SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) May 31, 2000
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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 (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
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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Item 2. Acquisition or Disposition of Assets
Effective May 31, 2000, ISG Resources, Inc. ("ISG") acquired all of the
outstanding stock of Palestine Concrete Tile Company ("Palestine"), as well as
certain land and buildings used by Palestine in the conduct of its business.
Palestine is a Texas corporation primarily engaged in the manufacture and
distribution of concrete block.
ISG will account for the acquisition of Palestine under the purchase
method of accounting. ISG established through negotiation a purchase price of
$18,600,000 in cash, subject to certain adjustments, for all of the outstanding
stock of Palestine held by Dale & Brenda, Ltd. and Dan & Dorenda, Ltd.
(collectively, the "Family Limited Partnerships"). ISG established through
negotiation a purchase price of $400,000 for the land and buildings held by the
Daniel Andrew Smith Family Trust and the Dale Wayne Smith Family Trust
(collectively, the "Family Trusts"). A copy of the stock purchase agreement and
an amendment to the stock purchase agreement are attached.
ISG financed the acquisition of Palestine by obtaining a $15,000,000
increase in the Secured Credit Facility on May 26, 2000 and receiving an equity
contribution of $10,000,000 from its parent, Industrial Services Group, Inc., on
April 19, 2000.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The financial
statements of Palestine, for the periods specified in Rule 3-05(b) of Regulation
S-X and as prepared in accordance with the requirement under Rule 2-02 of
Regulation S-X, are not being included within this report, but will be filed as
an amendment to this report within sixty days of the date hereof.
(b) Pro Forma Financial Information. The pro forma financial
information of Palestine is not being included within this report, but will be
filed as an amendment to this report within sixty days of the date hereof.
(c) Exhibits. The following documents are being filed as exhibits to
this report:
(i) Stock Purchase Agreement, dated as of April 30, 2000, by and
between ISG, the Family Limited Partnerships, the Family
Trusts, Dale W. Smith and Danny A. Smith.
(ii) Amendment to Stock Purchase Agreement, dated May 16, 2000,
by and between ISG, the Family Limited Partnerships, the
Family Trusts, Dale W. Smith and Danny A. Smith.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
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(registrant)
June 15, 2000 BY: /s/ R. Steve Creamer
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(Date) R. STEVE CREAMER,
CHIEF EXECUTIVE OFFICER
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated April 30,
2000, between ISG Resources, Inc., a Utah corporation ("Purchaser"), Dale &
Brenda, Ltd. and Dan & Dorenda, Ltd. (collectively the "Family Limited
Partnerships"), the Daniel Andrew Smith Family Trust and the Dale Wayne Smith
Family Trust (collectively the "Family Trusts") and Dale W. Smith and Danny A.
Smith.
RECITALS
The Family Limited Partnerships, Dale W. Smith and Danny A. Smith are
the owners of all of the issued and outstanding stock of Palestine Concrete Tile
Company (the "Company").
The Family Trusts are the owners of the land and buildings used by the
Company in Palestine, Texas (collectively the "Real Estate Assets") in the
conduct of its business.
The issued and outstanding stock of the Company will be collectively
referred to herein as the "Purchased Stock".
The Family Limited Partnerships, the Family Trusts and Dale W. Smith
and Danny A. Smith will be collectively referred to herein as the "Seller" or
the "Sellers".
The Purchaser and the Sellers are sometimes called the "Parties".
The Sellers own and desire to sell to Purchaser the Purchased Stock and
the Real Estate Assets.
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 and REAL ESTATE ASSETS; 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 Estate Assets.
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the
Purchased Stock and the Real Estate Assets shall be an amount equal to eighteen
million dollars ($18,000,000.00), less the balance of the Intercompany
Indebtedness (as defined below) paid by Purchaser, subject to the adjustments
set forth in Sections 1.2.2 and 1.2.3 below. The Purchase Price shall be
allocated as follows:
1.2.1.1 $17,600,000 for the Purchased Stock; and
1.2.1.2 $400,000 for the Real Estate Assets.
1.2.2 The Purchase Price will be increased, as set forth below
if the actual EBITDA (earnings before interest, taxes, depreciation and
amortization; the "actual EBITDA") of the Company for the twelve month period
ending on the Closing Date, and calculated in accordance with the formula
attached hereto as Exhibit "A", is greater than $3,600,000.00 ("the proforma
EBITDA"). In such event, the Purchase Price shall be increased by a sum equal to
five (5) times the difference between the actual EBITDA and the proforma EBITDA,
if a positive number.
1.2.3 In addition, the Purchase Price will be increased, on a
dollar-for-dollar basis, if and by the amount by which the working capital of
the Company (total current assets less total current liabilities), calculated as
of the Closing Date, in accordance with the formula attached hereto as Exhibit
"B", exceeds $2,600,000.00; provided, however, that for purposes of calculating
the working capital of the Company as of the Closing Date, no portion of the
indebtedness of the Company to either Cement-Dan, Inc., or Agg-Dale, Inc., under
the terms of those two certain promissory notes dated December 29, 1995 (the
"Intercompany Indebtedness") shall be treated as a current liability of the
Company.
1.2.4 Notwithstanding the amount of the increase to the
Purchase Price, if any, pursuant to the terms of Sections 1.2.2 and 1.2.3 above,
the Purchase Price shall in no event be greater than $20,000,000 (less the
balance of the Intercompany Indebtedness paid by Purchaser as of the Closing
Date) and shall not be otherwise reduced by any amount if TXI Operations, L.P.
("TXI") does not, for any reason, consent to the assignment and transfer of all
of the Company's rights and obligations under that certain Lease Agreement dated
October 14, 1997, by and between TXI and the Company (the "TXI Lease
Agreement").
1.2.5 To determine whether an adjustment is appropriate, the
Purchaser shall (within sixty days of the Closing Date) provide the Seller with
a balance sheet of the Company dated as of the Closing Date and an income
statement of the Company for the twelve month period ending on the Closing Date,
each prepared in accordance with GAAP, as applied historically by the Company,
along with a calculation of the actual EBITDA and working capital of the Company
as of the Closing Date, each in accordance with Exhibits "A" and "B" attached
hereto indicating whether an adjustment is due pursuant to either section 1.2.2
or 1.2.3, or both (the "Purchaser's Calculation"). If the Seller (within thirty
days of receiving the Purchaser's Calculation") disagrees with the Purchaser's
Calculation, then the Parties will mutually agree on the prompt engagement of 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.
The Parties shall each bear one-half of the fees and expenses if an independent
accounting firm is engaged pursuant to this section 1.2.5.
1.3 Closing. The Closing (the "Closing") of the purchase and sale of
the Purchased Stock will take place at the offices of Sayles & Lidji, Dallas,
Texas on the later of:
1.3.1 at 10:00 A.M. on March 31, 2000;
1.3.2 or at such other time as Purchaser and the Sellers shall
mutually agree (the "Closing Date").
1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the
sum of $18,000,000.00, less the balance of the Intercompany Indebtedness paid by
Purchaser as of the Closing Date, 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) days before the Closing Date, and pay the balance
due under the Intercompany Indebtedness directly to Cement Dan, Inc. and
Agg-Dale, Inc. Simultaneously, the Sellers will sell and convey to Purchaser the
Purchased Stock and the Real Estate Assets free and clear of all Liens, except
for any Permitted Encumbrances, by delivering to Purchaser a stock
certificate(s), registered in the name of Purchaser, representing the Purchased
Stock, along with general warranty deeds conveying title to the Real Estate
Assets. 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 Sellers agree with the Purchaser's Calculation,
then within twenty (20) days after delivery of the Purchaser's Calculation, and
if the Purchaser's Calculation indicates that an upward adjustment is
appropriate, the Purchaser will deliver to the Sellers cash in the amount of the
indicated adjustment.
1.5.2 If the Sellers disagree with the Purchaser's Calculation
then, within twenty (20) days after delivery of the report by the independent
accounting firm, referred to in Section 1.2.5, and 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.
1.5.3 If the Purchaser's Calculation, or the independent
accounting firm's report, indicates that an upward adjustment is appropriate,
the Purchaser shall pay the Sellers interest, at the rate of eight percent (8%)
per annum, on the principal amount of the upward adjustment for the period from
the Closing Date until the payment is made, if made within the twenty (20) day
period referred to in Sections 1.5.1 and 1.5.2, as the case may be, and at the
rate of twelve percent (12%) per annum thereafter until paid.
1.6 Sellers and Purchaser covenant and agree to act and cooperate with
each other in good faith in giving reasonable notice to all of the employees of
the Company (the "Company's Employees") about the transaction contemplated in
this Agreement affecting them; provided the form and content thereof is
reasonably satisfactory to Sellers and Purchaser. Purchaser covenants and agrees
to offer, or continue, at-will employment by the Company, on whatever terms and
conditions and for whatever time period and positions as Purchaser may elect, in
its sole discretion, to as many of the Company's Employees as deemed practicable
by Purchaser following the Closing, provided that the number of the Company's
Employees who are not offered employment shall be less than 15 persons.
Purchaser agrees to honor any accrued, but unused vacation earned by those of
the Company's Employees hired by the Purchaser on the Closing Date. Purchaser
agrees that as to any of the Company's Employees hired by the Purchaser at the
Closing, such employees shall be given credit by Purchaser for time in service
with the Company under plans granting additional benefits for time in services
(such as increased vacation, faster vesting, etc.)
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Daniel Andrew Smith and Dale Wayne Smith (the "Seller
Representatives"), 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
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 charter or enabling 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 $10.00 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, except as set forth in Section 2.2 of the Disclosure Schedule (the
Disclosure Schedule is attached hereto as Exhibit G), 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
Family Limited Partnerships, Dale W. Smith and Danny A. Smith 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 charter or enabling 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 material violation or material 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 (vi) 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. The Sellers have caused the Company to
furnish to Purchaser true and complete copies of (i) the audited financial
statements of the Company for the periods ending December 31, 1997, 1998 and
1999 and (ii) unaudited, but reviewed, financial statements of the Company for
the period January 1, 2000 through February 29, 2000, along with the related
internal balance sheets and statements of operations 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, in all material respects, 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, applied on a basis consistent with prior years and
present fairly the financial condition of the Company as of the dates set forth
thereon, except as specifically noted in the notes thereto, and except for
normal adjustments made for interim reporting purposes.
2.9 Absence of Changes. Since December 31, 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 and/or the
Real Estate Assets. 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, 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, other than in
the ordinary course of business; (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, other
than in the ordinary course of business 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
and/or the Real Estate Assets 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 and/or the Real Estate
Assets, other than write-offs and/or write-downs of accounts receivable or
inventory in the ordinary course of the Company's business;
2.9.7 any purchase of any Assets of any Person or disposition
of, or incurrence of a Lien on, any 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 other than in the ordinary course of business, 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, 1999 and disclosed to
Purchaser pursuant to Section 2.18.1 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, 1999 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 and/or the Real Estate Assets other
than Liabilities incurred in the ordinary course of the Company's business since
December 31, 1999.
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 Estate Assets 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 that are due and payable by the Company and/or related to the Real Estate
Assets (whether or not shown on any Tax Return) have been paid for all periods
up to and including December 31, 1999. 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 Neither the Sellers nor the Company are 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.
Neither the Sellers nor the Company have 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 or any Seller 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 and/or the Real Estate Assets
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 January 1, 1997. There are no Liens for Taxes
upon the Assets of the Company and/or the Real Estate Assets, except for
statutory liens for current taxes not yet due, but which have been accrued for
on the Books and Records 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 Seller Representatives, threatened against, relating
to or affecting the Company, or any of its Assets and/or the Real Estate 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 or the Sellers, could reasonably be
expected to result in (x) any injunction or other equitable relief against the
Company or the Sellers, 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 Seller Representatives 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/or related to the Real Estate Assets; and
2.12.1.4 neither the Sellers nor the Company has
received notice or are the Seller Representatives 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 of 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 and/or related to the
Real Estate Assets during the period from January 1, 1996 to the date hereof
Section 2.12 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 material default under,
any Law or Order applicable to the Company or any of its Assets and/or the Real
Estate 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 maintained by 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, the latest summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications during
the last three years, 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 in all material respects, and has at all times complied in all material
respects, 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, except where any such noncompliance
could not result in a material adverse change in the financial condition of the
Company;
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 material 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 either Seller Representative, threatened against
or with respect to any Benefit Plan and there are not facts or circumstances
known to either Seller Representative 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 does not have any Owned Real Property.
2.15.3 The Family Trusts have good and marketable title to the
Real Estate Assets, free and clear of all Liens, other than as specifically
listed in Section 2.15.3 of the Disclosure Schedule.
2.15.4 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 of the Seller Representatives have knowledge of any, or is aware of
either the Company or the Sellers having received any notice of any uncured
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.
2.15.5 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/or the Real Estate Assets, 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.
2.15.6 Except as disclosed in Section 2.15.6 of the Disclosure
Schedule, the improvements on the Real Property and the Real Estate Assets 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 the Seller
Representatives, there are no condemnation or appropriation proceedings pending
or threatened against Real Property and/or the Real Estate Assets or the
improvements thereon.
2.15.7 The Seller Representatives have no knowledge of any
claim, action or proceeding, actual or threatened, against the Company, the Real
Property and/or the Real Estate Assets 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,
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 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) the Seller Representatives have no knowledge
that such intellectual property is being infringed by any other Person. To the
knowledge of the Seller Representatives, neither the Company nor any Seller is
infringing any intellectual property of any Person, and no litigation is pending
and no claim has been made or, to the knowledge of the Seller Representatives,
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 and/or the Real Estate Assets is bound,
and which have a term of more than one year or require the Company to pay more
than 10,000.00 thereunder.
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 the Seller Representatives, 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, of each party thereto; and neither the guarantor
thereunder nor, to the knowledge of the Seller Representatives or any other
party to such guaranty, has any party thereto 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 material 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. With the exception of life insurance policies that insure employees of
the Company, 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
which were in excess of $25,000.00. 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 that are
reasonable and customary for Persons engaged in such business and operations and
having such Assets.
2.21 Affiliate Transactions. Except as disclosed in Section 2.21 of the
Disclosure Schedule, 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 Seller Representatives, 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
Seller Representatives, threatened against the Company, (ii) no strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of the Seller
Representatives, 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 Seller Representatives, 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:
2.23.2.1 The Company is in full compliance with and
is not in material 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
material 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,
including, but not limited to the Real Estate Assets) 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 Seller Representatives, 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 The Seller Representatives have no knowledge
of or any basis to expect that either the Sellers or the Company 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 either the
Sellers or the Company are or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
2.23.2.4 Neither the Company, the Sellers nor any
other Person for whose conduct it or they may be held responsible, has any
material Environmental, Health, and Safety Liabilities with respect to the
Facilities, any other Assets and/or the Real Estate Assets (whether real,
personal, or mixed) in which the Company or the Sellers (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 Estate Assets, 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 and/or the Real Estate Assets 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
Seller Representatives, any threat of Release of any Hazardous Materials at or
from the Facilities, the Real Estate Assets or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, the Real
Estate Assets, 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 Facilities
and/or the Real Estate Assets, 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, Leased Real Property and/or the
Real Estate Assets 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 and/or the Real Estate Assets.
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 or the Real
Estate Assets 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, 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 December 31, 1999.
Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the
knowledge of the Seller Representatives, 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, 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 Seller
Representatives, 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, except as limited by the provisions of
Article VII hereof.
2.32 Disclaimer of Warranties. Except for the representations and
warranties given or made by the Seller Representatives in this Agreement, and/or
given or made in any other document, instrument or agreement executed by the
Sellers, or any of them, pursuant to this Agreement, the Seller Representatives
hereby disclaim any and all implied representations and warranties with respect
to the Sellers, the Company, the Purchased Stock and the Real Estate Assets.
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
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, except as limited by the provisions of
Article VII hereof.
3.9 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 the Sellers pursuant to any
provision of this Agreement, 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.
3.10 Purchaser's Investment Decision. The Purchaser represents to the
Sellers that the Purchaser is able to bear the economic risk of the investment
contemplated by this Agreement, has knowledge and experience in financial and
business matters, and is capable of evaluating the merits and risks of the
investment contemplated by this Agreement. The Purchaser understands that its
investment involves substantial risks. The Purchaser has made an independent
examination and investigation of the Company. The Purchaser has had access to
the officers, directors, and certain books and records of the Company, and based
upon (among other things) the representations and warranties of the Seller
Representatives, deems such examination and investigation sufficient for the
purpose of making its investment decision. The Purchaser understands that the
Purchased Stock will not have been registered under the Securities Act, by
reason of their issuance by the Company in transactions exempt from the
registration requirements of the Securities Act, and that the Purchased Stock
must be held by the Purchaser indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration.
<PAGE>
ARTICLE IV
4 COVENANTS BY THE SELLERS
4.1 Noncompetition; Non Solicitation.
4.1.1 Except as they may be employed by the Company or the
Purchaser, during the Original Term (as such term is defined in those certain
Employment Agreements of even date herewith by and between the Purchaser and
each of Daniel Andrew Smith and Dale Wayne Smith (collectively, the "Employment
Agreements") and any renewal or extension thereof, and for a period of twelve
(12) months following the termination thereof, unless terminated by the Company
without Cause or by the employee for Good Reason (as defined in the Employment
Agreements), Daniel Andrew Smith and Dale Wayne Smith, 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 state of Texas, 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 publicly owned and regularly traded on any national
exchange or in the over-the-counter market.
4.1.2 Except as they may be employed by the Company or the
Purchaser, during the Original Term and any renewal or extension thereof, and
for a period of twelve (12) months following the termination thereof, unless
terminated by the Company without Cause or by the employee for Good Reason,
Daniel Andrew Smith and Dale Wayne Smith 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. For the purpose of this Section, a
Person shall be considered to be an employee, consultant or customer of the
Company at the time of solicitation or recruitment if such Person was an
employee, consultant or customer of the Company, or one of its Affiliates,
during the one year period prior to, and including, the date of such
solicitation or recruitment.
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 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. 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.
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 Estate Assets
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, except to
the extent that the representation or warranty is expressly limited by its terms
to another date.
5.1.2 Performance. The Sellers shall have performed and
complied with, in all material respects, 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, other than the consent of
TXI under the terms of the TXI Lease Agreement, 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), other than the consent of
TXI to assign and transfer all of the Company's rights and obligations to
Purchaser under the terms of the TXI Lease Agreement, relating in any way to the
Company, its Assets, business or prospects and/or the Real Estate Assets, 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 C hereto and (ii) certificates, dated the Closing Date and executed by
the chief financial officer of the Company, substantially in the form of Exhibit
D 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 Sayles and Lidji, a Professional Corporation, counsel to the Company
in connection with this Agreement, dated the Closing Date, substantially in the
form and to the effect of Exhibit E 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 Warranty Deed. General Warranty Deeds
conveying title to the Real Estate Assets to Purchaser in accordance with the
terms of this Agreement, along with title insurance policies insuring title to
the Real Estate Assets.
5.1.14 No Adverse Change. There shall have occurred no
material adverse change in the business or financial condition of the Company
between December 31, 1999 and the Closing Date and the failure to obtain the
consent of TXI to assign and transfer all of the Company's rights and
obligations under the TXI Lease Agreement shall not be deemed by Purchaser to
constitute a material adverse change in the business or financial condition of
the Company under this or any other provision of this Agreement.
5.1.15 Employment Agreements. Purchaser shall have received
Employment Agreements satisfactory to Purchaser, between the Company and each of
Dale Wayne Smith and Daniel Andrew Smith.
5.2 Conditions to the Obligations of the Sellers. The obligations of
the Sellers hereunder to sell the Purchased Stock and the Real Estate Assets 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 F hereto.
5.2.6 Employment Agreements. Dale Wayne Smith and Daniel
Andrew Smith shall have entered into Employment Agreements with the Company that
are satisfactory to the Parties.
5.2.7 Opinion of Counsel. Purchaser shall have furnished to
sellers an opinion of counsel, dated the Closing Date, in the form and to the
effect of Exhibit G hereto, and to such further effect as Sellers shall
reasonably request.
ARTICLE VI
6 TERMINATION
This Article intentionally omitted.
ARTICLE VII
7 INDEMNIFICATION; TAX MATTERS
7.1 Indemnification.
7.1.1 The Sellers will indemnify the Purchaser and its
respective stockholders and the officers, directors, employees, agents and
Affiliates of each of them (collectively the "Purchaser Indemnitees")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 a representation and/or warranty by the Seller Representatives 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); provided, however,
that Sellers shall have no liability to the Purchaser Indemnitees for breaches
of representations and warranties unless and solely to the extent that the
aggregate amount of damages resulting therefrom exceeds $50,000.00 and after
such $50,000.00 threshold is met, Sellers shall have no liability to the
Purchaser Indemnitees for damages resulting from such breaches with respect to
individual items that are less than $1,000, unless such individual items exceed
$10,000 in the aggregate; provided, however, that the aggregate amount which the
Sellers shall be obligated to pay the Purchaser Indemnitees, pursuant to the
Indemnification provisions of this Agreement shall not exceed the Purchase
Price, as adjusted. Such limitations shall not apply to damages from breaches of
representations and warranties constituting fraud or intentional
misrepresentation. Notwithstanding any other term or condition of this
Agreement, the Sellers shall not have any liability to Purchaser Indemnitees for
any Losses in the event TXI does not for any reason consent to the assignment
and transfer of all of the Company's rights and obligations under the TXI Lease
Agreement.
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).
7.1.3 The representations and warranties of the Seller
Representatives shall survive the Closing and shall continue in full force and
effect for the periods specified below (the Sellers' "Survival Period"):
7.1.3.1 The representations and warranties of the
Seller Representatives contained in Sections 2.1, 2.2, 2.3, 2.11, 2.14,
2.15, and 2.23 shall survive the Closing until the expiration of the
applicable statute or period of limitations, and any extensions
thereof; and
7.1.3.2 All other representations and warranties of
the Seller Representatives contained in this Agreement (including any
certificate delivered in connection herewith, or therewith) shall
survive until the expiration of a period of eighteen months beginning
on the Closing Date.
7.1.4 The representations and warranties of the Purchaser
contained in this Agreement (including any certificate delivered in connection
herewith, or therewith) shall survive (the Purchaser's "Survival Period") until
the expiration of the applicable statute or period of limitations, and any
extensions thereof.
7.1.5 Anything to the contrary notwithstanding, the Survival
Period shall be extended automatically to include any time period necessary to
resolve a claim for indemnification which was made before the expiration of the
respective Survival Period for such claim but not resolved prior to its
expiration, and any such extension shall apply only as to the claims asserted
and not so resolved within the Survival Period. Liability for any such item
shall continue until such claim shall have been finally settled, decided or
adjudicated.
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 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 Tax Liability. The Sellers agree that they shall be responsible, at
their sole expense, for the preparation and timely filing of all income Tax
Returns of the Company filed after the date this Agreement is executed for all
periods ending on or prior to the Closing Date, and that, except for non-income
Tax liabilities that are properly reflected as accrued liabilities on the Books
and Records as of the Closing, Sellers shall pay when due all Taxes properly
payable for the periods covered by such Tax Returns and shall be entitled to all
refunds allocable to such periods; provided that the Purchaser acknowledges and
agrees that the Company will sign and file all such Tax Returns of the Company
filed after the Closing. Sellers agree that they shall be responsible for all
items of income, gain, deduction and loss through the close of business on the
Closing Date to the extent those amounts have not been accrued for in the
Company's Financial Statements through the Closing Date. Purchaser agrees that
it shall be responsible, at its sole expense, for the preparation and timely
filing of all Tax Returns of the Company for all periods ending after the
Closing Date, and that Purchaser shall pay when due all Taxes properly payable
for the periods covered by such Tax Returns.
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 of the Sellers
receives or delivers, as the case may be, notice of a Tax Claim and 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 fail 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 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 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 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 Purchaser shall pay all
sales, use, transfer, stamp, documentary or similar transfer taxes or fees
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
Sellers with respect to such taxes. The Purchaser shall file all necessary
documentation and Tax Returns with respect to such taxes and provide to Sellers
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,
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, managed, leased or operated by the
Company and any buildings, plants, structures or equipment (including motor
vehicles, tank cars and rolling stock) currently or formerly owned, managed,
leased 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 by the Company on a basis consistent with
prior years.
"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.
"Permitted Encumbrances" shall mean the Liens allowed pursuant
to Section 2.15.3 of the Disclosure Schedule.
"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:
Daniel A. Smith
2203 Old Brushy Creek Road
Palestine, Texas 75801
with a copy to:
Michael R. Dorey, Esquire
Sayles and Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
All such notices, requests and other communications will (i) if delivered
personally or by courier 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 the earlier of the
third day following the date sent 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.
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 cause the 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.
9.13 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.
9.14 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.
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:/s/
------------------------
Its:
----------------------
SELLERS
/s/ /s/
----------------------- ---------------------------
Dale W. Smith Danny A. Smith
Dale & Brenda, Ltd. Dan & Dorenda, Ltd.
By: Dale W. Smith By: Danny A. Smith
Its: _________________ Its:______________________
/s/ /s/
------------------------------------ ---------------------------------
The Daniel Andrew Smith Family Trust The Dale Wayne Smith Family Trust
By:_____________________, Trustee By:____________________, Trustee
<PAGE>
Exhibit A
EBITDA Calculation
Example
Twelve Months Twelve Months
Ended Ended
December 31, 1999 March 31, 2000
Revenue $ 19,372,383
Cost of goods sold 14,150,730
SG&A 4,773,338
Operating income 448,315 -
Interest income 64,364
Other income 36,477
Income (loss) before income taxes 549,156 -
Income taxes:
Current 230,793
Deferred (29,690)
Taxes 201,103 -
Net earnings 348,053 -
Adjustments:
Interest expense (net) (50,430)
Income taxes 201,103
Depreciation and amortization 552,728
Unadjusted EBITDA 1,051,454
Contractual Adjustments to
Unadjusted EBITDA
Management Fees 2,159,300
Rent 360,000
Profit Sharing 250,000
Salaries and benefits (258,852)
Actual EBITDA as adjusted per Contract 3,561,902
Less pro-forma EBITDA 3,600,000
EBITDA difference (38,098)
Increase to purchase price (if previous line
is a positive number) -
<PAGE>
Exhibit B
Working Capital Calculation
December 31, 1999 March 31, 2000
Current Assets:
Cash 307,937
Accounts Receivable (under 90 days) 2,522,353
Inventory (excluding obsolete inventory) 1,038,970
Other 191,816
Total current assets 4,061,076 -
Less current liabilities:
Accounts Payable and Other 1,460,248
Current portion of long-term debt (28,393)
Total current liabilities 1,431,855 -
Actual working capital 2,629,221
Less pro-forma working capital (2,600,000) (2,600,000)
Working capital difference 29,221
Increase to Purchase Price if previous
line is a positive number 29,221
<PAGE>
Exhibit C
Sellers' Certificate
I, the undersigned, the President of Palestine Concrete Tile Company
(the "Company"), a Texas corporation, do hereby certify that:
1 This Certificate is being delivered at the Closing today pursuant to Section
5.1.7(i) of the Stock Purchase Agreement dated April 30, 2000 (the "Agreement")
between ISG Resources, Inc., a Utah corporation ("Purchaser") Dale & Brenda,
Ltd. and Dan & Dorenda, Ltd. (collectively the "Family Limited Partnerships")
the Daniel Andrew Smith Family Trust and the Dale Wayne Smith Family Trust
(collectively the "Family Trusts") and Dale W. Smith and Danny A. Smith. Unless
otherwise indicated herein, capitalized terms used in this Certificate shall
have the same meanings given to them in the Agreement.
2 The Company is a registered corporation, validly existing and in good standing
under the laws of the state of Texas.
3 Attached hereto as Exhibit A is a correct and complete copy of the Articles of
Incorporation of the Company and a correct and complete copy of the By-Laws of
the Company, including all amendments thereto effected through the Closing Date.
4 Attached hereto as Exhibit B 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
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.
5 Each of the representations and warranties made by the Seller Representatives
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 April 30, 2000.
/s/
--------------------------------
By: Dale Wayne Smith, President
Palestine Concrete Tile Company
<PAGE>
Exhibit A
Intentionally left blank - copies to be furnished upon request
<PAGE>
EXHIBIT B
Name Title Signature
Dale W. Smith President ________________________
Danny A. Smith Vice President and ________________________
Chief Financial Officer
Dale H. Smith Vice President ________________________
Celia O. Smith Secretary/Treasurer ________________________
<PAGE>
Exhibit D
Sellers' CFO's Certificate
I, the undersigned, the Chief Financial Officer of Palestine Concrete
Tile Company (the "Company"), a Texas corporation, do hereby certify that:
1 This Certificate is being delivered at the Closing today pursuant to Section
5.1.7(ii) of the Stock Purchase Agreement dated April 30, 2000 (the "Agreement")
between ISG Resources, Inc., a Utah corporation ("Purchaser") and Dale & Brenda,
Ltd. and the Dan & Dorenda, Ltd. (collectively the "Family Limited
Partnerships"), the Daniel Andrew Smith Family Trust and the Dale Wayne Smith
Family Trust (collectively the "Family Trusts") and Dale W. Smith and Danny A.
Smith. 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 All of 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, applied on a basis consistent with prior years and
present fairly the financial condition of the Company as of the dates set forth
thereon, except as specifically noted in the notes thereto, and except for
normal adjustments made for interim reporting purposes.
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 Purchased Stock constitutes all of the ownership interests of the Company
and are owned as follows:
Name Number of Shares Owned
Dale & Brenda, Ltd. 378.5
Dan & Dorenda, Ltd. 378.5
Dale W. Smith 121.5
Danny A. Smith 121.5
7 There are no outstanding options, warrants, calls, subscriptions, commitments,
agreements or other rights to purchase or dispose of 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 April 30, 2000.
/s/
----------------------------
By: Danny A. Smith, CFO
Palestine Concrete Tile Company
<PAGE>
Exhibit E
Opinion of Sellers' Counsel
April 30, 2000
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, Utah 84111
Attn: Brett A. Hickman
Gentlemen:
We have acted as counsel to Dale & Brenda, Ltd., Dan & Dorenda, Ltd.
(collectively the "Family Limited Partnerships"), the Daniel Andrew Smith Family
Trust, the Dale Wayne Smith Family Trust (collectively the "Family Trusts") and
Dale W. Smith and Danny A. Smith (together with the Family Limited Partnerships
and the Family Trusts, the "Sellers") and Palestine Concrete Tile Company, a
Texas corporation (the "Company") in connection with the Stock Purchase
Agreement dated April 30, 2000 (the "Agreement") by and between ISG Resources,
Inc., a Utah corporation (the "Purchaser") and the Sellers. This opinion is
delivered to you pursuant to Section 5.1.9 of the Agreement. Unless otherwise
defined herein, or as the context hereof otherwise requires, all capitalized
terms used, but not defined herein, shall have the respective meanings given to
those terms in the Agreement or the Accord referred to below.
As such counsel, we have examined the Agreement, and we have reviewed
the Articles of Incorporation, Bylaws and certain other corporate records of the
Company, and such other agreements, certificates, instruments and documents and
matters of law as we have deemed necessary to reach the conclusions hereinafter
set forth. We have also relied on the factual matters contained in the
representations and warranties of the Sellers contained in the Agreement.
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 laws of the United States and the
laws of the State of Texas.
In making the foregoing examination and in rendering this opinion, we
have assumed the genuineness of all signatures, the conformity to the originals
of all documents submitted to us as copies and the authenticity of all documents
submitted to us as originals, and the authority of the person or persons who
executed any such documents on behalf of any person or entity other than the
Sellers. We have further assumed the due authorization, execution and delivery
of the Agreement by the Purchaser.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge or awareness, it is intended to
signify that during the course of our representation of the Sellers, no
information has come to our attention which would give us actual knowledge of
the existence or absence of such facts. Except as expressly described herein, we
have not undertaken any independent investigation to determine the existence or
absence of such facts, and no inference as to our knowledge of the existence or
absence of such facts should be drawn from our serving as counsel for the
Sellers.
Based on the foregoing, and subject to the exceptions and
qualifications set forth herein, it is our opinion that:
1. The Agreement has been duly executed and delivered by the Sellers.
2. The Agreement is enforceable against the Sellers in accordance with
its terms, except (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights; (b) that the remedies of specific
performance, injunction and other forms of equitable relief are subject to
certain tests of equity jurisdiction, equitable defenses and the discretion of
the court before which any proceeding may be brought; (c) the effect of other
principles of equity; (d) the effect of antitrust laws; and (e) no implied
opinions are included.
3. The Purchased Stock constitutes all of the issued and outstanding
shares of capital stock of the Company and are owned as follows: Dale & Brenda,
Ltd. (378.5 shares); Dan & Dorenda, Ltd. (378.5 shares); Danny A. Smith (121.5
shares) and Dale W. Smith (121.5 shares). The outstanding shares of Purchased
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. 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, except as set forth in Section 2.2 of the Disclosure
Schedule, 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 Family Limited Partnerships, Danny A.
Smith and Dale W. Smith 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.
4. The Company was duly organized as a Texas corporation, and is
validly existing and in good standing under the laws of the State of Texas, with
full power and authority to own its properties and to engage in its business as
presently conducted or contemplated.
5. Neither the execution, delivery and performance of the Agreement nor
the consummation of any or all of the transactions contemplated therein will (a)
violate any provision of the articles of incorporation or bylaws (or other
governing instrument) of the Company, (b) to the best of our knowledge, breach
or constitute 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 any
Seller is a party, (c) to the best of our knowledge, result 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
its properties or assets are bound, or to which any of the properties or assets
of the Company are subject, or (d) to the best of our knowledge, violate any
statute, law, regulation, or rule, or any judgment, decree or order of any court
or other Governmental Body applicable to the Company.
6. To the best of our knowledge, except for the early termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, 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 the transactions contemplated therein.
To the best of our knowledge, other than as set forth in the Disclosure
Schedules, no claim, action, suit, proceeding, arbitration, investigation,
hearing or notice of hearing is pending or threatened before any Governmental
Body against the Company or any Seller, or any of the assets of the Company or
any Seller, seeking to prevent the consummation of the transaction contemplated
by the Agreement or seeking damages against the Company or any of the Sellers as
a consequence of the Agreement or the transactions contemplated thereby.
We are members of the Bar of the State of Texas and do not purport to
be experts on any laws other than the laws of the State of Texas and the federal
laws of the United States. Consequently, we are not rendering herein any
opinions on any laws other than the laws of the State of Texas and the federal
laws of the United States.
This Opinion is solely for the benefit of the Purchaser and may not be
relied upon in any manner by any other person or entity except with the prior
written consent of this firm. This Opinion may not be quoted, distributed or
used in whole or in any part, for any other purposes or delivered to any other
person or entity, except with the prior written consent of this firm. Further,
after the date of delivery, we assume no responsibility to amend this Opinion or
advise you of our discovery of any facts which might adversely affect the
opinions stated herein.
Very truly yours,
SAYLES & LIDJI,
A Professional Corporation
By: /s/
------------------------
Michael R. Dorey
<PAGE>
Exhibit F
Purchaser's Officers' 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
____ of the Stock Purchase Agreement dated _________, 2000 (the "Agreement")
between ISG Resources, Inc., a Utah corporation ("Purchaser") and Dale & Brenda,
Ltd.and Dan & Dorenda, Ltd. (collectively the "Family Limited Partnerships"),
the Daniel Andrew Smith Family Trust and the Dale Wayne Smith Family Trust
(collectively the "Family Trusts") and Dale W. Smith and Danny A. Smith. 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 __________, 2000.
ISG RESOURCES, INC.
/s/
-----------------------------
By: Brett A. Hickman
Its: Sr. Vice President, General
Counsel and Secretary
<PAGE>
Exhibit G
Opinion of Purchaser's Counsel
Dale & Brenda, Ltd.
Dan & Dorenda, Ltd.
Daniel Andrew Smith Family Trust
Dale Wayne Smith Family Trust
Dale W. Smith
Danny A. Smith
c/o PALESTINE CONCRETE TILE COMPANY
Post Office Box 2508
Palestine, Texas 75802-2508
Ladies and Gentlemen:
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 March 31, 2000 (the "Agreement")
between the Purchaser and Dale & Brenda, Ltd. and Dan & Dorenda, Ltd.
(collectively the "Family Limited Partnerships"), the Daniel Andrew Smith Family
Trust and the Dale Wayne Smith Family Trust (collectively the "Family Trusts")
and Dale W. Smith and Danny A. Smith (all collectively "the Sellers"). This is
the opinion contemplated by Section 5.2.7 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.
3. The 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.
Sincerely,
Brett A. Hickman
BAH/hs
cc: Michael R. Dorey, Esquire
<PAGE>
Exhibit H
DISCLOSURE SCHEDULES
TO THE
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
<PAGE>
SECTION 2.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Preemptive Rights
Since the Company's Articles of Incorporation and Bylaws do not deny
preemptive rights to the shareholders of the Company, the shareholders have
preemptive rights to acquire additional shares issued by the Company under Texas
law. However, this preemptive right has never arisen because the Company has
never issued additional shares of stock since its original issuance of 1,000
shares to Dale H. Smith on October 1, 1974.
<PAGE>
SECTION 2.4
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Subsidiaries; Company; Business
Line of Business:
The Company's main line of business is the manufacturing of concrete
masonry units ("CMUs"). The majority of the CMUs are distributed in Texas, but a
small amount of CMUs have been sold in other states. In addition to the
manufacture of CMUs, the Company manufactures and sells precast concrete
products, such as septic tanks, culverts and landscape products. The Company
also sells Portland Cement, lime, wall reinforcements, wall anchors, tools,
metal doors, plumbing supplies, chain link fencing, fireplace units, sand,
gravel and insulation.
Directors:
Dale Wayne Smith
Daniel A. Smith
Dale H. Smith
Celia O. Smith
Officers:
Dale Wayne Smith - President
Daniel A. Smith - Vice President
Dale H. Smith - Vice President
Celia O. Smith - Secretary/Treasurer
<PAGE>
SECTION 2.5
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Conflicts
1. Section 7.3 of the Bylaws provides that before a sale or transfer of
any shares of the Company's stock can be valid, the selling
shareholders must first offer the shares to the Company. The provisions
of 7.3 will be waived by the Company and each of the current and former
shareholders of the Company prior to the sale of the Purchased Stock.
2. The real estate lease between TXI Operations, L.P. and the Company
dated October 14,1997 requires the written consent of TXI prior to any
change in control.
3. The vehicle lease agreement between Ryder Truck Rental, Inc. and the
Company dated March 18, 1996 requires notification of a change in
ownership. The required notification has been made and a copy of such
notification has been delivered to Purchaser.
4. The vehicle lease agreement between Price International, Inc. and the
Company dated April 1, 1996 requires notification of a change in
ownership. The required notification has been made and a copy of such
notification has been delivered to Purchaser.
5. The forklift lease agreements between Yale Financial Services, Inc. and
the Company dated November 21, 1995, February 16, 1996, and April 24,
1996 require notification of a change in ownership. The required
notification has been made and a copy of such notification has been
delivered to Purchaser.
6. The License Agreement dated August 1, 1988 between Kiltie Corporation
and Texas Industries, which was assigned to Palestine Concrete Tile
Company on October 22, 1997, requires the prior written consent of
Kiltie prior to a change in ownership. Kiltie consented to the change
in ownership on March 27, 2000 and a copy of such consent has been
delivered to Purchaser.
7. The permits from the Texas Natural Resource Conservation Commission
listed on Section 2.19 of the Disclosure Schedule require notice to the
executive director upon a change in control. The required notification
was made to the executive director on March 30, 2000 and a copy of such
notice has been delivered to the Purchaser.
<PAGE>
SECTION 2.6
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Governmental Approvals and Filings
1. Consent of the United States Department of Justice and the Federal
Trade Commission is required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Early termination of the waiting
period was granted on February 8, 2000.
2. See Section 2.19 regarding notification of the Texas Natural Resource
Conservation Commission.
<PAGE>
SECTION 2.9
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Absence of Changes
1. The Company ordered a MD-1600 grinder from Con-Grind Systems, Inc. for
its operations. The cost of the grinder is $62,400. A deposit of
$18,200 was made when the grinder was ordered, and the balance will be
paid on delivery of the grinder.
2. The Company orally agreed to restructure Steve Morris' compensation
structure. The arrangement becomes effective on April 1, 2000 and is as
follows:
a. 5% on his Versa-Lok sales;
b. 2.5% on his discounted Versa-Lok sales to Mathis Concrete;
c. 4% on his sales of Burnished Blocks; and
d. Base salary of $46, 280.
3. The Company has hired Steve Bickerdike, effective April 1, 2000, to be
in charge of the Company's production, scheduling and control. His
annual salary will be $75,000.
4. There were no changes to the Company's accounting methods are
procedures except for those required by Ernst & Young pursuant to its
audit of the Company's financial statements for the twelve months ended
December 31, 1999, 1998 and 1997.
<PAGE>
SECTION 2.10
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Undisclosed Liabilities
1. As of March 31, 2000, the Company owed Agg-Dale, Inc. $507,157.79
pursuant to a promissory note dated December 29, 1995 in the principal
amount of $650,000.
2. As of March 31, 2000, the Company owed Cement-Dan, Inc. $546,169.89
pursuant to promissory note dated December 29, 1995 in the principal
amount of $700,000.
3. See Section 2.9 of the Disclosure Schedules.
<PAGE>
SECTION 2.11
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Taxes
2.11.1: No Exceptions
2.11.4: For the tax year ended December 31, 1996 and for all subsequent
reporting periods, the Company filed the following tax returns by their due
dates or their extended due dates:
1. Form 1120 - U.S. Corporation Income Tax Return
2. Form 941 - Employer's Quarterly Federal Tax Return
3. Form 940 - Employer's Annual Federal Unemployment (FUTA) Tax
Return
4. Texas Franchise Tax Return;
5. Texas Sales Tax Return;
6. Louisiana Sales Tax Returns (monthly returns for all sales
shipped into Louisiana); and
7. Sales Tax Returns for various Parishes in Louisiana where
products are shipped.
Except for a Texas Sales Tax Audit for the period beginning March 1, 1994 and
ending December 31, 1997 which found no tax being owed, none of the tax returns
filed during this period have been audited or are the subject of an audit.
Copies of all the tax returns filed by the Company since January 1, 1997 have
been provided to the Purchaser.
2.11.5: No Exceptions
<PAGE>
SECTION 2.12
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Legal Proceedings
1. The Company has an ongoing worker's compensation claim by Larry
Riddlesperger. Information regarding this claim was provided to
Purchaser in response to the Purchaser's due diligence request.
<PAGE>
SECTION 2.13
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Compliance with Laws and Orders
Except for the notice described in Section 2.23.2 of the Disclosure Schedules,
there have been no other notices that the Company is or has been at any time in
violation of or in default under any Law or Order applicable to the Company or
any of its Assets and/or the Real Estate Assets.
<PAGE>
SECTION 2.14
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Benefit Plans
List of Benefit Plans:
1. Principal Life Insurance Company Group Medical Insurance Policy
2. Palestine Concrete Tile Company 401(k) Profit Sharing Plan
3. Palestine Concrete Tile Company Premium Only Plan (Section 125
Cafeteria Plan)
4. Supplemental Life Insurance Plan
5. Supplemental Disability Insurance Plan
6. Compensation Bonus Plan-paid at Director's discretion
7. Salary Review and Annual Raises-performed in November to be effective
in January
<PAGE>
SECTION 2.15.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
US VISION, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
List of Real Property
(i) Owned Real Property - None
(ii) Leased Real Property
1. Seventeen acre tract of land in Anderson County, Texas on
which the Company operates its Palestine, Texas plant. The
land and buildings are leased from The Daniel Andrew Smith
Family Trust and the Dale Wayne Smith Family Trust. There is
no written lease agreement for this tract of land.
2. Eight acre tract of land in Dallas County, Texas on which the
Company operates its Dallas Block plant. The property is
leased from TXI Operations, L.P. A copy of such lease has been
provided to Purchaser. This lease may be terminated by either
party by giving the other party written notice at least one
(1) year prior to the effective date of termination, so long
as the effective date of termination is on after October 15,
2000.
(iii) Liens on Real Property: Deed of Trust to secure payment of $80,000 note
payable to The Royall National Bank date June 26, 1975. This lien is on
the seventeen acre tract of land in Anderson County owned by The Daniel
Andrew Smith Family Trust and the Dale Wayne Smith Family Trust. The
note has been paid, but the lien was never released. A Release of Lien
will be delivered at Closing by Compass Bank as the successor in
interest to Royall National Bank.
The land in Anderson County also is subject to two easements. First,
the land is subject to a utility easement granted to Texas Power &
Light Company on September 29, 1938 by Jeff D. Reagan and Eoline W.
Reagan. Second, the land is subject to an easement granted to the Texas
Highway Commission on August 5, 1940 by Jeff D. Reagan and Eoline W.
Reagan.
<PAGE>
SECTION 2.15.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Liens on Real Estate Assets
See Section 2.15.1(iii) of the Disclosure Schedule.
<PAGE>
SECTION 2.15.4
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Uncured Defaults on Leased Real Property
None.
<PAGE>
SECTION 2.15.6
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Condition of Real Property
No Exceptions.
<PAGE>
SECTION 2.16
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Liens on Personal Property
2. Liens on forklifts leased from Yale Financial Services, Inc. These
leases were assigned to and assumed by the Company from Texas
Industries, Inc. in connection with the Company's purchase of assets
from Texas Industries in 1997.
3. Lien on Year 2000 International Trucks (Serial Nos. 2HSCHAMR5YC028358
and 2HSCHAMR2YCO28334) created pursuant to a Security Agreement dated
September 20, 1999 between the Company and Compass Bank to secure the
payment of a promissory note in the amount of $161,316.00. In addition,
the Company's cash accounts held by Compass also serve as collateral
under the Security Agreement for the payment of the promissory note.
<PAGE>
SECTION 2.17
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Intellectual Property
The Company has a License Agreement dated August 1, 1988 with Kiltie
Corporation, as assigned to it by Texas Industries, to manufacture the Versa-Lok
and Versa-Tuff retaining wall systems.
Various third-party software licenses for the Company's computer applications.
<PAGE>
SECTION 2.18.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Contracts
1. Oral lease Agreements with The Daniel Andrew Smith Family Trust and The
Dale Wayne Smith Family Trust for 17 acre tract of land in Palestine,
Texas
2. Lease Agreement by and between TXI Operations, L.P and the Company
dated October 14, 1997
3. Energy Services Agreement with TXU Energy Services dated June 1, 1999
4. Independent contract agreements with the following trucking companies:
a. Jerry Anderson d/b/a Anderson Trucking
b. Freeny Trucking
c. J&P Trucking
d. Jesse Montgomery d/b/a Montgomery Trucking
e. Larry Nelms d/b/a Nelms Transportation Company
f. Jim Tacy d/b/a Tacy Trucking
5. Promissory Note to Cement-Dan, Inc. dated December 29, 1995 in the
principal amount of $700,000.
6. Promissory Note to Agg-Dale, Inc. dated December 29, 1995 in the
principal amount of $650,000.
7. Commercial Note in the original principal amount of $161,316 for the
purchase of two International Trucks and a Security Agreement securing
such Note with security interest in the two trucks by and between the
Company and Compass Bank dated September 20, 1999.
8. License Agreement with Kiltie Corporation dated August 1, 1988, as
assigned to the Company by Texas Industries, to manufacture the
Versa-Lok and Versa-Tuff restraining wall systems.
9. Lease Agreement with Yale Financial Services, Inc dated November 21,
1995 for 60 month lease of Yale Forklift GDP100M s/n 870126.
10. Lease Agreement with Yale Financial Services, Inc dated February 16,
1996 for 60 month lease of Yale Forklift GDP100M s/n B813D01904T.
11. Lease Agreement with Yale Financial Services, Inc dated February 16,
1996 for 60 month lease of Yale Forklift GDP060T s/n E177B09204S.
12. Lease Agreement with Yale Financial Services, Inc dated April 24, 1996
for 60 month lease of Yale Forklift GDP100M s/n B813D0160S.
13. Vehicle Lease Agreement with Ryder Truck Rental, Inc. dated March 18,
1996 for 72 month lease on two 1996 Freightliner Trucks (VIN Nos.
1FUYDCYBOTP859057 and 1FUYDCYB2TP859058).
14. Vehicle Lease Agreement with Price International, Inc. dated April 1,
1996 for a 60 month lease of a 1996 International 9200 6x4.
15. Vehicle Lease Agreements with GE Capital Trans Leasing, Inc. dated July
14, 1999 for a 60 month lease of two 2000 Freightliner Trucks.
16. Oral Agreement with Gary Lockwood to pay him commissions of 6.25% on
sales of concrete block products and 3% for those customers granted
discount prices on concrete block products.
17. Commission Agreement with Steve Morris (described more fully in Section
2.9 of the Disclosure Schedule).
18. All contracts, instruments and other agreements disclosed or arising
out of the affiliated relationships described in Section 2.21 of the
Disclosure Schedule.
<PAGE>
SECTION 2.18.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Contract Breaches
None.
<PAGE>
SECTION 2.18.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Materially Adverse Contracts
None
<PAGE>
SECTION 2.19
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Governmental Licenses and Permits
Texas Sales Tax Permit (No. 1-75-1455662-4).
Texas Natural Resource Conservation Commission ("TNRCC") Facility Wastewater
and/or Contact Storm Water Registration No. EJ-0000401. The registrant must
notify the executive director of the TNRCC upon any change in control or
ownership.
Texas Natural Resource Conservation Commission Facility Wastewater and/or
Contact Storm Water Registration No. EJ-0000376 (transferred from Texas
Industries). The registrant must notify the executive director of the TNRCC upon
any change in control or ownership.
Texas Natural Resource Conservation Commission Solid Waste Registration No.
85175. The registrant must notify the executive director of the TNRCC upon any
change in control or ownership.
National Pollutant Discharge Elimination Multi-Sector Permit for Palestine
location (No. TXR05C977).
National Pollutant Discharge Elimination Multi-Sector Permit for Dallas location
(No. TXR05I297).
None of these permits have an expiration date.
<PAGE>
SECTION 2.20
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Insurance
<TABLE>
<CAPTION>
------------------------------ ---------------------------- --------------------------- ------------------
Name of Insurer Type of Coverage Coverage Period Policy No
------------------------------ ---------------------------- --------------------------- ------------------
<S> <C> <C> <C>
Amerisure Insurance Company General Liability and 10/01/99 to 10/01/00 1314964-01
Property Coverage
------------------------------ ---------------------------- --------------------------- ------------------
Amerisure Insurance Company Business Auto Coverage 10/01/99 to 10/01/00 1314963-01
------------------------------ ---------------------------- --------------------------- ------------------
Michigan Mutual Insurance Umbrella Liability Coverage 10/01/99 to 10/01/00 1314965-01
Company
------------------------------ ---------------------------- --------------------------- ------------------
Amerisure Insurance Company Workers Compensation and 10/01/99 to 10/01/00 1314966-01
Employer's Liability
Coverage
------------------------------ ---------------------------- --------------------------- ------------------
</TABLE>
Information regarding past and existing claims made under the Company's
insurance policies have been furnished to Purchaser in the Company's response to
Purchaser's due diligence request.
Claims Made Since January 1, 1996 which are in excess of $25,000:
1. See Section 2.12 of the Disclosure Schedule regarding Larry
Riddlesberger pending worker's compensation claim.
<PAGE>
SECTION 2.21
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Affiliate Transactions
The Company purchases aggregate materials from Agg-Dale, Inc and cement products
from Cement-Dan, Inc. These entities are the major suppliers of aggregate
materials and cement products to the Company, and accordingly, accounts payable
to both entities are reflected on the books of the Company. Dale and Brenda
Smith are the only employees of Agg-Dale, Inc., and they are the only
participants in the Employee Stock Ownership Plan which owns 99% of the stock of
Agg-Dale, Inc. Danny and Dorenda Smith are the only employees of Cement-Dan,
Inc., and they are the only participants in the Employee Stock Ownership Plan
which owns 99% of the stock of Cement-Dan, Inc. As of March 31, 2000, the
Company owed Agg-Dale, Inc. $507,157.79 (including accrued interest) pursuant to
a promissory note dated December 29, 1995 in the principal amount of $650,000
and Cement-Dan, Inc. $546,169.89 (including accrued interest) pursuant to
promissory note dated December 29, 1995 in the principal amount of $700,000.
<PAGE>
SECTION 2.23.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Environmental Matters
1. On July 22, 1997, the Texas Natural Resource Conservation Commission
("TNRCC") notified the Company that it was in violation of certain
TNRCC regulations due to its failure to seek an exemption prior to
undertaking specified actions. However, on August 25, 1997, the TNRCC
notified the Company that its exemption request had been granted and
that it was no longer in violation of TNRCC regulations.
2. A Phase I Environmental Assessment of the property leased from TXI
Operations, L.P. and performed by Dames & More in 1997 (a copy of the
report on the Environmental Assessment was previously provided to
Purchaser in the Company's response to Purchaser's due diligence
request) indicated the existence of Hazardous Materials at the Dallas
Block Plant.
3. The Company keeps a 55 gallon barrel to hold used oil from oil changes
on its forklifts. The barrel is housed in an approved containment
structure in the event there is a spill. The used oil is used to coat
concrete forms, so there is never a need to dispose of the oil.
4. In March 2000 a delivery truck's fuel tank was punctured, and diesel
fuel leaked on to the ground at the Palestine, Texas location. The
Company took all required action to clean up the fuel spill and dispose
of the contaminated soil.
<PAGE>
SECTION 2.24.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Customer List
1. Wilk Masonry $1,467,635
2. Mustang Masonry $726,922
3. DMG Masonry $702,105
4. Gay & Son Masonry $526,338
5. C&D Masonry $497,316
6. Northeast Masonry $443,564
7. Trinity Masonry $363,717
8. Masonry Structures $349,116
9. Accurate Masonry $223,180
10. Mel Hardy Masonry $222,658
<PAGE>
SECTION 2.24.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
List of Suppliers
1. Cement-Dan, Inc. $3,169,103
2. Agg-Dale, Inc. $2,940,028
3. Gifford Hill $605,106
4. Lehigh Cement $388,572
5. W.R. Grace $269,365
6. Lambert Colors $230,462
7. Prewit Petroleum $204,062
8. Masonry Reinforcing Corp. $203,566
9. Georgetown $165,333
10. Texas Utilities $156,104
<PAGE>
SECTION 2.24.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Insolvency or Bankruptcy of Customer or Supplier
None.
<PAGE>
SECTION 2.25
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Accounts Receivable
No Exceptions.
<PAGE>
SECTION 2.28
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Bank and Brokerage Accounts
--------------------- ------------------ ---------------- ------------------
Bank Name Type of Account Account No. Signatories
--------------------- ------------------ ---------------- ------------------
Compass Bank Checking 008-0016-9 1. Dale Smith
Palestine, Texas 2. Danny Smith
3. Melissa Woodard
--------------------- ------------------ ---------------- ------------------
Compass Bank Treasury 780-7317-9 1. Dale Smith
Palestine, Texas 2. Danny Smith
3. Melissa Woodard
4. Celia Smith
--------------------- ------------------ ---------------- ------------------
A.G. Edwards & Investment 394-062294-003 1. Dale Smith
Sons, Inc. 2. Danny Smith
3. Melissa Woodard
--------------------- ------------------ ---------------- ------------------
<PAGE>
SECTION 3.3.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Conflicts
None.
<PAGE>
SECTION 3.4
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISG RESOURCES, INC.,
DALE & BRENDA, LTD., DAN & DORENDA, LTD.,
THE DALE WAYNE SMITH FAMILY TRUST,
THE DANIEL ANDREW SMITH FAMILY TRUST,
DALE W. SMITH AND DANNY A. SMITH
Governmental Approvals and Filings
Consent of the United States Department of Justice and the Federal Trade
Commission is required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. Early termination of the waiting period was granted on
February 8, 2000.
<PAGE>
May 16, 2000
VIA TELECOPY
J.I. "Chip" Everest, II
ISG Resources, Inc.
136 East South Temple, Suite 1300
Salt Lake City, Utah 84111
Re: Stock Purchase Agreement dated March 31, 2000, by and among
ISG Resources, Inc., Dale & Brenda, Ltd. and Dan & Dorenda
Ltd., the Daniel Andrew Smith Family Trust and the Dale Wayne
Smith Family Trust, Dale W. Smith and Danny A. Smith(the
"Stock Purchase Agreement")
Dear Chip:
As we have discussed, due to the delay in the closing of the
transaction described in the Stock Purchase Agreement, ISG Resources, Inc. and
the Sellers have agreed to make certain modifications to the terms of the Stock
Purchase Agreement. Accordingly, the purpose of this letter is to confirm in an
amendment to the Stock Purchase Agreement to be effective as of April 30, 2000,
each of those modifications. Unless otherwise defined in this letter, all
capitalized terms used but not otherwise defined herein shall have the meanings
assigned to those terms in the Stock Purchase Agreement. The Stock Purchase
Agreement is hereby amended as follows:
Section 1.2 of the Stock Purchase Agreement is hereby amended by
deleting that section and replacing it with the following:
1.2 Purchase Price.
1.2.1 The purchase price (the "Purchase Price") for the
Purchased Stock and the Real Estate Assets shall be an amount equal to nineteen
million dollars ($19,000,000.00), less the balance of the Intercompany
Indebtedness (as defined below) paid by Purchaser, subject to the adjustments
set forth in Sections 1.2.2 below. The Purchase Price shall be allocated as
follows:
1.2.1.1 $18,600,000 for the Purchased Stock; and
1.2.1.2 $400,000 for the Real Estate Assets.
1.2.2 The Purchase Price will be increased or decreased, as
the case may be, on a dollar-for-dollar basis, if and by the amount by which the
working capital of the Company (total current assets less total current
liabilities), calculated as of the Closing Date, in accordance with the formula
attached hereto as Exhibit "B", is more or less than $2,600,000.00; provided,
however, that for purposes of calculating the working capital of the Company as
of the Closing Date, no portion of the indebtedness of the Company to either
Cement-Dan, Inc., or Agg-Dale, Inc., under the terms of those two certain
promissory notes dated December 29, 1995 (the "Intercompany Indebtedness") shall
be treated as a current liability of the Company.
1.2.3 Notwithstanding the amount of the increase or decrease,
as the case may be, to the Purchase Price, if any, pursuant to the terms of
Section 1.2.2 above, the Purchase Price shall not be otherwise reduced by any
amount if TXI Operations, L.P. ("TXI") does not, for any reason, consent to the
assignment and transfer of all of the Company's rights and obligations under
that certain Lease Agreement dated October 14, 1997, by and between TXI and the
Company (the "TXI Lease Agreement").
1.2.4 To determine whether an adjustment is appropriate, the
Purchaser shall (within sixty days of the Closing Date) provide the Seller with
a balance sheet of the Company dated as of the Closing Date and prepared in
accordance with GAAP, as applied historically by the Company, along with a
calculation of the actual working capital of the Company as of the Closing Date,
all in accordance with Exhibit "B" attached hereto indicating whether an
adjustment is due pursuant to section 1.2.2 (the "Purchaser's Calculation"). If
the Seller (within thirty days of receiving the Purchaser's Calculation)
disagrees with the Purchaser's Calculation, then the Parties will mutually agree
on the prompt engagement of an independent accounting firm to review the
financial condition of the Company as of the Closing Date 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. The Parties shall each bear
one-half of the fees and expenses if an independent accounting firm is engaged
pursuant to this section 1.2.4.
1.2.5 Exhibit "A" is hereby deleted and of no further force or
effect.
Section 1.4 of the Stock Purchase Agreement is hereby amended by
deleting that section and replacing it with the following:
1.4 Payment of Purchase Price. At the Closing, Purchaser will
pay the sum of $19,000,000.00, less the balance of the Intercompany Indebtedness
paid by Purchaser as of the Closing Date, plus all accrued, but unpaid interest
at the rate of eight percent (8%) per annum on the $19,000,000 from May 1, 2000
through the Closing Date (the "Interest Payment"), 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) days before the Closing
Date, and pay the balance due under the Intercompany Indebtedness directly to
Cement Dan, Inc. and Agg-Dale, Inc. Simultaneously, the Sellers will sell and
convey to Purchaser the Purchased Stock and the Real Estate Assets free and
clear of all Liens, except for any Permitted Encumbrances, by delivering to
Purchaser a stock certificate(s), registered in the name of Purchaser,
representing the Purchased Stock, along with general warranty deeds conveying
title to the Real Estate Assets. At the Closing, the parties shall also deliver
the opinions, certificates, contracts, documents and instruments to be delivered
pursuant to this Agreement. If for any reason the Closing Date does not occur by
May 31, 2000, the Interest Payment shall be due and payable by Purchaser to
Sellers. In addition, Sellers hereby acknowledge their receipt of a payment from
purchaser in the amount of $120,000 for all accrued, but unpaid interest on the
original purchase price of $18,000,000 from April 1, 2000 through April 30,
2000.
Section 1.5 of the Stock Purchase Agreement is hereby amended by
deleting that section and replacing it with the following:
1.5 Post Closing Payment.
1.5.1 If the Sellers agree with the Purchaser's Calculation,
then within twenty (20) days after delivery of the Purchaser's Calculation, and
if the Purchaser's Calculation indicates that an upward adjustment is
appropriate, the Purchaser will deliver to the Sellers cash in the amount of the
indicated adjustment. If, however, the Sellers agree with the Purchaser's
Calculation and the Purchaser's Calculation indicates that a downward adjustment
is appropriate, then within twenty (20) days after delivery of the Purchaser's
Calculation, the Sellers will deliver to the Purchaser cash in the amount of the
indicated adjustment.
1.5.2 If the Sellers disagree with the Purchaser's Calculation
then, within twenty (20) days after delivery of the report by the independent
accounting firm referred to in Section 1.2.4, and 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. If, however, the report by the independent accounting firm referred
to in Section 1.2.4 indicates that a 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 within twenty (20) days
after the delivery of the report by the independent accounting firm.
1.5.3 If the Purchaser's Calculation, or the independent
accounting firm's report, indicates that an adjustment (upward or downward) is
appropriate, the Purchaser or the Sellers, as the case may be, shall pay the
other interest, at the rate of eight percent (8%) per annum, on the principal
amount of the adjustment for the period from the Closing Date until the payment
is made, if made within the twenty (20) day period referred to in Sections 1.5.1
and 1.5.2, as the case may be, and at the rate of twelve percent (12%) per annum
thereafter until paid.
If the terms of this amendment are acceptable, please sign this letter
where indicated below and return it to me by telecopy (214.939.8787). The
amendment described above shall be effective once this letter is signed by you
and all references to the Stock Purchase Agreement shall be deemed to be
references to the Stock Purchase Agreement as amended hereby.
This letter may be executed in any manner of counterparts, all of which
taken together shall constitute one and the same instrument. I am authorized to
sign this letter on behalf of all of the Sellers.
Best regards.
Very truly yours,
Dale Smith
Accepted and Agreed to
as of the 16th day of May, 2000
ISG RESOURCES, INC.
By: /s/
-------------------------------------
J.I. "Chip" Everest, II, Treasurer and CFO
