IN WITNESS WHEREOF, the undersigned corporations have caused this
Certificate of Merger to be executed on this ___ day of November, 1998.
FLO FIL CO., INC.
By:
--------------------------
R Steve Creamer
Chief Executive Officer
U.S. STABILIZATION, INC.
By:
--------------------------
R Steve Creamer
Chief Executive Officer
MICHIGAN ASH SALES COMPANY
By:
--------------------------
R Steve Creamer
Chief Executive Officer
ARTICLES OF MERGER
FOR THE MERGER
OF
FLY ASH PRODUCTS, INC.
WITH AND INTO
ISG RESOURCES, INC.
Pursuant to the provisions of section 4-27-1105 of the Arkansas - 1987
Business Corporation Act, ISG Resources, Inc., a Utah corporation (the
"Corporation"), the surviving corporation in the merger, hereby adopts and files
these Articles of Merger.
FIRST: A true and correct copy of the Plan of Merger (the "Plan") is
attached hereto and made a part hereof. Pursuant to the Plan, each constituent
corporation, will merge with and into the Corporation.
SECOND: The name and state of incorporation of each corporation which is a
party to this merger, the designation and number of outstanding shares of each
such corporation, and the number of shares voted for and against the Plan, are
set forth in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
Designation And Shares Voted Shares Voted
State of Number of For the Against the Plan
Name of Corporation Incorporation Outstanding Shares Plan
<S> <C> <C> <C> <C>
ISG Resources, Inc. Utah 100 shares of 100 0
Common Stock
JTM Industries, Inc. Texas 100 shares of 100 0
Common Stock
KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0
Common Stock
Pozzolanic Resources, Inc. Washington 200 shares of 200 0
Class A Common Stock
2,900 shares of 2,900 0
Special Dividend
Class C Stock
5,800 shares of 5,800 0
Special Dividend
Class D Stock
St. Helens Investments, Inc. Washington 100 shares of 100 0
Class A Voting
Common Stock
3,000 shares of 3,000 0
Class B Non-Voting
Common Stock
775,000 shares of 775,000 0
Special Dividend
Class C Stock
Pozzolanic Northwest, Inc. Washington 200 shares of 200 0
Voting Common Stock
300 shares of 300 0
Non-Voting Common
Stock
2,900 shares of 2,900 0
Preferred Capital A
Stock
5,800 shares of 5,800 0
Preferred Capital B
Stock
Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0
Inc. Voting Class A
Common Stock
60,000 shares of 60,000 0
Class B Regular
Dividend Stock
Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0
Common Stock
Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0
Common Stock
Livestock Waste Management, Inc. Iowa 1 share of Common 1 0
Stock
Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0
Common Stock
U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0
Common Stock
FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0
Common Stoc
Fly Ash Products, Inc. Arkansas 900 shares of 900 0
Common Stock
- - --------------------------------------- -------------------- --------------------- ----------------- -----------------
</TABLE>
THIRD: The shareholders of each of the constituent corporations in the
merger unanimously approved the Plan. The designation and number of outstanding
shares of each constituent corporation, and the number of shares voted for and
against the plan by class, is set forth in the table in paragraph Second above.
FOURTH: The effective date of the merger shall be January 1, 1999.
IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on
this ___ day of November, 1998.
ISG RESOURCES, INC.,
a Utah corporation
By:
--------------------------
R Steve Creamer
Chief Executive Officer
ARTICLES OF MERGER OF
MINERAL SPECIALTIES, INC. AND
IRVINE FLY ASH, INC.
WITH AND INTO
ISG RESOURCES, INC.
Pursuant to the provisions of section 16-10a-1104 of the Utah Revised
Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation
(the "Corporation"), hereby adopts and files the following Articles of Merger
relating to the merger of Mineral Specialties, Inc., a Montana corporation, and
Irvine Fly Ash, Inc., an Ohio corporation (individually, the "Subsidiary" and
collectively, the "Subsidiaries"), with and into the Corporation, with the
Corporation being the surviving corporation.
FIRST: The name and place of incorporation of each corporation which is a
party to this merger are as follows:
Name of Corporation Place of Incorporation
------------------- ----------------------
ISG Resources, Inc. Utah
Mineral Specialties, Inc. Montana
Irvine Fly Ash, Inc. Ohio
SECOND: A true and correct copy of the Agreement and Plan of Merger between
the Subsidiaries and the Corporation is attached hereto as Exhibit "A" (the
"Plan"). Pursuant to the Plan, each Subsidiary will merge with and into the
Corporation.
THIRD: Immediately prior to the merger, the Corporation owned 100% of the
outstanding shares of each Subsidiary.
FOURTH: The Corporation is the surviving corporation of the merger and all
the provisions of section 16-10a-1103(7) of the Act were met with respect to the
merger. Therefore, in accordance, with section 16-10a-1104(3) of the Act, the
shareholders of the Corporation and Subsidiaries are not required to vote on the
Plan.
FIFTH: The effective date of the merger is July 31, 1999. The Corporation
is the sole shareholder of each Subsidiary. Accordingly, the mailing
requirements of section 16-10a-1104(4) of the Act are inapplicable and the
effective date complies with section 16-10a-1104(5) of the Act.
IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on
this day of July, 1999.
ISG RESOURCES, INC.
By:
------------------------
Brett A. Hickman
Senior Vice President and Secretary
AGREEMENT AND PLAN
OF MERGER OF
MINERAL SPECIALTIES, INC. AND
IRVINE FLY ASH, INC.
WITH AND INTO
ISG RESOURCES, INC.
This Agreement and Plan of Merger is dated July _____, 1999, by and
among ISG Resources, Inc., a Utah corporation ("ISG"), Mineral Specialties,
Inc., a Montana corporation ("Mineral"), and Irvine Fly Ash, Inc., an Ohio
corporation ("Irvine") (Mineral and Irvine) may in the alternative be referenced
individually as the "Subsidiary" or collectively as the "Subsidiaries") and is
effective on July 31, 1999 (the "Effective Date").
ISG is a corporation duly organized and existing under the laws of the
state of Utah.
Mineral is a corporation duly organized and existing under the laws of
the state of Montana, having 630 common shares, par value of $10.00 per share,
issued and outstanding.
Irvine is a corporation duly organized and existing under the laws of
the state of Ohio, having 500 common shares, par value $1.00 per share, issued
and outstanding.
WHEREAS, ISG owns each issued and outstanding share of the stock of
each Subsidiary; and
WHEREAS, the Board of Directors of ISG deems it advisable, for the
general welfare and advantage of ISG and each Subsidiary, that each Subsidiary
merge with and into ISG;
NOW THEREFORE, the parties agree, in accordance with the provisions of
the Revised Business Corporation Act of the state of Utah, the Montana Business
Corporation Act and the Ohio General Corporation Law, that each Subsidiary shall
be, and hereby is, merged with and into ISG (the "Merger"), and that the terms
and conditions of the Merger and the mode of carrying the Merger into effect and
the manner of canceling the shares of each of the Subsidiaries, shall be as set
forth.
ARTICLE I.
Corporate Existence of Surviving Corporation
Except as otherwise specifically set forth in this agreement, the
identity, existence, purposes, powers, franchises, rights and immunities of ISG
shall continue unaffected and unimpaired by the Merger, and the corporate
identity, existence, purposes, powers, franchises, rights and immunities of each
Subsidiary shall be merged into ISG and ISG shall become the "Surviving
Corporation." The organization of each Subsidiary, except insofar as it may be
continued by statute, shall cease on the Effective Date.
ARTICLE II.
Articles and Bylaws of Surviving Corporation
The Articles of Incorporation and bylaws of ISG, as they shall exist on
the Effective Date, shall be the Articles of Incorporation and bylaws of the
Surviving Corporation until they shall be amended or repealed.
ARTICLE III.
Directors and Officers of Surviving Corporation
The directors of ISG as of the Effective Date shall be the directors of
the Surviving Corporation until their successors are elected and qualified.
The officers of ISG as of the Effective Date shall be the officers of
the Surviving Corporation until their successors are appointed by the board of
directors of the Surviving Corporation.
ARTICLE IV.
Manner of Converting Shares of the Subsidiary Corporations
into Shares of the Surviving Corporation
ISG waives any right to receive shares of common stock of the Surviving
Corporation in substitution or exchange for shares of common stock of each
Subsidiary owned by ISG. Accordingly, the Surviving Corporation shall not issue
any shares in substitution or exchange for any shares of common stock of each
Subsidiary owned by ISG on the effective date of this agreement and plan. The
shares of each Subsidiary held by ISG shall be cancelled on the Effective Date.
ARTICLE V.
Miscellaneous Provisions
A. In accordance with the provisions of Section 16-10a-1104 of the
Revised Business Corporation Act of the state of Utah and applicable foreign
statutes, ISG shall not submit this agreement and plan to the respective
shareholders of the Constituent Corporations. The President of ISG shall sign,
acknowledge, file and record this agreement and plan, in accordance with the
Revised Business Corporation Act of the state of Utah, the Business Corporation
Act of the state of Montana and the General Corporation Law of the state of
Ohio. This agreement and plan shall take effect and be deemed and taken to be
the agreement and act of Merger of ISG and each Subsidiary and the Merger shall
be and become effective immediately upon the start of business on the Effective
Date, every shareholder having duly waived the mailing requirement of Section
16-10a-1104(5) of the Business Corporation Act of the state of Utah.
B. Anything in this agreement or elsewhere to the contrary
notwithstanding, this agreement may be abandoned at any time prior to its filing
and recording by the resolution under the authority of the board of directors of
ISG.
C. If at any time the Surviving Corporation shall deem or be advised
that any further assignments or assurances in law or things are necessary or
desirable to vest or to perfect or confirm, of record or otherwise, in the
Surviving Corporation the title to any property of the Subsidiaries acquired or
to be acquired by reason of or as a result of the Merger, each Subsidiary and
its proper officers and directors shall and will execute and deliver any and all
such proper deeds, assignments and assurances in law and do all things necessary
or proper so to vest, perfect or confirm title to such property in the Surviving
Corporation and otherwise to carry out the purposes of this agreement.
D. The Surviving Corporation agrees that it may be served with process
in the states of Montana and Ohio in any proceeding for enforcement of any
obligation of a Subsidiary or for enforcement of any obligation of the Surviving
Corporation arising from the Merger, and appoints the respective Secretaries of
State of the states of Montana and Ohio as its agent to accept service of
process in any such suit or other proceeding. The address to which a copy of
such process shall be mailed by said Secretary of State is 136 East South
Temple, Suite 1300, Salt Lake City, Utah 84111.
E. The Surviving Corporation shall pay all the expenses of carrying
this agreement into effect and of accomplishing the Merger.
F. For the convenience of the parties and to facilitate the filing or
recording of this agreement, any number of counterparts may be executed, and
each such executed counterpart shall be deemed to be an original instrument.
The boards of directors of ISG and the Subsidiaries have duly caused
this agreement to be signed by their President.
ISG RESOURCES, INC.
By:
---------------------------------
Brett A. Hickman, Senior Vice President
and Secretary
IRVINE FLY ASH, INC. MINERAL SPECIALTIES, INC.
By: By:
----------------------------------- ----------------------------
Brett A. Hickman, Senior Vice President Brett A. Hickman, Senior Vice
and Secretary President and Secretary
Prescribed by J. Kenneth Blackwell Expedite this form [X] Yes
Please obtain fee amount and mailing instructions from the Forms Inventory
List (using the 3 digit form # located at the bottom of this form). To
obtain the Forms Inventory List or for assistance, please call Customer
Service:
Central Ohio: (614) 466-3910 Toll Free: 1-877-SOS-FILE (1-877-767-3453)
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio law, the undersigned
corporations, banks, savings banks, savings and loan, limited liability
companies, limited partnerships and/or partnerships with limited liability,
desiring to effect a merger, set forth the following facts:
I. Surviving Entity
A. The name of the entity surviving the merger is:
ISG RESOURCES, INC.
B. Name Change: As a result of this merger, the name of the surviving
entity has been changed to the following:
C. The surviving entity is a: (Please check the appropriate box and fill in
the appropriate blanks)
[ ] Domestic (Ohio) for-profit corporation, charter number _____________
[ ] Domestic (Ohio) non-profit corporation, charter number _____________
[X] oreign (Non-Ohio) corporation incorporated under the laws of the
state/country of _Utah_ and licensed to transact business in the State
of Ohio under license number _1032651_
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of the
state/country of ______ and NOT licensed to transact business in the
State of Ohio
[ ] Domestic (Ohio) limited liability company, with registration number
________
[ ] Foreign (Non-Ohio) limited liability company organized under the laws
of the state/country of ________ and registered to do business in the
State of Ohio under registration number ____________
[ ] Foreign (Non-Ohio) limited liability company organized under the laws
of the state/country of ________ and NOT registered to do business in
the State of Ohio.
[ ] Domestic (Ohio) limited partnership, with registration number _____.
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of the
state/country of _________ and registered to do business in the State
of Ohio under registration number _______.
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of the
state/country of _________ and NOT registered to do business in the
State of Ohio.
[ ] Domestic (Ohio) partnership having limited liability, with the
registration number ___________.
[ ] Foreign (Non-Ohio) partnership having limited liability organized
under the laws of the state/country of _________ and registered to
business in the state of Ohio under the registration number
_____________.
II. Merging Entities
The name, charger/license/registration number, type of entity,
state/country of incorporation or organization, respectively, of which is a
party to the merger are as follows: (If this is insufficient space to
reflect all merging entities, please attach a separate sheet listing the
merging entities.)
Name State/Country of Organization Type of Entity
ISG Resources, Inc. Utah Corporation
Irvine Fly Ash, Inc. Ohio Corporation
Mineral Specialties, Inc. Montana Corporation
III. Merger Agreement on File
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
ISG Resources, Inc. 136 East South Temple, Suite 1300
Attn: Curtis Brown (street and number)
(name)
Salt Lake City Utah 84111
(city, village or township) (state) (zip code)
IV. Effective Date of Merger
This merger is to be effective on: _July 31, 1999_ (if a date is specified,
the date must be a date on or after the date of filing; the effective date
of the merger cannot be earlier than the date of filing, if no date is
specified, the date of filing will be the effective date of the merger).
V. Merger Authorized
The laws of the state or country under which each constituent entity
exists, permits this merger. This merger was adopted, approved and
authorized by each of the constituent entities in compliance with the laws
of the state under which it is organized, and the persons signing this
certificate on behalf of the constituent entities are duly authorized to do
so.
IV. Statutory Agent
The name and address of the surviving entity's statutory agent upon whom
any process, notice or demand may be served is:
________________________ ________________________________
(name) (street and number)
________________________, Ohio ________________________________
(city, village or township) (zip code)
(This item MUST be completed if the surviving entity is a foreign entity
which is not licensed, registered or otherwise authorized to conduct
business in the state of Ohio.)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the
appointment of statutory agent for said entity.
/s/
------------------
Signature of Agent
(The acceptance of agent must be completed by domestic surviving entities
if through this merger the statutory agent for the surviving entity has
changed or the named agent differs in any way from the name currently on
record with the Secretary of State.)
VII. Statement of Merger
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VIII.Amendments
The articles of incorporation, articles of organization, certificate of
limited partnership or registration of partnership having limited liability
(circle appropriate term) of the surviving domestic entity have been
amended. Please see attached "Exhibit A." (Please note, if there will be no
change please state "no change").
IX. Qualification or Licensure of Foreign Surviving Entity
A. The listed surviving foreign corporation, bank, savings bank, savings
and loan, limited liability company, limited partnership, or partnership
having limited liability desires to transact business in Ohio as a foreign
corporation, bank, savings bank, savings and loan, limited liability
company, limited partnership, or partnership having limited liability, and
hereby appoints the following as its statutory agent upon whom process,
notice or demand against the entity may be served in the state of Ohio. The
name and complete address of the statutory agent is:
_________________________ ______________________________
(name) (street and number)
________________________, Ohio _______________________________
(city, village or township) (zip code)
The subject surviving foreign corporation, bank, savings bank, savings and
loan, limited liability company, limited partnership, or partnership having
limited liability irrevocably consents to service of process on the
statutory agent listed above as long as the authority of the agent
continues, and to service of process upon the Secretary of State of Ohio if
the agent cannot be found, if the corporation, bank, savings bank, savings
and loan, limited liability company, limited partnership, or partnership
having limited liability fails to designate another agent when required to
do so, or if the foreign corporation's, bank's, savings bank's, savings and
loan's, limited liability company's, limited partnership's, or partnership
having limited liability's license or registration to do business in Ohio
expires or is canceled.
B. The qualifying entity also states as follows: (Complete only if
applicable)
1. Foreign Notice Under Section 1703.031
(If the qualifying entity is a foreign bank, savings bank, or savings
and loan, then the following information must be completed.)
a. The name of the Foreign Nationally/Federally charted bank,
savings bank, or savings and loan association is __________.
b. The name(s) of any Trade Name(s) under which the
corporation will conduct business:
_____________________________________.
c. The location of the main office (non-Ohio) shall be:
__________________________________________________-
(street address)
__________________________ _______ _______ ________
(city, township or village) (county) (state) (zip code)
d. The principal office location in the state of Ohio shall
be:
_______________________________
(street address)
_________________________ ________ _______ _________
(city, township or village) (county) (state) (zip code)
(Please note, if there will not be an office in the state of
Ohio, please list none.)
e. The corporation will exercise the following purpose(s) in
the state of Ohio: (Please provide a brief summary of the
business to be conducted; a general clause is not sufficient)
_________________________________________
2. Foreign Qualifying Limited Liability Company
(If the qualifying entity is a foreign limited liability company, the
following information must be completed.)
a. The name of the limited liability company in its state of
organization/registration is _______________________________
b. The name under which the limited liability company desires
to transact business in Ohio is
_______________________________
c. The limited liability company was organized or registered
on ___________ under the laws of the state/country of
___________
d. The address to which interested persons may direct requests
for copies of the articles of organization, operating
agreement, bylaws, or other chart documents of the company is:
_____________________________________
(street address)
_______________________ ________ __________
(city, township or village) (state) (zip code)
3. Foreign Qualifying Limited Partnership
(If the qualifying entity is a foreign limited partnership, the
following information must be completed).
a. The name of the limited partnership is
_____________________
b. The limited partnership was formed on ____________________
c. The address of the office of the limited partnership in its
state/country of organization is:
________________________________________
(street address)
_________________________ ________ ______ ________
(city, township or village) (county) (state) (zip code)
d. The limited partnership's principal office address is:
________________________________________
(street address)
_________________________ ________ ______ ________
(city, township or village) (county) (state) (zip code)
e. The names and business or residence addresses of the
General partners of the partnerships are as follows:
Name Address
_____________________ _______________________
(If insufficient space to cover this item, please attach a
separate sheet listing the general partners and their
respective addresses)
f. The address of the office where a list of the names and
business or residence addresses of the limited partners and
their respective capital contributions is to be maintained is:
________________________________________
(street address)
_________________________ ________ ______ ________
(city, township or village) (county) (state) (zip code)
The limited partnership hereby certifies that it shall
maintain said records until the registration of the limited
partnership in Ohio is canceled or withdrawn.
4. Foreign Qualifying Partnership Having Limited Liability
a. The name of the partnership shall be
________________________
b. Please complete the following appropriate section (either
item b1 or b2):
1. The address of the partnership's principal office
in Ohio is:
__________________________________________
(street name and number)
_____________________, Ohio ___________
(city, township or village) (zip code)
(If the partnership does not have a principal office
in Ohio, then items b2 and item c must be completed)
2. The address of the partnership's principal office
(Non-Ohio):
_______________________________________
(street address)
_______________________ ______ ________
(city, township or village) (state) (zip code)
c. The name and address of a statutory agent for service of
process in Ohio is as follows:
_______________________ ______________________________
(name) (street address)
_________________________, Ohio ________________
(city, township or village) (zip code)
d. Please indicate the state or jurisdiction in which the
Foreign Limited Liability Partnership has been formed
____________________________________
e. The business which the partnership engages in is:
________________________________________________
The undersigned constituent entities have caused this certificate of merger
to be signed by its duly authorized officers, partners and representatives
on the date(s) stated below.
ISG Resources, Inc. Irvine Fly Ash, Inc.
------------------ --------------------
(Exact name of entity) (Exact name of entity)
By: /s/ Brett A. Hickman By: /s/ Brett A. Hickman
----------------------- ----------------------
Its: Brett A. Hickman, Sr. V.P. Its: Brett A. Hickman, Sr. V.P.
& Secretary & Secretary
Date: ______________________ Date: ______________________
Mineral Specialties, Inc.
------------------------
(Exact name of entity)
By: /s/ Brett A. Hickman
--------------------
Its: Brett A. Hickman, Sr. V.P. & Secretary
Date: ______________________
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated January __,
1999, between ISG Resources, Inc., a Utah corporation ("Purchaser") 11 and James
M. Isaac and Tommy C. Isaac, individuals residing in the state of Texas
(individually a "Seller" and collectively the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires
to purchase from the Sellers, all of the issued and outstanding shares of
capital stock of J. Marvin Isaac Interests, Inc., d/b/a Best Masonry & Tool
Supply (the "Company"), a Texas corporation.
The issued and outstanding capital stock of the Company is referred to
herein as the "Purchased Stock."
Unless otherwise defined in this Agreement, the capitalized terms used
in this, Agreement have the meanings given in Article VIII below.
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
1 SALE OF PURCHASED STOCK; CLOSING
1.1 Purchase and Sale. On the terms and conditions set forth in this
Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase from
the Sellers, the Purchased Stock.
1.2 Consideration.
1.2.1 The consideration (the "Consideration") for the Purchased Stock
is comprised of: (i) $13,300,000.00 IN CASH, subject to increase (riot decrease)
as set forth in Section 1.2.2 below (the "Deferred Consideration"); and (ii) as
"Additional Consideration", the Purchaser shall also pay to the Sellers at
closing the sum of $2,400,000.00 IN CASH to retire all of the indebtedness of
the Company due to the Sellers (the "Shareholder Debt").
1.2.2 The consideration will increase (and thus, the amount of the
Deferred Consideration is determined), dollar for dollar, equal to the amount of
increase in the Company's net book value (the "Net Book Value") (defined as
total assets less liabilities) during the period from July 31, 1998, to the
Closing Date (the amount of the Additional Consideration paid to retire the
Shareholder Debt shall not be included in the Net Book Value calculation on
either date). To determine whether an adjustment is appropriate, Sellers shall
(within thirty days of the Closing Date) provide to Purchaser with financial
statements of the Company that are prepared in a manner consistent with the
determination of the Net Book Value as of July 31, 1998, indicating the Net Book
Value as of the Closing Date (the "Sellers' Calculation") . Purchaser shall make
the Company records available, as necessary, to make such calculation. If
Purchaser (by notice to Sellers within thirty (30) days of receipt of Sellers'
Calculation) disagrees with the Sellers' Calculation ("Sellers' Objection
Notice"), then Purchaser and the Sellers shall submit the matter to Ernst &
Young and Mr. Andrew M. Rossi for resolution in accordance with GAAP on a basis
consistent with Sellers' Financial Statements. If, within thirty (30) days of
the dispute being submitted to them, Ernst & Young and Mr. Rossi are unable to
agree as to how the dispute should be resolved, then the parties shall submit
the matter to Arbitration as provided in Article 10 of this Agreement. If Ernst
& Young and Mr. Rossi are able to agree as to how the dispute should be
resolved, they will jointly prepare and deliver a report to all parties which
will detail whether a Consideration adjustment is necessary. The report will be
final and binding on both parties, absent fraud or clear error. If Seller fails
to furnish Sellers' Calculations within 45 days following the Closing, subject
to reasonable extensions due to the lack of Purchaser's cooperation, Sellers'
Calculation is deemed to be $350,000.00, subject to Purchaser timely objecting
to same pursuant to Sellers' Objection Notice.
1.3 Closing. The Closing (the "Closing") of the purchase and sale of
the Purchased Stock will take place at the offices of Sellers' attorney, Stephen
L. Brochstein, Esquire, One Riverway, Suite 1950, Houston, Texas 77056, on the
date hereof (the "Closing Date").
1.4 Payment of Consideration and Additional Consideration. At the
Closing, Purchaser will pay the Consideration and the Additional Consideration
to the Sellers by wire transfer to such account as the Sellers may direct by
written notice delivered to Purchaser by the Sellers before the Closing Date.
Simultaneously, the Sellers will sell and convey to Purchaser the Purchased
Stock free and clear of all Liens, by delivering to Purchaser a stock
certificate, registered in the name of Purchaser, representing the Purchased
Stock. At the Closing, the parties shall also deliver the certificates,
documents and instruments to be delivered pursuant to this Agreement.
1.5 Deferred Consideration. If the Purchaser fails to timely give
notice to Seller that it disagrees with the Sellers' Calculation, then within
thirty (30) days after delivery of the Sellers' Calculation (or determination
pursuant to Section 1.2), the Purchaser will deliver to the sellers cash in the
amount of the adjustment specified therein. If the Purchaser timely disagrees
with the Sellers' Calculation, the Purchaser will deliver to the Sellers cash
equal to the undisputed portion of the adjustment specified in the report, if
any. The Purchaser shall also pay interest, at the rate of eight percent (8%)
per annum, on the unpaid principal amount of the Deferred Consideration from the
Closing Date to the earlier of the date of payment or forty-five (45) days
following the date of the Closing, and thereafter, until paid, the unpaid
balance will accrue interest at the rate of eighteen (18%) percent per annum,
but not to exceed the maximum lawful rate.
1.6 Payment of the Deferred Consideration. The first $350,000 of the
Deferred consideration (to the extent the proper amount of the Deferred
Consideration is sufficient) shall be paid equally to Jamar Management Services,
Inc. and Tomco Management Services, Inc., both Texas corporations owned by the
Sellers, as consideration for the termination of existing management contracts
with those management companies deemed terminated as of the Closing Dates, and
the balance, if any, paid to the Sellers. Payment of the Additional
Consideration shall not reduce the amount of the Deferred Consideration payable
to Seller.
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers represent and warrant to Purchaser that: (i) the "Seller
Financial Statements" described in section 2.4 are materially accurate and
complete, and prepared in accordance with generally accepted accounting
principles (11GAAP11); discrepancy or difference between the Seller Financial
Statements and the Ernst & Young findings are not the subject of any warranty or
representation on the part of Sellers and Purchaser acquires the Purchased Stock
subject to any possible difference (and the Sellers shall not be deemed to be in
breach of any representation or warranty set forth herein due to such
differences or any resulting change in the statements of operations or financial
position of the Company as a result of the Ernst & Young findings) ; i: ii) the
Company has no "Indebtedness" other than as set forth on the Seller Financial
Statements or the "Interim Statements" (and similar type obligations through the
Closing Date) and the Shareholder Debt has been satisfied; (iii) the Company is
a corporation duly organized, validly existing and in good standing under the
laws of the state of Texas and has full corporate power and authority to conduct
its business; (iv) the Company is duly qualified, licensed and admitted to do
business in Texas and Georgia; (v) the Purchased Stock consists of the following
number of shares of capital stock: 1,000 shares of common stock, par value
($1.00) per share; (vi) the Sellers have full authority to enter into this
Agreement, to perform their obligations hereunder and to consummate the
transactions contemplated hereby; (vii) this Agreement has been duly and validly
executed and delivered by the Sellers and constitutes the legal, valid and
binding obligations of the Sellers, enforceable against them in accordance with
its terms; (viii) the Sellers have delivered to Purchaser true and complete
copies of the certificate or articles of incorporation and by-laws (or other
comparable corporate charter documents) of the Company, including all amendments
thereto effected through the Closing Date (the "Initial Corporate Documents");
and (ix) the Purchased Stock constitutes all of the issued and outstanding
shares of capital stock of the Company. The shares of Purchased Stock are
validly issued, fully paid and nonassessable, issued in compliance with all
applicable Laws, and no additional shares of capital stock have been reserved
for issuance. There are no outstanding Options with respect to the stock of the
Company or agreements, arrangements or understandings to issue options with
respect to the Company, nor are there any preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of the capital stock of the Company. The Sellers are the record
and beneficial owners of all of the shares of Purchased Stock, free and clear of
all Liens. The delivery to Purchaser of" the certificates representing the
Purchased Stock will transfer to Purchaser good and valid title to all shares of
the Purchased Stock, free and clear of all Liens, and written restrictions that
the Sellers and/or the Company may be party to, and after such transfer the
Purchased Stock, in the hands of Purchaser, will have been duly authorized,
validly issued, fully paid and nonassessable. From and after the Closing, no
Seller nor any other Person (other than the Purchaser or its successors or
assigns, or any person claiming by or through them), except to the extent
attributable, directly or indirectly, to Purchaser, will, as of the Closing
Date, have any rights whatsoever with respect to the Purchased Stock or to any
other securities of the Company.
In addition, Sellers, to their actual knowledge, (Sellers having no
duty or obligation of independent investigation of any kind) , hereby represent
and warrant to Purchaser as follows with respect to the following acts or
occurrences during the last three years (or such shorter applicable period as
hereafter provided) subject to the limitations of Section 2.26:
2.1 No Conflicts. As of the Closing Date, the execution and delivery by
the Sellers of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, except to the extent attributable, directly or
indirectly, to Purchaser or its successors or assigns, or due to any Laws or
Orders applicable to Purchaser exclusively arising due to this transaction:
2.1.1 conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Initial Corporate Documents;
2.1.2 conflict with or result in a violation or breach of any term or
provision of any Laws or Order applicable to any of the Sellers or to the
Company, or any of their Assets; or
2.1.3 except as disclosed in Section 2.1 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require any
of the Sellers or the Company to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the creation or
imposition of any Lien upon the Company or any of its Assets under, any written
Tiaterial contract or License to which any of the Sellers or the Company is a
party or by which any of their respective Assets is bound, except for such
conflicts, violations, breaches, defaults, consents, approvals, actions,
filings, notices ! terminations, cancellations, accelerations, modifications,
additional rights or entitlements or Liens that, individually or in the
aggregate, (A) are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of the Company, and (B)
could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or on the ability of any of the
Sellers or the Company to perform its obligations hereunder.
2.2 Governmental Approvals and Filings. Except as disclosed in Section
2.2 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of the Sellers
or the Company is required in connection with the execution, delivery and
performance of this Agreement or the consummation of transactions contemplated
herein, except to the extent attributable!, directly or indirectly, to
Purchaser, or any Laws or Orders applicable to Purchaser. Notwithstanding any
provision to the contrary, the Sellers make no representation whatsoever
regarding the necessity of a filing under the Hart- Scott-Rodino Antitrust
Improvements Act of 1976 : . as amended, or any similar or related Laws or
orders, and Purchaser shall indemnify, defend and hold Sellers harmless from any
claim relating thereto.
2.3 Books and Records. The minute books and other similar records of
the Company provided to Purchaser upon execution of this Agreement contain a
true and materially accurate record of the mattes set forth therein.
2.4 Financial Statements. The Sellers have caused the Company to
furnish to Purchaser true and correct copies of (i) the reviewed but Unaudited
Financial Statements of the Company for the periods ending July 31, 1997 and
July 31, 1998 prepared in accordance with GAAP (the "Seller Financial
Statements") and (ii) the unaudited internal balance sheets and statements of
operations certified as materially true and correct by the chief financial
officer of the Company for the period from August 1, 1998 through November 30,
1998 (the "Interim Statements") . The Seller Financial Statements and the
Interim Financial Statements (both of which are attached as Exhibit A) fairly
represent the financial condition and results of operations of the Company as of
their respective dates and for the periods referred to, all in accordance with
GAAP. The Company engaged Ernst & Young to perform the Company's certain due
diligence procedures with respect to financial records and other matters prior
to the Closing, at Purchaser's request and expense (and the Purchaser shall pay
the fees associated with such review). Sellers make no representation or
warranty regarding the findings of' Ernst & Young and advise Purchaser that the
results thereof may be in conflict with the aforesaid books and records of the
Company and the Sellers will have no liability for those differences. Further,
the Sellers represent and warrant that, as of the Closing Date, the Net Book
Value of the Company shall be at least equal to the Net Book Value of the
Company as of July 31, 1998 (per GAAP).
2.5 Absence of Changes. Since July 31, 1998, sellers have not received
written notice that there has been any undisclosed material adverse change or
event or development, which, individually or together with other such events,
including any positive related events, could reasonably be expected to result in
a material adverse change, in the business or condition of the Company as of the
Closing. In addition, except as expressly contemplated hereby, including any
matter covered by the preceding sentence, and except as otherwise disclosed by
the books and records of the Company (the Seller Financial Statements and the
Interim Statements being deemed to be part of the books and records of the
Company) or otherwise in section 2.5 of the Disclosure Schedule, Sellers have
received no written notice since July 31, 1998:
2.5.1 any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of the Company or any direct or indirect redemption, purchase or other
acquisition by the Company of any such capital stock (or other equity interests)
of the Company;
2.5.2 any authorization, issuance, sale or other disposition by the
Company of any shares of its capital stock (or other equity interests) , or any
modification or amendment of any right of any holder of any outstanding shares
of capital stock (or other equity interests) of the Company;
2.5.3 any uninsured physical damage, destruction or other casualty loss
(not covered by insurance) affecting any of the Assets of the Company in an
aggregate amount exceeding $50,000;
2.5.4 any undisclosed capital expenditures or commitments for additions
to property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $100,000;
2.5.5 any transactions by the Company with any of its officers,
directors, stockholders or Affiliates, involving in the aggregate more than
$50,000 other than pursuant to a Contract or arrangement in effect on July 31,
1998 and disclosed to Purchaser pursuant to Section 2.13.1.6. Contracts of
employment are verbal except for those listed pursuant to Section 2.13.1 of the
Disclosure Schedule; or
2.5.6 any entering into of a binding agreement to do or engage in any
of the foregoing for the time period indicated above.
2.6 Taxes.
2.6.1 Except as disclosed in Section 2.6 of the Disclosure Schedule and
subject to Section 6.3 of this Agreement, all Tax Returns required to have been
filed by or with respect to the Company with any Taxing Authority have been duly
and timely filed, and each such Tax Return correctly and completely reflects the
income, franchise or other Tax liability and all other information required to
be reported thereon.
The Company is not and has never been a member of any affiliated,
combined, consolidated, unitary or similar group with respect to the filing of
tax returns with respect to any Taxing Authority. All income taxes owed by the
Company (whether or not shown on any Tax Return) have been paid through the
period ending July 31, 1998. All monies required to be withheld by the Company
from employees, independent contractors, creditors or other third parties for
Taxes have been collected or withheld through the period ending July 31, 1998,
and either duly and timely paid to the appropriate Taxing Authority or (if not
yet due for payment) set aside in accounts for such purposes (Purchaser agreeing
to pay same, as due for the period indicated above). The Company has no
liability for Taxes for any Person other than the Company, except as shown in
the Seller Financial Statements or the Interim Statements.
2.6. 2 The taxes due as of July 31, 1998, have been paid.
2.6.3 The Company is not a party to any existing written agreement
extending, or having the effect of extending, the time within which to file any
Tax Return or the period of assessment or collection of any Taxes. The Company
has not received any written ruling of a Taxing Authority related to Taxes or
entered into any written and legally binding agreement with a Taxing Authority
relating to Taxes.
2.6.4 Except as set forth in Section 2.6.4 (being the IRS disputed
proposed penalty of $2,000), the Sellers have not received written notice since
January 1, 1996 that any Taxing Authority is asserting against the Company any
deficiency, claim or liability for additional Taxes or any adjustment of Taxes.
The Federal income Tax Returns of the Company for the 3-year period ending July
31, 1998 disclose (in accordance with Section 6662(d) (2) (B) of the Code) all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of section 6662(d) of the Code. The
Sellers have delivered to Purchaser complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by or with respect to, and all
Tax examination reports and statements of deficiencies assessed against or
agreed to by, the Company since July 31, 1996. The Sellers have not received
written notice after January 1, 1996, that there are any Liens for Taxes upon
the Assets of the Company.
2.6.5 Except as arising in the ordinary course of business or as
otherwise disclosed in section 2.6 of the Disclosure Schedule, or otherwise
disclosed to Purchaser, the Sellers have not received written notice since
January 1, 1996 that the Company is (i) a party to or bound by any obligations
under any tax sharing, tax indemnity or similar agreement or arrangement, (ii)
subject to any election under sections 338(e) or 341(f) of the Code or the
regulations thereunder, (iii) required to make, any adjustment under section 481
of the Code (or any comparable provision of state, local or foreign law) by
reason of a change in accounting method or otherwise, (iv) subject to any
agreement or arrangement that could result separately or in the aggregate in the
payment of any "excess parachute payments" within the meaning of section 280G of
the Code, (v) has ever been, a "United States real property holding corporation"
within the meaning of section 897 (c) (2) of the Code, (vi) a party to any "safe
harbor lease" that is subject to the provisions of section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any
"long-term contract" within the meaning of section 460 of the Code, (vii) a
party to any joint venture, partnership or other arrangement that is treated as
a partnership for federal income Tax purposes, or (viii) a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.7 Legal Proceedings.
2.7. 1 Except as disclosed in Section 2.7 of the Disclosure Schedule
(with paragraph references corresponding to those set forth below) :
2.7.1.1 Sellers have not received any written notice that there are any
material lawsuits, actions or proceedings pending or threatened, against the
Company, or any of its Assets which (A) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal any of the transactions contemplated by this Agreement or
otherwise result in a material diminution of the benefits contemplated by this
Agreement to Purchaser, or (B) if determined adversely to the Company, could
reasonably be expected to result in (x) any injunction or other equitable relief
against the Company, or (y) Losses by the Company, individually or in the
aggregate with Losses in respect of other such actions or proceedings, exceeding
$50,000 (any such claim less than $50,000 not being deemed to be material);
2.7.1.2 The Sellers have not received written notice during the last
six months of any material defects, dangerous or substandard conditions in the
products or materials manufactured, sold, distributed, or to be manufactured,
sold or distributed by the Company that could cause substantial bodily injury,
sickness, disease, death, or damage to property, or result in loss of use of
property, or any claim, suit, demand for arbitration or notice seeking damages
for bodily injury, sickness, disease, death, or damage to property, or loss of
use or property.
2.7.2 Section 2.7 of the Disclosure Schedule sets forth all known
actions or proceedings relating to or affecting the Company or its Assets during
the period commencing January 1, 1996, and ending upon the Closing Date.
2.8 Compliance with Laws and Orders. Except as disclosed in Section 2.8
of the Disclosure Schedule or otherwise, the Sellers have not received since
January 1, 1996 any written notice (or any actual verbal notice from a reliable
source within the 90 day period preceding the date of this Agreement) that the
Company is or has been at any time since such date, in material violation of or
in default under, any Law or order applicable to the Company or any of its
Assets which remains uncured. In furtherance and not limitation of the
foregoing, neither the Sellers nor the Company has violated any federal or state
securities law in connection with the offer, sale or purchase of any securities
prior to this Agreement (and unrelated to this transaction).
2.9 Benefit Plans; ERISA. All active Benefit Plans relating to the
Company are listed in Section 2.9 of the Disclosure Schedule, and copies of al:_
documentation relating to such Benefit Plans during the last three years have
been delivered or made available to Purchaser (including copies of written
Benefit Plans, written descriptions of oral Benefit Plans, summary plan
descriptions, trust agreements, the three most recent annual returns, employee
communications, and IRS determination letters). Except as disclosed in Section
2.9 of the Disclosure Schedule, the Sellers have not received written notice of
any uncured violations of any of the following since January 1, 1996:
2.9.1 each Benefit Plan, and the administration thereof, complies, and
has at all times complied, with the requirements of all applicable Law,
including ERISA and the Code, and each Benefit Plan intended to qualify under
section 401(a) of the Code has been so qualified, and each trust which forms a
part of any such plan has at all times since its adoption been tax-exempt under
section 501(a) of the Code;
2.9.2 no Benefit Plan has incurred any "accumulated funding deficiency"
within the meaning of section 302 of ERISA or section 412 of the Code;
2.9.3 no direct, contingent or secondary liability has been incurred or
is expected to be incurred by the Company under Title IV of ERISA to any party
with respect to any Benefit Plan, or with respect to any other Plan presently or
heretofore maintained or contributed to by any ERISA affiliate;
2. 9. 4 the "amount of unfunded benefit liabilities" within the meaning
of section 4001(a) (18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA;
2. 9. 5 no "reportable event" (within the meaning of section 4043 of
ERISA.) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA affiliate;
2.9.6 no Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA;
2.9.7 Neither the Company nor any ERISA affiliate has incurred any
liability for any Tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (1) of ERISA;
2.9.8 no benefit under any Benefit Plan, including, without limitation,
any severance or parachute payment plan or agreement, will be established or
become accelerated, vested or payable by reason of any transaction contemplated
under this Agreement;
2 .9 no Tax has been incurred under section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
2.9.10 no Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws
requiring continuation of benefits coverage following termination of employment;
2.9.11 no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
with respect to any Benefit Plan and there are not facts or circumstances known
to any the Sellers or the Company that could reasonably be expected to give rise
to any such suit, action or other litigation; and
2.9.12 all known contributions to Benefit Plans that were required to
be made under such Benefit Plans prior to December 31, 1998 have been made, and
all known benefits accrued under any unfunded Benefit Plan have been paid,
accrued or otherwise adequately reserved in accordance with GAAP, all of which
accruals under unfunded Benefit Plans are as disclosed in Section 2.9 of the
Disclosure Schedule, and the Company has performed all material obligations
required to be performed under all Benefit Plans.
2.10 Real Property.
2.10.1 Section 2.10.1 of the Disclosure Schedule contains a true and
correct list of (i) each parcel of real property owned (the "Owned Real
Property") by the Company, (ii) each parcel of real property leased or subleased
or otherwise occupied by the Company as tenant or subtenant (the "Leased Real
Property"; together with the owned Real Property, the "Real Property") together
with a true and correct list of all such leases, subleases or other similar
agreements and any amendments, modifications or extensions thereto (the "Real
Property Leases") , and (iii) all Liens relating to or affecting any parcel of
Real Property, in each case identifying the owner, lessor and lessee thereof,
except for liens in favor of Sellers which will be satisfied as of the Closing
as a result of the retirement of Shareholder Debt as contemplated hereby.
Notwithstanding any provision to the contrary, all Real Property which is owned
or leased is subject to all matters of record applicable thereto (other than
mortgage-type liens) , and matters that a correct survey thereof would reflect.
2.10.2 Subject to Section 2.10.1, the Company has good and marketable
title to its Owned Real Property, free and clear of all Liens, other than as
specifically listed in Section 2.10.2 of the Disclosure Schedule or matters of
record (other than mortgage-type liens) or that a survey of such property would
reflect.
2.10.3 Subject to the terms of its leases (and Section 2.10.1), the
Company has a valid and subsisting leasehold estate in and the right to quiet
enjoyment to the Leased Real Property for the full term of the lease thereof.
Except as set forth in Section 2.10.3 of the Disclosure Schedule, the Sellers
have not received any specific notice of any uncured default (or any condition
or event which, after notice or lapse of time or both, would constitute a
default) thereunder which is presently uncured. The Company has not assigned,
sublet, transferred, hypothecated or otherwise disposed of its interest in any
Real Property Lease, unless; disclosed by the Sellers to Purchaser.
Notwithstanding the foregoing or anything to the contrary, Sellers make no
representation or warranty regarding (i) oral leases including, without
limitation, any representation or warranty as their enforceability; or (ii) a
master lease where the Company is a sublessee.
2.10.4 The Sellers shall deliver to Purchaser, to the extent reasonably
available, upon the execution of this Agreement true and complete copies of all
(i) title policies, mortgages, deeds of trust, deeds, leases, easements,
restrictive covenants, certificates of occupancy, and similar documents, and all
amendments thereto concerning the Owned Real Property, and (ii) Real Property
Leases and all other documents referred to in clause (i) of this paragraph with
respect to the Leased Real Property.
2.10.5 Except as disclosed in Section 2.10.5 of the Disclosure
Schedule, have not received written notice of any pending or threatened
condemnation or appropriation proceedings, pending or threatened against Real
Property or the improvements thereon.
2.10.6 The Sellers have not received written notice of any specific
written claim, action or proceeding, actual or threatened in writing, against
the Company or the Real Property by any Person which would materially affect the
future use, occupancy or value of the Real Property or any part thereof.
2.11 Tangible Personal Property. Except as disclosed in Section 2.11 of
the Disclosure Schedule, the company is in possession of and has good and
marketable title to, or has valid leasehold interests in or valid rights under
contract to use, all tangible personal property used in the conduct of its
business, during the last 12 months, including all tangible personal property
reflected on the Seller Financial Statements and tangible personal property
acquired since July 31, 1998 other than (i) property disposed of since such date
in the ordinary course of business consistent with past practice and the terms
of this Agreement, or otherwise disclosed. All such tangible personal property
is free and clear of all Liens, other than Liens disclosed in Section 2.13 of
the Disclosure Schedule.
2.12 Intellectual Property Rights. The Sellers have not received
written notice after January 1, 1996 that the Company is infringing on any
intellectual property of any Person, and no litigation is pending and no claim
has been made or, to the knowledge of any the Sellers or of the Company, has
been threatened to such effect. The Company owns no patents, trademarks or other
intellectual property (other than common law rights, trade secrets, and assumed
name reservations) . If it is subsequently determined that the Sellers, or
either of them, own any intellectual property which relates to the business'
conducted by the Company, the Sellers shall assign their respective right, title
and interest in and to such intellectual property to the Purchaser or its
designee.
2.13 Contracts.
2.13.1 Section 2.13.1 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts of a substantial nature currently in
effect (true and complete copies, or, if none, reasonably complete and accurate
written descriptions of which, together with all amendments and supplements
thereto and all waivers of any terms thereof, have been delivered to Purchaser
prior to the execution of this Agreement), to which the Company is a party or by
which any of its Assets is bound in a material way:
2.13.1.1 (A) all written Contracts (excluding Benefit Plans) providing
for a commitment of employment or consultation services for a specified term
(other than (i) with Trans Management Company (Georgia plant manager) which
remain in effect after the Closing, and (ii) at-will agreements); and (B) any
written commitments involving an obligation of the Company to make substantial
payments to any Person in connection with, or as a consequence of, the
transactions contemplated hereby or to any employee, other than with respect to
salary or incentive compensation payments in the ordinary course of business
consistent with past practice;
2.13.1.2 all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company to engage in any
business activity or compete with any Person or prohibiting or limiting the
ability of any Person to compete with the Company or prohibiting or limiting
disclosure of confidential or proprietary information, of a material nature;
2.13.1.3 all management, partnership, joint venture, shareholders' or
other similar Contracts with any Person which is to survive the Closing;
2.13.1.4 all guarantees of the Indebtedness of the Company or any third
Person;
2.13.1.5 all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or acquisitions in the
ordinary course of business consistent with past practice or the provisions of
this Agreement;
2.13.1.6 all Contracts between or among the Company and any of the
Sellers, any current or former officer, director, stockholder or Affiliate of
the Company or of any such officer, director, stockholder or Affiliate, on the
other hand, which is to survive the Closing, other than Contracts disclosed
pursuant to Section 2.13.1.6;
2.13.1.7 any existing collective bargaining or similar labor Contracts;
2.13.1.8 all Contracts which are to survive the Closing that (A) limit
or contain restrictions on the ability of the Company to declare or pay
dividends on, to make any other distribution in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness,
to incur or suffer to exist any Lien, to purchase or sell any Assets or to
change the lines of business, (B) require the Company to maintain specified
financial ratios or levels of net worth or other indicia of financial condition
or (C) require the Company to maintain insurance in certain amounts or with
certain coverages; and
2.13.1.9 subject to Section 2.19 of this Agreement, all other
Contracts, including but not limited to Contracts with customers, that involve
the payment or potential payment, pursuant to the terms of any such Contract, by
or to the Company of more than $50,000 and all powers of attorney and comparable
delegations of authority.
2.13.2 Each Contract required to be disclosed in Section 2.13.1 of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 2.13.2 of the Disclosure Schedule,
Sellers have not received written notice that it is, in violation or breach of
or default under any such Contract (or with notice or lapse of time or both,
would be violation or breach of or default under any such Contract).
2.14 Licenses. Section 2.14 of the Disclosure Schedule contains a true
and complete list of all Licenses, other than sales tax permits, used in and
material to the business or operations of the Company;
2.14.1 the Company owns or validly holds all such Licenses;
2.14.2 each license listed in Section 2.14 of the Disclosure Schedule
is valid, binding and in full force and effect;
2.14.3 the Sellers are not aware that the Company received any written
notice during the last 12 months that the company is in default (or with the
giving of notice of lapse of time or both, would be in default) under any such
License; and
2.14.4 the transactions contemplated in this Agreement will not violate
any such License or give any other party thereto rights to terminate the License
or change the terms thereof.
2.15 Insurance. Section 2.15 of the Disclosure Schedule contains a true
and complete list of all existing insurance policies in effect (other than
medical or disability insurance or insurance relating to the Plans), each of
which is in force and effect on this date. The Sellers have not received written
notice during the last 12 months that any insurer under any policy referred to
in this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. Section 2.15 of the Disclosure
Schedule contains a list of all claims made under any insurance policies
covering the Company since January 1, 1996.
2.16 Affiliate Transactions. Except for the Shareholder Debt and the
Purchase]7'S obligation to pay the Deferred Consideration, (i) there are no
Liabilities between the Company and any current or former officer, director,
stockholder, Affiliate of the Company or any Affiliate of any such officer,
director, stockholder or Affiliate, and (ii) the Company does not provide or
cause to be provided any assets, services or facilities to any such current or
former officer, director, stockholder or Affiliate.
2.17 Employees; Labor Relations. Sellers have not received written
notice after January 1, 1996 of (i) any pending or threatened unfair labor
practice complaints against the company before the National Labor Relations
Board or comparable or similar state agency, or any grievance or arbitration
proceeding arising out of under collective bargaining agreements, (ii) no
strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the
Sellers, threatened against the Company, and (iii) no union representation
question exists with respect to the employees of' the Company or, to the actual
written knowledge of the Sellers, no union organization activities are taking
place.
2.18 Environmental Matters.
2.18.1 Except as disclosed in Section 2.18.1 of the Disclosure
Schedule:
2. 18. 1. 1 The Sellers have not received, since January 1, 1996, any
citation, directive, inquiry, notice, order, summons, warning, or other similar
communications that relates to any alleged, actual, or potential uncured
violation or failure to comply with any Environmental Law, or of any written
Environmental, Health, and Safety Liabilities with respect. to any of the
Facilities or any other Assets in which the Company had an interest since
January 1, 1996, or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
the Sellers, the Company, or any other Person f or whose conduct it or they are
or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
2.18.2 The Sellers have not received, since January 1, 1996, written
notice that there has been any Release since January 1, 1996 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, in violation
of any Environmental Law where the Company would be liable, or from or by any
other properties and assets (whether real, personal, or mixed) in which the
Company has Dr had an interest.
2.18.3 The Sellers do not have in their possession any written reports,
studies, analyses, tests, and monitoring pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
non-compliance by the Company or any other Person for whose conduct it or they
are or may be held responsible, with Environmental Laws, with respect to the
Facilities.
2.18.4 There have been no known written environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Sellers, arising since January 1, 1996, with
respect to any Asset of the Company prior to execution of this Agreement.
2.19 Substantial Customers and Suppliers. Section 2.19.1 of the
Disclosure Schedule lists the ten (10) largest customers of the Company on the
basis of revenues for goods sold or services provided for the twelve mont*..11
period ending July 31, 1998. Section 2.19.2 of the Disclosure Schedule lists the
ten (10) largest suppliers of the company on the basis; of cost of goods or
services purchased during the twelve month period ending July 31, 1998.
2.20 Accounts Receivable. Except as set forth in section 2.20 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Interim Financial Statements for the
period ended December 31, 1998, and all accounts and notes receivable arising
subsequent to such date, (i) arose from bona fide sales transactions in the
ordinary course of business consistent with past practice and are payable on
customary trade terms, (ii) are not subject to any known valid set-off or
counterclaim, (iii) do not represent obligations for goods sold on consignment,
on approval or on a sale-or-return basis or subject to any other repurchase or
return arrangements, and (iv) are not subject of any Actions or Proceedings
brought by or on behalf of the Company to which Sellers have actual written
notice since January 1, 1996.
2.21 Other Negotiations; Brokers. No agent, broker, finder, investment
banker, financial advisor or other Person will be entitled, by or through the
Sellers or the Company, to any fee, commission or other compensation in
connection with the transactions contemplated by this Agreement on the basis of
any act or statement made by the Sellers, the Company or any of their respective
Affiliates, or any investment banker, financial advisor, attorney, accountant or
other Person retained by or acting for or on behalf of the Sellers, the Company,
or any such Affiliate.
2.22 Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. The Company is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.23 Bank and Brokerage Accounts. Section 2.23 of the Disclosure
Schedule sets; forth (a) a list of the names and locations of all banks,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; and (b) a true and complete list and description of each
such account, box and relationship, indicating in each case the account number
and the names of all persons having signatory power and respect thereto.
2.24 Exemption from Registration. Except to the extent attributable,
directly or indirectly, to Purchaser, or Laws applicable to Seller, the offer
and sale of the Purchased Stock made pursuant to this Agreement are exempt from
the registration requirements of the Securities Act. Neither any the Sellers,
nor the Company nor any Person authorized to act on behalf of any of the
foregoing has, to Sellers, actual written knowledge, in connection with the
offering of the Purchased Stock, engaged in (i) any form of general solicitation
or general advertising (as those terms are used within the meaning of Rule 501
(c) under the Securities Act) , (ii) any action involving a public offering
within the meaning of section 4(2) of the Securities Act, or (iii) any action
that would require the registration under the Securities Act of the offering and
sale of the Purchased Stock pursuant to this Agreement or that would violate
applicable state securities or "blue sky" laws.
2.25 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Sellers' Financial Statements and the
Interim Statements), when taken together, do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements herein and therein, in the light of the circumstances under which
they were made, not misleading.
2.26 Limited Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any provision to the contrary: (i) except as
provided in the first grammatical paragraph of Section 2 to the contrary,
Sellers make no representation beyond their actual knowledge and have assumed no
duty of independent investigation of any kind pursuant to the numbered
subsections of this Section 2 (2.1 through 2.24) ; (ii) even though the
Purchaser may investigate the affairs of the Company and attempt to confirm the
accuracy of the representations and warranties of the Sellers, the Purchaser,
nonetheless, shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the Sellers contained in this Agreement,
but only to the extent not discovered, by the Purchaser, to be inaccurate prior
to the Closing; and (iii) all such representations, warranties, covenants and
agreements will survive the Closing, for a period `of eighteen (18) months only.
Any such claim must be timely pursued pursuant to Article IX only.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to Sellers that: (i) the
Purchaser has full authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby;
and (ii) this Agreement has been duly and validly executed and delivered by the
Purchaser and constitutes the legal, valid and binding obligations of the
Purchaser, enforceable against Purchaser in accordance with its terms.
In addition, Purchaser, to its best knowledge, represents and warrants
to the Sellers as follows:
3.1 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby, do
not and will not:
3.1.1 conflict or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
3.1.2 subject to obtaining the consents, approvals and actions, making
the filings and giving- the notices disclosed in Section 3.4 of the Disclosure
Schedule, if any, conflict with or result in a violation or breach of any term
or provision of any Law or order applicable to Purchaser or its Assets and
Properties; or
3.1.3 (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under, or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which Purchaser is a party, or by which it is bound.
3.2 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement to which it is a party or the consummation of the
transactions contemplated herein.
3.3 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.4 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.5 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.6 Survival of Representations, Warranties. Covenants and Agreements.
Even though the Sellers may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, nonetheless, shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing for a period of eighteen (18) months only.
Any such claim must be timely pursued pursuant to Article 10 only.
3.7 Existing Line of Credit. Purchaser, for itself and the Company, and
their successors and assigns, agree not to utilize the line of credit previously
available to the Company from Merrill Lynch Financial services or any affiliate.
3.8 The Company Obligations. The Purchaser will cause the Company to
perform all of its post-closing duties, liabilities and obligations hereunder.
ARTICLE IV
4 COVENANT'S BY THE SELLERS
4.1 Noncompetition; Non solicitation.
4.1.1 For a period of five (5) years from the Closing Date, each of the
Sellers, alone or in conjunction with any other Person, or directly or
indirectly through their present or future Affiliates, will not directly or
indirectly own, manage, operate, join, be employed by, have a financial interest
in, control or participate in the ownership, management, operation or control
of, or use or permit his name to be used in connection with any business or
enterprise engaged in the design, development, manufacture, distribution or sale
of any products, or the provision of any services involving, in a material way,
masonry tools and products (including, but not limited to, the manufacture, sale
and/or distribution of bagged and/or bulk masonry products such as mortar mix,
blended cement, stucco, acrylic finish), which the Company was designing,
developing, manufacturing, distributing, selling or providing at any time prior
to and up to and including the Closing Date anywhere in the United States of
America, provided that the foregoing restriction shall not be construed to
prohibit the ownership, in the aggregate, of not more than two percent (2%) of
any class of securities of any corporation which is engaged in any of the
businesses or enterprises described above, having a class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on any national exchange or
in the over-the-counter market.
4.1.2 For a period of five (5) years from the closing Date, each of the
Sellers shall not knowingly and intentionally directly or through an Affiliate,
in a material and adverse way, (i) directly and intentionally influence any
individual who is an employee of the Company as of the Closing, to terminate his
or her employment with the Company, (ii) interfere in any other way with the
employment, of any employee of the Company (while employed by the Company) or
(iii) cause or attempt to cause (or participate in any way in any discussion or
negotiation concerning) (x) any client, customer or supplier of the Company or
(y) any prospective client, customer or supplier of the Company from engaging in
business with the Company. This Section 4.1.2 does not apply to conversations
between Debbie Cooper and the Sellers.
4.1.3 The Sellers agree that Purchaser's remedies at law for any breach
or threat of breach by it of any of the provisions of this section 4.1 will be
inadequate, and that, in addition to any other remedy to which Purchaser may be
entitled at law or in equity, Purchaser shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining orders or orders to
prevent breaches of the provisions of this Section 4.1 and to enforce
specifically the terms and provisions hereof, in each case without the need to
post any security or bond. Nothing herein contained shall be construed as
prohibiting Purchaser from pursuing, in addition, any other remedies available
to it for such breach or threatened breach. A waiver by the Purchaser of any
breach of any provision hereof shall not operate or be construed as a waiver of
a breach of any other provisions of this Agreement or of any subsequent breach
thereof. Any breach or purported breach of Sections 4.1.1 or 4.1.,2, or any
other provision of this Agreement, shall not be a basis to withhold any payment
due to Sellers pursuant to Article I, including the payment of the Deferred
Consideration, when due.
4.1.4 The parties hereto consider the restrictions contained in this
Section 4.1 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Company, but if a final
judicial determination is made by a tribunal having jurisdiction that the time
or territory or any other restriction contained in this Section 4.1 is an
unenforceable restriction on the sellers, activities, the provisions of this
Section 4.1 shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the
tribunal referred to above finds that any restriction contained in this Section
4.1 or any remedy provided herein is unenforceable, and such restriction or
remedy cannot be amended so as to make it enforceable, such finding shall not
affect the enforceability of any of the other restrictions contained therein or
the availability of any other remedy. The provisions of this Section 4.1 shall
in no respect limit or otherwise affect the Seller's obligations under other
agreements with the Company.
4.2 Investigation by Purchaser.
4.2.1 Sellers afforded Purchaser and Purchaser's accountants, Ernst &
Young, and their respective representatives access to all contracts, books and
records, and all other documents and data of the Company, including formulas and
manufacturing procedural instructions; of the Company and certain other
documents and data that the Sellers disclosed prior to the Closing, such as
certain of the vendors of the Company or prices paid for certain products
connected with certain formulas, manufacturing processes, bagging operations and
acrylic stucco division processes and operations, as well as employee files and
records. Sellers do not endorse the Ernst & Young findings if and to the extent
in conflict with Sellers' books and records.
ARTICLE V
5 DELIVERABLES
5.1 Deliveries by Sellers. At the Closing, Sellers and the Company have
delivered or caused to be delivered to the Purchaser, all duly and properly
executed (where applicable) the following:
5.1.1 Representations and Warranties. A certification that each of the
representations and warranties made by the Sellers in this Agreement, except as
provided herein to the contrary (including results of Purchaser's due diligence)
shall, unless waived, be true and correct in all material respects as of the
date of this Agreement.
5.1.2 Regulatory Consents and Approvals. All consents, approvals and,
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and the Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby, if any.
5.1.3 Third Party Consents. Any consents (or waivers) identified i-1-i
Section 2.5 of the Disclosure Schedule, and all other consents (or waivers) to
the performance by the Purchaser of its obligations under this Agreement, or to
the consummation for the transactions contemplated hereby as are required under
any Contract or License to which the Purchaser is a party or by which any of its
Assets are bound and where the failure to obtain any such consent (or in lieu
thereof waiver) could reasonably be expected, individually or in the aggregate
with other such failures, to materially adversely affect the Purchaser or the
business or condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement.
5.1.4 Sellers' Certificates. The Sellers shall have delivered tc
Purchaser (i) certificates, dated the Closing Date and executed by an executive
officer of the Company, in the form and to the effect of Exhibit B hereto and
(ii) certificates, dated the Closing Date and executed by the chief financial
officer of the Company, in the form of Exhibit C hereto.
5.1.5 Resignations of Officers and Directors. The resignations of all
current officers and directors of the Company, effective as of the Closing Date.
5.1.6 Disclosure Schedule. The Disclosure Schedule, updated and current
through the Closing Date.
5.1.7 Receipt of Purchased Stock. Certificates representing the
Purchased Stock have been transferred to Purchaser in accordance with the terms
of this Agreement.
5.1.8 Payment of Indebtedness. A release executed by Sellers confirming
payment of the Consideration and the Additional Consideration acknowledging that
all Shareholder Debt has been cancelled or otherwise paid in full, and is of no
further force and effect. All other Indebtedness owing by the Company, and not
reflected by the Seller Financial Statements or the Interim Statements has been
retired, released or repaid except the Deferred Consideration shall be payable
following the Closing as provided in Section 1.5.
5.2 Deliveries by Purchaser. At the Closing, the Purchaser has
delivered or caused to be delivered to the Sellers, all duly and properly
executed (where applicable) the following:
5.2.1 Representations and Warranties. A certification that each of `
the representations and warranties made by Purchaser in this Agreement shall be
true and correct in all material respects as of the date of this Agreement.
5.2.2 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and the Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby, if any.
5.2.3 officers' certificate. Purchaser shall have delivered to the
Sellers a certificate, dated the Closing Date and executed by the president or
vice-president or other officer of Purchaser, substantially in the form and to
the effect of Exhibit D hereto.
ARTICLE VI
6 INDEMNIFICATION; TAX MATTERS
6.1 Indemnification.
6.1.1 Except as provided in Section 6.1.3, the Sellers will indemnify
the Company, the Purchaser and its stockholders and the officers, directors,
employees, agents and Affiliates, in respect of, and hold each of them harmless
from and against, any and all Losses actually suffered, incurred or sustained by
any of them, or resulting from any misrepresentation or breach of warranty or
nonfulfillment of or failure to perform any covenant or written agreement on the
part of the Sellers contained in this Agreement (including, without limitation,
any certificate delivered in connection herewith or therewith).
6.1.2 Purchaser will indemnify the Sellers in respect of, and hold him
harmless from and against, any and all Losses actually suffered, incurred or
sustained by him or to which he becomes subject, resulting from, arising out of
or relating to any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
6.1.3 The indemnification obligations of the Sellers set forth in this
Article VI shall apply only after the aggregate amount of such obligations
exceeds the sum of $50,000.00. If, and only after, the aggregate amount of such
obligations exceeds the sum of $50,000-00, then such obligations shall include
the first $50,000.00.
6.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 6.1 will be asserted and resolved as follows:
6.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 6.1 in respect of, arising out of or
involving a claim or demand made against the Indemnified ?arty (a "Claim"), the
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party
promptly after receipt by such Indemnified Party of written notice of the Third
Party Claim; Provided, that failure to give such claim Notice shall not affect
the indemnification provided hereunder except to the extent the Indemnifying
Party shall have been actually prejudiced as a result of such failure.
6.2.2 If a Claim is made against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnifying
Party, which counsel must be reasonably satisfactory to the Indemnified Party.
Should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof, but shall continue to pay for any expenses of investigation
or any Loss suffered. If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. If, and during such period that (i) the Indemnifying Party
shall not assume the defense of a Third Party claim with counsel reasonably
satisfactory to the Indemnified Party within 10 Business Days of any Claim
Notice or (ii) legal counsel for the Indemnified Party notifies the Indemnifying
Party that there are or may be legal defenses available to the Indemnifying
Party or to other Indemnified Parties which are different from or additional to
those available to the Indemnified Party, which., if the Indemnified Party and
the Indemnifying Party were to be represented by the same counsel, would
constitute a conflict of interest for such counsel or prejudice prosecution of
the defenses available to such Indemnified Party, or (iii) if the Indemnifying
Party shall assume the defense of a Third Party Claim and fail to diligently
prosecute such defense, then in each such case the Indemnified Party, by notice
to the Indemnifying Party, may employ its own counsel and control the defense of
the Third Party Claim and the Indemnifying Party shall be liable for the
reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party, and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation or any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damage and such monetary damages are paid in
full by the Indemnifying Party.
6.2.3 In the event any Indemnified Party should have a claim under
11;ection 6.1 against any Indemnifying Party that does not involve a third party
Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 6.1 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within thirty (30) days,
such dispute shall be resolved as provided in Article IX hereof.
6.3 Allocation of Tax Liability.
6.3.1. Except to the extent a reserve for Taxes is reflected on the
Sellers' Financial Statements or the Interim Statements, `the Sellers shall be
responsible for and pay and shall indemnify and hold harmless Purchaser and the
Company with respect to (i) any and all Taxes imposed on the Company, or for
which the Company is liable with respect to any periods ending on or before
December 31, 1998; provided, that in the case of any adjustment to any item of
loss or expense for any such years, which gives rise to corresponding and
offsetting items of loss or expense in subsequent years the benefit of which is
or will be actually realized by the Company or its successors or assigns
including by reason of any increase in a net operating loss, the Seller's
obligations shall be limited to the amount of interest (computed at the
appropriate statutory rates) and penalties actually paid to the appropriate
taxing authorities by the Company as a result of such timing differences in the
case of audit adjustments, or at a rate of eight percent (8~) per annum in the
case of other adjustments, (ii) without duplication (subject to the same
proviso) , all Taxes arising out of a breach of the representations, warranties
or covenants contained herein (to the extent not constituting a Non-Material
Claim), (iii) any Tax liability resulting from any ongoing state audits that
exceed, in the aggregate,, any reserve therefore set forth on the Sellers,
Financial Statements or the Interim Statements, and (iv) any reasonable
out-of-pocket costs or expenses with respect to Taxes indemnified hereunder.
6.3.2 From and after January 1, 1999, Purchaser shall cause the Company
to prepare, or cause to be prepared, and shall file, or cause to be filed, all
reports and returns of the Company required to be filed, and timely and fully
pay all such Taxes. . Purchaser shall cause the Company to timely pay the
appropriate taxing authorities the Taxes shown to be due and payable on all Tax
Returns of the Company filed after the Closing Date, concurrent with the filing
of such Tax Returns. Tax: Returns of the company for a period ending on or
before the Closing Date shall be prepared on a basis consistent with the Tax
Returns filed. by the Company for previous taxable periods, subject to the
requirements of applicable law.
6.4 Tax Contests.
6.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then
the party hereto first receiving notice of such Tax Claim shall promptly provide
written notice thereof to the other parties hereto. Such notice shall specify in
reasonable detail the basis for such Tax Claim and shall include a copy of any
relevant correspondence received, from time to time, as received from the Taxing
Authority or other Person.
6.4.2 If, within 30 calendar days after any the Sellers receives or
delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the
Purchaser an Election Notice, then subject to the provisions of this Section
7.4, the Sellers shall defend or prosecute, at their S01E! Cost, expense and
risk, such Tax Claim by all appropriate proceedings, which proceedings shall
defended or prosecuted diligently by the Sellers to a Final Determination;
provided, that the Sellers shall not, without the prior written consent of the
Company, enter into any compromise or settlement of such Tax Claim that would
result in any Tax detriment to the Company. So long as the Sellers are defending
or prosecuting a Tax Claim with respect to the Company, or as otherwise
reasonably required by Sellers in conjunction with filing or amending of tax
returns, the Company shall promptly provide or cause to be provided to the
Sellers any information reasonably requested by the Sellers relating to such Tax
Claim, and shall otherwise cooperate with the Sellers and their representatives
in good faith in order to contest effectively such Tax Claim. The Sellers shall
inform the Company of all developments and events relating to such Tax claim
(including, without limitation, providing to the Company copies of all written
materials relating to such Tax Claim) and the Company or its authorized
representatives shall be entitled, at the expense of the Company, to attend, but
not to participate in or control, all conferences, meetings and proceedings
relating to such Tax Claim.
6.4.3 If, with respect to any Tax Claim, the Sellers fail to deliver an
Election Notice to the Company within the period provided in Section 6.4.2 or,
after delivery of such Election Notice to the Company, the Sellers fail
diligently to defend or prosecute such Tax Claim to a Final Determination, then
upon not less than ten (10) days written notice of its intention to do so (thus
giving the Sellers 10 days notice and opportunity to cure), the Company shall at
any time thereafter have the right (but not the obligation) to defend or
prosecute, at. the sole cost, expense and risk of the Sellers, such Tax Claim,
to the extent reasonably necessary. The Company shall have full control of such
defense or prosecution and such proceedings, including any settlement or
compromise thereof, provided they act reasonably and in good faith and keep
Sellers reasonably informed. If requested by the Company, the Sellers shall
cooperate in good faith with the Company and its authorized representatives in
order to contest effectively such Tax Claim. The Sellers may attend, but not
participate in or control, any defense, prosecution, settlement or compromise of
any Tax Claim controlled by the Company pursuant to this Section 6.4.3, and
shall bear their own costs and expenses with respect thereto. In the case of any
Tax Claim that is defended or prosecuted by the Company pursuant to this Section
6.4.3, the Company shall, from time to time, be entitled to receive current
payments from the Sellers with respect to costs and expenses incurred by the
Company, to the extent reasonable in amount, in connection with such defense or
prosecution (including, without limitation, reasonable attorneys', accountants"
and experts" fees and disbursements, settlement costs, court costs and any other
costs or expenses for investigating, defending or prosecuting such Tax Claim,
and any Taxes imposed on the Company as a result of receiving a payment from the
Sellers pursuant to this Section 6.4) (collectively "Associated Costs").
6.4 In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by the Sellers pursuant to this Section 6.4, the Sellers
shall pay to the appropriate Tax Indemnitees, in immediately available funds,
the full amount of any Tax arising or resulting from such Tax Claim within five
Business Days after such Final Determination. In the case of any Tax Claim that
is defended or prosecuted to a Final Determination by the Company pursuant to
and in substantial compliance with the terms of this Section 6.4, the Sellers
shall pay to the appropriate Tax Indemnitee, in immediately available funds, the
full amount of any Tax arising or resulting from such Tax Claim, together with
any Associated Costs that have not theretofore been paid by the Sellers to the
Company, within five Business Days after such Final Determination, subject to
any right of appeal. In the case of any Tax Claim not: covered by the two
preceding sentences, the Sellers shall pay to the Company, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim (calculated after taking into account any actual reduction in the current
liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting
from such payment or such Tax Claim) , together with any Associated Costs that
have not theretofore been paid by the Sellers to the Company, at least five
Business Days before the-date payment of such Tax is due from any Tax
Indemnitee.
6.4.5 Notwithstanding anything contained in this Article VII to the
contrary, the rights of the Sellers under this Section 6.4 to defend or
prosecute,. or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
6.5 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules, workpapers and relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
6.6 Other Tax Covenants.
6.6.1 Without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld or delayed, neither the Sellers nor any
Affiliate of any the Sellers shall, to the extent it may affect or relate to the
Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Tax
Return, enter into any method of tax accounting, enter into any closing
agreement, settle any Tax Claim, assessment or proposed assessment, surrender
any right to claim a Tax refund, consent to any extension or waiver of the
limitation period applicable to any Tax Claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
6.6.2 Without the prior written consent of a Seller, neither the
Purchaser nor the Company shall, to the extent it may affect or relate tc the
Company, make or change any tax election, file any amended Tax Return, enter
into any closing Agreement, settle any Tax claim, assessment or proposed
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would
affect a Pre-Closing Tax Period, unless required by applicable law.
6.6.3 So long as any books, records and files retained by the Sellers
or and his Affiliates relating to the business of the Company or the books,
records and files delivered to the control of the Purchaser pursuant to this
Agreement to the extent they relate to the operations of the Company prior to
the Closing Date, remain in existence and are available, each party (at its own
expense) shall have the right upon prior notice to inspect and to make copies of
the same at any time during business hours for any proper purpose. The Purchaser
and the Sellers and their respective Affiliates shall use reasonable efforts not
to destroy or allow the destruction of any such books, records and files without
first: providing 60 days' written notice of intention to destroy to the other,
and allowing such other party to take possession of such records. The Purchaser
shall cause the Company to maintain relevant tax records for all at least three
years following the end of the applicable tax year, or such greater period while
in dispute, or then subject to audit.
6.7 Conflict. In the event of a conflict between the provisions of
Sections 6.3 through 6.7 of this Article VI and any other provision of this
Agreement, such provisions of this Article VI shall control.
ARTICLE VII
7 DEFINITIONS
7.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly owning, owned by, controlling, controlled by or under
common control with, that Person, (b) any director, partner, officer, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Assets" of any Person means all assets and properties of every kind,
nature, character and description, including goodwill and other tangibles,
operated, owned or leased by such Person, including cash and cash equivalents,
investments, accounts and notes receivable, chattel paper, documents,
instruments, real estate, equipment, inventory, goods and intellectual property.
"Associated Costs" has the meaning ascribed to it in Section 7.4.3.
"Benefit Plan" means any Plan, existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by the
Company or under which any employee, former employee or director of the Company
or any beneficiary thereof is covered, is eligible for =overage or has benefit
rights.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Company, including financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and plans
and environmental studies and plans.
"Claim" has the meaning ascribed to it in Section 6.2-1.
"Claim Notice" means written notification pursuant to Section 7.2.1 of
a Third Party Claim as to which indemnity under Section 7.1 is sought by an
Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them in
Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital of this
Agreement (and shall include all predecessors and subsidiaries of the Company).
"Consideration" has the meaning ascribed to it in Section 1.2.1.
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Deferred Consideration" has the meaning ascribed to it in
"Disclosure Schedule" means the schedules delivered to Purchaser by or
on behalf of the Company and the Sellers, and the schedules delivered by or on
behalf of Purchaser, containing lists, descriptions, exceptions and other
information and materials as are required to be included therein pursuant to
this Agreement.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the Sellers in
respect of a Tax Claim to the effect that (i) the Sellers acknowledge their
indemnity obligation under this Agreement with respect to such Tax Claim and
(ii) the Sellers elect to contest, and to control the defense or prosecution of,
such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater, drinking water
supply, stream sediments, or land, including soil, land surface or subsurface
strata, all fish, wildlife, biota and all other environmental medium or natural
resources.
"Environmental, Health and Safety Liabilities" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
any Environmental Law or Occupational Safety and Health Law and consisting of or
relating to (i) 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) ; (ii) 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; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) 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. Section 9601 et seq., as
amended (CERCLA).
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local, provincial, or
foreign permits, licenses, approvals, consent or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures or equipment (including motor vehicles, tank cars and rolling
stock) currently or formerly owned or operated by the Company.
"Final Determination" means (i) a decision, judgment, decree or other
order by any court of competent jurisdiction, which decision, judgment, decree
or other Order has become final after all allowable appeals by either party to
the action have been exhausted or the time for filing such appeals has expired,
(ii) a closing agreement entered into under Section 7121 of the Code or any
other settlement agreement entered into in connection with an administrative or
judicial proceeding, (iii) the expiration of the time for instituting suit with
respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"GAAP" means generally accepted accounting principles of the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Activity" means 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 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 Company.
"Hazardous Material" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(ii) any chemicals, materials, substances or wastes which are now or hereafter
become defined as or included in the definition of "hazardous substances,11
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes,," "toxic substances," "toxic pollutants" or words
of similar import, under any Environmental Law; and (iii) any other chemical,
material, substance or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business, as
reflected by the Books and Records), (iv) under capital (as opposed to real
estate) leases, (v) long term debt and (vi) in the nature of guarantees of the
obligations described in clauses (i) through (v) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section 7.2.3
of a claim for indemnity under Article VII by an Indemnified Party, specifying
the nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"Interim Statements" has the meaning ascribed to it in Section 2.4.
"Laws" means all laws, statutes, rules, regulations, ordinances arid
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in Section 2.15.
"Liabilities" means all Indebtedness, obligations and other liabilities
(or contingencies that have not yet become liabilities) of a Person (whether
absolute, accrued, contingent (or based upon any contingency) , known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties, deficiencies,
diminution in value of investment, losses and expenses, including without
limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, such as
fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Net Book Value" has the meaning ascribed to it in Section
"Occupational Safety and Health Law" means any Law 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.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Owned Real Property" has the meaning ascribed to it in Section 2.15.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period. `
"Pre-Closing Period" means any taxable period or portion thereof that
is not a Post-Closing Period.
"Consideration and Additional Consideration" have the meaning ascribed
to it in Section 1.2.
"Purchased Stock" has the meaning ascribed to it on the first page of
this Agreement.
"Purchaser" has the meaning ascribed to it in the first paragraph of
- - -this Agreement.
"Real Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in Section 2.15.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them on the
first page of this Agreement.
"Seller Financial Statement" in Section 2.4.
"Sellers' Calculation" has the meaning ascribed to it in Section 1.2.2.
"Shareholder Debt" has the meaning ascribed to it in Section 1.2.1.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least fifty
percent (50%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof. Unless the context otherwise
requires a different interpretation, references to a "Subsidiary" mean a
Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Tax Claim" means any written claim with respect to Taxes attributable
to a Pre-Closing Period made by any Taxing Authority or any Person that, if
pursued successfully, could serve as the basis for a claim for indemnification,
under this Agreement, of Purchaser the Company and other Indemnified Parties
specified in Section 7.1 of this Agreement.
"Tax Indemnity" means the Company, the Purchaser and their respective
stockholders, officers, directors, employees, agents and Affiliates of each of
them (other than the Sellers).
"Tax Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
7.2 Interpretation of Agreement.
7.2.1 Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the word "including" does
not imply any limitation to the item or matter mentioned; and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
7.2.2 When used herein, the phrase "to the knowledge of" any Person,
11to the best knowledge of" any Person or any similar phrase, means (i) with
respect to any Person who is an individual, the actual knowledge of such Person,
(ii) with respect to any other Person, the actual knowledge of the directors,
officers, managers, and other similar Persons in a similar position or having
similar powers and duties, in either case without any duty of independent
investigation of any kind.
ARTICLE IX
8 MISCELLANEOUS
8.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or mailed by prepaid first class certified mail, return receipt
requested, or sent by prepaid courier, to the parties at the following
addresses:
If to Purchaser, to:
--------------------
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
----------------------
Mr. James M. Isaac and Mr. Tommy C. Isaac
134 Mockingbird P.O. Box 768
Livingston, Texas 77351 Flatonia, Texas 78941
With copies to Sellers' attorney:
--------------------------------
Stephen L. Brochstein, Esquire
BROCHSTEIN, SLOBIN & CHAPMAN, P.C.
One Riverway, Ste. 1950
Houston, Texas; 77056
and to Sellers' accountant:
---------------------------
Mr. Andrew M. Rossi
A.M. ROSSI, PLLC
1458 Campbell Rd., Ste. 150
Houston, Texas 77055
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given -upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
8. 2 Entire Agreement. This Agreement (including the Exhibits hereto
and the Disclosure Schedule) supersedes all prior discussions and agreements
between the parties with respect to the subject matter hereof and thereof and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof and thereof.
8.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII) , each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, the Sellers will pay all
expenses relating hereto of the Company incurred in respect of the period prior
to the Closing; other than Ernst & Young.
8.4 Confidentiality. Purchaser and the Sellers will hold in strict
confidence from any Person (other than its Affiliates or representatives) all
documents and information concerning the other party hereto or any of its
Affiliates furnished to it by or on behalf of the other party in connection with
this Agreement or the transactions contemplated hereby, except to the extent the
disclosing party can demonstrate that such documents or information was (a)
previously known by the party receiving such documents or information, (b) in
the public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential. Such covenant of
confidentiality will remain in effect unless a party is compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental or Regulatory Authorities) or by other requirements of Law. This
section is meant to supplement the section entitled "Confidentiality" in that
certain Letter Agreement between the Purchaser and the Sellers dated November
13, 1998 (the "Letter Agreement"). Any conflict between the provisions of this
section and the "Confidentiality" section of the Letter Agreement shall be
resolved in accordance with the provisions of the Letter Agreement.
8.5 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Purchaser or the Sellers shall execute and
deliver to the other party such other documents and instruments, provide such
materials and information and take such other actions as the other party may
reasonably request to consummate the transactions contemplated by this Agreement
and otherwise to cause the Purchaser or the Sellers to fulfill their obligations
under this Agreement. The Sellers shall also, for a reasonable period of time
(not to exceed ninety (90) days), cooperate with Purchaser by continuing to
provide any welfare benefit plan, payroll services plan, operational service, or
other service of any nature being provided to the Company by the Sellers or any
business entity owned, managed or controlled, in any manner, by the Sellers. All
of such services shall be provided at the cost of Sellers, plus ten percent
(10%) , and be payable by Purchaser and the Company upon demand.
8.6 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
8.7 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
8.8 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of t `
he parties to confer third-party beneficiary rights, and this Agreement: does
not confer any such rights, upon any other Person other than any Person entitled
to indemnity under Article VII.
8.9 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and. assigns.
8. 10 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
8.11 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will. not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
8. 12 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Texas.
8.13 Limited Recourse of Purchaser. Regardless of anything in this
Agreement to the contrary, (i) obligations and liabilities of Purchaser
hereunder shall be without recourse to any stockholder of Purchaser or any of
such stockholder's Affiliates, directors, employees, officers or agents, except
and to the extent such third party is a successor or assign of Purchaser, and
shall be limited to the assets of such party and (ii) the stockholders of
Purchaser, except and to the extent such third party is a successor or assign of
Purchaser, have made no (and shall not be deemed to have made any)
representations, warranties or covenants (express or implied) under or in
connection with this Agreement or any other Operative Agreement, subject to
further written agreement by such obligor.
8. 14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.15 Limited Recourse of Sellers.
8.15.1 No Reliance. Purchaser acknowledges and agrees that upon the
Closing Purchaser shall have had ample opportunity to review documents
concerning the Company and its Assets and Liabilities (collectively, the
"Property") and to conduct physical inspections, including specifically, without
limitation, inspections regarding the environmental condition of the Real
Property and the Assets, the Purchaser hereby represents, warrants and agrees
that as of the Closing, Purchaser shall have (a) examined the Property and will
be familiar with the physical condition thereof; and (b) conducted such
investigations of the Property (including without limitation the environmental
condition thereof) as Purchaser has deemed necessary to satisfy itself as to the
condition of the Property and the existence or nonexistence, or curative action
to be taken with respect to, any hazardous or toxic substances on or discharged
from the Property, (c) neither Sellers, nor any of their affiliates, agents,
officers, employees or representatives of any of the foregoing have made or will
make any verbal or written representations, warranties, promises or guarantees
whatsoever to Purchaser, expressed or implied, other than as provided in this
Agreement or in any other closing documents executed by the Seller to be bound
thereby, and in particular, that no such representations, warranties,
*guarantees or promises have been or will be made with respect to the physical
condition, operation, or any other matter or thing affecting or related to the
Property, and (d) Purchaser has not relied and will not rely upon any
representations, warranties, guarantees or promises or upon any statements made
or any information provided concerning the Property provided or made by Seller
or its predecessors, or any of their respective agents and representatives,
other than as provided in this Agreement or :-n the Closing Documents executed
by the Seller to be bound thereby and subject thereto. Purchaser has elected to
purchase the Company only after having made and relied solely on its own
independent investigation, inspection, analysis, appraisal and evaluation and
the facts and circumstances related thereto. ACCORDINGLY, AND SUBJECT TO THE
PROCEEDING PROVISIONS OF THIS SECTION 8.15, PURCHASER ACKNOWLEDGES AND AGREES
THAT THE PROPERTY IS ACCEPTED "AS IS, WHERE IS, WITH ALL FAULTS", AND SELLER
OTHERWISE EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY
KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY. WITHOUT
LIMITING THE GENERALITY OF THE PRECEDING SENTENCE OR ANY OTHER DISCLAIMER SET
FORTH HEREIN, BUT SUBJECT TO ANY EXPRESS REPRESENTATIONS MADE IN THIS AGREEMENT
OR IN ANY CLOSING DOCUMENTS EXECUTED BY THE SELLER TO BE BOUND THEREBY, SELLERS
AND PURCHASER HEREBY AGREE THAT SELLERS HAVE NOT MADE AND ARE NOT MAKING ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO (A)
THE NATURE OR CONDITION, PHYSICAL OR OTHERWISE, OF THE PROPERTY OR ANY ASPECT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF HABITABILITY,
SUITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE, (B)
THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE
IMPROVEMENTS OR THE STATE OF REPAIR OR LACK OF REPAIR OF ANY OF THE
IMPROVEMENTS, (C) THE SOIL CONDITIONS, DRAINAGE CONDITIONS, TOPOGRAPHICAL
FEATURES, ACCESS TO PUBLIC RIGHTS-OF-WAY, AVAILABILITY OF UTILITIES OR OTHER
CONDITIONS OR CIRCUMSTANCES WHICH AFFECT OR MAY AFFECT THE PROPERTY OR ANY USE
TO WHICH PURCHASER MAY PUT THE PROPERTY, (E) ANY ENVIRONMENTAL, GEOLOGICAL,
METEOROLOGICAL, STRUCTURAL, OR OTHER CONDITION OR HAZARD OR THE ABSENCE THEREOF
HERETOFORE, NOW OR HEREAFTER AFFECTING IN ANY MANNER THE PROPERTY, INCLUDING BUT
NOT LIMITED TO, THE ABSENCE OF ASBESTOS OR ANY ENVIRONMENTALLY HAZARDOUS
SUBSTANCE ON, IN, UNDER OR ADJACENT TO THE PROPERTY, (I) THE COMPLIANCE OF THE
PROPERTY OR THE OPERATION OR USE OF THE PROPERTY WITH ANY APPLICABLE RESTRICTIVE
COVENANTS, OR WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL BODY
(INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ANY ZONING LAWS OR REGULATIONS, ANY
BUILDING CODES, ANY ENVIRONMENTAL LAWS, AND THE AMERICANS WITH DISABILITIES ACT
OF 1990, 42 U.S.C. 12101 ET SEQ. PURCHASER RECOGNIZES AND AGREES TF~AT UPON
CLOSING PURCHASER SHALL OTHERWISE BEAR THE RISK THAT ADVERSE MATTERS, INCLUDING
BUT NOT LIMITED TO, VIOLATIONS OF ANY APPLICABLE LAWS, CONSTRUCTION DEFECTS, AND
ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE
WAIVED, RELINQUISHED AND RELEASED SELLERS FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES,
LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF
ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE
ASSERTED OR ALLEGED AGAINST SELLERS BY REASON OF OR ARISING OUT OF ANY
VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING ANY ENVIRONMENTAL LAWS),
CONSTRUCTION DEFECTS, PHYSICAL CONDITIONS, AND ANY AND ALL OTHER ACTS,
OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY WITH THE
EXCEPTION OF THOSE MATTERS SET FORTH IN THIS AGREEMENT AND IN ANY CLOSING
DOCUMENT, SIGNED BY A SELLER.
ARTICLE IX
9 DISPUTE RESOLUTION
9.1 In the event there is a dispute under this Agreement, the
disagreeing parties shall meet with one another and diligently attempt to
resolve their disagreements. If they are unable to do so, then upon request of
either party to the dispute made within twenty (20) days of the failure of
negotiations, they will arbitrate the dispute, utilizing the process Set forth
below
9.2 Any dispute, controversy or claim arising out of or relating to
this Agreement, including those pertaining to indemnities and taxes, shall be
submitted for determination by a board of three (3) arbitrators to be selected
for each such controversy so arising as follows: The party desiring arbitration
(the "Petitioner") shall notify the other party (the "Respondent") to such
effect and shall submit the name of an arbitrator and state the "Question" or
"Questions". The Respondent shall within ten (10) business days thereafter
select an arbitrator and notify the Petitioner of the name of such arbitrator.
If Respondent shall fail to name an arbitrator within said ten (10) days, then
the Petitioner shall have the right to apply to the person who is then Senior
Judge (in term of service) of the United States District Court having
jurisdiction for the Southern District of Texas, Houston Division, for the
appointment of an arbitrator for or on behalf of the Respondent, and in such
case the arbitrator appointed by the person who is such Judge shall act as if
named by the Respondent. Within ten (10) days after the appointment of the
second arbitrator, the two arbitrators shall choose the third arbitrator. In the
event said two arbitrators should fail to choose the third arbitrator within
said ten (10) days, then either Petitioner or Respondent shall have the right,
upon reasonable notice to the other party, to apply to the person who is such
Judge for the appointment of a third arbitrator, and in such case the arbitrator
so appointed by such Judge shall act as the third arbitrator. Should any
arbitrator be or become unable or unwilling to act, another shall be selected in
the same manner.
9.3 The Question to be decided by the arbitrators shall be stated in
writing in the written request for arbitration, and the jurisdiction of the
arbitrators shall be limited to a decision of the Question so stated in writing.
The board of arbitrators so chosen shall proceed immediately, after reasonable
notice to the Parties hereto, to hear and determine the Question or Questions in
dispute. The arbitrators shall be impartial. The' arbitration shall be conducted
in Houston, Texas in accordance with the most recent commercial arbitration
rules promulgated by the American Arbitration Association, except as may be
provided for herein to the contrary. The arbitrators are relieved from judicial
formalities, and shall make their award with a view toward effecting the general
intent of this Agreement. The decision of the majority shall be final and
binding upon the Parties. The Petitioner shall submit its brief to the
arbitrators within fifteen (15) days after notice of the election of the third
arbitrator. Upon receipt of the Petitioner's brief, the Respondent shall have
fifteen (15) days to file a reply brief. On receipt of the Respondent's brief,
the Petitioner shall have seven (7) days to file a rebuttal brief. The
Respondent shall have seven (7) days. from the receipt of the Petitioner's
rebuttal to file its rebuttal brief. The arbitrators may extend the time for
filing of briefs at the request of either Party. The arbitration hearing shall
be concluded within three (3) days unless otherwise ordered by the arbitrators
and the award thereon shall be made within three (3) days after the close of the
submission of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all Parties
to the proceeding, and judgment on such award may be entered by either party in
the highest court, state or federal, having jurisdiction.
9.4 The decision of the arbitrators shall be in writing and signed by
such arbitrators, or a majority of them, and shall be final and binding upon the
Parties hereto as to the Question or Questions so submitted to and determined by
such arbitrators. Each Party shall bear the fees and expenses of the arbitrator
selected by or for such Party, the fees and expenses of counsel, witness and
employees of the Parties hereof and all other costs and expenses incurred
exclusively for the benefit of the Party incurring the same shall be borne by
the Party incurring such fees or expenses. The Party to be responsible for
paying all other fees and expenses, including but without limitation,
compensation for the third arbitrator, shall be determined by the decision of
the arbitrators as a part of the award. The Parties stipulate that the
provisions hereof shall be a complete defense to any suit, action, or proceeding
instituted in any federal, state, or local court or before any administrative
tribunal with respect to any controversy or dispute arising during the period of
this Letter Agreement and which is arbitrable as herein set forth. The
arbitration provisions hereof shall, with respect to such controversy or
dispute, survive the termination or expiration of this Letter Agreement. Nothing
herein contained shall be deemed to give the arbitrators any authority, power,
or right to alter, change, amend, modify, add to, or subtract from any of the
provisions of this Letter Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
/s/ J. I. Everest II
-----------------------
By: J. I. Everest II
Its: Treasurer & CFO
SELLERS
JAMES M. ISAAC
/s/James M. Isaac
--------------------
James M. Isaac
TOMMY C. ISAAC
/s/ Tommy C. Isaac
--------------------
Tommy C. Isaac
<PAGE>
EXHIBIT A
Sellers' Financial Statements For Period Ending July 31, 1998
and the Interim Statements
<PAGE>
EXHIBIT B
Sellers' Officer's Certificate
We, the undersigned, being the President and Vice President of J.
Marvin Isaac Interests, Inc., d/b/a Best Masonry & Tool Supply, a Texas
corporation (the "Company"), do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to
Section 5.1.8 of the Stock Purchase Agreement dated as of January 7, 1999 (the
"Agreement") between James M. Isaac and Tommy C. Isaac (collectively the
"Sellers") and ISG Resources, Inc., a Utah corporation (the "Purchaser"). Unless
otherwise defined herein, capitalized terms used in this Certificate have the
meanings given to them in the Agreement.
2. Attached hereto as Exhibit B-1 is a correct and complete copy of the
Articles of Incorporation of the Company, as in effect on the date hereof.
3. Attached hereto as Exhibit B-2 is a correct and complete copy of the
By-Laws of the Company, as
in effect on the date hereof.
4. Attached hereto as Exhibit B-3 is a correct and complete copy of the
Certificate of Good
Standing of the Company, as in effect on the date hereof.
5. Attached hereto as Exhibit B-4 is a schedule of persons that have
been duly elected (or appointed) or qualified, and/or that have acted, as
officers of the Company (to and including the date hereof), each holding the
respective offices set forth opposite their names; and the signatures set forth
on Exhibit B-4 opposite their names are the genuine signatures of such officers
executing the Agreement and any other agreements or documents on behalf of the
Company in connection with the Closing under the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of January 7, 1999.
J. MARVIN ISAAC INTERESTS, INC.,
d/b/a BEST MASONRY & TOOL SUPPLY
__________________
By:_______________
Its: President
J. MARVIN ISAAC INTERESTS, INC.,
d/b/a BEST MASONRY & TOOL SUPPLY
__________________
By:_______________
Its: Vice President
<PAGE>
EXHIBIT C
Officer's Certificate
We, the undersigned, the President and Vice President of J. Marvin
Isaac Interests, Inc., d/b/a Best Masonry & Tool Supply, a Texas corporation
(the "Company"), do hereby certify that:
1. This Certificate is being delivered as of the Closing pursuant to
Section 5.1.8 of the Stock Purchase Agreement dated as of January 6, 1999 (the
"Agreement") between James M. Isaac and Tommy C. Isaac (collectively the
"Sellers") and ISG Resources, Inc., a Utah corporation (the "Purchaser"). Unless
otherwise defined herein, capitalized terms used in this Certificate have the
meanings given to them in the Agreement.
2. We are familiar with the Company's finances and capitalization.
3. The Sellers have provided the Purchaser with Seller's Financial
Statements for the period Ending July 31, 1998 and Financial Statements for the
period August 1, 1998 through December 31, 1998 (the "Interim Statements"),
collectively, the "Statements".
4. The Statements fairly represent the Company's financial condition
and operations as of and through the respective dates and periods therein
delineated, and the results of the Company's operations and changes in financial
position for the periods then ended, and have been prepared as set forth in
Section 2.4 of the Agreement.
5. As of the Closing, no material adverse change in the financial
condition or operations of the Company has occurred from that shown on the
Statements, except as may be contemplated in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
to be effective as of January 7, 1999.
J. MARVIN ISAAC INTERESTS, INC.,
d/b/a BEST MASONRY & TOOL SUPPLY
______________________
By:___________________
Its: President
J. MARVIN ISAAC INTERESTS, INC.,
d/b/a BEST MASONRY & TOOL SUPPLY
_______________________
By:____________________
Its: Vice President
<PAGE>
EXHIBIT D
Purchaser's Officer's Certificate
The undersigned, the Vice President, Treasurer and Chief Financial
Officer of ISG Resources, Inc., a Utah corporation (the "Purchaser"), hereby
certifies that:
1. This Certificate is being delivered at the Closing today pursuant to
Section 5.2 of the Stock Purchase Agreement dated as of January 7, 1999 (the
"Agreement") between James M. Isaac and Tommy C. Isaac (collectively the
"Sellers") and the Purchaser. Unless otherwise defined herein, capitalized terms
used in this Certificate have the meanings given to them in the Agreement.
2. Attached hereto is a correct and complete copy of the authorization
of the Board of Directors of the Purchaser authorizing the consummation of the
transactions described in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of January 7, 1999.
ISG RESOURCES, INC.
_______________________
By: J.I. Everest, II
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is dated October 26, 1999,
between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Mary Ellen
Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t
October 19, 1990, an individual residing in the state of California and Judith
O. Garcia, as Trustee of the Osborne Trust, also an individual residing in the
state of California (Mrs. Dentis and Mrs. Garcia may be individually referred to
as a "Seller" or collectively as the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires
to purchase from the Sellers, all of the issued and outstanding shares of
capital stock of Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc.,
both California corporations, as well as 1.3 acres, more or less, of real
property located at 16005 Phoebe Avenue, La Mirada, California (the "Real
Property"), more particularly described on the attached Exhibit A.
The authorized capital stock issued and outstanding of both Lewis W.
Osborne, Inc. and United Terrazzo Supply Co., Inc. is referred to herein as the
"Purchased Stock." Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc.
will be collectively referred to in this Agreement as the "Company". Whenever a
statement, representation, warranty or covenant is made by or about the
"Company" it is understood that the statement, representation, warranty or
covenant is made by or about both Lewis W. Osborne, Inc. and United Terrazzo
Supply Co., Inc.
Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
1 SALE OF PURCHASED STOCK and REAL PROPERTY; CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and conditions set
forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will
purchase from the Sellers, the Purchased Stock and the Real Property.
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the
Purchased Stock and Real Property will be one million eight hundred thousand
dollars ($1,800,000.00) (subject to adjustment as described below) and will be
paid in cash at the Closing. The Purchase Price shall be allocated as follows:
1.2.1.1 For the Real Property - $700,000.00;
1.2.1.2 For the Lewis W. Osborne, Inc. stock -
$900,000.00
1.2.1.3 For the United Terrazzo, Inc. stock -
$200,000.00.
1.2.2 Commencing the first business day following the Closing
Date, Purchaser, with the cooperation of Sellers, shall prepare a balance sheet
for the Company reflecting the consolidated financial condition of Lewis W.
Osborne, Inc. and United Terrazzo Supply Co., Inc. as of the end of business day
on October 31, 1999 (the "Closing Date Balance Sheet"). Such Closing Date
Balance Sheet will be prepared on a basis consistent with GAAP as consistently
applied during the past two years by the Company's certified public accountants,
except as set forth below. On the basis of the Closing Date Balance Sheet and
within forty-five (45) days of the Closing Date, the Purchaser, with the
cooperation of the Sellers, shall calculate the consolidated adjusted net worth
of the Company as of the Closing Date ("Adjusted Net Worth"):
1.2.2.1 The trade accounts receivable shall be the
actual accounts receivable less the accounts receivable that
were more than 90 days old on the Closing Date. No reserve for
doubtful accounts shall be required in either the Closing Date
Balance Sheet or for the calculation of the Adjusted Net
Worth;
1.2.2.2 The final inventory value shall be obtained
by the parties taking a joint physical inventory on the
Closing Date to arrive at the final inventory as of the
Closing Date. The final inventory shall be evaluated at the
Company's replacement cost, but not lower than the actual cost
of the inventory paid by the Company; and
1.2.2.3 No reserve or accounts payable for the
Casmalia Disposal Site Superfund liabilities shall be required
in either the Closing Date Balance Sheet or for the
calculation of the Adjusted Net Worth.
Within forty-five (45) days following the Closing Date, the
Purchaser shall deliver to the Sellers the Closing Date
Balance Sheet and a statement reflecting the Adjusted Net
Worth (collectively, the "Final Statement"). The Purchaser
shall provide Sellers with access to copies of the work papers
and other relevant documents to verify the entries contained
in the Final Statement. The Sellers shall have a period of
thirty (30) days after delivery of the Final Statement to
review it and make any objections the Seller may have in
writing to the Purchaser. If written objections to the Final
Statement are delivered to the Purchaser within such thirty
(30) day period, then the Purchaser and Sellers shall
negotiate in good faith in an effort to resolve the matter or
matters in dispute. Following such good faith effort, any
unresolved matter shall be submitted to dispute resolution
pursuant to the provisions of Section 1.6.
1.2.3 The Base Net Worth is defined herein as the sum of One
Million One Hundred Nine Thousand One Hundred and Seventy Nine Dollars
($1,109,179.00) which is the consolidated net worth of the Company as of June
30, 1999. To the extent the Adjusted Net Worth is less than the Base Net Worth,
one-half of the difference shall be paid to Purchaser by Mary E. Dentis, as
Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19,
1990 and one-half of the difference shall be paid to Purchaser by Judith O.
Garcia, Trustee of the Osborne Trust. To the extent the Adjusted Net Worth
exceeds the Base Net Worth, Purchaser shall pay one-half the difference to Mary
E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t
October 19, 1990 and one-half of the difference to Judith O. Garcia, Trustee of
the Osborne Trust. Said payments shall be made within ten (10) days of Sellers
accepting the Final Statement or within ten (10) days of a resolution under
section 1.6.
1.3 Closing. The Closing (the "Closing" or "Closing Date") of the
purchase and sale of the Purchased Stock will take place at the offices of
Ferruzzo & Ferruzzo, 2114 North Broadway, Santa Ana, California with the
ancillary escrow closing simultaneously taking place at Chicago Title, 16969 Von
Karman, Irvine, California 92606, for the transfer of the Real Property, or at
such other place as Purchaser and the Sellers shall mutually agree, at 9:00 A.M.
local time, on October 26, 1999.
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the
Purchase Price to the Sellers by wire transfer to such account(s) as the Sellers
may direct by written notice delivered to Purchaser by the Sellers at least
three (3) Business Days before the Closing Date as follows:
1.4.1 To Mary E. Dentis, as Trustee of the Mary Ellen Dentis
Revocable Intervivos Trust, u/d/t October 19, 1990:
for the Real Property $350,000
for the Purchased Stock $595,000
---------
Total $945,000
1.4.2 To Judith O. Garcia, Trustee of the Osborne Trust
for the Real Property $350,000
for the Purchased Stock $505,000
---------
Total $855,000.
Simultaneously, the Sellers will sell and convey to Purchaser the
Purchased Stock and the Real Property free and clear of all Liens, by delivering
to Purchaser stock certificates, registered in the name of Purchaser,
representing the Purchased Stock, and a Grant Deed conveying title to the Real
Property. At the Closing, the parties shall also deliver the opinions,
certificates, contracts, documents and instruments to be delivered pursuant to
this Agreement. The Parties shall open an ancillary escrow with Chicago Title
for the transfer of the Real Property and shall execute escrow instructions as
prepared by Chicago Title consistent with this Agreement.
1.5 Real Property Provisions.
1.5.1 The transfer of the Real Property shall be consummated
through an escrow established with Chicago Title Insurance Company. The Closing
Date of the escrow will be October 26, 1999.
1.5.2 On the close of escrow, title shall vest in Purchaser.
1.5.3 Sellers shall by Grant Deed convey to Purchaser a fee
simple interest free and clear of all title defects, liens, encumbrances, deeds
of trust, and mortgages, except real property taxes, a lien not delinquent, and
other exceptions approved by Purchaser ("Permitted Exceptions"). Sellers shall
procure a California Land Title Association standard policy of title insurance
in the amount of $700,000 to be paid by Purchaser issued by Chicago Title
Insurance Co. showing title vested in Purchaser with only the Permitted
Exceptions.
1.5.4 There shall be no prorations since the Company is
responsible for the taxes and insurance.
1.5.5 Sellers shall pay all costs and expenses of clearing
title, preparing, executing, acknowledging and delivering the Grant Deed and
shall pay any transfer taxes. Purchaser shall pay the recording fees (except
those in connection with clearing title) the premium for the title insurance
policy and all fees and costs for any new financing. Sellers and Purchaser shall
each pay half of the escrow fees.
1.5.6 Sellers shall have Chicago Title prepare a preliminary
title report and deliver same to Purchaser for review. Purchaser shall within
five (5) days of receipt of said report approve of it or notify Sellers in
writing of any objections. Sellers may at Sellers election correct these matters
or elect to notify Purchaser that the matters will not be corrected. Upon
receipt of notice that the matters will not be corrected, Purchaser may waive
the objections and accept the title as is or terminate the entire Agreement
without liability on either parties part. All exceptions approved by Purchaser
are Permitted Exceptions.
1.5.7 Notwithstanding Article II, Sellers disclaim the making
of any representations or warranties, express or implied, regarding the Real
Property and Purchaser shall purchase the Real Property in its "As Is" condition
on the Closing Date.
1.6 Dispute Resolution.
1.5.8 In the event Purchaser and Sellers do not agree with the
determination of the Adjusted Net Worth and/or the Closing Date Balance Sheet
within sixty (60) days of the Closing Date, Purchaser and Sellers shall submit
the specific disagreement to a national independent public accountant firm (a
"Big 5 Firm") acceptable to Purchaser and to Sellers for resolution. Such Big 5
Firm to be selected by Purchaser and Sellers, but excluding any Big 5 Firm
presently used or previously used by Purchaser or Sellers or the Company.
1.5.9 Purchaser and Sellers shall cause the Big 5 Firm
selected, within forth-five (45) days after its selection, to resolve such
disagreement, which resolution shall be binding on all of the parties. The fees
and expenses of such Big 5 Firm shall be paid one-half (1/2) by Purchaser and
one-half (1/2) by Sellers.
1.5.10 In the event the parties are unable to select a Big 5
Firm acceptable to Purchaser and Sellers or in the event the Big 5 Firm selected
fails or refuses to act or resolve the dispute or refuses the proposed
engagement, then either Purchaser or Sellers can demand arbitration before the
American Arbitration Association under the Commercial Arbitration Rules and
Regulations in Orange County California. The arbitrator must have an accounting
background, preferably be a Certified Public Accountant and be familiar with the
purchase and sale of businesses.
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, to their best knowledge, hereby represent and warrant to
Purchaser as follows:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets. The
Company is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, (i) are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of the Company and (ii)
could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or any other agreement to which the
Company is a party or on the ability of the Sellers or the Company to perform
their obligations hereunder or thereunder. The Sellers have delivered to
Purchaser true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable corporate charter documents) of
the Company, including all amendments thereto effected through the Closing Date.
2.2 Capital Stock. The Purchased Stock consists of the following number
of shares of capital stock:
The authorized capital structure of Lewis W. Osborne, Inc. consists of
25,000 shares of voting common stock with a par value of $1.00 per
share of which 12,296 shares are issued and outstanding. Mary E.
Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust,
u/d/t October 19, 1990 owns 6,764 shares of Lewis W. Osborne, Inc. and
Judith O. Garcia, Trustee of the Osborne Trust owns 5,532 shares of
Lewis W. Osborne, Inc.
The authorized capital structure of United Terrazzo Supply Co., Inc.
consists of 800 shares of voting common stock with a par value of $250
per share of which 16 shares are issued and outstanding. Mary E.
Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust,
u/d/t October 19, 1990 owns 8 shares of United Terrazzo Supply Co.,
Inc. and Judith O. Garcia, Trustee of the Osborne Trust owns 8 shares
of United Terrazzo Supply Co., Inc.
The Purchased Stock constitutes all of the issued and outstanding shares of
capital stock of the Company. The shares of Purchased Stock are validly issued,
fully paid and nonassessable, issued in compliance with all applicable Laws and
no additional shares of capital stock have been reserved for issuance. There are
no outstanding Options with respect to the stock of the Company or agreements,
arrangements or understandings to issue Options with respect to the Company, nor
are there any preemptive rights or agreements, arrangements or understandings to
issue preemptive rights with respect to the issuance or sale of the capital
stock of the Company. The Sellers are the record and beneficial owners of all of
the shares of Purchased Stock, free and clear of all Liens. The delivery to
Purchaser of the certificates representing the Purchased Stock will transfer to
Purchaser good and valid title to all shares of the Purchased Stock, free and
clear of all Liens, and restrictions and after such transfer the Purchased
Stock, in the hands of Purchaser, will have been duly authorized, validly
issued, fully paid and nonassessable. From and after the Closing, no Seller nor
any other Person (other than the Purchaser) will have any rights whatsoever with
respect to the Purchased Stock or to any other securities of the Company.
2.3 Authority Relative to This Agreement. The Sellers have full
authority to enter into this Agreement, to perform their obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Sellers and constitutes the
legal, valid and binding obligations of the Sellers, enforceable against them in
accordance with its terms.
2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure
Schedule lists all lines of business in which the Company is participating or
engaged or has participated or engaged in the preceding three years. The name of
each director and officer of the Company, and the position with the Company held
by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds
no equity, partnership, joint venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Sellers of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not:
2.5.1 conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
the Company;
2.5.2 conflict with or result in a violation or breach of any
term or provision of any Laws or Order applicable to any of the Sellers, to the
Real Property, or to the Company, or any of their Assets; or
2.5.3 except as disclosed in Section 2.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any of the Sellers or the Company to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Real Property, the Company or
any of its Assets under, any Contract or License to which any of the Sellers or
the Company is a party or by which any of their respective Assets is bound
except for such conflicts, violations, breaches, defaults, consents, approvals,
actions, filings, notices, terminations, cancellations, accelerations,
modifications, additional rights or entitlements or Liens that, individually or
in the aggregate, (A) are not having and could not be reasonably expected to
have a material adverse effect on the business or condition of the Company, and
(B) could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or on the ability of any of the
Sellers or the Company to perform its obligations hereunder.
2.6 Governmental Approvals and Filings. Except as disclosed in Section
2.6 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of the Sellers
or the Company is required in connection with the execution, delivery and
performance of this Agreement or the consummation of transactions contemplated
herein.
2.7 Books and Records. The minute books and other similar records of
the Company to be provided to Purchaser upon execution of this Agreement contain
a true and complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the boards of directors
(or other similar governing entities) of the Company.
2.8 Financial Statements. The Sellers have caused the Company to
furnish to Purchaser true and complete copies of the complied but unaudited
financial statements of the Company for the periods ending June 30, 1999, along
with the related internal balance sheets and statements of operations and cash
flows certified as true and correct by the chief financial officer of the
Company. All of these statements, opinions, etc. (collectively referred to
herein as the "Financial Statements") are in accordance with the Books and
Records of the Company and fairly and accurately present the financial position
of the Company as of the dates thereof, for the periods covered thereby and the
results of operations and cash flows of the Company for the periods set forth
therein, all in conformity with GAAP as consistently applied by the Company's
Certified Public Accountants during the last two years and except as
specifically noted in the notes thereto and in section 2.8 of the Disclosure
Schedule. Further, the Sellers represent and warrant that, as of the Closing
Date, the Adjusted Net Worth shall be not less than 95% of the Base Net Worth.
2.9 Absence of Changes. Since June 30, 1999, there has not been any
material adverse change or any event or development, which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the business or condition of the Company. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.9 of the Disclosure Schedule, there has not occurred since June 30,
1999:
2.9.1 any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock (or other equity
interests) of the Company or any direct or indirect redemption, purchase or
other acquisition by the Company of any such capital stock (or other equity
interests) of the Company;
2.9.2 any authorization, issuance, sale or other disposition
by the Company of any shares of its capital stock (or other equity interests),
or any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other equity interests) of the Company;
2.9.3 (i) any increase in salary, rate of commissions or rate
of consulting fees of any employee or consultant of the Company; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any employee or consultant of the
Company) to any officer, director, stockholder, employee or consultant of the
Company; (iii) any establishment or modification of (A) targets, goals, pools or
similar provisions under any Benefit Plan, employment contract or other employee
compensation arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any Benefit Plan, employment contract or other employee
compensation arrangement; or (iv) any adoption, entering into, amendment,
modification or termination (partial or complete) of any Benefit Plan;
2.9.4 (i) incurrences by the Company of Indebtedness or (ii)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of the Company under, any Indebtedness of or owing to the Company;
2.9.5 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets of the Company
in an aggregate amount exceeding $10,000;
2.9.6 any write-off or write-down of or any determination to
write off or write down any of the Assets of the Company;
2.9.7 any purchase of any Assets of any Person or disposition
of, or incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
2.9.8 any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any
intellectual property rights owned by the Company;
2.9.9 any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
2.9.10 any commencement, termination or change by the Company
of any line of business;
2.9.11 any transaction by the Company with any of its
officers, directors, stockholders or Affiliates, other than pursuant to a
Contract or arrangement in effect on July 1, 1998 and disclosed to Purchaser
pursuant to Section 2.18.1.8 or other than pursuant to any Contract of
employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule;
2.9.12 any entering into of an agreement to do or engage in
any of the foregoing; or
2.9.13 any change in the accounting methods or procedures of
the Company or any other transaction involving or development affecting the
Company outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the June 30, 1999 balance sheet included in the Financial Statements
or as incurred in the ordinary course of business from June 30, 1999 through the
Closing Date or as disclosed in Section 2.10 of the Disclosure Schedule, the
Company has no Liabilities, nor are there any Liabilities relating to or
affecting the Company or any of its Assets.
2.11 Taxes.
2.11.1 Except as disclosed in Section 2.11 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company and/or the Real Property with any Taxing Authority have been duly and
timely filed, and each such Tax Return correctly and completely reflects the
income, franchise or other Tax liability and all other information required to
be reported thereon. The Company is not and has never been a member of any
affiliated, combined, consolidated, unitary or similar group with respect to the
filing of tax returns or otherwise with respect to any Taxing Authority. All
Taxes owed by the Company or related to the real Property (whether or not shown
on any Tax Return) have been paid. All monies required to be withheld by the
Company from employees, independent contractors, creditors or other third
parties for Taxes have been collected or withheld, and either duly and timely
paid to the appropriate Taxing Authority or (if not yet due for payment) set
aside in accounts for such purposes. The Company has no liability for Taxes for
any Person other than the Company.
2.11.2 The provisions for current Taxes in the Financial
Statements are sufficient for the payments of all accrued and unpaid Taxes not
yet due and payable as of their dates, whether or not disputed. As of the
Closing Date, such provisions, as adjusted for the passage of time through the
Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet
due and payable of the Company.
2.11.3 The Company is not a party to any agreement extending,
or having the effect of extending, the time within which to file any Tax Return
or the period of assessment or collection of any Taxes. The Company has not
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
2.11.4 No Taxing Authority is now asserting or threatening to
assert against the Company any deficiency, claim or liability for additional
Taxes or any adjustment of Taxes, and there is no reasonable basis for any such
assertion of which any of the Sellers or the Company is or reasonably should be
aware. No issues have been raised in any examination by any Taxing Authority
with respect to the Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. The federal income Tax Returns of the Company disclose
(in accordance with Section 6662(d)(2)(B) of the Code) all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662(d) of the Code. No claim has ever been
made by any Taxing Authority in a jurisdiction in which the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Section 2.11 of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after December 31, 1996, indicates those Tax
Returns, if any, that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to Purchaser
complete and correct copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company since
December 31, 1996. There are no Liens for Taxes upon the Assets of the Company
and/or the real Property.
2.11.5 Except as disclosed in Section 2.11 of the Disclosure
Schedule, the Company is not (i) a party to or bound by any obligations under
any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject
to any election under sections 338(e) or 341(f) of the Code or the regulations
thereunder, (iii) required to make, or reasonably expects that it might have to
make, any adjustment under section 481 of the Code (or any comparable provision
of state, local or foreign law) by reason of a change in accounting method or
otherwise, (iv) subject to any agreement or arrangement that could result
separately or in the aggregate in the payment of any "excess parachute payments"
within the meaning of section 280G of the Code, (v) and at no time has ever
been, a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is
subject to the provisions of section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986 or to any "long-term contract"
within the meaning of section 460 of the Code, (vii) a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes, or (viii) nor has it ever been, a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.12 Legal Proceedings.
2.12.1 Except as disclosed in Section 2.12 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
2.12.1.1 there are no actions or proceedings pending
or, to the knowledge of the Sellers or the Company, threatened against, relating
to or affecting the Company, the Real Property, or any of its Assets which (A)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement or otherwise result in a material diminution of
the benefits contemplated by this Agreement to Purchaser, or (B) if determined
adversely to the Company, could reasonably be expected to result in (x) any
injunction or other equitable relief against the Company, or (y) Losses by the
Company, individually or in the aggregate with Losses in respect of other such
actions or proceedings, exceeding $10,000;
2.12.1.2 there are no facts or circumstances known to
the Sellers or to the Company that could reasonably be expected to give rise to
any action or proceeding that would be required to be disclosed pursuant to
clause 2.12.1.1 above;
2.12.1.3 neither the Sellers nor the Company has
received notice, or is aware of any
Orders or lawsuits outstanding against the Company; and
2.12.1.4 neither the Sellers nor the Company has
received notice or is aware of any defects, dangerous or substandard conditions
in the products or materials manufactured, sold, distributed, or to be
manufactured, sold or distributed by the Company that could cause bodily injury,
sickness, disease, death, or damage to property, or result in loss of use of
property, or any claim, suit, demand for arbitration or notice seeking damages
for bodily injury, sickness, disease, death, or damage to property, or loss of
use or property.
2.12.2 Prior to the execution of this Agreement, the Sellers
and the Company have delivered all responses of counsel for the Company to
auditors' requests for information regarding actions or proceedings pending or
threatened against, relating to or affecting the Company during the period
commencing January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth
all actions or proceedings relating to or affecting the real Property, the
Company or its Assets during the period commencing January 1, 1996 prior to the
date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section
2.13 of the Disclosure Schedule, neither the Sellers nor the Company has
received at any time since January 1, 1996 any notice that the Company is or has
been at any time since such date, in violation of or in default under, any Law
or Order applicable to the Real Property, the Company or any of its Assets. In
furtherance and not limitation of the foregoing, neither the Sellers nor the
Company has violated any federal or state securities law in connection with the
offer, sale or purchase of any securities.
2.14 Benefit Plans; ERISA. All Benefit Plans relating to the Company
are listed in Section 2.14 of the Disclosure Schedule, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to Purchaser (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications, and IRS
determination letters). Except as disclosed in Section 2.14 of the Disclosure
Schedule:
2.14.1 each Benefit Plan, and the administration thereof,
complies, and has at all times complied, with the requirements of all applicable
Law, including ERISA and the Code, and each Benefit Plan intended to qualify
under section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such plan has at all times
since its adoption been tax-exempt under section 501(a) of the Code;
2.14.2 no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code;
2.14.3 no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
2.14.4 the "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA;
2.14.5 no "reportable event" (within the meaning of section
4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA affiliate since the effective date of said section 4043;
2.14.6 no Benefit Plan is a multiemployer plan within the
meaning of section 3(37) of ERISA;
2.14.7 Neither the Company nor any ERISA affiliate has
incurred any liability for any Tax imposed under section 4971 through 4980B of
the Code or civil liability under section 502(i) or (l) of ERISA;
2.14.8 no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
2.14.9 no Tax has been incurred under section 511 of the Code
with respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
2.14.10 no Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any
state laws requiring continuation of benefits coverage following termination of
employment;
2.14.11 no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) have been
brought or, to the knowledge of any Seller or the Company, threatened against or
with respect to any Benefit Plan and there are not facts or circumstances known
to any the Sellers or the Company that could reasonably be expected to give rise
to any such suit, action or other litigation; and
2.14.12 all contributions to Benefit Plans that were required
to be made under such Benefit Plans have been made, and all benefits accrued
under any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Section 2.14 of the Disclosure Schedule, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
2.15 Property.
2.15.1 Section 2.15.1 of the Disclosure Schedule contains a
true and correct list of (i) each parcel of real property owned (the "Owned Real
Property") by the Company, (ii) each parcel of real property leased or subleased
or otherwise occupied by the Company as tenant or subtenant (the "Leased Real
Property"; together with the Owned Real Property, the "Property") together with
a true and correct list of all such leases, subleases or other similar
agreements and any amendments, modifications or extensions thereto (the
"Property Leases"), and (iii) all Liens relating to or affecting any parcel of
Property, in each case identifying the owner, lessor and lessee thereof.
2.15.2 The Sellers or the Company have good and marketable
title to the Real Property and the Owned Real Property, free and clear of all
Liens, other than as specifically listed in Section 2.15.2 of the Disclosure
Schedule.
2.15.3 Subject to the terms of its leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment to the
Leased Real Property for the full term of the lease thereof. Each Property Lease
is a legal, valid and binding agreement, enforceable in accordance with its
terms, of the Company and of each other Person that is a party thereto, and
except as set forth in Section 2.15.3 of the Disclosure Schedule, there is no,
and neither the Sellers nor the Company, has knowledge of any, or has received
any, notice of any default (or any condition or event which, after notice or
lapse of time or both, would constitute a default) thereunder. The Company has
not assigned, sublet, transferred, hypothecated or otherwise disposed of its
interest in any Property Lease. No penalties are accrued and unpaid under any
Property Lease.
2.15.4 The Sellers shall deliver to Purchaser upon the
execution of this Agreement true and complete copies of all (i) title policies,
mortgages, deeds of trust, deeds, leases, easements, restrictive covenants,
certificates of occupancy, and similar documents, and all amendments thereto
concerning the Real Property and/or the Owned Real Property, and (ii) Property
Leases and all other documents referred to in clause (i) of this paragraph with
respect to the Leased Real Property.
2.15.5 Except as disclosed in Section 2.15.5 of the Disclosure
Schedule, the improvements on the Real Property and the Property are in good
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of each of the Sellers and of the
Company, there are no condemnation or appropriation proceedings pending or
threatened against Property or the improvements thereon.
2.15.6 Neither the Sellers nor the Company has any knowledge
of any claim, action or proceeding, actual or threatened, against the Company,
the Real Property or the Property by any Person which would materially affect
the future use, occupancy or value of the Real Property or the Property or any
part thereof.
2.16 Tangible Personal Property. The Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Financial Statements and tangible personal property acquired since June 30, 1999
other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement. All such
tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing
Date, is adequate and suitable for the conduct by the Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Company has interests in or uses
only the intellectual property described in Section 2.17 of the Disclosure
Schedule. The Company either has all right, title and interest in or a valid and
binding license to use such intellectual property. No other intellectual
property is used in or necessary to the conduct of the business of the Company.
All registrations, pending applications, registered rights and executed
agreements related to intellectual property are listed in Section 2.17 of the
Disclosure Schedule. Except as disclosed therein, (i) the Company has the right
to use the intellectual property described therein, (ii) all registrations on
behalf of the Company with and applications to Governmental or Regulatory
Authorities in respect of such intellectual property are valid and in full force
and effect and are not subject to the payment of any Taxes or maintenance fees
or the taking of any other actions by the Company to maintain their validity or
effectiveness, (iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no restrictions on
the direct or indirect transfer of any License, or any interest therein, held by
the Company in respect of such intellectual property, (v) the Sellers have
delivered, or have caused the Company to deliver, to Purchaser prior to the
execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets, (vii) neither the
Sellers nor the Company is, or has received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any License to use such intellectual property and (viii) neither the
Sellers nor the Company has any knowledge that such intellectual property is
being infringed by any other Person. To the knowledge of the Sellers and the
Company, the Company is not infringing any intellectual property of any Person,
and no litigation is pending and no claim has been made or, to the knowledge of
any the Sellers or of the Company, has been threatened to such effect.
2.18 Contracts.
2.18.1 Section 2.18.1 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts or other arrangements (true and
complete copies, or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company is a party or by which any of
its Assets is bound.
2.18.1.1 (A) all Contracts (excluding Benefit Plans)
providing for a commitment of employment or consultation services for a
specified or unspecified term, the name, position and rate of compensation of
each Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of the
Company to make payments (with or without notice, passage of time or both) to
any Person in connection with, or as a consequence of, the transactions
contemplated hereby or to any employee, other than with respect to salary or
incentive compensation payments in the ordinary course of business consistent
with past practice;
2.18.1.2 all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of the Company to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company or prohibiting or
limiting disclosure of confidential or proprietary information;
2.18.1.3 all partnership, joint venture,
shareholders' or other similar Contracts with any Person;
2.18.1.4 all Contracts relating to Indebtedness of
the Company;
2.18.1.5 all Contracts relating to the Real Property;
2.18.1.6 all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees;
2.18.1.7 all guarantees of any Indebtedness or other
obligations of the Company or any third Person;
2.18.1.8 all Contracts relating to the future
disposition or acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent with past practice
and the provisions of this Agreement;
2.18.1.9 all Contracts between or among the Company
and any of the Sellers, any current or former officer, director, stockholder or
Affiliate of the Company or of any such officer, director, stockholder or
Affiliate, on the other hand, other than Contracts disclosed pursuant to Section
2.18.1.8;
2.18.1.10 all collective bargaining or similar labor
Contracts;
2.18.1.11 all Contracts that (A) limit or contain
restrictions on the ability of the Company to declare or pay dividends on, to
make any other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer
to exist any Lien, to purchase or sell any Assets or to change the lines of
business, (B) require the Company to maintain specified financial ratios or
levels of net worth or other indicia of financial condition or (C) require the
Company to maintain insurance in certain amounts or with certain coverages; and
2.18.1.12 all other Contracts, including but not
limited to Contracts with customers, that involve the payment or potential
payment, pursuant to the terms of any such Contract, by or to the Company of
more than $10,000 and all powers of attorney and comparable delegations of
authority.
2.18.2 Each Contract required to be disclosed in Section
2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure
Schedule, neither the Company nor, to the knowledge of any the Sellers, any
other party to such Contract is, or has received notice that it is, in violation
or breach of or default under any such Contract (or with notice or lapse of time
or both, would be violation or breach of or default under any such Contract).
2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure
Schedule, the Company is not a party to or bound by any Contract that has been
or could reasonably be expected to be, individually or in the aggregate with any
other such Contracts, materially adverse to the business or condition of the
Company.
2.18.4 To the extent any of the guaranties for the benefit of
the Company or any of its Assets are not integrated with Contracts disclosed in
Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, or each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Sellers or the Company or any other
party to such guaranty is, or has received notice that it is, in violation or
breach of or default under any such guaranty (or with notice or lapse of time or
both, would be in violation or breach of default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of the Company, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Sellers or the Company have delivered to Purchaser true and complete copies
of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure
Schedule:
2.19.1 the Company owns or validly holds all Licenses that are
material to its respective business or operations;
2.19.2 each license listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect;
2.19.3 neither the Sellers nor the Company is, or has received
any notice that it is in default (or with the giving of notice of lapse of time
or both, would be in default) under any such License; and
2.19.4 the transactions contemplated in this Agreement will
not violate any such License or give any other party thereto rights to terminate
the License or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true
and complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or
affect or relate to the ownership, use or operation of any of the Assets of the
Company and that (i) have been issued to the Company, or (ii) have been issued
to any Person (other than the Company) for the benefit of the Company. Each
policy listed in Section 2.20 of the Disclosure Schedule is valid and binding
and in full force and effect, all premiums due thereunder have been paid when
due and neither the Sellers nor the Company or the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder, and the Company does not
know of any reason or state of facts that could lead to the cancellation of such
policies. Section 2.20 of the Disclosure Schedule contains a list of all claims
made under any insurance policies covering the Company since January 1, 1996.
Neither the Sellers nor the Company have received notice that any insurer under
any policy referred to in this Section is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause.
2.21 Affiliate Transactions. Except for the Shareholder Debt, (i) there
are no Liabilities between the Company and any current or former officer,
director, stockholder, Affiliate of the Company or any Affiliate of any such
officer, director, stockholder or Affiliate, and (ii) the Company does not
provide or cause to be provided any assets, services or facilities to any such
current or former officer, director, stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any
unfair labor practice. There is (i) no unfair labor practice complaint pending
or, to the knowledge of the Sellers or the Company, threatened against the
Company before the National Labor Relations Board or comparable or similar state
agency, and no grievance or arbitration proceeding arising out of under
collective bargaining agreements is so pending or, to the knowledge of the
Sellers or of the Company, threatened against the Company, (ii) no strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the
Company, threatened against the Company, and (iii) no union representation
question exists with respect to the employees of the Company or, to the
knowledge of the Sellers or the Company, no union organization activities are
taking place.
2.23 Environmental Matters.
2.23.1 The Company has obtained and holds all necessary
Environmental Permits, and all necessary Environmental Permits related to the
operations conducted on the Real Property have been obtained by the owner of the
Real Property.
2.23.2 Except as disclosed in Section 2.23.2 of the Disclosure
Schedule, to the best knowledge of the Sellers:
2.23.2.1 The 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. Neither the Sellers nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct they may be
held to be responsible received, any actual or threatened Order, notice, or
other communication from (A) any Governmental Body or private citizen acting in
the public interest, or (B) 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 the 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 the 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.
2.23.2.2 There are no pending or, to the knowledge of
the Sellers or the Company, 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 the Real Property or any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in which the Sellers or
the Company has or had an interest.
2.23.2.3 Neither the Sellers nor the Company has
knowledge of or any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held responsible received any citation,
directive, inquiry, notice, Order, summons, warning, or other communications
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 Environmental, Health, and Safety Liabilities with respect to the Real
Property or any of the Facilities or any other Assets in which the Company had
an interest , or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
the Sellers, the Company, or any other Person for whose conduct it or they are
or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
2.23.2.4 Neither the Company nor any other Person for
whose conduct it may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Real Property or any Facilities or with
respect to any other Assets (whether real, personal, or mixed) in which the
Company (or any predecessor thereof), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such Assets.
2.23.3 There are no Hazardous Materials present on or in the
Environment at the Real Property or 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. Neither the Company nor any other Person for whose conduct
it may be held responsible, or any other Person, has permitted or conducted, or
is aware of, any Hazardous Activity conducted with respect to the Real Property
or the Facilities or any other properties or assets (whether real, personal, or
mixed) in which the Sellers or the Company has or had an interest except in full
compliance with all applicable Environmental Laws.
2.23.4 There has been no Release or, to the knowledge of the
Sellers or of the Company, any 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 the Company has or had an
interest, or any geologically or hydrologically adjoining property.
2.23.5 The Sellers have delivered to Purchaser true and
complete copies and results of any reports, studies, analyses, tests, and
monitoring possessed or initiated by the Sellers or the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Real Property
or the Facilities, or concerning compliance by the Sellers, the Company or any
other Person for whose conduct it or they are or may be held responsible, with
Environmental Laws.
2.23.6 There are no Liens arising under or pursuant to any
Environmental Law on the Real Property or any Owned Real Property or Leased Real
Property and there are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions that could reasonably be expected to restrict, encumber, or
result in the imposition of special conditions under any Environmental Law with
respect to the ownership, occupancy, development, use, or transferability of any
Property.
2.23.7 There are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos
containing material, at the Real property or any Property.
2.23.8 There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Sellers or the Company with respect to any
Asset of, or property that is adjacent to an Asset of the Company which have not
been delivered to Purchaser prior to execution of this Agreement.
2.24 Substantial Customers and Suppliers. Section 2.24.1 of the
Disclosure Schedule lists the ten (10) largest customers of the Company on the
basis of revenues for goods sold or services provided for the twelve month
period ending June 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the
ten (10) largest suppliers of the Company on the basis of cost of goods or
services purchased during the twelve month period ending June 30, 1999. Except
as disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of
the Sellers and the Company, no such customer or supplier is insolvent or
threatened with bankruptcy or insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Financial Statements for the period ended
December 31, 1998, and all accounts and notes receivable arising subsequent to
such date, (i) arose from bona fide sales transactions in the ordinary course of
business consistent with past practice and are payable on ordinary trade terms,
(ii) are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangements, and (v) are not subject of any Actions
or Proceedings brought by or on behalf of the Company. Section 2.25 of the
Disclosure Schedule sets forth (x) a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company and (y) all jurisdictions in which the records relating to accounts
and notes receivable are located.
2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company,
nor any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers or the Company or any such Affiliate) have entered into
any agreement or had any discussions with any third party regarding any
transaction involving the Company which could result in the Company, the
Purchaser or its stockholders, or any officer, director, employee, agent or
Affiliate of any of them, being subject to any claim for liability to said third
party as a result of entering into this Agreement or consummating the
transactions contemplated hereby or thereby. No agent, broker, finder,
investment banker, financial advisor or other Person will be entitled to any
fee, commission or other compensation in connection with the transactions
contemplated by this Agreement on the basis of any act or statement made by the
Sellers, the Company or any of their respective Affiliates, or any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of the Sellers, the Company, or any such Affiliate.
2.27 Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. The Company is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure
Schedule sets forth (a) a list of the names and locations of all banks,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; and (b) a true and complete list and description of each
such account, box and relationship, indicating in each case the account number
and the names of all persons having signatory power and respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act. Neither any the Sellers, nor the Company nor
any Person authorized to act on behalf of any of the foregoing has, in
connection with the offering of the Purchased Stock, engaged in (i) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 501(c) under the Securities Act), (ii) any action involving a
public offering within the meaning of section 4(2) of the Securities Act, or
(iii) any action that would require the registration under the Securities Act of
the offering and sale of the Purchased Stock pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
the Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best knowledge, represents and warrants to the
Sellers as follows:
3.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Purchaser is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing which,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the validity or enforceability of this Agreement or
on the ability of Purchaser to perform its obligations hereunder or thereunder.
3.2 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby, do
not and will not:
3.3.1 conflict or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
3.3.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in Section 3.4 of
the Disclosure Schedule, if any, conflict with or result in a violation or
breach of any term or provision of any Law or Order applicable to Purchaser or
its Assets and Properties; or
3.3.3 except as disclosed in Section 3.3.3 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under, or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which Purchaser is a party, or by which it is bound.
3.4 Governmental Approvals and Filings. Except as disclosed in Section
3.4 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of this
Agreement to which it is a party or the consummation of the transactions
contemplated herein.
3.5 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.6 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.7 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.8 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Sellers may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, nonetheless, shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE IV
4 COVENANTS BY THE SELLERS AND PURCHASER
4.1 Regulatory and Other Approvals. The Sellers and Purchaser shall,
and the Sellers shall cause the Company to, (a) take all necessary or desirable
steps and proceed diligently and in good faith and use its diligent efforts, as
promptly as practicable, to obtain all consents, approvals or actions of, to
make all filings with and to give all notices to, Governmental or Regulatory
Authorities or any other Person required to consummate the transactions
contemplated hereby and those described in Sections 2.5 and 2.6 of the
Disclosure Schedule, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Purchaser or
such Governmental or Regulatory Authorities or other Persons may reasonably
request and (c) cooperate with Purchaser as promptly as practicable in obtaining
all consents, approvals or actions of, making all filings with and giving all
notices to, Governmental or Regulatory Authorities or other Persons required of
Purchaser to consummate the transactions contemplated hereby. The Sellers will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
4.2 Investigation by Purchaser.
4.2.1 From the date of this Agreement until the date on which
either Party provides the other Party with written notice that this Agreement is
terminated (the "Termination Date"), or until the Closing, whichever is earlier,
the Sellers will afford Purchaser's agents, employees, representatives and
accountants, and their representatives, access to the contracts, books and
records, and all other documents and data of the Company. Purchaser acknowledges
that certain of the books and records are highly confidential and their
disclosure will not be made except as provided herein due to the Sellers'
confidentiality and proprietary concerns.
4.3 Accounts Receivable.
4.3.1 At the Closing, the Company shall assign to the Sellers,
without recourse, all accounts receivable (including all accounts receivable
that have been written off as being uncollectible) of the Company which are more
than ninety (90) days old on the Closing Date.
4.3.2 Sellers agree to indemnify and hold harmless the
Purchaser from and against any losses resulting from the failure of the Company
to collect any account receivable which was taken into account as an asset in
determining the Adjusted Net Worth and not otherwise assigned to Sellers
pursuant to Section 4.3.1 hereof (hereinafter a "Warranted Receivable"). In the
event the Company shall fail to collect any Warranted Receivable within ninety
(90) days after the Closing Date ("Collection Period"), Purchaser shall have the
right to exchange for the assignment to the Sellers, without recourse, of unpaid
Warranted Receivables having an aggregate face amount equal to the amount paid
to Purchaser by Sellers under this indemnity.
4.3.3 Purchaser covenants and agrees that from and after the
Closing it will cause the Company to exercise prompt and diligent efforts in
good faith to collect all accounts receivable of the Company in existence
immediately before the Closing, provided, however, that neither Purchaser nor
the Company shall be required to initiate legal proceedings to collect any such
account. The Company will use reasonably diligent efforts to assist Sellers to
collect any such accounts transferred to them by the Company, and Sellers shall
reimburse the Company for any out of pocket costs it shall incur incident to
such efforts. In the event the Company shall collect in whole or in part any
such account which has been transferred to the Sellers, the Company will
transfer the amount collected to the Sellers within ten (10) days following
receipt thereof by the Company.
ARTICLE V
5 CLOSING CONDITIONS
5.1 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock and the Real Property are
subject to the fulfillment, at or prior to the Closing, of the following
conditions precedent (any or all of which may be waived in whole or in part by
Purchaser in its sole discretion):
5.1.1 Representations and Warranties. Each of the
representations and warranties made by the Sellers in this Agreement shall,
unless waived, be true and correct in all material respects as of the date of
this Agreement and on and as of the Closing Date as though each such
representation and warranty was made on and as of the Closing Date.
5.1.2 Performance. The Sellers shall have performed and
complied with, unless waived, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by them at or before the
Closing.
5.1.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to Purchaser.
5.1.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
be in form and substance reasonably satisfactory to Purchaser, (iii) shall not
impose any limitations or restrictions on Purchaser, (iv) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived, and
(v) shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation for the transactions contemplated by this Agreement shall
have occurred.
5.1.5 Third Party Consents. Any consents (or waivers)
identified in Section 2.5 of the Disclosure Schedule, and all other consents (or
waivers) to the performance by the Purchaser of its obligations under this
Agreement, or to the consummation for the transactions contemplated hereby as
are required under any Contract or License to which the Purchaser is a party or
by which any of its Assets are bound and where the failure to obtain any such
consent (or in lieu thereof waiver) could reasonably be expected, individually
or in the aggregate with other such failures, to materially adversely affect the
Purchaser or the business or condition of the Company or otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to the Purchaser in its sole discretion, (i) shall have been obtained,
(ii) shall be in form and substance satisfactory to the Purchaser in its sole
discretion, (iii) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (iv) shall be in full force and effect.
5.1.6 Purchaser's Investigation. Purchaser shall not have
discovered, as a result of its investigation and review pursuant to Section 4.2
hereof, any condition (financial or otherwise) relating in any way to the Real
Property, the Company, its Assets, business or prospects, that convinces
Purchaser, in its sole discretion, that it is not advisable to complete the
Closing.
5.1.7 Sellers' Certificates. The Sellers shall have delivered
to Purchaser (i) certificates, dated the Closing Date and executed by an
executive officer of the Company, substantially in the form and to the effect of
Exhibit B-1 hereto and (ii) certificates, dated the Closing Date and executed by
the chief financial officer of the Company, substantially in the form of Exhibit
B-2 hereto.
5.1.8 Resignations of Officers and Directors. The Sellers
shall have delivered to Purchaser the resignations of all current officers and
directors of the Company, effective as of the Closing Date.
5.1.9 Opinion of Counsel. Purchaser shall have received the
opinions of Ferruzzo & Ferruzzo, counsel to the Company and Mary E. Dentis, as
Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19,
1990, and Bewley, Lassleben & Miller, LLP counsel to Judith O. Garcia in
connection with this Agreement, dated the Closing Date, substantially in the
form and to the effect of Exhibit C hereto, and to such further effect as
Purchaser may reasonably request.
5.1.10 Disclosure Schedule. The Sellers shall have delivered
to Purchaser a copy of the Disclosure Schedule, updated and current through the
Closing Date.
5.1.11 Good Standing Certificates. The Sellers shall have
delivered to Purchaser (i) copies of the certificate or articles of
incorporation (or other comparable corporate charter documents), including all
amendments thereto of the Company certified by the applicable Secretary of State
or other appropriate governmental official, (ii) certificates from the
applicable Secretary of State or other appropriate governmental official to the
effect that the Company is in good standing in such jurisdiction, listing all
charter documents of the Company on file and attesting to its payment of all
franchise or similar Taxes, and (iii) certificates from the Secretary of State
or other appropriate official in each jurisdiction in which the Company is
qualified or admitted to do business to the effect that the Company is duly
qualified or admitted in good standing in such jurisdiction.
5.1.12 Receipt of Purchased Stock. Certificates representing
the Purchased Stock shall have been transferred to Purchaser in accordance with
the terms of this Agreement.
5.1.13 Receipt of Grant Deed. The Sellers shall present the
Purchaser with a Grant Deed, with all transfer stamps affixed thereon, conveying
the Real Property, with all improvements situated thereon, to the Purchaser,
free and clear of all liens and encumbrances except for those approved by
Purchaser referred to as Permitted Exceptions in accordance with the terms of
this Agreement.
5.1.14 No Adverse Change. There shall have occurred no
material adverse change in the business or financial condition of the Company
between June 30, 1999 and the Closing Date.
5.2 Conditions to the Obligations of the Sellers. The obligations of
the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject
to the fulfillment, at or prior to the Closing, of the following conditions
precedent (any or all of which may be waived in whole or in part by the Sellers
in theirs sole discretion):
5.2.1 Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and on and
as of the Closing Date as though each such representation and warranty was made
on and as of the Closing Date.
5.2.2 Performance. Purchaser shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or before
the Closing.
5.2.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Orders or Laws restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
5.2.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
not be subject to the satisfaction or any condition that has not been satisfied
or waived, and (iii) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have occurred.
5.2.5 Officers' Certificates. Purchaser shall have delivered
to the Sellers a certificate, dated the Closing Date and executed by the
president or vice-president or other officer of Purchaser, substantially in the
form and to the effect of Exhibit D hereto.
5.2.6 Opinion of Counsel. The Sellers shall have received the
opinion of Brett A. Hickman, Esquire, counsel of the Purchaser in connection
with this Agreement, dated the Closing Date, substantially in the form and to
the effect of Exhibit E hereto.
ARTICLE VI
6 TERMINATION
6.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
6.1.1 by Purchaser or the Sellers for their respective
convenience;
6.1.2 by Purchaser or by the 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;
6.1.3 (i) by Purchaser if any of the conditions in Section 5.1
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 Purchaser
to comply with its obligations under this Agreement) and Purchaser has not
waived such condition on or before the Closing Date, or (ii) by the Sellers, if
any of the conditions in Section 5.2 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 the Sellers to comply with his obligations under this
Agreement) and the Sellers has not waived such condition on or before the
Closing Date;
6.1.4 by mutual consent of Purchaser and the Sellers; or
6.1.5 by Purchaser or by the 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 October 26, 1999, or such later date as the parties may agree upon.
6.2 Effect of Termination. Each party's right of termination under
Section 6.1 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 6.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article
X will survive; provided, however, that if this Agreement is terminated by a
party because of a 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 (including specific performance) will survive such
termination unimpaired.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Company, the Purchaser
and their respective stockholders and the officers, directors, employees, agents
and Affiliates of each of them in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of the Sellers
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.1.2 Purchaser will indemnify the Sellers in respect of, and
hold them harmless from and against, any and all Losses suffered, incurred or
sustained by him or to which he becomes subject, resulting from, arising out of
or relating to any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.1 will be asserted and resolved as follows:
7.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by
such Indemnified Party of written notice of the Third Party Claim; provided,
that failure to give such Claim Notice shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure.
7.2.2 If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, but shall continue to
pay for any expenses of investigation or any Loss suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. If (i) the
Indemnifying Party shall not assume the defense of a Third Party claim with
counsel satisfactory to the Indemnified Party within five Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnifying Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnified Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) if the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party, and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation or any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damage and such monetary damages are paid in
full by the Indemnifying Party.
7.2.3 In the event any Indemnified Party should have a claim
under Section 7.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to
the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within thirty (30) days, such dispute shall be resolved as provided in Article X
hereof.
7.2.4 Any payment made by the Indemnifying Party to the
Indemnified Party in respect to any Third Party Claim or other claim shall be
net of any insurance proceeds realized by and paid to the Indemnified Party in
respect to such claims. The Indemnified Party shall make insurance claims
relating to any claim for which it is seeking Indemnification pursuant to this
Article VII. In computing the amount of indemnification due to the Indemnifying
Party there shall be deducted therefrom an amount equal to the net actual income
tax savings, if any, demonstrably resulting to the Indemnified Party from the
income tax deduction or deferral, if any, to the which the Indemnified Party
becomes entitled as a consequence of any loss, claim, damage, liability, cost,
expenses or deficiency giving rise to indemnification.
7.2.5 All claims for indemnification must be asserted within
eighteen (18) months of the Closing Date except for tax liability under Section
7.3 which shall be made prior to the termination of the Statute of Limitations
for tax claims and for claims under sections 2.1, 2.2, 2.3 and 2.11 which may be
made at any time.
7.2.6 Notwithstanding the foregoing, the maximum amount of
indemnification collectively payable by the Sellers arising under Article VII
hereof in no event shall exceed three hundred thousand dollars ($300,000),
except for claims arising from fraud or intentional misrepresentation where the
maximum amount of indemnification shall be the Purchase Price for the Purchased
Shares. Moreover, the Purchaser shall not be entitled to receive indemnification
for any matter (except for taxes under section 7.3) unless and until the
aggregate of the claims for such indemnification asserted pursuant to Section
7.1 exceeds Fifty Thousand Dollars ($50,000), in such event the Sellers shall be
liable for the entire amount asserted, including the first Fifty Thousand
Dollars ($50,000).
7.3 Allocation of Tax Liability.
7.3.1 In the case of Taxes with respect to or payable by the
Company with respect to a period that includes but does not end on the Closing
Date, the allocation of such Taxes between the Pre-Closing Period and the
Post-Closing Period shall be made on the basis of an interim closing of the
books of the Company as of the close of business on the Closing Date. In the
case of (i) franchise Taxes based on capitalization, debt or shares of stock
authorized, issued or outstanding and (ii) ad valorem Taxes, in either situation
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of days in such taxable period ending on
and including the Closing Date and the denominator of which is the entire number
of days in such taxable period; provided, that if any Company Asset is sold or
otherwise transferred prior to the Closing Date, then ad valorem Taxes
pertaining to such property, asset or other right shall be attributed entirely
to the Pre-Closing Period.
7.3.2 Except to the extent a reserve for Taxes is reflected on
the Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the Company is liable
with respect to any periods ending on or before the Closing Date; provided, that
in the case of any adjustment to any item of loss or expense for any such years,
which gives rise to corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually realized by the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers's obligations shall be limited to
the amount of interest (computed at the appropriate statutory rates) and
penalties actually paid to the appropriate taxing authorities by the Company as
a result of such timing differences in the case of audit adjustments, or at a
rate of eight percent (8%) per annum in the case of other adjustments, (ii)
without duplication (subject to the same proviso), all Taxes arising out of a
breach of the representations, warranties or covenants contained herein, (iii)
any Tax liability resulting from any ongoing state audits that exceed, in the
aggregate, any reserve therefore set forth on the Financial Statements, and (iv)
any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified
hereunder.
7.3.3 From and after the Closing Date, Purchaser shall cause
the Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.4 Tax Contests.
7.4.1 If any Taxing Authority or other Person asserts a Tax
Claim, then the party hereto first receiving notice of such Tax Claim shall
promptly provide written notice thereof to the other parties hereto. Such notice
shall specify in reasonable detail the basis for such Tax Claim and shall
include a copy of any relevant correspondence received from the Taxing Authority
or other Person.
7.4.2 If, within 30 calendar days after any the Sellers
receives or delivers, as the case may be, notice of a Tax Claim, the Sellers
provide to the Purchaser an Election Notice, then subject to the provisions of
this Section 7.4, the Sellers shall defend or prosecute, at their sole cost,
expense and risk, such Tax Claim by all appropriate proceedings, which
proceedings shall defended or prosecuted diligently by the Sellers to a Final
Determination; provided, that the Sellers shall not, without the prior written
consent of the Company, enter into any compromise or settlement of such Tax
Claim that would result in any Tax detriment to the Company. So long as the
Sellers are defending or prosecuting a Tax Claim, with respect to the Company,
the Company shall provide or cause to be provided to the Sellers any information
reasonably requested by the Sellers relating to such Tax Claim, and shall
otherwise cooperate with the Sellers and their representatives in good faith in
order to contest effectively such Tax Claim. The Sellers shall inform the
Company of all developments and events relating to such Tax Claim (including,
without limitation, providing to the Company copies of all written materials
relating to such Tax Claim) and the Company or its authorized representatives
shall be entitled, at the expense of the Company, to attend, but not to
participate in or control, all conferences, meetings and proceedings relating to
such Tax Claim.
7.4.3 If, with respect to any Tax Claim, the Sellers fails to
deliver an Election Notice to the Company within the period provided in Section
7.4.2 or, after delivery of such Election Notice to the Company, the Sellers
fail diligently to defend or prosecute such Tax Claim to a Final Determination,
then the Company shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and risk of the
Sellers, such Tax Claim. The Company shall have full control of such defense or
prosecution and such proceedings, including any settlement or compromise
thereof. If requested by the Company, the Sellers shall cooperate in good faith
with the Company and its authorized representatives in order to contest
effectively such Tax Claim. The Sellers may attend, but not participate in or
control, any defense, prosecution, settlement or compromise of any Tax Claim
controlled by the Company pursuant to this Section 7.4.3, and shall bear their
own costs and expenses with respect thereto. In the case of any Tax Claim that
is defended or prosecuted by the Company pursuant to this Section 7.4.3, the
Company shall, from time to time, be entitled to receive current payments from
the Sellers with respect to costs and expenses incurred by the Company in
connection with such defense or prosecution (including, without limitation,
reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as
a result of receiving a payment from the Sellers pursuant to this Section 7.4)
(collectively "Associated Costs").
7.4.4 In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4,
the Sellers shall pay to the appropriate Tax Indemnitees, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim within five Business Days after such Final Determination. In the case of
any Tax Claim that is defended or prosecuted to a Final Determination by the
Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the
appropriate Tax Indemnitee, in immediately available funds, the full amount of
any Tax arising or resulting from such Tax Claim, together with any Associated
Costs that have not theretofore been paid by the Sellers to the Company, within
five Business Days after such Final Determination. In the case of any Tax Claim
not covered by the two preceding sentences, the Sellers shall pay to the
Company, in immediately available funds, the full amount of any Tax arising or
resulting from such Tax Claim (calculated after taking into account any actual
reduction in the current liability for Taxes of such Tax Indemnitee for Tax
arising out of or resulting from such payment or such Tax Claim), together with
any Associated Costs that have not theretofore been paid by the Sellers to the
Company, at least five Business Days before the date payment of such Tax is due
from any Tax Indemnitee.
7.4.5 Notwithstanding anything contained in this Article VII
to the contrary, the rights of the Sellers under this Section 7.4 to defend or
prosecute, or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.5 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules, workpapers and relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.6 Payment of Transfer Taxes and Fees. The Sellers shall pay all
sales, use, transfer, stamp, documentary or similar Taxes imposed upon or
arising out of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the
Company and their Affiliates with respect to such Taxes. The Sellers shall file
all necessary documentation and Tax Returns with respect to such Taxes and
provide to Purchaser copies of all such Tax Returns.
7.7 Other Tax Covenants.
7.7.1 Without the prior written consent of Purchaser, neither
the Sellers nor any Affiliate of any the Sellers shall, to the extent it may
affect or relate to the Company, make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
7.7.2 Without the prior written consent of the Sellers,
neither the Purchaser nor the Company shall, to the extent it may affect or
relate to the Company, make or change any tax election, file any amended Tax
Return, enter into any closing Agreement, settle any Tax claim, assessment or
proposed assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would affect a Pre-Closing Tax Period, unless required by applicable
law.
7.7.3 So long as any books, records and files retained by the
Sellers or and his Affiliates relating to the business of the Company or the
books, records and files delivered to the control of the Purchaser pursuant to
this Agreement to the extent they relate to the operations of the Company prior
to the Closing Date, remain in existence and are available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any time during business hours for any proper purpose. The
Purchaser and the Sellers and their respective Affiliates shall use reasonable
efforts not to destroy or allow the destruction of any such books, records and
files without first providing 60 days= written notice of intention to destroy to
the other, and allowing such other party to take possession of such records.
7.8 Conflict. In the event of a conflict between the provisions of
Sections 7.3 through 7.7 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
8 DEFINITIONS
8.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly owning, owned by, controlling, controlled by or
under common control with, that Person, (b) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person.
"Agreement" means this Purchase Agreement, the Exhibits and
the Disclosure Schedule and the certificates delivered in connection herewith,
as the same may be amended from time to time in accordance with the terms
hereof.
"Assets" of any Person means all assets and properties of
every kind, nature, character and description, including, but not limited to,
the Real Property, goodwill and other tangibles, operated, owned or leased by
such Person, including cash and cash equivalents, investments, accounts and
notes receivable, chattel paper, documents, instruments, real estate, equipment,
inventory, goods and intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.4.3.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time been made
by the Company or under which any employee, former employee or director of the
Company or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Claim Notice" means written notification pursuant to Section
7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought
by an Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them
in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital
of this Agreement (and shall include all predecessors and subsidiaries of the
Company).
"Contract" means any agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of the Company and the Sellers, and the schedules
delivered by or on behalf of Purchaser, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the
Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge
their indemnity obligation under this Agreement with respect to such Tax Claim
and (ii) the Sellers elect to contest, and to control the defense or prosecution
of, such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater,
drinking water supply, stream sediments, or land, including soil, land surface
or subsurface strata, all fish, wildlife, biota and all other environmental
medium or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law and consisting of or relating to (i) 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); (ii) 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; (iii) financial responsibility under
Environmental Law for clean-up costs or corrective action, including any
investigation, clean-up, removal, containment, or other remediation or response
actions required by Environmental Law (whether or not such clean-up has been
required or requested by any governmental body or any other Person) and for any
natural resource damages; or (iv) any other compliance, corrective,
investigative, or remedial measures required under Environmental 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. Section 9601 et seq., as amended (CERCLA).
"Environmental Law" means all federal, state, local and
foreign environmental, health and safety laws, common law orders, decrees,
judgments, codes and ordinances and all rules and regulations promulgated
thereunder, civil or criminal, including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consent or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by the Company.
"Final Determination" means (i) a decision, judgment, decree
or other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" has the meaning ascribed to it in
Section 2.8.
"GAAP" means generally accepted accounting principles of the
United States, consistently applied.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Hazardous Activity" means 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 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 Company.
"Hazardous Material" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (ii) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (iii) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases, (v) long term debt and (vi) in the nature
of guarantees of the obligations described in clauses (i) through (v) above of
any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to
Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in
Section 2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses, including without limitation, interest,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include all fees and expenses, such as fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Owned Real Property" has the meaning ascribed to it in
Section 2.15.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion
thereof beginning after the Closing Date. If a taxable period begins on or
before the Closing Date and ends after the Closing Date, then the portion of the
taxable period that begins on the day following the Closing Date shall
constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion
thereof that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section
1.2.
"Purchased Stock" has the meaning ascribed to it on the first
page of this Agreement.
"Purchaser" has the meaning ascribed to it in the first
paragraph of this Agreement.
"Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in
Section 2.15.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them
on the first page of this Agreement.
"Subsidiary" means any Person in which another Person,
directly or indirectly through Subsidiaries or otherwise, beneficially owns at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof. Unless the
context otherwise requires a different interpretation, references to a
"Subsidiary" mean a Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, the Company and other
Indemnified Parties specified in Section 7.1 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
7.2.
8.2 Interpretation of Agreement.
8.2.1 Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the word "including" does
not imply any limitation to the item or matter mentioned; and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
8.2.2 When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person or any similar phrase, means the
actual knowledge of such Person or the actual knowledge of Mr. Gerald Steward,
General Manager of the Company and/or Mr. Frank Maggio, Plant Manager of the
Company.
ARTICLE IX
9 MISCELLANEOUS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or mailed by prepaid first class certified mail, return receipt
requested, or sent by prepaid courier, to the parties at the following
addresses:
If to Purchaser, to:
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
Mary E. Dentis Copy To: Thomas G. Ferruzzo, Esq.
#1 Sea Cove Lane Ferruzzo & Ferruzzo
Newport Beach, CA 92660 2114 North Broadway
Santa Ana, CA 92607
Judith O. Garcia Copy To: Edward L. Miller, Esq.
8440 La Bajada Brewley, Lassleben & Miller, LLP
Whittier, CA 90605 13215 East Penn Street
Suite 510, Whittier Square
Whittier, CA 90602
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, the Sellers will pay all
expenses relating hereto of the Company incurred in respect of the period prior
to the Closing.
9.4 Confidentiality. Purchaser and the Sellers will hold in strict
confidence from any Person (other than its Affiliates or representatives) all
documents and information concerning the other party hereto or any of its
Affiliates furnished to it by or on behalf of the other party in connection with
this Agreement or the transactions contemplated hereby, except to the extent the
disclosing party can demonstrate that such documents or information was (a)
previously known by the party receiving such documents or information, (b) in
the public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential. Such covenant of
confidentiality will remain in effect unless a party is compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental or Regulatory Authorities) or by other requirements of Law.
9.5 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.1, such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
9.6 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Purchaser or the Sellers shall execute and
deliver to the other party such other documents and instruments, provide such
materials and information and take such other actions as the other party may
reasonably request to consummate the transactions contemplated by this
Agreement.
9.7 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.8 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.9 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
California.
9.14 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
Operative Agreement.
9.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.16 Disclosure Schedule. The Disclosure in the Disclosure Schedule
must relate to the representations and warranties in the Section of the
Agreement to which they expressly relate except to the extent that the relevance
to such other representations and warranties is manifest on the face of the
Disclosure Schedule.
ARTICLE X
10 MEDIATION
In the event there is a dispute under this Agreement, the disagreeing
parties shall meet with one another and diligently attempt to resolve their
disagreements. If they are unable to do so, then upon request of either party to
the dispute made within twenty (20) days of the failure of negotiations, they
will mediate the dispute, utilizing an impartial mediator pursuant to the rules
of the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the mediation
is not successful, or if no mediation has been elected, then any party to the
dispute may file a legal action in any court of competent jurisdiction to
resolve the dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
____________________
By:_________________
Its:________________
SELLERS
MARY E. DENTIS, AS TRUSTEE OF THE MARY ELLEN DENTIS
REVOCABLE INTERVIVOS TRUST, u/d/t OCTOBER 19, 1990
_______________
Mary E. Dentis
As Trustee of the Mary Ellen Dentis Revocable Intervivos
Trust, u/d/t October 19, 1990
JUDITH O. GARCIA,
AS TRUSTEE OF THE OSBORNE TRUST
____________________
Judith O. Garcia
As Trustee of the Osborne Trust
<PAGE>
Exhibit A
Description of Real Property
See attached.
<PAGE>
Exhibit B
Sellers' Certificate
Exhibit B-1
Sellers' Officers' Certificate
I, the undersigned, the President of Lewis W. Osborne, Inc. and United
Terrazzo Supply Co., Inc. (collectively the "Company"), both California
corporations,, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to
Section 5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement")
between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable
Intervivos Trust, u/d/t October 19, 1990, and Judith O. Garcia, as Trustee of
the Osborne Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation
("Buyer"). Unless otherwise indicated herein, capitalized terms used in this
Certificate shall have the same meanings given to them in the Agreement.
2. Attached hereto as Exhibit B-1-a is a correct and complete copy of
the Articles of Incorporation of the Company, as in effect on the date hereof.
3. Attached hereto as Exhibit B-1-b is a correct and complete copy of
the By-Laws of the Company, as in effect on the date hereof.
4. Attached hereto as Exhibit B-1-c is a correct and complete copy of
the Certificates of Good Standing of the Company, as in effect on the date
hereof.
5. Attached hereto as Exhibit B-1-d is a schedule of persons that have
been duly elected (or appointed) or qualified, and/or that have acted, as
officers of the Company (to and including the date hereof), each holding the
respective offices set forth opposite their names; and the signatures set forth
on Exhibit B-1-d opposite their names are the genuine signatures of such
officers executing the Agreement and any other agreements or documents on behalf
of the Company in connection with the Closing under the Agreement.
6. Each of the representations and warranties made by the Sellers in
the Agreement are true and correct in all material respects as of the date of
the Agreement, and there has occurred no material adverse change in the business
or financial condition of the Company between June 30, 1999 and the Closing
Date.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
_____________________________
By: Mary E. Dentis, President
Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc.
<PAGE>
EXHIBIT B-1-d
Name Title Signature
Mary E. Dentis President, ____________
CFO and Director
Judith O. Garcia Vice President ____________
and Director
Kathleen Dentis Roman Secretary ____________
and Director
<PAGE>
Exhibit B
Sellers' Certificate
Exhibit B-2
Chief Financial Officer's Certificate
I, the undersigned, the Chief Financial Officer of Lewis W. Osborne,
Inc. and United Terrazzo Supply Co., Inc. (collectively the "Company"), both
California corporations, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between
Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos
Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the Osborne
Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer").
Unless otherwise indicated herein, capitalized terms used in this Certificate
shall have the same meanings given to them in the Agreement.
2. I am familiar with the Company's finances and capitalization.
3. The Company has provided the Purchaser with the Financial Statements as
provided in the Agreement.
4. The Financial Statements accurately present the Company's financial condition
and the results of operations, changes in stockholders' equity and cash flow of
the Company as of and through the respective dates and periods therein
delineated, and the results of the Company's operations and changes in financial
position for the periods then ended, and have been prepared in accordance with
GAAP, applied on a consistent basis.
5. As of the Closing Date, no material adverse change in the financial condition
or operations of the Company will have occurred from that shown on the Financial
Statements.
6. The authorized capital structure of Lewis W. Osborne, Inc. consists of 25,000
shares of voting common stock with a par value of $1.00 per share of which
12,296 shares are issued and outstanding. Mary Ellen Dentis, as Trustee of the
Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 owns 6,764
shares of Lewis W. Osborne, Inc. and Judith O. Garcia, Trustee of the Osborne
Trust owns 5,532 shares of Lewis W. Osborne, Inc. The authorized capital
structure of United Terrazzo Supply Co., Inc. consists of 800 shares of voting
common stock with a par value of $250 per share of which 16 shares are issued
and outstanding. Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis
Revocable Intervivos Trust, u/d/t October 19, 1990 owns 8 shares of United
Terrazzo Supply Co., Inc. and Judith O. Garcia, Trustee of the Osborne Trust
owns 8 shares of United Terrazzo Supply Co., Inc.
7. There are no outstanding options, warrants, calls, subscriptions,
commitments, agreements or other rights to purchase or dispose of Company common
stock or other securities which are, or may at any time be, convertible into
stock or other securities in the Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
_________________________
By: Mary E. Dentis, CFO
Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc.
<PAGE>
Exhibit C
Sellers' Counsel's Opinion
Opinion of Counsel to Sellers
On Ferruzzo & Ferruzzo Leterhead
March 27, 2000
Brett A. Hickman, Esq.
Sr. Vice President and General Counsel
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, Utah 84111
Re: The Purchase of the Capital Stock of Lewis W. Osborne, Inc. and
United Terrazzo Supply, Inc. by ISG Resources, Inc.
Dear Mr. Hickman:
We have acted as counsel to Mary Ellen Dentis, as Trustee of the Mary Ellen
Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 (sometimes referred to
herein as "Seller"), Lewis W. Osborne, Inc., and United Terrazzo Supply Co.,
Inc., both California corporations, in connection with the Purchase Agreement
dated October 26, 1999 (the "Agreement") between the Seller, Judith O. Garcia,
as Trustee of the Osborne Trust, and ISG Resources, Inc., a Utah corporation
("Buyer"). This is the opinion contemplated by Section 5.1.9 of the Agreement.
All capitalized terms used in this opinion without definition have the
respective meanings given to them in the Agreement or the Accord referred to
below.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord; and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United Sates and the Law of the State of
California.
We note that various issues concerning the Osborne Trust are addressed in the
opinion of Edward L. Miller, Esq., of the Law Firm of Bewley, Lassleben &
Miller, LLP, attached hereto, and we express no opinion with respect to those
matters.
The opinions hereafter expressed are subject to the following further
qualifications and exceptions:
1. Stock Certificate Nos. 5 and 7 of United Terrazzo Supply Co., Inc. were
issued to A. Corradini and Sons. Stock Certificate No. 5 was redeemed by
the Corporation on November 1, 1964. Stock Certificate No. 7 was issued on
October 26, 1962, and also redeemed by the Corporation on November 1, 1964.
We are unable to trace any authorized issue beyond the initial 12 shares
and, therefore, offer no opinion relating to the issuance of the shares
reflected by Stock Certificate Nos. 5 and 7.
2. Shares issued to John A. Harris are reflected by Certificate Nos. 6 and 8.
The original certificates are in the stock book but are not endorsed back
over to the Corporation. As such, we offer no opinion as to the owner of
those shares.
Based on the foregoing, our opinion is as follows:
1. The Agreement is enforceable against the Seller.
2. The authorized capital structure of Lewis W. Osborne, Inc. consists of
25,000 shares of voting common stock with a par value of $1 per share, of
which 12,296 shares are issued and outstanding. Mary E. Dentis owns 6,764
shares of Lewis W. Osborne, Inc.
3. The authorized capital structure of United Terrazzo Supply Co., Inc.
consists of 800 shares of voting common stock with a par value of $250 per
share, of which 16 shares are issued and outstanding. Mary E. Dentis owns 8
shares of United Terrazzo Supply Co., Inc.
4. Both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. are
corporations duly organized, validly existing and in good standing under
the laws of the State of California, with full corporate power and
authority to own its properties and to engage in its business as presently
conducted or contemplated. All of the outstanding shares of capital stock
of both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. have
been duly authorized and validly issued and are fully paid and
non-assessable, and were not issued in violation of the preemptive rights
of any Person.
5. Neither the execution and delivery of the Agreement nor the consummation of
any or all of the related transactions (a) violates any provision of the
certificate of incorporation or bylaws (or other governing instrument) of
either Lewis W. Osborne, Inc. or United Terrazzo Supply Co., Inc.
6. No consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Authority is required in connection
with the execution, delivery and performance of the Agreement or the
consummation of any related transaction(s).
7. We hereby confirm to you that, except as set forth in the Disclosure
Schedule, we have no actual knowledge of any Actions or Proceedings by or
before any court or Governmental Authority pending or overtly threatened
against or involving Lewis W. Osborne, Inc., or United Terrazzo Supply Co.,
Inc., or that questions or challenges the validity of the Agreement or any
action taken or to be taken by Lewis W. Osborne, Inc., or United Terrazzo
Supply Co., Inc., pursuant to the Agreement or in connection with any
related transactions. To our actual knowledge, neither Lewis W. Osborne,
Inc., nor United Terrazzo Supply Co., Inc. is subject to any judgment,
order or decree having prospective effect.
The Accord is changed for purposes of this Opinion Letter pursuant to '21 of the
Accord as follows:
1. The Primary Lawyer Group shall include all lawyers presently at our firm
who have given substantive attention to the affairs of the Seller, Lewis W.
Osborne, Inc., and/or United Terrazzo Supply Co., Inc., since 1992.
2. Accord '19(e) is deleted.
We understand that ISG Resources, Inc. is receiving a copy of this opinion in
connection with the purchase of stock and real property contemplated by the
Agreement and agree that ISG Resources, Inc. may rely on this opinion.
Very truly yours,
FERRUZZO & FERRUZZO
By
THOMAS G. FERRUZZO
ds
cc: Mary E. Dentis
Edward Miller, Esq.
<PAGE>
Exhibit D
Purchaser's Officer's Certificate
I, the undersigned, the Sr. Vice President, General Counsel and
Secretary of ISG Resources, Inc., a Utah corporation (the "Purchaser"), do
hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
5.2.5 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between
Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos
Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the Osborne
Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer").
Unless otherwise indicated herein, capitalized terms used in this Certificate
shall have the same meanings given to them in the Agreement.
2. Each of the representations and warranties made by the Purchaser in the
Agreement are true and correct in all material respects as of the date of the
Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of October 26, 1999.
ISG RESOURCES, INC.
_______________________
By: Brett A. Hickman
Its: Sr. Vice President, General
Counsel and Secretary
<PAGE>
Exhibit E
Purchaser's Counsel's Opinion
March 27, 2000
Mrs. Mary E. Dentis
#1 Sea Cove Lane
Newport Beach, CA 92660
Mrs. Judith O. Garcia
8440 La Bajada
Whittier, CA 90605
Ladies:
I am Sr. Vice President and General Counsel of ISG Resources, Inc., a
Utah corporation ("Purchaser") and have acted as counsel to Purchaser in
connection with the Purchase Agreement dated October 26, 1999 (the "Agreement")
between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable
Intervivos Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the
Osborne Trust (collectively the "Sellers") and the Purchaser. This is the
opinion contemplated by Section 5.2.6 of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement or the Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the laws of the United States.
Based on the foregoing, my opinion is as follows:
1. The Agreement is enforceable against the Purchaser.
2. Neither the execution and delivery of the Agreement nor the performance of
the Purchaser's obligations thereunder (a) violates any provision of the
certificate of incorporation or bylaws (or other governing instrument) of the
Purchaser, (b) breaches or constitutes a default (or an event that, with notice
or lapse of time or both, would constitute a default) under any agreement or
commitment to which the Purchaser is party or (c) violates any statute, law,
regulation or rule, or any judgment, decree or order of any court or
Governmental Authority applicable to the Purchaser.
Sincerely,
Brett A. Hickman
BAH/hs
cc: Thomas G. Ferruzzo, Esq.
Edward L. Miller, Esq.
<PAGE>
Disclosure Schedule
THE DISCLOSURE SCHEDULE OF
LEWIS W. OSBORNE, INC. AND UNITED TERRAZZO SUPPLY CO., INC.
The Disclosure Schedule of LEWIS W. OSBORNE, INC. and UNITED TERRAZZO SUPPLY
CO., INC. (both sometimes referred to as the "Company") has been prepared and is
being delivered by the Sellers pursuant to that certain Stock Purchase Agreement
dated as of the 26th day of October, 1999, by and among ISG RESOURCES, INC.,
MARY ELLEN DENTIS, as Trustee of the Mary Ellen Dentis Revocable Intervivos
Trust, u/d/t October 19, 1990 and JUDITH O. GARCIA, Trustee of the Osborne
Family Trust (the "Agreement"). Pursuant to Section 9.16 of the Agreement, any
disclosure in this Disclosure Schedule, and in any supplement hereto, shall
relate to the Section of the Agreement to which it refers, except to the extent
that the relevance to such other section is manifest on the face of the
Disclosure Schedule. Any capitalized terms set forth in any Section of this
Disclosure Schedule and not otherwise defined shall have the meaning ascribed to
it in the Agreement.
<PAGE>
SECTION 2.4
Lines of Business the Company is Participating
1. Building materials
2. Blending
3. Packaging sales of cement
4. Aggregates
5. Divider strip
6. Grinding and polishing machines
7. Grinding and polishing stones
8. Cleaners and sealers
<PAGE>
SECTION 2.6
Consents
None.
<PAGE>
SECTION 2.8
Exceptions to GAAP
1. The attorney fees and costs and accountant fees with respect to this
transaction have been paid by the Company and expensed without any
allocation between Shareholder and the Company.
2. The Financial Statements do not accrue vacation or sick leave for
employees.
<PAGE>
SECTION 2.9
Changes Since June 30, 1999
1. The Company has not had any adverse material effects when reviewed as a
whole, expenses have increased in some areas and decreased in others.
2. The Company's top ten accounts are listed in Schedule 2.24.1.
3. The Company has disposed of 3 tanks (2 large and 1 small) that were beyond
the end of their useful lives.
4. There has been changes in compensation for 3 employees (Nick Reeves, Truck
Driver, Tony Avila, Shop Foreman, and Frank Maggio, Plant Foreman). There
are no other raises planned or promised.
5. In connection with increased Medical plan (Kaiser) costs, the Company has
decided not to increase employee contributions to the cost of this plan.
<PAGE>
SECTION 2.10
Undisclosed Liabilities
The Company makes no representation or warranty with respect to any computer
hardware or software and its ability to recognize the year 2000.
<PAGE>
SECTION 2.11
Taxes
None.
<PAGE>
SECTION 2.12
Legal Proceedings
1. The Casmalia Disposal Site (see Section 2.23.2).
2. Notice to Comply dated February 8, 1996, issued by the South Coast Air
Quality Management District, attached hereto (see Section 2.13).
3. Failure to have a permit to operate air pressure tank since expiration of
prior permit (see Section 2.13).
4. In 1995 the Company was informed that another company was using the name
Osborne Building Supply, Inc. A cease and desist letter was sent by the
Company. A response was sent June 27, 1995 whereby Osborne Building Supply,
Inc. alleged it had the exclusive right to use such name. The Company has
been informed that Osborne Building Supply, Inc. is now out of business.
<PAGE>
SECTION 2.13
Compliance With Laws
1. The Company has not maintained an Injury Illness Prevention Program, but
will have one in place at the time of Closing.
2. The Company has not maintained a Hazardous Communications Program, but will
have one in place at the time of Closing.
3. The Company has not had a valid permit to operate its Air Pressure Tank.
The Company has applied for a renewal. Attached hereto is a copy of the
prior permit.
4. In 1996, the Company received a Notice to Comply from the South Coast Air
Quality Management District to "submit an application for cement blending
station." An application was immediately filed and the appropriate fees
paid; however, no permit was ever issued. The Company has contacted the
A.Q.M.D., who is processing the application.
5. The Company's Employee Handbook is out of date.
<PAGE>
SECTION 2.14
Employee Benefit Plans
Salaried employees - Medical, the company pays 80%
Paid Vacations
Paid Holidays
5 days paid sick leave
Hourly employees - Medical, the company pays 80%
Paid Vacations
Paid Holidays
The medical plan is with Kaiser
<PAGE>
SECTION 2.15
Owned Real Property and Leased Real Property
The Company owns no real property. The property which the Company occupies is
owned by the Stockholders, Mary E. Dentis and Judith O. Garcia. We do not have a
lease, but are on a month-to-month rental. The amount of the rental is $8,666
per month and is paid in the following manner:
$2,000 from United Terrazzo:
$ 1,000 to Mary Dentis
$ 1,000 to Judith Garcia, Trustee
$6,666 from Lewis W. Osborne:
$ 3,000 to Judith Garcia, Trustee
$ 3,666 to Mary Dentis
The amount paid to the owners from Lewis W. Osborne is being taken out of the
AAA.
<PAGE>
SECTION 2.15.2
Real Property Liens
Storm drain easement
Chevron pipeline easement
Those set forth in the Preliminary Title Report issued by Chicago Title
Insurance Company.
<PAGE>
SECTION 2.15.3
Exceptions to Enforceability of Leases
None.
<PAGE>
SECTION 2.15.5
Real Property Condition
The building was built prior to 1978 and, as such, may contain asbestos
containing materials, lead-based paint, and other products now considered
hazardous.
<PAGE>
SECTION 2.16
Personal Property Liens
None.
<PAGE>
SECTION 2.17
Intellectual Property
None.
<PAGE>
SECTION 2.18.1
Contracts
At-will employment contracts.
Toll Manufacturing Agreement.
Packaging Agreement with CTS Cement Manufacturing.
<PAGE>
SECTION 2.18.2
Default Notices
None.
<PAGE>
SECTION 2.18.3
Materially Adverse Contracts
None.
<PAGE>
SECTION 2.19
Licenses
1. Permit to Operate Liquified Petroleum Gas Tank
2. Permit to Operate Air Pressure Tank (see Section 2.13)
3. Permit to Operate Cement Blending Station (see Section 2.13)
4. City of La Mirada Business Licenses for United Terrazzo Supply Co., Inc.
and Lewis W. Osborne, Inc.
5. California State Board of Equalization Seller=s Permit
6. Permits Issued by the South Coast Air Quality Management District listed on
the attached APermit Renewals@ letter.
<PAGE>
SECTION 2.20
Insurance
Sherman Parent Insurance Package/Auto/Workers' Comp #CCP56373901 claim auto
96-97 amount $ 346.00.
No other claims in this time period since 1/01/96.
Health insurance with Kaiser.
<PAGE>
SECTION 2.23.2
Environmental Matters
We have a letter of final closure for underground tank removal.
Unsettled claim for soil that was sent to the Casmalia site in 1987. The Company
has paid $62,500 to have this dirt hauled and remediated. The Company exercised
a settlement option as set forth in the Casmalia Disposal Site Administrative
Order,U.S. EPA Docket No. 99-02(a), and sent in the sum of $77,983 as
settlement.
See Section 2.15.5.
See Section 2.13.
<PAGE>
SECTION 2.24.1
Customers
COMPANY TYPE OF BUSINESS YTD % OF
SALES SALES
- - ------- --------------- -------- --------
CORR01 TERRAZZO $ 203,277.68 11.1
HOCK01 POOL PLASTERING $ 118,956.56 6.5
CHEM01 BLENDS $ 114,599.78 6.3
WEST06 BLENDS $ 111,412.03 6.1
SCOF01 FLY ASH $ 103,770.55 5.7
PACI03 BLOCK WALLS $ 83,311.44 4.6
PAYN01 TERRAZZO $ 77,043.50 4.2
ADVA02 TERRAZZO $ 73,888.10 4.0
MOLI01 TERRAZZO $ 53,158.34 2.9
ASSO01 TERRAZZO $ 40,581.95 2.2
<PAGE>
SECTION 2.24.2
Suppliers
California Portland Cement
Manhattan American
Lehigh Cement
Riverside Cement
Oglebay Norton Sand
Fribel International
Heritage Glass
Tesco Products
Atlas Abrasives
Specialty Minerals
<PAGE>
SECTION 2.25
Accounts Receivable
None.
<PAGE>
SECTION 2.28
Bank Accounts
Cerritos Valley Bank (562) 868-3221
12100 Firestone Blvd.
Norwalk, Ca 90650-2971
Lewis W. Osborne, Inc. Checking Account #001005154
United Terrazzo Supply Checking Account #001010859
Signors on the above: Mary Dentis
Gerald Steward
Kathleen Roman
United Terrazzo Money Market Account #1049879
Signors on the above: Mary Dentis
Kathy Roman
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated December 1, 1999,
between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Bill E.
Nichols, John W. Nichols and Debbie Nichols Dickey, individuals residing in the
state of Texas (individually a "Seller" and collectively the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires to
purchase from the Sellers, all of the issued and outstanding shares of capital
stock of Magna Wall, Inc. (the "Company"), a Texas corporation.
The authorized capital stock of the Company is referred to herein as the
"Purchased Stock."
Unless otherwise defined in this Agreement, the capitalized terms used in
this Agreement have the meanings given in Article VIII below.
In consideration of the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as set forth herein.
ARTICLE I
1. SALE OF PURCHASED STOCK; CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and conditions set forth in
this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase
from the Sellers, the Purchased Stock.
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the Purchased Stock is one
million five hundred thousand dollars ($1,500,000.00) in cash, subject to
adjustment as set forth in Section 1.2.2 below.
1.2.2 The Purchase Price will increase or decrease, on a dollar for dollar
basis, based on changes in the Company's net asset value (the "Net Asset Value")
(defined as total assets less liabilities) during the period September 30, 1999
to the Closing Date. To determine whether an adjustment is appropriate, Sellers
shall (within thirty days of the Closing Date) provide the Purchaser with
financial statements of the Company indicating the Net Asset Value as of the
Closing Date (the "Sellers' Calculation"). If Purchaser (within thirty days of
receiving the Sellers' Calculation) disagrees with the Sellers' Calculation,
then Purchaser will promptly engage an independent accounting firm to review the
financial condition of the Company as of the Closing on a basis consistent with
the Financial Statements as described in Article 2.8 below. Within forty-five
(45) days after the matter is referred to the accounting firm, the accounting
firm will prepare and deliver a report to all parties which will detail whether
a Purchase Price adjustment is necessary. The report will be final and binding
on both parties, absent fraud or clear error.
1.3 Closing. The Closing (the "Closing") of the purchase and sale of the
Purchased Stock will take place at the offices of Donald L. Cuba, Wells Fargo
Bank Building, 8700 Crownhill Boulevard, Suite 105, San Antonio, Texas 78209 at
11:00 A.M. on December 1, 1999, or at such other place as Purchaser and the
Sellers shall mutually agree.
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the Purchase
Price to the Sellers by wire transfer to such account as the Sellers may direct
by written notice delivered to Purchaser by the Sellers at least three (3)
Business Days before the Closing Date. Simultaneously, the Sellers will sell and
convey to Purchaser the Purchased Stock free and clear of all Liens, by
delivering to Purchaser a stock certificate, registered in the name of
Purchaser, representing the Purchased Stock. At the Closing, the parties shall
also deliver the opinions, certificates, contracts, documents and instruments to
be delivered pursuant to this Agreement.
1.5 Post Closing Payment.
1.5.1 If the Purchaser agrees with the Sellers' Calculation, then within twenty
(20) days after delivery of the Sellers' Calculation, the Purchaser will deliver
to the Sellers cash in the amount of the adjustment specified therein.
1.5.2 If the Purchaser disagrees with the Sellers' Calculation then, within
twenty (20) days after delivery of the report by the independent accounting firm
referred to in Section 1.2.2: (i) if the report indicates that an upward
adjustment is appropriate, the Purchaser will deliver to the Sellers cash in the
amount of the adjustment specified in the report, absent fraud or clear error;
or (ii) if the report indicates that an downward adjustment is appropriate, the
Sellers will deliver to the Purchaser cash in the amount of the adjustment
specified in the report, absent fraud or clear error
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, to their best actual knowledge, hereby represent and warrant
to Purchaser as follows:
2.1 Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas and
has full corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets. The Company is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its Assets, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so qualified, licensed or
admitted and in good standing which, individually or in the aggregate, (i) are
not having and could not be reasonably expected to have a material adverse
effect on the business or condition of the Company and (ii) could not be
reasonably expected to have a material adverse effect on the validity or
enforceability of this Agreement or any other agreement to which it is a party
or on the ability of the Sellers or the Company to perform their obligations
hereunder or thereunder. The Sellers have delivered to Purchaser true and
complete copies of the certificate or articles of incorporation and by-laws (or
other comparable corporate charter documents) of the Company, including all
amendments thereto effected through the Closing Date.
2.2 Capital Stock. The Purchased Stock consists of 1,000 shares of common stock,
par value $1.00 per share. The Purchased Stock constitutes all of the issued and
outstanding shares of capital stock of the Company. The shares of Purchased
Stock are validly issued, fully paid and nonassessable, issued in compliance
with all applicable Laws and no additional shares of capital stock have been
reserved for issuance. There are no outstanding Options with respect to the
stock of the Company or agreements, arrangements or understandings to issue
Options with respect to the Company, nor are there any preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of the capital stock of the Company. The Sellers
are the record and beneficial owners of all of the shares of Purchased Stock,
free and clear of all Liens. The delivery to Purchaser of the certificates
representing the Purchased Stock will transfer to Purchaser good and valid title
to all shares of the Purchased Stock, free and clear of all Liens, and
restrictions and after such transfer the Purchased Stock, in the hands of
Purchaser, will have been duly authorized, validly issued, fully paid and
nonassessable. From and after the Closing, no Seller nor any other Person (other
than the Purchaser) will have any rights whatsoever with respect to the
Purchased Stock or to any other securities of the Company.
2.3 Authority Relative to This Agreement. The Sellers have full authority to
enter into this Agreement, to perform their obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Sellers and constitutes the legal,
valid and binding obligations of the Sellers, enforceable against them in
accordance with its terms.
2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure Schedule
lists all lines of business in which the Company is participating or engaged or
has participated or engaged in the preceding three years. The name of each
director and officer of the Company, and the position with the Company held by
each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds no
equity, partnership, joint venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Sellers of this Agreement
does not, and the consummation of the transactions contemplated hereby will not:
2.5.1 conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles of incorporation or
by-laws (or other comparable corporate charter documents) of the Company;
2.5.2 subject to obtaining the consents, approvals and actions, making the
filings and giving the notices referred to in Section 2.6 below or disclosed in
Section 2.6 of the Disclosure Schedule, if any, conflict with or result in a
violation or breach of any term or provision of any Laws or Order (to the extent
such conflict would result in a claim of more than $10,000.00 against the
Company) applicable to any of the Sellers or to the Company, or any of their
Assets; or
2.5.3 except as disclosed in Section 2.5 of the Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require any of
the Sellers or the Company to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (f) result in the creation or
imposition of any Lien upon the Company or any of its Assets under, any Contract
or License to which any of the Sellers or the Company is a party or by which any
of their respective Assets is bound except for such conflicts, violations,
breaches, defaults, consents, approvals, actions, filings, notices,
terminations, cancellations, accelerations, modifications, additional rights or
entitlements or Liens that, individually or in the aggregate, (A) are not having
and could not be reasonably expected to have a material adverse effect on the
business or condition of the Company, and (B) could not be reasonably expected
to have a material adverse effect on the validity or enforceability of this
Agreement or on the ability of any of the Sellers or the Company to perform its
obligations hereunder.
2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6 of
the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of the Sellers or
the Company is required in connection with the execution, delivery and
performance of this Agreement or the consummation of transactions contemplated
herein.
2.7 Books and Records. The minute books and other similar records of the Company
to be provided to Purchaser upon execution of this Agreement contain a true and
complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the boards of directors
(or other similar governing entities) of the Company.
2.8 Financial Statements. Set forth in Section 2.8 of the Disclosure Statement
are (a) the unaudited statements of income, of the Company for the period ended
Septempber 30, 1999 and (b) an unaudited balance sheet of the Company as at
September 30, 1999 (the "Balance Sheet")(collectively referred to herein as the
"the Financial Statements"). The Financial Statements fairly present the
financial condition of the Company as of the dates thereof and the earnings for
the periods indicated, all in accordance sound accounting principles,
consistently applied, and are consistent with the books and records of the
Company.
2.9 Absence of Changes. Since September 30, 1999, there has not been any
material adverse change or any event or development, which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the business or condition of the Company. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.9 of the Disclosure Schedule, there has not occurred since September
30, 1999:
2.9.1 any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of the Company or any direct or indirect redemption, purchase or other
acquisition by the Company of any such capital stock (or other equity interests)
of the Company;
2.9.2 any authorization, issuance, sale or other disposition by
the Company of any shares of its capital stock (or other equity interests), or
any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other equity interests) of the Company;
2.9.3 (i) any increase in salary, rate of commissions or rate of
consulting fees of any employee or consultant of the Company; (ii) any payment
of consideration of any nature whatsoever (other than salary, commissions or
consulting fees paid to any employee or consultant of the Company) to any
officer, director, stockholder, employee or consultant of the Company; (iii) any
establishment or modification of (A) targets, goals, pools or similar provisions
under any Benefit Plan, employment contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan, employment contract or other employee compensation
arrangement; or (iv) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Benefit Plan;
2.9.4 (i) incurrences by the Company of Indebtedness or (ii) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
the Company under, any Indebtedness of or owing to the Company;
2.9.5 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets of the Company
in an aggregate amount exceeding $10,000;
2.9.6 any write-off or write-down of or any determination to write
off or write down any of the Assets of the Company;
2.9.7 any purchase of any Assets of any Person or disposition of,
or incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
2.9.8 other than in the ordinary course of business, any entering
into, amendment, modification, termination (partial or complete) or granting of
a waiver under or giving any consent with respect to (i) any Contract which is
required (or had it been in effect on the date hereof would have been required)
to be disclosed in the Disclosure Schedule pursuant to Section 2.18.1, (ii) any
License held by the Company, or (iii) any intellectual property rights owned by
the Company;
2.9.9 any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
2.9.10 any commencement, termination or change by the Company of
any line of business;
2.9.11 any transaction by the Company with any of its officers,
directors, stockholders or Affiliates, other than pursuant to a Contract or
arrangement in effect on September 30, 1999 and disclosed to Purchaser pursuant
to Section 2.18.1.8 or other than pursuant to any Contract of employment and
listed pursuant to Section 2.18.1 of the Disclosure Schedule;
2.9.12 any entering into of an agreement to do or engage in any of
the foregoing, including without limitation with respect to any merger, sale of
substantially all assets or other business combination not otherwise restricted
by the foregoing paragraphs; or
2.9.13 any change in the accounting methods or procedures of the
Company or any other transaction involving or development affecting the Company
outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against in
the September 30, 1999 balance sheet included in the Financial Statements or as
disclosed in Section 2.10 of the Disclosure Schedule, and subject to the
limitation contained in 7.1.1 with respect to claims having insurance coverage,
the Company has no Liabilities, nor are there any Liabilities relating to or
affecting the Company or any of its Assets.
2.11 Taxes.
2.11.1 Except as disclosed in Section 2.11 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company with any Taxing Authority have been duly and timely filed, and each such
Tax Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. The Company
is not and has never been a member of any affiliated, combined, consolidated,
unitary or similar group with respect to the filing of tax returns or otherwise
with respect to any Taxing Authority. All Taxes owed by the Company (whether or
not shown on any Tax Return) have been paid. All monies required to be withheld
by the Company from employees, independent contractors, creditors or other third
parties for Taxes have been collected or withheld, and either duly and timely
paid to the appropriate Taxing Authority or (if not yet due for payment) set
aside in accounts for such purposes. The Company has no liability for Taxes for
any Person other than the Company (i) solely as a present or former member of a
consolidated group, (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
2.11.2 The provisions for current Taxes in the Financial
Statements are sufficient for the payments of all accrued and unpaid Taxes not
yet due and payable as of their dates, whether or not disputed. As of the
Closing Date, such provisions, as adjusted for the passage of time through the
Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet
due and payable of the Company.
2.11.3 The Company is not a party to any agreement extending, or
having the effect of extending, the time within which to file any Tax Return or
the period of assessment or collection of any Taxes. The Company has not
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
2.11.4 No Taxing Authority is now asserting or threatening to
assert against the Company any deficiency, claim or liability for additional
Taxes or any adjustment of Taxes, and there is no reasonable basis for any such
assertion of which any of the Sellers or the Company is or reasonably should be
aware. No issues have been raised in any examination by any Taxing Authority
with respect to the Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. The federal income Tax Returns of the Company disclose
(in accordance with Section 6662(d)(2)(B) of the Code) all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662(d) of the Code. No claim has ever been
made by any Taxing Authority in a jurisdiction in which the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Section 2.11 of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after December 31, 1998, indicates those Tax
Returns, if any, that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to Purchaser
complete and correct copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company since
January 1, 1996. There are no Liens for Taxes upon the Assets of the Company.
2.11.5 Except as disclosed in Section 2.11 of the Disclosure
Schedule, the Company is not (i) a party to or bound by any obligations under
any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject
to any election under sections 338(e) or 341(f) of the Code or the regulations
thereunder, (iii) required to make, or reasonably expects that it might have to
make, any adjustment under section 481 of the Code (or any comparable provision
of state, local or foreign law) by reason of a change in accounting method or
otherwise, (iv) subject to any agreement or arrangement that could result
separately or in the aggregate in the payment of any "excess parachute payments"
within the meaning of section 280G of the Code, (v) and at no time has ever
been, a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is
subject to the provisions of section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986 or to any "long-term contract"
within the meaning of section 460 of the Code, (vii) a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes, or (viii) nor has it ever been, a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.12 Legal Proceedings.
2.12.1 Except as disclosed in Section 2.12 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
2.12.1.1 there are no actions or proceedings pending or,
to the knowledge of the Sellers or the Company, threatened against, relating to
or affecting the Company, or any of its Assets which (A) could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal any of the transactions contemplated by
this Agreement or otherwise result in a material diminution of the benefits
contemplated by this Agreement to Purchaser, or (B) if determined adversely to
the Company, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company, or (y) Losses by the Company,
individually or in the aggregate with Losses in respect of other such actions or
proceedings, exceeding $10,000;
2.12.1.2 there are no facts or circumstances known to the
Sellers or to the Company that could reasonably be expected to give rise to any
action or proceeding that would be required to be disclosed pursuant to clause
2.12.1.1 above;
2.12.1.3 neither the Sellers nor the Company has received
notice, or is aware of any Orders or lawsuits outstanding against the Company;
and
2.12.1.4 neither the Sellers nor the Company has received
notice or is aware of any defects, dangerous or substandard conditions in the
products or materials manufactured, sold, distributed, or to be manufactured,
sold or distributed by the Company that could cause bodily injury, sickness,
disease, death, or damage to property, or result in loss of use of property, or
any claim, suit, demand for arbitration or notice seeking damages for bodily
injury, sickness, disease, death, or damage to property, or loss of use or
property.
2.12.2 Prior to the execution of this Agreement, the Sellers and
the Company have delivered all responses of counsel for the Company to auditors'
requests for information regarding actions or proceedings pending or threatened
against, relating to or affecting the Company during the period commencing
January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth all
actions or proceedings relating to or affecting the Company or its Assets during
the period commencing January 1, 1996 prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13
of the Disclosure Schedule, neither the Sellers nor the Company has received at
any time since January 1, 1996 any notice that the Company is or has been at any
time since such date, in violation of or in default under, any Law or Order
applicable to the Company or any of its Assets. In furtherance and not
limitation of the foregoing, neither the Sellers nor the Company has violated
any federal or state securities law in connection with the offer, sale or
purchase of any securities.
2.14 Benefit Plans; ERISA. The Company has in existence a defined
benefit plan (the "Plan") and copies of all documentation relating to the Plan
have been delivered or made available to Purchaser (including copies of the
Plan, summary plan descriptions, trust agreements, the three most recent annual
returns, employee communications, and IRS determination letters); The Plan
terminates on December 31,1999; there are no other benefit plans of any nature.
2.14.1 The Plan, and the administration thereof, complies, and
has at all times complied in all material respects, with the requirements of all
applicable Law, including ERISA and the Code, and the Plan intended to qualify
under section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such plan has at all times
since its adoption been tax-exempt under section 501(a) of the Code;
2.14.2 all "accumulated funding deficiency" within the meaning
of section 302 of ERISA or section 412 of the Code shall be eliminated prior to
termination of the Company's defined benefit plan;
2.14.3 no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
2.14.4 the "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not or will not upon termination of
the Plan exceed zero with respect to any Benefit Plan subject to Title IV of
ERISA;
2.14.5 other than termnimation of the Plan effective December
31, 1999 no other "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA affiliate since the effective date of said section 4043; proper notice
of termination has been given to all employees;
2.14.6 the Plan is not a multiemployer plan within the meaning
of section 3(37) of ERISA;
2.14.7 Neither the Company nor any ERISA affiliate has
incurred any liability for any Tax imposed under section 4971 through 4980B of
the Code or civil liability under section 502(i) or (l) of ERISA;
2.14.8 no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
2.14.9 no Tax has been incurred under section 511 of the Code
with respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
2.14.10 the Plan does not provides health or death benefit
coverage beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any
state laws requiring continuation of benefits coverage following termination of
employment;
2.14.11 no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) have been
brought or, to the knowledge of any Seller or the Company, threatened against or
with respect to the Plan and there are not facts or circumstances known to any
the Sellers or the Company that could reasonably be expected to give rise to any
such suit, action or other litigation; and
2.14.12 all contributions to the Plans that were required to
be made under the Plan have been or will be made prior to termination, and all
benefits accrued (including any unfunded contributions) under the Plan have been
or will be paid, accrued or otherwise adequately reserved in accordance with
GAAP, and the Company has performed all material obligations required to be
performed under all Benefit Plans.
2.15 Real Property. The Company owns no real property.
2.16 Tangible Personal Property. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Financial Statements and tangible personal property acquired since September 30,
1999 other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement. All such
tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing
Date, is adequate and suitable for the conduct by the Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Company has interests in or uses
only the intellectual property described in Section 2.17 of the Disclosure
Schedule. The Company either has all right, title and interest in or a valid and
binding license to use such intellectual property. No other intellectual
property is used in or necessary to the conduct of the business of the Company.
All registrations, pending applications, registered rights and executed
agreements related to intellectual property are listed in Section 2.17 of the
Disclosure Schedule. Except as disclosed therein, (i) the Company has the right
to use the intellectual property described therein, (ii) all registrations on
behalf of the Company with and applications to Governmental or Regulatory
Authorities in respect of such intellectual property are valid and in full force
and effect and are not subject to the payment of any Taxes or maintenance fees
or the taking of any other actions by the Company to maintain their validity or
effectiveness, (iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no restrictions on
the direct or indirect transfer of any License, or any interest therein, held by
the Company in respect of such intellectual property, (v) the Sellers has
delivered, or has caused the Company to deliver, to Purchaser prior to the
execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets, (vii) neither the
Sellers nor the Company is or has received any notice that it is in default (or
with the giving of notice or lapse of time or both, would be in default) under
any License to use such intellectual property and (viii) neither the Sellers nor
the Company has any knowledge that such intellectual property is being infringed
by any other Person. To the knowledge of the Sellers and the Company, the
Company is not infringing any intellectual property of any Person, and no
litigation is pending and no claim has been made or, to the knowledge of any the
Sellers or of the Company, has been threatened to such effect.
2.18 Contracts.
2.18.1 Section 2.18.1 of the Disclosure Schedule contains a true
and complete list of every Contract or other arrangements (true and complete
copies, or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, of which have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company is a party, a guarantor or by
which any of its Assets is bound.
2.18.2 Each Contract disclosed in Section 2.18.1 of the Disclosure
Schedule is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of each party thereto; and
except as disclosed in Section 2.18.2 of the Disclosure Schedule, neither the
Company nor, to the knowledge of any the Sellers, any other party to such
Contract is, or has received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be violation or breach of or default under any such Contract).
2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure
Schedule, the Company is not a party to or bound by any Contract that has been
or could reasonably be expected to be, individually or in the aggregate with any
other such Contracts, materially adverse to the business or condition of the
Company.
2.18.4 To the extent any of the guaranties for the benefit of the
Company or any of its Assets are not integrated with Contracts disclosed in
Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, or each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Sellers or the Company or any other
party to such guaranty is, or has received notice that it is, in violation or
breach of or default under any such guaranty (or with notice or lapse of time or
both, would be in violation or breach of default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and
complete list of all Licenses used in and material to the business or operations
of the Company, setting forth the owner, the function and the expiration and
renewal date of each. Prior to the execution of this Agreement, the Sellers or
the Company have delivered to Purchaser true and complete copies of all such
Licenses. Except as disclosed in Section 2.19 of the Disclosure Schedule:
2.19.1 the Company owns or validly holds all Licenses that are
material to its respective business or operations;
2.19.2 each license listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect;
2.19.3 neither the Sellers nor the Company is, or has received any
notice that it is in default (or with the giving of notice of lapse of time or
both, would be in default) under any such License; and
2.19.4 the transactions contemplated in this Agreement will not
violate any such License or give any other party thereto rights to terminate the
License or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true and
complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or
affect or relate to the ownership, use or operation of any of the Assets of the
Company and that (i) have been issued to the Company, or (ii) have been issued
to any Person (other than the Company) for the benefit of the Company. Each
policy listed in Section 2.20 of the Disclosure Schedule is valid and binding
and in full force and effect, all premiums due thereunder have been paid when
due and neither the Sellers nor the Company or the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder, and the Company does not
know of any reason or state of facts that could lead to the cancellation of such
policies. The insurance policies listed in Section 2.20 of the Disclosure
Schedule (i) in light of the business, operations and Assets of the Company are
in amounts and have coverages that are reasonable and customary for Persons
engaged in such businesses and operations and having such Assets and (ii) are in
amounts and have coverages as required by any Contract to which the Company is a
party. Section 2.20 of the Disclosure Schedule contains a list of all claims
made under any insurance policies covering the Company since January 1, 1996.
Neither the Sellers nor the Company have received notice that any insurer under
any policy referred to in this Section is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause. Since
January 1, 1996, the Company has maintained, in light of its business, location,
operations and Assets, at all times, without interruption appropriate insurance,
in scope and amount of coverages.
2.21 Affiliate Transactions. There are no Liabilities between the Company
and any current or former officer, director, stockholder, Affiliate of the
Company or any Affiliate of any such officer, director, stockholder or
Affiliate, and the Company does not provide or cause to be provided any assets,
services or facilities to any such current or former officer, director,
stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any unfair
labor practice. There is (i) no unfair labor practice complaint pending or, to
the knowledge of the Sellers or the Company, threatened against the Company
before the National Labor Relations Board or comparable or similar state agency,
and no grievance or arbitration proceeding arising out of under collective
bargaining agreements is so pending or, to the knowledge of the Sellers or of
the Company, threatened against the Company, (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the knowledge of the Sellers or the Company,
threatened against the Company, and (iii) no union representation question
exists with respect to the employees of the Company or, to the knowledge of the
Sellers or the Company, no union organization activities are taking place.
2.23 Environmental Matters. The Company operates no facilities. The Company
has conducted its business and its operations in full compliance with all
Environmental Laws; and, is not in violation of or liable under any
Environmental Law.
2.24 Substantial Customers and Suppliers. Section 2.24.1 of the Disclosure
Schedule lists the ten (10) largest customers of the Company on the basis of
revenues for goods sold or services provided for the twelve month period ending
September 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the ten (10)
largest suppliers of the Company on the basis of cost of goods or services
purchased during the twelve month period ending September 30, 1999. Except as
disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of the
Sellers and the Company, no such customer or supplier is insolvent or threatened
with bankruptcy or insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Financial Statements for the period ended
September 30, 1999, and all accounts and notes receivable arising subsequent to
such date, (i) arose from bona fide sales transactions in the ordinary course of
business consistent with past practice and are payable on ordinary trade terms,
(ii) are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangements, and (v) are not subject of any Actions
or Proceedings brought by or on behalf of the Company. Section 2.25 of the
Disclosure Schedule sets forth (x) a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company and (y) all jurisdictions in which the records relating to accounts
and notes receivable are located.
2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company, nor
any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers or the Company or any such Affiliate) have entered into
any agreement or had any discussions with any third party regarding any
transaction involving the Company which could result in the Company, Purchaser
or its stockholders, or any officer, director, employee, agent or Affiliate of
any of them, being subject to any claim for liability to said third party as a
result of entering into this Agreement or consummating the transactions
contemplated hereby or thereby. No agent, broker, finder, investment banker,
financial advisor or other Person will be entitled to any fee, commission or
other compensation in connection with the transactions contemplated by this
Agreement on the basis of any act or statement made by the Sellers, the Company
or any of their respective Affiliates, or any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers, the Company, or any such Affiliate.
2.27 Holding Company Act and Investment Company Act Status. The Company is
not a "holding company" or a "public utility company" as such terms are defined
in the Public Utility Company Act of 1935, as amended. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure Schedule
sets forth (a) a list of the names and locations of all banks, securities
brokers and other financial institutions at which the Company has an account or
safe deposit box or maintains a banking, custodial, trading or other similar
relationship; and (b) a true and complete list and description of each such
account, box and relationship, indicating in each case the account number and
the names of all persons having signatory power and respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased Stock
made pursuant to this Agreement are exempt from the registration requirements of
the Securities Act. Neither any the Sellers, nor the Company nor any Person
authorized to act on behalf of any of the foregoing has, in connection with the
offering of the Purchased Stock, engaged in (i) any form of general solicitation
or general advertising (as those terms are used within the meaning of Rule
501(c) under the Securities Act), (ii) any action involving a public offering
within the meaning of section 4(2) of the Securities Act, or (iii) any action
that would require the registration under the Securities Act of the offering and
sale of the Purchased Stock pursuant to this Agreement or that would violate
applicable state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
the Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best actual knowledge, represents and warrants to the
Sellers as follows:
3.1 Organization and Qualification. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the state of Utah.
Purchaser is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
the validity or enforceability of this Agreement or on the ability of Purchaser
to perform its obligations hereunder or thereunder.
3.2 Authority Relative to this Agreement. Purchaser has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by Purchaser
of the transactions contemplated hereby have been duly and validly approved by
its board of directors and no other corporate proceedings on the part of
Purchaser or its stockholders are necessary to authorize the execution, delivery
and performance of this Agreement by Purchaser and the consummation by Purchaser
of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Purchaser and constitutes a legal, valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
its terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement does
not, and the performance by Purchaser of its obligations under this Agreement
and the consummation of the transactions contemplated hereby, do not and will
not:
3.3.1 conflict or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
3.3.2 subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 3.4 of the Disclosure
Schedule, if any, conflict with or result in a violation or breach of any term
or provision of any Law or Order applicable to Purchaser or its Assets and
Properties; or
3.3.3 except as disclosed in Section 3.3.3 of the Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, or (iii) require
Purchaser to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of any Contract or
License to which Purchaser is a party, or by which it is bound.
3.4 Governmental Approvals and Filings. Except as disclosed in Section 3.4 of
the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of Purchaser is
required in connection with the execution, delivery and performance of this
Agreement to which it is a party or the consummation of the transactions
contemplated herein.
3.5 Legal Proceedings. There are no Actions or Proceedings pending or, to the
knowledge of Purchaser, threatened against, relating to or affecting Purchaser
or any of its Assets which (i) could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.6 Brokers. No agent, broker, finder, investment banker, financial advisor or
other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser. 3.7 Purchase
for Investment. The Purchased Stock will be acquired by Purchaser for its own
account for the purpose of investment and not with a view to the resale or
distribution of all or any part of the Purchased Stock in violation of the
Securities Act.
3.8 Survival of Representations, Warranties, Covenants and Agreements. Even
though the Sellers may investigate the affairs of the Purchaser and confirm the
accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, nonetheless, shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE IV
4 COVENANTS BY THE SELLERS
4.1 Noncompetition; Non Solicitation.
4.1.1 For a period of five (5) years from the Closing Date, each of the Sellers,
alone or in conjunction with any other Person, or directly or indirectly through
their present or future Affiliates, will not directly or indirectly own, manage,
operate, join, be employed by, have a financial interest in, control or
participate in the ownership, management, operation or control of, or use or
permit his name to be used in connection with, or be otherwise connected in any
manner with any business or enterprise engaged in the design, development,
manufacture, distribution or sale of any products, or the provision of any
services related to those which the Company was designing, developing,
manufacturing, distributing, selling or providing at any time prior to and up to
and including the Closing Date anywhere in the United States of America,
provided that with respect to John W. Nichols the foregoing restriction shall
only apply to businesses or enterprises engaged in manufacturing, distributing
and/or selling one-coat stucco, and not to businesses or enterprises engaged in
the use of said product provided that the foregoing restriction shall not be
construed to prohibit the ownership, in the aggregate, of not more than two
percent (2%) of any class of securities of any corporation which is engaged in
any of the businesses or enterprises described above, having a class of
securities registered pursuant to the Securities Exchange Act of 1934, as
amended, which securities are publicly owned and regularly traded on any
national exchange or in the over-the-counter market. Furthermore, this Covenant
shall not apply to Debbie Nichols Dickey.
4.1.1 For a period of five (5) years from the Closing Date, the Sellers shall
not directly or indirectly, or through an Affiliate, (i) influence any
individual who was an employee or consultant of the Company at any time, to
terminate his or her employment or consulting relationship with the Company,
(ii) interfere in any other way with the employment, or other relationship, of
any employee or consultant of the Company or (iii) cause or attempt to cause (or
participate in any way in any discussion or negotiation concerning) (x) any
client, customer or supplier of the Company or (y) any prospective client,
customer or supplier of the Company from engaging in business with the Company.
4.1.2 The Sellers agree that Purchaser's remedies at law for any breach or
threat of breach by it of any of the provisions of this Section 4.1 will be
inadequate, and that, in addition to any other remedy to which Purchaser may be
entitled at law or in equity, Purchaser shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining orders or orders to
prevent breaches of the provisions of this Section 4.1 and to enforce
specifically the terms and provisions hereof, in each case without the need to
post any security or bond. Nothing herein contained shall be construed as
prohibiting Purchaser from pursuing, in addition, any other remedies available
to it for such breach or threatened breach. A waiver by the Purchaser of any
breach of any provision hereof shall not operate or be construed as a waiver of
a breach of any other provisions of this Agreement or of any subsequent breach
thereof.
4.1.3 The parties hereto consider the restrictions contained in this Section 4.1
hereof to be reasonable for the purpose of preserving the goodwill, proprietary
rights and going concern value of the Company, but if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Section 4.1 is an unenforceable
restriction on the Sellers' activities, the provisions of this Section 4.1 shall
not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable. Alternatively, if the court referred to
above finds that any restriction contained in this Section 4.1 or any remedy
provided herein is unenforceable, and such restriction or remedy cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of this Section 4.1 shall in no
respect limit or otherwise affect the Sellers's obligations under other
agreements with the Company.
4.2 Regulatory and Other Approvals. The Sellers shall, and shall cause the
Company to, (a) take all necessary or desirable steps and proceed diligently and
in good faith and use diligent efforts, as promptly as practicable, to obtain
all consents, approvals or actions of, to make all filings with and to give all
notices to, Governmental or Regulatory Authorities or any other Person required
to consummate the transactions contemplated hereby and those described in
Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other Persons as Purchaser or such Governmental or Regulatory Authorities or
other Persons may reasonably request and (c) cooperate with Purchaser as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to, Governmental or Regulatory
Authorities or other Persons required of Purchaser to consummate the
transactions contemplated hereby. The Sellers will provide prompt notification
to Purchaser when any such consent, approval, action, filing or notice referred
to in clause (a) above is obtained, taken, made or given, as applicable, and
will advise Purchaser of any communications (and, unless precluded by Law,
provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement.
4.3 Investigation by Purchaser.
4.3.1 From the date of this Agreement until the date on which either Party
provides the other Party with written notice that this Agreement is terminated
(the "Termination Date"), or until the Closing, whichever is earlier, the
Sellers will afford Purchaser its employees, agents, accountants and other
representatives access to the Books and Records of the Company, as well as
employee files and records, not including product formulas, customer lists, etc.
4.3.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's
investigation proceeds. To the extent that any such product formulas, customer
lists, etc. are not furnished to Purchaser immediately, the same shall
nevertheless be furnished to Purchaser immediately prior to the Closing. In any
event, if any of this information is disclosed to Purchaser prior to or at the
Closing, Purchaser shall have the option to terminate this Agreement, at its
sole discretion, if the information discloses any matter which leads Purchaser
to the conclusion that it should not close the transaction contemplated herein.
4.4 Investigation by Purchaser.
4.4.1 From the date of this Agreement until the date on which either Party
provides the other Party with written notice that this Agreement is terminated
(the "Termination Date"), or until the Closing, whichever is earlier, the
Sellers will afford Purchaser its employees, agents, accountants and other
representatives access to the Books and Records of the Company, as well as
employee files and records, not including product formulas, customer lists, etc.
4.4.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's
investigation proceeds. To the extent that any such product formulas, customer
lists, etc. are not furnished to Purchaser immediately, the same shall
nevertheless be furnished to Purchaser immediately prior to the Closing. In any
event, if any of this information is disclosed to Purchaser prior to or at the
Closing, Purchaser shall have the option to terminate this Agreement, at its
sole discretion, if the information discloses any matter which leads Purchaser
to the conclusion that it should not close the transaction contemplated herein.
ARTICLE V
5 CLOSING CONDITIONS
5.1 Condition to the Obligations of the Purchaser. The obligations of Purchaser
hereunder to purchase the Purchased Stock are subject to the fulfillment, at or
prior to the Closing, of the following conditions precedent (any or all of which
may be waived in whole or in part by Purchaser in its sole discretion):
5.1.1 Representations and Warranties. Each of the representations and warranties
made by the Sellers in this Agreement shall, unless waived, be true and correct
in all material respects as of the date of this Agreement and on and as of the
Closing Date as though each such representation and warranty was made on and as
of the Closing Date.
5.1.2 Performance. The Sellers shall have performed and complied with, unless
waived, each agreement, covenant and obligation required by this Agreement to be
so performed or complied with by them at or before the Closing.
5.1.3 Orders and Laws. There shall not be pending, threatened or in effect on
the Closing Date any Order or Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or which could reasonably be expected to
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement to Purchaser.
5.1.4 Regulatory Consents and Approvals. All consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Authority necessary
to permit Purchaser and the Sellers to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or
restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived, and (v) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation for the
transactions contemplated by this Agreement shall have occurred.
5.1.5 Third Party Consents. Any consents (or waivers) identified in Section 2.5
of the Disclosure Schedule, and all other consents (or waivers) to the
performance by the Purchaser of its obligations under this Agreement, or to the
consummation for the transactions contemplated hereby as are required under any
Contract or License to which the Purchaser is a party or by which any of its
Assets are bound and where the failure to obtain any such consent (or in lieu
thereof waiver) could reasonably be expected, individually or in the aggregate
with other such failures, to materially adversely affect the Purchaser or the
business or condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement to
the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall
be in form and substance satisfactory to the Purchaser in its sole discretion,
(iii) shall not be subject to the satisfaction of any condition that has not
been satisfied or waived and (iv) shall be in full force and effect.
5.1.6 Purchaser's Investigation. Purchaser shall not have discovered, as a
result of its investigation and review pursuant to Section 4.3 hereof, any
condition (financial, legal or otherwise) relating in any way to the Company,
its Assets, business or prospects, that convinces Purchaser, in its sole
discretion, that it is not advisable to complete the Closing.
5.1.7 Sellers' Certificates. The Sellers shall have delivered to Purchaser (i)
certificates, dated the Closing Date and executed by an executive officer of the
Company, substantially in the form and to the effect of Exhibit B hereto and
(ii) certificates, dated the Closing Date and executed by the chief financial
officer of the Company, substantially in the form of Exhibit C hereto.
5.1.8 Resignations of Officers and Directors. The Sellers shall have delivered
to Purchaser the resignations of all current officers and directors of the
Company, effective as of the Closing Date.
5.1.9 Opinion of Counsel. Purchaser shall have received the opinion of Donald L.
Cuba, Esquire, counsel to the Company in connection with this Agreement, dated
the Closing Date, substantially in the form and to the effect as Purchaser may
reasonably request.
5.1.10 Disclosure Schedule. The Sellers shall have delivered to Purchaser a copy
of the Disclosure Schedule, updated and current through the Closing Date.
5.1.11 Good Standing Certificates. The Sellers shall have delivered to Purchaser
(i) copies of the certificate or articles of incorporation (or other comparable
corporate charter documents), including all amendments thereto of the Company
certified by the applicable Secretary of State or other appropriate governmental
official, (ii) certificates from the applicable Secretary of State or other
appropriate governmental official to the effect that the Company is in good
standing in such jurisdiction, listing all charter documents of the Company on
file and attesting to its payment of all franchise or similar Taxes, and (iii)
certificates from the Secretary of State or other appropriate official in each
jurisdiction in which the Company is qualified or admitted to do business to the
effect that the Company is duly qualified or admitted in good standing in such
jurisdiction.
5.1.12 Receipt of Purchased Stock. Certificates representing the Purchased Stock
shall have been transferred to Purchaser in accordance with the terms of this
Agreement.
5.1.13 No Adverse Change. There shall have occurred no material adverse change
in the business or financial condition of the Company between September 30, 1999
and the Closing Date.
5.1.14 Employment Agreements. Purchaser shall have received Employment
Agreements satisfactory to Purchaser, between the Company and any key employees
of the Company that Purchaser deems necessary.
5.2 Conditions to the Obligations of the Sellers. The obligations of the Sellers
hereunder to sell the Purchased Stock to the Purchaser are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by the Sellers in theirs
sole discretion):
5.2.1 Representations and Warranties. Each of the representations and warranties
made by Purchaser in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and on and as of the Closing Date as
though each such representation and warranty was made on and as of the Closing
Date.
5.2.2 Performance. Purchaser shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
5.2.3 Orders and Laws. There shall not be pending, threatened or in effect on
the Closing Date any Orders or Laws restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement.
5.2.4 Regulatory Consents and Approvals. All consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Authority necessary
to permit Purchaser and the Sellers to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall not be subject to the satisfaction
or any condition that has not been satisfied or waived, and (iii) shall be in
full force and effect, and all terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement shall have
occurred.
5.2.5 Officers' Certificates. Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date and executed by the president or
vice-president or other officer of Purchaser, substantially in the form and to
the effect of Exhibit "D" hereto.
5.2.6 Employment Agreements. Purchaser shall have delivered to Sellers an
Employment Agreement satisfactory to Sellers, between the Company and Bill
Nichols.
ARTICLE VI
6 TERMINATION
6.1 Termination Events. This Agreement may, by notice given prior to or at the
Closing, be terminated:
6.1.1 by Purchaser or by the 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;
6.1.2 (i) by Purchaser if any of the conditions in Section 5.1 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 Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived such
condition on or before the Closing Date, or (ii) by the Sellers, if any of the
conditions in Section 5.2 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 the Sellers to comply with his obligations under this Agreement)
and the Sellers has not waived such condition on or before the Closing Date;
6.1.3 by Purchaser for its convenience at any time prior to Closing;
6.1.4 by mutual consent of Purchaser and the Sellers; or
6.1.5 by Purchaser or by the 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 December 1, 1999,
or such later date as the parties may agree upon.
6.2 Effect of Termination. Each party's right of termination under Section 6.1
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 6.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article X will
survive; provided, however, that if this Agreement is terminated by a party
because of a 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 (including specific performance) will survive such termination
unimpaired.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Company, the Purchaser and
their respective stockholders and the officers, directors, employees, agents and
Affiliates of each of them in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of relating
to any misrepresentation or breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of the Sellers contained in
this Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith). Notwithstanding anything contained in this
agreement to the contrary, claims for indemnity arising or resulting from the
sale or manufacture of products, including product failure or failure of
performance, unknown and undisclosed by Sellers shall only be made, to the
extent and only to the extent that such claim or occurrence is covered by
insurance and Sellers in no way shall be personally liable for any claim,
judgment, amount, award, or liability whatsoever for any amount of such claim
which may exceed the amount of said insurance coverage. The limitation set forth
in the immediately preceding sentence shall not limit the liability of the
Sellers for claims made pursuant to any other representation or warranty set
forth in this Agreement or for any claims known to the Sellers or any of them as
of the date of this Agreement and not disclosed in the Disclosure Schedules.
7.1.2 Purchaser will indemnify the Sellers in respect of, and hold
them harmless from and against, any and all Losses suffered, incurred or
sustained by them or to which they become subject, resulting from, arising out
of or relating to any misrepresentation or breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.1 will be asserted and resolved as follows:
7.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by
such Indemnified Party of written notice of the Third Party Claim; provided,
that failure to give such Claim Notice shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure.
7.2.2 If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party claim with counsel satisfactory to
the Indemnified Party within five Business Days of any Claim Notice, or (ii)
legal counsel for the Indemnified Party notifies the Indemnifying Party that
there are or may be legal defenses available to the Indemnifying Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnified Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party, or (iii) if the Indemnifying Party shall
assume the defense of a Third Party Claim and fail to diligently prosecute such
defense, then in each such case the Indemnified Party, by notice to the
Indemnifying Party, may employ its own counsel and control the defense of the
Third Party Claim and the Indemnifying Party shall be liable for the reasonable
fees, charges and disbursements of counsel employed by the Indemnified Party,
and the Indemnified Party shall be promptly reimbursed for any such fees,
charges and disbursements, as and when incurred. Whether the Indemnifying Party
or the Indemnified Party control the defense of any Third Party Claim, the
parties hereto shall cooperate in the defense thereof. Such cooperation shall
include the retention and provision to the counsel of the controlling party of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation or any material provided hereunder. The
Indemnifying Party shall have the right to settle, compromise or discharge a
Third Party Claim (other than any such Third Party Claim in which criminal
conduct is alleged) without the Indemnified Party's consent if such settlement,
compromise or discharge (i) constitutes a complete and unconditional discharge
and release of the Indemnified Party, and (ii) provides for no relief other than
the payment of monetary damage and such monetary damages are paid in full by the
Indemnifying Party.
7.2.3 In the event any Indemnified Party should have a claim under
Section 7.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 7.1 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within thirty (30) days,
such dispute shall be resolved as provided in Article X hereof.
7.2.4 Notwithstanding anything to the contrary in this agreement
Sellers will indemnify and hold harmless Purchaser under this Article 7 without
limitation dollar for dollar against any Loss suffered, incurred or sustained by
it or which it becomes subject to resulting from, arising out of or relating to
the lawsuit referred to in Disclosure Schedule 2.12.1.1, and/or the matters
referred to in Disclosure Schedule 2.10.
<PAGE>
7.3 Allocation of Tax Liability.
7.3.1 In the case of Taxes with respect to or payable by the Company
with respect to a period that includes but does not end on the Closing Date, the
allocation of such Taxes between the Pre-Closing Period and the Post-Closing
Period shall be made on the basis of an interim closing of the books of the
Company as of the close of business on the Closing Date. In the case of (i)
franchise Taxes based on capitalization, debt or shares of stock authorized,
issued or outstanding and (ii) ad valorem Taxes, in either situation
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of days in such taxable period ending on
and including the Closing Date and the denominator of which is the entire number
of days in such taxable period; provided, that if any Company Asset is sold or
otherwise transferred prior to the Closing Date, then ad valorem Taxes
pertaining to such property, asset or other right shall be attributed entirely
to the Pre-Closing Period.
7.3.2 Except to the extent a reserve for Taxes is reflected on the
Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the Company is liable
with respect to any periods ending on or before the Closing Date; provided, that
in the case of any adjustment to any item of loss or expense for any such years,
which gives rise to corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually realized by the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers's obligations shall be limited to
the amount of interest (computed at the appropriate statutory rates) and
penalties actually paid to the appropriate taxing authorities by the Company as
a result of such timing differences in the case of audit adjustments, or at a
rate of eight percent (8%) per annum in the case of other adjustments, (ii)
without duplication (subject to the same proviso), all Taxes arising out of a
breach of the representations, warranties or covenants contained herein, (iii)
any Tax liability resulting from any ongoing state audits that exceed, in the
aggregate, any reserve therefore set forth on the Financial Statements, and (iv)
any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified
hereunder.
7.3.3 From and after the Closing Date, Purchaser shall cause the
Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.4 Tax Contests.
7.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then
the party hereto first receiving notice of such Tax Claim shall promptly provide
written notice thereof to the other parties hereto. Such notice shall specify in
reasonable detail the basis for such Tax Claim and shall include a copy of any
relevant correspondence received from the Taxing Authority or other Person.
7.4.2 If, within 30 calendar days after any the Sellers receives or
delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the
Purchaser an Election Notice, then subject to the provisions of this Section
7.4, the Sellers shall defend or prosecute, at their sole cost, expense and
risk, such Tax Claim by all appropriate proceedings, which proceedings shall
defended or prosecuted diligently by the Sellers to a Final Determination;
provided, that the Sellers shall not, without the prior written consent of the
Company, enter into any compromise or settlement of such Tax Claim that would
result in any Tax detriment to the Company. So long as the Sellers are defending
or prosecuting a Tax Claim, with respect to the Company, the Company shall
provide or cause to be provided to the Sellers any information reasonably
requested by the Sellers relating to such Tax Claim, and shall otherwise
cooperate with the Sellers and their representatives in good faith in order to
contest effectively such Tax Claim. The Sellers shall inform the Company of all
developments and events relating to such Tax Claim (including, without
limitation, providing to the Company copies of all written materials relating to
such Tax Claim) and the Company or its authorized representatives shall be
entitled, at the expense of the Company, to attend, but not to participate in or
control, all conferences, meetings and proceedings relating to such Tax Claim.
7.4.3 If, with respect to any Tax Claim, the Sellers fails to deliver
an Election Notice to the Company within the period provided in Section 7.4.2
or, after delivery of such Election Notice to the Company, the Sellers fail
diligently to defend or prosecute such Tax Claim to a Final Determination, then
the Company shall at any time thereafter have the right (but not the obligation)
to defend or prosecute, at the sole cost, expense and risk of the Sellers, such
Tax Claim. The Company shall have full control of such defense or prosecution
and such proceedings, including any settlement or compromise thereof. If
requested by the Company, the Sellers shall cooperate in good faith with the
Company and its authorized representatives in order to contest effectively such
Tax Claim. The Sellers may attend, but not participate in or control, any
defense, prosecution, settlement or compromise of any Tax Claim controlled by
the Company pursuant to this Section 7.4.3, and shall bear their own costs and
expenses with respect thereto. In the case of any Tax Claim that is defended or
prosecuted by the Company pursuant to this Section 7.4.3, the Company shall,
from time to time, be entitled to receive current payments from the Sellers with
respect to costs and expenses incurred by the Company in connection with such
defense or prosecution (including, without limitation, reasonable attorneys',
accountants' and experts' fees and disbursements, settlement costs, court costs
and any other costs or expenses for investigating, defending or prosecuting such
Tax Claim, and any Taxes imposed on the Company as a result of receiving a
payment from the Sellers pursuant to this Section 7.4) (collectively "Associated
Costs").
7.4.4 In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by the Sellers pursuant to this Section 7.4, the Sellers
shall pay to the appropriate Tax Indemnitees, in immediately available funds,
the full amount of any Tax arising or resulting from such Tax Claim within five
Business Days after such Final Determination. In the case of any Tax Claim that
is defended or prosecuted to a Final Determination by the Company pursuant to
the terms of this Section 7.4, the Sellers shall pay to the appropriate Tax
Indemnitee, in immediately available funds, the full amount of any Tax arising
or resulting from such Tax Claim, together with any Associated Costs that have
not theretofore been paid by the Sellers to the Company, within five Business
Days after such Final Determination. In the case of any Tax Claim not covered by
the two preceding sentences, the Sellers shall pay to the Company, in
immediately available funds, the full amount of any Tax arising or resulting
from such Tax Claim (calculated after taking into account any actual reduction
in the current liability for Taxes of such Tax Indemnitee for Tax arising out of
or resulting from such payment or such Tax Claim), together with any Associated
Costs that have not theretofore been paid by the Sellers to the Company, at
least five Business Days before the date payment of such Tax is due from any Tax
Indemnitee.
7.4.5 Notwithstanding anything contained in this Article VII to the
contrary, the rights of the Sellers under this Section 7.4 to defend or
prosecute, or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.4.6 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules, workpapers and relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.6 Payment of Transfer Taxes and Fees. The Sellers shall pay all sales, use,
transfer, stamp, documentary or similar Taxes imposed upon or arising out of or
in connection with the transactions effected pursuant to this Agreement, and
shall indemnify, defend, and hold harmless the Purchaser, the Company and their
Affiliates with respect to such Taxes. The Sellers shall file all necessary
documentation and Tax Returns with respect to such Taxes and provide to
Purchaser copies of all such Tax Returns.
7.7 Other Tax Covenants.
7.7.1 Without the prior written consent of Purchaser, neither the
Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect
or relate to the Company, make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file any
amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
7.7.2 Without the prior written consent of the Sellers, neither the
Purchaser nor the Company shall, to the extent it may affect or relate to the
Company, make or change any tax election, file any amended Tax Return, enter
into any closing Agreement, settle any Tax claim, assessment or proposed
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would
affect a Pre-Closing Tax Period, unless required by applicable law.
7.7.3 So long as any books, records and files retained by the Sellers
or and his Affiliates relating to the business of the Company or the books,
records and files delivered to the control of the Purchaser pursuant to this
Agreement to the extent they relate to the operations of the Company prior to
the Closing Date, remain in existence and are available, each party (at its own
expense) shall have the right upon prior notice to inspect and to make copies of
the same at any time during business hours for any proper purpose. The Purchaser
and the Sellers and their respective Affiliates shall use reasonable efforts not
to destroy or allow the destruction of any such books, records and files without
first providing 60 days? written notice of intention to destroy to the other,
and allowing such other party to take possession of such records.
7.8 Conflict. In the event of a conflict between the provisions of
Sections 7.3 through 7.7 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
8 DEFINITIONS
8.1 Definitions. As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly owning, owned by, controlling, controlled by or under
common control with, that Person, (b) any director, partner, officer, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Assets" of any Person means all assets and properties of every
kind, nature, character and description, including goodwill and other tangibles,
operated, owned or leased by such Person, including cash and cash equivalents,
investments, accounts and notes receivable, chattel paper, documents,
instruments, real estate, equipment, inventory, goods and intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.4.3.
"Financial Statements" has the meaning ascribed to it in Section
2.8.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time been made
by the Company or under which any employee, former employee or director of the
Company or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
attorneys, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs, legal files,
retrieval programs, operating data and plans and environmental studies and
plans.
"Claim Notice" means written notification pursuant to Section
7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought
by an Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them in
Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital of
this Agreement (and shall include all predecessors and subsidiaries of the
Company).
"Contract" means any written or oral agreement, lease, guaranty,
evidence of indebtedness, mortgage, indenture, security agreement or other
contract of any nature whatsoever.
"Disclosure Schedule" means the schedules delivered to Purchaser
by or on behalf of the Company and the Sellers, and the schedules delivered by
or on behalf of Purchaser, containing all lists, descriptions, exceptions and
other information and materials as are required to be included therein pursuant
to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the Sellers
in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their
indemnity obligation under this Agreement with respect to such Tax Claim and
(ii) the Sellers elect to contest, and to control the defense or prosecution of,
such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater, drinking
water supply, stream sediments, or land, including soil, land surface or
subsurface strata, all fish, wildlife, biota and all other environmental medium
or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law and consisting
of or relating to (i) 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); (ii) 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; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) 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. Section 9601 et seq., as
amended (CERCLA).
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consent or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by the Company.
"Final Determination" means (i) a decision, judgment, decree or
other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" has the meaning ascribed to it in Section
2.8.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases, (v) long term debt and (vi) in the nature of
guarantees of the obligations described in clauses (i) through (v) above of any
other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section
7.2.3 of a claim for indemnity under Article VII by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Knowledge" on the part of any person or company means actual
knowledge of the person or a director of the Company of the event or notice to
be attributed to the person or Company.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in Section
2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, such as
fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Occupational Safety and Health Law" means any Law 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.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Owned Real Property" has the meaning ascribed to it in Section
2.15.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof
that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Purchased Stock" has the meaning ascribed to it on the first page
of this Agreement.
"Purchaser" has the meaning ascribed to it in the first paragraph
of this Agreement.
"Real Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in Section
2.15.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them on
the first page of this Agreement.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least fifty
percent (50%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof. Unless the context otherwise
requires a different interpretation, references to a "Subsidiary" mean a
Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, the Company and other
Indemnified Parties specified in Section 7.1 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2.
8.2 Interpretation of Agreement.
8.2.1 Unless the context of this Agreement otherwise requires, (i) words of any
gender include each other gender; (ii) words using the singular or plural number
also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (v) the word "including" does not imply
any limitation to the item or matter mentioned; and (vi) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company.
8.2.2 When used herein, the phrase "to the knowledge of" any Person, "to the
best knowledge of" any Person or any similar phrase, means (i) with respect to
any Person who is an individual, the actual knowledge of such Person, (ii) with
respect to any other Person, the actual knowledge of the directors, officers,
managers, and other similar Persons in a similar position or having similar
powers and duties, and (iii) in the case of each of (i) and (ii), the knowledge
of facts that such individuals should have after reasonable inquiry.
ARTICLE IX
9 MISCELLANEOUS
9.1 Notices. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or mailed by prepaid first class certified mail, return receipt requested, or
sent by prepaid courier, to the parties at the following addresses:
If to Purchaser, to:
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
Bill E. Nichols John W. Nichols Debbie Nichols Dickey
29521 No Le Hace 13489 Landfair Rd. 10951 Laureate, #1208
Fair Oaks Ranch, Texas 78015 San Diego, California 92130 San Antonio, Tx 78249
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, the Sellers will pay all
expenses relating to the closing hereof of the Company incurred in respect of
the period prior to the Closing.
9.4 Confidentiality. Purchaser and the Sellers will hold in strict confidence
from any Person (other than its Affiliates or representatives) all documents and
information concerning the other party hereto or any of its Affiliates furnished
to it by or on behalf of the other party in connection with this Agreement or
the transactions contemplated hereby, except to the extent the disclosing party
can demonstrate that such documents or information was (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential. Such covenant of confidentiality will
remain in effect unless a party is compelled to disclose by judicial or
administrative process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law.
9.5 Further Assurances; Post-Closing Cooperation. At any time or from time to
time after the Closing, the Purchaser or the Sellers shall execute and deliver
to the other party such other documents and instruments, provide such materials
and information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to causethe Purchaser or the Sellers to fulfill their obligations
under this Agreement.
9.6 Waiver. Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
9.7 Amendment. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of the parties hereto.
9.8 No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article VII.
9.9 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.10 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.11 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Texas.
9.14 Limited Recourse. Regardless of anything in this Agreement to the contrary,
(i) obligations and liabilities of Purchaser hereunder shall be without recourse
to any stockholder of Purchaser or any of such stockholder's Affiliates,
directors, employees, officers or agents and shall be limited to the assets of
such party and (ii) the stockholders of Purchaser have made no (and shall not be
deemed to have made any) representations, warranties or covenants (express or
implied) under or in connection with this Agreement or any other Operative
Agreement.
9.15 Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
ARTICLE X
10 MEDIATION
In the event there is a dispute under this Agreement, the disagreeing
parties shall meet with one another and diligently attempt to resolve their
disagreements. If they are unable to do so, then upon request of either party to
the dispute made within twenty (20) days of the failure of negotiations, they
will mediate the dispute, utilizing an impartial mediator pursuant to the rules
of the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the mediation
is not successful, or if no mediation has been elected, then any party to the
dispute may file a legal action in any court of competent jurisdiction to
resolve the dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
_________________
By: _____________
Its: ____________
SELLERS
BILL E. NICHOLS JOHN W. NICHOLS
________________ _____________________
Bill E. Nichols John W. Nichols
DEBORAH N. DICKEY
_____________________
Deborah N. Dickey
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated May__ , 1999,
between ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __ .
Leslie, an individual residing in the state of Montana and __________
(individually a "Seller" and collectively the "Sellers").
RECITALS
The Sellers own and desire to sell to Purchaser, and Purchaser desires
to purchase from the Sellers, all of the issued and outstanding shares of
capital stock of Mineral Specialties, Inc. (the "Company"), a Montana
corporation.
The authorized capital stock of the Company is referred to herein as
the "Purchased Stock."
Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
1 SALE OF PURCHASED STOCK; CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and conditions set
forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will
purchase from the Sellers, the Purchased Stock.
1.2 Purchase Price and Additional Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the
Purchased Stock is $__________ in cash, subject to adjustment as set forth in
Section 1.2.2 below.
1.2.2 Additionally, the Purchaser shall pay the Seller a
royalty of five percent (5%) (the "Additional Purchase Price") of the
Purchaser's sales of fly ash generated at the Colstrip facility should the ash
generated at that facility become marketable. The royalty will be calculated
using the F.O.B. plant price, less any processing costs incurred by the
Purchaser and less any payments made by the Purchaser to the utility, and will
be paid for a period of five (5) years from the date on which such sales begin.
1.2.3 The Purchase Price will increase dollar for dollar equal
to the amount of increase in the Company's net book value (the "Net Book Value")
(defined as total assets less liabilities) during the period ___________ to the
Closing Date . To determine whether an adjustment is appropriate, Sellers shall
(within thirty days of the Closing Date) provide the Purchaser with financial
statements of the Company indicating the Net Book Value as of the Closing Date
(the "Sellers' Calculation"). If Purchaser (within thirty days of receiving the
Sellers' Calculation") disagrees with the Sellers' Calculation, then Purchaser
will promptly engage an independent accounting firm to review the financial
condition of the Company as of the Closing in accordance with GAAP, on a basis
consistent with the Financial Statements. Within forty-five (45) days after the
matter is referred to the accounting firm, the accounting firm will prepare and
deliver a report to all parties which will detail whether a Purchase Price
adjustment is necessary. The report will be final and binding on both parties,
absent fraud or clear error.
1.3 Closing. The Closing (the "Closing") of the purchase and sale of
the Purchased Stock will take place at the offices of __________________ , or at
such other place as Purchaser and the Sellers shall mutually agree, at 10:00
A.M. local time, on the latest to occur of the following dates (the "Closing
Date"):
1.3.1 June ___ , 1999;
1.3.2 Two days after the date on which all conditions
precedent to the closing specified herein are satisfied;
1.3.3 Two days after the receipt by Purchaser or Seller of a
written termination of the waiting period issued by the Federal Trade Commission
or the United States Department of Justice pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), or the expiration of the
waiting period described therein; or
1.3.4 Such other date as the parties shall agree upon.
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the
Purchase Price to the Sellers by wire transfer to such account as the Sellers
may direct by written notice delivered to Purchaser by the Sellers at least
three (3) Business Days before the Closing Date. Simultaneously, the Sellers
will sell and convey to Purchaser the Purchased Stock free and clear of all
Liens, by delivering to Purchaser a stock certificate, registered in the name of
Purchaser, representing the Purchased Stock. At the Closing, the parties shall
also deliver the opinions, certificates, contracts, documents and instruments to
be delivered pursuant to this Agreement.
1.5 Post Closing Payment. If the Purchaser agrees with the Seller's
Calculation, then within twenty (20) days after delivery of the Sellers'
Calculation, the Purchaser will deliver to the Sellers cash in the amount of the
adjustment specified therein. If the Purchaser disagrees with the Sellers'
Calculation, within twenty (20) days after delivery of the report by the
independent accounting firm referred to in Section 1.2.2, the Purchaser will
deliver to the Sellers cash in the amount of the adjustment specified in the
report, if any, absent fraud or clear error.
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, to their best knowledge, hereby represent and warrant to
Purchaser as follows:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Montana and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets. The
Company is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, (i) are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of the Company and (ii)
could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or any other agreement to which it
is a party or on the ability of the Sellers or the Company to perform their
obligations hereunder or thereunder. The Sellers have delivered to Purchaser
true and complete copies of the certificate or articles of incorporation and
by-laws (or other comparable corporate charter documents) of the Company,
including all amendments thereto effected through the Closing Date.
2.2 Capital Stock. The Purchased Stock consists of the following number
of shares of capital stock:
___ shares of common stock, par value $___ per share,
and ______ shares of preferred stock, par value $____ per share
The Purchased Stock constitutes all of the issued and outstanding shares of
capital stock of the Company. The shares of Purchased Stock are validly issued,
fully paid and nonassessable, issued in compliance with all applicable Laws and
no additional shares of capital stock have been reserved for issuance. There are
no outstanding Options with respect to the stock of the Company or agreements,
arrangements or understandings to issue Options with respect to the Company, nor
are there any preemptive rights or agreements, arrangements or understandings to
issue preemptive rights with respect to the issuance or sale of the capital
stock of the Company. The Sellers are the record and beneficial owners of all of
the shares of Purchased Stock, free and clear of all Liens. The delivery to
Purchaser of the certificates representing the Purchased Stock will transfer to
Purchaser good and valid title to all shares of the Purchased Stock, free and
clear of all Liens, and restrictions and after such transfer the Purchased
Stock, in the hands of Purchaser, will have been duly authorized, validly
issued, fully paid and nonassessable. From and after the Closing, no Seller nor
any other Person (other than the Purchaser) will have any rights whatsoever with
respect to the Purchased Stock or to any other securities of the Company.
2.3 Authority Relative to This Agreement. The Sellers have full
authority to enter into this Agreement, to perform their obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Sellers and constitutes the
legal, valid and binding obligations of the Sellers, enforceable against them in
accordance with its terms.
2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure
Schedule lists all lines of business in which the Company is participating or
engaged or has participated or engaged in the preceding three years. The name of
each director and officer of the Company, and the position with the Company held
by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds
no equity, partnership, joint venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Sellers of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not:
2.5.1 conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
the Company;
2.5.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices referred to in Section 2.6
below or disclosed in Section 2.6 of the Disclosure Schedule, if any, conflict
with or result in a violation or breach of any term or provision of any Laws or
Order applicable to any of the Sellers or to the Company, or any of their
Assets; or
2.5.3 except as disclosed in Section 2.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any of the Sellers or the Company to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Company or any of its Assets
under, any Contract or License to which any of the Sellers or the Company is a
party or by which any of their respective Assets is bound except for such
conflicts, violations, breaches, defaults, consents, approvals, actions,
filings, notices, terminations, cancellations, accelerations, modifications,
additional rights or entitlements or Liens that, individually or in the
aggregate, (A) are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of the Company, and (B)
could not be reasonably expected to have a material adverse effect on the
validity or enforceability of this Agreement or on the ability of any of the
Sellers or the Company to perform its obligations hereunder.
2.6 Governmental Approvals and Filings. Except as disclosed in Section
2.6 of the Disclosure Schedule, and other than filings with the Federal Trade
Commission and the United States Department of Justice under HSR, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of the Sellers or the Company is required in connection
with the execution, delivery and performance of this Agreement or the
consummation of transactions contemplated herein.
2.7 Books and Records. The minute books and other similar records of
the Company to be provided to Purchaser upon execution of this Agreement contain
a true and complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the boards of directors
(or other similar governing entities) of the Company.
2.8 Financial Statements. The Sellers have caused the Company to
furnish to Purchaser true and complete copies of (i) the unaudited financial
statements of the Company as of December 31, 1998 and (ii) unaudited financial
statements of the Company for the period January 1, 1999 through May 31, 1998,
along with the related statements of operations and cash flows, accompanied by
the opinions thereon of ____________ , independent certified public accountants,
together with the notes thereto, certified by the chief financial officer of the
Company. All of these statements, opinions, etc. (collectively referred to
herein as the "Financial Statements") are in accordance with the Books and
Records of the Company and fairly and accurately present the financial position
of the Company as of the dates thereof, for the periods covered thereby and the
results of operations and cash flows of the Company for the periods set forth
therein, all in conformity with GAAP, except as specifically noted in the notes
thereto. Further, the Sellers represent and warrant that, as of the Closing
Date, the Net Book Value of the Company shall be at least equal to the Net Book
Value of the Company as of December 31, 1998.
2.9 Absence of Changes. Since December 31, 1998, there has not been any
material adverse change or any event or development, which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the business or condition of the Company. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.9 of the Disclosure Schedule, there has not occurred since December
31, 1998:
2.9.1 any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock (or other equity
interests) of the Company or any direct or indirect redemption, purchase or
other acquisition by the Company of any such capital stock (or other equity
interests) of the Company;
2.9.2 any authorization, issuance, sale or other disposition
by the Company of any shares of its capital stock (or other equity interests),
or any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other equity interests) of the Company;
2.9.3 (i) any increase in salary, rate of commissions or rate
of consulting fees of any employee or consultant of the Company; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any employee or consultant of the
Company) to any officer, director, stockholder, employee or consultant of the
Company; (iii) any establishment or modification of (A) targets, goals, pools or
similar provisions under any Benefit Plan, employment contract or other employee
compensation arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any Benefit Plan, employment contract or other employee
compensation arrangement; or (iv) any adoption, entering into, amendment,
modification or termination (partial or complete) of any Benefit Plan;
2.9.4 (i) incurrences by the Company of Indebtedness or (ii)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of the Company under, any Indebtedness of or owing to the Company;
2.9.5 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets of the Company
in an aggregate amount exceeding $10,000;
2.9.6 any write-off or write-down of or any determination to
write off or write down any of the Assets of the Company;
2.9.7 any purchase of any Assets of any Person or disposition
of, or incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
2.9.8 any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any
intellectual property rights owned by the Company;
2.9.9 any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
2.9.10 any commencement, termination or change by the Company
of any line of business;
2.9.11 any transaction by the Company with any of its
officers, directors, stockholders or Affiliates, other than pursuant to a
Contract or arrangement in effect on December 31, 1998 and disclosed to
Purchaser pursuant to Section 2.18.1.8 or other than pursuant to any Contract of
employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule;
2.9.12 any entering into of an agreement to do or engage in
any of the foregoing, including without limitation with respect to any merger,
sale of substantially all assets or other business combination not otherwise
restricted by the foregoing paragraphs; or
2.9.13 any change in the accounting methods or procedures of
the Company or any other transaction involving or development affecting the
Company outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the December 31, 1998 balance sheet included in the Financial
Statements or as disclosed in Section 2.10 of the Disclosure Schedule, the
Company has no Liabilities, nor are there any Liabilities relating to or
affecting the Company or any of its Assets.
2.11 Taxes.
2.11.1 Except as disclosed in Section 2.11 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company with any Taxing Authority have been duly and timely filed, and each such
Tax Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. The Company
is not and has never been a member of any affiliated, combined, consolidated,
unitary or similar group with respect to the filing of tax returns or otherwise
with respect to any Taxing Authority. All Taxes owed by the Company (whether or
not shown on any Tax Return) have been paid. All monies required to be withheld
by the Company from employees, independent contractors, creditors or other third
parties for Taxes have been collected or withheld, and either duly and timely
paid to the appropriate Taxing Authority or (if not yet due for payment) set
aside in accounts for such purposes. The Company has no liability for Taxes for
any Person other than the Company (i) solely as a present or former member of a
consolidated group, (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
2.11.2 The provisions for current Taxes in the Financial
Statements are sufficient for the payments of all accrued and unpaid Taxes not
yet due and payable as of their dates, whether or not disputed. As of the
Closing Date, such provisions, as adjusted for the passage of time through the
Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet
due and payable of the Company.
2.11.3 The Company is not a party to any agreement extending,
or having the effect of extending, the time within which to file any Tax Return
or the period of assessment or collection of any Taxes. The Company has not
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
2.11.4 No Taxing Authority is now asserting or threatening to
assert against the Company any deficiency, claim or liability for additional
Taxes or any adjustment of Taxes, and there is no reasonable basis for any such
assertion of which any of the Sellers or the Company is or reasonably should be
aware. No issues have been raised in any examination by any Taxing Authority
with respect to the Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. The federal income Tax Returns of the Company disclose
(in accordance with Section 6662(d)(2)(B) of the Code) all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662(d) of the Code. No claim has ever been
made by any Taxing Authority in a jurisdiction in which the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Schedule 2.11 of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after December 31, 1998, indicates those Tax
Returns, if any, that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to Purchaser
complete and correct copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company since
December 31, 1996. There are no Liens for Taxes upon the Assets of the Company.
2.11.5 Except as disclosed in Section 2.11 of the Disclosure
Schedule, the Company is not (i) a party to or bound by any obligations under
any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject
to any election under sections 338(e) or 341(f) of the Code or the regulations
thereunder, (iii) required to make, or reasonably expects that it might have to
make, any adjustment under section 481 of the Code (or any comparable provision
of state, local or foreign law) by reason of a change in accounting method or
otherwise, (iv) subject to any agreement or arrangement that could result
separately or in the aggregate in the payment of any "excess parachute payments"
within the meaning of section 280G of the Code, (v) and at no time has ever
been, a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is
subject to the provisions of section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986 or to any "long-term contract"
within the meaning of section 460 of the Code, (vii) a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes, or (viii) nor has it ever been, a member of any
affiliated, consolidated, combined, unitary or similar group for any Tax
purpose.
2.12 Legal Proceedings.
2.12.1 Except as disclosed in Section 2.12 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
2.12.1.1 there are no actions or proceedings pending
or, to the knowledge of the Sellers or the Company, threatened against, relating
to or affecting the Company, or any of its Assets which (A) could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal any of the transactions contemplated by
this Agreement or otherwise result in a material diminution of the benefits
contemplated by this Agreement to Purchaser, or (B) if determined adversely to
the Company, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company, or (y) Losses by the Company,
individually or in the aggregate with Losses in respect of other such actions or
proceedings, exceeding $10,000;
2.12.1.2 there are no facts or circumstances known to
the Sellers or to the Company that could reasonably be expected to give rise to
any action or proceeding that would be required to be disclosed pursuant to
clause 2.12.1.1 above;
2.12.1.3 neither the Sellers nor the Company has
received notice, or is aware of any Orders or lawsuits outstanding against the
Company; and
2.12.1.4 neither the Sellers nor the Company has
received notice or is aware of any defects, dangerous or substandard conditions
in the products or materials manufactured, sold, distributed, or to be
manufactured, sold or distributed by the Company that could cause bodily injury,
sickness, disease, death, or damage to property, or result in loss of use of
property, or any claim, suit, demand for arbitration or notice seeking damages
for bodily injury, sickness, disease, death, or damage to property, or loss of
use or property.
2.12.2 Prior to the execution of this Agreement, the Sellers
and the Company have delivered all responses of counsel for the Company to
auditors' requests for information regarding actions or proceedings pending or
threatened against, relating to or affecting the Company during the period
commencing January 1, 1995. Section 2.12.2 of the Disclosure Schedule sets forth
all actions or proceedings relating to or affecting the Company or its Assets
during the period commencing January 1, 1995 prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section
2.13 of the Disclosure Schedule, neither the Sellers nor the Company has
received at any time since January 1, 1995 any notice that the Company is or has
been at any time since such date, in violation of or in default under, any Law
or Order applicable to the Company or any of its Assets. In furtherance and not
limitation of the foregoing, neither the Sellers nor the Company has violated
any federal or state securities law in connection with the offer, sale or
purchase of any securities.
2.14 Benefit Plans; ERISA. All Benefit Plans relating to the Company
are listed in Section 2.14 of the Disclosure Schedule, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to Purchaser (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications, and IRS
determination letters). Except as disclosed in Section 2.14 of the Disclosure
Schedule:
2.14.1 each Benefit Plan, and the administration thereof,
complies, and has at all times complied, with the requirements of all applicable
Law, including ERISA and the Code, and each Benefit Plan intended to qualify
under section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such plan has at all times
since its adoption been tax-exempt under section 501(a) of the Code;
2.14.2 no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code;
2.14.3 no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
2.14.4 the "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA;
2.14.5 no "reportable event" (within the meaning of section
4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA affiliate since the effective date of said section 4043;
2.14.6 no Benefit Plan is a multiemployer plan within the
meaning of section 3(37) of ERISA;
2.14.7 Neither the Company nor any ERISA affiliate has
incurred any liability for any Tax imposed under section 4971 through 4980B of
the Code or civil liability under section 502(i) or (l) of ERISA;
2.14.8 no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
2.14.9 no Tax has been incurred under section 511 of the Code
with respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
2.14.10 no Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any
state laws requiring continuation of benefits coverage following termination of
employment;
2.14.11 no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) have been
brought or, to the knowledge of any Seller or the Company, threatened against or
with respect to any Benefit Plan and there are not facts or circumstances known
to any the Sellers or the Company that could reasonably be expected to give rise
to any such suit, action or other litigation; and
2.14.12 all contributions to Benefit Plans that were required
to be made under such Benefit Plans have been made, and all benefits accrued
under any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP, all of which accruals under unfunded Benefit
Plans are as disclosed in Section 2.14 of the Disclosure Schedule, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
2.15 Real Property.
2.15.1 Section 2.15.1 of the Disclosure Schedule contains a
true and correct list of (i) each parcel of real property owned (the "Owned Real
Property") by the Company, (ii) each parcel of real property leased or subleased
or otherwise occupied by the Company as tenant or subtenant (the "Leased Real
Property"; together with the Owned Real Property, the "Real Property") together
with a true and correct list of all such leases, subleases or other similar
agreements and any amendments, modifications or extensions thereto (the "Real
Property Leases"), and (iii) all Liens relating to or affecting any parcel of
Real Property, in each case identifying the owner, lessor and lessee thereof.
2.15.2 The Company has good and marketable title to its Owned
Real Property, free and clear of all Liens, other than as specifically listed in
Section 2.15.2 of the Disclosure Schedule.
2.15.3 Subject to the terms of its leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment to the
Leased Real Property for the full term of the lease thereof. Each Real Property
Lease is a legal, valid and binding agreement, enforceable in accordance with
its terms, of the Company and of each other Person that is a party thereto, and
except as set forth in Section 2.15.3 of the Disclosure Schedule, there is no,
and neither the Sellers nor the Company, has knowledge of any, or has received
any, notice of any default (or any condition or event which, after notice or
lapse of time or both, would constitute a default) thereunder. The Company has
not assigned, sublet, transferred, hypothecated or otherwise disposed of its
interest in any Real Property Lease. No penalties are accrued and unpaid under
any Real Property Lease.
2.15.4 The Sellers shall deliver to Purchaser upon the
execution of this Agreement true and complete copies of all (i) title policies,
mortgages, deeds of trust, deeds, leases, easements, restrictive covenants,
certificates of occupancy, and similar documents, and all amendments thereto
concerning the Owned Real Property, and (ii) Real Property Leases and, to the
extent reasonably available, all other documents referred to in clause (i) of
this paragraph with respect to the Leased Real Property.
2.15.5 Except as disclosed in Section 2.15.5 of the Disclosure
Schedule, the improvements on the Real Property are in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are presently being
used and, to the knowledge of each of the Sellers and of the Company, there are
no condemnation or appropriation proceedings pending or threatened against Real
Property or the improvements thereon.
2.15.6 Neither the Sellers nor the Company has any knowledge
of any claim, action or proceeding, actual or threatened, against the Company or
the Real Property by any Person which would materially affect the future use,
occupancy or value of the Real Property or any part thereof.
2.16 Tangible Personal Property. The Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Financial Statements and tangible personal property acquired since December 31,
1998 other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement. All such
tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing
Date, is adequate and suitable for the conduct by the Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Company has interests in or uses
only the intellectual property described in Section 2.17 of the Disclosure
Schedule. The Company either has all right, title and interest in or a valid and
binding license to use such intellectual property. No other intellectual
property is used in or necessary to the conduct of the business of the Company.
All registrations, pending applications, registered rights and executed
agreements related to intellectual property are listed in Section 2.17 of the
Disclosure Schedule. Except as disclosed therein, (i) the Company has the right
to use the intellectual property described therein, (ii) all registrations on
behalf of the Company with and applications to Governmental or Regulatory
Authorities in respect of such intellectual property are valid and in full force
and effect and are not subject to the payment of any Taxes or maintenance fees
or the taking of any other actions by the Company to maintain their validity or
effectiveness, (iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no restrictions on
the direct or indirect transfer of any License, or any interest therein, held by
the Company in respect of such intellectual property, (v) the Sellers has
delivered, or has caused the Company to deliver, to Purchaser prior to the
execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets, (vii) neither the
Sellers nor the Company is or has received any notice that it is in default (or
with the giving of notice or lapse of time or both, would be in default) under
any License to use such intellectual property and (viii) neither the Sellers nor
the Company has any knowledge that such intellectual property is being infringed
by any other Person. To the knowledge of the Sellers and the Company, the
Company is not infringing any intellectual property of any Person, and no
litigation is pending and no claim has been made or, to the knowledge of any the
Sellers or of the Company, has been threatened to such effect.
2.18 Contracts.
2.18.1 Section 2.18.1 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts or other arrangements (true and
complete copies, or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Purchaser prior to the
execution of this Agreement), to which the Company is a party or by which any of
its Assets is bound.
2.18.1.1 (A) all Contracts (excluding Benefit Plans)
providing for a commitment of employment or consultation services for a
specified or unspecified term, the name, position and rate of compensation of
each Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of the
Company to make payments (with or without notice, passage of time or both) to
any Person in connection with, or as a consequence of, the transactions
contemplated hereby or to any employee, other than with respect to salary or
incentive compensation payments in the ordinary course of business consistent
with past practice;
2.18.1.2 all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of the Company to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company or prohibiting or
limiting disclosure of confidential or proprietary information;
2.18.1.3 all partnership, joint venture,
shareholders' or other similar Contracts with any Person;
2.18.1.4 all Contracts relating to Indebtedness of
the Company;
2.18.1.5 all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees;
2.18.1.6 all guarantees of any Indebtedness or other
obligations of the Company or any third Person;
2.18.1.7 all Contracts relating to the future
disposition or acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent with past practice
and the provisions of this Agreement;
2.18.1.8 all Contracts between or among the Company
and any of the Sellers, any current or former officer, director, stockholder or
Affiliate of the Company or of any such officer, director, stockholder or
Affiliate, on the other hand, other than Contracts disclosed pursuant to Section
2.18.1.8;
2.18.1.9 all collective bargaining or similar labor
Contracts;
2.18.1.10 all Contracts that (A) limit or contain
restrictions on the ability of the Company to declare or pay dividends on, to
make any other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer
to exist any Lien, to purchase or sell any Assets or to change the lines of
business, (B) require the Company to maintain specified financial ratios or
levels of net worth or other indicia of financial condition or (C) require the
Company to maintain insurance in certain amounts or with certain coverages; and
2.18.1.11 all other Contracts, including but not
limited to Contracts with customers, that involve the payment or potential
payment, pursuant to the terms of any such Contract, by or to the Company of
more than $10,000 and all powers of attorney and comparable delegations of
authority.
2.18.2 Each Contract required to be disclosed in Section
2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure
Schedule, neither the Company nor, to the knowledge of any the Sellers, any
other party to such Contract is, or has received notice that it is, in violation
or breach of or default under any such Contract (or with notice or lapse of time
or both, would be violation or breach of or default under any such Contract).
2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure
Schedule, the Company is not a party to or bound by any Contract that has been
or could reasonably be expected to be, individually or in the aggregate with any
other such Contracts, materially adverse to the business or condition of the
Company.
2.18.4 To the extent any of the guaranties for the benefit of
the Company or any of its Assets are not integrated with Contracts disclosed in
Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, or each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Sellers or the Company or any other
party to such guaranty is, or has received notice that it is, in violation or
breach of or default under any such guaranty (or with notice or lapse of time or
both, would be in violation or breach of default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of the Company, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Sellers or the Company have delivered to Purchaser true and complete copies
of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure
Schedule:
2.19.1 the Company owns or validly holds all Licenses that are
material to its respective business or operations;
2.19.2 each license listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect;
2.19.3 neither the Sellers nor the Company is, or has received
any notice that it is in default (or with the giving of notice of lapse of time
or both, would be in default) under any such License; and
2.19.4 the transactions contemplated in this Agreement will
not violate any such License or give any other party thereto rights to terminate
the License or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true
and complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or
affect or relate to the ownership, use or operation of any of the Assets of the
Company and that (i) have been issued to the Company, or (ii) have been issued
to any Person (other than the Company) for the benefit of the Company. Each
policy listed in Section 2.20 of the Disclosure Schedule is valid and binding
and in full force and effect, all premiums due thereunder have been paid when
due and neither the Sellers nor the Company or the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder, and the Company does not
know of any reason or state of facts that could lead to the cancellation of such
policies. The insurance policies listed in Section 2.20 of the Disclosure
Schedule (i) in light of the business, operations and Assets of the Company are
in amounts and have coverages that are reasonable and customary for Persons
engaged in such businesses and operations and having such Assets and (ii) are in
amounts and have coverages as required by any Contract to which the Company is a
party. Section 2.20 of the Disclosure Schedule contains a list of all claims
made under any insurance policies covering the Company since January 1, 1995.
Neither the Sellers nor the Company have received notice that any insurer under
any policy referred to in this Section is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause. Since
January 1, 1995, the Company has maintained, in light of its business, location,
operations and Assets, at all times, without interruption appropriate insurance,
in scope and amount of coverages.
2.21 Affiliate Transactions. Except for the Shareholder Debt, (i) there
are no Liabilities between the Company and any current or former officer,
director, stockholder, Affiliate of the Company or any Affiliate of any such
officer, director, stockholder or Affiliate, and (ii) the Company does not
provide or cause to be provided any assets, services or facilities to any such
current or former officer, director, stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any
unfair labor practice. There is (i) no unfair labor practice complaint pending
or, to the knowledge of the Sellers or the Company, threatened against the
Company before the National Labor Relations Board or comparable or similar state
agency, and no grievance or arbitration proceeding arising out of under
collective bargaining agreements is so pending or, to the knowledge of the
Sellers or of the Company, threatened against the Company, (ii) no strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the
Company, threatened against the Company, and (iii) no union representation
question exists with respect to the employees of the Company or, to the
knowledge of the Sellers or the Company, no union organization activities are
taking place.
2.23 Environmental Matters.
2.23.1 The Company has obtained and holds all necessary
Environmental Permits.
2.23.2 Except as disclosed in Section 2.23.2 of the Disclosure
Schedule, to the best knowledge of the Sellers with no duty of independent
investigation:
2.23.2.1 The 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. Neither the Sellers nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct they may be
held to be responsible received, any actual or threatened Order, notice, or
other communication from (A) any Governmental Body or private citizen acting in
the public interest, or (B) 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 the 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 the 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.
2.23.2.2 There are no pending or, to the knowledge of
the Sellers or the Company, 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 the Sellers or the Company has or
had an interest.
2.23.2.3 Neither the Sellers nor the Company has
knowledge of or any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held responsible received any citation,
directive, inquiry, notice, Order, summons, warning, or other communications
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 Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other Assets in which the Company had an interest, or with
respect to any Facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by the Sellers, the Company,
or any other Person for whose conduct it or they are or may be held responsible,
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
2.23.2.4 Neither the Company nor any other Person for
whose conduct it may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
Assets (whether real, personal, or mixed) in which the Company (or any
predecessor thereof), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such Assets.
2.23.3 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. Neither the Company nor any other Person for whose conduct it may be
held responsible, or 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 the Sellers or
the Company has or had an interest except in full compliance with all applicable
Environmental Laws.
2.23.4 There has been no Release or, to the knowledge of the
Sellers or of the Company, any 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 the Company has or had an
interest, or any geologically or hydrologically adjoining property.
2.23.5 The Sellers has delivered to Purchaser true and
complete copies and results of any reports, studies, analyses, tests, and
monitoring possessed or initiated by the Sellers or the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Sellers, the Company or any other Person for whose
conduct it or they are or may be held responsible, with Environmental Laws.
2.23.6 There are no Liens arising under or pursuant to any
Environmental Law on any Owned Real Property or Leased Real Property and there
are no facts, circumstances, or conditions that could reasonably be expected to
restrict, encumber, or result in the imposition of special conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any Environmental Law with respect to the ownership,
occupancy, development, use, or transferability of any Real Property.
2.23.7 There are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos
containing material, at any Real Property.
2.23.8 There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Sellers or the Company with respect to any
Asset of, or property that is adjacent to an Asset of the Company which have not
been delivered to Purchaser prior to execution of this Agreement.
2.24 Substantial Customers and Suppliers. Section 2.24.1 of the
Disclosure Schedule lists the ten (10) largest customers of the Company on the
basis of revenues for goods sold or services provided for the twelve month
period ending December 31, 1998. Section 2.24.2 of the Disclosure Schedule lists
the ten (10) largest suppliers of the Company on the basis of cost of goods or
services purchased during the twelve month period ending December 31, 1998.
Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the
knowledge of the Sellers and the Company, no such customer or supplier is
insolvent or threatened with bankruptcy or insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of the
Disclosure Schedule, the accounts and notes receivable of the Company reflected
on the balance sheets included in the Financial Statements for the period ended
December 31, 1998, and all accounts and notes receivable arising subsequent to
such date, (i) arose from bona fide sales transactions in the ordinary course of
business consistent with past practice and are payable on ordinary trade terms,
(ii) are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangements, and (v) are not subject of any Actions
or Proceedings brought by or on behalf of the Company. Section 2.25 of the
Disclosure Schedule sets forth (x) a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company and (y) all jurisdictions in which the records relating to accounts
and notes receivable are located.
2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company,
nor any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Sellers or the Company or any such Affiliate) has entered into any
agreement or had any discussions with any third party regarding any transaction
involving the Company which could result in the Company, Purchaser or its
stockholders, or any officer, director, employee, agent or Affiliate of any of
them, being subject to any claim for liability to said third party as a result
of entering into this Agreement or consummating the transactions contemplated
hereby or thereby. No agent, broker, finder, investment banker, financial
advisor or other Person will be entitled to any fee, commission or other
compensation in connection with the transactions contemplated by this Agreement
on the basis of any act or statement made by the Sellers, the Company or any of
their respective Affiliates, or any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Sellers, the Company, or any such Affiliate.
2.27 Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. The Company is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure
Schedule sets forth (a) a list of the names and locations of all banks,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; and (b) a true and complete list and description of each
such account, box and relationship, indicating in each case the account number
and the names of all persons having signatory power and respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act. Neither any the Sellers, nor the Company nor
any Person authorized to act on behalf of any of the foregoing has, in
connection with the offering of the Purchased Stock, engaged in (i) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 501(c) under the Securities Act), (ii) any action involving a
public offering within the meaning of section 4(2) of the Securities Act, or
(iii) any action that would require the registration under the Securities Act of
the offering and sale of the Purchased Stock pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
the Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best knowledge, represents and warrants to the
Sellers as follows:
3.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Purchaser is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing which,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the validity or enforceability of this Agreement or
on the ability of Purchaser to perform its obligations hereunder or thereunder.
3.2 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby, do
not and will not:
3.3.1 conflict or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
3.3.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in Section 3.4 of
the Disclosure Schedule, if any, conflict with or result in a violation or
breach of any term or provision of any Law or Order applicable to Purchaser or
its Assets and Properties; or
3.3.3 except as disclosed in Section 3.3.3 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under, or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which Purchaser is a party, or by which it is bound.
3.4 Governmental Approvals and Filings. Except as disclosed in Section
3.4 of the Disclosure Schedule, other than filings with the Federal Trade
Commission and the United States Department of Justice under HSR, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the execution,
delivery and performance of this Agreement to which it is a party or the
consummation of the transactions contemplated herein.
3.5 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.6 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.7 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.8 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Sellers may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Sellers, nonetheless, shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
ARTICLE IV
4 COVENANTS BY THE SELLERS
4.1 Noncompetition; Non Solicitation.
4.1.1 For a period of five (5) years from the Closing Date,
each of the Sellers, alone or in conjunction with any other Person, or directly
or indirectly through their present or future Affiliates, will not directly or
indirectly own, manage, operate, join, have a financial interest in, control or
participate in the ownership, management, operation or control of, or use or
permit his name to be used in connection with, or be otherwise connected in any
manner with any business or enterprise engaged in the design, development,
manufacture, distribution or sale of any products, or the provision of any
services, which the Company was designing, developing, manufacturing,
distributing, selling or providing at any time prior to and up to and including
the Closing Date anywhere in the State of Montana, provided that the foregoing
restriction shall not be construed to prohibit the ownership, in the aggregate,
of not more than two percent (2%) of any class of securities of any corporation
which is engaged in any of the businesses or enterprises described above, having
a class of securities registered pursuant to the Securities Exchange Act of
1934, as amended, which securities are publicly owned and regularly traded on
any national exchange or in the over-the-counter market.
4.1.2 For a period of five (5) years from the Closing Date,
the Sellers shall not directly or indirectly, or through an Affiliate, (i)
influence any individual who was an employee or consultant of the Company at any
time, to terminate his or her employment or consulting relationship with the
Company, (ii) interfere in any other way with the employment, or other
relationship, of any employee or consultant of the Company or (iii) cause or
attempt to cause or participate in any way in any discussion or negotiation
concerning (x) any client, customer or supplier of the Company or (y) any
prospective client, customer or supplier of the Company from engaging in
business with the Company.
4.1.3 The Sellers agree that Purchaser's remedies at law for
any breach or threat of breach by it of any of the provisions of this Section
4.1 will be inadequate, and that, in addition to any other remedy to which
Purchaser may be entitled at law or in equity, Purchaser shall be entitled to a
temporary or permanent injunction or injunctions or temporary restraining orders
or orders to prevent breaches of the provisions of this Section 4.1 and to
enforce specifically the terms and provisions hereof, in each case without the
need to post any security or bond. Nothing herein contained shall be construed
as prohibiting Purchaser from pursuing, in addition, any other remedies
available to it for such breach or threatened breach. A waiver by the Purchaser
of any breach of any provision hereof shall not operate or be construed as a
waiver of a breach of any other provisions of this Agreement or of any
subsequent breach thereof.
4.1.4 The parties hereto consider the restrictions contained
in this Section 4.1 hereof to be reasonable for the purpose of preserving the
goodwill, proprietary rights and going concern value of the Company, but if a
final judicial determination is made by a court having jurisdiction that the
time or territory or any other restriction contained in this Section 4.1 is an
unenforceable restriction on the Sellers' activities, the provisions of this
Section 4.1 shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the court
referred to above finds that any restriction contained in this Section 4.1 or
any remedy provided herein is unenforceable, and such restriction or remedy
cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of this Section 4.1 shall in no
respect limit or otherwise affect the Sellers's obligations under other
agreements with the Company.
4.2 Regulatory and Other Approvals. The Sellers shall, and shall cause
the Company to, (a) take all necessary or desirable steps and proceed diligently
and in good faith and use its best efforts, as promptly as practicable, to
obtain all consents, approvals or actions of, to make all filings with and to
give all notices to, Governmental or Regulatory Authorities or any other Person
required to consummate the transactions contemplated hereby and those described
in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other Persons as Purchaser or such Governmental or Regulatory Authorities or
other Persons may reasonably request and (c) cooperate with Purchaser as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to, Governmental or Regulatory
Authorities or other Persons required of Purchaser to consummate the
transactions contemplated hereby. the Sellers will provide prompt notification
to Purchaser when any such consent, approval, action, filing or notice referred
to in clause (a) above is obtained, taken, made or given, as applicable, and
will advise Purchaser of any communications (and, unless precluded by Law,
provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement.
4.3 Investigation by Purchaser.
4.3.1 From the date of this Agreement until the date on which
either Party provides the other Party with written notice that this Agreement is
terminated (the "Termination Date"), or until the Closing, whichever is earlier,
the Sellers will afford Purchaser's accountants, and their representatives
access to certain contracts, books and records, and all other documents and data
of the Company, other than formulas and manufacturing procedural instructions of
the Company and certain other documents and data that the Sellers will not
disclose until Closing, such as certain of the vendors of the Company or prices
paid for certain products connected with certain formulas, manufacturing
processes, bagging operations and acrylic stucco division processes and
operations, as well as employee files and records. Sellers will advise Purchaser
what is not being disclosed as Purchaser's investigation proceeds.
4.3.2 From the date of this Agreement until the Termination
Date, or until the Closing, whichever is earlier, the Sellers will afford
Purchaser, its employees, agents and representatives full and free access to
certain books and records of the Company as provided in Section 4.3.1 hereof. To
the extent that any such books and records are not furnished to Purchaser
immediately, the same shall nevertheless be furnished to Purchaser at a mutually
agreeable time, not later than one day prior to the Closing. Purchaser
acknowledges that certain of the books and records are highly confidential and
their disclosure will not be made except as provided herein due to the Sellers'
confidentiality and proprietary concerns. Sellers will advise Purchaser what is
not being disclosed as Purchaser's investigation proceeds. In any event, if any
of this highly confidential information is disclosed to Purchaser prior to or at
the Closing, Purchaser shall have the option to terminate this Agreement, at its
sole discretion, if the highly confidential information discloses any matter
which leads Purchaser to the conclusion that it should not close the transaction
contemplated herein.
ARTICLE V
5 CLOSING CONDITIONS
5.1 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by Purchaser in its sole
discretion):
5.1.1 Representations and Warranties. Each of the
representations and warranties made by the Sellers in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
on and as of the Closing Date as though each such representation and warranty
was made on and as of the Closing Date.
5.1.2 Performance. The Sellers shall have performed and
complied with each agreement, covenant and obligation required by this Agreement
to be so performed or complied with by them at or before the Closing.
5.1.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to Purchaser.
5.1.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
be in form and substance reasonably satisfactory to Purchaser, (iii) shall not
impose any limitations or restrictions on Purchaser, (iv) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived, and
(v) shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation for the transactions contemplated by this Agreement shall
have occurred.
5.1.5 Third Party Consents. Any consents (or waivers)
identified in Section 2.5 of the Disclosure Schedule, and all other consents (or
waivers) to the performance by the Purchaser of its obligations under this
Agreement, or to the consummation for the transactions contemplated hereby as
are required under any Contract or License to which the Purchaser is a party or
by which any of its Assets are bound and where the failure to obtain any such
consent (or in lieu thereof waiver) could reasonably be expected, individually
or in the aggregate with other such failures, to materially adversely affect the
Purchaser or the business or condition of the Company or otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to the Purchaser in its sole discretion, (i) shall have been obtained,
(ii) shall be in form and substance satisfactory to the Purchaser in its sole
discretion, (iii) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (iv) shall be in full force and effect.
5.1.6 Purchaser's Investigation. Purchaser shall not have
discovered, as a result of its investigation and review pursuant to Section 4.3
hereof, any condition (financial or otherwise) relating in any way to the
Company, its Assets, business or prospects, that convinces Purchaser, in its
sole discretion, that it is not advisable to complete the Closing.
5.1.7 Sellers' Certificates. The Sellers shall have delivered
to Purchaser (i) certificates, dated the Closing Date and executed by an
executive officer of the Company, substantially in the form and to the effect of
Exhibit B hereto and (ii) certificates, dated the Closing Date and executed by
the chief financial officer of the Company, substantially in the form of Exhibit
C hereto.
5.1.8 Resignations of Officers and Directors. The Sellers
shall have delivered to Purchaser the resignations of all current officers and
directors of the Company, effective as of the Closing Date.
5.1.9 Opinion of Counsel. Purchaser shall have received the
opinion of ________________ , Esquire, counsel to the Company in connection with
this Agreement, dated the Closing Date, substantially in the form and to the
effect of Exhibit D hereto, and to such further effect as Purchaser may
reasonably request.
5.1.10 Disclosure Schedule. The Sellers shall have delivered
to Purchaser a copy of the Disclosure Schedule, updated and current through the
Closing Date.
5.1.11 Good Standing Certificates. The Sellers shall have
delivered to Purchaser (i) copies of the certificate or articles of
incorporation (or other comparable corporate charter documents), including all
amendments thereto of the Company certified by the applicable Secretary of State
or other appropriate governmental official, (ii) certificates from the
applicable Secretary of State or other appropriate governmental official to the
effect that the Company is in good standing in such jurisdiction, listing all
charter documents of the Company on file and attesting to its payment of all
franchise or similar Taxes, and (iii) certificates from the Secretary of State
or other appropriate official in each jurisdiction in which the Company is
qualified or admitted to do business to the effect that the Company is duly
qualified or admitted in good standing in such jurisdiction.
5.1.12 Receipt of Purchased Stock. Certificates representing
the Purchased Stock shall have been transferred to Purchaser in accordance with
the terms of this Agreement.
5.1.13 Payment of Indebtedness. Purchaser must receive
evidence satisfactory to Purchaser that upon payment of the Purchase Price, (i)
all Shareholder Debt will be cancelled or otherwise paid in full, and be of no
further force and effect, (ii) all other Indebtedness owing by the Company will
be retired, released or repaid, and (iii) the Company has been conditionally
released from all obligations it has in respect of (i) and (ii) above.
5.1.14 No Adverse Change. There shall have occurred no
material adverse change in the business or condition of the Company between
December 31, 1998 and the Closing Date.
5.1.15 Inventory. The silos and tanks at the Corette facility
being filled with marketable fly ash to within 80% of capacity at the time of
the Closing; and
5.1.16 Contract Extension. The Sellers shall obtain, prior to
the Closing, an executed extension of the contracts between the Company and
Montana Power & Light and the Company and Montana Dakota Utilities (collectively
the "Contracts"). The Contracts must be extended for a period of at least an
additional five (5) years, preferably ten (10), with substantially the same
terms and conditions as those in existence as of the execution of this
Agreement. The Montana Power & Light contract shall provide for a term of five
(5) years from the date that the ash generated at the Colstrip facility becomes
marketable.
5.2 Conditions to the Obligations of the Sellers. The obligations of
the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject
to the fulfillment, at or prior to the Closing, of the following conditions
precedent (any or all of which may be waived in whole or in part by the Sellers
in theirs sole discretion):
5.2.1 Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and on and
as of the Closing Date as though each such representation and warranty was made
on and as of the Closing Date.
5.2.2 Performance. Purchaser shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or before
the Closing.
5.2.3 Orders and Laws. There shall not be pending, threatened
or in effect on the Closing Date any Orders or Laws restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
5.2.4 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and the Sellers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall
not be subject to the satisfaction or any condition that has not been satisfied
or waived, and (iii) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have occurred.
5.2.5 Officers' Certificates. Purchaser shall have delivered
to the Sellers a certificate, dated the Closing Date and executed by the
president or vice-president or other officer of Purchaser, substantially in the
form and to the effect of Exhibit E hereto.
ARTICLE VI
6 TERMINATION
6.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
6.1.1 by Purchaser or by the 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;
6.1.2 (i) by Purchaser if any of the conditions in Section 5.1
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 Purchaser
to comply with its obligations under this Agreement) and Purchaser has not
waived such condition on or before the Closing Date, or (ii) by the Sellers, if
any of the conditions in Section 5.2 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 the Sellers to comply with his obligations under this
Agreement) and the Sellers has not waived such condition on or before the
Closing Date;
6.1.3 by mutual consent of Purchaser and the Sellers; or
6.1.4 by Purchaser or by the 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 February 28, 1999, or such later date as the parties may agree upon.
6.2 Effect of Termination. Each party's right of termination under
Section 6.1 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 6.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article
X will survive; provided, however, that if this Agreement is terminated by a
party because of a 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 (including specific performance) will survive such
termination unimpaired.
6.2.1 If this Agreement is terminated, and the transaction
contemplated herein is not consummated, Purchaser shall not employ any of the
employees identified in Section 5.1.16 above, or any of the employees of the
Company who are specifically identified to the Purchaser in writing by the
Company within ten (10) days following cancellation or termination of this
Agreement, for a period of five (5) years following cancellation or termination
of this Agreement. The foregoing shall likewise apply to all subsidiary and
related companies owned or controlled, directly or indirectly, by the Purchaser.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Company, the Purchaser
and their respective stockholders and the officers, directors, employees, agents
and Affiliates of each of them in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of the Sellers
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.1.2 Purchaser will indemnify the Sellers in respect of, and
hold him harmless from and against, any and all Losses suffered, incurred or
sustained by him or to which he becomes subject, resulting from, arising out of
or relating to any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith).
7.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.1 will be asserted and resolved as follows:
7.2.1 In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by
such Indemnified Party of written notice of the Third Party Claim; _provided_,
that failure to give such Claim Notice shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure.
7.2.2 If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, but shall continue to
pay for any expenses of investigation or any Loss suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. If (i) the
Indemnifying Party shall not assume the defense of a Third Party claim with
counsel satisfactory to the Indemnified Party within five Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnifying Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnified Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) if the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party, and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation or any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damage and such monetary damages are paid in
full by the Indemnifying Party.
7.2.3 In the event any Indemnified Party should have a claim
under Section 7.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to
the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within thirty (30) days, such dispute shall be resolved as provided in Article X
hereof.
7.3 Allocation of Tax Liability.
7.3.1 In the case of Taxes with respect to or payable by the
Company with respect to a period that includes but does not end on the Closing
Date, the allocation of such Taxes between the Pre-Closing Period and the
Post-Closing Period shall be made on the basis of an interim closing of the
books of the Company as of the close of business on the Closing Date. In the
case of (i) franchise Taxes based on capitalization, debt or shares of stock
authorized, issued or outstanding and (ii) _ad valorem_ Taxes, in either
situation attributable to any taxable period that includes but does not end on
the Closing Date, the portion of such Taxes attributable to the Pre-Closing
Period shall be the amount of such Taxes for the entire taxable period,
multiplied by a fraction the numerator of which is the number of days in such
taxable period ending on and including the Closing Date and the denominator of
which is the entire number of days in such taxable period; _provided_, that if
any Company Asset is sold or otherwise transferred prior to the Closing Date,
then _ad valorem_ Taxes pertaining to such property, asset or other right shall
be attributed entirely to the Pre-Closing Period.
7.3.2 Except to the extent a reserve for Taxes is reflected on
the Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the Company is liable
with respect to any periods ending on or before the Closing Date; _provided_,
that in the case of any adjustment to any item of loss or expense for any such
years, which gives rise to corresponding and offsetting items of loss or expense
in subsequent years the benefit of which is or will be actually realized by the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers's obligations shall be limited to
the amount of interest (computed at the appropriate statutory rates) and
penalties actually paid to the appropriate taxing authorities by the Company as
a result of such timing differences in the case of audit adjustments, or at a
rate of eight percent (8%) per annum in the case of other adjustments, (ii)
without duplication (subject to the same proviso), all Taxes arising out of a
breach of the representations, warranties or covenants contained herein, (iii)
any Tax liability resulting from any ongoing state audits that exceed, in the
aggregate, any reserve therefore set forth on the Financial Statements, and (iv)
any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified
hereunder.
7.3.3 From and after the Closing Date, Purchaser shall cause
the Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.4 Tax Contests.
7.4.1 If any Taxing Authority or other Person asserts a Tax
Claim, then the party hereto first receiving notice of such Tax Claim shall
promptly provide written notice thereof to the other parties hereto. Such notice
shall specify in reasonable detail the basis for such Tax Claim and shall
include a copy of any relevant correspondence received from the Taxing Authority
or other Person.
7.4.2 If, within 30 calendar days after any the Sellers
receives or delivers, as the case may be, notice of a Tax Claim, the Sellers
provide to the Purchaser an Election Notice, then subject to the provisions of
this Section 7.4, the Sellers shall defend or prosecute, at their sole cost,
expense and risk, such Tax Claim by all appropriate proceedings, which
proceedings shall defended or prosecuted diligently by the Sellers to a Final
Determination; provided, that the Sellers shall not, without the prior written
consent of the Company, enter into any compromise or settlement of such Tax
Claim that would result in any Tax detriment to the Company. So long as the
Sellers are defending or prosecuting a Tax Claim, with respect to the Company,
the Company shall provide or cause to be provided to the Sellers any information
reasonably requested by the Sellers relating to such Tax Claim, and shall
otherwise cooperate with the Sellers and their representatives in good faith in
order to contest effectively such Tax Claim. the Sellers shall inform the
Company of all developments and events relating to such Tax Claim (including,
without limitation, providing to the Company copies of all written materials
relating to such Tax Claim) and the Company or its authorized representatives
shall be entitled, at the expense of the Company, to attend, but not to
participate in or control, all conferences, meetings and proceedings relating to
such Tax Claim.
7.4.3 If, with respect to any Tax Claim, the Sellers fails to
deliver an Election Notice to the Company within the period provided in Section
7.4.2 or, after delivery of such Election Notice to the Company, the Sellers
fail diligently to defend or prosecute such Tax Claim to a Final Determination,
then the Company shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and risk of the
Sellers, such Tax Claim. The Company shall have full control of such defense or
prosecution and such proceedings, including any settlement or compromise
thereof. If requested by the Company, the Sellers shall cooperate in good faith
with the Company and its authorized representatives in order to contest
effectively such Tax Claim. the Sellers may attend, but not participate in or
control, any defense, prosecution, settlement or compromise of any Tax Claim
controlled by the Company pursuant to this Section 7.4.3, and shall bear their
own costs and expenses with respect thereto. In the case of any Tax Claim that
is defended or prosecuted by the Company pursuant to this Section 7.4.3, the
Company shall, from time to time, be entitled to receive current payments from
the Sellers with respect to costs and expenses incurred by the Company in
connection with such defense or prosecution (including, without limitation,
reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as
a result of receiving a payment from the Sellers pursuant to this Section 7.4)
(collectively "Associated Costs").
7.4.4 In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4,
the Sellers shall pay to the appropriate Tax Indemnitees, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim within five Business Days after such Final Determination. In the case of
any Tax Claim that is defended or prosecuted to a Final Determination by the
Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the
appropriate Tax Indemnitee, in immediately available funds, the full amount of
any Tax arising or resulting from such Tax Claim, together with any Associated
Costs that have not theretofore been paid by the Sellers to the Company, within
five Business Days after such Final Determination. In the case of any Tax Claim
not covered by the two preceding sentences, the Sellers shall pay to the
Company, in immediately available funds, the full amount of any Tax arising or
resulting from such Tax Claim (calculated after taking into account any actual
reduction in the current liability for Taxes of such Tax Indemnitee for Tax
arising out of or resulting from such payment or such Tax Claim), together with
any Associated Costs that have not theretofore been paid by the Sellers to the
Company, at least five Business Days before the date payment of such Tax is due
from any Tax Indemnitee.
7.4.5 Notwithstanding anything contained in this Article VII
to the contrary, the rights of the Sellers under this Section 7.4 to defend or
prosecute, or to control the defense or prosecution of, any Tax Claim shall be
no greater than those rights that the Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.5 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its subsidiaries and Affiliates to, provide to the other parties
hereto and the Company such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules, workpapers and relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.6 Payment of Transfer Taxes and Fees. the Sellers shall pay all
sales, use, transfer, stamp, documentary or similar Taxes imposed upon or
arising out of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the
Company and their Affiliates with respect to such Taxes. the Sellers shall file
all necessary documentation and Tax Returns with respect to such Taxes and
provide to Purchaser copies of all such Tax Returns.
7.7 Other Tax Covenants.
7.7.1 Without the prior written consent of Purchaser, neither
the Sellers nor any Affiliate of any the Sellers shall, to the extent it may
affect or relate to the Company, make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
7.7.2 Without the prior written consent of the Sellers,
neither the Purchaser nor the Company shall, to the extent it may affect or
relate to the Company, make or change any tax election, file any amended Tax
Return, enter into any closing Agreement, settle any Tax claim, assessment or
proposed assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would affect a Pre-Closing Tax Period, unless required by applicable
law.
7.7.3 So long as any books, records and files retained by the
Sellers or and his Affiliates relating to the business of the Company or the
books, records and files delivered to the control of the Purchaser pursuant to
this Agreement to the extent they relate to the operations of the Company prior
to the Closing Date, remain in existence and are available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any time during business hours for any proper purpose. The
Purchaser and the Sellers and their respective Affiliates shall use reasonable
efforts not to destroy or allow the destruction of any such books, records and
files without first providing 60 days' written notice of intention to destroy to
the other, and allowing such other party to take possession of such records.
7.8 Conflict. In the event of a conflict between the provisions of
Sections 7.3 through 7.7 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
8 DEFINITIONS
8.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly owning, owned by, controlling, controlled by or
under common control with, that Person, (b) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person.
"Agreement" means this Purchase Agreement, the Exhibits and
the Disclosure Schedule and the certificates delivered in connection herewith,
as the same may be amended from time to time in accordance with the terms
hereof.
"Assets" of any Person means all assets and properties of
every kind, nature, character and description, including goodwill and other
tangibles, operated, owned or leased by such Person, including cash and cash
equivalents, investments, accounts and notes receivable, chattel paper,
documents, instruments, real estate, equipment, inventory, goods and
intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.4.3.
"Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time been made
by the Company or under which any employee, former employee or director of the
Company or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Claim Notice" means written notification pursuant to Section
7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought
by an Indemnified Party.
"Closing" and "Closing Date" have the meaning ascribed to them
in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital
of this Agreement (and shall include all predecessors and subsidiaries of the
Company).
"Contract" means any agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of the Company and the Sellers, and the schedules
delivered by or on behalf of Purchaser, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Election Notice" means a written notice provided by the
Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge
their indemnity obligation under this Agreement with respect to such Tax Claim
and (ii) the Sellers elect to contest, and to control the defense or prosecution
of, such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater,
drinking water supply, stream sediments, or land, including soil, land surface
or subsurface strata, all fish, wildlife, biota and all other environmental
medium or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law and consisting
of or relating to (i) 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); (ii) 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; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) 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. Section 9601 et seq., as
amended (CERCLA).
"Environmental Law" means all federal, state, local and
foreign environmental, health and safety laws, common law orders, decrees,
judgments, codes and ordinances and all rules and regulations promulgated
thereunder, civil or criminal, including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consent or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by the Company.
"Final Determination" means (i) a decision, judgment, decree
or other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" has the meaning ascribed to it in
Section 2.8.
"GAAP" means generally accepted accounting principles of the
United States, consistently applied.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Hazardous Activity" means 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 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 Company.
"Hazardous Material" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (ii) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (iii) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases, (v) long term debt and (vi) in the nature
of guarantees of the obligations described in clauses (i) through (v) above of
any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to
Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in
Section 2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, such as
fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Occupational Safety and Health Law" means any Law 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.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Owned Real Property" has the meaning ascribed to it in
Section 2.15.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion
thereof beginning after the Closing Date. If a taxable period begins on or
before the Closing Date and ends after the Closing Date, then the portion of the
taxable period that begins on the day following the Closing Date shall
constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion
thereof that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section
1.2.
"Purchased Stock" has the meaning ascribed to it on the first
page of this Agreement.
"Purchaser" has the meaning ascribed to it in the first
paragraph of this Agreement.
"Real Property" has the meaning ascribed to it in Section
2.15.
"Real Property Leases" has the meaning ascribed to it in
Section 2.15.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Seller" and the "Sellers" have the meaning ascribed to them
on the first page of this Agreement.
"Subsidiary" means any Person in which another Person,
directly or indirectly through Subsidiaries or otherwise, beneficially owns at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof. Unless the
context otherwise requires a different interpretation, references to a
"Subsidiary" mean a Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, the Company and other
Indemnified Parties specified in Section 7.1 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
7.2.
8.2 Interpretation of Agreement.
8.2.1 Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the word "including" does
not imply any limitation to the item or matter mentioned; and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
8.2.2 When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person or any similar phrase, means (i)
with respect to any Person who is an individual, the actual knowledge of such
Person, (ii) with respect to any other Person, the actual knowledge of the
directors, officers, managers, and other similar Persons in a similar position
or having similar powers and duties, and (iii) in the case of each of (i) and
(ii), the knowledge of facts that such individuals should have after reasonable
inquiry.
ARTICLE IX
9 MISCELLANEOUS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or mailed by prepaid first class certified mail, return receipt
requested, or sent by prepaid courier, to the parties at the following
addresses:
If to Purchaser, to:
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, UT 84111
Attn.: Sr. Vice President and General Counsel
If to the Sellers, to:
Mr. William ___. Leslie
_________________
_________________
_________________
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt and (iv) if delivered
by courier to the address as provided for in this Section, be deemed given on
the earlier of the second Business Day following the date sent by such courier
or upon receipt. Any party from time to time may change its address or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; _provided_, the Sellers will pay
all expenses relating hereto of the Company incurred in respect of the period
prior to the Closing.
9.4 Confidentiality. Purchaser and the Sellers will hold in strict
confidence from any Person (other than its Affiliates or representatives) all
documents and information concerning the other party hereto or any of its
Affiliates furnished to it by or on behalf of the other party in connection with
this Agreement or the transactions contemplated hereby, except to the extent the
disclosing party can demonstrate that such documents or information was (a)
previously known by the party receiving such documents or information, (b) in
the public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential. Such covenant of
confidentiality will remain in effect unless a party is compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental or Regulatory Authorities) or by other requirements of Law.
9.5 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.1, such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
9.6 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Sellers shall execute and deliver to
Purchaser such other documents and instruments, provide such materials and
information and take such other actions as Purchaser may reasonably request to
consummate the transactions contemplated by this Agreement and otherwise to
cause each the Sellers to fulfill its obligations under this Agreement. The
Sellers shall also, for a reasonable period of time (not to exceed ninety (90)
days), cooperate with Purchaser by continuing to provide any welfare benefit
plan, payroll services plan, operational service, or other service of any nature
being provided to the Company by the Sellers or any business entity owned,
managed or controlled, in any manner, by the Sellers. All of such services shall
be provided at cost, plus ten percent (10%).
9.7 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.8 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.9 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Montana, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Montana.
9.14 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
Operative Agreement.
9.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
ARTICLE X
10 MEDIATION
In the event there is a dispute under this Agreement, the disagreeing
parties shall meet with one another and diligently attempt to resolve their
disagreements. If they are unable to do so, then upon request of either party to
the dispute made within twenty (20) days of the failure of negotiations, they
will mediate the dispute, utilizing an impartial mediator pursuant to the rules
of the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the mediation
is not successful, or if no mediation has been elected, then any party to the
dispute may file a legal action in any court of competent jurisdiction to
resolve the dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth on the first page hereof.
PURCHASER
ISG RESOURCES, INC.
_______________
By: ___________
Its: __________
SELLERS
WILLIAM __. LESLIE
________________
William __. Leslie
<PAGE>
EXHIBIT B
Officer's Certificate
I, the undersigned, the President of Mineral Specialties, Inc. (the
"Company"), a Montana corporation, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
__ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between
ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie,
an individual residing in the state of Montana. Unless otherwise indicated
herein, capitalized terms used in this Certificate shall have the same meanings
given to them in the Agreement.
2. Attached hereto as Exhibit __-1 is a correct and complete copy of the
Certificate of Incorporation of the Company, as in effect on the date hereof.
3. Attached hereto as Exhibit __-2 is a correct and complete copy of the By-Laws
of the Company, as in effect on the date hereof.
4. Attached hereto Exhibit __-3 is a correct and complete copy of the
Certificates of Good Standing of the Company, as in effect on the date hereof.
5. Attached hereto Exhibit __-4 is a correct and complete list of the persons
that have been duly elected (or appointed), qualified and acting as officers and
directors of the Company (to and including the date hereof), each holding the
respective offices set forth opposite their names; and the signatures set forth
opposite their names on Exhibit -4 are the genuine signatures of such persons.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of the date hereof.
____________________
By:_________________
President, Mineral Specialties, Inc.
<PAGE>
EXHIBIT C
Chief Financial Officer's Certificate
I, the undersigned, the Chief Financial Officer of Mineral Specialties,
Inc. (the "Company"), a Montana corporation, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
__ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between
ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie,
an individual residing in the state of Montana. Unless otherwise indicated
herein, capitalized terms used in this Certificate shall have the same meanings
given to them in the Agreement.
2. I am familiar with the Company's finances and capitalization.
3. The Company has provided the Purchaser with the Financial Statements as
provided in the Agreement.
4. The Financial Statements accurately present the Company's financial condition
and operations as of and through the respective dates and periods therein
delineated, and the results of the Company's operations and changes in financial
position for the periods then ended, and have been prepared in accordance with
GAAP, applied on a consistent basis.
5. As of the Closing Date, no material adverse change in the financial condition
or operations of the Company will have occurred from that shown on the Financial
Statements.
6. The Company's authorized capital stock consists of ___ shares of common
stock, all of which are outstanding and owned by the Seller.
7. There are no outstanding options, warrants, calls, subscriptions,
commitments, agreements or other rights to purchase or dispose of Company common
stock or other securities which are, or may at any time be, convertible into
stock or other securities in the Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of the date hereof.
_____________________
By:_____________________
CFO, Mineral Specialties, Inc.
<PAGE>
EXHIBIT D
Opinion of Counsel
On Counsel's Letterhead
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, Utah 84111
Dear Sirs:
I have acted as counsel to _______________ (herein collectively the
"Sellers") and Mineral Specialties, Inc., a Montana corporation (the "Company"),
in connection with the Stock Purchase Agreement dated May , 1999 (the
"Agreement") between ISG Resources, Inc., a Utah corporation ("Purchaser"), and
the Sellers. This is the opinion contemplated by section ____ of the Agreement.
All capitalized terms used in this opinion without definition have the
respective meanings give to them in the Agreement or the Accord referred to
below.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The General qualifications, as
defined in the Accord, apply to all of the opinions set forth in this Opinion
Letter.
Based on the foregoing, our opinion is as follows:
1. The Agreement is enforceable against the Sellers.
2. The authorized capital stock of the company consists of ___ shares
of common stock, all of which are outstanding. Sellers own all of the
outstanding stock of record free and clear of all adverse claims. As a result of
the delivery of certificates to Purchaser and the payment to Sellers being made
at the Closing, Purchaser is acquiring ownership of all of the outstanding stock
of the company, free and clear of all adverse claims.
3. The Company is a corporation duly organized, validly existing and in
good standing under the laws of Montana, with full corporate power and authority
to own its properties and to engage in their business as presently conducted or
contemplated. All of the outstanding shares of capital stock of the Company have
been authorized and validly issued and are paid and nonassessable and were not
issued in violation of the preemptive rights or any person.
4. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the transactions contemplated by the Agreement (a)
breaches or constitutes a default (or an event that, with notice or lapse of
time or both, would constitute a default) under any agreement or commitment to
which the Sellers are parties or (b) violates any statute, law, regulation or
rule, or any judgement, decree or order of any court applicable to the Sellers.
5. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the transactions contemplated by the agreement (a)
violates any provision of the certificate of incorporation or bylaws of the
company, (b) breaches or constitutes a default (or any event that, with notice
or lapse of time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or excuses
performance by any person of any of its obligations under, or causes the
acceleration of the maturity of any debt or obligation pursuant to, or results
in the creation or imposition of any encumbrance upon any property or assets of
the Company under any agreement or commitment to which the Company is a party or
by which any of the properties or assets of the Company are subject, or (c)
violates any statute, law, regulation, or rule, or any judgement decree or order
of any court applicable to the Company.
6. No consent, approval or authorization of, or declaration, filing or
registration with, any governmental body is required in connection with the
execution, delivery and performance of the Agreement or the consummation of any
of the transactions contemplated by the Agreement.
I hereby confirm to you that, with the exception of the insured claims
reflected on the Disclosure Statement, if any, there are no proceedings or
actions by or before any court or governmental body pending or overtly
threatened against or involving the Company or that questions or challenges the
validity of the Agreement or any action taken or to be taken by the Company
pursuant to the Agreement or in connection with the transactions contemplated by
the Agreement, and the Company is not subject to any judgement order or decree
having prospective effect.
Very truly yours,
<PAGE>
EXHIBIT E
Purchaser's Officers' Certificate
Purchaser shall have delivered to the Sellers a certificate, dated the Closing
Date and executed by the president or vice-president or other officer of
Purchaser, substantially in the form and to the effect of Exhibit E hereto.
I, the undersigned, the ________ of ISG Resources, Inc. (the
"Company"), a Utah corporation, do hereby certify that:
1. This Certificate is being delivered at the Closing today pursuant to Section
__ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between
ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie,
an individual residing in the state of Montana. Unless otherwise indicated
herein, capitalized terms used in this Certificate shall have the same meanings
given to them in the Agreement.
2. Attached hereto as Exhibit __-1 is a true copy of the Board Resolution of the
Company with respect to the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
as of the date hereof.
___________________
By: _______________
________, ISG Resources, Inc.
DON'S BUILDING SUPPLY L.L.P.
(A Texas Limited Liability Partnership)
PARTNERSHIP REGULATIONS
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................1
1.1 Definitions...........................................................1
ARTICLE II FORMATION OF THE COMPANY.....................................3
2.1 Name and Formation....................................................3
2.2 Principal Place of Business...........................................4
2.3 Principal Office......................................................4
2.4 Term..................................................................4
2.5 Purposes and Powers...................................................4
ARTICLE III MANAGEMENT.......................................................4
3.1 Management by Board of Directors......................................4
3.2 Board of Directors....................................................5
3.3 Officers..............................................................6
3.4 Committees of the Board of Directors..................................9
ARTICLE IV INDEMNIFICATION...................................................10
4.1 Liability of Director or Officer of the Company for Certain Acts.....10
4.2 Indemnification of Director, Officer and Partners of the Company.....10
ARTICLE V MEETINGS OF BOARD OF DIRECTORS..............................12
5.1 Meetings.............................................................12
5.2 Place of Meetings....................................................12
5.3 Notice of Meetings...................................................12
5.4 Meetings of All Directors............................................12
5.5 Quorum...............................................................12
5.6 Manner of Acting.....................................................12
5.7 Action by Directors Without a Meeting................................13
5.8 Waiver of Notice.....................................................13
5.9 Conduct of Meetings..................................................13
ARTICLE VI CONTRIBUTIONS TO CAPITAL AND CAPITAL ACCOUNTS....................13
6.1 Capital Contributions................................................13
6.2 Units................................................................13
6.3 Withdrawal or Reduction of Partners' Contributions to Capital........14
6.4 Liability of Partners................................................14
6.5 Deficit Capital Accounts.............................................14
ARTICLE VII ALLOCATIONS, DISTRIBUTIONS, ELECTIONS
AND REPORTS.................................................14
7.1 Allocations of Profits and Losses....................................14
7.2 Distributions........................................................14
7.3 Tax Withholdings.....................................................16
7.4 Limitation Upon Distributions........................................16
7.5 Accounting Principles................................................16
7.6 Records and Reports..................................................17
7.7 Returns and Other Elections..........................................17
ARTICLE VIII TRANSFERABILITY.................................................17
8.1 Restrictions on Transfer of Interests in the Company.................17
8.2 Assignees............................................................18
8.3 Substituted and Additional Partners..................................18
8.4 Continuing Liability of Partners.....................................19
ARTICLE IX DISSOLUTION AND TERMINATION.....................................19
9.1 Dissolution..........................................................19
9.2 Distribution of Assets Upon Dissolution..............................20
ARTICLE X MEETINGS OF PARTNERS........................................20
10.1 Place and Manner of Meetings.........................................20
10.2 Special Meetings of Partners.........................................20
10.3 Notice of Meetings of Partners.......................................20
10.4 Quorum...............................................................20
10.5 Registered Partners..................................................21
10.6 Proxies..............................................................21
10.7 Conduct of Meetings..................................................21
10.8 Fixing Record Dates for Matters Other than Consents to Actions.......21
10.9 Fixed Record Dates for Consents to Action............................21
10.10Actions Without a Meeting............................................22
10.11Nature of Partnership Interest.......................................22
ARTICLE XI MISCELLANEOUS PROVISIONS........................................22
11.1 Notices..............................................................22
11.2 Waiver of Notice.....................................................22
11.3 Application of Texas Law.............................................23
11.4 No Action for Partition..............................................23
11.5 Headings and Sections................................................23
11.6 Amendment of Partnership Agreement and Partnership Regulations.......23
11.7 Registered Limited Liability Partnership.............................23
11.8 Resignation..........................................................23
11.9 Numbers and Gender...................................................23
11.10Binding Effect.......................................................24
11.11Counterparts.........................................................24
ATTACHMENT:
SCHEDULE A - Names and Units Owned of the Partners
<PAGE>
PARTNERSHIP REGULATIONS
OF
DON'S BUILDING SUPPLY L.L.P.
These Partnership Regulations are hereby adopted as the Partnership
Regulations of DON'S BUILDING SUPPLY L.L.P., a Texas limited liability
partnership (the "Company"), and are hereby confirmed and approved for good and
valuable consideration.
R E C I T A L S
A. The Predecessor Entity, as hereinafter defined, was organized on November
9, 1981.
B. The Company was created as general partnership by a conversion of the
Predecessor Entity into the Company on December 31, 1998.
C. The Partnership Agreement of the Company was executed on December 31, 1998.
D. On December 31, 1998 the Company registered as a registered limited
liability partnership.
E. The Partnership Agreement contemplates the adoption of Partnership
Regulations that would have the effect of amending the Partnership
Agreement to provide detailed provisions as to the agreement of the
Partners regarding the ownership and operation of the Company.
R E G U L A T I O N S
ARTICLE I
DEFINITIONS
I.1 Definitions. The following terms used in these Partnership
Regulations shall have the following meanings (unless otherwise expressly
provided herein):
(a) "Act" shall mean the Texas Revised Partnership Act, as the
same may be amended from time to
time.
(b) "Partnership Agreement" has the meaning given that term in
Section 2.1 hereof.
(c) "Board of Directors" means the committee designated
pursuant to Article III.
(d) "Capital Account" means, with respect to any Partner, the
account maintained for such Partner in a manner consistent with the requirements
of the Act, recognizing that distributions to the Partners are to be made
without regard to Capital Accounts.
(e) "Capital Contribution" means any contribution to the
capital of the Company in cash or property by a Partner whenever made.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Company" means DON'S BUILDING SUPPLY L.L.P., a Texas
limited liability partnership.
(h) "Director" means a Manager designated pursuant to Section
3.1(b) hereto.
(i) "Disposition" means any sale, transfer, encumbrance, gift,
donation, assignment, pledge, hypothecation or other disposition, whether
voluntary or involuntary and whether during a Partner's lifetime or upon or
after his or her death, including without limitation, any partition of community
property and any Disposition by operation of law, by court order, by judicial
process or by foreclosure, levy or attachment.
(j) "Fiscal Year" means the Company's fiscal year, which shall
be the calendar year.
(k) "Losses" means, for each Fiscal Year, the net losses of
the Company determined in accordance with accounting principles consistently
applied from year to year employed under the accrual method of accounting and as
reported, separately or in the aggregate, as appropriate, on the Company's
information tax return filed for federal income tax purposes.
(l) "Majority" means, with respect to any referenced groups of
members of the Board of Directors or any committee, a combination of any of such
persons constituting more than fifty percent of the number of such persons of
such referenced group who are then elected and qualified.
(m) "Majority in Interest" means, with respect to the
Partners, a combination of such Persons (one or more) holding more than fifty
percent of the issued and outstanding Units.
(n) "Partner" means each Person designated as a Partner on
Schedule A, attached hereto and hereby made a part hereof, any successor or
successors to all or any part of any such Person's interest in the Company, or
any additional Partner admitted as a Partner of the Company in accordance with
Article VIII, each in the capacity as a Partner of the Company, but does not
include any who has ceased to be a Partner of the Company. "Partners" means all
such Persons collectively in their capacity as Partners of the Company.
(o) "Partnership Interest" means the percentage of partnership
interest in the Company held by a Partner, which percentage shall be equal to
the Unitholding Percentage of such Partner.
(p) "Permitted Disposition" means any of the following kinds
of Dispositions:
(i) A Disposition of the community property or other
interest in all or any part of the interests in the Company of a Partner's
spouse, upon the death of such spouse, to the surviving Partner;
(ii) A Disposition of the community property or other
interest in all or any part of the interests in the Company of a Partner's
spouse to such Partner in connection with the termination of the marital
relationship of the Partner and the Partner's spouse;
(iii) A Disposition made pursuant to and as permitted
by the terms of these Partnership Regulations.
(q) "Person" shall have the meaning given that term in Section
1.01(14) of the Act.
(r) "Predecessor Entity" means Don's Building Supply, Inc., a
Texas corporation that was converted into the Company (the "Conversion")
effective on December 31, 1998.
(s) "Profits" means, for each Fiscal Year, the net income and
net gains of the Company determined in accordance with accounting principles
consistently applied from year to year as reported, separately or in the
aggregate, as appropriate, on the Company's information tax return filed for
federal income tax purposes.
(t) "Partnership Regulations" means these Partnership
Regulations of the Company as originally adopted and as amended from time to
time.
(u) "Unitholding Percentage" of a Partner means the percentage
that the Units held by such Partner bears to the aggregate number of issued and
outstanding Units.
(v) "Units" means the units of ownership in the Company,
denominated as Units of Partnership Interest of the Company.
ARTICLE II
FORMATION OF THE COMPANY
II.1 Name and Formation. The name of the Company is Don's Building
Supply L.L.P. The Partnership Agreement of the Company (the "Partnership
Agreement") was executed on December 31, 1998.
II.2 Principal Place of Business. The principal place of business of
the Company within the State of Texas shall be Dallas, Texas. The Company may
locate its place(s) of business and registered office at any other place or
places as the Board of Directors may from time to time deem necessary or
advisable.
II.3 Principal Office. The Company's initial principal office shall be
at 2327 Langford, Dallas, Texas 75208.
II.4 Term. The term of existence of the Company shall be perpetual,
unless the Company is earlier dissolved in accordance with either the provisions
of the Partnership Agreement, these Partnership Regulations or the Act.
II.5 Purposes and Powers.
(a) The purposes and character of the business of the Company
shall be to accomplish any or all lawful business for which partnerships may be
organized under the Act.
(b) The Company shall have any and all powers which are
necessary, proper, advisable, convenient, or desirable to carry out the purposes
and business of the Company, to the extent the same may be legally exercised by
partnerships under the Act. The Company shall carry out the foregoing activities
pursuant to the arrangements set forth in the Partnership Agreement of the
Company and these Partnership Regulations.
ARTICLE III
MANAGEMENT
III.1 Management by Board of Directors.
(a) General. The business and affairs of the Company shall be
managed by a committee to be known as the Board of Directors.
(b) Duties and Obligations. Subject to Section 4.1, each
person serving on the Board of Directors (a "Director") and/or as officers of
the Company shall exercise such person's business judgment in managing the
business, operations and affairs of the Company.
(c) No Authority of Partners or Directors to Bind Company.
Unless authorized to do so by the Partnership Agreement, these Partnership
Regulations or the Board of Directors, no Partner, Director, agent or employee
of the Company shall have any power or authority to bind the Company in any way.
(d) Voting by the Units. Actions to be taken by the Partners
shall be approved by Partners holding a majority of the Units.
III.2 Board of Directors.
(a) Management. Any decisions to be made by the Partners under
the Act, the Partnership Agreement or these Partnership Regulations shall be
made by the Board of Directors unless specifically provided otherwise.
(b) Decisions Reserved to Partners. Notwithstanding the
provisions of Section 3.2(a) or any other provisions herein to the contrary, the
Board of Directors may not cause the Company to do any of the following actions
without the agreement of the Partners holding at least a majority of the Units:
(i) the merger or consolidation of the Company with
and into any corporation, limited liability company or other entity, or of any
corporation, limited liability company or other entity with and into the
Company, or the participation of the Company in any exchange of interests;
(ii) the conversion of the Company into another form
of entity;
(iii) the liquidation or dissolution of the Company;
and
(iv) the delegation to an agent of the Company of the
power to take any of the actions referred to in the foregoing clauses.
(c) Designation and Election of Directors. The initial Board
of Directors shall consist of those individuals designated as the directors in
the Partnership Agreement. Thereafter, the Board of Directors shall be elected
by majority vote of the Partners. Each of the members of the Board of Directors
shall serve until his or her resignation or death or until his or her successor
shall be elected as provided herein. Each Director elected shall have one vote.
Except as provided in Section 3.2(b), the Directors shall in all respects
relating to the Company represent and act on behalf of the Partners.
(d) General.
(i) Resignation. Any Director may resign at any time
by giving notice to the other members of the Board of Directors. A Director's
resignation shall take effect at the time specified in the notice and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
(ii) Vacancies. Any vacancy occurring in the Board of
Directors shall be filled by
majority vote of the Partners.
(iii) Meetings. Meetings of the Board of Directors
shall be held in accordance with Article V.
(iv) Reimbursement. The Directors shall be entitled
to receive such compensation as shall be determined by the Directors, and shall
be entitled to reimbursement for reasonable "out-of-pocket" expenses incurred in
connection with their services to the Company.
(v) Indemnification. The Company shall indemnify the
Directors to the extent set forth in Article IV.
III.3 Officers.
(a) Election of Officers. The members of the Board of
Directors, at their first meeting, shall elect such officers as the Board shall
choose to elect. No officers need be a Partner or a resident of Texas. The
Directors may elect or appoint such other officers and agents as they shall deem
necessary, who shall be appointed for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time by the Board of
Directors. Any two or more offices may be held by the same Person.
(i) Each officer of the Company shall hold office
until his or her successor is chosen and is qualified in such officer's stead or
until the death, resignation or removal from office of such officer.
(ii) Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by such person as is elected or
appointed by a majority vote of the Board of Directors.
(iii) The compensation of all officers and agents
shall be fixed by the Board of Directors or by a committee formed and appointed
by the Board of Directors, as allowed pursuant to Section 3.4 of these
Partnership Regulations.
(b) Authority and Duties. The officers of the Company, if the
Board chooses to elect one or more of such officers, shall have the authority
and shall exercise the powers and perform the duties specified below and as may
be additionally specified by the Board of Directors or these Partnership
Regulations (and in all cases where the duties of any officer are not prescribed
by these Partnership Regulations or the Board of Directors, such officer shall
follow the orders and instructions of the President):
(i) President. The President shall preside over the
general and active management of the business of the Company, and shall direct,
manage and control the business of the Company to the best of the President's
ability. The President shall serve until resignation or dissolution and
liquidation of the Company or removal by the Board of Directors. The President
shall, subject to the provisions of Section 3.3(d), have full and complete
authority, power and discretion to make any and all decisions and do any and all
things that the President deems to be reasonably required in furtherance of the
Company's business and objectives. Without limiting the generality of the
foregoing, the President or such subordinate officer designated by the
President, or any officer duly authorized by the Board of Directors shall have
the power and authority on behalf of the Company:
(1) to purchase liability and other insurance
to protect the Company's property and business;
(2) to invest any Company funds temporarily
(by way of example but not limitation) in time deposits, short-term governmental
obligations, commercial paper or other investments;
(3) to employ accountants, legal counsel,
managing agents or other experts, employees or agents to perform services for
the Company and to compensate them from Company funds;
(4) to negotiate with employees and any labor
organization representing employees of the Company; and
(5) to carry out all orders and resolutions of
the Board of Directors.
(ii) Vice-Presidents. The Vice Presidents, unless
otherwise determined by the Board of Directors shall, in the absence or
disability of the President, perform the duties and have the authority and
exercise the powers of the President. The Vice-Presidents shall perform such
other duties and have such other authority and powers as the Board of Directors
may from time to time prescribe or as the President may from time to time
delegate.
(iii) Secretary. The Secretary shall attend all
meetings of the Board of Directors and Partners and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for any committee, if requested. The Secretary shall give,
or cause to be given, notice of the meetings of the Board of Directors and
Partners where such notices are required to be given by these Partnership
Regulations. The Secretary shall be under the supervision of the President, and
shall perform such other duties and have such other authority and powers as the
Board of Directors may from time to time prescribe or as the President may from
time to time delegate.
(iv) Treasurer. The Treasurer shall have the custody
of the Company funds and shall keep full and accurate accounts of receipts and
disbursements of the Company, and shall deposit all monies and other valuable
effects in the name and to the credit of the Company in such depositories as may
be designated by the Board of Directors. The Treasurer shall disburse the funds
of the Company as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and Board of
Directors, at the regular meetings of the Board of Directors, or whenever they
may require it, an account of all transactions as Treasurer and of the financial
condition of the Company. If required by the Board of Directors, the Treasurer
shall give the Company a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the Treasurer's office and for the restoration to
the Company, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money or other property of
whatever kind in the Treasurer's possession or under his or her control
belonging to the Company. The Treasurer shall perform such other duties and have
such other authority and powers as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate.
(c) Execution of Contracts. Each of the President or such
subordinate officer or officers designated by the President or any officer
designated by the Board of Directors shall have the authority to execute on
behalf of the Company all agreements, instruments and documents, including,
without limitation, checks, drafts, notes and other negotiable instruments,
mortgages, deeds of trusts, security agreements, financing statements, documents
providing for the acquisition, mortgage or disposition of the Company property,
assignments, bills of sale, leases, partnership agreements and any other
instruments or documents necessary to effectuate any actions which have been
approved by the Partners or the Board of Directors (if such actions require,
under the Act, the Partnership Agreement or these Partnership Regulations, the
approval of the Partners or the Board of Directors) or by the President (if such
actions do not require under the Act, the Partnership Agreement or these
Partnership Regulations the approval of the Partners or the Board of Directors).
(d) Actions Requiring Board of Directors Approval.
Notwithstanding any other provision of the Partnership Agreement or these
Partnership Regulations and in addition to any other actions requiring Partner
or Board of Directors approval as provided herein or in the Act, the following
actions on behalf of the Company shall require the approval of the Board of
Directors:
(i) the sale, lease, transfer or other disposition of
all or a material part of the Company's assets or business;
(ii) any increase or decrease in the capitalization
of the Company;
(iii) any acquisition by the Company of the stock,
assets or business of another corporation or entity or any investment by the
Company of corporate funds in another corporation or entity, including the
creation of any subsidiary;
(iv) the admission of any new Partner to the Company;
(v) the lending of Company funds to any Partner or
any affiliate of any Partner;
(vi) any guarantee by the Company of any indebtedness
or other obligation of any kind of any Partner or any affiliate of a Partner;
(vii) the entry into, or any amendment or
modification or cancellation of, a management, service, or other agreement or
contract between the Company and a Partner or its affiliates;
(viii) the making of a material tax election under
the Code applicable to the Company unless specifically allowed pursuant to the
terms of these Partnership Regulations;
(ix) the confession of a judgment by the Company; (x)
the filing of bankruptcy by the Company;
(xi) the offering of any securities or Partnership
Interests to third parties by the Company.
(xii) the incurrence of any indebtedness, making of
any contract (or any material amendment to any contract formerly approved in the
Company's annual budget or by the Board of Directors), making of any capital
expenditure or investment, the disposal or pledge of Company property or
settlement of any claim or litigation in an amount in excess of $5,000;
(xiii) the appointment or removal of any officer of
the Company;
(xiv) the acquisition, expansion or disposal of
facilities of the Company;
(xv) any other agreement which would substantially
affect the operation of the Company.
Notwithstanding the preceding provisions of this subparagraph (d) to the
contrary, the approval of the Board of Directors shall not be required with
respect to any of the actions listed above if such actions have been approved in
writing by Partners holding a majority of the Units.
(e) General.
(i) Removal. Any officer may be removed at any time
by a majority vote of the Board of Directors whenever in the Board of
Directors's best judgment the best interests of the Company will be served
thereby, but such removal will be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer shall not
in itself create contract rights.
(ii) Resignation. Any officer may resign at any time,
subject to the rights or obligations under any existing contracts between the
officer and the Company, by giving written notice to the President or the Board
of Directors. An officer's resignation shall take effect at the time specified
in the notice, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
(iii) Vacancies. A vacancy in any office, however
occurring, may be filled by the Board of Directors as provided in Section
3.3(a)(ii) for the unexpired portion of the term.
(iv) Indemnification. The Company shall indemnify the
Directors, officers, and Partners to the extent set forth in Article IV.
III.4 Committees of the Board of Directors. The Board of Directors may
designate one or more committees, each of which shall be comprised of one or
more of its members, and may designate one or more of its members as alternate
members of any committee, who may, subject to any limitations imposed by the
Board of Directors, replace absent or disqualified members at any meeting of
that committee. Any such committee, to the extent provided in the resolution
establishing it, shall have and may exercise all of the authority that may be
exercised by the Board of Directors. Regular and special meetings of any
committee may be held on such dates, at such times and upon such notice (if any)
as shall be provided in the resolution establishing such committee or, if not
addressed in such resolution, as may be determined by the members of such
committee. The Board of Directors may dissolve any committee at any time.
ARTICLE IV
INDEMNIFICATION
IV.1 Liability of Director or Officer of the Company for Certain Acts.
Each Director and officer of the Company shall exercise such person's business
judgment in managing the business, operations and affairs of the Company. Absent
fraud, deceit, gross negligence, willful misconduct or a wrongful taking,
neither a Director nor an officer of the Company shall be liable or obligated to
the Partners or to the Company for any mistake of fact or judgment, for the
doing of any act, or for the failure to do any act in conducting the business,
operations and affairs of the Company which may cause or result in any loss or
damage to the Company or its Partners. No Director or officer of the Company
guarantees the return of the Partners' capital contributions or a profit for the
Partners from the operations of the Company. No Director or officer of the
Company shall be responsible to any Partner because of a loss of such Partner's
investment, unless the loss shall have been the result of the Director's or
officer's fraud, deceit, gross negligence, willful misconduct or a wrongful
taking. Neither the Directors nor officers of the Company shall be jointly and
severally liable for fraud, deceit, gross negligence, willful misconduct or
wrongful taking, but each such person shall only be liable for such person's own
actions and omissions.
IV.2 Indemnification of Director, Officer and Partners of the Company.
(a) Right to Indemnification. The Company shall indemnify, to
the fullest extent permitted by law (including without limitation in
circumstances in which, in the absence of this Section 4.2(a), indemnification
would be discretionary under the laws of Texas or limited or subject to
particular standards of conduct under such laws) each Director, officer and
Partner of the Company against all costs, expenses and liability, including
reasonable attorneys' fees, incurred in connection with, relating to or as a
result of any action, suit or proceeding to which a Director, officer or Partner
of the Company may be involved or made a party by reason of being or having been
a Director, officer or Partner of the Company, or while a Director, officer or
Partner of the Company, is or was serving at the request of the Company as a
manager, director, officer, partner, trustee, employee, fiduciary or agent of
any other domestic or foreign limited liability partnership, corporation,
partnership, joint venture, trust, employee benefit plan or other entity or
enterprise.
(b) Advancement of Expenses. In the event of any action, suit
or proceeding in which a Director, officer or Partner of the Company is involved
or which may give rise to a right of indemnification under Section 4.2(a),
following written request to the Company by the Director, officer or Partner of
the Company, the Company shall pay to such Director, officer or Partner, to the
fullest extent permitted by law (including without limitation in circumstances
in which, in the absence of this Section 4.2(b), advancement of expenses would
be discretionary under the laws of Texas or limited or subject to particular
standards of conduct under such laws), amounts to cover expenses incurred by the
Director, officer or Partner in, relating to or as a result of such action, suit
or proceeding in advance of its final disposition.
(c) Settlements. The Company shall not be liable under this
Section 4.2 for any amounts paid in settlement of any action, suit or proceeding
effected without the approval of the Board of Directors. The Company shall not
settle any action, suit or proceeding in any manner that would impose any
penalty or limitation on a Director, officer or Partner of the Company without
the Director, officer or Partner's written consent. Consent to a proposed
settlement of any action, suit or proceeding shall not be unreasonably withheld
by the Board of Directors.
(d) Liability Insurance. The Company may purchase and maintain
insurance on behalf of any person who is or was a Director, officer or Partner
of the Company or who is or was serving at the request of the Company as a
manager, director, officer, partner, trustee, employee, fiduciary or agent of
any other domestic or foreign limited partnership, limited liability
partnership, corporation, partnership, joint venture, trust, employee benefit
plan or other entity or enterprise against any liability asserted against and
incurred by a Director, officer or Partner of the Company in any such capacity
or arising out of a Director, officer or Partner's status as such, whether or
not the Company would have the power to indemnify such person against such
liability under the provisions of this Section. Any such insurance may be
procured from any insurance company designated by the Board of Directors,
whether such insurance company is formed under the laws of Texas or any other
jurisdiction of the United States or elsewhere.
(e) Other Rights and Remedies. The rights to indemnification
and advancement of expenses provided in this Section shall be in addition to any
other rights a Director, officer or Partner of the Company may have or hereafter
acquire under any law, provision of the Partnership Agreement, any other or
further provision of these Partnership Regulations, vote of the Board of
Directors, agreement or otherwise. The Company shall have the right, but shall
not be obligated, to indemnify or advance expenses to any employee or agent of
the Company in accordance with and to the fullest extent permitted by law.
(f) Applicability and Effect. The rights to indemnification
and advancement of expenses provided in this Section shall be applicable to acts
or omissions that occurred prior to the adoption of this Section, shall continue
as to any Director, officer or Partner of the Company during the period such
Director, officer or Partner serves in any one or more of the capacities covered
by this Section, shall continue thereafter so long as the Director, officer or
Partner may be subject to any possible action, suit or proceeding by reason of
the fact that the Director, officer or Partner served in any one or more of the
capacities covered by this Section, and shall inure to the benefit of the estate
and personal Directors of each such person. Any repeal or modification of this
Section or of any provision hereof shall not affect any rights or obligations
then existing. All rights to indemnification under this Section shall be deemed
to be provided by a contract between the Company and each Director, officer or
Partner of the Company.
(g) Limitation on Partners' Liability. The indemnification
provided for in this Section shall in no event cause the Partners to incur any
liability, nor shall it result in any liability of the Partners to any third
party.
ARTICLE V
MEETINGS OF BOARD OF DIRECTORS
V.1 Meetings. Meetings of the Board of Directors may be called for any
purpose, unless otherwise prescribed by statute, by the President or any of the
Directors.
V.2 Place of Meetings. The Directors may designate any place, either
within or outside the State of Texas, as the place of meeting for meetings. If
no designation is made, the place of meeting shall be the principal office of
the Company in the State of Texas. Directors may participate in such meetings by
means of conference telephone and similar communications equipment by means of
which all Persons participating in the meeting can hear each other, and
participation in a meeting as provided herein shall constitute presence in
person at such meeting, except where a Person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
V.3 Notice of Meetings. The Chairman of the Board of Directors, the
President or the Person(s) calling the meeting shall cause written notice
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose for which the meeting is called to be delivered not less
than two (2) days before the date of the meeting, either personally or by mail,
to each Director entitled to vote at such meeting. If mailed, such notice shall
be deemed to be given two business days following when it deposited in the
United States mail, addressed to the Director at such Director's business
address as set forth in the records of the Company, with postage prepaid. If a
meeting is adjourned to another place or time, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken.
V.4 Meetings of All Directors. If all of the Directors shall meet at
any time and place, either within or outside of the State of Texas, and consent
to the holding of a meeting at such time and place, such meeting shall be valid
without call or notice, and any action taken at such meeting shall be lawful.
V.5 Quorum. A quorum shall consist of a majority of the Directors;
provided that in the event of a quorum not being present, such meeting shall be
adjourned to a date one (1) day after the date of such meeting but at the same
time and location and any Directors then in attendance shall be deemed to be a
quorum.
V.6 Manner of Acting. If a quorum is present, the majority vote of the
Directors entitled to vote on the subject matter shall be the act of the
Partners.
V.7 Action by Directors Without a Meeting. Action required or permitted
to be taken at a meeting of the Board of Directors or the Board of Managers may
be taken without a meeting if the action is evidenced by written consents signed
by all Directors or Managers entitled to vote.
V.8 Waiver of Notice. When any notice is required to be given to any
Director, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. By attending a meeting, a Director: (a)
waives objection to lack of notice or defective notice of such meeting unless
the Director, at the beginning of the meeting, objects to the holding of the
meeting or the transaction of business at the meeting, and (b) waives objection
to consideration at such meeting of a particular matter not within the purpose
or purposes described in the notice of such meeting unless the Director objects
to considering the matter when it is presented.
V.9 Conduct of Meetings. All meetings of the Board of Directors shall
be presided over by the chairman of the meeting, who shall be a member of the
Board of Directors. The chairman of any meeting of the Board of Directors shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem in
order to him or her.
ARTICLE VI
CONTRIBUTIONS TO CAPITAL AND CAPITAL ACCOUNTS
VI.1 Capital Contributions.
(a) As a result of the Conversion, each Partner contributed to
the capital of the Company his proportionate interest in the assets and business
of the Predecessor Entity. As a result of the Conversion, each Partner received
his or her Partnership interest and the Units described on Schedule A, attached
hereto.
(b) If the Board of Directors determines that additional
capital contributions are needed to carry out the purposes of the Company, the
Board of Directors may request that the Partners make additional cash or
property Capital Contributions to the Company to purchase additional Units to be
issued by the Company. No Partner shall be required to make any additional
Capital Contribution without the written consent of all the Partners.
(c) No Partner shall be paid interest on any Capital
Contribution to the Company.
VI.2 Units.
(a) Each Partner's interest in the Company shall be
represented by units of Partnership Interest denoted as Units. The Units owned
by the Partners in the Company immediately after the Conversion are set forth on
the attached Schedule A. Subject to the provisions of Section 8.3, additional
Partners shall receive the number of Units determined by the Partners. The
number of Units issued to an additional Partner, and the Capital Contribution
required for the issuance of such Units, shall be within the sole discretion of
the Partners.
(b) The Board of Directors, in its discretion, shall be
empowered to determine the form of any stock certificate that will evidence
Units of the Company.
VI.3 Withdrawal or Reduction of Partners' Contributions to Capital.
(a) A Partner shall not receive out of the Company's property
any part of his or her Capital Contributions until all liabilities of the
Company, except the liabilities to Partners on account of their Capital
Contributions, have been paid or there remains property of the Company
sufficient to pay such liabilities.
(b) No Partner shall have the right to withdraw all or any
part of his or her Capital Contribution, except as may be otherwise specifically
provided in these Partnership Regulations. Under circumstances involving a
return of any Capital Contributions, no Partner shall have the right to receive
property other than cash.
(c) No Partner shall have priority over any other Partner,
either as to the return of Capital Contributions or as to Profits, Losses or
distributions; provided that this subsection shall not apply to loans (as
distinguished from Capital Contributions) which a Partner has made to the
Company.
VI.4 Liability of Partners. No Partner shall be liable for the debts,
liabilities or obligations of the Company. No Partner shall be required to
contribute any funds to the capital of the Company, or to loan any funds to the
Company.
VI.5 Deficit Capital Accounts. No Partner will be required to pay to
the Company, to any other Partner, or to any third party any deficit balance
which may exist from time to time in the Partner's Capital Account.
ARTICLE VII
ALLOCATIONS, DISTRIBUTIONS, ELECTIONS AND REPORTS
VII.1 Allocations of Profits and Losses. The Profits and Losses of the
Company for each Fiscal Year shall be allocated among the Partners in accordance
with the rules applicable to S corporations for federal income tax purposes. Any
credit available for federal income tax purposes shall be allocated among the
Partners in the same manner.
VII.2 Distributions. All distributions of any nature whatsoever,
including, without limitation, partial returns of capital, profit distributions,
refinancing proceeds and liquidating distributions, shall be made solely to the
Partners, in proportion to their respective Units and without regard to their
Capital Account balances, so that, with respect to each such distribution, each
Partner or other holder of Units will receive an equal dollar amount of
distribution per Unit held as of the record date of such distribution. Anything
in the Partnership Agreement or these Partnership Regulations to the contrary
notwithstanding, each Unit shall confer upon the holder thereof identical rights
to distribution and liquidation proceeds from the Company. Distributions shall
be made if approved by the Board of Directors; provided, however, anything in
these Partnership Regulations to the contrary notwithstanding, the Partnership
shall make the Minimum Distributions, as hereinafter defined, to the Partners
each year in order to provide the funds for the Partners to pay the federal,
estate and local income taxes imposed on the income of the Partnership allocated
to the Partners.
(a) The "Minimum Distributions" for a year shall be such
distributions to Partners or other holders of Units so that each Partner or
other holder of Units will receive at least the amount of his or her Tax
Distribution Amount, as hereinafter defined, for such year.
(b) To carry out the obligation to distribute the Minimum
Distributions, Net Operating Cash Flow, as hereinafter defined, shall be
distributed to the Partners or other holders of Units in accordance with the
provisions of this Section 7.2 at least a reasonable period before the
respective Partners or other holders of Units are required to pay their
estimated and final federal, state and local income taxes on the income of the
Partnership allocated to the Partners or other holders of Units. The Board of
Directors, in its discretion, may authorize the distribution of additional
amounts of Net Operating Cash Flow to the Partners or other holders of Units.
Notwithstanding the foregoing, no distribution of the Net Operating Cash Flow of
the Partnership shall be made if and to the extent that, after the distribution
is made, the liabilities of the Partnership shall exceed the fair market value
of the assets of the Partnership.
(c) For purposes of making the Minimum Distributions, Net
Operating Cash Flow for each calendar year or other taxable period shall be
distributed among the Partners or other holders of Units so that each Partner or
other holder of Units receives an equal amount per Unit held until the Minimum
Distributions have been made; i.e., each Partner or other holder of Units has
received at least such party's Tax Distribution Amount.
(i) The "Tax Distribution Amount" of a Partner or
other holder of Units for a year shall be an amount equal to the greater of: (1)
the combined federal and state income tax on the amount of such party's Total
Taxable Income, as hereinafter defined, for such period, which combined federal
and state income tax shall be calculated using the highest combined tax rates
for individuals under federal and state law after taking into account any
deductibility of such taxes on any other tax return; or (2) the combined federal
alternative minimum tax (as imposed by Sections 55 through 59 of the Code or the
subsequent equivalent of such provisions) on the amount of such party's federal
alternative minimum taxable income and state income tax on the amount of state
taxable income or state alternative minimum taxable income, as applicable to
individuals, on the amount of such party's Total Taxable Income for such period,
which combined federal alternative minimum tax and state income tax shall be
calculated using the highest combined federal alternative minimum tax rate and
either state alternative minimum tax rates or state income tax rates, as
applicable to individuals, after taking into account any deductibility of such
taxes on any other tax return.
(ii) In the event Net Operating Cash Flow is
insufficient to distribute the Minimum Distributions for a year, such deficiency
shall be satisfied in the first subsequent calendar year that Net Operating Cash
Flow is available.
(iii) For purposes of this Agreement, "Total Taxable
Income" means the net amount of taxable income of the Partnership allocated to a
Partner or other holder of Units for such period, including without limitation
the allocation to such party of all items of income, gains, deductions and
losses required to be separately stated and allocated among the Partners or
other holders of Units for income tax purposes.
(iv) In the event that a self-employment tax or
similar tax is imposed on a Partner or other holder of Units based in whole or
in part on such party's allocable share of Partnership net income, such tax
shall be deemed to constitute an income tax and the tax rate applicable to such
self-employment or similar tax (taking into account the deductibility, if any,
of such self-employment or similar tax) shall be added to, and treated as such
constituent part of, the income tax rate (and, if applicable, the alternative
minimum tax rate) of the applicable tax jurisdiction.
(d) "Net Operating Cash Flow" shall be determined in the
discretion of the Board of Directors, but generally shall mean the gross cash
proceeds from Partnership operations less the portion thereof required to pay
Partnership expenses less any reserves established by the Board of Directors for
direct operating expenses, taxes, maintenance, insurance, capital expenditures,
repairs and other items deemed reasonable and necessary for the Partnership's
business operations. In addition, Net Operating Cash Flow shall include any net
cash proceeds received from the sale, financing or refinancing of Partnership
assets.
VII.3 Tax Withholdings. To the extent the Company is required by
federal, state or local law or any tax treaty to withhold or to make tax
payments on behalf of or with respect to any Partner, the Company shall withhold
such amounts and make such tax payments as so required. The amount of such
payments shall constitute an advance by the Company to such Partner and shall be
repaid to the Company by reducing the amount of the current or next succeeding
distribution or distributions which would otherwise have been made to such
Partner or, if such distributions are not sufficient for that purpose, by so
reducing the proceeds of liquidation otherwise payable to such Partner or, if
such proceeds are insufficient, such Partner shall pay to the Company the amount
of such insufficiency.
VII.4 Limitation Upon Distributions. The Company may not make a
distribution to its Partners to the extent that, immediately after giving effect
to the distribution, all liabilities of the Company, other than liabilities to
Partners with respect to their interests and liabilities for which the recourse
of creditors is limited to specified property of the Company, exceed the fair
value of the Company's assets, except that the fair value of the property that
is subject to the liability for which recourse of creditors is limited shall be
included in the Company assets only to the extent that the fair value of the
property exceeds that liability.
VII.5 Accounting Principles. The net income of the Company shall be
determined in accordance with accounting principles applied on a consistent
basis and adequate for the Company business as determined by the Board of
Directors.
VII.6 Records and Reports. At the expense of the Company, the Board of
Directors shall maintain records and accounts of all operations and expenditures
of the Company. At a minimum, the Company shall keep at its principal place of
business the following records:
(a) A current list that states:
(i) The name and mailing address of each Partner; and
(ii) The Units owned by each Partner;
(b) Copies of the federal, state and local information or
income tax returns for each of the Company's six most recent tax years;
(c) A copy of the Partnership Agreement and these Partnership
Regulations, all amendments or restatements, executed copies of any powers of
attorney, and copies of any document that creates, in the manner provided by the
Partnership Agreement or these Partnership Regulations, classes or groups of
Partners;
(d) Correct and complete books and records of account of the
Company; and
(e) Any other books, records or documents required by the Act
or other applicable law.
VII.7 Returns and Other Elections. The Board of Directors shall cause
the preparation and timely filing of all tax returns required to be filed by the
Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of such
returns, or pertinent information therefrom, shall be furnished to the Partners
within a reasonable time after the end of each Fiscal Year of the Company
considering any extensions of time for filing that may be obtained by or on
behalf of the Company. All elections permitted to be made by the Company under
federal or state laws shall be made by an officer of the Company authorized to
do so by the Board of Directors.
ARTICLE VIII
TRANSFERABILITY
VIII.1 Restrictions on Transfer of Interests in the Company.
(a) A Partner shall not attempt to transfer nor make or suffer
any Disposition of all or any part of his Units, except in accordance with this
Article VIII.
(b) Notwithstanding anything to the contrary contained herein,
unless all of the Partners shall consent in writing or unless such Disposition
constitutes a Permitted Disposition under Section 1.1(p)(i) or (ii) hereof, no
Partner shall make or suffer any Disposition of all or any portion of his or her
Units to any person other than a Permitted Transferee, as hereinafter defined. A
Partner shall be entitled to sell, transfer or assign all or any portion of his
or her Units to one or more Permitted Transferees without obtaining the consent
of any other Partner. For purposes of these Partnership Regulations, "Permitted
Transferee" means and includes (i) an individual who is already a Partner, or
(ii) an individual who is a child of a Partner.
(c) The Partners agree that the holding and disposition of
their respective Units shall be subject to and governed by all existing and
effective agreements in effect immediately prior to the Conversion, with such
agreements being applied to the Units with the same effect as such agreements
were applicable to the outstanding shares of capital stock of the Predecessor
Entity.
VIII.2 Assignees.
(a) The Company shall not recognize for any purpose any
purported sale, assignment or transfer of all or any portion of a Partner's
Units unless the assigning Partner complies with all of the provisions of
Article VIII, all costs of such assignment have been paid by the assigning
Partner and there is filed with the Company a written and dated notification of
such sale, assignment or transfer, in satisfactory form, executed and
acknowledged by both the seller, assignor or transferor and the purchaser,
assignee or transferee and such notification (i) contains the agreement by the
purchaser, assignee or transferee to be bound by all the terms and provisions of
these Partnership Regulations and (ii) represents that such sale, assignment or
transfer was made in accordance with all applicable securities laws, the
Partnership Agreement and these Partnership Regulations (including suitability
standards) and Section 8.1(b) hereof. Any sale, assignment or transfer shall be
recognized by the Company as effective on the date of receipt of such
notification by the Company.
(b) Unless an assignee becomes a Partner in accordance with
the provisions set forth below, such assignee shall not be entitled to any of
the rights granted to a Partner hereunder, other than the right to receive
allocations of income, gain, loss, deduction, credit and similar items and
distributions to which the assignor would otherwise be entitled.
(c) Any Partner who assigns all his or her interest in the
Company shall cease to be a Partner, except that, unless and until a substituted
Partner has been admitted into the Company, such assigning Partner shall retain
the statutory rights of an assignor of a Partner's interest under the Act.
(d) A person who is the assignee of all or any fraction of the
interest of a Partner, but does not become a substituted Partner, and desires to
make a further assignment of such interest, shall be subject to all the
provisions of this Article and Article IX to the same extent and in the same
manner as any Partner desiring to make an assignment of his or her interest.
VIII.3 Substituted and Additional Partners.
(a) With the written consent of all Partners, each Partner
shall have the right to substitute in his or her place a purchaser, assignee,
transferee, donee, heir, legatee or other recipient (a "Transferee") of all or
any portion of the Units held by such Partner, provided that such substitution,
and admittance to the Company as a substituted Partner, shall be effective at
such time as the Transferee satisfies the conditions set forth in Section 8.2(a)
hereof.
(b) Any person may, subject to the terms and conditions of the
Partnership Agreement and these Partnership Regulations, become an additional
Partner in the Company by the issuance by the Company of new Units in the
Company for such consideration and upon such terms as the Partners, by written
consent of all of the Partners, shall determine. In order to become an
additional Partner, a person shall be required to enter into a written agreement
with the Company in which such person (i) agrees to be bound by all the terms
and provisions of the Partnership Agreement and these Partnership Regulations,
and (ii) agrees to the capital contribution(s) to be made to the Company by such
person and such other terms and conditions as shall be determined by the
Company.
(c) No person shall become a substituted or additional Partner
until such person has satisfied the requirements of this Article VIII; provided,
however, that for the purpose of allocating Profits, Losses and distributions, a
person shall be treated as having become, and as appearing in the records of the
Company as, a Partner, as the case may be, on such date as the sale, assignment
or transfer of Units to such person was recognized by the Company pursuant to
Section 8.2.
VIII.4 Continuing Liability of Partners. No assignment or transfer of
an interest in the Company as provided herein, shall relieve the assigning or
transferring Partner from any personal liability for outstanding indebtedness,
liabilities, liens and obligations relating to the Company or the Company's
assets which may exist and for which such Partner has any liability on the date
of such assignment or transfer.
ARTICLE IX
DISSOLUTION AND TERMINATION
IX.1 Dissolution.
(a) The Company shall be dissolved upon the election to
dissolve the Company by a Majority in Interest of the Partners.
(b) Upon dissolution of the Company, the business and affairs
of the Company shall terminate, and the assets of the Company shall be
liquidated under this Article IX.
(c) Dissolution of the Company shall be effective as of the
day on which the event occurs giving rise to the dissolution, but the Company
shall not terminate until there has been a winding up of the Company's business
and affairs, and the assets of the Company have been distributed as provided in
Section 9.2.
(d) Upon dissolution of the Company, the Board of Directors
may cause any part or all of the assets of the Company to be sold in such manner
as the Board of Directors shall determine in an effort to obtain the best prices
for such assets; provided, however, that the Board of Directors may distribute
assets of the Company in kind to the Partners to the extent practicable.
(e) The Company shall not dissolve upon the death, insanity,
retirement, resignation, withdrawal, expulsion, bankruptcy, legal incapacity or
dissolution of any Partner, or the occurrence of any other event which
terminates the continued status of any Partner as a partner in the Partnership.
IX.2 Distribution of Assets Upon Dissolution. In settling accounts
after dissolution, the assets of the Company shall be paid in the following
order:
(a) First, to creditors, in the order of priority as provided
by law, except those to Partners of the Company on account of their Capital
Contributions; and
(b) Second, to the Partners in respect of their interests in
capital and accumulated earnings, by making distributions to the Partners or
their assignees in proportion to the issued and outstanding Units.
ARTICLE X
MEETINGS OF PARTNERS
X.1 Place and Manner of Meetings. All meetings of the Partners shall be
held at the principal office of the Company or at such other place within or
without the State of Texas as may be determined by a Majority in Interest of the
Partners and set forth in the respective notice or waivers of notice of such
meeting. Partners may participate in such meetings by means of conference
telephone and similar communications equipment by means of which all Persons
participating in the meeting can hear each other, and participation in a meeting
as provided herein shall constitute waiver of notice of the same and presence in
person at such meeting, except where a Person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
X.2 Special Meetings of Partners. Special meetings of the Partners may
be called by the holders of not less than twenty percent (20%) of all the
Partnership Interests. Business transacted at all special meetings shall be
confined to the purpose stated in the notice; provided however that the notice
of special meetings may state that the meeting may consider the transaction of
such other business as may properly come before the meeting.
X.3 Notice of Meetings of Partners. Written or printed notice stating
the place, day and hour of the meeting and, in the case of special meetings, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the discretion of the Person calling the
meeting, to each Partner of record entitled to vote at such meeting.
X.4 Quorum. A Majority in Interest of the Partners present at a
meeting, in person or by proxy, shall constitute a quorum at all meetings of the
Partners, except as otherwise provided by law or the Partnership Agreement. Once
a quorum is present at the meeting of the Partners, the subsequent withdrawal
from the meeting of any Partner prior to adjournment or the refusal of any
Partner to vote shall not affect the presence of a quorum at the meeting. If,
however, such quorum shall not be present at any meeting of the Partners, the
Partners entitled to vote at such meeting shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until the holders of the requisite amount of Partnership Interests
shall be present or represented. At any meeting of the Partners at which a
quorum is present, the vote of the holders of a Majority in Interest of all the
Partners present, in person or by proxy, shall be the act of the Partners,
unless the vote of a greater number is required by law, the Partnership
Agreement or these Partnership Regulations. Any vote may be taken viva voce or
by show of hands unless someone entitled to vote objects, in which case written
ballots shall be used.
X.5 Registered Partners. The Company shall be entitled to treat the
holder of record of any Partnership Interest as the holder of such Partnership
Interest for all purposes, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such Partnership Interest on the part
of any other Person, whether or not it shall have express or other notice of
such claim or interest, except as expressly provided by the Partnership
Agreement, these Partnership Regulations or the laws of Texas.
X.6 Proxies. A Partner may vote either in person or by proxy executed
in writing by the Partner. A telegram, telex, cablegram, or similar transmission
by the Partner, or a photographic, photostatic, facsimile, or similar
reproduction of a writing executed by the Partner shall be treated as having
been executed in writing for purposes of this Section.
X.7 Conduct of Meetings. All meetings of the Partners shall be presided
over by the chairman of the meeting, who shall be a Partner designated by a
Majority in Interest of the Partners. The chairman of any meeting of Partners
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem in order to him or her.
X.8 Fixing Record Dates for Matters Other than Consents to Actions. The
Partners may fix in advance a record date for the purpose of determining
Partners entitled to notice of or to vote at a meeting of the Partners (other
than determining Partners entitled to consent to action by Partners proposed to
be taken without a meeting of Partners), the record date to be not less than ten
(10) nor more than sixty (60) days prior to said meeting. In the absence of any
action by the Partners, the date upon which the notice of the meeting is mailed
shall be the record date.
X.9 Fixed Record Dates for Consents to Action. Unless a record date
shall have previously been fixed or determined pursuant to Section 5.9 hereof,
whenever action by Partners is proposed to be taken by consent in writing
without a meeting of Partners, if provided for by these Partnership Regulations,
the Partners may fix a record date for purposes of determining Partners entitled
to consent to that action, which record date shall not precede, and shall not be
more than ten (10) days after, the date upon which the resolution fixing the
record date as adopted by the Partners. If no record date has been fixed by the
Partners and the prior action by the Partners is not required by the Act, the
record date for determining Partners entitled to consent to action in writing
without a meeting shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Company by delivery to its registered office, its principal place of business,
or a Partner of the Company having custody of the books in which proceedings of
meetings of Partners are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to any Partner of the Company. If no record
date has been fixed by the Partners and prior action of the Partners is required
by statute, the record date for determining Partners entitled to consent to
action in writing without a meeting shall be at the close of business on the
date on which the Partners adopt a resolution taking such prior action.
X.10 Actions Without a Meeting. Any action required by the Act to be
taken at a meeting of the Partners, or any action which may be taken at a
meeting of the Partners, may be taken without a meeting, without prior notice,
and without a vote, if a consent or consents in writing, setting forth the
actions setting forth the action so taken, shall be signed by the holder or
holders of Partnership Interests having not less than the minimum percentage
share of Partnership Interests that would be necessary to take such action at a
meeting at which the holders of all of Partnership Interests entitled to vote on
the action were present and voted. Every written consent pursuant to this
Section shall be signed, dated, and delivered in the manner required by, and
shall become effective at the time and remain effective for the period specified
by, the Act. A telegram, telex, cablegram, or similar transmission by a Partner,
or a photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a Partner shall be regarded as signed by the Partner for purposes of
this Section. Prompt notice of the taking of any action by Partners without a
meeting by less than unanimous written consent shall be given to those Partners
who do not consent in writing to the action.
X.11 Nature of Partnership Interest. A Partnership Interest is personal
property. A Partner shall have no interest in specific property of the Company.
ARTICLE XI
MISCELLANEOUS PROVISIONS
XI.1 Notices. Any notice, demand or communication required or permitted
to be given by any provision of the Partnership Agreement or these Partnership
Regulations shall be deemed to have been sufficiently given or served for all
purposes if delivered personally to the party or to an officer of the party to
whom the same is directed or, if sent by registered or certified mail, postage
and charges prepaid, addressed to the Partner's and/or Company's address as it
appears in the Company's records, as appropriate. Except as otherwise provided
herein, any such notice shall be deemed to be given three business days after
the date on which the same was deposited in a regularly maintained receptacle
for the deposit of United States mail, addressed and sent as aforesaid.
XI.2 Waiver of Notice. Whenever, by statute, the Partnership Agreement
or these Partnership Regulations, notice is required to be given to any Partner,
a waiver thereof in writing signed by the Person or Persons entitled to such
notice, whether before or after the time stated in such notice, shall be
equivalent to the giving of such notice. Attendance of a Partner at a meeting
shall constitute a waiver of notice of such meeting, except where a Partner
attends the meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or convened.
XI.3 Application of Texas Law. The Partnership Agreement and these
Partnership Regulations and the application or interpretation hereof, shall be
governed exclusively by the laws of the State of Texas, and specifically the
Act, provided that the provisions of the Partnership Agreement and these
Partnership Regulations shall override the provisions of the Act to the extent
allowed by law.
XI.4 No Action for Partition. No Partner shall have any right to
maintain any action for partition with respect to the property of the Company.
XI.5 Headings and Sections. The headings in these Partnership
Regulations are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent of these
Partnership Regulations or any provision hereof. Unless the context requires
otherwise, all references in these Partnership Regulations to Sections or
Articles shall be deemed to mean and refer to Sections or Articles of these
Partnership Regulations.
XI.6 Amendment of Partnership Agreement and Partnership Regulations.
These Partnership Regulations amend the Partnership Agreement. In case of any
conflict between the provisions of the Partnership Agreement and the provisions
of these Partnership Regulations, the provisions of these Partnership
Regulations shall control. Except as otherwise expressly set forth in these
Partnership Regulations, the Partnership Agreement of the Company and these
Partnership Regulations may be amended, supplemented or restated only upon the
written approval of a majority of the Partners, or in the alternative, upon
written approval by a majority of the members of the Board of Directors.
Notwithstanding the foregoing, any amendment to the Partnership Agreement or
these Partnership Regulations which either (i) changes the allocation of Profits
and Losses to an allocation that is not in proportion to Unitholding
Percentages, or (ii) causes any Partner to be personally liable for the debts
and/or obligations of the Partnership shall require the written consent of each
affected Partner.
XI.7 Registered Limited Liability Partnership. The Partnership has
registered as a registered limited liability partnership pursuant to Section
3.08 of the Act. The officers and directors of the Partnership shall cause the
Partnership to make such filings, pay such filing fees and otherwise take any
other reasonable measures as necessary or appropriate to maintain and continue
the status of the Partnership as a registered limited liability partnership.
XI.8 Resignation. Any officer or agent of the Company may resign by
giving written notice to any remaining Partner. The resignation shall take
effect at the time specified therein. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
XI.9 Numbers and Gender. Where the context so indicates, the masculine
shall include feminine and neuter, and the neuter shall include the masculine
and feminine, the singular shall include the plural.
XI.10 Binding Effect. Except as herein otherwise provided to the
contrary, these Partnership Regulations shall be binding upon and inure to the
benefit of the Partners, their distributees, heirs, legal representatives,
executors, administrators, successors and permitted assigns.
XI.11 Counterparts. These Partnership Regulations may be executed in
multiple counterparts, each of which shall be deemed to be an original, but all
of such counterparts shall constitute the same Partnership Regulations.
These Partnership Regulations were duly adopted by written agreement of
the Partners to be effective from and after December 31, 1998.
_______________ ____________________
Victoria Smith Charlie A. Meador
Date Signed: Date Signed:
_______________ ____________________
Stephen Smith Charlie E. Meador
Date Signed: Date Signed:
_______________ ____________________
Deanna R. Smith Blake A. Meador
Date Signed: Date Signed:
<PAGE>
Attachment to Partnership Regulations
of Don's Building Supply LLP
SCHEDULE A
NAMES AND UNITS OWNED
OF THE PARTNERS
- - -------------------------------------- -------------------- ------------------
Name Units Owned
- - -------------------------------------- -------------------- ------------------
Deanna R. Smith 2
- - -------------------------------------- -------------------- ------------------
Stephen and Victoria Smith 48
- - -------------------------------------- -------------------- ------------------
Charlie E. Meador 2
- - -------------------------------------- -------------------- ------------------
Blake A. Meador 2
- - -------------------------------------- -------------------- ------------------
Charlie A. Meador 66
- - -------------------------------------- -------------------- ------------------
TOTAL 120
- - -------------------------------------- -------------------- ------------------
- - -------------------------------------- -------------------- ------------------
EMPLOYMENT AGREEMENT
This employment agreement (this "Agreement") is made and entered into
on this the __ day of October, 1997 by and between JTM Industries, Inc.
("Employer"), a Texas corporation with its principal place of business located
at 1000 Cobb Place Blvd., Bldg. 400, Kennesaw, Georgia 30144 and Clinton W.
Pike, Sr. ("Employee"), an individual who resides at 725 Towne Green Boulevard,
#1417, Kennesaw, Georgia 30144.
WHEREAS, Employer desires to employ Employee and Employee desires to be
employed by Employer on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
herein.
1. EMPLOYMENT
Employer employs Employee and Employee accepts employment from Employer
pursuant to the terms and conditions of this Agreement.
2. DUTIES.
a. Subject to a change in title or responsibility at the discretion of
Employer, that in no way materially decreases Employee's responsibilities,
Employee is engaged by Employer as Executive Vice President in charge of
Employer's currently existing: operations and sales west of the Mississippi
River; non-traditional sales; and (iii) research and development. Employee shall
perform such duties as are from time to time reasonably assigned to Employee by
Employer consistent with Employee's position.
b. Employee shall devote Employee's entire business time, attention and
energies to the Employer's business and shall not at any time during the term of
this Agreement be engaged in any other business activity which interferes or
competes with Employer's business.
3. TERM, EXTENSION, TERMINATION.
a. Except as hereinafter provided, the term of this Agreement shall
commence on the date first above written and shall terminate on the fifth (5th)
anniversary thereafter.
b. The term of this Agreement shall be automatically extended for one
year periods beginning on the fifth anniversary date of this Agreement and
ending one year therefrom unless either party notifies the other of its desire
to not renew the term of this Agreement by giving written notice of such desire
to the other party in writing at any time within sixty (60) days prior to the
expiration of the then current term.
c. Either party may terminate this Agreement without cause upon thirty
(30) days notice to other party. Provided however, that Employer's termination
of this Agreement, other than as set forth below, shall not terminate Employer's
obligation to make when due all compensation payments set forth in Paragraphs 4
through 6 of this Agreement for the balance of the original term for so long as
Employee does not compete with the business of the Employer.
d. Employer shall have the right to terminate this Agreement for cause
at any time. If Employer terminates this Agreement for cause there shall be no
obligation on the part of Employer to give prior notice to termination. For
purposes of this Agreement, cause shall include:
i. willful and/or unjustified or unexcused violations of
express Employer policies, guidelines, rules or regulations, as set forth
in Employer's Human Resources manual(s) as may be amended from time to
time;
ii. theft, misappropriation or embezzlement of property and/or
funds of Employer and/or its subsidiaries as determined by an independent
third party;
iii. material breach of fiduciary duty owed to Employer for
Employee's material personal benefit;
iv. conviction of any felony;
v. habitual intoxication or drug addiction at work or which
affects work performance, provided, however, that habitual intoxication
and/or drug addiction shall not constitute cause if Employee receives
appropriate, in Employer's discretion, and successful treatment for either
condition.
e. Upon termination for cause, in accordance with this Agreement, and
after the date of such termination, Employer shall have no further obligations
or liability hereunder, or otherwise, to pay or provide salary, incentive
compensation, and employee benefits.
f. If the Employee's employment with Employer is terminated by Employee
voluntarily, after the date of such termination Employer shall have no further
obligation or liability to pay or provide salary, incentive, compensation, and
other employee benefits, except as may be otherwise provided in Section 7,
hereof. Provided however, that in such event, Employee shall abide by the terms
of the Covenant Not To Compete set forth in Section 9, hereof, for so long as
Employer continues to pay Employee the salary and insurance benefits paid, or
provided to him, as of the date of the termination of this Agreement.
g. If Employee is unable to perform his job for a period of six (6)
consecutive months because of physical or mental disability, Employee's rights
under this Agreement shall then terminate, and Employer shall have no further
obligation or liability to pay or provide salary and employee benefits, except
that Employee shall be entitled to such benefits as he may have as a participant
in Employer's disability benefit plan, and except as may be otherwise provided
in Section 7, hereof.
h. In the event that Employee's employment by Employer is terminated
because of Employee's death, after the date of death, Employer shall have no
further obligation or liability to Employee or Employee's heirs for salary,
incentive, compensation or benefits, except as may be otherwise provided in
Section 7, hereof.
4. COMPENSATION.
a. For the services to be rendered by Employee, and for Employee's
covenant not to compete with Employer, as set forth herein, Employer shall pay
Employee and Employee shall accept as full compensation for such services and
agreement the compensation set forth herein.
b. A base salary of $160,000.00 per year, payable in equal installments
on the regular corporate payroll dates of Employer, subject to normal
withholding and other applicable taxes and deductions. On each anniversary date
of this Agreement, or such other time as the parties may agree, Employee shall
receive a merit increase in accordance with existing written Employer policies
and guidelines.
c. An annual performance bonus up to 30% of Employee's current base
salary consistent with Employer's policies. The performance bonus shall be paid
in a lump sum within sixty (60) days of the end of the Employer's fiscal year or
such other time as the parties may agree. The performance bonus will be based on
objective performance (based on EBIT, defined as earnings before interest and
taxes, within Employee's area of responsibility) and personal performance goals
set annually by the Employer prior to each fiscal year. In the event Employer
fails to set new performance goals prior to the sixtieth (60th) day following
the start of a new fiscal year, then the previous fiscal year's performance
goals shall control.
d. Employee shall be entitled to an additional bonus if actual EBIT
within Employee's area of responsibility ("actual EBIT") exceeds budgeted EBIT
within Employee's area of responsibility ("budgeted EBIT"), as set forth below:
i. If actual EBIT exceeds budgeted EBIT by 30% or more in any
fiscal year, then Employee shall receive a bonus equal to 50% of base
salary;
ii. If actual EBIT exceeds budgeted EBIT by 50% or more in any
fiscal year, then Employee shall receive a bonus equal to 100% of base
salary; and
iii. If actual EBIT exceeds budgeted EBIT by 75% or more in
any fiscal year, then Employee shall receive a bonus equal to 200% of base
salary.
e. Employer shall pay Employee a signing bonus of $250,000.00 payable
as follows:
i. $100,000.00 within thirty (30) days of Employee's execution
of this Agreement;
ii. $100,000.00 on January 2, 1998; and
iii. $50,000.00 on January 2, 1999.
iv. If Employee voluntarily terminates his employment with
Employer or is terminated for cause within one (1) year from the date of
this Agreement, Employee shall repay to Employer the signing bonus paid by
Employer.
5. ADDITIONAL BENEFITS.
Employee shall be entitled to such other and further benefits as are
made available to additional full-time employees of Employer in similar
positions as Employee, subject to qualification periods, including, but not
limited to:
i. An automobile, automobile maintenance, medical and dental
insurance, 401(k) or other retirement plan, life insurance, and company
related expense reimbursement. All such benefits shall be in accordance
with the applicable standards or policies in place for officers of
Employer as of September 1, 1997;
ii. Four (4) weeks annual paid vacation;
iii. Twelve (12) days illness/disability leave in any
continuous twelve (12) month period;
iv. Payment by the Employer on behalf of the Employee of
membership dues in such professional, civic or social organizations as the
Employer and Employee may agree; and,
v. Payment by the Employee of all costs incidental to the
annual physical examination of Employee at a facility of Employee's choice.
6. NEW BUSINESS PROCUREMENT.
In the event Employer enters into a contract with an entity after
execution of this Agreement and the contract is a result of the efforts of
Employee, then Employee shall be entitled to a bonus of one-half of one percent
(.5%) of the value of the contract. For the purpose of this Agreement only, the
value of the contract shall be determined as follows: The Employer shall
determine the amount of the Employer's investment in the project within thirty
(30) days of the contract execution and that amount shall be deemed the value of
the contract. A bonus earned under this section shall be due and payable sixty
(60) days after the date the contract is signed by Employer.
7. PHANTOM STOCK.
a. Subject to the conditions and requirements set forth in this
Agreement, Employer hereby grants to Employee a "phantom stock" right relating
to one (1) share of common stock of the Employer which represents one percent
(1%) of the outstanding shares of common stock of Employer as of the date of
this Agreement, subject to adjustment as provided in (e), below. The Employee
shall become vested in fifty percent (50%) of the phantom stock right on the
date that is forty five (45) days after the execution of this Agreement, and
shall become vested in the remaining fifty percent (50%) of the phantom stock
right on the first anniversary of the execution of this Agreement, provided that
Employee remains employed by Employer on each such date. The parties agree and
acknowledge that the grant of the phantom stock right hereunder shall not confer
upon the Employee the right to receive any actual equity of any kind in the
Employer, and the Employee shall not be entitled to any privileges of ownership
of a stockholder of the Employer in connection with the phantom stock right.
Rather, such phantom stock right shall only represent the right of the Employee
to receive a payment should either of the following events occur:
i. the sale of all of the outstanding stock of the Employer,
or its parent company, to a third party or entity not owning
such stock as of the date of this Agreement. In such event,
the Employee shall receive, within thirty (30) days of such
sale, a lump sum cash payment equal to the fair market value
(as determined in accordance with (f), below) of the shares of
common stock to which this phantom stock right then relates,
to the extent vested, determined as of the date of the sale;
or
ii. the completion of a public offering of the stock of the
Employer, or its parent company. In such event, the Employee
shall receive, within thirty (30 days of the completion of the
public offering, a lump sum payment in cash or common stock of
the Employer, as determined by the Employer, equal to the fair
market value (as determined in accordance with (f), below) of
the shares of common stock to which this phantom stock right
then relates, to the extent vested, determined, as of the date
of the public offering.
b. If the Employee voluntarily terminates his employment with Employer,
dies or becomes disabled (as set forth in paragraph 3. g.), his phantom stock
right, to the extent vested, shall be valued as of the date that his employment
is terminated, he dies or he becomes disabled. In any event, no lump sum
distribution shall be made until the occurrence of the earlier of the events
described in paragraph 7. a. i. or ii.
c. The phantom stock right shall be immediately forfeited in the event
that the Employee's employment with Employer is terminated for cause, as set
forth in this Agreement, or if, following any termination of employment, the
Employee violates any of the restrictive covenants contained in this Agreement.
d. The Employee shall not have the power to sell, transfer, pledge,
hypothecate, assign, mortgage, anticipate or otherwise encumber the phantom
stock right.
e. In the event of any reclassification, recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or reverse stock
split, or any other similar change in corporate structure which, in the
judgement of the Board of directors of the Employer (the "Board") affects the
value of the shares of common stock of the Employer, the Board shall make
equitable adjustments to the number and class of shares that relate to this
phantom stock right. However, Employee acknowledges that his interest may be
diluted through future issuances of shares of stock of the Employer.
f. For purposes of this Section 7, fair market value of a share of
common stock of the Employer shall be determined by the Board acting in good
faith in its sole discretion; provided, however, that in the case of Section
7(a)(ii) where the public offering relates to the common stock of the Employer,
the fair market value thereof shall be based on the public offering price.
8. RELOCATION ALLOTMENT.
In the event Employer relocates Employee's work location from Marietta,
Georgia to a location more than fifty (50) miles from Marietta, Georgia, then in
such event Employer shall pay Employee $100,000.00 no later than thirty (30)
days prior to the move, and upon such payment Employer shall have no further
obligation to Employee for relocation expenses.
9. COVENANT NOT TO COMPETE.
a. Employee agrees that during the term of this Agreement and for a
period of one (1) year after the termination of this Agreement, he will not,
either individually or in partnership or in conjunction with any person or
persons, firm, association, syndicate, company, joint venture, corporation or
other entity (of any kind whatsoever), and whether as principal, agent,
shareholder, officer, employee, investor, or in any manner whatsoever, directly
or indirectly carry on or be engaged in or be concerned with or interested in,
or advise, lend money to, guarantee the debts or obligations of, or permit his
name to be used or employed by any person or persons (including, without
limitation, any corporation or other business enterprise) which at any time is
or becomes engaged in or concerned with or interested in any business which is
in any manner competitive with the business of Employer (the "Business") within
North America.
b. Without limiting the foregoing, Employee further agrees that
Employee shall not directly or indirectly, for himself or any other individual
or business entity:
i. solicit Business for or from any person, company, or other
entity which was a customer of Employer or which is now or hereafter
becomes or could become a customer of the Employer or to which the
Employer has submitted a bid, proposal or other offer to do business
during the term of this Agreement and for the twelve (12) months period
immediately preceding the effective date of this Agreement; or
ii. use or release to any third party any trade secrets or
other confidential information such as: customer lists, customer
information, employee lists, employee information, intellectual property,
and/or sensitive operational information that he was or may have been
privileged to during his tenure with Employer, or its predecessors; or
iii. induce or attempt to persuade any person now or hereafter
employed by the Employer or any successor, affiliate or subsidiary thereof
to terminate his employment relationship; or
iv. advise any person or business entity not to do business
with the Employer or any of their respective successors, affiliates, or
subsidiaries; or
v. make any disparaging, defamatory or negative comments,
either orally or in writing, regarding or otherwise about the Employer, its
officers, agents, employees or business operations.
10. INTELLECTUAL PROPERTY.
Any intellectual property rights (i.e. patents, copyrights, trademarks,
etc.), of whatsoever nature related in any manner to the business of Employer,
arising during the term of this Agreement or which result from the efforts of
Employer and/or Employee during the term of this Agreement shall be the sole
property of Employer.
11. MISCELLANEOUS
a. This Agreement may not be modified, changed, amended, or altered
except in writing, signed by the Employee and Employer.
b. All notice given or required to be given shall be in writing, sent
by United States first-class certified or registered mail, postage prepaid, to
Employee (or to Employee's spouse or estate upon Employee's death) at Employee's
last known address, and to Employer at its principal offices. All such notices
shall be effective when deposited in the mail in the manner specified in this
paragraph. Either party by a notice in writing may change or designate the place
for receipt of all such notices.
c. No course of conduct between Employer and Employee and no delay or
omission of Employer or Employee to exercise any right or power given under this
Agreement shall: (i) impair the subsequent exercise of any right or power, or
(ii) be construed to be a waiver of any default or any acquiescence in or
consent to the curing of a default while any other default shall continue to
exist, or be construed to be a waiver of such continuing default or of any other
right or power that shall theretofore have arisen; and, every power and remedy
granted by law and by this Agreement to any party hereto may be exercised from
time to time, and as often as may be deemed expedient. All such rights and
powers shall be cumulative to the fullest extent permitted by law.
d. This Agreement shall be governed in all respects and be interpreted
by and under the laws of the State of Georgia.
e. Any waiver by any party of any provision or condition of this
Agreement shall not be construed or deemed to be a waiver of any other provision
or condition of this Agreement, nor a waiver of a subsequent breach of the same
provision or condition, unless such waiver be expressed in writing by the party
to be bound.
f. Any notice to be given under this Agreement shall be in writing and
addressed or delivered to the following:
For Employee: For Employer:
725 Towne Green Boulevard, #1417 JTM Industries, Inc.
Kennesaw, Georgia 30144 1000 Cobb Place Blvd., Bldg. 400
Kennesaw, GA 30144
Attn: President
g. This Agreement constitutes the entire Agreement between Employee and
Employer. All previous negotiations and representations not specifically
incorporated herein are superseded and are rendered null and void upon execution
of this Agreement. No modification of this Agreement shall be binding on
Employee or Employer unless in writing and signed by all parties.
h. Employee agrees that this Agreement is reasonable, that valid
consideration has been received therefor and that each party affected by this
Agreement has been responsible for drafting the same. Employee undertakes not to
contest any action taken by Employer to enforce the same and this clause may be
pleaded in complete estoppel of any defense; provided, however, that it is
agreed between Employee and Employer that notwithstanding the foregoing, in the
event that any court of competent jurisdiction should determine that any portion
of the Covenant Not To Compete contained herein should require modification as
being unreasonable, said Covenant Not To Compete shall be amended in accordance
with the decision of such court of competent jurisdiction. It is acknowledged
and agreed by Employee that the compensation and benefits (the "compensation")
paid by Employer pursuant to this Agreement was based in part upon the entering
into by Employee of the Covenant Not To Compete under the scope set out herein,
and that should a court of competent jurisdiction reduce the scope of the
Covenant Not To Compete contained herein as being unreasonable, it shall be open
to such court to reduce the consideration paid and payable by Employer pursuant
to this Agreement accordingly, and in such case the Employee shall forthwith pay
to Employer the amount by which such consideration is reduced.
i. In the event that Employee violates any of the provisions of this
Agreement, Employer shall be entitled to maintain an action against Employee for
damages, and since an action for damages could not adequately compensate
Employer for any such violation, in addition to Employer's remedy at law,
Employer shall also be entitled to injunctive relief.
j. If any section, subsection, sentence or clause of this Agreement
shall be adjudged illegal, invalid or unenforceable such illegality, invalidity,
or unenforceability shall not affect the legality, validity or enforceability of
the Agreement as a whole or of any section, subsection, sentence or clause
hereof not so adjudged.
IN WITNESS WHEREOF, intending to be legally bound hereby the parties
hereto have duly executed this Agreement as of the day and year above written.
JTM INDUSTRIES, INC. CLINTON W. PIKE, SR.
_____________________ _________________________
By:_____________
Its:____________
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment To Employment Agreement (this "Agreement") is made and
entered into on this the 14th day of October, 1998 by and between ISG Resources,
Inc., f/k/a JTM Industries, Inc. ("Employer"), a Texas corporation with its
principal place of business located at 136 East South Temple, Suite 1300, Salt
Lake City, Utah 84111 and Clinton W. Pike, Sr. ("Employee"), an individual who
resides at 10777 Richmond Avenue, Apartment 708, Houston, Texas 77042.
WHEREAS, Employer and Employee entered into an Employment Agreement in
October, 1997 (the "Employment Agreement");
WHEREAS Employer and Employee desire to amend the Employment Agreement
as set forth herein, and to agree to certain other employment related issues.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
herein.
1. The parties agree that the date of the Employment Agreement is October 23,
1997.
2. The parties agree that the Employment Agreement is hereby amended as follows:
a. Paragraph 2.a. of the Employment Agreement is amended to provide
that:
"a. Subject to a change in title or responsibility at the
discretion of Employer, that in no way materially decreases
Employee's responsibilities, Employee is engaged by Employer
as Executive Vice President. Employee shall perform such
duties as are from time to time reasonably assigned to
Employee by Employer consistent with Employee's position."
b. Paragraphs 4.c., 4.d. and 4.e., and all subparagraphs therein, of
the Employment Agreement are amended by deleting them in their entirety and
inserting the following in their place:
"c. For the four month period ending December 31, 1998,
Employee shall be paid a bonus of $15,000.00 which will be
paid to Employee on January 2, 1999.
d. For the 1999 fiscal year period, Employee shall be eligible
for a performance bonus based on overall Employer performance
and the performance of the Manufactured Goods Division, as set
forth below:
(1) If the Employer's actual corporate EBITDA
(earnings before interest, taxes, depreciation and
amortization) equals or exceeds ninety percent (90%)
of its budgeted EBITDA, but is less than one hundred
percent (100%) of its budgeted EBITDA, then Employee
shall receive a bonus as follows:
Actual Payout %
EBITDA
90% 32% of 15% of his current salary
91% 36% of 15% of his current salary
92% 41% of 15% of his current salary
93% 46% of 15% of his current salary
94% 52% of 15% of his current salary
95% 58% of 15% of his current salary
96% 65% of 15% of his current salary
97% 73% of 15% of his current salary
98% 81% of 15% of his current salary
99% 90% of 15% of his current salary
(2) If the Employer's actual corporate EBITDA equals
or exceeds its budgeted EBITDA, then Employee shall
receive a bonus as follows:
(a) If actual corporate EBITDA equals or
exceeds budgeted EBITDA, then Employee shall
receive a bonus in the amount of 15% of his
then current base salary;
(b) If actual corporate EBITDA equals or
exceeds budgeted EBITDA by 30%, but less
than 50%, then Employee shall receive a
bonus equal to 25% of his then current base
salary;
(c) If actual corporate EBITDA equals or
exceeds budgeted EBITDA by 50% but less than
75%, then Employee shall receive a bonus
equal to 50% of his then current base
salary; or
(d) If actual corporate EBITDA equals or
exceeds budgeted EBITDA by 75% or more, then
Employee shall receive a bonus equal to 100%
of his then current base salary.
(3) If the actual EBITDA of the Manufactured Goods
Division equals or exceeds ninety percent (90%) of
its budgeted EBITDA, but is less than one hundred
percent (100%) of its budgeted EBITDA, then Employee
shall receive a bonus as follows:
Actual EBITDA Payout %
90% 32% of 15% of his current salary
91% 36% of 15% of his current salary
92% 41% of 15% of his current salary
93% 46% of 15% of his current salary
94% 52% of 15% of his current salary
95% 58% of 15% of his current salary
96% 65% of 15% of his current salary
97% 73% of 15% of his current salary
98% 81% of 15% of his current salary
99% 90% of 15% of his current salary
(4) If the actual EBITDA of the Manufactured Goods
Division equals or exceeds its budgeted EBITDA, then
Employee shall receive a bonus as follows:
(a) If actual EBITDA of the Manufactured
Goods Division equals or exceeds budgeted
EBITDA, then Employee shall receive a bonus
in the amount of 15% of his then current his
then current base salary;
(b) If actual EBITDA of the Manufactured
Goods Division equals or exceeds budgeted
EBITDA by 30%, but less than 50%, then
Employee shall receive a bonus equal to 25%
of his then current base salary;
(c) If actual EBITDA of the Manufactured
Goods Division equals or exceeds budgeted
EBITDA by 50% but less than 75%, then
Employee shall receive a bonus equal to 50%
of his then current base salary; or
(d) If actual EBITDA of the Manufactured
Goods Division equals or exceeds budgeted
EBITDA by 75% or more, then Employee shall
receive a bonus equal to 100% of his then
current base salary."
3. For the consideration set forth herein, Paragraph 6 of the Employment
Agreement is amended by deleting it in its entirety.
4. Employee's bonus for the period ending August 31, 1998 will be equal to 44%
of his existing base salary of $160,000.00.
5. The parties agree that effective October 14, 1998, pursuant to Section 4.b.
of the Employment Agreement, Employee's base annual salary shall be increased to
$166,000.00.
6. Pursuant to the provisions of section 4.e.iii. of the Employment Agreement
(as it existed prior to this Agreement), Employee shall be paid the sum of
$50,000.00 on January 2, 1999.
7. Pursuant to the provisions of section 6 of the Employment Agreement (as it
existed prior to this Agreement), Employee shall be paid the sum of $10,000.00
for his efforts in securing the award of the MidAmerica contract.
8. Employee shall be paid the relocation allotment of $100,000.00 pursuant to
Section 8 of the Employment Agreement. Employee, who has relocated to Houston,
Texas, has the option of remaining in Houston, Texas, or of relocating to Salt
Lake City, Utah. If Employee chooses to relocate to Salt Lake City, Utah, he
shall bear all expenses related to the relocation, and shall be entitled to no
further compensation from Employer.
9. The remaining provisions of the Employment Agreement shall remain in full
force and effect. Reference is craved to the Employment Agreement for specific
terms and conditions thereof which are incorporated herein by reference, except
as amended by this Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby the parties
hereto have duly executed this Agreement as of the day and year above written.
ISG RESOURCES, INC. CLINTON W. PIKE, SR.
____________________ ____________________
By:_______________
Its:______________
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment To Employment Agreement (this "Agreement") is
made and entered into on this the ___ day of August, 1999 by and between ISG
Resources, Inc. ("Employer"), a Utah corporation with its principal place of
business located at 136 East South Temple, Suite 1300, Salt Lake City, Utah
84111 and Clinton W. Pike, Sr. ("Employee"), an individual who resides at 10777
Richmond Avenue, Apartment 708, Houston, Texas 77042.
WHEREAS, Employer and Employee entered into an Employment Agreement in
October, 1997 (the "Employment Agreement") and an Amendment To Employment
Agreement on October 14, 1998 (the "First Amendment");
WHEREAS Employer and Employee desire to amend the Employment Agreement
again as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
herein.
1. The parties agree that the Employment Agreement is hereby amended as follows:
a. Section 7 of the Employment Agreement is amended by adding the
following section:
"g. If the Employee dies, his phantom stock right, to the
extent vested and subject to the other provisions of the Employment
Agreement (as amended by the First Amendment) and any other applicable
laws, shall pass to his wife, Sandi S. Pike.
2. The remaining provisions of the Employment Agreement, as amended by the First
Amendment, shall remain in full force and effect. Reference is craved to the
Employment Agreement and the First Amendment for specific terms and conditions
thereof which are incorporated herein by reference, except as amended by this
Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby the parties
hereto have duly executed this Agreement as of the day and year above written.
ISG RESOURCES, INC. CLINTON W. PIKE, SR.
___________________ _____________________
By:________________
Its________________
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"),
by and between JTM Industries, Inc. (the "Company") and R. Stephen Creamer (the
"Executive").
WHEREAS, simultaneous with and effective upon the acquisition of the
company by Industrial Quality Services, Inc., a Delaware corporation from
Laidlaw, Inc., the Company desires to employ the Executive as Chief Executive
Officer of the Company; and
WHEREAS, the Executive desire to be retained in such capacity on the
terms and conditions set forth herein, effective upon the consummation of such
acquisition (the "Commencement Date"), it being understood and acknowledged that
if the consummation of the acquisition shall not occur, this Agreement shall
have no force or effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. No Conflict. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
and shall not conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) default under any contract,
agreement or understanding, whether oral or written, to which the Executive is a
party or of which the Executive is or should be aware.
2. Employment; Duties. The Company shall employ the Executive as Chief
Executive Officer for the "Employment Period" as defined in Section 3. In
addition, the Company shall use its best efforts to cause the Executive to be
elected Chairman of the Board of Directors of the Company (the "Board") during
the Employment Term. The Executive, in his capacity as Chief Executive Officer,
shall have such duties, responsibilities and authority normally incident to such
office. The precise duties, responsibilities and authority of the Executive may
be expanded, limited or modified, at any time and from time to time, at the
discretion of the Board. During the Employment Period, the Executive shall
devote all necessary working time, attention, knowledge and experience and give
his diligent effort, skill and abilities, to promote the business and interests
of the Company. Subject to Section 8, the Executive may serve as an officer or
director of make investments in, or otherwise participate in, other entities,
provided that such service is disclosed in advance to the Board.
3. Employment Period. This Agreement shall have a term of three years,
commencing as of the Commencement Date and ending on the third anniversary of
the Commencement Date (the "Initial Period"), unless sooner terminated in
accordance with the provisions of Section 9. On the expiration of the Initial
Period and on each yearly anniversary thereof, this Agreement shall
automatically renew for an additional one-year period, unless sooner terminated
in accordance with the provisions of Section 9, unless the Company or the
Executive notifies the other in writing of its intention not to renew this
Agreement not less than sixty (60) days prior to such expiration date or
anniversary, as the case may be. The term of this Agreement, as in effect from
time to time, is referred to herein as the "Employment Period."
4. Compensation and Benefits.
a. Base Compensation. The Executive shall be paid an aggregate base
salary (the "Base Salary") at the rate of $150,000 per annum, less statutory
deductions and withholdings. The Base Salary shall be payable in a manner
consistent with the normal payroll practices of the Company as in effect from
time to time. The Base Salary shall be reviewed annually by the Compensation
Committee of the Board (the "Committee").
b. Annual Bonus. In addition to the Base Salary, the Executive may be
entitled to receive a discretionary annual bonus for each year during the
Employment Period based upon such factors as shall be established by the
Committee, at the sole discretion of the Committee.
c. Employee Benefits. The Executive shall be entitled to participate in
each and every employee benefit and group insurance plan and program provided by
the Company for its officers and employees generally, in accordance with the
terms of the applicable plan documents as they may be amended form time to time,
substantially consistent with the employee benefits being provided to the
officers and/or employees of the Company as of the date immediately preceding
the effectiveness of this Employment Agreement.
d. Business Expense Reimbursement. The Company shall reimburse the
Executive for all reasonable and necessary business and travel expenses that the
Executive incurs in connection with the Executive's performance of services for
the Company hereunder, in accordance with the reimbursement policies established
by the Company from time to time (which, the parties hereto acknowledge, shall
be consistent with the policies of the Company as they relate to business
expense reimbursement as of thee date immediately preceding the effectiveness of
this Employment Agreement), and shall reimburse the Executive for the reasonable
expenses associated with the maintenance of an office in Utah, provided that
such reimbursement shall be limited to $3,000 per month.
5. Confidentiality. The Executive recognizes that it is in the
legitimate business interest of the Company to restrict his disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries, parents or affiliates for any purpose other
than in connection with his performance of his duties to the Company, and to
limit any potential appropriation of such Trade Secrets and Confidential
Information by the Executive. The Executive therefore agrees that both during
and at all times after the Employment Period, shall be maintained as
confidential all Trade Secrets and Confidential Information relating to the
Company and its direct or indirect subsidiaries, parents or affiliates
heretofore or in the future obtained by the Executive. The terms "Trade Secrets"
and/or "Confidential Information" means matters of a confidential technical or
business nature that have been maintained as confidential or the disclosure of
which could likely have an adverse effect upon the interests of the Company or
its direct or indirect subsidiaries, parents or affiliates.
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other Confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, parents or affiliates, and (b) all documents, materials and other
property (including, without limitation, computer files) belonging to the
Company or its direct or indirect subsidiaries, parents or affiliates, which in
either case are in the possession or under the control of the Executive (or his
heirs or personal representatives).
7. Discoveries and Works. All Discoveries and Works made or conceived
by the Executive during his employment by the Company, whether during the
Employment Period or at any time prior thereto, whether or not on the property
or premises of the Company, jointly or with others, which relate to the
activities of the Executive with the company or its direct or indirect
subsidiaries, parents or affiliates shall be owned by the Company or its direct
or indirect subsidiaries, parents or affiliates. The term "Discoveries and
Works" includes, by way of example but without limitation, Trade Secrets and
other Confidential information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications. The Executive shall (a) promptly notify, make
full disclosure to, and execute and deliver any documents requested by, the
Company, as the case may be, to evidence or better assure title to Discoveries
and Works in the Company or its direct or indirect subsidiaries, parents or
affiliates, as so requested, (b) renounce any and all claims, including but not
limited to claims of ownership and royalty, with respect to all Discoveries and
Works and all other property owned or licensed by the Company or its direct or
indirect subsidiaries, parents or affiliates, (c) assist the Company or its
direct or indirect subsidiaries, parents or affiliates in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all
Discoveries and Works, and (d) promptly execute, whether during his employment
with the Company or thereafter, all applications or other endorsements necessary
or appropriate to maintain patents and other rights for the Company or its
direct or indirect subsidiaries, parents or affiliates and to protect the title
of the Company or its direct or indirect subsidiaries, parents or affiliates
thereto, including but not limited to assignments of such patents and other
rights. The Executive acknowledges that all Discoveries and Works shall be
deemed "works made for hire" under the Copyright Act of 1976, as amended, 17
U.S.C. ss. 101.
8. Noncompetition and Nonsolicitation.
a. Restrictive Covenant. The Executive agrees that he shall, during the
Restricted Period (as defined below), refrain from, either alone or in
conjunction with any other Person, or directly or indirectly through his present
or future affiliates or Associates (as defined below):
(i) (except pursuant to his duties performed for the Company
during the Employment Period) directly or indirectly, owning, managing,
operating, joining, or having a financial interest, in controlling or
participating in the ownership, management, operation or control of, or
being employed as an employee, agent or the Executive, or in any other
individual or representative capacity whatsoever, or using or permitting
his name to be used in connection with, or lending assistance (financial or
otherwise) to or being otherwise connected in any manner with any business
or enterprise engaged in the Restricted Business (as defined below) within
any portion of the United States whether or not such business is physically
located within the United States); _provided_,_however_, that nothing
contained herein shall be construed as preventing the Executive from
engaging in the ownership, purchase and/or sale of landfills; and
(ii) soliciting, inducing, or attempting to influence any
individual who the Executive, after due inquiry, knows is an employee of
the Company or any of its subsidiaries, parents or affiliates to terminate
his or her employment relationship with the Company or such subsidiary or
affiliates, or to become employed by the Executive or any affiliate or
associate of the Executive or any person by which the Executive is
employed, or interfering in any other way the employment, or other
relationship, of the Company or such subsidiary, parent or affiliate and
any employee thereof; provided, however, that this clause (ii) shall not
apply as it may relate to Jean I. Everest.
b. Definitions. As used herein:
(i) "Associate" means with respect to any person, any
corporation or other business organization of which such person is an
officer, employee or partner or is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of any class of equity securities,
any trust or estate in which such person has a substantial beneficial
interest or as to which such person serves as a trustee or in a similar
capacity and any relative or spouse of such person, or any relative of such
spouse;
(ii) "Cause" shall mean (i) the willful and continued failure
of the Executive to follow the lawful directions of the Board, (ii) any act
of fraud or dishonesty, misappropriation or embezzlement, or willful
misconduct in connection with the performance of the Executive's duties
hereunder, (iii) a material breach by the Executive of any material
provision hereof or of any material contractual or material legal duty to
the company (including, but not limited to, the unauthorized disclosure of
Trade Secrets or other Confidential Information), after written notice
thereof from the Board and a 30-day opportunity to cure in the event that
such breach is curable, (iv) the conviction of the Executive of a felony or
other crime or offense involving moral turpitude (including pleading guilty
or no contest to such a crime or offense or a lesser charge which results
from plea bargaining), whether or not committed in connection with the
business of the Company, (v) the Executive's alcohol or substance abuse or
(vi) a material breach by the Executive of the provisions of any
stockholders agreement or other agreement relating to the Executive's
acquisition of an equity interest in the Company to which the Executive may
become a party on or after the Commencement Date after written notice
thereof from the Board and a 30-day opportunity to cure in the event that
such breach is curable.
(iii) "Good Reason" shall mean a material breach by the
Company of any material provision hereof (after written notice thereof from
the Executive and a 30-day opportunity to cure in the event that such
breach is curable); a transfer of the Executive's customary place of
employment to a location more than 40 milers from Salt Lake City, Utah; or
a material change in the nature of the Executive's duties, title or
responsibility without the consent of the Executive.
(iv) "Restricted Business" means the provision of coal
by-product ("CCB") management services, such as collection, removal,
disposal and marketing of fly-ash and other CCBs.
(v) "Restricted Period" means the Employment Period, and the
period thereafter equal to (i) three years in the case of a termination of
the Employment Period by the Company with Cause or by the Executive without
Good Reason, or (ii) two years in the case of a termination of the
Employment Period for any other reason (including by reason of expiration
of the term of the Agreement).
c. Reasonableness of Restrictions. The Executive acknowledges and
agrees that the restrictions set forth in this Section 8, and, specifically, the
period of time designated as the Restricted Period and geographical area
specified hereunder, are reasonable in view of the nature of the business in
which the Company is engaged, and the Executive's particular knowledge of the
Company's and its subsidiaries, parents and affiliates' respective businesses,
and the Executive hereby agrees not to challenge in any way, or to otherwise
raise a defense to, the enforceability of any of the restrictions set forth in
this Section 8 during the Restricted Period in any manner whatsoever, including
but not limited to challenging the reasonableness of the restrictions set forth
herein.
d. Enforceability of Restrictive Covenant. It is the understanding of
the Executive and the Company that the provisions of this Section 8 be enforced
to the fullest extent permissible under the laws and policies of each
jurisdiction in which enforcement may be sought, and that the unenforceability
(or the modification to conform to such laws or policies) of any provisions of
this Section shall not render unenforceable, or repair, the remainder of the
provisions of this Section 8, or of this Agreement.
9. Termination. The Company or the Executive may terminate this
Agreement, with or without cause, with or without prior notice. In the event the
Company terminates this Agreement or the Executive resigns from employment, the
Executive's rights and the obligations of the Company hereunder shall cease as
of the effective date of the termination, including, without limitation, the
right to receive the Base Salary, any Bonus Award and all other compensation or
benefits provided for in this Agreement, and the Executive hereby acknowledges
and agrees that no severance or similar or other damages or payments of any kind
whatsoever shall be payable to the Executive due to, in connection with, or in
the event of, the Executive's termination or resignation from employment for any
reason.
10. Enforcement.
a. Equitable Relief. The Executive agrees that the remedies at law for
any breach or threat of breach by him of any of the provisions of Section 5, 6,
7 and 8 hereof will be inadequate, and that, in addition to any other remedy to
which the Company may be entitled at law or in equity, the Company shall be
entitled to a temporary or permanent injunction or injunctions or temporary
restraining order or orders to prevent breaches of the provisions of Sections 5,
6, 7, and 8 hereof and to enforce specifically the terms and provisions thereof,
in each case without the need to post any security or bond. Nothing herein
contained shall be construed as prohibiting the Company from pursuing, in
addition, any other remedies available to the Company for such breach or
threatened breach. A waiver by the Company of any breach of any provision hereof
shall not operate or be construed as a waiver of a breach of any other provision
of this Agreement or of any subsequent breach by the Executive.
b. Enforceability. It is expressly understood and agreed that although
the Company and the Executive consider the restrictions contained in Sections 5,
6, 7 and 8 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Company, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in such Sections 5, 6, 7 and 8 is an
unenforceable restriction on the Executive's activities, the provisions of such
Sections 5, 6, 7 and 8 shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such other extent as such
court may judicially determine or indicate to be reasonable. Alternatively, if
the court referred to above finds that any restriction contained in Sections 5,
6, 7 and 8 or any remedy provided herein is unenforceable, and such restriction
or remedy cannot be amended so as to make it enforceable, such finding shall not
affect the enforceability of any of the other restrictions contained therein or
the availability of any other remedy. The provisions of Sections 5, 6, 7 and 8
shall in no respect limit or otherwise affect the Executive's obligations under
other agreements with the Company.
11. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided that this Agreement is assignable by the Company to any affiliate of
the Company, to any successor in interest to any business of the Company, or to
a purchaser of all or substantially all of the assets of any business of the
Company.
12. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
R. Stephen Creamer
ECDC Environmental
127 South 500 East
Suite 675
Salt Lake City, Utah 84102
Fax: (801) 536-6111
with a copy to:
Parsons Behle & Latimer
One Utah Center
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Fax: (801) 536-6111
Attention: J. Gordon Hansen, Esq.
and properly addressed to the Company if addressed to:
JTM Industries, Inc.
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Attention: Joseph Silvestri
Facsimile No.: (212) 888-2940
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Philip Werner, Esq.
13. Severability. Wherever there is any conflict between any provision
of this Agreement and any statute, law, regulation or judicial precedent, the
latter shall prevail, but in such event the provisions of this Agreement thus
affected shall be curtailed and limited only to the extent necessary to bring
them within the requirements of the law. In the event that any provision of this
Agreement shall be held by a court of proper jurisdiction to be indefinite,
invalid, void or voidable or otherwise unenforceable, the balance of the
Agreement shall continue in full force and effect unless such construction would
clearly be contrary to the intentions of the parties or would result in an
unconscionable injustice.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. Effect of Termination. Notwithstanding anything to the contrary
contained herein, this Agreement or the Executive's employment is terminated
pursuant to Section 9 or otherwise expires, the provisions of Sections 5, 6, 7,
8, 9, 10, 12, 13, 15, 16, 17 and 18 shall continue in full force and effect.
16. Disputes. Except as necessary to obtain the relief specified in
Section 10(a), any claim or controversy arising out of or relating to this
Agreement, or any breach thereof, or otherwise arising out of or relating to the
Executive's employment, compensation and benefits with the Company or the
termination thereof, shall be settled by arbitration in Salt Lake City, Utah in
accordance with the rules established by the American Arbitration Association,
_provided,_however_, that the parties agree that (i) the arbitrator shall be
prohibited from disregarding, adding to or modifying the terms of this
Agreement; and (ii) the arbitrator shall be required to follow established
principles of substantive law and the law governing burdens of proof. Any claim
or controversy not submitted to arbitration in accordance with this Section 16
shall be considered waived and, thereafter, no arbitration panel or tribunal or
court shall have the power to rule or make any award on any such claim or
controversy. The award rendered in any arbitration proceeding held under this
Section 16 shall be final and binding, and judgment upon the award may be
entered in any court having jurisdiction thereof.
17. Miscellaneous; Choice of Law. This Agreement constitutes the entire
agreement, and supersedes all prior agreements, of the parties hereto relating
to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Utah, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Utah.
18. Indemnification. In the event the Executive is made, or threatened
to be made, a party to any legal action or proceeding, whether civil or
criminal, by reason of the fact that the Executive is or was an officer or
director of the Company or any subsidiary of the Company, the Executive shall be
indemnified by the Company, and the Company shall pay the Executive's related
expenses when and as incurred, all to the fullest extent permitted by law,
provided, however, that no indemnification shall be made hereunder with respect
to payments and expenses incurred in relation to (i) matters as to which the
Executive shall not have acted in good faith and in the reasonable belief that
his action was in the best interest of the Company, or (iii) matters as to which
are otherwise prohibited by law.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
JTM INDUSTRIES, INC.
/s/ J. I. Everest
---------------------
By: J.I. Everest II
Title: Treasurer & CFO
EXECUTIVE
/s/ R. Stephen Creamer
------------------------
R. Stephen Creamer
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"),
by and between JTM Industries, Inc. (the "Company") and Raul Deju (the
"Executive").
WHEREAS, simultaneous with and effective upon the acquisition of the
Company by Industrial Quality Services, Inc., a Delaware corporation from
Laidlaw, Inc., the Company desires to employ the Executive as President and
Chief Operating Officer of the Company; and
WHEREAS, the Executive desires to be retained in such capacity on the
terms and conditions set forth herein, effective upon the consummation of such
acquisition (the "Commencement Date"), it being understood and acknowledged that
if the consummation of the acquisition shall not occur, this Agreement shall
have no force or effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. No Conflict. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
and shall not conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under any contract,
agreement or understanding, whether oral or written, to which the Executive is a
party or of which the Executive is or should be aware.
2. Employment; Duties. The Company shall employ the Executive as
President and Chief Operating Officer for the "Employment Period" as defined in
Section 3. The Executive, in his capacity as President and Chief Operating
Officer, shall have such duties, responsibilities and authority normally
incident to such office. The precise duties, responsibilities and authority of
the Executive may be expanded, limited or modified, at any time and from time to
time, at the discretion of the Board of Directors of the Company (the "Board").
During the Employment Period, the Executive shall render his business services
primarily in the performance of his duties hereunder, and the Executive agrees
that during the term of his employment hereunder, he shall devote substantially
all of his working time, attention, knowledge and experience and give his best
effort, skill and abilities, to promote the business and interests of the
Company. Other than as set forth on Schedule A hereto, the Executive may not
serve as an officer or director of, make investments in, or otherwise
participate in, any other entity without the prior written consent of the Board;
provided, however, that the foregoing shall not prevent the Executive from
acquiring, directly or indirectly, solely as an investment, not more than five
percent (5%) of any class of securities of any entity that are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended,
including the regulations issued thereunder.
3. Employment Period. This Agreement shall have a term of three years,
commencing as of the Commencement Date and ending on the third anniversary of
the Commencement Date (the "Initial Period"), unless sooner terminated in
accordance with the provisions of Section 9. On the expiration of the Initial
Period and on each yearly anniversary thereof, this Agreement shall
automatically renew for an additional one-year period, unless sooner terminated
in accordance with the provisions of Section 9, unless the Company of the
Executive notifies the other in writing of its intention not to renew this
Agreement not less than sixty (60) days prior to such expiration date or
anniversary, as the case may be. The terms of this Agreement, as in effect from
time to time, is referred to herein as the "Employment Period."
4. Compensation and Benefits.
(a) Base Compensation. The Executive shall be paid a base
salary (the "Base Salary") at the rate of $140,000 per annum, less statutory
deductions and withholdings. The Base Salary shall be payable in a manner
consistent with the normal payroll practices of the Company as in effect from
time to time. The Base Salary shall be reviewed annually by the Compensation
Committee of the Board (the "Committee").
(b) Annual Bonus. In addition to the Base Salary, the
Executive may be entitled to receive a discretionary annual bonus for each year
during the Employment Period based upon such factors as shall be established by
the Committee, at the sole discretion of the Committee.
(c) Employee Benefits. The Executive shall be entitled to
participate in each and every employee benefit and group insurance plan and
program provided by the Company for its officers and employees generally, in
accordance with the terms of the applicable plan documents as they may be
amended from time to time, substantially consistent with the employee benefits
being provided to the officers and/or employees of the Company as of the date
immediately preceding the effectiveness of this Employment Agreement.
(d) Business Expense Reimbursement. The Company shall
reimburse the Executive for all reasonable and necessary business and travel
expenses that the Executive incurs in connection with the Executive's
performance of services for the Company hereunder, in accordance with the
reimbursement policies established by the Company from time to time (which, the
parties hereto acknowledge, shall be consistent with the policies of the Company
as they relate to business expense reimbursement as of the date immediately
preceding the effectiveness of this Employment Agreement), and shall reimburse
the Executive for the reasonable expenses associated with the maintenance of an
office in California, provided that reimbursement for such office shall be
limited to $3,000 per month.
5. Confidentiality. The Executive recognizes that it is in the
legitimate business interest of the Company to restrict his disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries, parents or affiliates for any purpose other
than in connection with his performance of his duties to the Company, and to
limit any potential appropriation of such Trade Secrets and Confidential
Information by the Executive. The Executive therefore agrees that both during
and at all times after the Employment Period, he shall maintain as confidential
all Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries, parents or affiliates heretofore or in the
future obtained by the Executive. The terms "Trade Secrets" and/or "Confidential
Information" means matters protected by the Uniform Trade Secrets Act as stated
in California Civil Code Sections 3426 through 3426.10 and as interpreted under
California law. Confidential Information includes matters of a significant
technical or business nature that have been maintained as confidential or the
disclosure of which could likely have an adverse effect upon the interests of
the Company or its direct or indirect subsidiaries, parents or affiliates.
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at nay time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other Confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, parents or affiliates, and (b) all documents, materials and other
property (including, without limitation, computer files) belonging to the
Company or its direct or indirect subsidiaries, parents or affiliates, which in
either case are in the possession or under the control of the Executive (or his
heirs or personal representatives).
7. Discoveries and Works. All Discoveries and Works made or conceived
by the Executive during his employment by the Company, whether during the
Employment Period or at any time prior thereto, whether or not on the property
or premises of the Company, jointly or with others, which relate to the
activities of the Executive with the Company or its direct or indirect
subsidiaries, parents or affiliates shall be owned by the Company or its direct
or indirect subsidiaries, parents or affiliates. The term "Discoveries and
Works" includes, by way of example but without limitation, Trade Secrets and
other Confidential Information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications. The Executive shall (a) promptly notify, make
full disclosure to, and execute and deliver any documents requested by, the
Company, as the case may be, to evidence or better assure title to Discoveries
and Works in the Company or its direct or indirect subsidiaries, parents or
affiliates, as so requested, (b) renounce any and all claims, including but not
limited to claims of ownership and royalty, with respect to all Discoveries and
Works and all other property owned or licensed by the Company or its direct or
indirect subsidiaries, parents or affiliates, (c) assist the Company or its
direct or indirect subsidiaries, parents or affiliates in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all
Discoveries and Works, and (d) promptly execute, whether during his employment
with the Company or thereafter, all applications or other endorsements necessary
or appropriate to maintain patents and other rights for the Company or its
direct or indirect subsidiaries, parents or affiliates thereto, including but
not limited to assignments of such patents and other rights. The Executive
acknowledges that all discoveries and Works shall be deemed "works made for
hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss. 101.
8. Noncompetition and Nonsolicitation.
(a) Restrictive Covenant. The Executive agrees that he shall,
during the Restricted Period (as defined below), refrain from, either alone or
in conjunction with any other Person, or directly or indirectly through his
present or future affiliates or Associates (as defined below):
(i) (except pursuant to his duties performed for the
Company during the Employment Period) directly or indirectly, owning, managing,
operating, joining, or having a financial interest in, controlling of, or being
employed as an employee, agent or the Executive, or in any other individual or
representative capacity whatsoever, or using or permitting his name to be used
in connection with, or lending assistance (financial or otherwise) to or being
otherwise connected in any manner with any business or enterprise engaged in the
Restricted Business (as defined below) within any portion of the United States
(whether or not such business is physically located within the United States);
provided, however, that nothing contained herein shall be construed as
preventing the Executive from engaging in the ownership, purchase and/or sale of
landfills; and
(ii) soliciting, inducing, entering into any
agreement with, or attempting to influence any individual who the Executive,
after due inquiry, knows is an employee of the Company or any of its
subsidiaries, parents or affiliates during the Restricted Period to terminate
his or her employment relationship with the Company or such subsidiary or
affiliate, or to become employed by the Executive or any affiliate or associate
of the Executive or any person by which the Executive is employed, or
interfering in any other way with the employment, or other relationship, of the
Company or such subsidiary, parent or affiliate and any employee thereof.
(b) Definitions. As used herein:
(i) "Associate" means with respect to any person, any
corporation or other business organization of which such person is an officer,
employee or partner or is the beneficial owner, directly or indirectly, of ten
percent (10%) or more of any class of equity securities, any trust or estate in
which such person has a substantial beneficial interest or as to which such
person serves as a trustee or in a similar capacity and any spouse of such
person;
(ii) "Cause" shall mean (i) the willful and continued
failure of the Executive to follow the lawful directions of the Board, (ii) any
act of fraud or dishonesty, misappropriation or embezzlement, or willful and
material misconduct in connection with the performance of the Executive's duties
hereunder, (iii) a material breach by the Executive of any material provision
hereof or of any material contractual or material legal duty to the Company
(including, but not limited to, the unauthorized disclosure of Trade Secrets or
other Confidential Information), after written notice thereof from the Board and
a 30-day opportunity to cure in the event that such breach is curable, (iv) the
conviction of the Executive of a felony or other crime or offense involving
dishonest (including pleading guilty or no contest to such a crime or offense or
a lesser charge which results from plea bargaining), whether or not committed in
connection with the business of the Company, (v) the Executive's alcohol or
substance abuse or (vi) a material breach by the Executive of the provisions of
any stockholders agreement or other agreement relating to the Executive's
acquisition of an equity interest in the Company to which the Executive may
become a party on or after the Commencement Date after written notice thereof
from the Board and a 30-day opportunity to cure in the event that such breach is
curable.
(iii) "Good Reason" shall mean a material breach by
the Company of any material provision hereof, after written notice thereof from
the Executive and a 30-day opportunity to cure in the event that such breach is
curable; a transfer of the Executive's customary place of employment to a
location that could not be accommodated from a California office; or a material
change in the nature of the Executive's duties, title or responsibility without
the consent of the Executive.
(iv) "Restricted Business" means the provision of
coal by-product ("CCB") management services, such as collection, removal
disposal and marketing of fly-ash and other CCBs.
(v) "Restricted Period" means the Employment Period,
and the period thereafter equal to (i) three years in the case of a termination
of the Employment Period by the Company with Cause or by the Executive without
Good Reason, or (ii) two years in the case of a termination of the Employment
Period for any other reason (including by reason of expiration of the term of
the Agreement).
(b) Reasonableness of Restrictions. The Executive acknowledges
and agrees that the restrictions set forth in this Section 8, and, specifically,
the period of time designated as the Restricted Period and geographical area
specified hereunder, are reasonable in view of the nature of the business in
which the Company is engaged, and the Executive's particular knowledge of the
Company's an its subsidiaries, parents and affiliates' respective businesses,
and the Executive hereby agrees not to challenge in any way, or to otherwise
raise a defense to, the enforceability of any of the restrictions set forth in
this Section 8 during the Restricted Period in any manner whatsoever, including
but not limited to challenging the reasonableness of the restrictions set forth
herein.
(c) Enforceability of Restrictive Covenant. It is the
intention of the Executive and the Company that the provisions of this Section 8
be enforce to the fullest extent permissible under the laws and policies of each
jurisdiction in which enforcement may be sought, and that the unenforceability
(or the modification to conform to such laws or policies) of any provisions of
this Section shall not render unenforceable, or impair, the remainder of the
provisions of this Section 8, or of this Agreement.
9. Termination.
(a) General. The Company or the Executive may terminate this
Agreement, with or without cause, with or without prior notice. Except as
provided in Section 9(b), in the event the Company terminates this Agreement or
the Executive resigns from employment, the Executive's rights and the
obligations of the Company hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, any Bonus Award and all other compensation or benefits provided for in
this Agreement, and the Executive hereby acknowledges and agrees that, except
for salary, bonuses and employee benefits accrued and/or vested but unpaid as of
the date of termination (the "Accrued Obligations"), no severance or similar or
other damages or payments of any kind whatsoever shall be payable to the
Executive due to, in connection with, or in the event of, the Executive's
termination or resignation from employment for any reason.
(b) Termination Without Cause; Resignation for Good Reason. In
the event the Company terminates this Agreement without Cause, or the Executive
resigns for Good Reason, the Executive shall be entitled to continue to receive
payments of his Base Salary for the balance of the ten-existing Employment
Period, payable at such times and in such amounts as if this Agreement were not
terminated; provided, however, that the period during which the Executive shall
be entitled to continue to receive payments of his Base Salary hereunder shall
in no event exceed eighteen (18) months. Other than as set in the preceding
sentence, the Executive's rights and the obligations of the Company hereunder
shall cease as of the effective date of such termination, including, without
limitation, the right to receive the Base Salary, any Bonus Award and all other
compensation or benefits provided for in this Agreement, and the Executive
hereby acknowledges and agrees that, except for the Accrued Obligations, no
severance or similar or other damages or payments of any kind whatsoever shall
be payable to the Executive due to, in connection with, or in the event of, such
termination or resignation. Notwithstanding the foregoing, such continuation of
Base Salary shall immediately cease upon any violation by the Executive of the
restrictions contained in Sections 5, 6, 7 and 8 hereof, provided, that if such
violation is curable, the Company shall have first given the Executive notice
thereof and a period of 30 days in which to cure such violation.
(c) Termination for Cause; Resignation without Good Reason. In
the event the Company terminates this Agreement for Cause or in the event that
the Executive resigns from his employment under this Agreement without Good
Reason, the Executive's rights hereunder shall cease as of the effective date of
the termination, including, without limitation, the right to receive the Base
Salary, any Bonus Award and all other compensation or benefits provided for in
this Agreement. In such event, the Executive hereby acknowledges and agrees
that, except for the Accrued Obligations, no severance or similar or other
damages or payments of any kind whatsoever shall be payable to the Executive due
to, in connection with, or in the event of, such termination.
(d) Disability; Death. If, prior to the expiration of the
Employment Period or the termination of this Agreement, the Executive shall be
unable to perform his duties by reason of mental or physical disability for at
least one-hundred eighty (180) consecutive days or any one-hundred eighty (180)
days (whether or not consecutive) in any three-hundred sixty (360) consecutive
day period, the Company may terminate this Agreement and the remainder of the
Employment Period by giving written notice to the Executive to that effect.
Immediately upon the giving of such notice, the Employment Period shall
terminate. Upon termination of this Agreement pursuant to this Section 9(d), the
Executive shall be paid, in addition to the Accrued Obligations, his Base Salary
for the month in which notice is given. In the event of a dispute as to whether
the Executive is disabled within the meaning of Section 9(d), either party may
from time to time request a medical examination of the Executive by a doctor
appointed by the Chief of Staff of a hospital selected by mutual agreement of
the parties, or as the parties may otherwise agree, and the written medical
opinion of such doctor shall be conclusive and binding upon the parties as to
whether the Executive has become disabled and the date when such disability
arose. If, prior to the expiration of the Employment Period or the termination
of this Agreement, the Executive shall die, the Executive's estate shall be
paid, in addition to the Accrued Obligations, his Base Salary through the end of
the month in which the Executive's death has occurred, at which time the
Employment Period shall terminate without further notice and the Company shall
have no further obligations hereunder.
10. Enforcement.
(a) Equitable Relief. The Executive agrees that the remedies
at law for any breach of threat of breach by him of any of the provisions of
Sections 5, 6, 7, and 8 hereof, will be inadequate, and that, in addition to any
other remedy to which the Company may be entitled at law or in equity, the
Company shall be entitled to a temporary or permanent injunction or injunctions
or temporary restraining order or orders to prevent breaches of the provisions
of Sections 5, 6, 7, and 8 hereof and to enforce specifically the terms and
provisions thereof, in each case without the need to pose any security or bond.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing, in addition, any other remedies available to the Company for such
breach or threatened breach. A waiver by the Company of any breach of any
provision hereof shall not operate or be construed as a waiver of a breach of
any provision hereof shall not operate or be construed as a waiver of a breach
of any other provision of this Agreement or of any subsequent breach by the
Executive.
(b) Enforceability. It is expressly understood and agreed that
although the Company and the Executive consider the restrictions contained in
Sections 5, 6, 7 and 8 hereof to be reasonable for the purpose of preserving the
goodwill, proprietary rights and going concern value of the Company, if a final
arbitratory or judicial determination is made by a court or arbitrator having
jurisdiction that the time or territory or any other restriction contained in
such Sections 5, 6, 7 and 8 is an unenforceable restriction on the Executive's
activities, the provisions of such Sections 5, 6, 7 and 8 shall not be rendered
void but shall be deemed amended to apply as to such maximum time and territory
and to such other extent as such arbitrator or court may determine or indicate
to be reasonable. Alternatively, if the arbitrator or court referred to above
finds that any restriction contained in Sections 5, 6, 7 or 8 or any remedy
provided herein is unenforceable, and such restriction or remedy cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of Sections 5, 6, 7 and 8 shall
in no respect limit or otherwise affect the Executive's obligations under other
agreements with the Company, and the provisions of Sections 5, 6, 7 and 8 shall
in no respect limit the rights of the Executive as set forth in this Agreement
or any other agreement between the Executive and the Company.
11. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided that this Agreement is assignable by the Company to any affiliate of
the Company, to any successor in interest to any business of the Company, or to
a purchaser of all or substantially all of the assets of any business of the
Company.
12. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
Raul Deju
5 Hastings Court
Moraga, California 94556
Facsimile No.: (510) 299-7840
with a copy to:
Otis & Hogan
180 Montgomery Street, Suite 1240
San Francisco, California 94104
Facsimile No." (415) 362-7332
Attention: J. Morrow Otis
and properly addressed to the Company if addressed to:
JTM Industries, Inc.
127 South 500 East, Suite 675
Salt Lake City, Utah 84102
Attention: Chief Executive Officer
with a copy to"
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Attention: Joseph Silvestri
Facsimile No.: (212) 888-2940
13. Severability. Wherever there is any conflict between any provision
of this Agreement and any statute, law, regulation or judicial precedent, the
latter shall prevail. In the event that any provision of this Agreement shall be
held by a court of proper jurisdiction to be indefinite, invalid, void or
voidable or otherwise unenforceable, the balance of the Agreement shall continue
in full force and effect unless such construction would clearly be contrary to
the intentions of the parties or would result in an unconscionable injustice.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. Effect of Termination. Notwithstanding anything to the contrary
contained herein, if this Agreement or the Executive's employment is terminated
pursuant to Section 9 or otherwise expires, the provisions of Sections 5, 6, 7,
8, 9, 10, 12, 13, 15, 16, 17 and 18 shall continue in full force and effect.
16. Disputes. Except as necessary to obtain the relief specified in
Section 10(a), any claim or controversy arising out of or relating to this
Agreement, or any breach thereof, or otherwise arising out of or relating to the
Executive's employment, compensation and benefits with the Company or the
termination thereof hereafter, shall be settled by arbitration in San Francisco
County, California, in accordance with the rules established by the American
Arbitration Association, provided, however, that the parties agree that (i) a
30-day negotiation period between the Company and the Executive will be
specified prior to any arbitration proceeding; (ii) the arbitrator shall be
prohibited form disregarding, adding to or modifying the terms of this
agreement; and (iii) the arbitrator shall be required to follow established
principles of substantive law and the laws governing burdens of proof. Any claim
or controversy not submitted to arbitration in accordance with this Section 16
shall be considered waived and, thereafter, no arbitration panel or tribunal or
court shall have the power to rule or make any award on any such claim or
controversy. The award rendered in any arbitration proceeding held under this
Section 16 shall be final and binding, and judgment upon the award may be
entered in any court having jurisdiction thereof. The prevailing party shall be
entitled to recover all reasonable attorneys fees and related costs form the
losing party.
17. Miscellaneous: Choice of Law. This Agreement constitutes the entire
agreement, and supersedes all prior agreements, of the parties hereto relating
to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. This
Agreement shall be governed by and construed in accordance with (i) with respect
to Section 8 and all other provisions of this Agreement which affect the
interpretation and/or the enforceability of the restrictive covenants therein
contained, the domestic laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the s State of New York, and (ii) with respect to
all other provisions of this Agreement, the domestic laws of the State of
California, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of California.
18. Indemnification. In the event that any claim is asserted against
the Executive, including but not limited to any legal action or administrative
proceeding, whether civil or criminal, by reason of the fact that the Executive
is or was an officer or director of the Company or any subsidiary or affiliate
of the Company, the Executive shall be indemnified by the Company, and the
Company shall pay the Executive's attorney fees, accounting fees, expert witness
fees and other customary expenses within 30 days after the Company receives
notice of such fees, expenses and costs, all to the fullest extent permitted by
law, provided, however, that no indemnification shall be made hereunder with
respect to payments and expenses incurred in relation to (i) matters as to which
the Executive shall not have acted in good faith and in the reasonable belief
that his action was in the best interest of the Company, of (ii) matters as to
which are otherwise prohibited by law.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
JTM INDUSTRIES, INC.
/s/ J.I. Everest
------------------
By: J.I. Everest II
Title:Treasurer & CFO
EXECUTIVE
/s/ Raul Deju
---------------
Raul Deju
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"),
by and between JTM Industries, Inc. (the "Company") and Jean I. ("Chip") Everest
(the "Executive").
WHEREAS, simultaneous with and effective upon the acquisition of the
Company by Industrial Quality Services, Inc., a Delaware corporation from
Laidlaw, Inc., the Company desires to employ the Executive as Chief Financial
Officer of the Company; and
WHEREAS, the Executive desires to be retained in such capacity on the
terms and conditions set forth herein, effective upon the consummation of such
acquisition (the "Commencement Date"), it being understood and acknowledged that
if the consummation of the acquisition shall not occur, this Agreement shall
have no force or effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. No Conflict. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
and shall not conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under any contract,
agreement or understanding, whether oral or written, to which the Executive is a
party or of which the Executive is or should be aware.
2. Employment; Duties. The Company shall employ the Executive as Chief
Financial Officer for the "Employment Period" as defined in Section 3. The
Executive, in his capacity as Chief financial Officer, shall have such duties,
responsibilities and authority normally incident to such office. The precise
duties, responsibilities and authority of the Executive may be expanded, limited
or modified, at any time and from time to time, at the discretion of the Board
of Directors of the Company (the "Board") or its Chief Executive Officer. During
the Employment Period, the Executive shall devote all necessary working time,
attention, knowledge and experience and give his diligent effort, skill and
abilities, to promote the business and interests of the Company. Subject to
Section 8, the Executive may serve as an officer or director of, make
investments in, or otherwise participate in, other entities, provided that such
service is disclosed in advance to the Board.
3. Employment Period. This Agreement shall have a term of three years,
commencing as of the commencement Date and ending on the third anniversary of
the commencement Date (the "Initial Period"), unless sooner terminated in
accordance with the provisions of Section 9. On the expiration of the Initial
Period and on each yearly anniversary thereof, this Agreement shall
automatically renew for an additional one-year period, unless sooner terminated
in accordance with the provisions of Section 9, unless the Company or the
Executive notifies the other in writing of its intention not to renew this
Agreement not less than sixty (60) days prior to such expiration date or
anniversary, as the case may be. The term of this Agreement, as in effect from
time to time, is referred to herein as the "Employment Period."
4. Compensation and Benefits.
(a) Base Compensation. The Executive shall be paid an
aggregate base salary (the "Base Salary") at the rate of $125,000 per annum,
less statutory deductions and withholdings. The Base Salary shall be payable in
a manner consistent with the normal payroll practices of the Company as in
effect from time to time. The Base Salary shall be reviewed annually by the
Compensation Committee of the Board (the "Committee").
(b) Annual Bonus. In addition to the Base Salary, the
Executive may be entitled to receive a discretionary annual bonus for each year
during the Employment Period based upon such factors as shall be established by
the Committee, at the sole discretion of the Committee.
(c) Employee Benefits. The Executive shall be entitled to
participate in each and every employee benefit and group insurance plan and
program provided by the Company for its officers and employees generally, in
accordance with the terms of the applicable plan documents as they may be
amended from time to time, substantially consistent with the employee benefits
being provided to the officers and/or employees of the Company as of the date
immediately preceding the effectiveness of this Employment Agreement.
(d) Business Expense Reimbursement. The Company shall
reimburse the Executive for all reasonable and necessary business and travel
expenses that the Executive incurs in connection with the Executive's
performance of services for the Company hereunder, in accordance with the
reimbursement policies established by the Company from time to time (which, the
parties hereto acknowledge, shall be consistent with the policies of the Company
as they relate to business expense reimbursement as of the date immediately
preceding the effectiveness of this Employment Agreement), and shall reimburse
the Executive for the reasonable expenses associated with the maintenance of an
office in Utah, provided that such reimbursement shall be limited to $3,000 per
month.
5. Confidentiality. The Executive recognizes that it is in the
legitimate business interest of the Company to restrict his disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries, parents or affiliates for any purpose other
than in connection with his performance of his duties to the Company, and to
limit any potential appropriation of such Trade Secrets and Confidential
Information by the Executive. The Executive therefore agrees that both during
and at all times after the Employment Period, he shall maintain as confidential
all Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries, parents or affiliates heretofore or in the
future obtained by the Executive. The terms "Trade Secrets" and/or "Confidential
Information" means matters of a confidential technical or business nature that
have been maintained as confidential or the disclosure of which could likely
have an adverse effect upon the interests of the Company or its direct or
indirect subsidiaries, parents or affiliates.
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, parents or affiliates, and (b) all documents, materials and other
property (including, without limitation, computer files) belonging to the
Company or its direct or indirect subsidiaries, parents or affiliates, which in
either case are in the possession or under the control of the Executive (or his
heirs or personal representatives).
7. Discoveries and Works. All Discoveries and Works made or conceived
by the Executive during his employment by the Company, whether during the
Employment Period or at any time period thereto, whether or not on the property
or premises of the Company, jointly or with others, which relate to the
activities of the Executive with the Company or its direct or indirect
subsidiaries, parents or affiliates shall be owned by the Company or its direct
or indirect subsidiaries, parents or affiliates. The term "Discoveries and
Works" includes, by way of example but without limitation, Trade Secrets and
other Confidential Information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications. The Executive shall (a) promptly notify, make
full disclosure to, and execute and delivery any documents requested by, the
Company, as the case may be, to evidence or better assure title to Discoveries
and Works in the Company, as the case may be, to evidence or better assure title
to Discoveries and Works in the Company, as the case may be, to evidence or
better assure title to Discoveries and Works in the Company or its direct or
indirect subsidiaries, parents or affiliates, as so requested, (b) renounce any
and all claims, including but not limited to claims of ownership and royalty,
with respect to all Discoveries and Works and all other property owned or
licensed by the Company or its direct or indirect subsidiaries, parents or
affiliates, (c) assist the Company or its direct or indirect subsidiaries,
parents or affiliates in obtaining or maintaining for itself at its own expense
United States and foreign patents, copyrights, trade secret protection or other
protection of any and all Discoveries and Works, and (d) promptly execute,
whether during his employment with the Company or thereafter, all applications
or other endorsements necessary or appropriate to maintain patents and other
rights for the Company or its direct or indirect subsidiaries, parents or
affiliates and to protect the title of the Company or its direct or indirect
subsidiaries, parents or affiliates thereto, including but not limited to
assignments of such patents and other rights. The Executive acknowledges that
all Discoveries and Works shall be deemed "works made for hire" under the
Copyright Act of 1976, as amended, 17 U.S.C. ss. 101.
8. Noncompetition and Nonsolicitation.
(a) Restrictive Covenant. The Executive agrees that he shall,
during the Restricted Period (as defined below), refrain from, either alone or
in conjunction with any other Person, or directly or indirectly through his
present or future affiliates or Associates (as defined below):
(i) (except pursuant to his duties performed for the
Company during the Employment Period) directly or indirectly, owning, managing,
operating, joining or having a financial interest in, controlling or
participating in the ownership, management, operation or control of, or being
employed as an employee, agent or the Executive, or in any other individual or
representative capacity whatsoever, or using or permitting his name to be used
in connection with, or lending assistance (financial or otherwise) to or being
otherwise connected in any manner with any business or enterprise engaged in the
Restricted Business (as defined below) within any portion of the United States
(whether or not such business is physically located within the United States);
provided, however, that nothing contained herein shall be construed as
preventing the Executive from engaging in the ownership, purchase and/or sale of
landfills; and
(ii) soliciting, inducing, or attempting to influence
any individual who the Executive, after due inquiry, knows is an employee of the
Company or any of its subsidiaries, parents or affiliates to terminate his or
her employment relationship with the Company or such subsidiary or affiliate, or
to become employed by the Executive is employed, or interfering in any other way
with the employment, or other relationship, of the Company or such subsidiary,
parent or affiliate and any employee thereof; provided, however, that this
clause (ii) shall not apply as it may relate to R. Stephen Creamer.
(b) Definitions. As used herein:
(i) "Associate" means with respect to any person, any
corporation or other business organization of which such person is an officer,
employee or partner or is the beneficial owner, directly or indirectly, of ten
percent (10%) or more of any class of equity securities, any trust or estate in
which such person has a substantial beneficial interest or as to which such
person serves as a trustee or in a similar capacity and any relative or spouse
of such person, or any relative of such spouse;
(ii) "Cause" shall mean (i) the willful and continued
failure of the Executive to follow the lawful directions of the Board, (ii) any
act of fraud or dishonesty, misappropriation or embezzlement, or willful
misconduct in connection with the performance of the Executive's duties
hereunder, (iii) a material breach by the Executive of any material provision
hereof or any of any material contractual or material legal duty to the Company
(including, but not limited to, the unauthorized disclosure of Trade Secrets or
other Confidential Information), after written notice thereof from the Board and
a 30-day opportunity to cure in the event that such breach is curable, (iv) the
conviction of the Executive of a felony or other crime or offense involving
moral turpitude (including pleading guilty or no contest to such a crime or
offense or a lesser charge which results from plea bargaining), whether or not
committed in connection with the business of the Company, (v) the Executive's
alcohol or substance abuse or (vi) a material breach by the Executive of the
provisions of any stockholders agreement or other agreement relating to the
Executive's acquisition of any equity interest in the Company to which the
Executive may become a party on or after the Commencement Date after written
notice therefrom the Board and a 30-day opportunity to cure in the event that
such breach is curable.
(iii) "Good Reason" shall mean a material breach by
the Company of any material provision hereof (after written notice thereof from
the Executive and a 30-day opportunity to cure in the event that such breach is
curable); a transfer of the Executive's customary place of employment to a
location more than 40 miles from Salt Lake City, Utah; or a material change in
the nature of the Executive's duties, title or responsibility without the
consent of the Executive.
(iv) "Restricted Business" means the provision of
coal by-product ("CCB") management services, such as collection, removal,
disposal and marketing of fly-ash and other CCBs.
(v) "Restricted Period" means the Employment Period,
and the period thereafter equal to (i) three years in the case of a termination
of the Employment Period by the Company with Cause or by the Executive without
Good Reason, or (ii) two years in the case of a termination of the Employment
Period for any other reason (including by reason of expiration of the term of
the Agreement).
(c) Reasonableness of Restrictions. The Executive acknowledges
and agrees that the restrictions set forth in this Section 8, and specifically,
the period of time designated as the Restricted Period and geographical area
specified hereunder, are reasonable in view of the nature of the business in
which the Company is engaged, and the Executive's particular knowledge of the
Company's and its subsidiaries, parents and affiliates' respective businesses,
and the Executive hereby agrees not to challenge in any way, or other otherwise
raise a defense to, the enforceability of any of the restrictions set forth in
this Section 8 during the Restricted Period in any manner whatsoever, including
but not limited to challenging the reasonableness of the restrictions set forth
herein.
(d) Enforceability of Restrictive Covenants. It is the
understanding of the Executive and the Company that the provisions of this
Section 8 be enforced to the fullest extent permissible under the laws and
policies of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or policies) of
any provisions of this Section shall not render unenforceable, or impair, the
remainder of the provisions of this Section 8, or of this Agreement.
9. Termination. The Company or the Executive may terminate this
Agreement, with or without cause, with or without prior notice. In the vent the
Company terminates this Agreement or the Executive resigns from employment, the
Executive's rights and the obligations of the Company hereunder shall cease as
of the effective date of the termination, including, without limitation, the
right to receive the Base Salary, any Bonus Award and all other compensation or
benefits provided for in this Agreement, and the Executive hereby acknowledges
and agrees that no severance or similar or other damages or payments of any kind
whatsoever shall be payable to the Executive due to, in connection with, or in
the event of, the Executive's termination or resignation from employment for any
reason.
10. Enforcement.
(a) Equitable Relief. The Executive agrees that remedies at
law for any breach of threat of breach by him of any of the provisions of
Sections 5, 6, 7, and 8 hereof will be inadequate, and that, in addition to any
other remedy to which the Company may be entitled at law or in equity, the
Company shall be entitled to a temporary or permanent injunction or injunctions
or temporary restraining order or orders to prevent breaches of the provisions
of Sections 5, 6, 7 and 8 hereof and to enforce specifically the terms and
provisions hereof, in each case without the need to post any security or bond.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing, in addition, any other remedies available to the Company for such
breach or threatened breach. A waiver by the Company of any breach of any
provision hereof shall not operate or be construed as a waiver of a breach of
any other provision of this Agreement or of any subsequent breach by the
Executive.
(b) Enforceability. It is expressly understood and agreed that
although the Company and the Executive consider the restrictions contained in
Sections 5, 6, 7 and 8 hereof to be reasonable for the purpose of preserving the
goodwill, proprietary rights and going concern value of the Company, if a final
judicial determination is made by a court having jurisdiction that the time or
territory or any other restriction contained in such Sections 5, 6, 7 and 8 is
an unenforceable restriction on the Executive's activities, the provisions of
such Sections 5, 6, 7 and 8 shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that any restriction
contained in Sections 5, 6, 7 or 8 or any remedy provided herein is
unenforceable, and such restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
restrictions contained therein or the availability of any other remedy. The
provisions of Sections 5, 6, 7 and 8 shall in no respect limit or otherwise
affect the Executive's obligations under other agreements with the Company.
11. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided that this Agreement is assignable by the Company to any affiliate of
the Company, to any successor in interest to any business of the Company, or to
a purchaser of all or substantially all of the assets of any business of the
Company.
12. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
Jean I. ("Chip") Everest
ECDC Environmental
127 South 500 East
Suite 675
Salt Lake City, Utah 84102
Fax: (801) 536-6111
with a copy to:
Parsons Behle & Latimer
One Utah Center
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Fax: (801) 536-6111
Attention: J. Gordon Hansen, Esq.
and properly addressed to the Company if addressed to:
JTM Industries, Inc.
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Attention: Joseph Silvestri
Facsimile No: (212) 888-2940
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Philip Werner, Esq.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
JTM INDUSTRIES, INC.
/s/ unreadable
-------------------------------
By:
Title:
EXECUTIVE
/s/ J. I. Everest
--------------------------------
Jean I. ("Chip") Everest
JTM
An INDUSTRIALSERVICESGROUP Company
February 6, 1998
Brett A. Hickman, Esquire
87 North Foxhill Road
North Salt Lake, Utah 84054
Dear Brett:
This letter is written to confirm the agreement (this "Agreement")
which we have reached wherein you will be employed by JTM Industries, Inc.
("JTM" or the "Company"). We at JTM are happy to have you as a member of the
senior management team and look forward to working with you. In consideration of
your decision to leave your current position and join JTM, JTM agrees that your
responsibilities, compensation and benefits will be as set forth herein.
1. The term of this Agreement shall begin on the date upon which you accept it
and shall expire on October 13, 2000.
2. You will be employed in the position of Sr. Vice President, General Counsel
and Secretary of JTM and its affiliated companies, including its parent company,
Industrial Services Group, Inc. Your responsibilities will be to manage the
legal affairs of the Company and to report directly to me. You will be provided
with such clerical, paralegal and support staff and assistance as are necessary
to perform your duties.
3. You will receive an initial annual salary of $120,000.00 (paid twice monthly
in accordance with Company policy), less statutory deductions and withholding.
Your salary will be subject to annual review in accordance with Company policy.
4. You will receive all of the benefits of all executive incentive, savings,
retirement, vacation and stock option plans and programs currently maintained or
hereinafter established by the Company for the benefit of its senior management
and/or officers.
5. You and your family will receive all benefits under each welfare benefit plan
of the Company currently maintained or hereinafter established by the Company
for the benefit of its employees. Such welfare benefit plans will include,
without limitation, medical, dental, disability, group life, accidental death
and travel accident insurance plans and programs.
6. Even though you are beginning your employment during the fiscal year, you
will be paid a bonus for this fiscal year, if one is earned by other management
employees of the Company, as if you were an employee of the Company for the
entire fiscal year.
7. You will receive a monthly automobile allowance in the amount of $750.00.
8. If your employment relationship with JTM is terminated for any reason,
including but not limited to your death or disability, other than just cause
(defined as your conviction for a felony or your wilful refusal to perform your
duties), at any time during the term of this Agreement, or any extension hereof,
or by the expiration of this Agreement, then JTM will: (i) pay you (or in the
event of your death, your beneficiary) a severance package equal to one year of
your salary at the time of termination (in the form of a continuation of your
salary for said one year period), along with an extension of all benefits
(insurance, automobile allowance, etc.) for the same period of time and an
amount equal to the bonus which would be paid to you during the year in which
the employment relationship is terminated had the relationship not been
terminated.
9. If, at any time during the period beginning upon the termination of your
employment with JTM and until two years after such date (but in no event later
than five years from the date of this Agreement), you (or in the event of your
death, your family) desire to return to any State in the Southeastern United
States, JTM will: (i) pay your (or in the event of your death, your beneficiary)
all costs involved in relocating you and your family (which shall include, but
not be limited to, the payment of all closing costs associated with the sale of
your residence and the purchase of a new residence in the city to which you
relocate and the payment of any discount points or costs necessary for you to
obtain a 30 year fixed rate mortgage at 7.0% for the purchase of the new home)
to a city of your choice in the Southeastern United States; and, (iii) will
purchase your Salt Lake City home for market value or original purchase price,
whichever is higher.
10. You will be allowed to continue your relationship as General Counsel,
Western Division, or some similar position, for Laidlaw Environmental Services,
Inc. ("Laidlaw") provided that you devote no more than one working day per week
(you may also devote such additional after work and week-end time as you desire)
toward these responsibilities to Laidlaw. You may also devote time to any other
projects or matters which I request or direct you to manage.
If this letter accurately sets forth our agreement, please sign this
letter on the space indicated below, and return a copy to me.
Sincerely,
/s/ R Steve Creamer
--------------------
R Steve Creamer
Chairman of the Board
and Chief Executive Officer
RSC/bh
/s/ Brett A. Hickman
- - --------------------
Brett A. Hickman
Accepted: February 10, 1998
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of October ___, 1999
("Agreement"), by and between WEBE ENTERPRISES, LTD., a Michigan corporation, or
its assigns ("Purchaser"), and ISG RESOURCES, INC. ("Seller").
W I T N E S S E TH:
WHEREAS, the Seller is the owner and holder of all the outstanding
shares of common stock of PNEUMATIC TRUCKING, INC. ("Pneumatic"), a Michigan
corporation, which shares are hereinafter referred to as the "Purchased Shares";
and
WHEREAS, the Seller desires to sell, and the Purchaser desires to
purchase the Purchased Shares, all upon and subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants herein contained, the parties hereby covenant and agree
as follows:
ARTICLE I
Purchase and Sale of Shares
1.1 Purchase and Sale. Subject to the terms, provisions and conditions
of this Agreement, and on the basis of the representations and warranties herein
contained, the Seller agrees to sell to Purchaser, and the Purchaser agrees to
purchase from Seller, at the Closing (as hereinafter defined), all of the
Purchased Shares consisting of 1,000 shares of the common stock of Pneumatic,
which is all of its issued and outstanding shares and Seller represents that
there are no stock options, warrants or preferred stock or common stock held by
anyone or any entity other than the Seller whose entire interest in Pneumatic is
being sold to Purchaser pursuant to this Agreement.
Seller represents and warrants that the shares set forth above are
owned by it free and clear of any and all claims of any nature or kind
whatsoever which could or would affect the transfer or sale contemplated by this
Agreement. Seller further represents and warrants that it has not pledged,
encumbered or hypothecated the Purchased Shares.
1.2 Purchase Consideration. The consideration for the Purchased Shares
("Purchase Price") to be paid by Purchaser to Seller shall be SEVEN HUNDRED AND
FIFTY THOUSAND DOLLARS ($750,000.00).
1.3 Manner of Payment of Purchase Price. The SEVEN HUNDRED AND FIFTY
THOUSAND DOLLARS ($750,000.00) Purchase Price shall be paid by the Purchaser at
Closing to Seller, by a cashier's check or checks or wire transfer.
ARTICLE II
Closing
2.1 Date of Closing. The transactions contemplated hereby shall close
at a date and time mutually agreeable to Purchaser and Seller, but no later than
October 31, 1999, which Closing shall be at the offices of Sullivan and Leavitt,
P.C., 22375 Haggerty Road, Novi, Michigan, or at such other place or time as
Purchaser and Seller shall mutually agree upon in writing ("Closing").
2.2 Documents to be Delivered at Closing.
(a) Documents to be Delivered by Seller. At closing, the
Seller shall deliver to Purchaser:
(i) Certificates representing the Purchased Shares
duly endorsed in blank or accompanied by stock powers executed
in blank.
(ii) All minute books, stock records and stock books
of Pneumatic.
(iii) Resignation letters of all officers and
directors of Pneumatic.
(iv) Titles to all of the vehicles owned by Pneumatic
as such vehicles are identified on Schedule A hereto entitled
ISG Resources North Central Vehicle Listing As Of February 28,
1999.
(v) Releases of any liens on the titles to the
vehicles set forth on Schedule A (i.e., Certificate of Good
Standing of Pneumatic Trucking, Inc. as a Michigan
corporation).
(vi) Letter of Indemnification by Seller indemnifying
Purchaser against any Central States Southeast and Southwest
Area Pension Fund Withdrawal Liability accrued as of the date
of Closing.
(vii) An opinion letter from Seller's counsel in a
form satisfactory to Purchaser's counsel in accordance with
Section 5.1(j) hereof in the form of Schedule B hereto.
(viii) Such other documents as may reasonably be
requested by the Purchaser or its counsel.
(b) Documents to be Delivered by Purchaser. At the Closing,
Purchaser will deliver, or cause to be delivered to the Seller, the
following:
(i) The Purchase Price represented by a cashier's
check(s) of a national banking Institution or wire transfer to
Seller of the Purchase Price.
(ii) Certified resolutions of the Board of Directors
of Purchaser, authorizing the transactions contemplated by
this Agreement.
(iii) Such other documents as may reasonably be
requested by Seller or its counsel.
ARTICLE III
Representations and Warranties of Seller
The Seller represents and warrants to Purchaser that:
3.1 Organization and Good Standing. Pneumatic is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan, and has full power and authority to own its properties and to carry on
its business as now conducted.
3.2 Charter and Bylaws. Schedule B contains true, correct and complete
copies of the Articles of Incorporation, as amended, certified as of a date
within ten (10) days of the Closing by the Michigan Secretary of State, and of
the Bylaws of Pneumatic, as amended through and including the date of this
Agreement, certified as of the date hereof by the Secretary of Pneumatic.
3.3 Capitalization. The authorized capital stock of Pneumatic consists
of 60,000 shares of common stock, $1.00 par value, of which 1,000 shares are
validly issued and outstanding, and shall be validly issued and outstanding at
Closing. The Purchases Shares shall consist of all of the Pneumatic shares which
are validly issued, fully paid and nonassessible. There are no dividends owing
or dividends which have been declared but not paid with respect to the Purchased
Shares. Pneumatic does not have any subsidiaries and does not own any interest
in any other person.
3.4 Title and Authority: Investment Representation. Seller is the
absolute owner of the Purchased Shares, free, clear and discharged of and from
any and all liens or other encumbrances, and Seller has full right, power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement. Upon delivery of the Purchased Shares by Seller at the
Closing, duly endorsed for transfer, Purchaser will be the absolute owner of all
the Purchased Shares so delivered, free and clear of and from any and all liens
and encumbrances. This Agreement is the legal, valid and binding obligation of
Seller and is enforceable in accordance with its terms, except as the
enforcement of this Agreement may be limited by laws of general application
relating to bankruptcy, insolvency and relief of debtors.
3.5 No Commitment to Issue Capital Stock or Rights to Acquire Capital
Stock. Seller has not entered into any contract or agreement or made any
commitment to purchase, redeem, sell or otherwise transfer or issue any shares
of Pneumatic's capital stock, nor are there any outstanding options,
subscriptions, warrants, conversion rights or similar rights of any kind
convertible into any shares of Pneumatic's capital stock.
3.6 Ability to Carry Out Agreement. The execution and delivery of this
Agreement and the performance by the Seller of its obligations hereunder will
not conflict with, violate or result in any breach of or constitute a default
under any provisions of the Articles of Incorporation or Bylaws of Seller or
Pneumatic, or of any mortgage, lease, contract, franchise agreement, license,
permit, instrument, order, judgment, law, regulation or any other restriction to
which either Seller or Pneumatic is a party or by which either Seller or
Pneumatic is bound. Except for those already obtained, no consent of any
governmental authority or other third-party is required to be obtained by either
Seller or Pneumatic in connection with the Shareholders' execution, delivery or
performance of this Agreement.
3.7 Financial Statements.
(a) Pneumatic's balance sheet as of December 31, 1998, and
related statements of income, retained earnings and cash flow for, the
year ended December, 1998 (the "Financial Statement Date"), prepared by
the chief financial officer of Seller are referred to herein as the
"Pneumatic Financial Statements" and are attached hereto as Schedule C.
The Pneumatic Financial Statements (I) present fairly, in all material
respects, the financial position of Pneumatic at the Financial
Statement Date; and (ii) were prepared in conformity with generally
accepted accounting principles in a manner consistent with Pneumatic's
historic accounting practice applied on a consistent basis, except as
otherwise indicated.
(b) Pneumatic's giving effect balance sheet as of October 31,
1999, and related statements of income, retained earnings and cash flow
for the 10 months ended October 31, 1999, are attached as Schedule D
and are referred to herein as the "Pneumatic Interim Financial
Statements." The Pneumatic Interim Financial Statements (I) present
fairly, in all material respects, the financial position of Pneumatic
at October 31, 1999; and (ii) were prepared in conformity with
generally accepted accounting principles in a manner consistent with
Pneumatic's historic accounting practice applied on a consistent basis,
subject to year-end closing adjustments.
(c) Schedules C and D shall sometimes be referred to jointly
as the "Financial Statements."
3.8 Taxes of Pneumatic. Pneumatic has paid any and all taxes, license
fees, other charges levied, assessed, or imposed on the business and any of the
property of Pneumatic, except those that are not due and payable. All taxes,
franchises, contributions, and other charges required to be paid to governmental
agencies by Pneumatic, with respect to its operations to the date of the closing
will be paid as they become due.
3.9 Tax returns of Pneumatic.
(a) Preparation. Pneumatic has duly prepared and filed any and
all tax returns and reports required by federal, state, and local tax
authorities.
(b) Correctness. The returns filed are correct, true, and
complete;
(c) Payment. Any and all such taxes, including sales,
corporate franchise, property, excise, and use taxes have been paid or
are adequately provided for on the latest Pneumatic financial
statement; and
(d) No dispute. Pneumatic is not involved in any dispute with
any tax authority about the amount of taxes due, nor has it received
any notice of any deficiency, audit, or other indication of deficiency
from any tax authority not disclosed to the parties to this Agreement.
3.10 Unreported and Contingent Liabilities. Except as set forth in the
Financial Statements or on Schedule E attached hereto, Seller has no liabilities
or obligations, whether accrued, absolute, fixed, known or unknown, contingent
or otherwise, existing, arising out of or relating to any transactions entered
into, or state of facts existing, on or prior to the date of this Agreement.
3.11 Licenses and Permits. Pneumatic possesses all material licenses or
permits necessary to conduct its respective business as now operated, including
the requisite operating authority issued by the Surface Transportation Road of
the Federal Highway Administration and the Michigan Public Service Commission.
Such licenses and permits are valid and in full force and effect. No action or
claim is pending, or, to the knowledge of Seller, threatened, to revoke or
terminate any such licenses or permits or declare any of them invalid in any
respect.
3.12 Litigation. Except as set forth on Schedule F, there is not
pending against Pneumatic, or, to the knowledge of Seller, threatened against
it, any claim, action, suit, arbitration proceedings, governmental proceeding or
investigation or other proceeding of any character.
3.13 Compliance With Laws Generally. Pneumatic has substantially
complied with all laws, rules, regulations and ordinances materially affecting
its business. Except for laws, rules, regulations or ordinances that are or are
to be of general applicability, there are no existing or, to the knowledge of
the Seller, proposed laws, rules, regulations or ordinances of such a nature as
could be reasonably expected to materially adversely affect the continued
conduct of Pneumatic's business in the manner presently conducted.
3.14 Trademark, etc. Attached hereto as Schedule G is a list of all
copyrights, trade names and material trademarks and trade secrets as to which
Pneumatic claims an ownership interest or as to which Pneumatic is a licensee or
licensor (the "Pneumatic Intellectual Property"). Pneumatic has good and
marketable title to or possesses adequate licenses or other valid rights to use
the Pneumatic Intellectual Property, free and clear of all liens, charges,
claims and other encumbrances. To the knowledge of the Seller, the use of the
Pneumatic Intellectual Property does not misappropriate, infringe upon or
conflict with any patent, copyright, trade name, trade secret or trademark of
any third-party. No party has filed a claim (or, to the knowledge of Seller,
threatened to file a claim) against Pneumatic alleging that it has violated,
infringed on or otherwise improperly used the intellectual property rights of
such party and Pneumatic has not violated or infringed any trademark, trade
name, service mark, service name, copyright or trade secret held by others.
3.15 Equipment. It is agreed that the motor vehicle equipment set forth
on Schedule A is conveyed by Seller and accepted by Purchaser "as is" and "with
all faults" and that Seller is making no representations or warranties regarding
any aspect thereof. It being understood that Purchaser has obtained or will
obtain its own independent assurances as to all such matters to such extent as
Purchaser, in its discretion, has deemed necessary or appropriate. Purchaser
acknowledges that it is entering into this purchase on the basis of Purchaser's
own investigation of the motor vehicle equipment and other assets of Pneumatic.
Except as otherwise expressly set forth herein, Purchaser further acknowledges
that Seller, Seller's agents and other persons acting on behalf of Seller, have
made no representation or warranty of any kind in connection with any matter
relating to the condition, value or fitness for use of the motor vehicle
equipment and/or other assets of Pneumatic. Purchaser hereby waives, releases,
remises, acquits and forever discharges Seller and Seller's agents or any other
person acting on behalf of Seller, of and from any claims, actions, causes of
action, demands, rights, damages, liabilities, costs, expenses or compensation
whatsoever, direct or indirect, known or unknown, foreseen or unforeseen, which
Purchaser now has or which may arise in the future on account of or in any way
connected with the condition of the motor vehicle equipment and/or such other
assets.
3.16 States Incorporated or Licensed to Do Business In. To the best of
Seller's knowledge, Pneumatic is duly licensed to do business in those states
where necessary to carry on the business of Pneumatic and all Federal, State,
County and Municipal tax returns, including but not limited to fuel tax returns
with the various states, currently due have been filed and the taxes paid.
3.17 Insurance Policies. To the best of Seller's knowledge, Pneumatic
has in effect those insurance policies normally maintained by it in order to
conduct its business. Schedule H attached hereto contains a copy of all such
insurance policies and/or certificates.
3.18 Central States Southeast and Southwest Areas Pension Fund.
Pneumatic contributes to the Central States Southeast and Southwest Areas
Pension Fund on behalf of its driver employees and has or will obtain from such
fund a written estimate of any withdrawal liability it would be subject to
pursuant to ERISA (29 U.S.C.A. Section 1001 et seq.) which shall be attached
hereto as Schedule I and shall be dated within 100 days of the Closing and
Seller agrees to indemnify Purchaser in respect to any such liability which may
have existed as of October 27, 1999.
3.19 Workers' Compensation Claims of Employees. Schedule J attached
hereto contains, to the best of Seller's knowledge, a listing of all filed or
threatened Workers' compensation claims.
3.20 Real Estate. Pneumatic owns no real estate and is not a party to
any terminal or office lease.
3.21 Disclosure. No representations or warranties by Seller in this
Agreement, and no document, certificate or other writing furnished by Seller to
the Purchaser, to the best of the knowledge of the Seller, contains any untrue
statements of material fact, or omits any material fact necessary to make the
statements herein or therein not misleading.
3.22 Representations and Warranties as of the Closing Date. Each of the
representations and warranties made by the Seller hereunder shall be deemed to
have been made again on and as of the Closing Date.
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to the Seller as follows:
4.1 Organization. Purchaser is a corporation formed under the laws of
the State of Michigan and is duly organized, validly existing and in good
standing pursuant to the laws of the State of Michigan.
4.2 Authority Relative to This Agreement. Purchaser or its assigns has
or will have, prior to Closing, full legal power and authority to execute and
deliver the Agreement and all agreements contemplated hereby. This Agreement
shall be duly and validly executed by Purchaser, and shall constitute a valid
and binding agreement of Purchaser enforceable against Purchaser in accordance
with its terms.
4.3 Purchase for Investment. Purchaser is acquiring the Purchased
Shares as a means of acquiring the business of Pneumatic in order to own and
operate such business, and is not acquiring the Purchased Shares with a view
towards their subsequent sale, transfer of distribution, although Purchaser
shall have the right to freely seek, pledge or encumber the shares being
acquired.
Purchaser has 10 or fewer security holders or stockholders.
Purchaser, either alone, or with the Purchaser's representatives, has
sufficient knowledge and experience concerning investments generally and
Pneumatic's in particular, such that it is able to evaluate the risks and merits
of this investment. Purchaser has had full opportunity to make all inquiries it
deems appropriate with respect to the business and affairs of Pneumatic and has
had such inquiries answered to its full satisfaction. Purchaser represents that
no commission is being paid now or owed in connection with this transaction to
any party.
4.4 Collective Bargaining Agreements. After the execution, Pneumatic
shall continue in full force and effect its collective bargaining agreements
with Locals 406 and 486 affiliated with the International Brotherhood of
Teamsters as extended or renegotiated pursuant to 5.1(b) hereof in accordance
with their terms on a non-interrupted basis and shall also continue to make
contributions to any applicable multi-employer pension plans in accordance with
their terms on a non-interrupted basis. Seller shall take no action to interfere
with such Agreements and represents that there are no written employment
agreements between Pneumatic and any third-party. Schedule M attached hereto
contains copies of the Collective Bargaining Agreements of Pneumatic, as well as
signed participation agreements with employee benefit funds resulting therefrom.
4.5 Disclosure. No representations or warranties by Purchaser in this
Agreement, and no document, certificate or other writing furnished by Purchaser
to the Seller, to the best of the knowledge of the Purchaser, contains any
untrue statements of material fact, or omits any material fact necessary to make
the statements herein or therein not misleading.
4.6 Correct on Closing Date. The representations and warranties
contained herein will be true and correct on and as of the Closing with the same
effect as if were made on and as of Closing.
ARTICLE V
Conditions Precedent to the Performance by the Purchaser
and the Seller of Their Obligations Under This Agreement
5.1 Purchaser's Conditions. The obligation of the Purchaser to complete
the purchase of the Purchased Shares hereunder shall be subject to the
satisfaction of, or compliance with, at or before the Closing, each of the
following conditions precedent (each of which is hereby acknowledged to be
inserted for the exclusive benefit of the Purchaser and may be waived by it in
whole or in part):
(a) Financing. The Purchaser, upon application for appropriate
financing of the Purchase Consideration within forty-five (45) days of
the execution of this Agreement, shall obtain financing from a banking
institution upon terms and conditions which in Purchaser's sole
discretion are acceptable to it.
(b) Labor Agreements. The Purchaser shall obtain an extension
of or shall have renegotiated the existing Collective Bargaining
Agreements with Teamsters Locals 406 and 486 covering the drivers of
Pneumatic, which extension or renegotiation shall be under terms and
conditions satisfactory to Purchaser in its sole discretion.
(c) ISG Hauling Agreement. The Seller shall enter into the Fly
Ash Hauling Agreement with Purchaser in the form attached hereto as
Schedule N.
(d) Performance of Obligations. The Seller and Pneumatic shall
have performed or complied with, in all respects, all of their
obligations, covenants and agreements hereunder.
(e) Receipt of Closing Documentation. All documentation
relating to the due authorization and completion by the Seller of the
sale and purchase hereunder of the Purchased Shares, and all actions
and proceedings taken on or prior to the Closing in connection with the
performance by the Seller of its obligations pursuant to this
Agreement, and the documentation provided to the Purchaser hereunder,
shall be reasonably satisfactory to the Purchaser and its counsel, and
the Purchaser shall have received copies of all such documentation or
other evidence as it may reasonably request in order to establish the
consummation by the Seller of the transactions contemplated hereby and
the taking of all proceedings by the Seller in connection therewith in
compliance with these conditions, in form (as to certification and
otherwise) and substance reasonably satisfactory to the Purchaser.
(f) Subleases. Seller shall sought the consent of the
respective landlords and have obtained permission from such landlords
to enter into Subleases with Purchaser for a portion of its leased
facilities which would permit the Purchaser to continue to park and/or
store a similar quantity of motor vehicles and equipment as is
presently being stored at Muskegon, Lansing and Erie, Michigan, which
subleases shall be in the form of Schedules O, P and Q attached hereto.
(g) Consents, Authorization and Registrations. All consents,
approvals, orders and authorizations of any persons or governmental
authorities, including courts (or registrations, declarations, filings
or recordings with any such authorities) required in connection with
the completion of any of the transactions contemplated by this
Agreement, the execution of this Agreement, the Closing or the
performance of any of the terms and conditions hereof, shall have been
obtained on or before the Closing including, without limiting the
generality of the foregoing, any and all consents or approvals to the
sale of the Purchased Shares to the Purchaser required from any federal
or state authority having jurisdiction over the issuance of operating
authorities or licenses, unless such consents, orders or authorizations
are waived by the Purchaser in writing.
(h) Directors and Officers of Pneumatic. There shall have been
delivered to the Purchaser, on or before the Closing, the resignations
of Pneumatic's Officers and Directors from such positions, and duly
executed comprehensive releases from such Officers and Directors as
well as all non-union employees of Pneumatic of all claims against
Pneumatic, other than those arising as a result of this Agreement,
including claims relating to any existing Employment Agreements between
Pneumatic and any such parties, which Employment Agreements shall be
canceled as of the Closing.
(i) Preservation of Business. Seller shall use its best
efforts to preserve the business organization of Pneumatic intact, to
keep available to Purchaser the services of the present employees,
except those referenced hereinbefore, of Pneumatic and to preserve for
Purchaser the present relationships between Pneumatic on the one hand
and its suppliers, customers and others having business relations with
it, on the other hand.
(j) Opinion of Counsel. That at Closing, Seller's counsel
shall give its legal opinion in a form satisfactory to Purchaser, in
respect to the matters contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5,
3.6, 3.10, 3.12 and 3.14.
(k) Lien Search. Seller shall provide Purchaser with a tax
lien and financing statement search, both certified to a date later
than the date of this Agreement, in respect to public records of the
states of Utah and Michigan for both Seller and Pneumatic.
(l) Purchaser shall have been given access to and shall have
conducted a due diligence review of the assets, business and legal
status of Pneumatic satisfactory to it, in it's sole discretion.
5.2 Seller's Conditions. The obligations of the Seller to complete the
sale of the Purchased Shares hereunder shall be subject to the satisfaction of,
or compliance with, at or before the Closing, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of the Seller and may be waived by it in whole or in part):
(a) Existing Labor Issues. The Seller shall have resolved to
its satisfaction any pending grievances, threatened grievances or other
claims, arising pursuant to the Collective Bargaining Agreements with
Local Unions Number 406 and 486 as of the date of Closing which
resolution shall be in the form of Schedule R hereto and executed by
such local unions.
(b) Assumption of Collective Bargaining Agreements. Purchaser
shall have agreed in writing in the form of Schedule S hereto to assume
all obligations pursuant to the Collective Bargaining Agreements set
forth in Schedule M hereto or such agreements, successors as of the day
after the Closing.
(c) Performance of Obligations. The Purchaser shall have
performed or complied with, in all respects, all its other obligations,
covenants and agreements hereunder.
(d) Receipt of Closing Documents. All documentation relating
to the due authorization and completion by the Purchaser of the sale
and purchase hereunder of the Purchased Shares, and all actions and
proceedings taken on or prior to the Closing in connection with the
performance by the Purchaser of its obligations under this Agreement,
shall be reasonably satisfactory to the Seller, and the Seller shall
have received copies of all such documentation or other evidence as it
may reasonably request in order to establish consummation by the
Purchaser of the transaction contemplated hereby and the taking by it
of all corporate proceedings in connection therewith in compliance with
these conditions, in form (as to certification and otherwise) and
substance reasonably satisfactory to the Seller.
ARTICLE VI
Indemnification
Indemnification. Seller shall defend, indemnify and hold harmless Purchaser, its
directors, officers, shareholders, successors and assigns, from and against any
and all costs, losses, claims, suits, actions, assessments, diminution in value,
liabilities, fines, penalties, damages (compensatory, consequential and other),
and expenses (including reasonable legal fees) to the extent resulting from:
(a) any inaccuracy and any misrepresentation or breach of any
warranty of the Seller contained in this Agreement;
(b) Seller's failure to perform or observe in full, or to have
performed in or observed in full, any covenant, agreement or condition
to be performed or observed by the Seller under this Agreement or any
documents related to this transaction;
(c) Seller shall 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,
unless within a period of two (2) years following the date of closing,
Purchaser notifies Seller of a claim specifying the factual basis of
that claim in reasonable detail.
ARTICLE VII
Access and Information
7.1 Due Diligence. During the period from the date of this Agreement to
Closing, the parties agree:
(a) Release of Information. Seller shall or cause Pneumatic to
provide to Purchaser and to Purchaser's agents full access, during
normal business hours, throughout the period before the Closing, to all
of Pneumatic's assets, properties, books, contracts, commitments and
records and shall furnish to Purchaser during that period all the
information concerning Pneumatic's affairs that Purchaser may
reasonably request.
(b) Confidentiality. Purchaser acknowledges that, pursuant to
the right to inspect Pneumatic's books, records, and other documents
and material, Purchaser may become privy to confidential information of
Pneumatic, and that communication of such confidential information to
third parties (whether or not such communicated information is
authorized by Purchaser) could injure Pneumatic's business in the event
that this transaction is not completed. Purchaser agrees to take
reasonable steps to ensure that such information about Pneumatic,
obtained by Purchaser, shall remain confidential and shall not be
disclosed or revealed to outside sources, and further agrees not to
solicit any customers of Pneumatic disclosed from such confidential
information. As used in this Agreement, confidential information
includes information ordinarily known only to Pneumatic personnel, and
information such as customer lists, supplier lists, trade secrets,
channels of distribution, pricing policy and records, inventory
records, and other information normally understood to be confidential
or designated as such by Pneumatic.
ARTICLE VIII
Covenants of the Parties
8.1 Conduct of Business Prior to Closing. During the period from the
date of this Agreement to Closing, the Seller will cause Pneumatic to:
(a) Conduct Business in Ordinary Course. Except as otherwise
contemplated or permitted by this Agreement, or as specifically
authorized in writing by the Purchaser, to maintain and repair
Pneumatic's vehicles as set forth on Schedule A, in accordance with
past practice and to conduct its business in the ordinary and normal
course thereof with no change from prior accounting practices and not,
without the prior written consent of the Purchaser, to enter into any
transaction which, if effected before the date of this Agreement, would
materially affect the assets or liabilities of Pneumatic.
(b) Insurance. To maintain in force policies of insurance
similar to those types of policies set forth in Schedule H and in such
amounts presently maintained by Pneumatic.
(c) Perform Obligations. To comply with all laws affecting the
operation of the business of Pneumatic.
ARTICLE IX
General
9.1 Expenses. All costs and expenses (including, without limitation,
the fees and disbursements of legal counsel and any accountant's or consultants'
fees) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring same.
9.2 Records. The Seller agrees at the Closing in turn over to Purchaser
any and all records including but not limited to corporate minute books, stock
record books and tax returns in its possession relating to Pneumatic, which
records have been in the control of Seller.
9.3 Time. Time shall be of the essence hereof.
9.4 Notices. Any notice or other writing required or permitted to be
given hereunder or for the purposes hereof (hereinafter called a "Notice") to
any party shall be sufficiently given if delivered personally, by recognized
courier service or if transmitted by facsimile or other form of recorded
communication tested prior to transmission to such party with an acknowledgment
of receipt from the recipient:
In the case of a Notice to the Seller: ISG Resources, Inc.
Attn: General Counsel
136 E. South Temple, Suite 1300
Salt Lake City, UT 84111
In the case of a Notice to Purchaser: Richard Notestine
P.O. Box 7
Mongo, IN 46771
with a copy to: Bill D. Eberhand, Jr., Esq.
115 South Detroit Street
LaGrange, IN 46761
and
Richard Schwartz
212 South Main Street
Brooklyn, MI 49230
with a copy to: Philip J. Curtis, Esq.
120 W. Michigan Ave., Ste. 1500
Jackson, MI 49204-0594
with an additional copy to: Martin J. Leavitt, Esq.
22375 Haggerty, PO Box 400
Northville, MI 48167
or at such other address as the Party to whom such writing is to be given shall
have last notified the party giving the same in the manner provided in this
Section. Any notice delivered personally or by courier service to the Party to
whom it is addressed as hereinbefore provided shall be deemed to have been given
and received on the day it is so delivered at such address, provided that if
such day is not a business day, then the notice shall be deemed to have been
given and received on the next following business day. Any notice transmitted by
facsimile or other form of recorded communication shall be deemed given and
received on the first business day after its transmission and acknowledgment of
receipt.
9.5 Assignment. The purchase of the stock, which is the subject of this
Agreement, and any rights hereunder, are assignable by the Purchaser or by the
Seller. This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective successors (including any successor by reason of
amalgamation of any party), heirs and assigns.
9.6 Further Assurances. The parties hereto shall, with reasonable
diligence, do all such things and provide all such reasonable assurances as may
be required to consummate the transactions contemplated hereby, and each party
shall provide such further documents or instruments required by any other party
as may be reasonably necessary or desirable to effect the purpose of this
Agreement and carry out its provisions, whether before or after the Closing.
9.7 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
9.8 Severability. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal or unenforceable,
such holding shall not affect any other provision of this Agreement, but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.
9.9 Governing Law. This Agreement is executed in, and shall be
construed in accordance with the laws of the State of Michigan.
9.10 Entire Agreement. This Agreement and any amendments and
attachments hereto supersedes any other agreement, whether oral or written,
between the parties hereto relating to the matters contemplated hereby, and
constitutes the entire agreement between the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed as of ________ 10,
1999.
WITNESSED BY: SELLER:
________________________ ISG RESOURCES, INC.
________________________ By:_____________________________
Its:_____________________________
WITNESSED BY: PURCHASER:
________________________ WEBE ENTERPRISES, LTD.
________________________ By:_____________________________
Richard Schwartz, President
<PAGE>
SCHEDULES TO STOCK PURCHASE AGREEMENT
(Pneumatic Trucking, Inc.)
A. ISG Resources North Central Vehicle Listing as of February 28, 1999.
B. Opinion of Seller's Counsel.
C. Certified copy of Amended Articles of Incorporation as of October 19, 1999
and Bylaws of Pneumatic Tucking, Inc.
D. Pneumatic Financial Statements as of December 31, 1998.
E. Pneumatic Interim Financial Statements as of October 31, 1999.
F. Unreported and Contingent Liabilities.
G. Litigation Pending or Threatened.
H. Pneumatic Intellectual Property.
I. Pneumatic's Insurance Policies.
J. Central States Estimate of Withdrawal Liability.
K. Filed or Threatened Workers' Compensation Claims.
L. Pneumatic Owned Real Estate.
M. Pneumatic Leased Real Estate, Pneumatic Collective Bargaining Agreements
and Benefit Funds.
N. Participation Agreements.
O. ISG Hauling Agreement.
P. Sublease of Michigan Terminal Facility.
Q. Sublease of Lansing Terminal Facility.
R. Sublease of Erie Terminal Facility.
S. Release of Seller of Claims or obligations arising from Collective
Bargaining Agreements.
T. Assumption by Purchaser of obligations arising from Collective Bargaining
Agreements.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as of June
2, 1999, by and between ISG Resources, a Utah corporation, having a business
address at 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111
("Buyer"), and Koch Carbon, Inc., a Kansas corporation, having a business
address at 4111 East 37th Street North, Wichita, Kansas 67220 ("Seller");
RECITALS:
A. Seller is the sole shareholder of all the issued and outstanding shares of
capital stock of Irvine Fly Ash, Inc., an Ohio corporation, having its
principal business address at 2303 Gilbert Street, Cincinnati, Ohio 45206
(the "Company"); and
B. Seller desire to sell, and Buyer desire to purchase, all of the issued and
outstanding shares (the "Shares") of capital stock of the Company for the
consideration and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, 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:
"Adjustment Amount" has the meaning as defined in Section 2.5.
"Affiliated Group" shall mean an "affiliated group" as defined in Section
1504(a) of the IRC.
"Applicable Contract" means any Contract (a) under which the Company has or may
acquire any rights, (b) under which the Company has or may become subject to any
obligation or liability, or (c) by which the Company or any of the assets owned
or used by it is or may become bound.
"Best Efforts" means 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" means a breach of a representation, warranty, covenant, obligation, or
other provision of this agreement or any instrument delivered pursuant to the
Agreement will be deemed to have occurred if there is or has been (a) any
material inaccuracy in or breach of, or any material failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision except to the extent that any such representation, warranty, covenant,
obligation or other provision may be limited or qualified by any other
representation, warranty, covenant, obligation or other provision contained in
the Agreement), or (b) any material claim (by and Person) or other occurrence or
circumstance that is or was materially inconsistent with such representation,
warranty, covenant, claim, occurrence, or circumstance, unless otherwise limited
or qualified as set forth in the Disclosure Letter (as hereinafter defined).
"Buyer" has the meaning as defined in the first paragraph of the Agreement.
"Closing" has the meaning as defined in Section 2.3.
"Closing Date" means the date and time as of which the Closing actually takes
place.
"Company" has the meaning as defined in the Recitals of the Agreement.
"Consent," means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" means all of the transactions contemplated by this
Agreement, including:
(b) the sale of the Shares by Seller to Buyer;
(c) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement;
(d) Buyer's acquisition and ownership of the Shares and exercise of control
over the Company; and
(e) the Buyer and Seller entering into that certain Slag Sale and Purchase
Agreement dated as of the Closing Date, which shall be duly executed
and delivered between the parties in accordance with the form attached
hereto as Exhibit 2.4(c) and made a part hereof by reference.
"Contract" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages" has the meaning as defined in Section 10.2.
"Disclosure Letter" means the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of the Agreement.
"Encumbrance" means 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" means soil, land surface or subsurface strata, surface water
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), ground-waters, 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" means 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:
(b) any environmental, health, or safety matters or conditions (including
on-site contamination, occupational safety and health, and regulation of
chemical substances or products);
(c) 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;
(d) 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 Environment 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 resources damages; or
(e) 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" means any Legal Requirement that requires or relates to:
(b) 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;
(c) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;
(d) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(e) 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;
(f) protecting resources, species, or ecological amenities;
(g) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful
substances;
(h) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such cleanup or prevention; or
(i) 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" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to ERISA or any
successor law.
"Facilities" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Interim Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" means 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 of pursuant to any
Legal Requirement.
"Governmental Body" means any of the following:
(b) federal, state, local, municipal, foreign, or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court
or other tribunal).
"Hazardous Activity" means the distribution, generation, handing, manufacturing,
processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use of Hazardous Material in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
posses 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 Company,
except the receipt, handling, transportation, disposal and sale of fly ash by
the Company in the Ordinary Course of Business.
"Hazardous Material" means any waste or other substance that is listed, defined,
designated, or classified as 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 material, except the receipt, handling, transportation,
disposal and sale of fly ash by the Company in the Ordinary Course of Business.
"Independent Auditor" means KPMG Peat Marwick, LLP
"Intellectual Property Assets" has the meaning as defined in Section 3.22.
"Interim Balance Sheet" has the meaning as defined in Section 3.4.
"IRC" means the Internal Revenue Code of 1986, as amended, or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency.
"Knowledge" means that a Person will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) is actually aware of such fact or other matter.
"Legal Requirement" means any federal, state, local municipal law, ordinance,
principle of common law, regulation, or statue.
"Occupational Safety and Health Law" means any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"Order" means any award, decision, injunction, judgement, 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" means an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(b) 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; and
(c) 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 and) of such person.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of the Company, and (b) any amendments to any of
the foregoing.
"Person" means 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.
"Plan" has the meaning as defined in Section 3.13.
"Proceeding" means 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" means with respect to a specified Person other than an
individual:
(b) 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;
(c) any Person that holds a Material Interest in such specified Person;
(d) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(e) any Person in which such specified Person holds a Material Interest; and
(f) any Person with respect to which such specified Person serves as a general
partner of a trustee (or in a similar capacity).
For purposes of this definition, "Material Interest" means any direct or
indirect beneficial ownership of voting securities or other voting interest in a
Person or equity securities or other equity interests in a Person.
"Release" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" means, 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.
"Seller" has the meaning as defined in the first paragraph of this Agreement.
"Seller' Releases" has the meaning as defined in Section 2.4.
"Shares" has the meaning as defined in the Recitals of this Agreement.
"Subsidiary" means, 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 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.
"Taxes" shall mean all taxes, however denominated, including any interest or
penalties that may become payable in respect thereof, imposed by any federal,
state, local, or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the generality
of the foregoing, all income taxes (including the alternative minimum tax and
the environmental tax as defined in Section 55 and 59A of the IRC), payroll and
employee withholding taxes, occupation taxes, real and personal property taxes,
stamp taxes, transfer taxes, severance taxes, value added taxes, taxes measured
by or imposed on capital, levies, imposts, duties, work's compensation, and
other obligations of the same or similar nature, whether arising before or after
the Closing Date.
"Tax Return" means 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" means 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" means that 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.
7. SALE AND TRASFER OF SHARES; CLOSING
7.1 SHARES
Subject to the terms and conditions of the Agreement, at the Closing, Seller
will sell, transfer and deliver the Shares to Buyer, and Buyer will purchase the
Shares from Seller.
7.2 PURCHASE PRICE
The purchase price for the Shares will be $6,000,000.00 (the "Purchase Price"),
which shall be increased or decreased after the Closing Date by the Adjustment
Amount determined in accordance with the provisions of Sections 2.5 and 2.6
hereof.
7.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Seller located at 4111 East 37th Street North, Wichita,
Kansas 67220, at 10:00 a.m. (local time) on or before the 2nd day of June, 1999,
or at such other time and place as the parties may agree in writing. Subject to
the provisions of Section 9, failure to consummate the purchase and sale
provided for in the Agreement on the date and time and at the place determined
pursuant to this Section 2.3 will not result in the termination of the Agreement
and will not relieve any party of any obligation under this Agreement.
7.4 CLOSING OBLIGATIONS
At the Closing:
(b) Seller will deliver to Buyer:
(c) certificates representing the Shares, duly endorsed (or accompanied by duly
executed stock powers) for transfer to Buyer;
(ii)
(iii)a certificate executed by Seller representing and warranting to Buyer each
of Seller'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 (giving full
effect to any disclosures that were delivered by Seller to Buyer prior to
the Closing Date in accordance with Section 5.5);
(iv)
(v) a certificate, dated as of the Closing Date and executed by the Controller
of the Seller, substantially in the form and to the effect set forth in
Exhibit 2.4(iii) hereof;
(vi)
(vii)the resignation of all current officers and directors of the Company,
effective as of the Closing Date; and
(viii)
(ix) a copy of the Disclosure Letter, updated and current through the Closing
Date.
(x)
(xi) Buyer will deliver to Seller:
(xii)
(xiii) the amount of the Purchase Price by wire transfer to the bank account
specified by Seller; and
(xiv)a certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of buyer's representations and warranties
in the Agreement was accurate in all respects as of the date of the
Agreement and is accurate in all respects as of the Closing Date as if made
on the Closing Date; and
(o) Buyer and Koch Oil Marketing, S.A., and affiliate of Seller, shall enter
into that certain Slag Sale and Purchase agreement dated as of the Closing
Date, which shall be duly executed and delivered between the parties in
accordance with the form attached hereto as Exhibit 2.4(c) and made a part
hereof by reference
15.1 ADJUSTMENT AMOUNT
The Adjustment Amount (which may be a positive or negative number) will be equal
to (a) any changes in the net assets of the Company for the period between the
Interim Balance Sheet (as defined in Section 3.4) and the Closing Financial
Statements (as defined in Section 2.6), as determined in accordance with GAAP,
plus (b) interest on any such changes in the net assets of the Company, which
will be paid in accordance with the applicable provisions of Section 2.6(b).
15.2 ADJUSTMENT PROCEDURE
(b) within a period of six days after the Closing Date, Seller will cause the
Independent Auditor to prepare and deliver to Buyer an audited balance
sheet and supporting footnotes (_Closing Financial Statement") of the
Company as of May 31, 1999. If within thirty days following delivery of the
Closing Financial Statements, Buyer has not given Seller notice of its
objection to the Closing Financial Statements (such notice must contain a
statement of the basis of Buyer's objection), then the net assets of the
Company reflected in the Closing Financial Statements will be used in
computing the Adjustment Amount. If Buyer gives such notice of objection,
than the issues in dispute will be submitted to Ernst & Young, LLP,
certified public accountants (the "Accountants"), for resolution. If issues
in dispute are submitted to the Accountants for resolution, (i) each party
will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request
and are available to that party (or its independent public accountants),
and will be afforded the opportunity to present to the accountants any
material relating to the determination and to discuss the determination
with the Accountants; (ii) the determination by the Accountants, as set
forth in a notice delivered to both parties by the accountants, will be
binding and conclusive on the parties, except for fraud or obvious errors;
and (iii) Buyer and Seller will each bear 50% of the fees of the
Accountants for such determination.
(c) On the tenth business day following the final determination of the
Adjustment Amount, if the Purchase price (as increased or decreased by the
Adjustment Amount( is greater than the payment made pursuant to Section
2.4(b)(i), Buyer will pay the difference to Seller, and if the Purchase
price is less than such payment, Seller will pay the difference to Buyer.
All payments will be made together with interest at the annual rate of 8%
compounded daily beginning on the Closing Date and ending on the date of
payment. Payments must be made in immediately available funds. Payments to
Seller must be made in the manner set forth in Section 2.4(b)(i). Payments
to Buyer must be made by wire transfer to such bank account as Buyer will
specify.
4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING
(b) The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to conduct 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. Except as set forth in Part
3.1 of the Disclosure Letter, the 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 on 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.
(c) Seller has delivered to Buyer copies of the Organizational Documents of the
Company, as currently if effect.
3.1 AUTHORITY; NO CONFLICT
(b) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms. Seller has
the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and to perform its obligations under
this agreement.
(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 Company, or (B) any resolution adopted
by the board of directors or the stockholders of the 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 the Company or the
Seller, or any of the assets owned or used by the 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 the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) 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
(v) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither the Seller
nor the 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.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 750 shares of common
stock, without par value, of which 500 shares are issued and outstanding and
constitute the Shares. Seller is and will be on the Closing Date the record and
beneficial owner and holder of the Shares, free and clear of all Encumbrances.
No legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of any Legal Requirement. The
Company does not own, or have any Contract to acquire, any equity securities or
other securities of any Person (other than Company) or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer an unaudited balance sheet of the Company as at
April 30, 1999 (the "Interim Balance Sheet") and the related unaudited statement
of income for the six (6) months then ended. Such financial statements fairly
present the financial condition and the results of operations of the Company at
the respective date of and for the period referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring yearend adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse); 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 any notes to such financial statements. No financial
statements of any Person other than the Company are required by GAAP to be
included in the financial statements of the Company.
3.5 BOOKS AND RECORDS
Since November 1, 1997, the books of account, minute books, stock record books,
and other records of the Company, 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. Since November 1, 1997, the minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholder and the Board of Directors, and no meeting of
any such stockholder or Board of Directors 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 Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all real property, leaseholds, or other interests therein owned by the
Company. Seller has delivered or made available to Buyer copies of the
deeds, leases and other instruments by which the Company acquired such real
property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Seller or the Company
and relating to such property or interests. The Company owns (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 in connection with the facilities and other assets owned or
operated by the Company or reflected as owned in the books and records of
the Company, including all of the properties and assets reflected in the
Interim Balance Sheet (except for assets held under capitalized leases
disclosed or not otherwise required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Company since
the date of the Interim Balance Sheet (except for personal property
acquired and sold since the date of the Interim Balance Sheet in the
Ordinary Course of Business) are listed in Part 3.6 of the Disclosure
Letter. All material properties and assets reflected in the Interim Balance
Sheet are free and clear of all Encumbrances except, with respect to all
such properties and assets, (i) mortgages or security interests shown on
the Interim 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, (ii) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim 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, (iii) liens for current
taxes not yet due, and (iv) with respect to real property, 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 the Company, and zoning laws
and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
(b) The Company has a valid and subsisting leasehold estate in and the right to
quiet enjoyment to any leased real property for the full term of the lease
thereof. Each real property lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Company and of each other
Person that is a party thereto, and except as set forth in Part 3.6 of the
Disclosure Letter, there is no, and neither the Seller nor the Company has
knowledge of any, or has received any, notice of any default (or any
condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder. The Company has not assigned, sublet,
transferred, hypothecated or otherwise disposed of its interest in any real
property lease. No penalties are accrued and unpaid under any real property
lease.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The equipment of the Company is in good operating condition and repair, and
adequate for the uses to which it is being put, and none of the equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The equipment of the Company is
sufficient for the continued conduct of the Company's business after the Closing
in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the Interim Balance
Sheet or on the accounting records of the Company 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 Interim Balance Sheet or
on the accounting records of the Company 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 greater percentage of
the Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented by 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
setoff, within ninety days after the day on which it first becomes due and
payable. There is no contest, claim, or right of setoff, 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.
3.9 INVENTORY
At the time of Closing, the business assets and other property of the Company
shall not include any inventory of fly ash or any other dry bulk material.
3.10 NO UNDISCLOSED LIABILITIES
To the Knowledge of Seller and the Company, except as otherwise provided in
this Agreement or as set forth in Part 3.10 of the Disclosure Letter (or any
other part of the Disclosure Letter) or as otherwise included as part of any
Applicable Contract entered into by the Company in the Ordinary Course of
Business, the Company has no undisclosed liabilities or obligations of any
nature (whether absolute, accrued, contingent, or otherwise), except for (a)
liabilities or obligations reflected or reserved against in the Interim Balance
Sheet (including the related unaudited statement of income) or the Closing
Financial Statements and (b) liabilities or obligations otherwise incurred by
the Company in the Ordinary Course of Business.
3.11 TAXES
(a) The Company has filed or caused to be filed all Tax Returns that are or
were required to be filed pursuant to applicable Legal Requirements, except
where the failure to file Tax Returns would not have a material adverse
effect on the financial condition of the Company. The Company has 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 Seller or the 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 have been provided in the
Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of the Company have
been audited by the IRS or relevant state tax authorities or are closed by
the applicable statute of limitations for all taxable years through
December 31, 1992. All deficiencies proposed as a result of any such audits
have been paid, reserved against, settled, or are being contested in good
faith by appropriate proceedings. Except as described in Part 3.11 of the
Disclosure Letter, the Company has not 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 the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the respective
books of the Company are adequate and are at least equal to the Company's
liability for Taxes. There exists no proposed tax assessment against the
Company except as disclosed in the Interim Balance Sheet or in Part 3.11 of
the Disclosure Letter. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) To the Knowledge of Seller and the Company, all Tax Returns filed by (or
that include on a consolidated basis) the Company are true, correct, and
complete. Any tax sharing agreement between the Seller and the Company
shall be terminated as of the Closing Date and any such agreement will have
no further effect for any taxable year (whether the current year, a future
year or any past year).
(e) There are no liens for Taxes (other than current Taxes which are not yet
due and payable) upon any of the assets or property of the Company.
(f) The Contemplated Transactions described in this Agreement are not subject
to the tax withholding provisions of Subchapter A of Chapter 3 or Section
3406 of the IRC or any other Legal Requirement.
(g) All of the assets or other property with respect to which the Company
claims any depreciation, amortization or similar expense for Tax purposes
is owned by the Company.
(h) Seller, with the cooperation of Buyer and the Company, shall be responsible
for the timely filing (taking into account any extensions received from the
relevant Tax Authorities) of all Returns required by law to be filed by the
Company for periods ending on or prior to the Closing Date, which Returns
shall be true, correct and complete in all material respects, and all Taxes
indicated as due and payable on such Tax Returns shall be paid or will be
paid by Seller as and when required by law, except to the extent such Taxes
have been accrued on the Closing Financial Statements of the Company as of
the Closing Date.
(i) Any Tax refunds that are received by Buyer or the Company and any amounts
credited against taxes to which Buyer or the Company become entitled, that
relate to Tax periods or portions thereof ending on or before the Closing
Date, shall be for the account of Seller, and Buyer shall pay to Seller any
such refund or the amount of any such refund or the amount of any such
credit within a period of fifteen (15) days after receipt or entitlement
thereto. In addition, to the extent that a claim for refund or a proceeding
results in a payment or credit against any Tax by a taxing authority to the
Buyer or the Company of any amount accrued on the Closing Financial
Statements, the Buyer shall pay such amount to Seller within fifteen (15)
days after receipt or entitlement thereto.
(j) At Seller's request, the Buyer will cause the Company to make and/or join
with the Seller or Seller's affiliated group in making any election by
Seller or Seller's affiliated group that does not have a material adverse
impact on the Company or Buyer in any Tax period following the Closing
Date.
(k) In order to appropriately apportion any Taxes relating to a period that
includes the Closing Date, the Seller and the Buyer will, to the extent
permitted by applicable law, elect with the relevant taxing authority to
treat for all purposes the Closing Date as the last day of a taxable period
of the Company (a "short period"), and such period shall be treated as a
Short Period and a period ending prior to or on the Closing Date for
purposes of this Agreement.
(l) In any case where applicable law does not permit the Company to treat the
Closing date as the last day of a Short Period, then for purposes of this
Agreement, the portion of each Tax that is attributable to the Company's
operations which would have qualified as a Short Period if such election
had been permitted by applicable law (an "Interim Period") shall be (A) in
the case of a Tax that is not based on net or gross income, the total
amount of such Tax for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in such period, and (B) in
the case of a Tax that is based on net or gross income, the Tax that would
be due with respect to the Interim, Period if such Interim Period were a
Short Period shall be determined based upon an interim closing of the books
of the Company.
(m) Seller, at its expense, shall have the exclusive authority to represent the
Company before the IRS or any other governmental agency or authority or any
court regarding any Tax Return and/or Taxes paid by the Company for periods
ending on or before the Closing Date, including, but not limited to (A) the
exclusive control of any response to any examination by the IRS of any
federal tax returns of the Seller's affiliate group in respect of the
operation of the Company for such Periods or any examinations of a unitary
state return of Seller's affiliate group; and (B) the exclusive control
over any contest of any issue to the extent included in any return of the
Seller's affiliated group through final determination, including, but not
limited to, whether and in what forum to conduct such contest, and whether
and on what basis to settle such contest.
(n) Buyer agrees to retain all of the Company's records regarding any of the
Company's tax returns filed by law for all periods ending on or prior to
the Closing Date. Buyer shall not destroy any of the Company's records
covering periods prior to the Closing Date without the prior written
consent in each instance of the Seller.
(o) In general, Seller and Buyer agree to cooperate with each other and their
respective representatives in a prompt and timely manner, in connection
with the preparation and filing of, and any administrative or judicial
proceeding involving, any Tax return or information filed or required to be
filed by or for Seller or any member of Seller's affiliated group for any
period ending on or before the Closing Date, or the Buyer's affiliated
group or any member thereof for any period ending after the Closing Date,
with respect to any item or issue affecting the property or operations of
the Company. Such cooperation shall include, but not be limited to, the
execution and delivery to Seller by Buyer or any of its affiliated group
(including the Company) of any waiver of the statute of limitations or any
power of attorney required to allow Seller and its counsel to represent the
Company in any controversy which the Seller shall have the right to control
pursuant to this Section 3.11, the prompt and timely filing of appropriate
claims for any refund on IRS Form 1139 (or any successor thereto), and
making available to the other parties, during normal business hours, all
books, records (including, but not limited to, working papers and
schedules) and information, officers and employees (without substantial
interruption of employment) reasonably requested and necessary or useful in
connection with any tax inquiry, audit, investigation, dispute, litigation
or any other matter requiring such books, records, information, officers or
employees for any reasonable business purpose. Notwithstanding the
foregoing, neither party shall be required to furnish to the other the
federal income tax returns or drafts thereof (except as otherwise expressly
provided in this Agreement) of Seller's affiliated group or Buyer's
affiliated group, as the case may be, for any period, except that each
party shall furnish to the other the applicable portions of such returns
reporting the operations of the Company and the applicable portions of all
reports relating to the examination by the IRS or any other federal, state,
local or foreign governmental agency relating to the examination of such
returns.
(p) In order to assist Seller in complying with its obligations pursuant to
this Section 3.11, within 180 days following the Closing Date, Buyer shall
furnish to Seller any information that may be necessary for Seller to
prepare a draft federal income Tax return reporting the operations of the
Company for the Short Period. Such draft return shall be prepared without
regard to the items of income, gain, deduction, loss or credit of the other
members of the Seller's affiliated group. All items of income, gain,
deduction, loss and credit included in such draft return shall be reported
therein on a basis consistent with the reporting of such items (or
substantially similar items by the Company in prior federal income tax
returns of Seller's affiliated group), except to the extent otherwise
required by the IRC or as a result of a change in factual circumstances.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, there has not been any material
adverse change (or any event or development which, individually or together with
other such events, could reasonably be expected to result in a material adverse
change) in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a material adverse change.
3.13 EMPLOYEE BENEFITS, ETC.
(a) Subject to the provisions of Section 3.20, as of the Closing Date, the
Company shall terminate its employment relationship with all of its
employees and the Seller shall be responsible for (A) the payment of all
wages, severance and other remuneration due to such employees with respect
to their employment services for the Company prior to the Closing Date,
including accrued vacation, (B) the provision of health plan continuation
coverage for such employees in accordance with the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
Sections 601 through 609 of ERISA ("COBRA"), and (C) the handling of
relationships with and any liabilities to such employees as a result of any
claims, demands, suits, proceedings and the like arising prior to the
Closing Date, or obligations triggered by, or resulting from, the
Contemplated Transactions, except such liabilities as may arise from any
employmentrelated decisions of Buyer with respect to such employees
(b) As of the Closing Date, Buyer shall cause the Company to make available to
the employees of the Company hired on or after the Closing Date such
benefit plans and programs as shall be comparable to those offered to
similarly situated employees of the Company prior to the Closing Date. Such
employees shall be given credit for all years of service recognized by the
Company under its current employee benefit plans and other benefit
arrangements for the purposes of determining eligibility to become a
participant, including their vested interest under any retirement plan,
based upon their recognized original date of employment with the Company.
For each such employee who was enrolled in any group medical and dental
coverage offered by the Company on the Closing Date and who thereafter
enrolls in any group medical and dental plan of the Buyer or the Company,
the Buyer shall (A) waive or cause the Company to waive any preexisting
condition limitation that might otherwise apply to such employee, and (B)
agrees to recognize or cause the Company to recognize the dollar amount of
all expenses incurred by such employee during the year in which the Closing
Date occurs for purposes of satisfying the deductibles and copayment
limitations in accordance with the terms of such group medical and dental
plan of the Buyer or the Company. Seller will cause the Company to provide
the Buyer with a true and complete listing of all amounts so expended and
such other information as Buyer may reasonably require in order to properly
administer any provisions of this Section 3.13(a).
(c) All former Company employees hired by Buyer for employment by the Company
on or after the Closing Date shall be subject to the vacation policy of the
Buyer or any policy adopted by the Company thereafter, except that (A) such
employees shall be given full vacation credit for prior years of service
recognized by the Company prior to the Closing Date, and (B) the amount of
annual vacation to which such employees are entitled on the Closing Date
under the Company's vacation policy shall not be reduced and shall be
carried forward on an annual basis until each such employee's annual
vacation entitlements reach a parity with such entitlements under the
vacation policy of the Buyer or any such policy thereafter adopted by the
Company. Seller shall be responsible for payment to such employees based
upon any accrued and earned but unused vacation entitlements prior to the
Closing Date.
(d) Buyer and Seller hereby acknowledge and agree that this Agreement shall not
constitute a contract of employment or otherwise between either Buyer,
Seller or the Company and any employee of the Company, nor shall any such
employee be entitled to rely on this Agreement as a basis for any breach of
contract claim against either Buyer, Seller or the Company. In no event
shall Seller have any liability for the administration or payment of any
benefits due under any employee benefit plans maintained by the Buyer or
the Company after the Closing Date.
(e) Pursuant to the Company terminating its employment relationship with all of
its employees as contemplated under Section 3.13(a), Seller shall cause the
Company to comply with all applicable federal, state and local laws,
ordinances and regulations, including but not limited to the applicable
provisions of the Worker Adjustment Retraining and Notification Act.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the Knowledge of Seller and the Company since November 1, 1997, the
Company 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) to the Knowledge of Seller and the Company since November 1, 1997, no event
has occurred or circumstance exists that (with or without notice or lapse
of time) may constitute or result in a violation by the Company of, or a
failure on the part of the Company to comply with, any Legal Requirement;
and
(iv) the Company has not received since November 1, 1997, any pending 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 the
Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the Knowledge of Seller and the Company, the Company is, and at all
times since November 1, 1997, has been in full compliance with all of the
terms and requirements of each Governmental Authorization held by the
Company;
(ii) to the Knowledge of Seller and the Company, no event has occurred or
circumstance exists since November 1, 1997, 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 held by the Company, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization held
by the Company;
(iii) the Company has not received at any time since November 1, 1997, 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 held by the
Company, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any such Governmental Authorization; and
(iv) to the Knowledge of Seller and the Company, all applications required to
have been filed for the renewal of any Governmental Authorizations held by
the Company 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 held by the Company collectively constitute all
of the Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate its business in the manner it currently conducts and
operates such business and to permit the Company to own and use its assets in
the manner in which it currently owns and uses such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) To the Knowledge of Seller and the Company, 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 the Company or that otherwise relates
to or may affect the business of, or any of the assets owned or used by,
the 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 Seller and the Company, (1) no 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. Seller
has 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 the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the assets owned or used
by the Company, is subject;
(ii) the Seller is not subject to any Order that relates to the business of, or
any of the assets owned or used by, the Company; and
(iii)to the Knowledge of Seller and the Company, no officer, director, agent,
or employee of the 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 the Company.
(c) To the Knowledge of Seller and the Company, except as set forth in Part
3.15 of the Disclosure Letter:
(i) the Company is, and at all times since November 1, 1997, 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 the Company, or
any of the assets owned or used by the Company, is subject; and
(iii)the Company has not received, at any time since November 1, 1997, 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 the Company, or any of the assets owned
or used by the 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
Interim Balance Sheet, the Company has conducted its businesses only in the
Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition
by the 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 the Company;
(c) payment or increase by the 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,
except as contemplated under the respective employment contracts with
Messrs. James H. Irvine and Lee L. Irvine (the "Employment Contracts");
(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 the
Company, except as contemplated under the respective Employment Contracts;
(e) damage to or destruction or loss of any asset or property of the Company,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of the
Company, 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, except in the Ordinary Course of Business, or
(ii) any Contract or transaction involving a total remaining commitment by
or to the Company of at least $25,000, except in the Ordinary Course of
Business;
(g) sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the 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 the Company
in excess of $50,000;
(i) material change in the accounting methods used by the Company;
(j) agreement, whether oral or written, by the Company to do any of the
foregoing, except as contemplated under the respective Employment
Contracts;
(k) transaction by the Company with any of its officers, directors, employees,
stockholders or affiliates, other than pursuant to an Applicable Contract,
the respective Employment Contracts between the Seller and Messrs. James H.
Irvine and Lee L. Irvine, or arrangement in effect on the date of the
Interim Balance Sheet and disclosed to Buyer; or
(l) entry into of any agreement by the Company to do or engage in any of the
foregoing, including, without limitation, any merger, sale of substantially
all the assets or other business combination not otherwise restricted by
any of the foregoing provisions.
3.17 CONTRACTS; NO DEFAULTS
(a) To the Knowledge of Seller and the Company, Part 3.17(a) of the Disclosure
Letter contains a complete and accurate list, and Seller has delivered to
Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services or delivery
of goods or materials by the Company;
(ii) each Applicable Contract that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of the Company;
(iii)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;
(iv) 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 nondisclosure of any of
the Intellectual Property Assets;
(v) each collective bargaining agreement and other Applicable Contract to or
with any labor union or other employee representative of a group of
employees;
(vi) each joint venture, partnership, and other Applicable Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by the
Company with any other Person;
(vii)each Applicable Contract containing covenants that in any way purport to
restrict the business activity of the Company or limit the freedom of the
Company to engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for goods;
(ix) each power of attorney that is currently effective and outstanding;
(x) each Applicable Contract for capital expenditures in excess of $25,000;
(xi) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by the Company other than in
the Ordinary Course of Business; and
(xii)each amendment, supplement, and modification (whether oral or written) in
respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter, as of the
Closing:
(i) Seller (and no Related Person of Seller) neither has nor may acquire any
rights under, and Seller neither has nor 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, the Company; and
(ii) No officer, director, agent, employee, consultant, or contractor of the
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 the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) To the Knowledge of Seller and the Company, 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) to the Knowledge of Seller and the Company, the Company is, and at all
times since November 1, 1997, has been, in material compliance with all
applicable terms and requirements of each Contract under which the Company
has or had any obligation or liability or by which the Company or any of
the assets owned or used by the Company is or was bound;
(ii) to the Knowledge of Seller and the Company, each other Person that has or
had any obligation or liability under any Contract under which the Company
has or had any rights is, and at all times since November 1, 1997, has
been, in material compliance with all applicable terms and requirements of
such Contract;
(iii)to the Knowledge of Seller and the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
materially contravene, conflict with, or result in a material violation or
breach of, or give the 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) to the Knowledge of Seller and the Company, the Company has not given to or
received from any other Person, at any time since November 1, 1997, 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) to the Knowledge of Seller and the Company, there are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to the Company under current or completed Contracts
with any Person and no such Person has made written demand for such
renegotiation.
(f) to the Knowledge of Seller and the Company, the Contracts relating to the
sale, design, manufacture, or provision of products or services by the
Company 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
It is hereby acknowledged and agreed that the majority of the Company's property
and liability exposures are insured under risk financing programs provided
through the Seller, which utilize a combination of selfinsurance and large
deductibles, as well as other riskfinancing techniques; therefore, effective as
of the Closing, (a) Seller shall be entitled to cancel and terminate all
property and liability insurance coverage applicable to the property and
business operations of the Company, and (b) Buyer and/or the Company shall bear
all risk of loss and liability accruing from and after the Closing with respect
the property and business operations of the Company.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) To the Knowledge of Seller and the Company, the Company is, and at all
times since November 1, 1997, has been in substantial compliance with, and
since November 1, 1997, has not been and is not in material violation of,
any applicable Environmental Law. Neither the Seller nor the Company has
any basis to expect 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 by the Company
to comply with any Environmental Law, or of any actual or Threatened
obligation of the Company 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 the Company has an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, transported, imported, used, or
processed by the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received by the Company.
(b) There are no pending or, to the Knowledge of Seller and the Company,
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 the Company has an interest.
(c) Neither the Seller nor the Company has any basis to expect, nor has either
of them 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
Seller or the Company has an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) To the Knowledge of Seller and the Company, neither the Seller nor the
Company has any Environmental, Health, and Safety Liabilities with respect
to the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which the Company has an interest.
(e) To the Knowledge of Seller and the Company, there are no Hazardous
Materials present on the Facilities, 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. Neither the Company, nor to the
Knowledge of Seller and the Company, 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 the Company has an interest except in full compliance
with all applicable Environmental Laws.
(f) To the Knowledge of Seller and the Company, since November 1, 1997, there
has been no Release or, to the Knowledge of Seller and the Company, 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 the Company has an interest, whether by
Seller, the Company, or any other Person.
(g) Seller has to its Knowledge delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Company 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 (other than officers and
directors) of the Company, including each employee on leave of absence or
layoff status: name; job title; current compensation paid or payable and
any change in compensation since November 1, 1997; vacation accrued; and
service credited for purposes of vesting and eligibility to participate
under the Company's pension, retirement, profit-sharing, thriftsavings,
deferred compensation, stock bonus, stock option, cash bonus, employee
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.
(b) Except as set forth in the respective Employment Contracts between the
Seller and Messrs. James H. Irvine and Lee L. Irvine, or Part 3.20 of the
Disclosure Letter, to the Knowledge of Seller and the Company, no employee
of the Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other Person
that in any way adversely affects or will affect (i) the performance of his
duties as an employee of the Company, or (ii) the ability of the Company to
conduct its business in the Ordinary Course of Business.
(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 Company, 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.
(d) Buyer may interview and make offers of employment to each of the employees
of the Company, effective as of the Closing Date. Any such offers of
employment shall be made on substantially the same terms and conditions and
at substantially the same levels of compensation as exist with each such
employee prior to the Closing Date. On or before the Closing Date, Buyer
shall provide Seller with a written list of all employees of the Company
who have accepted offers from the Buyer for employment by the Company as of
the Date of Closing.
3.21 LABOR RELATIONS; COMPLIANCE
The Company is not a party to any collective bargaining or other labor
Contract. There has not been, there is not presently pending or existing,
and there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or
affecting the 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 the Company or its premises, or
(c) any application for certification of a collective bargaining agent. 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 the Company, and no such action is contemplated by the
Company. To the Knowledge of Seller, the 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. To the Knowledge
of Seller, the Company is not 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.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets. With respect to the Company, the term
"Intellectual Property Assets" includes:
(i) the name Irvine Fly Ash, Inc., all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks"); and
(ii) all knowhow, 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 the Company as licensee or licensor.
(b) KnowHow Necessary for the Business.
(i) The Intellectual Property Assets are all those necessary for the operation
of the Company's business as currently conducted. The Company 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.
(ii) To the Knowledge of Seller and the Company, no employee of the 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 the Company.
(c) Trademarks.
(i) To the Knowledge of Seller and the Company, the Company 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.
(ii) To the Knowledge of Seller and the Company, no Mark has been or is now
involved in any opposition, invalidation, or cancellation and, to the
Knowledge of Seller, no such action is Threatened with the respect to any
of the Marks.
(iii)To the Knowledge of Seller and the Company, there is no potentially
interfering trademark or trademark application of any third party.
(d) Trade Secrets.
(i) To the Knowledge of Seller and the Company, 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) Seller and the Company have taken all reasonable precautions in the
Ordinary Course of Business to protect the secrecy, confidentiality, and
value of their Trade Secrets.
(iii)To the Knowledge of Seller and the Company, (A) the Company has good title
and an absolute (but not necessarily exclusive) right to use the Trade
Secrets, (B) the Trade Secrets are not part of the public knowledge or
literature, and have not been used, divulged, or appropriated either for
the benefit of any Person (other than the Company) or to the detriment of
the Company, and (C) no Trade Secret is subject to any adverse claim or has
been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
To the Knowledge of Seller and the Company, neither the Company nor any
director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the 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 the Company, or (iv) in violation of any Legal
Requirement; or (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) To the Knowledge of Seller and the Company, no representation or warranty
of Seller 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 5.5 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) There is no fact known to Seller that has specific application to the
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 Company that has not been set forth in this
Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
As of the Closing, neither the Seller nor any Related Person of Seller or of the
Company has any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company's
business, except that certain Commercial Lease Agreement dated as of November 1,
1997, by and between 2303 Gilbert Associates, as Lessor, and the Company, as
lessee, covering certain office facilities located at 2303 Gilbert Avenue,
Cincinnati, Ohio 45206 (the "Office Lease"). Neither the Seller nor any Related
Person of Seller or, to the Knowledge of Seller, of the Company is the owner (of
record or as a beneficial owner) of any equity interest, or any other financial
or profit interest in, any Person that has (i) business dealings or a material
financial interest in any transaction with the Company other than the Office
Lease or business dealings or transactions conducted in the Ordinary Course of
Business with the Company at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with the
Company with respect to the sale of fly ash or related services of the Company
(a "Competing Business") in any market presently served by the 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
overthecounter market. Except as set forth in Part 3.25 of the Disclosure
Letter, neither the Seller nor any Related Person of Seller or of the Company is
a party to any Contract with, or has any claim or right against, the Company.
3.26 BROKERS OR FINDERS
Seller and its 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 BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Utah.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Buyer has
the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the related closing documents and to perform its
obligations under this Agreement and the related closing documents,
respectively.
(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.
4.3 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 of 1933
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
4.4 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 the
Knowledge of Buyer, no such Proceeding has been Threatened.
4.5 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.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION
Subject to the terms and conditions contained in that certain Confidentiality
Agreement dated as of December 9, 1998, by and between Buyer and Seller, it is
understood and agreed that between the date of this Agreement and the Closing
Date, without unreasonable interference with the business operations of the
Company, Seller will, and will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives (collectively, "Buyer's Advisors") full and
free access to the Company's personnel, properties, 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 pertaining to the Company as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional financial,
'operating, and other data and information pertaining to the Company as Buyer
may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Seller will, and will
cause the Company to:
(a) conduct the business of the Company only in the Ordinary Course of
Business;
(b) use their Best Efforts to preserve intact the current business organization
of the Company, keep available the services of the current officers,
employees, and agents of the Company, and maintain the relations and good
will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(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 the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Seller will not, and will cause the Company
not to, without the prior consent of Buyer, take any affirmative action, or fail
to take any reasonable action within its control, as a result of which any of
the changes or events listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller will, and
will cause the Company to, make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions. Between the
date of this Agreement and the Closing Date, Seller will, and will cause the
Company to, (a) reasonably 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) reasonably cooperate with Buyer in
obtaining all consents identified in Schedule 4.2.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Seller will
promptly notify Buyer in writing if the Seller or the Company becomes aware of
any fact or condition that causes or constitutes a material Breach of any of
Seller's representations and warranties as of the date of this Agreement, or if
the Seller or the 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 material 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, Seller will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, the Seller will promptly
notify Buyer of the occurrence of any material Breach of any covenant of Seller
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.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Seller will cause all
indebtedness owed to the Company by either Seller or any Related Person of
the Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Seller will not, and will cause the Company and each of its Representatives
not to, directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide any
nonpublic 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 the Company, or any of the capital stock of
the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Seller will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.9 NONCOMPETITION
From and after the Closing Date, Seller agrees that:
(a) Except as otherwise contemplated under this Section 5.9, for a period of
two (2) years from the Closing Date (the "Restricted Period"), the Seller,
alone or in conjunction with any other Person, or directly or indirectly
through a Related Person, will not directly or indirectly own, manage,
operate, join, have a financial interest in, control or participate in the
ownership, management, operation or control of, or use or permit its name
to be used in connection with, or be otherwise connected in any manner with
any business or enterprise engaged in providing services of any nature
whatsoever related to the management, disposal, marketing, sale or other
beneficial reuse of fly ash (the "Restricted Business") in the states of
Ohio, Missouri, Indiana, Kentucky, Tennessee, West Virginia and/or Illinois
(the "Territory"), provided that the Restricted Business shall not include
(i) the transportation or terminating of fly ash or (ii) consulting
services or the sale of flyash products (not to exceed 2,000 tons of fly
ash per year) related to mixdesign by Seller or any Related Person within
the Territory.
(b) In the event that any petroleum coke customer of the Seller requests that
the Seller, alone or in conjunction with any other Person, or directly or
indirectly through a Related Person, perform or provide any services
related to the Restricted Business within the Territory during the
Restricted Period, the Buyer shall have a right of first refusal to perform
or provide the requested services. Once Seller has secured a bona fide
offer from a third party to provide such services, then Seller will
promptly submit in writing the pertinent details of such offer to Buyer,
provided that Buyer shall then have a period of ten (10) business days to
notify Seller in writing of the exercise of its right of first refusal in
accordance with the terms of the thirdparty offer. To the extent that Buyer
fails to notify Seller in writing of the exercise of its right of first
refusal hereunder, then Seller may accept the terms of the thirdparty offer
without any further duty or obligation to Buyer as to the performance of
such services in connection with the Restricted Business. The parties agree
that the intent of this Section 5.9(b) is to allow the Seller to meet the
needs of its petroleum coke customers while at the sale time honoring the
provisions of this Agreement. As such, the benefits of any contract between
the Seller and its coalfired power plant customer related to the Restricted
Business shall be in the form of a passthrough relationship for the benefit
of the Buyer, and shall not contain any markup or other financial
consideration to the Seller.
(c) During the Restricted Period, the Seller shall not directly or indirectly,
or through a Related Person, (i) influence any individual who was an
employee or consultant of the Company at any time, to terminate his or her
employment or consulting relationship with the Company (except as provided
in the respective Employment Contracts), (ii) interfere in any other way
with the employment, or other relationship, of any employee or consultant
of the Company or (iii) cause or attempt to cause or participate in any way
in any discussion or negotiation which may cause (x) any client, customer
or supplier of the Company or (y) any prospective client, customer or
supplier of the Company, from engaging in business with the Company.
(d) The Seller agrees that the Buyer's remedies at law for any breach or threat
of breach by it of any of the provisions of this Section 5.9 will be
inadequate, and that, in addition to any other remedy to which Buyer may be
entitled at law or in equity, Buyer shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining order or
orders to prevent breaches of the provisions of this Section 5.9 and to
enforce specifically the terms and provisions hereof, in each case without
the need to post any security or bond. Nothing herein contained shall be
construed as prohibiting Buyer from pursuing, in addition, any other
remedies available to it for such breach or threatened breach. A waiver by
the Buyer of any breach of any provision hereof shall not operate or be
construed as a waiver of a breach of any other provisions of this Agreement
or of any subsequent breach.
(e) The parties hereto consider the restrictions contained in this Section 5.9
to be reasonable for the purpose of preserving the goodwill, proprietary
rights and going concern value of the Company, but if a final judicial
determination is made by a court having jurisdiction that the time or
territory or any other restriction on the Seller's activities, the
provisions of this Section 5.9 shall not be rendered void but shall be
deemed amended to apply as to such maximum time and territory and to such
other extent as such court may judicially determine or indicate to be
reasonable. Alternatively, if the court referred to above finds that any
restriction contained in this Section 5.9 or any remedy provided herein is
unenforceable, and such restriction or remedy cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of
any of the other restrictions contained therein or the availability of any
other remedy.
6. COVENANTS OF BUYER
6.1 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, (i) reasonably cooperate with Seller with respect
to all filings that Seller is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) reasonably cooperate
with Seller 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.
6.2 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 7 and 8 to be satisfied.
7. 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
in writing by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Seller' 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, subject to the effect of any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Seller is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), 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
5.4 and 5.8 must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Seller's legal counsel, dated the Closing Date, in the form
of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the purpose of (i)
enabling its counsel to provide the opinion referred to in Section 8.4(a),
(ii) evidencing the accuracy of any of Seller's representations and
warranties, (iii) evidencing the performance by either Seller of, or the
compliance by either Seller with, any covenant or obligation required to be
performed or complied with by such Seller, (iv) evidencing the satisfaction
of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5 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.
7.6 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, the Company, or (b) is entitled to all
or any portion of the Purchase Price payable for the Shares.
7.7 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.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Seller' obligation to sell the Shares and to take the other actions required to
be taken by Seller at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may
be waived in writing by Seller, in whole or in part):
8.1 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.
8.2 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 and must have paid the Purchase Price
required to be made by Buyer pursuant to Section 2.4(b)(i).
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Seller:
(a) an opinion of Buyer's legal counsel, dated the Closing Date, in the form of
Exhibit 8.4(a); and
(b) such other documents as Seller may reasonably request for the purpose of
(i) enabling their counsel to provide the opinion referred to in Section
7.4(a), (ii) evidencing the accuracy of any representation or warranty of
Buyer, (iii) 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, (iv) evidencing the satisfaction of any condition referred
to in this Section 8, or (v) otherwise facilitating the consummation of any
of the Contemplated Transactions.
8.5 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 Seller to Buyer, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Seller 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 7 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
in writing on or before the Closing Date; or (ii) by Seller, 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 Seller to comply with their obligations under this
Agreement) and Seller have not waived such condition in writing on or
before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller 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
2, 1999, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11. 1 and
11.3 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 and/or equitable remedies will survive such termination
unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing, subject to the provisions of Sections 10.4 and 10.5.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Subject to the provisions of Sections 10.4 and 10.5, Seller will indemnify and
hold harmless Buyer, the Company, 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, expense (including
reasonable attorneys' fees) (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in this
Agreement (after 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 Seller pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by Seller in this
Agreement as if such representation or warranty were made on and as of the
Closing Date (after giving effect to any supplement to the Disclosure
Letter), other than any such Breach that is expressly disclosed in a
supplement to the Disclosure Letter;
(c) any Breach by Seller of any covenant or obligation of such Seller in this
Agreement; or
(d) 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 the Seller or the Company (or any Person
acting on their behalf) in connection with any of the Contemplated
Transactions.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller, and will pay to Seller 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, (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, (d) any Environmental, Health, and Safety
Liabilities arising out of or relating to the ownership, operation, or condition
occurring at any time after the Closing Date of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) in which the Company has an ownership interest, or (e) any bodily
injury (including illness, disability, and death), personal injury, property
damage (including trespass, nuisance, wrongful eviction, and deprivation of the
use of real property), or other damage of or to any Person, including any
employee of former employee of the Company, in any way arising from any
Hazardous Activity conducted by the Company after the Closing Date, or from
Hazardous Material that was Released by the Company at any time after the
Closing Date.
10.4 TIME LIMITATIONS
If the Closing occurs, Seller 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
within a period of two (2) years following the Closing Date, Buyer notifies
Seller of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer.
10.5 LIMITATIONS ON AMOUNT-SELLER
The indemnifying party shall not have any liability or obligation (for
indemnification or otherwise) to the indemnified party with respect to the
matters described in Sections 10.2 and 10.3 until the total of all Damages
incurred by the indemnified party with respect to such matters exceeds $75,000
or the limits of any applicable and recoverable insurance coverage available to
the indemnified party, whichever is greater, and then only for the amount by
which such Damages exceed $75,000 or the limits of any such applicable and
recoverable insurance coverage, whichever is greater; provided, however, that in
no event shall Seller or any of its affiliated entities have any liability or
obligation under this Agreement, including but not limited to the provisions of
Section 10.2 hereof, in excess of Six Million and No/100 Dollars
($6,000,000.00).
10.6 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(b)
(c) Promptly after receipt by an indemnified party under Sections 10.2 or 10.3
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
indemnified party's failure to give such notice.
(d)
(e) If any Proceeding referred to in Section 10 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 reasonably satisfactory to the 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 10 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. 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, which consent shall not be unreasonably withheld or
delayed, 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 indemnifying 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 or
delayed).
(d) Seller hereby consent to the nonexclusive 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 agrees that
process may be served on Seller with respect to such a claim anywhere in
the world.
10.7 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS
A claim for indemnification for any matter not involving a thirdparty claim may
be asserted by notice to the party from whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 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. Seller will cause the Company not to incur any
material outofpocket expenses in connection with this Agreement, unless
expressly approved in writing by Buyer. 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.
11.2 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 Seller determines. Unless consented to in writing by Seller in
advance or required by Legal Requirements, prior to the Closing Buyer shall keep
this Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Seller and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and suppliers
and others having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication. Buyer shall have the right to announce (publicly or otherwise)
the acquisition of the Company following the Closing of the Contemplated
Transactions.
11.3 CONFIDENTIALITY
Without limitation of that certain Confidentiality Agreement dated as, of
December 9, 1998, by and between Seller and Buyer, between the date of this
Agreement and the Closing Date, Buyer and Seller will maintain in confidence,
and will cause their respective directors, officers, employees, agents, and
advisors to maintain in confidence, any written, oral, or other information
obtained in confidence from another party or the 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 or necessary or appropriate in Connection with any legal
proceedings.
11.4 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, (b) sent by telecopier (with written confirmation of receipt), (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):
Seller: Koch Carbon, Inc.
4111 East 37th Street North
Wichita, Kansas 67220
Attention: President
Facsimile No.: 316/8285046
with a copy to: Ronald D. Watson, Esq.
Facsimile No.: 316/8285803
Buyer: ISG Resources, Inc.
136 East South Temple
Suite 1300
Sale Lake City, Utah 84111
Attention: Brett A. Hickman, Esq.
Facsimile No.: 801/2369730
11.5 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 Kansas, County of Sedgwick, or, if it has or can
acquire jurisdiction, in the United States District Court for the Western
District of Kansas, 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.
11.6 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.
11.7 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.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter 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.
11.9 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 this 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.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRDPARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. 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.
11.11 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.
11.12 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.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Kansas without
regard to conflicts of laws principles.
11.15 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.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the date first written above.
Seller: Buyer:
Koch Carbon, Inc. ISG Resources, Inc.
By: By:
Name: Name:
Title: Title:
ISG Resources, Inc.
Statement re Computation of Ratio of Earnings to Fixed Charges
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year Year 2 1/2 Months 9 1/2 Months
Ended Ended Ended Ended
December 31, December 31, December 31, October 13, Year Ended December 31,
----------------------
1999 1998 1997 1997 1996 1995
---------------------------- ------------ ------------ --------- ------------
Fixed Charges:
<S> <C> <C> <C> <C> <C> <C>
Interest on debt $ 12,690 $ 8,874 $ 628 $ 4,160 $ 4,853 $ 4,081
Amortization of debt issuance costs 702 464 - - - -
Interest portion of rental expense 2,531 2,038 420 1,448 2,045 2,016
---------------------------- ------------ ------------ --------- ------------
Total fixed charges $ 15,923 $ 11,376 $ 1,048 $ 5,608 $ 6,898 $ 6,097
============================ ============ ============ ========= ============
Earnings:
Pre-tax income (loss) from continuing
operations $ 285 $ 4,808 $ 517 $ (2,478) $(2,232) $ (2,541)
Add back fixed charges 15,923 11,376 1,048 5,608 6,898 6,097
---------------------------- ------------ ------------ --------- ------------
Total earnings $ 16,208 $ 16,184 $ 1,565 $ 3,130 $ 4,666 $ 3,556
============================ ============ ============ ========= ============
Ratio of Earnings to Fixed Charges 1.02 1.42 1.49 0.56 0.68 0.58
============================ ============ ============ ========= ============
Deficit of Earnings to Fixed Charges $ - $ - $ - $ 2,478 $ 2,232 $ 2,541
============================ ============ ============ ========= ============
</TABLE>
Subsidiaries of the Registrant (As of March, 30, 2000)
Best Masonry & Tool Supply, Inc. f/k/a J. Marvin Isaac Interests, Inc.(Texas
domestic)
Lewis W. Osborne, Inc. (California domestic)
United Terrazzo Supply Co., Inc. (California domestic)
Magna Wall, Inc. (Texas domestic)
ISG Canada Limited (New Brunswick domestic - Canadian subsidiary)
ISG Manufactured Products, Inc. (Utah domestic)
Don's Building Supply, L.L.P. (Texas domestic)*
Palestine Concrete Tile Company (Texas domestic)
* This L.L.P is owned 90% by ISG Manufactured Products, Inc. and 10% by ISG
Resources, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001063018
<NAME> ISG Resources, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 21,496,616
<ALLOWANCES> 329,000
<INVENTORY> 4,055,425
<CURRENT-ASSETS> 27,046,921
<PP&E> 41,477,562
<DEPRECIATION> 7,893,374
<TOTAL-ASSETS> 220,462,511
<CURRENT-LIABILITIES> 18,075,120
<BONDS> 133,500,000
0
0
<COMMON> 0
<OTHER-SE> 27,161,804
<TOTAL-LIABILITY-AND-EQUITY> 220,462,511
<SALES> 120,319,575
<TOTAL-REVENUES> 156,205,272
<CGS> 83,442,725
<TOTAL-COSTS> 142,883,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,391,944
<INCOME-PRETAX> 285,177
<INCOME-TAX> 647,589
<INCOME-CONTINUING> (362,412)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (362,412)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
