SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
January 5, 1999
- ----------------------------------------------------------------
Date of Report (date of earliest event reported)
TEMTEX INDUSTRIES, INC.
- ----------------------------------------------------------------
Exact name of Registrant as Specified in its Charter
Delaware 0-5940 75-1321869
- ----------------------------------------------- ---------------------
State or Other Jurisdiction Commission File IRS Employer
of Incorporation Number Identification Number
5400 LBJ Freeway, Suite 1375, Dallas, Texas 75240
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Address of Principal Executive Offices, Including Zip Code
(972) 726-7175
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Registrant's Telephone Number, Including Area Code
N/A
- ----------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On January 5, 1999, Temtex Industries, Inc. (the "Company")
completed the sale of substantially all of the assets and
specified liabilities of Texas Clay Industries, a division of the
Company (the "Brick Business"), to Acme Brick Company (the
"Sale"). Texas Clay Industries manufactures and markets clay
face brick products. The Sale was consummated in accordance with
the terms of that certain Asset Purchase Agreement between Acme
Brick Company and Temtex Industries, Inc. dated October 22, 1998
(the "Sale Agreement") which has been attached hereto and
incorporated herein by reference.
The consideration paid to the Company in connection with the
Sale was as follows: (i) $12.97 million, of which $0.9 million
is being withheld pending final calculation of certain post-
closing balance sheet items as set forth in detail in the Sale
Agreement; and (ii) assumption of accounts payable and other debt
of Texas Clay Industries totaling approximately $0.9 million.
The total consideration paid in the Sale was determined
through arm's length negotiations between the parties. Neither
the Company nor any of its affiliates had, nor to the knowledge
of the Company did any director or officer or any associate of
any such director or officer of the Company, have any material
relationship with Acme Brick Company prior to the Sale.
Item 7. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Not Applicable.
(b) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet
as of November 30, 1998 reflects the historical accounts of the
Company as of that date adjusted to give pro forma effect to the
Sale as if the transaction had occurred as of the date presented.
The following unaudited pro forma consolidated statements of
operations for the fiscal quarter ended November 30, 1998 and the
three fiscal years ended August 31, 1998 reflect the historical
accounts of the Company for those periods, adjusted to give pro
forma effect to the Sale as if the transaction had occurred at
the beginning of each period presented.
The pro forma financial data and accompanying notes should
be read in conjunction with the description of the Sale contained
in this Current Report on Form 8-K and the Consolidated Financial
Statements and related notes included in the Company's 1998
Annual Report on Form 10-K and the Quarterly Report on Form 10-Q
relating to the fiscal quarter ended November 30, 1998, in each
case, previously filed with the Commission. The Company believes
that the assumptions used in the following statements provide a
reasonable basis on which to present the pro forma financial
data. The pro forma financial data is provided for informational
purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the
Sale been consummated on the dates assumed and are not intended
to project the Company's financial condition on any future date
or results of operations for any future period.
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars)
<TABLE>
<CAPTION>
As of November 30, 1998
----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------- ---------------- ----------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 540 $ 11,124[2] $ 11,664
Accounts receivable - net 5,694 (1,088)[1] 4,606
Inventories 10,845 (1,445)[1] 9,400
Prepaid expenses 323 (11)[1] 312
Deferred taxes 607 294[3] 901
---------------- ---------------- ----------------
TOTAL CURRENT ASSETS 18,009 8,874 26,883
DEFERRED TAXES 138 116[3] 254
OTHER ASSETS 463 -- 463
PROPERTY, PLANT AND EQUIPMENT
Land and clay deposits 566 (566)[1] --
Buildings and improvements 3,491 (876)[1] 2,615
Machinery, equipment, furniture and fixtures 25,037 (7,789)[1] 17,248
Leasehold improvements 1,077 -- 1,077
---------------- ---------------- ----------------
30,171 (9,231) 20,940
Less allowance for depreciation,
depletion and amortization 23,076 (7,315)[1] 15,761
---------------- ---------------- ----------------
7,095 (1,916) 5,179
---------------- ---------------- ----------------
$ 25,705 $ 7,074 $ 32,779
================ ================ ================
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars)
<TABLE>
<CAPTION>
As of November 30, 1998
---------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------- ---------------- ----------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes payable $ 1,600 $ -- $ 1,600
Accounts payable 4,038 (595)[1] 3,443
Accrued expenses 1,129 -- 1,129
Income taxes payable 99 2,872[3] 2,971
Current maturities of indebtedness to related parties 11 -- 11
Current maturities of long-term obligations 118 (82)[1] 36
---------------- ----------------- ----------------
TOTAL CURRENT LIABILITIES 6,995 2,195 9,190
INDEBTEDNESS TO RELATED PARTIES,
less current maturities 1,590 -- 1,590
LONG-TERM OBLIGATIONS, less current
maturities 631 (204)[1] 427
STOCKHOLDERS' EQUITY
Common stock 718 -- 718
Additional capital 9,246 -- 9,246
Retained earnings 6,852 5,083[3] 11,935
---------------- ----------------- ----------------
16,816 5,083 21,899
Less: Cost of treasury stock 327 -- 327
---------------- ----------------- ----------------
16,489 5,083 21,572
---------------- ----------------- ----------------
$ 25,705 $ 7,074 $ 32,779
================ ================= ================
</TABLE>
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<PAGE>
Footnotes to Unaudited Pro Forma Consolidated Balance Sheet
(In thousands of dollars)
(1) To reflect the elimination of assets and liabilities
relating to and resulting from the operations of the Brick
Business sold in connection with the Sale.
(2) To reflect the net proceeds resulting from and related to
the Sale of the Brick Business calculated as follows:
Gross proceeds from sale of net assets $ 12,970
Purchase price adjustments based on assumed
net assets, as defined (746)
Payment of estimated fees and transaction
costs (820)
Payment of estimated severance costs (280)
-----------
Net proceeds $ 11,124
===========
(3) To reflect the estimated gain for financial statement
purposes resulting from the Sale of the Brick Business
calculated as follows:
Gross proceeds from sale of net assets
$ 12,970
Purchase price adjustments (746)
Net book value of assets and liabilities
related to and resulting from the
operations of the Brick Business
(3,579)
Taxes, estimated fees and transaction
costs, and estimated severance costs
(3,562)
-----------
Estimated gain $ 5,083
===========
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended November 30, 1998
-----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales $ 10,317 $ (2,642)[1] $ 7,675
Cost of goods sold 7,539 (1,457)[1] 6,082
----------------- ---------------- ----------------
2,778 (1,185) 1,593
Costs and expenses:
Selling, general and administrative 2,345 (310)[1] 2,035
Interest 121 (9)[2] 112
Other expense / (income) (23) 25[1] 2
----------------- ---------------- ----------------
2,443 (294) 2,149
INCOME/(LOSS) FROM OPERATIONS ----------------- ---------------- ----------------
BEFORE INCOME TAXES 335 (891) (556)
Income tax provision (benefit) 134 (285)[1] (151)
----------------- ---------------- ----------------
NET INCOME/(LOSS) $ 201 $ (606) $ (405)
================= ================ ================
Basic and diluted income (loss) from operations
per common share $0.06 $(0.12)
Weighted average common shares outstanding 3,477,141 3,477,141
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Year ended August 31, 1998
----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales $ 37,183 $ (11,021)[1] $ 26,162
Cost of goods sold 27,045 (6,393)[1] 20,652
----------------- ---------------- ----------------
10,138 (4,628) 5,510
Costs and expenses:
Selling, general and administrative 8,912 (1,302)[1] 7,610
Interest 464 (42)[2] 422
Other expense / (income) (68) 12[1] (56)
----------------- ---------------- ----------------
9,308 (1,332) 7,976
INCOME (LOSS) BEFORE
----------------- ---------------- ----------------
INCOME TAXES 830 (3,296) (2,466)
Income tax provision (benefit) 323 (1,154)[1] (831)
----------------- ---------------- ----------------
NET INCOME (LOSS) $ 507 $ (2,142) $ (1,635)
================= ================ ================
Basic income (loss) per common share $0.15 $(0.47)
Diluted income (loss) per common share $0.14 $(0.47)
Basic weighted average common shares outstanding 3,477,141 3,477,141
Diluted weighted average common and common equivalent
shares outstanding 3,531,414 3,477,141
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Year Ended August 31, 1997
-----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales $ 39,208 $ (9,010)[1] $ 30,198
Cost of goods sold 29,317 (5,971)[1] 23,346
---------------- ----------------- -----------------
9,891 (3,039) 6,852
Costs and expenses:
Selling, general and administrative 9,831 (1,431)[1] 8,400
Interest 519 (48)[2] 471
Other expense / (income) (114) 25[1] (89)
---------------- ----------------- -----------------
10,236 (1,454) 8,782
LOSS BEFORE ---------------- ----------------- -----------------
INCOME TAXES (345) (1,585) (1,930)
Income tax benefit (144) (541)[1] (685)
---------------- ----------------- -----------------
NET LOSS $ (201) $ (1,044) $ (1,245)
================ ================= =================
Basic and diluted loss per common share $(0.06) $(0.36)
Weighted average common shares outstanding 3,474,155 3,474,155
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TEMTEX INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Year Ended August 31, 1996
----------------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net sales $ 41,972 $ (8,862)[1] $ 33,110
Cost of goods sold 30,977 (5,970)[1] 25,007
------------------ ------------------ ------------------
10,995 (2,892) 8,103
Costs and expenses:
Selling, general and administrative 9,548 (1,491)[1] 8,057
Interest 583 (45)[2] 538
Other expense / (income) (2) 15[1] 13
10,129 (1,521) 8,608
INCOME (LOSS) BEFORE ------------------ ------------------ ------------------
INCOME TAXES 866 (1,371) (505)
Income tax provision (benefit) 324 (462)[1] (138)
------------------ ------------------ ------------------
NET INCOME (LOSS) $ 542 $ (909) $ (367)
================== ================== ==================
Basic income (loss) per common share $0.16 $(0.11)
Diluted income (loss) per common share $0.15 $(0.11)
Basic weighted average common shares outstanding 3,465,739 3,465,739
Diluted weighted average common and common
equivalent shares outstanding 3,531,631 3,465,739
</TABLE>
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<PAGE>
Footnotes to Unaudited Pro Forma Consolidated Statements of
Operations
(In thousands of dollars)
(1) To reflect the elimination of net sales, costs of goods
sold, costs and expenses, and income taxes of the Brick
Business.
(2) To reflect the elimination of interest expense which
includes $3, $18, $21 and $13 for long-term obligations
directly related to the Brick Business and $6, $24, $27 and
$32 of interest expense associated with the Company's line
of credit allocated to the Brick Business based upon total
current assets for the fiscal quarter ended November 30,
1998 and the fiscal years ended August 31, 1998, 1997, and
1996, respectively.
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<PAGE>
(c) EXHIBITS
Exhibit
Number Description
- ----------- -----------
2.1 Asset Purchase Agreement dated October 22, 1998
between Acme Brick Company and Temtex Industries, Inc.
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<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 hereunto duly authorized.
TEMTEX INDUSTRIES, INC.
Dated: January 19, 1999
By: /s/ Roger N. Stivers
---------------------------
Roger N. Stivers
Vice President-Finance, Chief
Financial Officer and Chief
Accounting Officer
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<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- ----------- -----------
2.1 Asset Purchase Agreement dated October 22, 1998
between Acme Brick Company and Temtex Industries, Inc.
- ----------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN
ACME BRICK COMPANY
BUYER
and
TEMTEX INDUSTRIES, INC.
SELLER
October 22, 1998
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. Purchased and Sale 1
1.1 Purchased Assets 1
1.2 Assumption of Specified Liabilities 4
1.3 Non-Assumption of Certain Liabilities 8
1.4 No Expansion of Third-Party Rights 10
1.5 Corporate Action by Seller 10
2. Purchase Price and Closing 11
2.1 Purchase Price 11
2.2 Purchase Price Adjustments. 11
2.3 The Closing 14
3. Representations and Warranties of Seller 15
3.1 Existence; Good Standing; Corporate Authority;
Compliance With Law 15
3.2 Authorization, Validity and Effect of Agreements 15
3.3 Financial Statements 16
3.4 Absence of Certain Changes or Events 16
3.5 Taxes 17
3.6 Personal Property 17
3.7 Accounts Receivable 17
3.8 Inventory 17
3.9 Business Property Rights 17
3.10 Owned Real Property 18
3.11 Leased Real Property 20
3.12 Title to Property; Encumbrances; Sufficiency of
Purchased Assets 20
3.13 Licenses and Permits 20
3.14 Compliance with Law 21
3.15 Litigation 21
3.16 Contracts 21
3.17 Labor Matters 22
3.18 Employee Plans 22
3.19 Insurance 23
3.20 Environmental Matters 23
3.21 Customers and Suppliers 23
3.22 No Brokers 23
3.23 No Other Agreements to Sell the Purchased Assets 23
3.24 Accuracy of Information 23
4. Representations and Warranties of Buyer 24
4.1 Existence; Good Standing; Corporate Authority;
Compliance With Law 24
4.2 Authorization, Validity and Effect of Agreements 24
-i-
<PAGE>
TABLE OF CONTENTS (continued)
5. Survival of Provisions/Indemnification 25
5.1 Survival of Provisions 25
5.2 Indemnification by Seller 25
5.3 Indemnification by Buyer 26
5.4 Limitations on Indemnification 26
5.5 Conditions of Indemnification 28
5.6 Buyer's Right of Withholding and Offset 29
6. Other Covenants and Agreements 30
6.1 Restrictive Covenants 30
6.2 Conduct of the Business 32
6.3 Consents and Approvals 32
6.4 Access to Properties and Records 33
6.5 Acquisition Proposals 33
6.6 Public Announcements 34
6.7 Notification of Certain Matters 34
6.8 Execution of Additional Documents 34
6.9 Costs and Expenses 34
6.10 Transfer Taxes 34
6.11 Cooperation on Tax Matters; Business Records 34
6.12 Allocation of Total Purchase Price 35
6.13 Proration of Property Taxes 35
6.14 Offers of Employment 36
6.15 Title Commitments, Title Policies and Surveys
Covering Owned Real Property 36
6.16 Environmental Information 37
7. Conditions of Closing 37
7.1 Buyer's Conditions of Closing 37
7.2 Seller's Conditions of Closing 39
8. Termination and Abandonment 40
8.1 Reasons for Termination 40
8.2 Procedure Upon and Effect of Termination 41
9. Miscellaneous 41
9.1 Notices 41
9.2 Binding Effect; Benefits 43
9.3 Entire Agreement 43
9.4 Governing Law 43
9.5 Counterparts 44
9.6 Headings 44
9.7 Waivers 44
9.8 Merger of Documents 45
9.9 Incorporation of Exhibits and Schedules 45
9.10 Severability 45
9.11 Assignability 45
-ii-
<PAGE>
TABLE OF CONTENTS (continued)
9.12 Drafting 45
9.13 References 46
9.14 Calendar Days, Weeks and Months 46
9.15 Gender; Plural and Singular 46
9.16 Cumulative Rights 46
9.17 No Implied Covenants 46
9.18 Attorneys' Fees 46
9.19 Indirect Action 46
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<PAGE>
Exhibit
A Form of Bill of Sale, Assignment and Assumption Agreement
B Form of Legal Opinion of Seller's Counsel
C Form of Legal Opinion of Buyer's Counsel
Schedule
1.1.1A Owned Real Property
1.1.1B Leases and Leased Real Property
1.1.1C Certain Purchased Assets
1.1.1D Business Property Rights
1.1.1E Description of the Owned Gas Pipeline
1.1.2 Excluded Assets
1.2A Certain Long Term Debt and Current Maturities
Assumed Liabilities
1.2B Assumed Contracts
3.1 Violations of Law; Failures to Obtain Permits
3.2 Seller's Third Party Consents Required;
Defaults; Violations
3.3 Interim Financial Statements
3.10 Owned Real Property Matters
3.11 Defaults Under Leases
3.12 Certain Encumbrances
3.13 Licenses and Permits
3.14 Violations of Law
3.15 Pending or Threatened Litigation or Claims
3.16 Material Contracts
3.17 Employment and Labor Agreements
3.18 Employee Plans
3.19 Insurance
3.20 Environmental Matters
4.2 Buyer's Third Party Consents Required;
Defaults; Violations
6.15 Encumbrances on Owned Real Property to be
Removed Prior to Closing
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as
of October 22, 1998, by and between ACME BRICK COMPANY, a
Delaware corporation ("Buyer"), and TEMTEX INDUSTRIES, INC., a
Delaware corporation ("Seller").
WHEREAS, Seller is engaged, among other things, in the
business of manufacturing, storing, selling, delivering,
supplying and/or distributing clay face brick products through
its Texas Clay Industries division (the "Business"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires
to acquire from Seller, the Purchased Assets (as such term is
hereinafter defined) in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. PURCHASED AND SALE.
1.1 PURCHASED ASSETS.
1.1.1 On the terms and subject to the conditions
contained in this Agreement, on the Closing Date (as
such term is hereinafter defined), Seller shall sell,
assign, grant, convey, bargain, set over, transfer and
deliver to Buyer, and Buyer shall purchase and acquire
from Seller, the following assets and properties of
Seller (hereinafter referred to collectively as the
"Purchased Assets"), except any of the following which
are Excluded Assets:
(i) the real property described on Schedule
1.1.1A hereof, together with all interests in such
real property (including, without limitation,
leases and contract rights), all buildings,
improvements and other structures located on such
real property, all uses, easements and rights-of-
way which benefit such real property, and all
minerals (surface and subsurface), clays and sands
located on, at or below such real property (such
assets and properties being collectively referred
to herein as the "Owned Real Property");
(ii) all rights, title and interest of Seller
under the leases or subleases of real property or
interests in real property (including mineral,
sand or clay rights) described on Schedule 1.1.1B
hereof (such leases and subleases being
collectively referred to herein as the "Leases"
and the real property or interests in real
property leased or subleased
<PAGE>
under the Leases being collectively referred to
herein as the "Leased Real Property");
(iii) all of the assets and properties of
Seller of every kind, nature and description which
are located at or on any of the Owned Real
Property or Leased Real Property, except any such
assets or properties which may be disposed of
after the date hereof in the ordinary course of
business consistent with past practice;
(iv) all of the assets and properties
(wherever located) set forth in a detailed list of
plant and equipment as of the date of the Balance
Sheet (as such term is hereinafter defined)
prepared from the accounting records of Seller and
attached hereto as Schedule 1.1.1C, and all such
assets and properties of the Business as may have
been acquired by Seller after the date of the
Balance Sheet which would be included on a list
prepared in like manner from such accounting
records as of the Closing Date, except any such
assets or properties which have been or may be
disposed of since the date of the Balance Sheet in
the ordinary course of business consistent with
past practice;
(v) all accounts, notes and other
receivables (including, without limitation,
amounts due from distributors or customers of the
Business) and related deposits, security or
collateral therefor arising out of the operations
of the Business, as the same shall exist as of the
Closing Date;
(vi) all inventories, inventories of parts,
raw materials, work in process and finished goods
which are held in connection with, or used or held
for use in the business and operations of, the
Business, except any such assets or properties
which may be disposed of after the date hereof in
the ordinary course of business consistent with
past practice;
(vii) all drawings, blueprints,
specifications, designs and data pertaining to the
Purchased Assets;
(viii) all technology, know-how, designs,
devices, processes, methods, inventions, drawings,
schematics, specifications, standards, trade
secrets and other proprietary information which
are held in connection with, or used or held for
use in, the manufacture of clay face brick
products;
(ix) all patents and applications therefor
and the licenses thereto, and all trademarks and
tradenames (including, without limitation, "Texas
Clay", "Texas Clay Products", "Texas Clay
Industries", "Building Better Places, Brick by
Brick" and any variations thereof), trademark and
tradename registrations, service marks and
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<PAGE>
service mark registrations, copyrights and
copyright registrations, the applications therefor
and the licenses thereto, which are listed or
described on Schedule 1.1.1D hereof (such assets
and properties being hereinafter collectively
referred to as the "Business Property Rights"),
together with the goodwill and the business
appurtenant thereto;
(x) that certain 3 inch, 6-1/2 mile natural
gas
pipeline more fully described in Schedule 1.1.1E
hereof, together with all rights-of-way and
easement interests, if any, owned or held by
Seller in connection therewith (such assets and
properties being collectively referred to herein
as the "Owned Gas Pipeline");
(xi) all catalogues, brochures, sales
literature, promotional material, samples and
other selling material pertaining to the Purchased
Assets;
(xii) all books and records and all
files, documents, papers, agreements, books of
account and other records pertaining to the
Purchased Assets, provided, however, that Seller
may retain copies thereof;
(xiii) all rights, title and interest of
Seller under all of its contracts, agreements,
licenses, leases, sales orders, permits, purchase
orders and other commitments (whether oral or
written), other than the Leases (individually a
"Contract" and collectively the "Contracts"),
which Buyer will assume pursuant to Section 1.2
hereof;
(xiv) all lists of past, present and
qualified prospective customers of the Business
and distributors of products of the Business;
(xv) all goodwill relating to the Purchased
Assets;
(xvi) all governmental establishment and
product licenses and permits, approvals, license
and permit applications and license and permit
amendment applications pertaining to the Purchased
Assets; and
(xvii) all claims against third parties,
whether or not asserted and whether now existing
or hereafter arising, related to the Purchased
Assets (including, without limitation, all claims
based on any indemnities or warranties in favor of
Seller relating to any of the Purchased Assets).
1.1.2 Anything herein contained to the
contrary notwithstanding, (i) the assets and properties
of Seller which are not held in connection with, or not
used or held for use in the business or operations of,
the Business are specifically excluded from the
Purchased Assets and shall be retained by Seller; and
(ii) the assets and properties of Seller which are held
in connection with, or used or held for use in the
business or operations of, the Business and which are
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<PAGE>
described in Schedule 1.1.2 hereof, as the same shall
exist as of the Closing Date (collectively the
"Excluded Assets"), are specifically excluded from the
Purchased Assets and shall be retained by Seller.
1.1.3 Subject to Section 1.1.4 hereof, at the
Closing, Seller shall execute and deliver to Buyer (i)
a Bill of Sale, Assignment and Assumption Agreement, in
the form attached hereto as Exhibit "A" (the "Bill of
Sale, Assignment and Assumption Agreement"), under the
terms of which Seller shall sell, grant, convey,
assign, transfer and deliver the Purchased Assets to
Buyer, (ii) a special warranty deed in form and content
reasonably satisfactory to Buyer relating to each of
the tracts of Owned Real Property, and (iii) such other
bills of sale, deeds, instruments of assignment and
other appropriate documents as may be reasonably
requested by Buyer in order to carry out the intentions
and purposes hereof.
1.1.4 Notwithstanding the foregoing, this
Agreement shall not constitute an agreement to assign
or transfer any Lease or Contract if an assignment or
transfer or an attempt to make such an assignment or
transfer without the consent of a third party would
constitute a breach or violation thereof or affect
adversely the rights of Buyer or Seller thereunder; and
any transfer or assignment to Buyer by Seller of any
interest under any such Lease or Contract hereunder
that requires the consent or approval of a third party
shall be made subject to such consent or approval being
obtained. In the event any such consent or approval is
not obtained on or prior to the Closing Date and Buyer
waives as of the Closing Date the condition that such
consent or approval be obtained, Seller shall continue
to use all reasonable efforts to obtain any such
consent or approval after the Closing Date until such
time as such consent or approval be obtained, and
Seller shall cooperate with Buyer in any lawful and
economically feasible arrangement to provide that Buyer
shall receive the interest of Seller in all benefits
under any such Lease or Contract, including without
limitation performance by Seller as agent if
economically feasible; provided, however, that Buyer
shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the
extent Buyer would have been responsible therefor
hereunder if such consent or approval had been obtained
as of the Closing Date. Seller shall pay and
discharge, and shall indemnify and hold Buyer harmless
from and against, any and all out-of-pocket costs of
seeking to obtain or obtaining any such contractual
consent or approval before or after the Closing Date.
Nothing in this Section 1.1.4 shall be deemed a waiver
by Buyer of its right to have received on or before the
Closing Date an effective assignment of all of the
Leases, and of all of the Contracts it has requested be
assigned to it hereunder, nor shall this Section 1.1.4
be deemed to constitute an agreement to exclude any
Leases or Contracts from the terms of this Agreement.
1.2 ASSUMPTION OF SPECIFIED LIABILITIES. Upon the
terms and subject to the conditions set forth herein,
subject however to Section 1.1.4 and 1.3 hereof, and as
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additional consideration for Buyer's purchase of the
Purchased Assets, Buyer shall, on the Closing Date, assume,
and covenant and agree to pay, perform and discharge when
due, only the following liabilities and obligations of
Seller (the "Assumed Liabilities"):
(i) accounts payable of the Business as at the
Closing Date incurred in the ordinary course of
business and consistent with past practice (not to
exceed $800,000.00 in the aggregate);
(ii) accrued liabilities of Seller relating to the
Richardson Property (as such term is hereinafter
defined) as at the Closing Date (not to exceed
$141,000.00 in the aggregate);
(iii) the long term debt and current
maturities liabilities of the Business listed on
Schedule 1.2A hereof (not to exceed $123,000.00 in the
case of long term debt liabilities and $90,000.00 in
the case of current maturities liabilities), less any
such liabilities which are paid, performed or
discharged by Seller between the date hereof and the
Closing Date;
(iv) those liabilities or obligations of Seller
with respect to clay pit reclamation on the Owned Real
Property or under the Leases, whether or not occurring
before or after the Closing Date;
(v) those liabilities or obligations of Seller
accruing after the Closing Date under the Leases (other
than liabilities or obligations with respect to clay
pit reclamation) or under the terms of a Contract (x)
which is listed on Schedule 1.2B hereof, or (y) which
otherwise relates to the Business and which was entered
into by Seller after the date hereof and on or prior to
the Closing Date in the ordinary course of business and
consistent with past practice and which Buyer, in the
exercise of its sole discretion, desires to assume and
agree to pay, perform and discharge, in each case less
any such liabilities or obligations which are paid,
performed or discharged by Seller between the date
hereof and the Closing Date;
(vi) the obligations of Seller to ship finished
products relating to the Business with respect to all
outstanding orders from customers or distributors for
such products which are not fully shipped as of the
Closing Date and which arose on or prior to the Closing
Date in the ordinary course of business and consistent
with past practice;
(vii) all warranties, liabilities or
obligations to customers or distributors with respect
to the repair or replacement of any finished products
related to the Business which have been manufactured by
Seller on or prior to the Closing Date (and which are
included as part of the inventories portion of the
Purchased Assets) and which are shipped by Buyer after
the Closing Date;
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(viii) all wages and benefits for employees of
the Business who did not receive any required notice
under the Worker Adjustment and Retraining Notification
Act or for civil penalties by local governments which
may be imposed for failure to give advanced notice
under the Worker Adjustment and Retraining Notification
Act, including without limitation fines and attorneys'
fees;
(ix) liabilities or obligations with respect to
any Environmental Condition (as such term is
hereinafter defined) relevant to any Site (as such term
is hereinafter defined) or any facilities or operations
thereon, except for any Serious Environmental Condition
(as such term is hereinafter defined);
(x) any liabilities or obligations with respect
to any violation of an Environmental Law (as such term
is hereinafter defined) with respect to any Site or any
facilities or operations thereon, except for any
Serious Environmental Condition arising therefrom;
(xi) liabilities or obligations with respect to
the removal, closure and any remediation activities
associated with any underground storage tanks located
at the Owned Real Property, except for any Serious
Environmental Condition arising therefrom;
(xii) liabilities or obligations for all
fines, penalties and remedial work required by the
Texas Natural Resources Conservation Commission (the
"TNRCC") or other governmental agency after the Closing
Date to bring facilities of the Business as currently
operated into compliance with all orders, decrees,
rules and regulations of the TNRCC or such governmental
agency;
(xiii) any individual warranty claim of
$3,000.00 or less with respect to the repair or
replacement of any finished products related to the
Business which have been manufactured by Seller on or
prior to the Closing Date and which have been shipped
by Seller on or prior to the Closing Date (provided,
however, that Buyer's aggregate Assumed Liability under
this Section 1.2(xiii) for all such claims shall not
exceed $40,000.00); and
(xiv) any other liabilities or obligations of
Seller expressly assumed by Buyer under any other
provision of this Agreement.
Subject to Sections 1.1.4 and 1.3 hereof, at the
Closing, Buyer shall execute and deliver to Seller the Bill
of Sale, Assignment and Assumption Agreement, under the
terms of which Buyer shall assume the Assumed Liabilities.
As used herein, the term "CERCLA" means the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. '9601 et seq., as amended to the
date hereof.
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As used herein, the term "Environment" shall mean soil,
surface waters, groundwaters, land, stream sediments,
surface or subsurface strata, ambient air, and any
environmental medium.
As used herein, the term "Environmental Condition"
shall mean any condition with respect to the Environment on
or off any Site, whether or not yet discovered, which could
or does result in any damage, loss, cost, expense, claim,
demand, order, or liability to or against Seller or Buyer by
any third party (including, without limitation, any
government entity), including without limitation any
condition resulting from the operation of the Business
and/or the operation of the business of any other property
owner or operator in the vicinity of any Site and/or any
activity or operation formerly conducted by any person or
entity on or off any Site.
As used herein, the term "Serious Environmental
Condition" shall mean any condition with respect to
contaminated groundwater on or off any Site, which (a)
existed at the Closing Date and is discovered within two
years after the Closing Date, and (b) under any
Environmental Law requires Seller or Buyer to conduct
monitoring, investigatory or corrective action to address
the contaminated groundwater. Corrective action means any
engineering control designed to prevent the migration of the
contaminated groundwater, any long-term monitoring necessary
to assess natural attenuation of contaminants, or any
treatment process designed to remove groundwater
contaminants necessary to achieve risk-based cleanup levels
for the contaminated groundwater.
As used herein, the term "Site" shall mean any Owned
Real Property or Leased Real Property.
As used herein, the term "Environmental Laws" shall
mean all applicable laws and regulations (federal, state,
and local), whether existing as of the date hereof,
previously enforced or subsequently enacted, relating to
pollution, the protection of environmentally sensitive areas
or species, or to the protection of public safety, public
health, public welfare, industrial hygiene, or the
Environment, including without limitation (i) those laws and
regulations relating to the Release or threatened Release of
Hazardous Materials and to the manufacture, generation,
management, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials, (ii) duties or requirements arising out of common
law, and (iii) judicial and administrative interpretations
thereof.
As used herein, the term "Hazardous Material" shall
mean (i) any chemicals, materials, wastes or substances that
are defined, regulated, determined or identified as toxic or
hazardous in any Environmental Law (including, without
limitation, substances defined as "hazardous substances",
"hazardous materials", or "hazardous waste" "pollutant or
contaminant", "petroleum" or "natural gas liquids" in
CERCLA, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, or comparable state
and local statutes or in the regulations adopted and
publications promulgated pursuant to said statutes), and
(ii) any asbestos or presumed asbestos
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containing materials, polychlorinated biphenyls, urea
formaldehyde, lead based paint, petroleum, petroleum
products, oil, solid waste, pollutants, and other
contaminants (whether or not regulated under any
Environmental Law).
As used herein, the term "Release" or "Released" shall
mean emitting, depositing, leaking, spilling, pumping,
pouring, emptying, discharging, injecting, escaping,
leaching, dumping or disposing.
1.3 NON ASSUMPTION OF CERTAIN LIABILITIES.
Notwithstanding any other provision of this Agreement, Buyer
shall not assume, and shall not be deemed to have assumed or
be in any way liable for or subject to or have any
obligation for or with respect to, any liabilities or
obligations of Seller of any kind, nature or description
whatsoever, except as expressly provided in Section 1.2
hereof (the "Excluded Liabilities"). Anything in Section
1.2 hereof or elsewhere herein to the contrary
notwithstanding and without limiting the generality of the
foregoing, Buyer shall not assume, and shall not be deemed
to have assumed or be in any way liable for or subject to or
have any obligation for or with respect to, any of the
following Excluded Liabilities:
(i) except for the liabilities assumed by Buyer
pursuant to section 1.2(viii) hereof, any and all
claims, liabilities or obligations that arise, result
from, or relate in any way to any or all employment
practices, decisions, actions, or proceedings
undertaken by Seller prior to or on the Closing Date in
connection with persons employed or seeking to be
employed in connection with the operation of the
Business, including without limitation any and all
claims, liabilities or obligations that arise out of,
result from, or relate to (a) Employment and Labor
Agreements, Employee Policies and Procedures or Plans
(as such terms are hereinafter defined), (b) any
National Labor Relations Board ("NLRB") proceedings,
(c) any other matters arising out of the employment of
people in connection with the operation of the
Business, such as workers' compensation, wage and hour,
safety and health, employment discrimination, unfunded
pension liability for vested and non-vested employees,
vacation accruals, and the like, and (d) any liability,
including without limitation federal and state income
tax liability, by reason of Seller's failure, through
any act or omission prior to or on the Closing Date, to
comply with the requirements of COBRA (as such term is
hereinafter defined) with respect to any "qualified
beneficiary" (as defined in COBRA); or
(ii) any and all liabilities or obligations of
Seller in respect of (x) any Taxes (as such term is
hereinafter defined) attributable to the Business and
attributable to periods or events prior to or ending or
occurring on the Closing Date or (y) except as
otherwise specifically provided in Section 6.10 hereof,
any Taxes, legal, accounting, brokerage, finder's fees,
or other expenses of whatsoever kind or nature incurred
by Seller or any partner, affiliate, director, employee
or officer of Seller as a result of the execution of
this Agreement or the consummation of the transactions
contemplated hereby; or
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(iii) any and all liabilities or obligations
of Seller relating to the Business arising out of any
litigation, action, suit or proceeding based upon an
event occurring, a condition existing or a claim
arising relating to the Business (x) on or prior to the
Closing Date (including, without limitation, the
litigation, actions, suits, proceedings and claims
listed on Schedule 3.15 hereof), or (y) after the
Closing Date in the case of claims, litigation,
actions, suits or proceedings in respect of products of
the Business sold by Seller on or prior to the Closing
Date and attributable to acts relating to the Business
performed or omitted by Seller on or prior to the
Closing Date (other than any of the foregoing which
constitute Assumed Liabilities); or
(iv) any individual warranty claim in excess of
$3,000.00 (or any warranty claim of $3,000.00 or less
in excess of Buyer's maximum Assumed Liability for such
claims under Section 1.2(xiii) hereof) with respect to
the repair or replacement of any finished products
related to the Business which have been manufactured by
Seller on or prior to the Closing Date and which have
been shipped by Seller on or prior to the Closing Date;
or
(v) any and all liabilities or obligations of
Seller under any of the Leases or Contracts assigned to
Buyer hereunder based upon an event occurring, a
condition existing or a claim arising (x) on or prior
to the Closing Date, or (ii) after the Closing Date in
the case of liabilities or obligations thereunder
attributable to acts performed or omitted by Seller on
or prior to the Closing Date (other than any of the
foregoing which constitute Assumed Liabilities); or
(vi) any and all liabilities or obligations
arising out of any claim, litigation, action, suit or
proceeding by third parties (including, without
limitation, current or former employees of the
Business) in respect of the death or personal injury of
any person attributable to acts relating to the
Business performed or omitted, or the operation of the
Business, on or prior to the Closing Date (including,
without limitation, any Releases of any Hazardous
Material on, at or from any Site existing or occurring
on or prior to the Closing Date); or
(vii) any and all liabilities or obligations
of Seller arising out of or related to this Agreement.
As used herein, the term "COBRA" means the provisions
of the Code, ERISA and the Public Health Service Act enacted
by Sections 10001 through 10003 of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (P.L. 99-272), including
any subsequent amendments to such provisions.
As used herein, the term "Code" means the Internal
Revenue Code of 1986, as amended.
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As used herein, the term "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended.
As used herein, the terms "Tax" or "Taxes" means all
federal, foreign, state, county, local or other net or gross
income, gross receipts, sales, use, transfer, transfer
gains, ad valorem, value-added, franchise, production,
severance, windfall profit, withholding, payroll,
employment, excise or similar taxes, assessments, duties,
fees, levies or other governmental charges (together with
any interest thereon, any penalties, additions to tax or
additional amounts with respect thereto and any interest in
respect of such penalties, additions or additional amounts).
1.4 NO EXPANSION OF THIRD-PARTY RIGHTS. The assumption
by Buyer of any Assumed Liabilities hereunder shall in no
way expand the rights or remedies of any third party against
Buyer as compared to the rights and remedies that such third
party would have had against Seller had Buyer not assumed
such Assumed Liabilities. Without limiting the generality of
the preceding sentence, the assumption by Buyer of such
Assumed Liabilities shall not create any third-party
beneficiary rights.
1.5 CORPORATE ACTION BY SELLER.
1.5.1 Seller hereby represents and warrants to
Buyer that Seller's Board of Directors (the "Board")
has, without dissent of any member thereof, (i)
determined that this Agreement, the sale of the
Purchased Assets hereunder and all other transactions
contemplated hereby are fair to and in the best
interests of its stockholders; and (ii) approved and
adopted this Agreement, the sale of the Purchased
Assets hereunder and all other transactions
contemplated hereby, and resolved to recommend, and to
continue to recommend between the date hereof and the
earlier of the Closing Date or the Termination Date (as
such term is hereinafter defined), that Seller's
stockholders vote in favor of the approval and adoption
of this Agreement, the sale of the Purchased Assets
hereunder and all other transactions contemplated
hereby and to use the Board's best efforts to obtain
such stockholder approval.
1.5.2 As soon as practicable after the
execution of this Agreement, Seller shall duly call and
cause to be held an annual or special meeting of its
stockholders and shall direct that this Agreement, the
sale of the Purchased Assets hereunder and all other
transactions contemplated hereby be submitted to
Seller's stockholders for the purpose of approving and
adopting the same. Seller agrees to use its best
efforts to obtain approval of this Agreement, the sale
of the Purchased Assets hereunder and all other
transactions contemplated hereby by its stockholders.
As promptly as possible after the execution
of this Agreement, Seller shall prepare and mail a
proxy statement and other proxy materials for such
meeting and shall comply with all legal requirements
applicable hereto. Seller shall provide Buyer and its
representatives with a reasonable opportunity
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to review and comment on such proxy statement and other
materials before they are distributed to Seller's
stockholders. Seller shall comply with all provisions
of federal and state securities laws applicable to
solicitation of proxies and consummation of the sale of
the Purchased Assets hereunder.
1.5.3 Seller further represents and warrants to
Buyer that each member of the Board has agreed for the
benefit of Buyer to vote or cause others to vote all of
the shares of capital stock of Seller beneficially
owned by such Board member or his affiliates (to the
extent such shares have voting rights) in favor of the
approval and adoption of this Agreement, the sale of
the Purchased Assets hereunder and all other
transactions contemplated hereby. Evidence of such
agreement has been provided to Buyer prior to the
execution of this Agreement.
2. PURCHASE PRICE AND CLOSING.
2.1 PURCHASE PRICE.
2.1.1 BEGINNING PURCHASE PRICE. Subject to
adjustment as provided in Section 2.2 below, the
purchase price for the Purchased Assets shall be
$12,970,000.00 (such price, as adjusted as provided in
Section 2.2 below, being herein referred to as the
"Purchase Price").
2.1.2 INITIAL PAYMENT. At the Closing, Buyer
shall deliver to Seller an initial payment determined
by Buyer pursuant to this Section 2.1.2 (the "Initial
Payment"). At least five business days prior to the
Closing Date, Seller shall deliver to Buyer copies of
the most recently available month end unaudited balance
sheet of the Business, and the unaudited statement of
income of the Business for the period ended on such
month end, together with the notes and schedules
thereto, if any, and such other information as
requested by Buyer as may be reasonably necessary to
make the calculation of the Initial Payment pursuant to
this Section 2.1.2. Such financial statements shall
present fairly the financial position, results of
operations and cash flows of the Business as at the
month end date thereof and for the period then ended,
in accordance with generally accepted accounting
principles consistently applied, subject to year end
adjustments. Buyer shall then determine in good faith
(solely for purposes of determining the Initial Payment
pursuant to this Section 2.1.2) the Purchase Price and
the adjustments thereto set forth in Sections 2.2.1,
2.2.2 and 2.2.3 below based on such financial
statements (and such other information provided by
Seller) and assuming, for such purpose, that such
adjustments were made as at the month end date of such
balance sheet rather than as at the Closing Date as
provided in Sections 2.2.1, 2.2.2 and 2.2.3 below.
Prior to the Closing, Buyer shall provide to Seller a
schedule setting forth in reasonable detail such
determination by Buyer. At the Closing, Buyer shall
deliver to Seller as the Initial Payment, by means of
federal funds wire or interbank transfer in immediately
available funds to such bank account(s) as Seller shall
designate, the greater of (i) $11,500,000.00, or (ii)
an amount equal to the Purchase Price
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(as theretofore calculated and adjusted by Buyer for
purposes of determining the Initial Payment pursuant to
this Section 2.1.2) less $300,000.00.
2.2 PURCHASE PRICE ADJUSTMENTS.
2.2.1 TRADE ACCOUNTS RECEIVABLE ADJUSTMENT. As
used herein, "Trade Accounts Receivable" shall mean all
accounts, notes and other receivables (including,
without limitation, amounts due from customers whether
recorded as accounts, notes or other receivables or
reductions in accounts payable) and related deposits,
security or collateral therefor (including, without
limitation, recoverable customer deposits of Seller),
which (i) are payable to or for the benefit of the
Business as at the Closing Date, (ii) arise out of the
ordinary course of business of the Business, and (iii)
represent bona fide, undisputed indebtedness (subject
to no counterclaim, right of offset or warranty claim
and after taking into account all offsets and credits
thereto) incurred by the applicable account debtor for
goods held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract
of sale.
If the aggregate net amount owing on all Trade
Accounts Receivable is less than $877,000.00, then the
Purchase Price shall be decreased by the amount that
the aggregate net amount owing on all Trade Accounts
Receivable is less than $877,000.00. If the aggregate
net amount owing on all Trade Accounts Receivable is
more than $877,000.00, then the Purchase Price shall be
increased by the amount that the aggregate net amount
owing on all Trade Accounts Receivable is more than
$877,000.00; provided, however, that there shall be no
such adjustment to the Purchase Price for aggregate net
amounts owing on all Trade Accounts Receivable in
excess of $2,250,000.00.
2.2.2 INVENTORY/PREPAID CLAY LEASE EXPENSES
ADJUSTMENT. As used herein, "Value" shall mean the
lower of cost or replacement value, in the case of raw
materials and supplies inventory, or the lower of cost
or net realizable value (which is less than replacement
value), in the case of work in progress and finished
goods inventory, in each case as at the Closing Date;
provided, however, that the Value of any unique runs of
finished goods brick inventory classified as "seconds"
(consistent with Seller's past practice as reasonably
approved by Buyer) shall be equal to the lesser of (i)
70% of such cost or (ii) net realizable value.
As used herein, "Inventory" shall mean all
inventories of raw materials and supplies, work in
process and finished goods as the same may exist on the
Closing Date, wherever located, used or relating to the
Business. The term Inventory excludes any of the
foregoing which is not usable or saleable in the
ordinary course of business of the Business as
heretofore conducted.
If the aggregate Value of Inventory is less than
$1,657,000.00, then the Purchase Price shall be
decreased by the amount that the aggregate Value of
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Inventory is less than $1,657,000.00. If the aggregate
Value of Inventory is more than $1,657,000.00, then the
Purchase Price shall be increased by the amount that
the aggregate Value of Inventory is more than
$1,657,000.00; provided, however, that there shall be
no such adjustment to the Purchase Price for aggregate
Value of Inventory in excess of $2,440,000.00.
As used herein, "Prepaid Clay Lease Expenses"
shall mean all prepaid expenses paid and incurred by
Seller as at the Closing Date relating to Seller's clay
leases entered into in the ordinary course of business
of the Business consistent with past practice.
If the aggregate amount of Prepaid Clay Lease
Expenses is less than $20,000.00, then the Purchase
Price shall be decreased by the amount that the
aggregate amount of Prepaid Clay Lease Expenses is less
than $20,000.00. If the aggregate amount of Prepaid
Clay Lease Expenses is more than $20,000.00, then the
Purchase Price shall be increased by the amount that
the aggregate amount of Prepaid Clay Lease Expenses is
more than $20,000.00; provided, however, that there
shall be no such adjustment to the Purchase Price for
aggregate amounts of Prepaid Clay Lease Expenses in
excess of $25,000.00.
2.2.3 LIABILITIES ADJUSTMENT. To the extent
assumed by Buyer pursuant to Section 1.2 hereof, the
accounts payable of the Business and accrued
liabilities of Seller relating to the Richardson
Property (as such term is hereinafter defined), in each
case as at the Closing Date and incurred in the
ordinary course of its business consistent with past
practice (not to exceed the applicable maximum amounts
therefor referred to in Sections 1.2(i) and 1.2(ii)
hereof), shall decrease the Purchase Price on a dollar
for dollar basis.
2.2.4 ADJUSTMENTS REPORT.
(a) Within 120 days after the Closing Date,
Buyer shall deliver to Seller a report (the
"Adjustments Report"), prepared by Buyer in good faith
and on a reasonable basis, setting forth in reasonable
detail Buyer's determination of the adjustments set
forth in Sections 2.2.1, 2.2.2 and 2.2.3 hereof.
(b) Within 30 days after receipt of the
Adjustments Report, Seller shall review the Adjustments
Report and notify Buyer in writing whether or not
Seller accepts all or any of the adjustments set forth
on the Adjustments Report. If Seller accepts the
Adjustments Report with respect to all adjustments
contained therein, Buyer or Seller, as appropriate,
shall, within five business days of such acceptance,
make the following adjustments: (i) if the Purchase
Price calculated based on the Adjustments Report is
greater than the Initial Payment, Buyer shall pay to
Seller in cash (by means of federal funds wire or
interbank transfer in immediately available funds) the
amount of such difference, or (ii) if the Purchase
Price calculated based on the Adjustments
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Report is less than the Initial Payment, Seller shall
pay to Buyer in cash (by means of federal funds wire or
interbank transfer in immediately available funds) the
amount of such difference.
(c) If Seller in good faith objects to any
adjustments set forth on the Adjustments Report, Seller
shall give notice thereof to Buyer in writing within 30
days after receipt of the Adjustments Report,
specifying in reasonable detail the nature and extent
of such disagreement and Buyer and Seller shall have a
period of 30 days from Buyer's receipt of such notice
in which to resolve such disagreement. If such notice
of objection is not received by Buyer within 30 days
after receipt of the Adjustments Report, it shall be
deemed that Seller has accepted the Adjustments Report
with respect to all items set forth therein and within
five business days after the expiration of such 30 day
period Buyer or Seller, as appropriate, shall make the
payments described in Section 2.2.4(b) hereof. Any
disputed amounts which cannot be agreed to by the
parties within 30 days from Buyer's receipt of Seller's
notice of objection to any of the adjustments set forth
in the Adjustments Report shall be determined by the
Houston, Texas office of the accounting firm of Ernst &
Young LLP ("EY"). The engagement of and the
determination by EY (or any other accounting firm
designated by EY as set forth below) shall be completed
within 60 days after such assignment is given to EY and
shall be binding on and shall be nonappealable by
Seller and Buyer. If for any reason EY is unable to
act in such capacity, such determination will be made
by any other nationally recognized accounting firm
selected by the Houston, Texas office of EY. The fees
and expenses payable to EY (or any other accounting
firm designated by EY) in connection with such
determination will be borne 50% by Seller and 50% by
Buyer, unless (i) the determination of EY (or any other
accounting firm designated by EY) with respect to the
disputed amounts results in a payment by Seller in an
amount which exceeds by more than $25,000 the amount
Seller shall have claimed it owes hereunder, in which
case all the fees and expenses payable to EY (or any
other accounting firm designated by EY) shall be paid
by Seller, or (ii) the determination of EY (or any
other accounting firm designated by EY) with respect to
the disputed amounts results in a payment by Buyer in
an amount which exceeds by more than $25,000 the amount
Buyer shall have claimed it owed hereunder, in which
case all the fees and expenses payable to EY (or any
other accounting firm designated by EY) shall be paid
by Buyer. Within five business days after final
determination of all disputed amounts in the
Adjustments Report as provided in this Section
2.2.4(c), Buyer or Seller, as appropriate, shall make
the following adjustments: (i) if the Purchase Price as
finally determined is greater than the Initial Payment,
Buyer shall pay to Seller in cash (by means of federal
funds wire or interbank transfer in immediately
available funds) the amount of such difference; or (ii)
if the Purchase Price as finally determined is less
than the Initial Payment, Seller shall pay to Buyer in
cash (by means of federal funds wire or interbank
transfer in immediately available funds) the amount of
such difference. Each party shall, upon the request of
the other party, promptly reimburse such other party
for any fees or
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expenses of EY (or any other accounting firm designated
by EY) for which it is responsible under this Section
2.2.4(c) but which have been paid by such other party.
(d) In the event any payment required by
this Section 2.2.4 is not made by the appropriate party
when due pursuant to the terms of this Section 2.2.4,
such payment shall accrue interest from the date such
payment was due at the lesser of 15% per annum or the
maximum rate permitted by applicable law. Such
interest shall be paid by the appropriate party upon
demand by the other party.
2.3 THE CLOSING. The closing of the purchase and sale
of the Purchased Assets provided herein (the "Closing")
shall occur (i) at the offices of Kelly, Hart & Hallman, a
professional corporation, 201 Main Street, Suite 2500, Fort
Worth, Texas 76102, at 10:00 a.m., local time, on the first
business day immediately following the day on or by which
the last to be fulfilled or waived of the conditions set
forth in Section 7 hereof shall be fulfilled or waived in
accordance herewith or (ii) at such other time and place or
on such other date as Seller and Buyer may mutually agree
(such date and time of Closing being herein referred to
collectively as the "Closing Date"). The Closing shall be
deemed to have occurred as of 11:59 p.m. on the Closing
Date.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Buyer as follows:
3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY;
COMPLIANCE WITH LAW. Seller (i) is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware; (ii) is duly licensed or
qualified to do business as a foreign corporation under the
laws of the State of Texas; (iii) is duly licensed or
qualified to do business as a foreign corporation under the
laws of any other jurisdiction in which the character of the
properties owned or leased by it therein or in which the
transaction of its business makes such qualification
necessary, except where the failure to be so qualified would
not have a material adverse effect on the results of
operations or financial condition of the Business and/or the
Purchased Assets (a "Material Adverse Effect"); (iv) has all
requisite corporate power and authority to own its
properties and carry on its business as now conducted; (v)
is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal to
which Seller is a party or is subject; (vi) except as set
forth in Schedule 3.1 hereof, is not in violation of any
laws, ordinances, governmental rules or regulations to which
it is subject, except for violations that would not have a
Material Adverse Effect; and (vii) except as set forth in
Schedule 3.1 hereof, has obtained all licenses, permits and
other authorizations and has taken all actions required by
applicable laws or governmental regulations in connection
with its business as now conducted, except where the failure
to obtain such licenses, permits or authorizations, or the
failure to take such actions, would not have a Material
Adverse Effect.
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3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
3.2.1 The execution and delivery of this
Agreement and all agreements and documents contemplated
hereby by Seller, and the consummation by it of the
transactions contemplated hereby, have been duly
authorized by the Board and, except for the approval of
Seller's stockholders, no other corporate proceedings
on the part of Seller are necessary to authorize this
Agreement and the transactions contemplated hereby.
3.2.2 This Agreement constitutes, and all
agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value
received will constitute, the valid and legally binding
obligations of Seller enforceable in accordance with
their terms, except that enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium, bulk sales,
preference, equitable subordination, marshalling or
other similar laws of general application now or
hereafter in effect relating to the enforcement of
creditors' rights generally and except 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
therefor may be brought.
3.2.3 The execution and delivery of this
Agreement by Seller does not, and the consummation of
the transactions contemplated hereby by Seller will
not, except as set forth on Schedule 3.2 hereof, (i)
require the consent, approval or authorization of, or
declaration, filing or registration with, any
governmental or regulatory authority or any third
party; (ii) result in the breach of any term or
provision of, or constitute a default under, or result
in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the
lapse of time or both) any obligation under, or result
in the creation or imposition of any Encumbrance (as
such term is hereinafter defined) upon any part of the
property of Seller pursuant to any provision of, any
order, judgment, arbitration award, injunction, decree,
indenture, mortgage, lease, license, lien, or other
agreement or instrument to which Seller is a party or
by which it is bound; or (iii) violate or conflict with
any provision of the by-laws or certificate of
incorporation of Seller as amended to the date hereof.
As used herein, the term "Encumbrance" means any
security interest, pledge, mortgage, lien (including,
without limitation, environmental and tax liens),
charge, adverse claim, preferential arrangement, or
restriction of any kind, including, without limitation,
any restriction on the use, transfer, or other exercise
of any attributes of ownership.
3.3 FINANCIAL STATEMENTS. Attached as Schedule 3.3
are true and complete copies of the unaudited balance sheet
of the Business as at July 31, 1998 (the "Balance Sheet"),
and the unaudited statement of income of the Business for
the eleven-month period ended on such date, together with
the notes and schedules thereto, if any. The financial
statements described in this Section 3.3 are referred to
herein collectively as
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the "Interim Financial Statements". Except as set forth in
Schedule 3.3 hereof, the Interim Financial Statements
present fairly the financial position, results of operations
and cash flows of the Business as at the date thereof and
for the period then ended, in accordance with generally
accepted accounting principles consistently applied, subject
to year end adjustments.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July
31, 1998, there has not been: (i) any material adverse
change in the business, operations, properties, condition
(financial or other) or prospects of the Business, and no
factor or condition exists and no event has occurred that
would be likely to result in any such change, (ii) any
material loss, damage, or other casualty to the Purchased
Assets (other than any for which insurance awards have been
received or guaranteed), or (iii) any loss of the
employment, services or benefits of any key employee of the
Business. Since July 31, 1998, Seller has operated the
Business in the ordinary course of business consistent with
past practice and has not: (i) incurred or failed to pay or
satisfy any material obligation or liability (whether
accrued, contingent or otherwise) relating to the operations
of the Business except in the ordinary course of business
consistent with past practice, (ii) incurred or failed to
discharge or satisfy any Encumbrance other than Encumbrances
arising in the ordinary course of business that do not,
individually or in the aggregate, interfere with the use,
operation, enjoyment or marketability of any of the
Purchased Assets, all of which shall be released as of the
Closing Date, (iii) sold or transferred any of the assets of
the Business or canceled any debts or claims or waived any
rights material to the Business relating to the operations
of the Business, (iv) defaulted on any material obligation
relating to the operations of the Business, (v) entered into
any transaction material to the Business, or materially
amended or terminated any arrangement material to the
Business or relating to the Business, except in the ordinary
course of business consistent with past practice, or (vi)
entered into any agreement or made any commitment to do any
of the foregoing.
3.5 TAXES. Seller (i) has duly and timely filed or
caused to be filed all federal, state, local and foreign tax
returns required to be filed by it prior to the date hereof
which relate to the Business or with respect to which the
Business or the Purchased Assets are liable or otherwise in
any way subject; (ii) has paid or fully accrued for all
Taxes shown to be due and payable on such returns (which
Taxes are all the Taxes due and payable under the laws and
regulations pursuant to which such returns were filed); and
(iii) has properly accrued for all such Taxes accrued in
respect of it, the Business or the Purchased Assets for
periods subsequent to the periods covered by such returns.
No deficiency in payment of any such Taxes for any period
has been asserted by any taxing body and remains unsettled
at the date hereof.
3.6 PERSONAL PROPERTY. The machinery, equipment,
furniture, fixtures and other tangible personal property
owned, leased or used by Seller in the Business and included
in the Purchased Assets are reasonably sufficient and
adequate to carry on the Business as presently conducted.
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3.7 ACCOUNTS RECEIVABLE. All trade accounts, notes
and other receivables arising out of the operations of the
Business have arisen in the ordinary course of business and
represent bona fide, undisputed indebtedness (subject to no
counterclaim, right of setoff or warranty claim) incurred by
the applicable account debtor for goods held subject to
delivery instructions or heretofore shipped or delivered
pursuant to a contract of sale or for services heretofore
performed by Seller.
3.8 INVENTORY. The inventories of Seller which are
held in connection with, or used or held for use in the
business and operations of, the Business do not include any
inventory which is not usable or saleable in the ordinary
course of business of the Business as heretofore conducted.
3.9 BUSINESS PROPERTY RIGHTS.
3.9.1 The Business Property Rights comprise
all patents and applications therefor and the licenses
thereto, and all trademarks and tradenames, trademark
and tradename registrations, service marks and service
mark registrations, copyrights and copyright
registrations, the applications therefor and the
licenses thereto, owned or held by Seller and which are
used or held for use in connection with the Business
and which are material to the Business.
3.9.2 Seller owns or has valid rights to use
all Business Property Rights without conflict with the
rights of others. Except as set forth in Schedule 3.15
hereof, no person or entity has made or, to the best of
Seller's knowledge, threatened to make any claims that
the operation of the Business is in violation of or
infringes any other proprietary or trade rights of any
third party. To the best of Seller's knowledge, no
third party is in violation of or is infringing upon
any Business Property Rights.
3.10 OWNED REAL PROPERTY. The Owned Real Property
comprises all of the real property owned, either in whole or
in part, by Seller which is currently used or held for use
in connection with the Business as now being conducted.
Except as set forth in Schedule 3.10 hereof, Seller, as
lessor, does not lease any Owned Real Property to any third
party. Except as set forth in Schedule 3.10 hereof,
(i) Seller has not received any notice from
any insurance company or from any board of fire
underwriters (or other body exercising similar
functions) claiming any defects or deficiencies in
the Owned Real Property or suggesting, requiring
or requesting the performance of any repairs,
alterations or other work to the Owned Real
Property that have been performed.
(ii) All permanent certificates of occupancy
and all other licenses, permits, authorizations,
consents, certificates and approvals required by
all governmental authorities having jurisdiction
and the
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requisite certificates of the local board of fire
insurance underwriters (or other body exercising
similar functions), in each case for the operation
of the Owned Real Property as currently operated,
which are material to the Business and which have
been issued for the Owned Real Property, have been
paid for, and are in full force and effect; all of
the same will be assignable by Seller on the
Closing Date, and none of them will be
invalidated, violated, or otherwise adversely
affected by the assignment thereof or by the
transfer of the Owned Real Property to Buyer.
(iii) The improvements on the Owned Real
Property are being maintained and operated in
substantial compliance with all applicable laws,
regulations, insurance requirements, contracts,
leases, permits, licenses, ordinances,
restrictions, and easements, and Seller has
received no notice, written or verbal, claiming
any violation of any of the same.
(iv) Utility systems and lines necessary to
operate the Owned Real Property as currently
operated serve the Owned Real Property and are
connected to the lines and/or other facilities of
the respective public authorities or utility
companies providing such services or accepting
such discharge, either adjacent to the Owned Real
Property or through easements or rights of way
benefitting, appurtenant to and forming a part of
the Owned Real Property; and any such easements or
rights-of-way have been fully granted; and all
charges therefor have been fully paid by Seller
and all charges for the aforesaid utility systems
and the connection of the Owned Real Property
thereto, including without limitation connection
fees, "tie-in" charges and other charges now or
hereafter to become due and payable, have been
fully paid by Seller; provided, however, that
Seller makes no representation or warranty with
respect to the adequacy or validity of any
easements associated with the Owned Gas Pipeline.
(v) All contractors, subcontractors, and
other persons or entities furnishing work, labor,
materials or supplies to Seller or Seller's
predecessors in interest for the development and
construction of the Owned Real Property have been
paid in full for all work performed to date except
for retainage in customary amounts in accordance
with the construction contracts for the Owned Real
Property, and there are no claims against Seller
or the Owned Real Property in connection
therewith.
(vi) No zoning variances, special exceptions
or other special relief from applicable
governmental requirements have been issued for the
construction of the Owned Real Property or for its
present or intended use.
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(vii) Seller has not received any notice
of any governmental regulation, order or
requirement restricting the operation of the Owned
Real Property in the manner in which the Owned
Real Property is being operated on the date
hereof.
(viii) Seller has not received any written
notice of, nor to the best of Seller's knowledge,
is there any proceeding pending for the increase
or decrease of the assessed valuation of all or
any portion of the Owned Real Property.
(ix) Seller has not received any notice of
any condemnation proceeding or other proceedings
in the nature of eminent domain in connection with
the Owned Real Property.
(x) No portion of the Owned Real Property is
located within an area designated as a flood
hazard area or an area which will require the
purchase of flood insurance for the obtaining of
any federally insured or federally related loan;
and no portion of the Owned Real Property is
located in any conservation or historic district.
(xi) No assessments for public improvements
have been made against the Owned Real Property
which remain unpaid and all such assessments which
have been or could be levied for public
improvements ordered, commenced or completed prior
to the Closing Date have been paid for in full by
Seller. All ad valorem real property taxes and
personal property taxes related to the Owned Real
Property and the personal property therein have
been paid through and including 1997.
(xii) There are no special assessments
respecting the Owned Real Property which will
result from work, activities or improvements done
to the Owned Real Property by Seller in the course
of construction, alteration or repair of the Owned
Real Property.
3.11 LEASED REAL PROPERTY. The Leases comprise all of
the leases or subleases by Seller of real property or
interests in real property (including mineral, sand or clay
rights) used or held for use in connection with the Business
as now being conducted. Seller has not received any written
notification that it is in default with respect to any of
the Leases nor are there any disputes between any landlord
and Seller with respect to the Leases that would affect the
right of Seller to remain in possession or otherwise affect
the current use of the property leased or the rental amount
then due. Except as set forth in Schedule 3.11 hereof,
Seller has performed all obligations required to be
performed by it to date under, and is not in default in
respect of, any Lease, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a
default. To the best of Seller's knowledge, no other party
to any Lease is in default in respect thereof, and no event
has occurred which, with due
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notice or lapse of time or both, would constitute such a
default. True and complete copies of all Leases have been
made available to Buyer or its representatives.
3.12 TITLE TO PROPERTY; ENCUMBRANCES; SUFFICIENCY OF
PURCHASED ASSETS. Seller has good, valid and, in the case
of the Owned Real Property, indefeasible fee simple, title
to all the Purchased Assets, in each case free and clear of
all Encumbrances except for (i) Encumbrances on the Owned
Real Property reflected in any Title Commitment (as such
term is hereinafter defined) or (ii) other Encumbrances
reflected in Schedule 3.12 hereof; provided, however, that
Seller makes no representation or warranty with respect to
the adequacy or validity of any easements associated with
the Owned Gas Pipeline. No part of the Business is operated
by Seller through any person or entity other than Seller.
The Purchased Assets, together with the Excluded Assets,
comprise all of the assets and properties of Seller which
are held in connection with, or used or held for use in the
business or operations of, the Business as now being
conducted and which are required for the continued conduct
of the Business as now being conducted.
3.13 LICENSES AND PERMITS. Schedule 3.13 hereof sets
forth a true and complete list of all of Seller's material
licenses, permits, franchises, authorizations,
registrations, approvals and certificates of occupancy (or
their equivalent), including without limitation any
environmental permits, issued or granted to it with respect
to the Business by the government of the United States or of
any state, city, municipality, county or town thereof, or of
any foreign jurisdiction, or any department, agency, board
division, subdivision, audit group or procuring office,
commission, bureau or instrumentality of any of the
foregoing (the "Licenses and Permits"), and all pending
applications therefor. Except as set forth on Schedule
3.13, each of Seller's Licenses and Permits has been duly
obtained, is valid and in full force and effect, and is not
subject to any pending or, to the best of Seller's
knowledge, threatened administrative or judicial proceeding
to revoke, cancel, suspend or declare such License and
Permit invalid in any respect.
3.14 Compliance with Law. Except as set forth on
Schedule 3.14 hereof or except to the extent constituting an
Assumed Liability, the operations of the Business have been
conducted in all material respects in accordance with all
applicable laws, regulations, orders and other requirements
of all courts and other governmental or regulatory
authorities, domestic or foreign, having jurisdiction over
it and its assets, properties and operations, except where
the failure to so conduct its business would not have a
Material Adverse Effect. Seller has not received notice of
any violation of any such law, regulation, order or other
legal requirement, or is not in default with respect to any
order, writ, judgment, award, injunction or decree of any
national, state or local court or governmental or regulatory
authority or arbitrator, domestic or foreign, applicable to
the Business or the Purchased Assets, except where the
violation or default would not have a Material Adverse
Effect.
3.15 LITIGATION. Except as set forth in Schedule 3.15
hereof, there are no claims, actions, suits, proceedings or
investigations pending or, to the best of Seller's
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knowledge, threatened before any federal, state or local
court or governmental or regulatory authority, domestic or
foreign, or before any arbitrator of any nature, brought by
or against Seller or any of its officers, directors,
employees, or agents involving, affecting or relating to the
Business, the Purchased Assets or the transactions
contemplated by this Agreement, nor does there exist any
fact which might reasonably be expected to give rise to any
such suit, proceeding, dispute or investigation. Neither
the Business nor the Purchased Assets is subject to any
order, writ, judgment, award, injunction or decree of any
federal, state or local court or governmental or regulatory
authority, domestic or foreign, or any arbitrator of any
nature, that affects or might affect the Business or the
Purchased Assets, or that would or might interfere with the
transactions contemplated by this Agreement.
3.16 CONTRACTS. Schedule 3.16 hereof sets forth a true
and complete list of all material Contracts by which any of
the Purchased Assets are bound or affected, or to which
Seller is a party or by which it is bound in connection with
the Purchased Assets or the Business. All of the Contracts
to be assumed by Buyer hereunder are in full force and
effect and are valid, binding and enforceable against the
parties thereto in accordance with their terms. Seller and,
to its best knowledge, each other party to such assumed
Contracts has performed all obligations required to be
performed by it to date under, and is not in default or
delinquent in performance, status or any other respect
(claimed or actual) in connection with, such assumed
Contracts, and no event has occurred which, with due notice
or lapse of time or both, would constitute such a default.
The enforceability of such assumed Contracts will not be
affected in any manner by the execution, delivery and
performance of this Agreement, subject to any required
consents. Seller has delivered to Buyer or its
representatives true and complete originals or copies of all
such written assumed Contracts and summaries of all such
oral assumed Contracts.
3.17 LABOR MATTERS. Except for Seller's Collective
Bargaining Agreement with the United Steel Workers of
America District Number 12, (i) Seller is not a party to any
employment agreements with employees that are not terminable
at will, or that provide for the payment of any bonus or
commission, (ii) Seller is not a party to any agreement,
policy or practice that requires it to pay termination or
severance pay to salaried, non-exempt or hourly employees of
the Business (other than as required by law), (iii) Seller
is not a party to any collective bargaining agreement or
other labor union contract applicable to employees of the
Business nor does Seller know of any activities or
proceedings of any labor union to organize any such
employees, and (iv) Seller is not a party to or subject to
any conciliation agreements, consent decrees or settlements
with respect to the Business or its employees. Seller has
furnished to Buyer complete and correct copies of all such
agreements (the "Employment and Labor Agreements"). Seller
has not breached or otherwise failed to comply with any
provisions of the Employment and Labor Agreements, there are
no grievances outstanding thereunder.
Except as set forth in Schedule 3.17 hereof: (i) Seller
is in compliance with all applicable laws relating to
employment and employment practices, wages, hours, and
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terms and conditions of employment in each case relating to
the Business, (ii) there is no unfair labor practice charge
or complaint pending before the NLRB relating to the
Business, or, to Seller's best knowledge, threatened against
the Business, (iii) there is no labor strike, material
slowdown or material work stoppage or lockout pending or, to
Seller's best knowledge, threatened against or affecting the
Business, and Seller has not experienced any strike,
material slowdown or material work stoppage, lockout or
other collective labor action by or with respect to
employees of the Business within the last 24 months, (iv)
there is no representation, claim or petition pending before
the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees
of the Business, (v) there are no charges with respect to or
relating to the Business pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment
practices, and (vi) Seller has not received notice from any
national, state, local or foreign agency responsible for the
enforcement of labor or employment laws of an intention to
conduct an investigation of it relating to the Business and
no such investigation is in progress.
Seller has furnished Buyer with a complete and accurate
list of all its employee manuals, policies, procedures and
work-related rules that apply to employees of the Business
("Employee Policies and Procedures").
3.18 EMPLOYEE PLANS. Except as set forth in Schedule
3.18 hereof, Seller does not maintain and does not have any
obligation to contribute to any pension, savings,
retirement, health, life, disability, other insurance,
severance, bonus, incentive compensation, stock option or
other equity-based or other employee benefit or fringe
benefit plans (whether or not "employee benefit plans" as
defined in Section 3(3) of ERISA) with respect to the
Business (collectively referred to herein as the "Plans").
Seller or any trade or business (whether or not
incorporated) which is or has ever been treated as a single
employer with Seller under Section 414(b), (c), (m) or (o)
of the Code ("ERISA Affiliate") has incurred no liability
under Title IV of ERISA or Section 412 of the Code, except
for any such liability which has been satisfied in full, and
no events have occurred and no circumstances exist that
could reasonably be expected to result in any such liability
to Seller or any ERISA Affiliate.
3.19 INSURANCE. Schedule 3.19 hereof lists the
fidelity bonds and the aggregate coverage amount and type
and generally applicable deductibles of all insurance
policies insuring the Business and the Purchased Assets or
relating to employees of the Business. Seller shall
maintain the coverage under all policies and bonds listed in
Schedule 3.19 hereof in full force and effect through the
Closing Date.
3.20 ENVIRONMENTAL MATTERS. Schedule 3.20 hereof sets
forth a list of all documents, records and information in
Seller's possession or control concerning Environmental
Conditions and/or Serious Environmental Conditions relevant
to any Site or any facilities or operations thereon, whether
generated by Seller or others, including without limitation
environmental audits, environmental risk assessments, or
site assessments of any Site and/or adjacent property or
other property in the vicinity
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of any Site owned or operated by Seller relating to the
Business, documentation regarding any on-site or off-site
Release of Hazardous Materials, spill control plans, permits
or registrations and related compliance, and environmental
agency reports and correspondence. Seller has delivered to
Buyer or its representatives true and complete originals or
copies of all such documents, records and information.
3.21 CUSTOMERS AND SUPPLIERS. Seller does not have any
outstanding purchase contracts or commitments or unaccepted
purchase orders relating to the Business which are in excess
of the normal, ordinary and usual requirements. No supplier
or subcontractor to the Business has reduced its shipments
of orders issued by Seller, or threatened to discontinue,
supplying such items or services to Seller on reasonable
terms. Seller has not received notice that, nor does Seller
have any knowledge that, any such supplier or subcontractor
to the Business has, will or plans to discontinue doing
business with Seller on substantially the same terms as are
consistent with its past practices.
3.22 NO BROKERS. Neither Seller nor any related party
has entered into any contract, arrangement or understanding
with any person or firm which may result in the obligation
of Buyer to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
3.23 NO OTHER AGREEMENTS TO SELL THE PURCHASED ASSETS.
Neither Seller nor any related party has any commitment or
legal obligation to any other person other than Buyer to
sell, assign, transfer or effect a sale of any of the
Purchased Assets (other than in the ordinary course of
business), to effect any merger, consolidation, liquidation,
dissolution or other reorganization of Seller, or to enter
into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
3.24 ACCURACY OF INFORMATION. None of Seller's
representations, warranties or statements contained in this
Agreement, in the Schedules and Exhibits hereto or in any
other document delivered to the Buyer in connection with the
transactions contemplated by this Agreement, contains or
will contain any untrue statement of a material fact or
omits to state any material fact necessary in order to make
any of such representations, warranties or statements, in
light of the circumstances under which they were made, not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller as follows:
4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY;
COMPLIANCE WITH LAW. Buyer (i) is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware; (ii) is duly licensed or
qualified to do business as a foreign corporation and is in
good standing under the laws of any other jurisdiction in
which the character of the properties owned or leased by it
therein or in which the transaction of its business makes
such qualification necessary, except where
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the failure to be so qualified would not have a material
adverse effect on the results of operations or financial
condition of Buyer; (iii) has all requisite corporate power
and authority to own its properties and carry on its
business as now conducted; (iv) is not in default with
respect to any order of any court, governmental authority or
arbitration board or tribunal to which Buyer is a party or
is subject; (v) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject,
except for violations that would not have a material adverse
effect on the results of operations or financial condition
of Buyer; and (vi) has obtained all licenses, permits and
other authorizations and has taken all actions required by
applicable laws or governmental regulations in connection
with its business as now conducted, except where the failure
to obtain such licenses, permits or authorizations, or the
failure to take such actions, would not have a material
adverse effect on the results of operations or financial
condition of Buyer.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
4.2.1 The execution and delivery of this
Agreement and all agreements and documents contemplated
hereby by Buyer, and the consummation by it of the
transactions contemplated hereby, have been duly
authorized by all requisite corporate action.
4.2.2 This Agreement constitutes, and all
agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value
received will constitute, the valid and legally binding
obligations of Buyer enforceable in accordance with
their terms, except that enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium, bulk sales,
preference, equitable subordination, marshalling or
other similar laws of general application now or
hereafter in effect relating to the enforcement of
creditors' rights generally and except 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
therefor may be brought.
4.2.3 The execution and delivery of this
Agreement by Buyer does not, and the consummation of
the transactions contemplated hereby by Buyer will not,
except as set forth on Schedule 4.2 hereof, (i) require
the consent, approval or authorization of, or
declaration, filing or registration with, any
governmental or regulatory authority or any third
party; (ii) result in the breach of any term or
provision of, or constitute a default under, or result
in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the
lapse of time or both) any obligation under, or result
in the creation or imposition of any Encumbrance upon
any part of the property of Buyer pursuant to any
provision of, any order, judgment, arbitration award,
injunction, decree, indenture, mortgage, lease,
license, lien, or other agreement or instrument to
which Buyer is a party or by which it is bound; or
(iii) violate or conflict with any provision
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of the by-laws or certificate of incorporation of Buyer
as amended to the date hereof.
5. SURVIVAL OF PROVISIONS/INDEMNIFICATION.
5.1 SURVIVAL OF PROVISIONS. All the respective
representations, warranties, covenants and agreements of
each of the parties hereto made herein or in any certificate
or other document furnished or to be furnished by the
parties pursuant hereto (except covenants and agreements
which are expressly required to be performed and are
performed in full on or before the Closing Date) shall be
considered to have been relied upon by the other party
hereto, as the case may be, shall survive, in accordance
with their terms, delivery by the parties hereto of the
consideration to be given by them hereunder, and shall
survive the execution hereof, the Closing hereunder and the
Closing Date, except as otherwise provided herein.
5.2 INDEMNIFICATION BY SELLER. Upon the terms and
subject to the conditions set forth in Sections 5.4 and 5.5
hereof and this Section 5.2, Seller agrees to indemnify,
defend, protect, save and hold harmless each Buyer
Indemnitee (as such term is hereinafter defined) against,
and will reimburse each Buyer Indemnitee on demand for, any
and all Losses (as such term is hereinafter defined) made or
incurred by or asserted against such Buyer Indemnitee, at
any time after the Closing Date, directly or indirectly,
arising out of, related to, caused by, or resulting from any
of the following ("Seller Indemnifiable Claims"):
(a) any and all Excluded Liabilities; or
(b) any inaccuracy, omission, misrepresentation,
breach of warranty, or nonfulfillment of any term,
provision, covenant or agreement on the part of Seller
contained herein or in any certificate or other
instrument furnished or to be furnished by Seller to
Buyer pursuant hereto.
As used herein, the term "Losses" shall mean, with
respect to any person or party, any payment, loss,
liability, obligation, damage (including, without
limitation, consequential, punitive, special or otherwise),
deficiency, lien, claim, suit, cause of action, judgment,
cost or expense (including, without limitation, reasonable
attorneys' fees and court costs) of any kind, nature or
description.
As used herein, the term "Buyer Indemnitee" shall mean
Buyer and any entity controlling, controlled by or under
common control with Buyer.
As used herein, the term "control", "controlling" and
"controlled" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a person or party, whether
through the ownership of voting securities or voting
interests, by contract or otherwise.
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5.3 INDEMNIFICATION BY BUYER. Upon the terms and
subject to the conditions set forth in Sections 5.4 and 5.5
hereof and this Section 5.3, Buyer agrees to indemnify,
defend, protect, save and hold harmless Seller against, and
will reimburse Seller on demand for, any and all Losses made
or incurred by or asserted against Seller, at any time after
the Closing Date, directly or indirectly, arising out of,
related to, caused by, or resulting from any of the
following ("Buyer Indemnifiable Claims"):
(a) any and all Assumed Liabilities; or
(b) all warranties, liabilities or obligations to
customers or distributors with respect to the repair or
replacement of any finished products related to the
Business which are manufactured by Buyer after the
Closing Date, and all other liabilities or obligations
of Buyer arising out of or related to the Purchased
Assets and/or the Business that arise or occur after
the Closing Date to the extent such liabilities or
obligations do not constitute Excluded Liabilities; or
(c) any inaccuracy, omission, misrepresentation,
breach of warranty, or nonfulfillment of any term,
provision, covenant or agreement on the part of Buyer
contained herein or in any certificate or other
instrument furnished or to be furnished by Buyer to
Seller pursuant hereto.
5.4 LIMITATIONS ON INDEMNIFICATION. Rights to
indemnification under Section 5.2 or 5.3 hereof are subject
to the following limitations:
(a) No amount shall be payable by Seller in
indemnification under Section 5.2 hereof until and
unless the aggregate of all Losses incurred by all
Buyer Indemnitees with respect to one or more Seller
Indemnifiable Claims (other than Losses incurred by the
Buyer Indemnitees with respect to Seller Indemnifiable
Claims relating to any representation or warranty of
Seller set forth in Section 3.1(i), 3.2.1, 3.2.2, 3.5,
3.9.1, 3.10, 3.11, 3.12 or 3.20 hereof or to any
Excluded Liability (including, without limitation, any
Serious Environmental Condition)) shall exceed
$25,000.00 (the "Threshold"), in which event the Buyer
Indemnitees shall be entitled to indemnification under
Section 5.2 hereof for all such Losses (including
amounts up to the Threshold) incurred by all Buyer
Indemnitees with respect to all such Seller
Indemnifiable Claims up to an amount equal to the
Purchase Price.
(b) No amount shall be payable by Seller in
indemnification under Section 5.2 hereof with respect
to any Losses incurred by any Buyer Indemnitee with
respect to any Seller Indemnifiable Claim relating to
any representation or warranty of Seller set forth in
Section 3.1(iii), 3.3, 3.6, 3.8, 3.17, 3.18, 3.19, 3.23
or 3.24 hereof, which representations and warranties
shall be deemed to be conditions to the Closing and
shall not survive the Closing or the Closing Date. No
amount shall be payable by Seller in indemnification
under Section 5.2 hereof with respect to any Losses
incurred by any Buyer Indemnitee with respect to any
Seller Indemnifiable Claim relating to the adequacy or
validity of any easements associated with the Owned Gas
Pipeline.
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(c) With respect to any Losses incurred by any
Buyer Indemnitee with respect to any Seller
Indemnifiable Claim relating to any representation or
warranty of Seller set forth in Section 3.1(i), 3.2.1,
3.2.2, 3.5, 3.9.1, 3.10, 3.11, 3.12 or 3.20 hereof or
to any Excluded Liability (including, without
limitation, any Serious Environmental Condition), such
Buyer Indemnitee shall be entitled to indemnification
under Section 5.2 hereof for all such Losses incurred
by such Buyer Indemnitee with respect to such Seller
Indemnifiable Claim without limitation as to the amount
of such Losses.
(d) The obligations of Seller under Section 5.2
hereof with respect to any Losses incurred by any Buyer
Indemnitee with respect to any Seller Indemnifiable
Claim arising out of or relating to any breach of any
representation or warranty of Seller set forth in
Section 3.1(i), 3.2.1, 3.2.2, 3.5, 3.9.1, 3.10, 3.11 or
3.12 hereof, or to any Excluded Liability (other than
any Serious Environmental Condition), shall not expire.
(e) Subject to Section 5.4(h) hereof, the
obligations of Seller under Section 5.2 hereof with
respect to any Losses incurred by any Buyer Indemnitee
with respect to any Seller Indemnifiable Claim arising
out of or relating to any breach of any covenant or
agreement of Seller set forth in this Agreement shall
terminate upon expiration, if any, of such covenant or
agreement as provided herein.
(f) Subject to Section 5.4(h) hereof, the
obligations of Seller under Section 5.2 hereof with
respect to any Losses incurred by any Buyer Indemnitee
with respect to any Seller Indemnifiable Claim arising
out of or relating to any Serious Environmental
Condition, or to any breach of any representation or
warranty of Seller set forth in this Agreement (other
than any breach of any representation or warranty of
Seller set forth in Section 3.1(i), 3.1(iii), 3.2.1,
3.2.2, 3.3, 3.5, 3.6, 3.8, 3.9.1, 3.10, 3.11, 3.12,
3.17, 3.18, 3.19, 3.23 or 3.24 hereof), shall terminate
on the second anniversary of the Closing Date.
(g) Subject to Section 5.4(h) hereof, the
obligations of Buyer under Section 5.3 hereof with
respect to any Losses incurred by Seller with respect
to any Buyer Indemnifiable Claim arising out of or
relating to any breach of any representation or
warranty of Buyer contained in this Agreement shall
terminate on the second anniversary of the Closing
Date. The obligations of Buyer under Section 5.3
hereof with respect to any Losses incurred by Seller
with respect to any Buyer Indemnifiable Claim arising
out of or relating to any Assumed Liability, or to any
matter referred to in Section 5.3(b) hereof, shall not
expire. Subject to Section 5.4(h) hereof, the
obligations of Buyer under Section 5.3 hereof with
respect to any Losses incurred by Seller with respect
to any Buyer Indemnifiable Claim arising out of or
relating to any breach of any covenant or agreement of
Buyer set forth in this Agreement shall terminate upon
expiration, if any, of such covenant or agreement as
provided herein.
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(h) The foregoing provisions of this Section 5.4
notwithstanding, if, prior to the termination of any
obligation to indemnify, written notice of a Seller
Indemnifiable Claim or a Buyer Indemnifiable Claim, as
the case may be, is given by the party seeking
indemnification (the "Indemnified Party") to the party
from whom indemnification is sought (the "Indemnifying
Party"), or a suit or action based upon a Seller
Indemnifiable Claim or a Buyer Indemnifiable Claim, as
the case may be, is commenced against the Indemnifying
Party, the Indemnified Party shall not be precluded
from pursuing such claimed breach, occurrence, other
matter, or suit or action, or recovering from the
Indemnifying Party (whether through the courts or
otherwise) on the Seller Indemnifiable Claim or the
Buyer Indemnifiable Claim, as the case may be, by
reason of the termination otherwise provided for above
in this Section 5.4, if any.
5.5 CONDITIONS OF INDEMNIFICATION. With respect to
any actual or potential claim, any written demand, the
commencement of any action, or the occurrence of any other
event which involves any Seller Indemnifiable Claim or Buyer
Indemnifiable Claim (a "Claim"):
(a) Promptly after the President of the
Indemnified Party first receives written documents
pertaining to the Claim, or if such Claim does not
involve a third party Claim (a "Third Party Claim"),
promptly after the Indemnified Party first has actual
knowledge of such Claim, the Indemnified Party shall
give notice to the Indemnifying Party of such Claim in
reasonable detail and stating the amount involved, if
known, together with copies of any such written
documents.
(b) The obligation of the Indemnifying Party to
indemnify the Indemnified Party with respect to any
Claim shall not be affected by the failure of the
Indemnified Party to give the notice with respect
thereto in accordance with Section 5.5(a) hereof unless
the Indemnifying Party shall establish by clear and
convincing evidence that it has been irretrievably
prejudiced thereby.
(c) If the Claim involves a Third Party Claim,
then the Indemnifying Party shall have the right, at
its sole cost, expense and ultimate liability
regardless of the outcome, and through counsel of its
choice (which counsel shall be reasonably satisfactory
to the Indemnified Party), to litigate, defend, settle
or otherwise attempt to resolve such Third Party Claim;
provided, however, that if in the Indemnified Party's
reasonable judgment a conflict of interest may exist
between the Indemnified Party and the Indemnifying
Party with respect to such Third Party Claim, then the
Indemnified Party shall be entitled to select counsel
of its own choosing, reasonably satisfactory to the
Indemnifying Party, in which event the Indemnifying
Party shall be obligated to pay the fees and expenses
of such counsel. Notwithstanding the preceding
sentence, the Indemnified Party may elect, at any time
and at the Indemnified Party's sole cost, expense and
ultimate liability, regardless of the outcome, and
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through counsel of its choice, to litigate, defend,
settle or otherwise attempt to resolve such Third Party
Claim. If the Indemnified Party so elects (for reasons
other than the Indemnifying Party's failure or refusal
to provide a defense to such Third Party Claim), then
the Indemnifying Party shall have no obligation to
indemnify the Indemnified Party with respect to such
Third Party Claim, but such disposition will be without
prejudice to any other right the Indemnified Party may
have to indemnification under Section 5.2 or 5.3
hereof, regardless of the outcome of such Third Party
Claim. If the Indemnifying Party fails or refuses to
provide a defense to any Third Party Claim, then the
Indemnified Party shall have the right to undertake the
defense, compromise or settlement of such Third Party
Claim, through counsel of its choice, on behalf of and
for the account and at the risk of the Indemnifying
Party, and the Indemnifying Party shall be obligated to
pay the costs, expenses and attorney's fees incurred by
the Indemnified Party in connection with such Third
Party Claim. In any event, Seller and the Buyer
Indemnitees shall fully cooperate with each other and
their respective counsel in connection with any such
litigation, defense, settlement or other attempted
resolution.
5.6 BUYER'S RIGHT OF WITHHOLDING AND OFFSET.
5.6.1 In addition to any other rights of the
Buyer Indemnitees, if any Seller Indemnifiable Claim
remains unresolved as between Buyer and Seller on any
date on which any payment of any amount is otherwise
due and payable by Buyer hereunder, then Buyer shall be
entitled to withhold payment of any such amount that is
otherwise due and payable hereunder up to an aggregate
amount equal to the estimated Losses with respect to
all such unresolved Seller Indemnifiable Claims until
the earlier of (i) such time as such Seller has paid
all such unresolved Seller Indemnifiable Claims in full
or otherwise corrected or remedied all such unresolved
Seller Indemnifiable Claims to the reasonable
satisfaction of Buyer or (ii) final adjudication
(including appeals) by a court of competent
jurisdiction; provided, however, that Seller does not
waive any of its rights against wrongful withholding.
5.6.2 Upon a final determination (by a court of
competent jurisdiction or otherwise by agreement of
Buyer and Seller) of the value of any Seller
Indemnifiable Claim, Buyer shall be entitled to an
offset and credit against the unpaid payments hereunder
in an aggregate amount equal to the value of such
Seller Indemnifiable Claim.
6. OTHER COVENANTS AND AGREEMENTS.
6.1 RESTRICTIVE COVENANTS.
6.1.1 CUSTOMER RESTRICTION. Subject to Section
6.1.4 hereof, Seller covenants and agrees that it shall
not, for a period of five years from and after the
Closing Date, working alone or in conjunction with one
or more other
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persons or entities, for compensation or not, (i)
provide or offer to provide to any Customer (as such
term is hereinafter defined) any clay brick product, or
(ii) induce or attempt to induce any Customer to
withdraw, curtail or cancel such business with Buyer or
any of its subsidiaries or affiliates or in any manner
modify or fail to enter into any such actual or
potential business relationship with Buyer or any of
its subsidiaries or affiliates. As used in this
Section 6.1, the term "Customer" means any person or
entity for whom Seller provided clay brick product on
or prior to the Closing Date. As used in this Section
6.1, the term "Vendor" means any third party selling or
licensing a product or service to a Customer or to the
Business on or prior to the Closing Date.
6.1.2 NON-RAID. Subject to Section 6.1.4 hereof,
Seller covenants and agrees that it shall not, for a
period of five years from and after the Closing Date,
working alone or in conjunction with one or more other
persons or entities, for compensation or not, (i)
recruit or otherwise solicit or induce any person or
entity who is, on the Closing Date or thereafter, an
employee or Vendor of the Business to terminate their
employment with, or otherwise cease or reduce their
relationship with, the Business, Buyer or any of its
subsidiaries or affiliates, or (ii) recruit or
otherwise solicit any person or entity who, within the
six months immediately preceding the Closing Date, had
been an employee or Vendor of the Business.
6.1.3 NONCOMPETITION. Subject to Section 6.1.4
hereof, Seller covenants and agrees that it shall not,
for a period of five years from and after the Closing
Date, working alone or in conjunction with one or more
other persons or entities, for compensation or not,
permit Seller's name to be used by or engage in or
carry on, directly or indirectly, either for itself or
as a member of a partnership or other entity or as a
stockholder, investor, agent, associate or consultant
of any person, partnership, corporation or other entity
(other than Buyer or a subsidiary or affiliate of
Buyer), the business of manufacturing, storing,
delivering, selling, supplying or distributing clay
brick products (but only for as long as such business
is carried on by (i) Buyer and/or any of its
subsidiaries or affiliates or (ii) any person,
corporation, partnership, trust or other organization
or entity deriving title from Buyer and/or any of its
subsidiaries or affiliates to the assets and goodwill
of such business) in any county in any state of the
United States in which Buyer or any of its subsidiaries
or affiliates conducts such business, or in any other
county in each state of the United States. The parties
intend that the covenants contained in this Section
6.1.3 shall be deemed to be a series of separate
covenants, one for each county in each state of the
United States and, except for geographic coverage, each
such separate covenant shall be identical in terms to
the covenant contained in this Section 6.1.3.
6.1.4 Notwithstanding anything to the contrary
contained herein, the covenants set forth in Sections
6.1.1, 6.1.2 and 6.1.3 hereof shall terminate in the
event of a Change of Control (as such term is
hereinafter defined). For
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purposes of this Section 6.1, a "Change in Control"
shall be deemed to have occurred if any one of the
following shall have occurred: (i) there is
consummated a merger, consolidation or reorganization
of Seller, other than a merger, consolidation or
reorganization which would result in the voting
securities of Seller outstanding immediately prior to
such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity or any
parent thereof) at least 50% of the combined voting
power of the securities of Seller or such surviving
entity or any parent thereof outstanding immediately
after such merger, consolidation or reorganization; or
(ii) the stockholders of Seller approve a plan of
complete liquidation or dissolution of Seller or there
is consummated an agreement for the sale or disposition
by Seller of all or substantially all of Seller's
assets, other than a sale or disposition by Seller of
all or substantially all of Seller's assets to an
entity at least 50% of the combined voting power of the
voting securities of which are owned by stockholders of
Seller immediately prior to such sale.
6.1.5 REFORMATION. If, in any judicial
proceeding, the court shall refuse to enforce any of
the separate covenants contained in Section 6.1.1,
6.1.2 or 6.1.3 hereof because the time limit is too
long, then it is expressly understood and agreed
between the parties hereto that for purposes of such
proceeding such time limitation shall be deemed reduced
to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court
shall refuse to enforce any of the separate covenants
contained in Section 6.1.1, 6.1.2 or 6.1.3 hereof
because it is more extensive (whether as to geographic
area, scope of business or otherwise) than necessary to
protect the business and goodwill of Buyer, then it is
expressly understood and agreed between the parties
hereto that for purposes of such proceeding the
geographic area, scope of business or other aspect
shall be deemed reduced to the extent necessary to
permit enforcement of such covenants.
6.1.6 INJUNCTIVE RELIEF. Seller acknowledges
that a breach of Section 6.1.1, 6.1.2 or 6.1.3 hereof
would cause irreparable damage to Buyer, and in the
event of its actual or threatened breach of the
provisions of Section 6.1.1, 6.1.2 or 6.1.3 hereof,
Buyer shall be entitled to a temporary restraining
order and an injunction restraining Seller from
breaching such covenants without the necessity of
posting bond or proving irreparable harm, such being
conclusively admitted by Seller. Nothing shall be
construed as prohibiting Buyer from pursuing any other
available remedies for such breach or threatened
breach, including the recovery of damages from Seller.
Seller acknowledges that the restrictions set forth in
Sections 6.1.1, 6.1.2 and 6.1.3 hereof are reasonable
in scope and duration, given the nature of the business
of Buyer.
6.2 CONDUCT OF THE BUSINESS.
6.2.1 AFFIRMATIVE COVENANTS. On and after the
date hereof and until the Closing Date or the date, if
any, on which this Agreement is earlier
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terminated and abandoned pursuant to Section 8 hereof
(the "Termination Date"), Seller shall:
(i) conduct the operations of the Business
according to its ordinary and usual course of
business consistent with past practice; and
(ii) use its best efforts to preserve intact
the Business' organization and goodwill, to keep
available the services of its employees, and to
maintain satisfactory relationships with
suppliers, distributors, licensors, licensees,
customers, employees and others having business
relationships with the Business.
6.2.2 NEGATIVE COVENANTS. Without limiting the
generality of the foregoing, and except for actions to
be taken in connection with any of the transactions
contemplated hereby, without Buyer's prior written
consent, Seller shall not, on or after the date hereof
and until the earlier of the Closing Date or the
Termination Date:
(i) make any material change in the conduct
of the Business or enter into any transaction
other than in the ordinary course of business
consistent with past practice;
(ii) make any sale, transfer, or other
conveyance of the Purchased Assets or any part
thereof, except transactions pursuant to Contracts
and dispositions of inventory or worn-out or
obsolete equipment and machinery for fair or
reasonable value in the ordinary course of
business consistent with past practice;
(iii) subject any of the Purchased Assets to
any Encumbrance (other than under existing banking
arrangements);
(iv) take any action that would cause any of
the representations and warranties made by it in
this Agreement not to remain true and correct; or
(vi) commit to do any of the foregoing.
6.3 CONSENTS AND APPROVALS. Seller shall, at its cost
and expense, use its reasonable efforts to obtain all
necessary authorizations, consents, waivers, estoppel
certificates and approvals of all governmental and
regulatory authorities, and of all other persons or entities
required in connection with the execution, delivery and
performance by Seller of this Agreement (including, without
limitation, obtaining all authorizations, consents, waivers,
estoppel certificates and approvals as may be required in
connection with the assignment of the Leases and of those
Contracts to be assigned to Buyer pursuant hereto). Each
party shall reasonably assist and cooperate with the other
party in preparing and filing all documents, including
permit, transfers,
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modifications and applications required to be submitted by
the other to any governmental or regulatory authority, in
connection with such transactions and in obtaining any
governmental consents, waivers, authorizations, estoppel
certificates or approvals which may be required to be
obtained in connection with such transactions (which
assistance and cooperation shall include without limitation
timely furnishing to the other party all information
concerning such party that counsel to the other party
reasonably determines is required to be included in such
documents or would be helpful in obtaining any such consent,
waiver, estoppel certificate, novation, authorization or
approval).
6.4 ACCESS TO PROPERTIES AND RECORDS. Seller shall
afford to Buyer, and to the accountants, counsel,
prospective lenders, agents and representatives of Buyer,
upon reasonable notice, full access during normal business
hours, throughout the period from the date hereof through
the earlier of the Closing Date or the Termination Date, to
the Business and all properties, books, Leases, Contracts
and files and records (including but not limited to tax
returns and correspondence with accountants) of Seller
relating to the Business and, during such period, shall
furnish promptly to Buyer all other information concerning
the Business and its properties and personnel as Buyer may
reasonably request; provided, however, that no investigation
or receipt of information pursuant to this Section 6.4 shall
qualify any representation or warranty of Seller or the
conditions to the obligations of Buyer. In addition to the
foregoing, Seller shall provide to Buyer all environmental
studies and reports pertaining to the Business or the
Purchased Assets and Seller acknowledges that Buyer's
investigation pursuant to this Section 6.4 may include,
without limitation, (i) testing of the soil, groundwater,
building components, tanks and other equipment, and (ii)
contacting present and potential customers and conducting
such due diligence investigation relating to such customer
relations as Buyer deems reasonably necessary or
appropriate.
6.5 ACQUISITION PROPOSALS. Until the earlier of the
Closing Date or the Termination Date, Seller shall not,
directly or indirectly, through any officer, director,
agent, representative (including, without limitation,
investment bankers, attorneys and accountants) or otherwise,
(i) solicit, initiate or encourage submission of inquiries,
proposals or offers from any person, corporation,
partnership or other entity or group other than Buyer (a
"Third Party"), relating to any acquisition or purchase of
all or a portion of the Purchased Assets; or (ii)
participate in any discussions or negotiations regarding, or
furnish to any Third Party any information with respect to,
or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or
attempt by any Third Party to do or seek any of the
foregoing. Seller shall promptly notify Buyer if any such
proposal or offer, or any inquiry or contact with any Third
Party with respect thereto, is made, and shall in any such
notice set forth in reasonable detail the identity of the
Third Party and the terms and conditions of such inquiry,
proposal or offer.
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6.6 PUBLIC ANNOUNCEMENTS. On or after the date
hereof, and until the earlier of the Closing Date or the
Termination Date, neither party shall furnish any written
communication to the Business' suppliers, partners,
customers, creditors or to the public generally if the
subject matter thereof relates to the transactions
contemplated hereby without the prior approval of the other
party as to the content thereof; provided, however, that the
foregoing shall not be deemed to prohibit disclosures
pursuant to the proxy statement referred to in Section 1.5
hereof or any disclosure required by any applicable law or
by any governmental authority having jurisdiction over such
matters.
6.7 NOTIFICATION OF CERTAIN MATTERS. Seller shall
give prompt notice to Buyer, and Buyer shall give prompt
notice to Seller, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be
likely to cause any representation or warranty of such party
contained herein to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing
Date; and (ii) any material failure of Seller or of Buyer,
as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by
it hereunder.
6.8 EXECUTION OF ADDITIONAL DOCUMENTS. Each party
hereto will at any time, and from time to time after the
Closing Date, upon request of the other party hereto,
execute, acknowledge and deliver, without payment, all such
further deeds, assignments, transfers, conveyances, powers
of attorney and assurances, and take all such further
action, as may be required to carry out or effectuate the
intentions and purposes of this Agreement, and to transfer
and vest title to any Purchased Asset being transferred
hereunder, and to protect the right, title and interest in
and enjoyment of all of the Purchased Assets sold, granted,
assigned, transferred, delivered and conveyed pursuant
hereto; provided, however, that this Agreement shall be
effective regardless of whether any such additional
documents are executed.
6.9 COSTS AND EXPENSES. Except as otherwise provided
herein, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such costs and
expenses.
6.10 TRANSFER TAXES. Except as otherwise provided
herein, any and all sales, use, transfer or similar Taxes
("Transfer Taxes") which result from the transfer of the
Purchased Assets, Assumed Liabilities or the Business
pursuant to this Agreement shall be borne 50% by Seller and
50% by Buyer. The parties shall prepare and file any related
tax returns required to be filed in connection with the
payment of such Transfer Taxes on a timely basis. After the
Closing Date, each party shall, upon the request of the
other party, promptly reimburse such other party for any
Transfer Taxes or related expenses for which it is
responsible under this Agreement but which have been paid by
such other party.
6.11 COOPERATION ON TAX MATTERS; BUSINESS RECORDS.
Buyer and Seller agree to furnish or cause to be furnished
to each other, as promptly as practicable, such information
and assistance relating to the Business as is reasonably
necessary for the preparation and filing of any return,
claim for refund or other required or optional filings
relating to Tax matters, for the preparation for and proof
of facts during any tax audit, for the preparation for any
Tax protest, for the prosecution or defense of any suit or
other proceeding relating to Tax matters and for the answer
to any governmental or regulatory inquiry relating to Tax
matters.
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Buyer agrees to retain possession of all accounting,
business, financial and Tax records and information (i)
relating to the Business in existence on the Closing Date
transferred to Buyer hereunder and (ii) coming into
existence after the Closing Date which relate to the
Business prior to or on the Closing Date, for the period not
to exceed six years from the Closing Date. In addition,
from and after the Closing Date, Buyer agrees that it will
not unreasonably withhold access by Seller and its
attorneys, accountants and other representatives (after
reasonable notice and during normal business hours and with
reasonable charge), to such personnel, books, records,
documents and any or all other information relating to the
Business as Seller may reasonably deem necessary to properly
prepare for, file, prove, answer, prosecute and/or defend
any such Tax return, filing, audit, protest, claim, suit,
inquiry or other proceeding. Such access shall include
without limitation access to any computerized information
retrieval systems relating to the Business.
6.12 ALLOCATION OF TOTAL PURCHASE PRICE. On or prior
to the Closing Date, Buyer and Seller shall prepare a
mutually agreeable preliminary allocation of the estimated
final Purchase Price to be determined pursuant to Section
2.2 hereof and the Assumed Liabilities among the Purchased
Assets (any agreed allocation hereinafter referred to as the
"Agreed Allocation"). A copy of the Agreed Allocation with
respect to the Owned Real Property will also be delivered to
the Title Company (as such term is hereinafter defined) and
will constitute the agreement of Buyer and Seller with
respect to the insurable value of each tract of Owned Real
Property for purposes of the applicable Owners Title Policy
(as such term is hereinafter defined). Buyer and Seller
agree that the final allocation shall be made pursuant to
the following procedure: after determination of the final
Purchase Price pursuant to Section 2.2 hereof, Buyer shall
deliver to Seller an allocation of such final Purchase Price
and the Assumed Liabilities among the Purchased Assets.
Seller shall accept and agree to such allocation by Buyer
unless such allocation is manifestly unreasonable in light
of the preliminary Allocation referred to above, in which
case Seller shall deliver written notice to Buyer within 30
days after Seller's receipt thereof. If Seller so objects
to such allocation, then Seller and Buyer shall prepare
separate allocations of the final Purchase Price and Assumed
Liabilities among the Purchased Assets. Buyer and Seller
agree to act in accordance with the Agreed Allocation, if
any, in any tax returns or similar filings. All fees and
expenses relating to the Agreed Allocation shall be borne
equally by the parties. In the event that any Tax authority
disputes the Agreed Allocation, Seller or Buyer, as the case
may be, shall promptly notify the other party of the nature
of such dispute.
6.13 PRORATION OF PROPERTY TAXES. Ad valorem real
property and personal property Taxes and assessments on the
Purchased Assets shall be prorated between Buyer and Seller
as of the Closing Date. All such prorations shall be
allocated so that items relating to time periods ending on
or prior to the Closing Date shall be allocated to Seller
and items relating to time periods beginning after the
Closing Date shall be allocated to Buyer. The amount of all
such prorations shall be settled and paid on the Closing
Date based on assessed values, provided that final payments
with respect to prorations that are not able to be
calculated as of the Closing Date shall be calculated and
paid as soon as practicable thereafter.
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6.14 OFFERS OF EMPLOYMENT. Buyer may, but shall not be
required to, offer employment to individuals who are
employees of the Business on or prior to the Closing Date,
on wages, terms and conditions and in accordance with hiring
practices determined in Buyer's sole discretion. Seller
shall cooperate with all requests made by Buyer for the
purpose of facilitating Buyer's hiring of such employees.
For purposes of this Agreement, "Transferred Employees"
shall mean all such employees to whom employment is offered
as provided above and who accept employment with Buyer,
including without limitation those on medical, disability or
other leave of absence, provided that employees on leave
shall not be considered Transferred Employees until the date
on which each such employee is released by the employee's
physician to return to work and the employee actually
returns to work. Buyer shall provide health insurance to
all Transferred Employees in accordance with Buyer's current
health insurance policies, and, in connection therewith, (i)
with respect to any length of service requirements
applicable to such policies, Buyer shall credit each
Transferred Employee with the number of days such
Transferred Employee was employed by Seller and (ii) Buyer
shall waive any pre-existing condition exclusions applicable
to any Transferred Employee who was covered under Seller's
health insurance policy. Should any liability occur as a
result of the failure to give any required notice under the
Worker Adjustment and Retraining Notification Act, Buyer
assumes all responsibility and liability for any wages and
benefits for employees of the Business who did not receive
any such required notice or for civil penalties by local
governments which may be imposed for failure to give advance
notice under the Worker Adjustment and Retraining
Notification Act, including without limitation fines and
attorneys' fees. Nothing herein expressed or implied shall
confer upon any Transferred Employee or other employee or
former employee of Seller or legal representatives thereof,
any rights or remedies, including without limitation any
right to employment or continued employment for any
specified period, of any nature or kind whatsoever, or any
right to specific terms or conditions of employment
(including rate of pay, fringe benefits or position) under
or by reason of this Agreement.
6.15 TITLE COMMITMENTS, TITLE POLICIES AND SURVEYS COVERING
OWNED REAL PROPERTY.
6.15.1 With respect to each of the Owned Real
Properties, Seller, at its sole cost and expense, has
delivered or caused to be delivered to Buyer (i) a
commitment for title insurance (a "Title Commitment")
in a preliminary amount set forth therein and from East
Texas Title Company (the "Title Company") setting forth
the status of the title of such Owned Real Property and
showing all Encumbrances and other matters of record
affecting such Owned Real Property and all improvements
thereon; and (ii) a true, complete and legible copy of
all documents referred to in such Title Commitment.
6.15.2 Seller, at its sole cost and expense, has
delivered or caused to be delivered to Buyer a current
on the ground survey for each Owned Real Property (a
"Survey") consisting of plats and filed notes prepared
by licensed surveyors (together with a computer file of
each Survey using Autocad Version 13).
6.15.3 Prior to the Closing, Seller, at its sole
cost and expense, shall be obligated to cure, release
or remove all Encumbrances reflected on Schedule 6.15
hereof against the Owned Real Property.
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6.15.4 At the Closing, Seller shall deliver or
cause to be delivered to Buyer a Texas Standard Form
Owner's Policy of Title Insurance (the "Owners Title
Policy") in the amount for each tract of Owned Real
Property which is specified in the Agreed Allocation
and issued through the Title Company pursuant to the
applicable Title Commitment, subject only to such
Encumbrances (but excluding the Encumbrances referred
to in Schedule 6.15 hereof) set forth in the Title
Commitment. Seller shall pay the premium for such
insurance and Buyer shall pay for any survey
endorsement. At the Closing, Seller shall deliver or
cause to be delivered to Buyer executed special
warranty deeds with respect to each of the Owned Real
Properties, in form and substance reasonably
satisfactory to Buyer and its counsel. Seller shall
reimburse Buyer for 50% of all costs and expenses
incurred by Buyer in connection with the recording of
such special warranty deeds.
6.16 ENVIRONMENTAL INFORMATION. Until the earlier of
the Closing Date or the Termination Date and for a period of
two years after the Closing Date, Seller shall, within 30
days after its receipt, provide to Buyer copies of any and
all documents, records and information that come into
Seller's possession or control subsequent to the date hereof
concerning Environmental Conditions and/or Serious
Environmental Conditions relevant to any Site or any
facilities or operations thereon, whether generated by
Seller or others, including without limitation environmental
audits, environmental risk assessments, or site assessments
of any Site and/or adjacent property or other property in
the vicinity of any Site owned or operated by Seller
relating to the Business prior to the Closing Date,
documentation regarding any on-site or off-site Release of
Hazardous Materials, spill control plans, permits or
registrations and related compliance, and environmental
agency reports and correspondence. For a period of two
years after the Closing Date, Buyer shall provide to Seller
copies of any and all documents, records and information
that come into Buyer's possession or control subsequent to
the Closing Date concerning Serious Environmental Conditions
relevant to any Site or any facilities or operations
thereon, whether generated by Buyer or others.
7. CONDITIONS OF CLOSING.
7.1 BUYER'S CONDITIONS OF CLOSING. The obligation of
Buyer to purchase and pay for the Purchased Assets and to
assume the specified liabilities and obligations set forth
herein shall be subject to and conditioned upon, at Buyer's
option, the satisfaction at the Closing of each of the
following conditions:
7.1.1 The holders of shares of the issued and
outstanding capital stock of Seller shall have duly
adopted and approved this Agreement and all
transactions contemplated hereby in accordance with the
requirements of Delaware law and the certificate of
incorporation and by-laws, as amended to the date
hereof, of Seller.
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7.1.2 All representations and warranties of
Seller contained herein shall be true and correct at
and as of the Closing Date with the same effect as
though made as of the Closing Date (except for the
failure of any such representation or warranty to be
true and correct at and as of the Closing Date
resulting from a reduction in Seller's sales to current
distributors or other material changes in the
relationship or business conduct between Seller and its
current distributors) and Seller shall have performed
all agreements and covenants and satisfied all
conditions on its part to be performed or satisfied by
the Closing Date pursuant to the terms hereof, and
Buyer shall have received a certificate of Seller,
signed by an authorized officer of Seller and dated the
Closing Date, to both such effects.
7.1.3 As of the Closing, there shall have been no
material adverse change since July 31, 1998 in the
financial condition, business or affairs of the
Business and/or the Purchased Assets (except for any
such change resulting from a reduction in Seller's
sales to current distributors or other material changes
in the relationship or business conduct between Seller
and its current distributors), and the Business and/or
the Purchased Assets shall not have suffered any
material loss (whether or not insured) by reason of
physical damage caused by fire, earthquake, accident or
other calamity which substantially affects the value of
the Business and/or the Purchased Assets, and Buyer
shall have received a certificate of Seller, signed by
the President of Seller and dated the Closing Date, to
both such effects.
7.1.4 Seller shall have obtained all
authorizations, consents, waivers, estoppel
certificates and approvals as may be required in
connection with the assignment of the Leases and of
those Contracts to be assigned to Buyer pursuant hereto
upon terms acceptable to Buyer in its sole discretion.
7.1.5 The Encumbrances reflected in Schedule 3.12
and Schedule 6.15 hereof shall have been cured,
removed, discharged, released or terminated pursuant to
documents in form and substance reasonably acceptable
to Buyer and its counsel.
7.1.6 Seller shall have executed and delivered to
Buyer (i) the Bill of Sale, Assignment and Assumption
Agreement, (ii) a special warranty deed in form and
content reasonably satisfactory to Buyer relating to
each tract of the Owned Real Property, and (iii) and
such other bills of sale, deeds, instruments of
assignment and other appropriate documents as may be
reasonably requested by Buyer in order to carry out the
intentions and purposes hereof.
7.1.7 Seller shall have delivered or caused to be
delivered to Buyer an Owners Title Policy for each
tract of the Owned Real Property in accordance with
Section 6.15.4 hereof.
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7.1.8 Seller shall have delivered to Buyer a
certificate, dated the Closing Date, of Seller's
corporate Secretary certifying:
(i) Resolutions of its Board of Directors
approving and adopting this Agreement and all
transactions contemplated hereby and authorizing
Seller's execution, performance and delivery of
this Agreement and all agreements, documents and
transactions contemplated hereby; and
(ii) The incumbency of its officers
executing this Agreement and all agreements and
documents contemplated hereby.
7.1.9 The approvals and all consents from third
parties and governmental agencies required to
consummate the transactions contemplated hereby shall
have been obtained (including, without limitation, all
approvals for transfer of any air permits relating to
facilities utilized by the Business).
7.1.10 No suit, action, investigation, inquiry or
other proceeding by any governmental or regulatory
authority shall have been instituted or threatened
which questions the validity or legality of the
transactions contemplated hereby.
7.1.11 There shall be no effective injunction,
writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or
any of them not be consummated as so provided or
imposing any conditions on the consummation of the
transactions contemplated hereby, which is unduly
burdensome on Buyer.
7.1.12 Buyer shall have received from Arter &
Hadden LLP, counsel for Seller, an opinion, dated as of
the Closing Date, in the form attached hereto as
Exhibit "B".
7.2 SELLER'S CONDITIONS OF CLOSING. The obligation of
Seller to sell, grant, convey, assign, transfer and deliver
the Purchased Assets shall be subject to and conditioned
upon, at Seller's option, the satisfaction at the Closing of
each of the following conditions:
7.2.1 The holders of shares of the issued and
outstanding capital stock of Seller shall have duly
adopted and approved this Agreement and all
transactions contemplated hereby in accordance with the
requirements of Delaware law and the certificate of
incorporation and by-laws, as amended to the date
hereof, of Seller.
7.2.2 All representations and warranties of Buyer
contained herein shall be true and correct at and as of
the Closing Date with the same effect as though made as
of the Closing Date and Buyer shall have performed all
agreements and covenants and satisfied all conditions
on its part to be performed or satisfied by the Closing
Date pursuant to the terms hereof, and Seller shall
have received a certificate of Buyer, signed by an
authorized officer of Buyer and dated the Closing Date,
to both such effects.
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7.2.3 Seller shall have received the Initial
Payment in accordance with Section 2.1.2 hereof.
7.2.4 Buyer shall have executed and delivered the
Bill of Sale, Assignment and Assumption Agreement.
7.2.5 Buyer shall have delivered to Seller a
certificate, dated the Closing Date, of Buyer's
corporate Secretary certifying:
(i) Resolutions of its Board of Directors
adopting and approving this Agreement and all
transactions contemplated hereby and authorizing
Buyer's execution, performance and delivery of
this Agreement and all agreements, documents and
transactions contemplated hereby; and
(ii) The incumbency of its officers
executing this Agreement and all agreements and
documents contemplated hereby.
7.2.7 The approvals and all consents from third
parties and governmental agencies required to
consummate the transactions contemplated hereby shall
have been obtained (including, without limitation, all
approvals for transfer of any air permits relating to
facilities utilized by the Business).
7.2.8 No suit, action, investigation, inquiry or
other proceeding by any governmental or regulatory
authority shall have been instituted or threatened
which questions the validity or legality of the
transactions contemplated hereby.
7.2.9 There shall be no effective injunction,
writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or
any of them not be consummated as so provided or
imposing any conditions on the consummation of the
transactions contemplated hereby, which is unduly
burdensome on Seller.
7.2.10 Seller shall have received from Kelly,
Hart & Hallman, a professional corporation, counsel for
Buyer, an opinion, dated as of the Closing Date, in the
form attached hereto as Exhibit "C".
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8. TERMINATION AND ABANDONMENT.
8.1 REASONS FOR TERMINATION. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement
may be terminated and abandoned at any time after the date
hereof but not later than the Closing:
8.1.1 by the mutual consent of Seller and Buyer;
or
8.1.2 by Buyer at any time after December 31,
1998 if, by that date, the conditions set forth in
Section 7.1 hereof shall not have been fulfilled or
waived; or
8.1.3 by Seller at any time after December 31,
1998 if, by that date, the conditions set forth in
Section 7.2 hereof shall not have been fulfilled or
waived; or
8.1.4 by Buyer at any time if there has been a
material adverse change since July 31, 1998 in the
business, financial condition, or results of operations
of the Business and/or the Purchased Assets (except for
any such change resulting from a reduction in Seller's
sales to current distributors or other material changes
in the relationship or business conduct between Seller
and its current distributors); or
8.1.5 by Buyer or by Seller at any time if there
has been a material breach of any representation or
warranty made by the other party herein or in any
certificate or other document delivered pursuant hereto
or if there has been any failure by the other party to
perform in all material respects all obligations or to
comply with all covenants on its part to be performed
hereunder.
8.2 PROCEDURE UPON AND EFFECT OF TERMINATION. In the
event of any termination and abandonment pursuant to Section
8.1 hereof, written notice thereof shall forthwith be given
to the other party and the transactions contemplated hereby
shall thereupon be terminated and abandoned, without further
action by Buyer or by Seller, and there shall be no
liability on the part of either Seller or Buyer or their
respective officers, directors or shareholders, except for
the material breach of any representation, warranty or
covenant contained herein that is within the control of the
party in breach.
9. MISCELLANEOUS.
9.1 NOTICES. Any notice, consent, approval, request,
demand, declaration or other communication required
hereunder shall be in writing to be effective and shall be
given and shall be deemed to have been given if (i)
delivered in person with receipt acknowledged, (ii) telexed
or telecopied and electronically confirmed, (iii) deposited
in the custody of a nationally recognized overnight courier
for next day delivery, or (iv) placed in the federal mail,
postage prepaid, certified or registered mail, return
receipt requested, in each case addressed as follows:
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If to Buyer:
Acme Brick Company
2821 West Seventh Street
Fort Worth, Texas 76107
Attention: Edward L. Stout, President
Facsimile #: 817/390-2404
Confirming #: 817/390-2406
Copy to:
Wayne B. Whitham, Esq.
Kelly, Hart & Hallman, a professional corporation
201 Main Street
Suite 2500
Fort Worth, Texas 76102
Facsimile #: 817/878-9280
Confirming #: 817/878-3554
If to Seller:
Temtex Industries, Inc.
5400 LBJ Freeway
Suite 1375
Dallas, Texas 75240
Attention: E. R. Buford, President and Chief
Executive Officer
Facsimile #: 972/726-0315
Confirming #: 972/726-7175
and, prior to the Closing,
Texas Clay Industries
P.O. Box 469
700 West Bartlett Street
Malakoff, Texas 75148
Attention: Maury Ward, President
Facsimile #: 903/489-2480
Confirming#: 903/489-1331
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Copy to:
Stanley R. Huller, Esq.
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75201-4605
Facsimile #: 214/741-7139
Confirming #: 214/761-2100
or at such other address as may be substituted by giving the
other parties not fewer than five business days' advance
written notice of such change of address in accordance with
the provisions hereof. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall
be deemed to have been duly served, delivered and received
on the date on which personally delivered with receipt
acknowledged or telecopied or telexed and electronically
confirmed, or 48 hours after being deposited into the
custody of a nationally recognized overnight courier for
next day delivery, or five business days after the same
shall have been placed in the federal mail as aforesaid.
Failure or delay in delivering copies of any consent,
notice, demand, request, approval, declaration or other
communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration
or other communication.
9.2 BINDING EFFECT; BENEFITS. This Agreement shall be
binding upon and shall inure to the benefit of the parties
and their respective successors and permitted assigns.
Notwithstanding anything contained herein to the contrary,
nothing in this Agreement, expressed or implied, is intended
to confer on any person (other than the parties hereto, the
Buyer Indemnitees (but only with respect to Section 5
hereof), or their respective successors and permitted
assigns) any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.3 ENTIRE AGREEMENT. This Agreement, together with
the Exhibits, Schedules and other agreements and documents
contemplated hereby, constitutes the final written
expression of all of the agreements between the parties, and
is a complete and exclusive statement of those terms.
Except as specifically included or referred to herein, this
Agreement and the Exhibits, Schedules and other agreements
and documents contemplated hereby supersede all prior
understandings, negotiations and agreements concerning the
matters specified herein. Any representations, promises,
warranties or statements made by any party that differ in
any way from the terms of this written Agreement, and the
Exhibits, Schedules and other agreements and documents
contemplated hereby, shall be given no force or effect
(except as specifically included or referred to herein).
The parties specifically represent, each to the others, that
there are no additional or supplemental agreements between
them related in any way to the matters herein contained
unless specifically included or referred to herein.
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At any time before or after approval and adoption of
this Agreement by the stockholders of Seller and prior to
the Closing, this Agreement may be amended or supplemented
in writing by an affirmative action of the President of
Seller and the President of Buyer with respect to any of the
terms contained herein except to the extent approval of
Seller's stockholders would otherwise be required under any
applicable law.
9.4 GOVERNING LAW. THIS AGREEMENT, AND ALL QUESTIONS
RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND
ENFORCEMENT (INCLUDING, WITHOUT LIMITATION, PROVISIONS
CONCERNING LIMITATIONS OF ACTION), SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
(EXCLUSIVE OF THE CONFLICT OF LAW PROVISIONS THEREOF)
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
THIS AGREEMENT HAS BEEN EXECUTED, ACCEPTED AND
DELIVERED AND IS PERFORMABLE IN TARRANT COUNTY, TEXAS, AND
VENUE IN ANY SUIT, PROCEEDING OR ACTION ARISING OUT OF OR
INVOLVING THIS AGREEMENT SHALL BE IN TARRANT COUNTY, TEXAS.
9.5 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
instrument; but in making proof of this Agreement, it shall
not be necessary to produce or account for more than one
such counterpart. It is not necessary that each party
execute the same counterpart, so long as identical
counterparts are executed by all parties. Executed
signature pages to any counterpart instrument may be
detached and affixed to a single counterpart, which single
counterpart with multiple signature pages affixed thereto
constitutes an original counterpart instrument. All such
counterpart signature pages shall be read as though one and
they shall have the same force and effect as if all of the
parties had executed a single signature page.
9.6 HEADINGS. Headings of the Sections of this
Agreement are for the convenience of reference only, and
shall be given no substantive or interpretive effect
whatsoever.
9.7 WAIVERS. Any party may, by written notice to the
other parties, (i) extend the time for the performance of
any of the obligations or other actions of the other parties
hereunder; (ii) waive any inaccuracies in the
representations or warranties of the other parties contained
herein or in any other agreement or document delivered
pursuant hereto; (iii) waive compliance with any of the
conditions or covenants of the other parties contained
herein; or (iv) waive performance of any of the obligations
of the other parties hereunder. Except as provided in the
preceding sentence, no action taken pursuant hereto,
including without limitation any investigation by or on
behalf of any party, shall be deemed to constitute a waiver
by the party taking such action of
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compliance with any representations, warranties, covenants
or agreements contained herein. No failure or delay on the
part of any party in exercising any right, privilege, power
or remedy under this Agreement, and no course of dealing
among the parties, shall operate as a waiver of such right,
privilege, power or remedy; nor shall any single or partial
waiver or exercise of any right, privilege, power or remedy
under this Agreement preclude any other or further exercise
of such right, privilege, power or remedy, or the exercise
of any other right, privilege, power or remedy. No notice
or demand on any party in any case shall entitle such party
to any other or future notice or demand in any similar or
other circumstances or constitute a waiver of the right of
the party giving such notice or making such demand to take
any other or future action in any circumstances without
notice or demand.
9.8 MERGER OF DOCUMENTS. This Agreement and all
agreements and documents contemplated hereby constitute one
agreement and are interdependent upon each other in all
respects.
9.9 INCORPORATION OF EXHIBITS AND SCHEDULES. All
Exhibits and Schedules attached hereto are by this reference
incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
9.10 SEVERABILITY. If for any reason whatsoever, any
one or more of the provisions hereof shall be held or deemed
to be illegal, inoperative, unenforceable or invalid as
applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such
provision illegal, inoperative, unenforceable or invalid in
any other case or of rendering any of the other provisions
hereof illegal, inoperative, unenforceable or invalid.
Furthermore, in lieu of each illegal, invalid, unenforceable
or inoperative provision, there shall be added
automatically, as part of this Agreement, a provision
similar in terms of such illegal, invalid, unenforceable or
inoperative provision as may be possible and as shall be
legal, valid, enforceable and operative.
9.11 ASSIGNABILITY. Neither this Agreement nor any of
the parties' rights hereunder may be assigned or otherwise
transferred by any party without the prior written consent
of the other parties; provided, however, that Buyer's or its
successors' or permitted assigns' rights hereunder may be
assigned or otherwise transferred, in whole or in part,
without any other party's consent (i) to any successor by
merger or consolidation, (ii) to any bank or other financial
institution, or to any individual, partnership, corporation
or other entity, providing any financing to Buyer, its
successors or permitted assigns, or (iii) to any individual,
partnership, corporation or other entity deriving title from
Buyer, or its successors or permitted assigns, to all or
substantially all of the Purchased Assets as constituted on
the date of any such transfer; provided further, however,
that Seller's or its successors' or permitted assigns'
rights hereunder may be assigned or otherwise transferred,
in whole but not in part, without any other party's consent,
(i) to any successor by merger or consolidation, or (ii)
after the Closing Date, to any individual, partnership,
corporation or other entity deriving title from Seller, or
its successors or permitted assigns, to all or substantially
all of its assets as constituted on the date of such
transfer. No assignment or other transfer permitted by this
Section 9.11 shall operate as a release of the assignor's
obligations or liabilities hereunder, and the assignor shall
remain liable hereunder notwithstanding such assignment or
other transfer. In the event of any assignment or other
transfer permitted by this Section 9.11, an instrument of
assignment shall be executed by the assignee and shall
expressly state that the assignee assumes all of the
applicable obligations and liabilities of the assignor
contained herein.
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9.12 Drafting. The parties acknowledge and confirm that
each of their respective attorneys have participated jointly
in the review and revision of this Agreement and that it has
not been written solely by counsel for one party. The
parties therefore stipulate and agree that the rule of
construction to the effect that any ambiguities are to be or
may be resolved against the drafting party shall not be
employed in the interpretation of this Agreement to favor
any party against another.
9.13 References. The use of the words "hereof,"
"herein," "hereunder," "herewith," "hereto," "hereby," and
words of similar import shall refer to this entire
Agreement, and not to any particular article, section,
subsection, clause, or paragraph of this Agreement, unless
the context clearly indicates otherwise.
9.14 Calendar Days, Weeks and Months. Unless
otherwise, specified herein, any reference to "day", "week",
or "month" herein shall mean a calendar day, week or month.
9.15 Gender; Plural and Singular. Where the context
clearly indicates otherwise, the singular shall include the
plural and vice versa. Whenever the masculine, feminine or
neuter gender is used inappropriately in this Agreement,
this Agreement shall be read as if the appropriate gender
had been used.
9.16 Cumulative Rights. All rights and remedies
specified herein are cumulative and are in addition to, not
in limitation of, any rights or remedies the parties may
have at law, in equity, or otherwise, and all such rights
and remedies may be exercised singularly or concurrently.
9.17 No Implied Covenants. Each party, against the
other, waives and relinquishes any right to assert, either
as a claim or as a defense, that the other party is bound to
perform or liable for the nonperformance of any implied
covenant or implied duty or implied obligation.
9.18 Attorneys' Fees. The prevailing party in any
dispute between the parties arising out of the
interpretation, application or enforcement of any provision
hereof shall be entitled to recover all of its reasonable
attorney's fees and costs whether suit be filed or not,
including without limitation costs and attorneys' fees
related to or arising out of any trial or appellate
proceedings.
9.19 Indirect Action. Where any provision hereof
refers to action to be taken by any person or party, or
which such person or party is prohibited from taking, such
provision shall be applicable whether the action in question
is taken directly or indirectly by such person or party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the day and year hereinabove
first set forth.
BUYER:
ACME BRICK COMPANY
By: /s/ EDWARD L. STOUT
------------------------------
Edward L. Stout, President
SELLER:
TEMTEX INDUSTRIES, INC.
By: /s/ E. R. Buford
------------------------------
E. R. Buford, President and
Chief Executive Officer
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