Exhibit 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
BALCHEM MINERALS CORPORATION,
CHELATED MINERALS CORPORATION
AND
THE SHAREHOLDERS OF CHELATED MINERALS CORPORATION
OCTOBER 31, 2005
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of the 31st day
of October, 2005, by and among the Albert and Verla Richards LTD, Partnership, a
Utah limited partnership (the "Partnership"), Bruce R. Sherman, Suzanne R.
Sherman, Frank Ciaramella, Frank D'Angelo, Corporation of the President of The
Church of Jesus Christ of Latter-day Saints (the "Church"), and Katie H.
Mitchell (collectively the "Shareholders" or individually a "Shareholder"),
Chelated Minerals Corporation, a Utah corporation (the "Company"), and Balchem
Minerals Corporation, a Delaware corporation (the "Purchaser"). The
Shareholders, Company and Purchaser may hereinafter be individually referred to
as a "Party" or collectively as the "Parties."
RECITALS
WHEREAS, the Shareholders own all of the shares of the outstanding capital
stock of the Company (collectively, the "Shares") as set forth in Exhibit A
attached hereto and made a part hereof; and
WHEREAS, the Shareholders desire to sell and transfer to the Purchaser all
of the Shares, and the Purchaser wishes to acquire such Shares, all pursuant to
and in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, the parties hereto hereby agree as follows:
ARTICLE 1. PURCHASE AND SALE OF SHARES.
Section 1.1 Purchase and Sale. Subject to the terms and conditions of this
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Agreement, the Purchaser agrees to purchase from the Shareholders, and the
Shareholders as of the Closing Date (as defined in Section 7.1 hereof) agree to
sell, transfer and convey to the Purchaser all of the Shares.
ARTICLE 2. PURCHASE PRICE; INVENTORY; ADJUSTMENT.
Section 2.1 Purchase Price. Subject to the adjustment provisions of
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Section 2.3 hereof, and upon the terms and subject to the conditions contained
in this Agreement, the Purchaser shall pay to the Shareholders the sum of
Seventeen Million Three Hundred Fifty Thousand Dollars ($17,350,000) (the
"Purchase Price") in full consideration for the Shares.
Section 2.2 Payment of the Purchase Price. At the Closing, the Purchaser
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shall pay the Purchase Price to the Shareholders' Representative (as defined in
Section 2.5 below) by wire transfer of immediately available funds, for
distribution to the Shareholders by the Shareholders' Representative in the
amounts set forth in Schedule 2.2, subject to adjustment, if any, pursuant to
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Section 2.3 hereof and subject to the payment into escrow of $1,600,000 of such
Purchase Price (the "Escrow Fund") pursuant to the escrow agreement referred to
in Section 2.4 (the "Escrow Agreement").
Section 2.3 Post-Closing Adjustment.
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A. The Purchase Price will be adjusted dollar for dollar following the
Closing Date to the extent that the Net Working Capital (as hereinafter defined)
of the Company as of the Closing Date (the "Final Working Capital") shown upon
the Final Working Capital Statement (as hereinafter defined) differs from the
Net Working Capital of the Company at February 28, 2005 (the "Contract Working
Capital") shown on Schedule 2.3 (the "Contract Working Capital Statement"). For
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purposes of this Agreement, the term "Net Working Capital" shall mean the net
working capital of the Company as defined and determined in the manner set forth
on the Contract Working Capital Statement. The "Final Working Capital Statement"
will be prepared by the Parties from the books of account of the Company as of
the Closing Date within sixty (60) days of the Closing Date. The Final Working
Capital Statement shall be prepared consistent with the practice of the Company
used in the preparation of the Contract Working Capital Statement, in the manner
provided in Section 4 of the Escrow Agreement.
B. If the Final Working Capital exceeds the Contract Working Capital,
the Purchase Price shall be increased by the amount of such excess and such
amount shall be paid to the Shareholders within ten (10) days following the
final determination of the Purchase Price adjustment amount by wire transfer of
immediately available funds to an account designated by the Shareholders'
Representative, for distribution to the Shareholders pro-rata in accordance with
their ownership of the Shares.
C. If the Final Working Capital is less than the Contract Working
Capital, the Purchase Price shall be decreased by the amount of such deficiency
and such amount shall be refunded to the Purchaser within ten (10) days
following the final determination of the Purchase Price adjustment amount as
follows: (i) up to $800,000 of such amount (or the full amount thereof if it is
less than or equal to $800,000) shall be paid to the Purchaser from the Escrow
Fund in accordance with the provisions of the Escrow Agreement; and (ii) the
balance (if any) shall paid to the Purchaser by the Shareholders pro-rata by
wire transfer of immediately available funds to an account designated by the
Purchaser. If the Shareholders fail to pay any amount owed pursuant to clause
(ii) of the preceding sentence within five (5) days following the due date
therefor, then Purchaser shall be entitled (at its option, exercisable by
written notice to the Shareholders' Representative and the Escrow Agent) to
receive payment thereof from the Escrow Fund, and Shareholders shall reimburse
the Escrow Fund for the full amount of such payment within ten (10) days after
receipt of written notice by the Shareholders' Representative of the making of
such payment from either the Purchaser or the Escrow Agent.
Section 2.4 Escrow. At Closing, the Shareholders, the Company and the
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Purchaser shall enter into an escrow agreement substantially in the form of
Exhibit B.
Section 2.5 Appointment of the Shareholders' Representative.
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A. In order to efficiently administer (i) the determination of the
Final Working Capital amount, (ii) the waiver of any rights of the Shareholders
under this Agreement, and (iii) the defense and/or settlement of any claims for
which the Shareholders may be required to indemnify the Purchaser pursuant to
Article 9 below, each of the Shareholders hereby designate Suzanne R. Sherman as
his, her or its representative (the "Shareholders' Representative") to act on
their behalf with respect to such matters.
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B. The Shareholders hereby authorize the Shareholders' Representative
(i) to make all decisions on behalf of the Shareholders relating to the
determination of the Final Working Capital and the adjusted Purchase Price, (ii)
to take all action necessary in connection with the waiver of any rights of the
Shareholders pursuant to this Agreement, or the defense and/or settlement of any
claims for which the Shareholders may be required to indemnify the Purchaser
pursuant to Article 9 below, (iii) to give and receive all notices required to
be given by the Shareholders under the Agreement, and (iv) to take any and all
additional action as is contemplated to be taken by or on behalf of the
Shareholders by the terms of this Agreement.
C. If the Shareholders' Representative dies, becomes unable to perform
her responsibilities hereunder or resigns from such position, Bruce R. Sherman
shall act as her successor. If Bruce R. Sherman is not available or declines to
assume such position, or if he assumes the position and thereafter dies, becomes
unable to perform his responsibilities hereunder or resigns from such position,
then Shareholders holding, immediately before the Closing, a majority of the
Shares as set forth on Exhibit A attached hereto shall select another
representative to fill such vacancy and such substituted representative shall be
deemed to be the Shareholders' Representative for all purposes of this
Agreement.
D. All decisions and actions by the Shareholders' Representative,
including, without limitation, any agreement between the Shareholders'
Representative and the Purchaser relating to the determination of the Final
Working Capital, or the adjusted Purchase Price, or the defense or settlement of
any claims for which the Shareholders may be required to indemnify the Purchaser
pursuant to Article 9 below, shall be binding upon all of the Shareholders, and
no Shareholder shall have the right to object, dissent, protest or otherwise
contest the same.
E. By execution of this Agreement, each of the Shareholders agrees
that:
i. the Purchaser shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to the
determination of the Final Working Capital or the adjusted Purchase Price, or
the settlement of any claims for indemnification by the Purchaser pursuant to
Article 9 below or any other actions required to be taken by the Shareholders'
Representative hereunder, and no party hereunder shall have any cause of action
against the Purchaser for any action taken by the Purchaser in reliance upon the
instructions or decisions of the Shareholders' Representative;
ii. all actions, decisions and instructions of the Shareholders'
Representative shall be conclusive and binding upon all of the Shareholders and
no Shareholder shall have any cause of action against the Shareholders'
Representative for any action taken, decision made or instruction given by the
Shareholders' Representative under this Agreement, except for fraud or willful
breach of this Agreement by the Shareholders' Representative;
iii. the provisions of this Section are independent and severable,
are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Shareholder may have in
connection with the transactions contemplated by this Agreement;
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iv. the remedies available at Law (as defined below) for any
breach of the provisions of this Section are inadequate; therefore, the
Purchaser and/or the Shareholders' Representative shall be entitled to temporary
and permanent injunctive relief without the necessity of proving damages if the
Purchaser and/or the Shareholders' Representative bring an action to enforce the
provisions of this Section; and
v. (v) the provisions of this Section shall be binding upon the
executors, heirs, legal representatives and successors of each Shareholder, and
any references in this Agreement to a Shareholder or the Shareholders shall mean
and include the successors to the Shareholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
F. All fees and expenses incurred by the Shareholders' Representative
in the performance of his or her duties hereunder shall be paid by the
Shareholders in proportion to their ownership of Shares as set forth on Exhibit
A attached hereto.
G. The Shareholders' Representative will not be liable to the
Shareholders for any action taken or omitted in good faith.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.
Section 3.1 Representations and Warranties of the Shareholders. The
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Shareholders represent and warrant to the Purchaser as follows:
A. Corporate Organization and Standing. The Company is a corporation
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duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority necessary to own or lease and operate the properties and to carry on
its business as presently conducted in all material respects. The Company has
delivered to the Purchaser complete and correct copies of the Articles of
Incorporation and Bylaws of the Company, as amended to date and currently in
effect. The Company is duly qualified, licensed or registered to do business and
in good standing in each of the jurisdictions in which the nature of the
business as now being conducted by it or the property owned or leased by it
makes such qualification, licensing or registration necessary except where the
failure to be so qualified would not have a Material Adverse Effect. Except as
set forth in Schedule 3.1.A, the Company does not directly or indirectly own any
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equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. For purposes
of this Agreement, "Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other changes,
effects or circumstances that have occurred prior to the date of determination
of the occurrence of the Material Adverse Effect, is or is reasonably likely to
be materially adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operation of the Company, as the
case may be, in each case taken as a whole.
B. Capitalization of the Company. The authorized capital stock of the
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Company consists of (i) 300,000 shares of common stock, $1.00 par value, of
which 243,496 shares have been duly authorized, validly issued and are fully
paid and nonassessable and owned
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by the Shareholders as set forth in Exhibit A, free and clear of all liens,
encumbrances, restrictions and claims of any kind. There are no preemptive or
similar rights on the part of any holder of any class of securities of the
Company, or obligating the Company to issue or sell any shares of capital stock
of, or other equity interests in, the Company. Except as set forth in Schedule
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3.1.B, no options, warrants, conversion or other rights, agreements or
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commitments of any kind obligating the Company, contingently or otherwise, to
issue or sell any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares, are outstanding, and no
authorization or commitment therefor has been given. Upon consummation of the
transactions contemplated by this Agreement, Purchaser will be the sole owner of
all of the issued and outstanding capital stock of the Company, with good and
marketable title to all of the Shares free and clear of all liens, encumbrances,
restrictions and claims of any kind.
C. Authorization. The Company has all necessary corporate power and
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authority to enter into this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Shareholders and is the valid
and binding obligation of the Company and the Shareholders enforceable against
each of them in accordance with its terms, except as enforcement may be limited
by equitable principles limiting the right to obtain specific performance or
other equitable remedies, or by applicable bankruptcy or insolvency laws and
related decisions affecting creditors' rights generally.
D. No Conflict. Except as set forth in Schedule 3.1.D, and to the
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knowledge of the Company and the Shareholders, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in the acceleration of, or the creation in any party of
any right to accelerate, terminate, modify or cancel any material indenture,
contract, lease, sublease, loan agreement, note or other obligation or liability
to which the Company is a party or by which it is bound or to which any of its
assets is subject, (ii) conflict with or result in a breach of or constitute a
default under any provision of the Articles of Incorporation or Bylaws (or other
charter documents) of the Company, or a default under or violation of any
material restriction, lien, encumbrance, indenture, contract, lease, sublease,
loan agreement, note or other obligation or liability to which it is a party or
by which it is bound or to which any of its assets is subject or result in the
creation of any lien or encumbrance upon any of said assets, or (iii) violate or
result in a breach of or constitute a default under any Law (as defined below)
or any judgment, order, decree, rule or regulation of any court or governmental
agency to which the Company is subject, and which, in each of clauses (i), (ii)
and (iii) above, would have a Material Adverse Effect. As used in this
Agreement, the term "Law" or "Laws" means any and all laws, rules, regulations,
statutes, codes, judgments, orders, injunctions, decrees, writs, rulings,
directives, interpretations, constitutions, ordinances, common law, or treaty,
of any federal, state, local, municipal, foreign, international or multinational
government, administrative agency or commission, court, arbitrational tribunal
or other governmental or regulatory authority or agency of any country.
E. Financial Statements.
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i. The Shareholders have provided the Purchaser with the following
financial statements of the Company (collectively, the "Financial Statements"):
(i) unaudited
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balance sheets and related statements of income and shareholders' equity of the
Company as of and for the fiscal years ended February 28, 2003, 2004 and 2005;
and (ii) an unaudited balance sheet (the "Current Balance Sheet") and related
statements of income and shareholders' equity, of the Company (the "Year-to-Date
Financial Statements") as of and for the six (6) months ended August 31, 2005
(the "Balance Sheet Date"). Except as set forth in Schedule 3.1.E, the Financial
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Statements have been prepared on a consistent basis throughout the periods
covered thereby, present fairly the financial condition and results of
operations of the Company as of such dates and for such periods, are correct and
complete in all material respects, and are consistent with the books and records
of the Company (which books and records are correct and complete in all material
respects).
ii. The Company has no material liabilities of any nature, whether
absolute, accrued, asserted or unasserted or contingent or whether due or to
become due, except as and to the extent (a) shown on the Current Balance Sheet,
(b) set forth in Schedule 3.1.E, or (c) incurred in the ordinary course of
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business after the Balance Sheet Date and properly recorded or reserved for on
the Final Working Capital Statement.
iii. Except as set forth in Schedule 3.1.E, as of the Closing
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Date, all Company Indebtedness (as hereinafter defined) has been paid in full,
and the Company has no Indebtedness of any nature. As used herein, the term
"Indebtedness" means and includes (a) all indebtedness for borrowed money or for
the deferred purchase price of property or services, including, without
limitation, all indebtedness evidenced by notes, bonds, debentures and similar
instruments, as well as all interest, fees and charges payable with respect
thereto, (b) all obligations and liabilities under or with respect to letters of
credit, banker's or other acceptances or similar obligations, (c) all
obligations and liabilities under or in respect of capital leases or
sale-leaseback arrangements, (d) all obligations and liabilities arising under
guarantees or similar undertakings, (e) all indebtedness and other obligations
of the Company to any Shareholder, and (f) all obligations and liabilities
created or arising under any conditional sales contract or other title retention
agreement, but shall not include (i) trade payables, and (ii) customer advance
payments and customer deposits received in the ordinary course of business.
F. Insurance.
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i. Schedule 3.1.F sets forth (a) a complete and correct list and
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description of all policies of insurance to which the Company is a party or
under which the Company or any of its assets or operations are or have been
covered during the past three (3) years, true and complete copies of which
policies have been delivered to the Purchaser; and (b) a description of all
obligations of the Company to third parties with respect to insurance (including
such obligations under leases and service agreements) and identifies the policy
under which such coverage is provided.
ii. Schedule 3.1.F sets forth, by year, for the current policy
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year and each of the three (3) preceding policy years: (a) a summary of the loss
experience under each policy; (b) a statement describing each claim under an
insurance policy for an amount in excess of $5,000, which sets forth: (I) the
name of the claimant; (II) a description of the policy by insurer, type of
insurance, and period of coverage; and (III) the amount and a brief description
of
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the claim; and (c) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
iii. Except as set forth on Schedule 3.1.F, all policies to which
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the Company is a party or that provide coverage to the Company: (a) are valid,
outstanding, and enforceable; (b) are issued by a reputable insurer; (c) are
sufficient for compliance with all legal requirements applicable to the Company
and contracts and agreements to which the Company is a party or by which it is
bound; (d) will continue in full force and effect following the consummation of
the transactions contemplated by this Agreement; and (e) do not provide for any
retrospective premium adjustment or other experienced-based liability on the
part of the Company.
iv. The Company has paid all premiums due, and has otherwise
performed all of its respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company.
v. The Company has given notice to the applicable insurer under
each policy to which the Company is a party or that provides coverage to the
Company of all claims that may be insured thereby.
G. Litigation. There is no claim, action, suit, proceeding, or
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investigation pending or, to the knowledge of the Company or the Shareholders,
threatened against or affecting the Company, or its directors, officers, agents
or employees, or any properties, assets or rights of the Company, and there are
no orders, writs, injunctions or decrees currently in force against the Company
or its directors, officers, agents or employees of the Company with respect to
the conduct of the Company or its business. Except as described in Schedule
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3.1.G, there is no claim, action, suit or proceeding by the Company pending or
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threatened against others.
H. Licenses and Permits; Compliance with Laws. Except as set forth in
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Schedule 3.1.H, the Company owns, holds or possesses in its own name, all
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governmental licenses, franchises, permits, approvals and other governmental
authorizations (federal, state and local) (collectively, "Licenses and Permits")
necessary to entitle it to use its corporate name, to own or lease, operate and
use its respective assets and properties and to carry on and conduct its
respective businesses and operations as presently conducted, except for such
Licenses and Permits the absence of which would not have a Material Adverse
Effect. The Company is not in violation of or default under any Licenses or
Permits or any judgment, order, writ, injunction or decree of any court or
administrative agency issued against it, or any Law, applicable to it, which
could reasonably be expected individually or in the aggregate to have a Material
Adverse Effect or which could reasonably be expected to interfere materially
with the consummation of the transactions contemplated herein. Schedule 3.1.H
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sets forth a complete and correct list of all Licenses and Permits owned, held
or possessed by the Company, all of which are in full force and effect as of the
date hereof and will continue in full force and effect following the
consummation of the transactions contemplated by this Agreement.
I. Tax Matters.
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i. For purposes of this Agreement, (i) "Tax" means any of the
Taxes, and "Taxes" means (A) all net income, capital gains, gross income, gross
receipts, sales, use, ad valorem, franchise, capital, profits, license, and
other withholding, employment, social security, payroll, transfer, conveyance,
documentary, stamp, property, value added, customs duties, minimum taxes,
estimated and any other taxes, fees, charges, levies, excises, duties or
assessments of any kind whatsoever, together with additions to tax or additional
amounts, interest and penalties relating thereto that may be imposed by the
federal government or any state, local, or foreign government, and (B) any
liability of the Company for the payment of any amount of any type described in
clause (A) as a result of the Company being a transferee or a member of an
affiliated or combined group prior to the Closing, (ii) "Tax Returns" means all
returns, reports, statements, and forms required to be filed in respect of any
Tax, and (iii) "Code" means the Internal Revenue Code of 1986, as amended,
including the rules and regulations thereunder and any substitute or successor
provisions.
ii. Except as set forth on Schedule 3.1.I:
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a. The Company has: (A) timely filed all federal, foreign,
state, and local Tax Returns required to be filed by or with respect to the
Company on or prior to the Closing Date and all such Tax Returns are true,
complete and correct; and (B) timely paid in full all Taxes due, or for which
assessments have been received, for all periods ending on or prior to the
Closing Date.
b. The Company is not a party to any pending action or
proceeding, nor, to the knowledge of the Shareholders or the Company, is any
action or proceeding threatened by any governmental authority for the assessment
or collection of any Taxes, and no claim for the assessment or collection of any
Taxes has been asserted or proposed to be asserted against the Company, which
has not been settled with all amounts due having been paid. There are no matters
under discussion with any taxing authority, which might result in the assessment
of additional Taxes against, or relating to, the Company.
c. There are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the filing of any Tax Returns
or for the assessment of any Tax or deficiency against or relating to the
Company. There are no outstanding powers of attorney enabling any party to
represent the Company with respect to Tax matters.
d. All other Taxes required to have been withheld or collected
by the Company have been duly withheld and collected and have been duly paid
over to the proper governmental authority, or settled or adequately reserved for
on the Final Working Capital Statement, all as and to the extent prescribed by
Law.
e. All Taxes due from the Company with respect to Company
employee income tax withholding, social security taxes, unemployment, and any
similar Taxes for all periods ending on or prior to the Closing Date have been
either paid in full on or prior to the Closing Date or accrued as a liability on
the Final Working Capital Statement.
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f. The reserves for Taxes on the Contract Working Capital
Statement, the Current Balance Sheet and the Final Working Capital Statement
(excluding any reserves for deferred Taxes) are sufficient for the payment of
all unpaid Taxes through the dates shown and for all periods prior thereto,
including, without limitation, all Taxes, if any, imposed after such dates but
in respect of any period or periods prior to the dates of such Working Capital
Statement.
g. The Company is not a party to any agreement, arrangement,
or practice for the sharing of Taxes or is obligated to indemnify any other
party for Taxes.
h. There are no liens for Taxes on any asset of the Company,
other than for Taxes not yet due and payable.
J. Brokers, Finders. Except as set forth in Schedule 3.1.J, neither
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the Company nor any Shareholder has retained any broker or finder in connection
with the transactions contemplated herein or is obligated or has agreed to pay
any brokerage or finder's commission, fee or similar compensation.
K. Absence of Certain Changes.
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i. Since the Balance Sheet Date, except as set forth in Schedule
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3.1.K(i), the Company has conducted its business in the ordinary course and
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there has not occurred with respect to the Company;
a. any Material Adverse Effect, or any event, development or
circumstance that could be reasonably foreseen to result in a Material Adverse
Effect;
b. any payment, discharge or satisfaction of any liabilities
or obligations (whether accrued, absolute, contingent or otherwise) in excess of
$20,000 other than the payment, discharge or satisfaction, in the ordinary
course of business, of liabilities or obligations incurred in the ordinary
course of business;
c. except in the ordinary course of business, any assets
(whether real, personal or mixed, tangible or intangible) becoming subject to
any mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind;
d. any cancellation or waiver of any claims or rights of
value, or any sale, lease, transfer, assignment, distribution or other
disposition of any material assets, except in the ordinary course of business;
e. any increase in the base compensation or other payment to
any director, officer or employee, whether now or hereafter payable or granted
(other than increases in base compensation in the ordinary course consistent in
timing and amount with past practices), or entry into or variation of the terms
of any employment or incentive agreement with any such person;
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f. any capital expenditure or commitment for additions to
property, plant or equipment, or lease agreement, which exceeds $10,000;
g. any damage, destruction or loss of any asset, whether or
not covered by insurance, which exceeds $10,000 or which could otherwise have a
Material Adverse Effect;
h. except liabilities incurred in the ordinary course of
business, any obligation or liability, including, without limitation, any
liability for nonperformance or termination of any contract;
i. any elimination of any reserves established on the
Company's books or any changing of the method of accrual;
j. any change in any accounting method, principle or practice
of the Company, any revaluation by the Company of any of its assets or
properties or any change in collection policies or payment terms applicable to
any customers or suppliers of the Company; or
k. any agreement, undertaking or commitment to do any of the
foregoing.
ii. Since February 28. 2005, except as set forth in Schedule
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3.1.K(ii) hereto, the Company has not:
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a. authorized for issuance, issued, delivered or sold any
equity securities of the Company, or altered the terms of any outstanding
securities issued by it or in any way increased its indebtedness for borrowed
money; or
b. declared, paid or set aside for payment any dividend or
other distribution (whether in cash, stock or property or otherwise) in respect
of any Shares, including, without limitation, any Subchapter S distribution or
dividend distribution or any similar distribution, or redeemed, purchased or
otherwise acquired any Shares, any securities convertible into or exchangeable
for any Shares, or any options, warrants or other rights to purchase or
subscribe to any of the foregoing (and no dividends are or will be owed to any
holder of Shares).
L. Real Properties. Schedule 3.1.L lists and describes briefly all
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real property owned or leased by the Company. With respect to each such parcel
of owned real property, except as set forth on Schedule 3.1.L or 3.1.T:
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i. the Company has good and marketable title to the parcel of real
property, free and clear of any lien, easement, covenant, or other restriction,
except for installments of special assessments not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the current
use, occupancy, or value, or the marketability of title, of the property subject
thereto;
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ii. there are no pending or, to the knowledge of the Company or
the Shareholders, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other matters affecting
adversely the current use, occupancy, or value thereof;
iii. the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, are not in violation of applicable setback requirements, zoning Laws, or
other Laws (and none of the properties or buildings or improvements thereon are
subject to "permitted nonconforming use" or "permitted nonconforming structure"
classifications), and do not encroach on any easement which may burden the land,
the land does not serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
iv. all facilities located on the parcel of real property have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the ownership or operation thereof, and
comply with and have been operated and maintained in accordance with applicable
Laws (except as disclosed in Schedule 3.1.T);
v. there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the parcel of real property;
vi. there are no outstanding options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or interest
therein;
vii. there are no parties (other than the Company) in possession
of the parcel of real property;
viii. all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services, to the knowledge of the Shareholders, are
adequate in accordance with all applicable Laws and are provided via public
roads or via permanent, irrevocable, appurtenant easements benefiting the parcel
of real property; and
ix. the parcel of real property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property, and
access to the property is provided by paved public right-of-way with adequate
curb cuts available.
M. Material Contracts. Schedule 3.1.M sets forth a complete and
------------------- ---------------
correct list of all of the Material Contracts (as hereinafter defined) to which
the Company is a party or to which the Shareholders are a party and that relate
to the business of the Company. The Company has furnished or will furnish to the
Purchaser prior to the Closing true and correct copies of all written Material
Contracts (each as amended to date), and a written summary of the terms and
conditions of all oral/verbal Material Contracts. Except as otherwise set forth
in
11
Schedule 3.1.M: (a) each Material Contract (including, without limitation,
- --------------
each real property lease and personal property lease) is legal, valid, binding,
enforceable, and in full force and effect; (b) each Material Contract will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (c) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under any Material Contract; and (d)
no party has repudiated any provision of any Material Contract. As used in this
Agreement, "Material Contracts" means
i. all leases or other agreements under which the Company is
lessee of, or holds or operates, any machinery, equipment, vehicle or other
tangible personal property owned by a third party and used in the business of
the Company and which entails annual payments, in the case of any such lease or
agreement, in excess of $10,000;
ii. outstanding contracts with its officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors, sales
agents or dealers of the Company other than contracts which by their terms are
cancelable by the Company, or the Shareholders with notice of not more than
thirty (30) days and without cancellation penalties or severance payments, in
the case of any such contract, in excess of $20,000;
iii. all mortgages, indentures, security agreements, pledges,
notes, loan agreements or guarantees relating to the Company; and
iv. all outstanding contracts with customers or vendors (other
than purchase orders) expected to result in payment to or by the Company in
excess of $10,000;
v. all distributor, sales representative, agency and similar
agreements;
vi. all contracts, agreements and other documents and information
relating to the disposal of waste (whether or not hazardous);
vii. any agreement concerning confidentiality, assignment of
inventions, nonsolicitation or noncompetition, including, without limitation,
any agreement which limits or restricts the Company's right to compete with any
person in any respect;
viii. any bonus, pension, profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, insurance,
hospitalization or other plan, understanding or arrangement pursuant to which
benefits are provided to any current or past employee of the Company;
ix. any agreement under which the consequences of a default or
termination could reasonably be expected to result in a Material Adverse Effect;
or
x. any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 or which are
otherwise material to the Company.
N. Intellectual Property Rights.
----------------------------
12
i. Except as set forth in Schedule 3.1.N, the Company solely owns
--------------
or has the right to use, free and clear of any lien or other encumbrance or
restriction, all Intellectual Property (as defined below) owned or used by the
Company in the conduct of its business. Schedule 3.1.N sets forth a complete and
--------------
correct list of all such Intellectual Property. Except as set forth in Schedule
--------
3.1.N hereto, there is no claim or demand of any person pertaining to, or any
- -----
proceeding pending or, to the knowledge of the Shareholders or the Company,
threatened, which challenges the rights of the Company in respect of (i) any
Intellectual Property or (ii) the rights of the Company in respect of any
material trade secret owned or used by the Company in the conduct of the
Company's businesses. None of the Intellectual Property Rights is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any court,
arbitrator or administrative agency. To the knowledge of the Company and the
Shareholders, neither the Company nor any aspect of its business or operations
nor any products manufactured, distributed and sold by the Company infringe any
Intellectual Property held, owned or used by any third party. To the knowledge
of the Company and the Shareholders, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property of the Company.
ii. Except as shown on Schedule 3.1.N, with respect to each item
---------------
of Intellectual Property required to be identified in Schedule 3.1.N which is
--------------
owned by the Company:
a. the Company possesses all right, title, and interest in and
to the item, free and clear of any lien, encumbrance, license, or other
restriction;
b. no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Company and the Shareholders, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
c. neither the Company nor any of its predecessors in interest
or affiliates has ever agreed to indemnify any third party for or against any
interference, infringement, misappropriation, or other conflict with respect to
the item.
iii. As used herein, the term "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation) other than third
13
party software used pursuant to a valid license agreement, (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
O. Labor Matters.
-------------
i. Except as set forth in Schedule 3.1.O(i), there are no (i)
-----------------
labor strikes, disputes, slowdowns, representation campaigns or work stoppages
with respect to employees of the Company pending or, to the knowledge of the
Company or the Shareholders, threatened against or affecting the Company, (ii)
grievance or arbitration proceedings arising out of collective bargaining
agreements to which the Company is a party (other than informal grievances),
(iii) unfair labor practice complaints pending or, to the knowledge of the
Company or the Shareholders, threatened against the Company, or (iv) collective
bargaining agreements or other labor union contracts applicable to persons
employed by the Company and to the knowledge of the Company or the Shareholders,
there are no activities or proceedings of any labor union to organize any such
employees.
ii. Except to the extent set forth in Schedule 3.1.O(ii), to the
------------------
knowledge of the Company and the Shareholders, the Company is in material
compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice.
P. No Consent. Except as set forth in Schedule 3.1.P, no consent,
----------- ---------------
approval, authorization order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be made or
obtained by the Company, or the Shareholders in connection with the execution
and delivery of this Agreement by the Company, or the Shareholders or the
consummation by the Company, or the Shareholders of the transactions
contemplated hereby.
Q. Employee Benefit Plans; Employment Agreements. Schedule 3.1.Q sets
--------------------------------------------- --------------
forth a complete and correct list of all employee contracts, arrangements and
"employee welfare benefit" or "employee pension benefit" plans relating to the
Company, as such plans are defined in Sections 3(1) and 3(2), respectively, of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively, the "Plans"). The Company has furnished to the Purchaser true and
correct copies of instruments evidencing all such contracts and arrangements and
the Plans, all as amended to date. The Plans comply with all applicable Laws,
and have been administered in material compliance with their terms and with all
filings, reporting, disclosure, and other requirements of ERISA, the Internal
Revenue Code and all other applicable Laws.
R. Product Liability. Except as set forth in Schedule 3.1.R, there is
----------------- --------------
no claim, action, suit, inquiry, proceeding or investigation in any case by or
before any court or governmental body pending or, to the knowledge of the
Shareholders or the Company, threatened, against or involving the Company
relating to any product alleged to have been designed, manufactured or sold by
the Company and alleged to have been defective or improperly designed or
manufactured.
S. Personal Property. Schedule 3.1.S sets forth a complete and correct
----------------- --------------
list of all personal property owned by the Company and sets forth any material
lease pursuant to which
14
the Company leases personal property as lessee or lessor (the "Personal Property
Leases"). Except as set forth in Schedule 3.1.S hereto, the Company has or will
--------------
have at the Closing (a) good and valid title to all of the personal property
listed in Schedule 3.1.S as owned by it, including, without limitation, the
---------------
personal property acquired after the date of this Agreement (except for
inventories and other assets sold or otherwise disposed of in accordance with
the provisions of this Agreement), and (b) valid leasehold interests in all
personal property listed in Schedule 3.1.S as leased by it, in each case free
---------------
and clear of all mortgages, liens, charges, encumbrances, easements, security
interests or title imperfections other than (i) those listed in Schedule 3.1.S,
--------------
(ii) mechanics, materialmen, suppliers, vendors or similar liens arising in the
ordinary course securing amounts which are not delinquent, (iii) liens for
current taxes, assessments or governmental charges not yet due and delinquent,
or (iv) those which do not, individually or in the aggregate materially
interfere with the use of the personal property or materially detract from its
value. The personal property set forth in Schedule 3.1.S hereto constitutes all
--------------
personal property necessary for the operation of the Company's business as
presently conducted. Except as set forth on Schedule 3.1.S hereto, the personal
--------------
property is maintained in good operating condition, reasonable wear and tear
excepted, and is suitable for the purposes for which it is currently being used.
T. Environmental, Health, and Safety Matters.
-----------------------------------------
i. For purposes of this Agreement, the capitalized terms defined
below shall have the meanings ascribed to them below.
a. "Environmental Law(s)" means all federal, state or local
law (including common law), statute, ordinance, rule, regulation, code, or other
requirement relating to the environment, natural resources, or public or
employee health and safety and includes, but is not limited to the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.
9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et
-- --- --
seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et
- --- --
seq., the Clean Water Act, 33 U.S.C. Section ss. 1251 et seq., the Clean Air
- --- -- ---
Act, 42 U.S.C. ss. 7401 et seq., the Toxic Substance Control Act, 15 U.S.C. ss.
-- ---
2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., and the
-- --- -- ---
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., as such laws have
-- ---
been amended or supplemented, and the regulations promulgated pursuant thereto,
and all analogous state or local statutes and any applicable transfer statutes.
b. "Environmental Permits" means all approvals,
authorizations, consents, permits, licenses, registrations and certificates
required by any applicable Environmental Law.
c. "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products (including but not
limited to waste petroleum and petroleum products), methane, hazardous
materials, hazardous wastes, pollutants, contaminants and hazardous or toxic
substances, as defined in or regulated under any applicable Environmental Law.
15
d. "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the environment.
ii. Except as disclosed in Schedule 3.1.T attached hereto and made
--------------
a part hereof, to the Company's and the Shareholders' knowledge, the Company (i)
has obtained all Environmental Permits that are required for the lawful
operation of its business; (ii) is in material compliance with all terms and
conditions of its Environmental Permits and with any applicable Environmental
Law, and (iii) has not received written notice of any material violation by or
material claim against the Company under any Environmental Law including any
investigatory, remedial or corrective obligations arising thereunder.
iii. Except as disclosed in Schedule 3.1.T, to the Company's and
---------------
the Shareholders' knowledge, there have been no Releases, or threatened
Releases, of any Hazardous Substances into, on or under any of the properties
owned or operated, in any case in such a way as to create any liability
(including the costs of investigation and remediation) under any applicable
Environmental Law
iv. Except as disclosed in Schedule 3.1.T hereof, to the Company's
--------------
and the Shareholders' knowledge, the Company has not been identified as a
potentially responsible party at any federal or state National Priority List
("Superfund") site.
v. Except as disclosed in Schedule 3.1.T hereof, to the Company's
--------------
and the Shareholders' knowledge, none of the following exists at any property
owned or operated by the Company: (1) underground storage tanks; (2) asbestos
containing materials in any form or condition; (3) materials or equipment
containing polychlorinated biphenyls; or (4) landfills, surface impoundments, or
disposal areas.
vi. Except as disclosed in Schedules 3.1.T and 3.1.BB hereof, to
---------------------------
the Company's and the Shareholders' knowledge, the Company has not treated,
stored, disposed of, arranged for or knowingly permitted the disposal of,
transport of, or handling of any substance, including without limitation any
Hazardous Substance, or owned or operated the Company in a manner that has given
or would give rise to material liabilities, including any material liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to any Environmental Law
currently in effect.
vii. There have been no environmental investigations, studies,
audits, tests, reviews, or other analyses conducted by or which are in the
possession of the Company which have not been delivered to the Purchaser prior
to the date hereof.
viii. All documents filed by or on behalf of the Company with any
governmental authority pursuant to any Environmental Law were true, correct and
complete in all material respects and did not omit to state any fact required to
be stated therein or necessary to make the statements therein not materially
misleading.
U. Customers and Suppliers. Schedule 3.1.U contains a list setting
------------------------ ---------------
forth the 10 largest customers of the Company, by dollar amount, over the 12
months ended March 31, 2005, and the 10 largest suppliers of the Company, by
dollar amount, over the 12 months ended
16
March 31, 2005. All purchase and sale orders and other commitments for purchases
and sales made by the Company have been made in the ordinary course of business
in accordance with past practices, and no payments have been made to any
supplier or customers or any of their respective representatives other than
payments to such suppliers or the payment of the invoiced price of supplies
purchased or goods sold in the ordinary course of business. Trade inventories of
the products of the Company are not excessive in kind or amount. Subject to the
warranty reserve set forth on the Current Balance sheet, all products sold by
the Company conform to applicable Laws and all applicable warranty thereof. The
Company does not have any obligation to accept returns of products in excess of
the reserve for returns set forth in the Final Working Capital Statement, which
will not exceed the reserve therefor set forth on the Current Balance Sheet.
Except as set forth in Schedule 3.1.U, since February 28, 2005, no customer
---------------
listed in Schedule 3.1.U has indicated that it shall stop, or materially
---------------
decrease the rate of, buying materials, products or services from the Company,
and no supplier listed in Schedule 3.1.U has indicated that it shall stop, or
---------------
materially decrease the rate of, supplying materials, products or services to
the Company.
V. Certain Agreements. All Material Contracts, real property leases,
------------------
Personal Property Leases and all other contracts and agreements of the Company,
including, without limitation, open sales orders and unfilled purchase orders
(collectively, the "Commitments") are legal, valid and binding obligations of
the Company enforceable (except as enforcement may be limited by equitable
principles limiting the right to obtain specific performance or other equitable
remedies or by applicable bankruptcy or insolvency Laws and related decisions
affecting creditors' rights generally) against the Company and, to the knowledge
of the Company or the Shareholders, against the other party in accordance with
their respective terms, are fully transferable without the consent of any third
party, except as listed on Schedule 3.1.M or Schedule 3.1.V.
--------------------------------
W. Inventory. Except as provided in Schedule 3.1.W, the Inventory as
--------- --------------
reflected in the Current Balance Sheet is carried at an amount not in excess of
the lower of cost or net realizable value. The Inventory is merchantable and fit
for the purpose for which it was procured or manufactured, and none of which is
defective, or not usable or saleable in the ordinary course of business of the
Company as heretofore conducted, subject to the inventory valuation reserves set
forth on the Final Working Capital Statement, which will not exceed those set
forth on the Current Balance Sheet. Since February 28, 2005, no inventory has
been sold or disposed of by the Company except through sales in the ordinary
course of business.
X. Notes and Accounts Receivable. Except as provided in Schedule
------------------------------- --------
3.1.X, all notes and accounts receivable of the Company are reflected properly
- -----
on their respective books and records, are valid and existing receivables which
arose in the ordinary course of business and are subject to no refunds or other
adjustments and to no defenses, rights of setoff, assignments, restrictions,
encumbrances, conditions enforceable by third parties, or counterclaims, and
will be fully collectible by the Company in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth in the
Final Working Capital Statement, which will not exceed the reserve therefor set
forth on the Current Balance Sheet as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company.
17
Y. Bank Accounts; Safe Deposit Boxes. Schedule 3.1.Y sets forth a
------------------------------------ ---------------
complete and correct list of each account with any bank, trust company,
securities broker or other financial institution with which the Company has any
account and all safe deposit boxes maintained by the Company, the identifying
numbers or symbols thereof.
Z. Guaranties. Except as set forth in Schedule 3.1.Z, the Company is
---------- --------------
not a guarantor for any liability or obligation (including indebtedness) of any
third party.
AA. Certain Business Relationships with the Company. Except as set
--------------------------------------------------
forth in Schedule 3.1.AA, Shareholders have not been involved in any business
----------------
arrangement or relationship with the Company within the past 12 months, and
Shareholders own no asset, tangible or intangible, which is used in the business
of the Company.
BB. Independent Product Analyses. The Company has provided the
------------------------------
Purchaser with the independent product analyses set forth on Schedule 3.1.BB.
---------------
CC. Employees and Consultants. Schedule 3.1.CC contains a true and
-------------------------- ----------------
complete list of the names, titles or job classifications and salaries or rates
of compensation of all employees and consultants of the Company. Except as
disclosed in Schedule 3.1.CC, none of such persons has an employment agreement
---------------
or understanding, whether oral or written, with the Company which is not
immediately terminable by the Company at any time upon notice to the other party
without cost or other liability to the Company. Except as set forth in Schedule
--------
3.1.CC, no employee or consultant of the Company has advised the Company (orally
- ------
or in writing) that he intends to terminate employment or engagement with the
Company. The Company has complied in all material respects with all applicable
Laws relating to employment and labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with ERISA.
DD. Books and Records. The books of account, minute books, stock
------------------
record books, and other records of the Company, all of which have been made
available to Purchaser, are complete and correct in all material respects and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books of the
Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Company, and no material meeting of
any such stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the
Company.
Section 3.2 Representations and Warranties of Shareholders. Each
---------------------------------------------------
Shareholder represents and warrants to the Purchaser, but only with respect to
such Shareholder, as follows:
A. Approvals. All consents, approvals, authorizations and orders
---------
(corporate, governmental or otherwise) necessary for the due authorization,
execution and delivery by the Shareholders of this Agreement and the valid sale
and delivery of the Shares have been obtained or will be obtained prior to the
Closing Date.
18
B. Authorization. The Shareholder has all right, power and authority
-------------
to enter into this Agreement, the Escrow Agreement, the Noncompete Agreements
referred to in Section 8.1.F (if applicable) and all other agreements
contemplated by or referred to in this Agreement to which such Shareholder is a
party and to perform fully his, her or its obligations hereunder and thereunder.
This Agreement, the Escrow Agreement, the Noncompete Agreement and all other
agreements contemplated by or referred to in this Agreement have been duly
executed and delivered by such Shareholder and are the valid and binding
obligations of such Shareholder enforceable against him, her or it in accordance
with their terms, except as enforcement may be limited by equitable principles
limiting the right to obtain specific performance or other equitable remedies,
or by applicable bankruptcy or insolvency Laws and related decisions affecting
creditors' rights generally.
C. No Conflict. The execution and delivery of this Agreement, the
-----------
Escrow Agreement, the Noncompete Agreements and all other agreements
contemplated by or referred to in this Agreement by such Shareholder, the
consummation by such Shareholder of the transactions contemplated herein and
therein, the sale to the Purchaser of the Shares owned by such Shareholder, and
the performance by such Shareholder of this Agreement, the Escrow Agreement, the
Noncompete Agreement and all other agreements contemplated by or referred to in
this Agreement in accordance with their respective terms do not and will not
conflict with or result in a breach of any terms and provisions of, or
constitute a default under or conflict with, any material agreement, indenture
or other instrument to which such Shareholder is a party or by which such
Shareholder or his or its assets are bound, or as to the articles of
incorporation or by-laws of the Company, or any judgment, decree, order or award
of any court, governmental body of arbitrator or any Law applicable to the
Shareholder.
D. Title to Shares. The Shareholder is the record and beneficial owner
---------------
of and has good and valid title to his, her or its Shares, free and clear of any
liens, pledges, charges, security interests, encumbrances, title retention
agreements, adverse claims or options, and upon the delivery of and payment for
the Shares at the Closing as provided for herein, the Purchaser will acquire
good and valid title thereto, free and clear of any liens, pledges, charges,
security interests, encumbrances, title retention agreements, adverse claims or
options.
Section 3.3 Definition of "Knowledge". For purposes of this Agreement, the
-------------------------
terms "to the knowledge" of the Company or "to the knowledge" of the Company
and/or the Shareholders or other term of similar import means the actual
knowledge of the officers of the Company and/or the Shareholders, as the case
may be.
Section 3.4 Disclosure. No representation or warranty made by the Company
----------
or the Shareholders in this Agreement, any Schedule, any Exhibit or any
certificate delivered, or to be delivered, by or on behalf of the Company or the
Shareholders pursuant hereto contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not materially misleading. There is
no fact which the Company or the Shareholders have not disclosed to the
Purchaser in writing which the Company or the Shareholders presently believe has
or may have a Material Adverse Effect on the properties, assets, business,
operations, financial condition or prospects of the Company or the business or
on the ability of the Company or Shareholders to perform their obligations under
this Agreement. Matters disclosed on any Schedule shall be deemed disclosed
19
on all Schedules, to the extent it is reasonably clear from a reading of the
disclosure, and not an actual reading of the document, sections or paragraphs
that are the subject matter of the disclosure, that such disclosure is
applicable to such other Schedules.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Section 4.1 Representations and Warranties. The Purchaser represents and
------------------------------
warrants to the Shareholders as follows:
A. Organization and Standing. The Purchaser is a corporation duly
--------------------------
incorporated, organized, and validly existing under the Laws of the State of
Delaware and has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and perform its obligations hereunder.
B. Authorization. All corporate and other proceedings required to be
-------------
taken on the part of the Purchaser, including, without limitation, all action
required to be taken by the directors or shareholders of the Purchaser to
authorize the Purchaser to enter into and carry out this Agreement and to
purchase the Shares hereunder, have been, or prior to the Closing will be, duly
and properly taken. This Agreement and all other agreements contemplated by or
referred to in this Agreement have been duly executed and delivered by the
Purchaser and are the valid and binding obligations of the Purchaser enforceable
against it in accordance with their terms, except as enforcement may be limited
by equitable principles limiting the right to obtain specific performance or
other equitable remedies, or by applicable bankruptcy or insolvency Laws and
related decisions affecting creditors' rights generally.
C. Compliance. The execution and delivery of this Agreement by the
----------
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby, upon satisfaction of the conditions set forth in Article 7 hereof, will
not:
i. result in the breach of any of the terms or conditions of, or
constitute a default under or violate, as the case may be, the certificate of
incorporation or by-laws of the Purchaser, or any agreement, lease, mortgage,
note, bond, indenture, license or other document or undertaking, oral or
written, to which the Purchaser or any of its subsidiaries or affiliates is
bound, or by which any of its or their properties or assets may be affected; or
ii. violate any rule, regulation, writ, injunction, order or
decree of any court, administrative agency or governmental body.
D. Litigation. There are no actions, suits, proceedings or
----------
investigations pending, or to the Purchaser's knowledge, threatened against the
Purchaser which question the validity of this Agreement or of any action taken
or to be taken by the Purchaser in connection herewith or the consummation by
the Purchaser of the transactions contemplated herein.
E. Brokers, Finders. The Purchaser has not retained any broker or
-----------------
finder in connection with the transactions contemplated herein and is not
obligated and has not agreed to pay any brokerage or finder's commission, fee or
similar compensation.
20
F. Approvals. All consents, approvals, authorizations and orders
---------
(corporate, governmental or otherwise) necessary for the due authorization,
execution and delivery by the Purchaser of this Agreement and the consummation
by the Purchaser of the transactions contemplated hereby have been obtained or
will be obtained prior to the Closing Date.
G. Financial Condition. The Purchaser has the financial capabilities
-------------------
to fully meet and perform all of its obligations under this Agreement.
ARTICLE 5. COVENANTS AND AGREEMENTS.
Section 5.1 [RESERVED].
Section 5.2 Reasonable Best Efforts to Close. During the period commencing
--------------------------------
on the date of the execution of this Agreement and continuing until the Closing
Date, the Purchaser and the Shareholders shall use their reasonable best efforts
to comply promptly with all requests or requirements which applicable federal or
state Law or governmental officials may impose on them with respect to the
transactions which are the subject of this Agreement, and to consummate such
transactions as promptly as practicable. The reasonable best efforts of the
Purchaser and the Shareholders shall include, without limitation, good faith
response, in cooperation with each other, to all requests for information,
documentary or otherwise, by any governmental agency.
Section 5.3 Disclosures. Except as required by Law or stock exchange
-----------
rules, or occurring after the Closing, neither the Shareholders nor the
Purchaser, without the prior written consent of the other, will make any press
release or any similar public announcement concerning the transactions
contemplated hereby without the prior written approval of the Purchaser or the
Shareholders' Representative. Except as required by Law or stock exchange rules,
or occurring after the Closing, no written or oral announcement or private
disclosure with respect to the transactions contemplated hereby will be made to
any person unrelated to the Shareholders or the Purchaser unless jointly
approved by the Shareholders' Representative and the Purchaser. If disclosure is
required by Law or stock exchange rules, the disclosing Party shall consult in
advance with the other Party and attempt in good faith to reflect such other
Party's concerns in the required disclosures.
Section 5.4 Tax Returns. The Shareholders shall file any applicable
-----------
federal and state income tax returns for the Company for all periods expiring on
or before the Closing Date.
Section 5.5 Notice of Developments. The Company will give prompt written
----------------------
notice to the Purchaser of any development which might result in a Material
Adverse Effect or cause a breach of any of the representations and warranties in
Article 3 above. Each Party will give prompt written notice to the others of any
material adverse development causing a breach of any of his, her or its own
representations and warranties in this Agreement.
Section 5.6 Property Not Used in the Business. Prior to or at the Closing,
---------------------------------
the Company shall divest itself of or otherwise transfer (i) to Suzanne R.
Sherman or her assigns, the parcel of real property (approximately 3.47 acres)
owned by the Company on which the operations of Chelated Minerals International,
Inc. ("CMI") are currently situated, as described
21
on Schedule 3.1.M (the "CMI Property") and (ii) those assets, tangible or
intangible, listed on Schedule 5.6 of this Agreement.
------------
Section 5.7 Real Property. Following the Closing, the Company agrees to
-------------
reasonably cooperate in obtaining all additional governmental consents and
approvals necessary to divide the CMI Property from the real property owned by
the Company, provided that the Company shall not be required to incur any out of
pocket expenses in connection with obtaining such consents and approvals.
Section 5.8 Restrictions on Distributions to Limited Partners. Following
--------------------------------------------------
the Closing, the Partnership, and Suzanne R. Sherman as general partner of the
Partnership, agree that the Partnership will at all times retain sufficient cash
and liquid assets to pay the Partnership's pro rata share of the Indemnity Cap
as defined in Section 9.3 until the Partnership's indemnification obligations
under Section 9.1 and 9.3 terminate. The Purchaser shall have the right to
request periodic statements from the Partnership demonstrating compliance by the
Partnership with this Section.
ARTICLE 6. CONDUCT OF BUSINESS PENDING CLOSING.
Section 6.1 Conduct of Business Pending Closing. The Shareholders and the
-----------------------------------
Company agree that, pending the Closing:
Section 6.2 Conduct of Business in Ordinary Course. The Shareholders shall
--------------------------------------
cause the Company to conduct its business in a manner consistent with the past
practices of the Company, and the Shareholders shall cause the Company not to
engage in any transactions out of the ordinary course of business. Furthermore,
except as may otherwise be required under this Agreement, the Shareholders shall
cause the Company not to do any of the following without the prior consent of
the Purchaser:
A. incur or permit to be incurred any obligation or other liabilities
(exclusive of normal wages, salaries, and insurance premiums) which would, in
the aggregate, be in excess of $20,000 except for inventory purchases in the
normal and ordinary course of business consistent with past practice;
B. voluntarily permit to be incurred any lien or encumbrance on any of
the assets of the Company;
C. increase the compensation payable or to become payable to any of
the employees of the Company, except for increases in the ordinary course and
consistent with past practice, or otherwise enter into or alter any employment,
consulting, or service agreement;
D. commence, enter into, or alter any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retirement, or
incentive plan or any fringe benefit plan for employees of the Company;
E. sever or terminate any employees of the Company except for cause in
the ordinary course of business;
22
F. make or commit to any capital expenditure in excess of $20,000 or
make or commit to such expenditures which would, in the aggregate, exceed
$40,000.
G. make any tax election or settle or compromise any Tax liability.
Section 6.3 No Changes to Organization Documents. No change will be made
-------------------------------------
to the organization documents of the Company.
Section 6.4 Changes to Capital Stock. No issuance, sale, pledge,
---------------------------
disposition or encumbrance of, or authorization of the issuance, sale, pledge,
disposition or encumbrance of, any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of capital stock of, or any other ownership interest in the Company
will be made. Notwithstanding the preceding, the Purchaser acknowledges that
certain options held by Shareholders shall be converted to shares of common
stock immediately prior to or contemporaneously with the Closing. The exercise
price of such options will be deemed paid to the Company prior to Closing and
distributed to all Shareholders pro rata based on post-exercise Shareholder
ownership percentages pursuant to Section 6.5(iii) or pursuant to the Purchase
Price Adjustment described in Section 2.3. The Shareholders holding options
acknowledge that this may result in such Shareholders receiving less than their
post-exercise pro rata percentage of the Purchase Price.
Section 6.5 Dividends and Transfers. Notwithstanding any provisions of
------------------------
Articles 3, 5 or 6, (i) the Company shall pay all amounts owed on account of
stock appreciation rights as shown on Schedule 3.1.Q; (ii) the Company may, in
--------------
the Company's sole discretion, pay bonuses and SEP payments to employees; (iii)
the Company may, in its sole discretion, dividend to the Shareholders all cash
of the Company prior to Closing; and (iv) make the transfers described in
Section 5.6.
Section 6.6 Audit. The Company will retain the certified public
-----
accounting firm of McGladrey & Pullen, LLP, to conduct an audit of the Company's
Financial Statements (the "Audit") prior to the Closing. Following the Closing,
and notwithstanding any provision of this Agreement, the Company will remain
liable for the payment of all accounting fees and expenses incurred in
connection with the Audit and such fees and expenses will be excluded from the
Final Working Capital Statement and will in no way reduce the Purchase Price or
the Purchase Price adjustment. The Purchaser and the Shareholders acknowledge
that (i) the Audit is required for purposes of the Purchasers' compliance with
certain Laws and that the Audit is not part of Purchaser's due diligence and
will not be used to adjust the Purchase Price and (ii) the Purchase Price has
already been adjusted to account for the Shareholders' portion of the cost of
the Audit.
ARTICLE 7. CLOSING DATE, CONDITIONS AND TRANSACTIONS.
Section 7.1 Closing Date and Place. The consummation of the sale and
-----------------------
purchase of the Shares contemplated by this Agreement (the "Closing") will take
place at the offices of the Mabey Murray LC at 136 South Main Street, Suite
1000, Salt Lake City, Utah at 10:00 A.M. Mountain within five (5) days following
completion of the Audit, or at such other date and time as may be mutually
agreeable to the parties hereto (the "Closing Date"). In the event the Audit is
completed after November 25, 2005, the Shareholders shall have the right to
extend the Closing
23
Date until no later than January 5, 2006. The Closing will be effective as of
the end of business on the Closing Date. At the Closing, the Shareholders will
deliver to the Purchaser certificates representing all of the Shares duly
endorsed for transfer or accompanied by duly executed stock powers, in either
case executed in favor of the Purchaser or its nominee as the Purchaser may have
directed prior to the Closing. At the Closing, the Purchaser will deliver to the
Shareholders the Purchase Price as provided in Section 2 hereof.
Section 7.2 Conditions Precedent to the Obligations of the Purchaser. The
--------------------------------------------------------
obligations of the Purchaser under this Agreement are subject to the fulfillment
prior to or at the Closing of each of the following conditions, any one or more
of which may be waived by the Purchaser.
A. No Injunctive Proceedings. No preliminary or permanent injunction
--------------------------
or other order (including a temporary restraining order) of any state or federal
court or other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement or prohibits the
Purchaser's ownership of the Shares shall have been issued and remain in effect
(provided that the Purchaser has acted in accordance with the requirements of
Section 5.2 hereof).
B. Representations and Warranties. All representations and warranties
------------------------------
of the Company and/or the Shareholders contained in this Agreement shall be true
and correct in all material respects as of the Closing Date, except (i) as
otherwise contemplated by this Agreement, and (ii) that no representation or
warranty of the Company and/or the Shareholders shall be deemed to be untrue or
incorrect by reason of any transaction that conforms to the requirements of
Articles 5 or 6 hereof. In the event that the Purchaser believes any such
representations or warranties to be untrue or incorrect in any material respect,
the Shareholders shall have ten (10) days following written notice from the
Purchaser to remedy such representation or warranty.
C. Performance of Agreements; Instruments of Transfer. The Company and
--------------------------------------------------
the Shareholders shall have fully performed in all material respects all
obligations, agreements, conditions and commitments required to be fulfilled by
the Company and the Shareholders pursuant to the terms hereof on or prior to the
Closing Date and the Shareholders shall have tendered to the Purchaser the
Shares and other documents, instruments and certificates required by Article 8
hereof. In the event that the Purchaser believes any such obligation, agreement,
condition or commitment has not been fully performed in all material respects,
the Shareholders shall have ten (10) days following written notice from the
Purchaser to remedy such nonperformance.
D. Material Adverse Effect. There shall not have been any Material
-------------------------
Adverse Effect from the date hereof to the Closing Date.
E. Consents. All authorizations, consents or approvals of any and all
--------
governmental regulatory authorities necessary in connection with the
consummation of the Closing shall have been obtained and be in full force and
effect.
F. Due Diligence. The Purchaser shall have completed all business and
-------------
legal review of the Company by October 31, 2005 and the Purchaser shall in its
reasonable discretion be satisfied with the results of said review.
24
G. Audit. The Company shall have completed the Audit.
-----
Section 7.3 Conditions Precedent to the Obligations of the Shareholders.
-------------------------------------------------------------
The obligations of the Shareholders and/or the Company under this Agreement are
subject to the fulfillment prior to the Closing of each of the following
conditions, any one or more of which may be waived by the Shareholders and the
Company:
A. No Injunctive Proceedings. No preliminary or permanent injunction
--------------------------
or other order (including a temporary restraining order) of any state or federal
court or other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement or prohibits the
Purchaser's ownership of the Shares shall have been issued and remain in effect
(provided that the Shareholders have acted in accordance with the requirements
of Section 5.2 hereof).
B. Payment. The Purchaser shall have delivered to the Shareholders'
-------
Representative the payments provided for in Section 2 hereof and all other
payments required to be made by the Purchaser on the Closing Date pursuant to
the terms hereof.
C. Representations and Warranties. Except as otherwise contemplated by
------------------------------
this Agreement, all representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date.
D. Performance of Agreements; Instruments of Transfer. The Purchaser
---------------------------------------------------
shall have fully performed in all material respects all obligations, agreements,
conditions and commitments required to be fulfilled by the Purchaser on or prior
to the Closing Date and shall have tendered to the Shareholders the documents,
instruments and certificates required by Article 8 hereof.
E. Consents. All authorizations, consents or approvals of any and all
--------
governmental regulatory authorities necessary in connection with the
consummation of the Closing shall have been obtained and be in full force and
effect.
F. Release. The Shareholder shall have received releases of all
-------
personal guaranties and liabilities of the Company in form reasonably
satisfactory to the Shareholders.
Section 7.4 Noncompliance with and Termination of This Agreement. This
------------------------------------------------------
Agreement may be terminated at any time prior to Closing:
A. by the written mutual agreement of the Shareholders, the Company,
and the Purchaser;
B. by the Purchaser, if any of the conditions specified in Section 7.2
hereof shall not have been met prior to Closing and shall not have been waived
in writing by the Purchaser;
C. by the Shareholders and the Company, if any of the conditions set
forth in Section 7.3 hereof shall not have been met prior to Closing and shall
not have been waived in writing by the Shareholders; provided that such
termination shall not relieve the Purchaser of any
25
obligations under Section 10.8 or any confidentiality agreements between the
Company and the Purchaser; or
D. by either the Company or Purchaser after January 6, 2006, provided
the Closing has yet to occur on said date.
E.
ARTICLE 8. CLOSING DOCUMENTS.
Section 8.1 Shareholders' Obligations. At the Closing, the Shareholders
--------------------------
shall deliver to the Purchaser the following:
A. Resolutions. Copies of resolutions of the Company certified by the
-----------
Secretary or Assistant Secretary of the Company, as the case may be, authorizing
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
B. Share Certificates. Certificates representing the Shares, duly
-------------------
endorsed in blank or accompanied by an appropriate stock power.
C. Books and Records. The Company's corporate minute books, seals and
-----------------
stock ledger books.
D. Resignations. Resignations of all officers and directors of the
------------
Company.
E. Escrow Agreement. The Escrow Agreement duly executed by all of the
----------------
Shareholders.
F. Noncompete Agreement. A Noncompete Agreement in substantially the
---------------------
form attached hereto as Exhibit C duly executed by CMI and all of the
Shareholders other than Frank D'Angelo and the Church.
Section 8.2 The Purchaser's Obligations. At the Closing, the Purchaser
-----------------------------
shall deliver to the Shareholders the following:
A. Payment. Funds in the amounts and payable as set forth in Section
-------
2.1 hereof and all other payments required to be made by the Purchaser on or
prior to the Closing Date pursuant to the provisions of this Agreement.
B. Escrow Agreement. The Escrow Agreement duly executed by the
-----------------
Purchaser.
C. Consulting Agreements. The Consulting Agreements for Bruce R.
----------------------
Sherman and Frank Ciaramella duly executed by the Purchaser and reasonably
acceptable to the parties thereto.
Section 8.3 The Company's Obligations. At or prior to the Closing, the
--------------------------
Company shall deliver the following:
26
A. Deed. A Special Warranty Deed to Suzanne R. Sherman or her assigns
----
duly executed by the Company in substantially the form attached hereto as
Exhibit D conveying the CMI Property.
B. [RESERVED]
C. Shared Services Agreement. The Shared Services Agreement duly
---------------------------
executed by the Company in substantially the form attached hereto as Exhibit E.
D. Amendment to License Agreement. The Amended and Restated Technology
------------------------------
License Agreement duly executed by the Company in substantially the form
attached hereto as Exhibit F.
ARTICLE 9. INDEMNIFICATION.
Section 9.1 Indemnification by the Shareholders. Subject to the limits set
-----------------------------------
forth in this Article 9, the Shareholders, pro rata in accordance with their
ownership of the applicable Shares, agree to indemnify, defend and hold the
Purchaser, and each of the Purchaser's officers, directors, employees, agents,
successors and assigns (the Purchaser and such persons are collectively
hereinafter referred to as the "Purchaser's Indemnified Persons"), harmless from
and against any and all claim, loss, liability, damage or deficiency (including
interest, penalties, costs of preparation and investigation, and reasonable
attorneys' fees) (collectively, "Losses") that the Purchaser's Indemnified
Persons may suffer, sustain, incur or become subject to arising out of or due
to: (a) any inaccuracy of any representation of the Company and/or such
Shareholder in this Agreement or any other agreement contemplated by or referred
to in this Agreement to which such Shareholder is a party, or any schedule or
exhibit hereto or thereto, or any certificate delivered pursuant hereto or
thereto; (b) the breach of any warranty of the Company and/or such Shareholder
in this Agreement or any other agreement contemplated by or referred to in this
Agreement to which such Shareholder is a party, or any schedule or exhibit
hereto or thereto, or any certificate delivered pursuant hereto or thereto; or
(c) the nonfulfillment of any covenant, undertaking, agreement or other
obligation of the Company and/or such Shareholder under this Agreement or any
other agreement contemplated by or referred to in this Agreement to which such
Shareholder is a party, or any schedule or exhibit hereto or thereto, or any
certificate delivered pursuant hereto or thereto not otherwise waived by the
Purchaser, including, without limitation, any failure by the Shareholders to pay
all Shareholder Acquisition Expenses (as defined in Section 10.1) in accordance
with the provisions of Section 10.1.
Section 9.2 Indemnification by the Purchaser. Subject to the limits set
---------------------------------
forth in this Article 9, the Purchaser agrees to indemnify, defend and hold the
Shareholders and each of the Shareholders' successors and assigns (the
Shareholders and such persons are hereinafter collectively referred to as the
"Shareholder's Indemnified Persons"), harmless from and against any and all
Losses that the Shareholders' Indemnified Persons may suffer, sustain, incur or
become subject to arising out of or due to: (a) any inaccuracy of any
representation of the Purchaser in this Agreement or any other agreement
contemplated by or referred to in this Agreement, or any schedule or exhibit
hereto or thereto, or any certificate delivered pursuant hereto or thereto; (b)
the breach of any warranty of the Purchaser in this Agreement or any other
agreement contemplated by or referred to in this Agreement, or any schedule or
exhibit hereto or
27
thereto, or any certificate delivered pursuant hereto or thereto; or (c) the
nonfulfillment of any covenant, undertaking, agreement or other obligation of
the Purchaser under this Agreement or any other agreement contemplated by or
referred to in this Agreement, or any schedule or exhibit hereto or thereto, or
any certificate delivered pursuant hereto or thereto not otherwise waived by the
Shareholders, including, without limitation, any failure by the Purchaser to pay
all Purchaser Acquisition Expenses (as defined in Section 10.1) in accordance
with the provisions of Section 10.1.
Section 9.3 Survival of Representations, and Warranties; Deductible. The
--------------------------------------------------------
representations and warranties of the parties contained in this Agreement or in
any document delivered pursuant hereto and the parties' right to indemnity in
accordance with this Article 9 shall survive the Closing Date and shall remain
in full force and effect thereafter for a period of twelve (12) months after the
Closing Date and shall be effective with respect to any inaccuracy therein or
breach thereof, notice of which shall have been duly given within such 12 month
period in accordance with Section 9.4 hereof, after which twelve (12) month
period they shall terminate and be of no further force or effect. Except as
provided in Section 9.5, anything to the contrary contained herein
notwithstanding, neither party shall be entitled to any recovery from the other
party with respect to any inaccuracy or breach of such warranties or
representations unless and until the amount of such Losses suffered, sustained
or incurred by the asserting party, or to which such party becomes subject, by
reason of such inaccuracy or breach, shall exceed $60,000 calculated on a
cumulative basis. Notwithstanding any other provision of this Agreement, in no
event shall the Shareholders or the Purchaser be liable to the other, in each
case, in an aggregate amount in excess of $7,500,000 (the "Indemnity Cap"). As
an illustration of the provisions of Sections 9.1 and 9.3, a Shareholder holding
10% of the Shares could not be liable to the Purchaser in an amount exceeding
$750,000. Notwithstanding anything to the contrary contained in this Section 9.3
to the contrary, the covenants of the parties contained in this Agreement shall
survive according to their respective terms.
Section 9.4 Notice and Opportunity to Defend. If there occurs an event
---------------------------------
which either party asserts is an indemnifiable event pursuant to Sections 9.1 or
9.2 hereof, the party seeking indemnification (the "Indemnitee") shall notify
the party obligated to provide indemnification (the "Indemnitor") promptly. If
such event involves (a) any claim, or (b) the commencement of any action or
proceeding by a third person, the Indemnitee shall give the Indemnitor written
notice of such claim or the commencement of such action or proceeding. Delay or
failure to so notify the Indemnitor shall only relieve the Indemnitor of its
obligations hereunder to the extent, if at all, that it is prejudiced by reasons
of such delay or failure. The Indemnitor shall have a period of fifteen (15)
days (or such lesser period as circumstances may dictate, if the nature of the
claim requires an earlier response) within which to notify the Indemnitee of its
intention to assume responsibility for the defense or settlement of the claim or
action, and shall have the right to compromise or defend, at its own expense and
by counsel chosen by the Indemnitor and reasonably satisfactory to the
Indemnitee, such matter, so long as (i) the Indemnitor notifies the Indemnitee
of its intention to assume responsibility to do so within the prescribed period;
(ii) the Indemnitor provides the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that the Indemnitor has the
financial resources to and will assume and be responsible for the liability at
issue, subject to the limitations set forth in Section 9.5 hereof, (iii) the
particular claim or cause of action involves only money damages and does not
seek an injunction or other equitable relief, (iv) settlement of, or an adverse
judgment with respect to, the
28
claim or action is not, in the good faith judgment of the Indemnitee, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests of the Indemnitee, and (v) the Indemnitor conducts the
defense of the claim or action actively and diligently. If the Indemnitor does
not respond within such period or rejects responsibility for such matter in
whole or in part, or if any of the conditions set forth in the preceding
sentence is not satisfied or becomes unsatisfied, the Indemnitee shall be free
to defend or compromise such claim or action in any matter it may reasonably
deem appropriate, without prejudice to any of its rights hereunder, and may
pursue any and all remedies as may be available to the Indemnitee under
applicable Law. The Indemnitee agrees, at the Indemnitor's cost and expense, to
cooperate fully with the Indemnitor and its counsel in the defense against any
such asserted liability. In any event, the Indemnitee and the Indemnitor shall
have the right to participate at its own expense in the defense of such asserted
liability, including any meetings, discussions, and negotiations with any
adverse party. Any compromise of such asserted liability by the Indemnitor shall
require the prior written consent of the Indemnitee and until such consent is
obtained the Indemnitor shall continue the defense of such asserted liability.
If, however, the Indemnitee refuses its consent to a bona fide offer of
settlement which the Indemnitor wishes to accept that involves solely money
damages (and no injunctive or other equitable relief) in an amount to be paid
entirely by the Indemnitor without contribution by the Indemnitee and provides
for an unconditional release of the Indemnitee, the Indemnitee may continue to
pursue such matter, free of any participation by the Indemnitor, at the sole
expense of the Indemnitee. In such event, the obligation of the Indemnitor to
the Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and expenses of
the Indemnitee prior to the date the Indemnitor notifies the Indemnitee of the
offer of settlement, and (ii) the actual out-of-pocket amount the Indemnitee is
obligated to pay as a result of the Indemnitee's continuing to pursue such
matter.
Section 9.5 Reduction for Insurance. The amount which an Indemnitor is
-------------------------
required to pay to, for, or on behalf of an Indemnitee pursuant to this Article
9 shall be reduced (including, without limitation, retroactively) by any
insurance proceeds actually recovered by or on behalf of the Indemnitee in
reduction of the related indemnifiable loss (the "Indemnifiable Loss"). Amounts
required to be paid, as so reduced, are hereinafter sometimes called an
"Indemnity Payment". If an Indemnitee shall have received, or if an Indemnitor
shall have paid on its behalf, an Indemnity Payment in respect of an
Indemnifiable Loss and shall subsequently receive, directly or indirectly,
insurance proceeds in respect of such Indemnifiable Loss, then such Indemnitee
shall promptly pay to the Indemnitor the amount of such insurance proceeds, or,
if less, the amount of the Indemnity Payment. The parties hereto agree that the
foregoing shall not affect the subrogation rights of any insurance companies
making payments hereunder.
Section 9.5 Offset of Escrow. The Shareholders' indemnification
------------------
obligations under Section 9.1 and Section 9.3 shall be secured by $800,000 held
pursuant to the terms of the Escrow Agreement.
ARTICLE 10. MISCELLANEOUS.
Section 10.1 Expenses. Except as otherwise set forth in this Agreement,
--------
each of the parties hereto shall pay its own expenses and costs incurred or to
be incurred by it in negotiating, closing and carrying out this Agreement.
Notwithstanding the foregoing, it is understood and
29
agreed that the Shareholders will pay all fees and expenses incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, all legal, accounting (other than the
Audit), investment banking, tax, financial advisory and other fees and expenses
of third parties incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the consummation
of the transactions contemplated hereby (including, without limitation, all
commissions due to AgriCapital Corporation in connection with this Agreement and
the transactions contemplated hereby but excluding the $50,000 retainer and
monthly expenses paid to AgriCapital Corporation by the Company) (collectively,
"Shareholder Acquisition Expenses"). The accounting fees and expenses of the
Audit shall be paid after the Closing Date by the Company. In the event that the
transactions contemplated in this Agreement do not close, the Purchaser shall
pay all accounting costs and expenses of the Audit (the "Purchaser Acquisition
Expenses").
Section 10.2 Notices. All notices, requests, demands and other
-------
communications given hereunder (collectively, "Notices") shall be in writing and
delivered personally or by overnight courier to the parties at the following
addresses or sent by facsimile, with confirmation received, to the facsimile
number specified below:
If to the Shareholders at the address and facsimile number set forth next
to their names on Exhibit A hereto.
If to the Shareholders, to the Shareholders' Representative at:
Suzanne R. Sherman
7029 S. Monica Cove
Salt Lake City, UT 84121
Facsimile: (801) 943-1681
Telephone: (801) 942-1790
With a copy to:
David M. Connors
Mabey Murray LC
136 South Main
1000 Kearns Building
Salt Lake City, Utah 84101
Facsimile: (801) 359-8256
Telephone: (801) 320-6700
If to the Purchaser at:
Balchem Minerals Corporation
c/o Balchem Corporation
52 Sunrise Park Road
P.O. Box 600
New Hampton, New York 10958
Telephone: (845) 326-5662
30
Facsimile: (845) 326-5702
Attn: Dino A. Rossi
with a copy to:
Balchem Corporation
52 Sunrise Park Road
P.O. Box 600
New Hampton, New York 10958
Telephone: (845) 326-5662
Facsimile: (845) 326-5702
Attn: General Counsel
All Notices shall be deemed delivered when actually received if delivered
personally or by overnight courier, sent by facsimile, addressed in
accordance with this Section. Each of the parties shall hereafter notify
the other in accordance with this Section of any change of address or
facsimile number to which notice is required to be mailed.
Section 10.3 Counterparts. This Agreement may be executed simultaneously
------------
in one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
Section 10.4 Entire Agreement. This Agreement constitutes the entire
-----------------
agreement and supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
Section 10.5 Headings. The headings contained in this Agreement and in the
--------
Schedules and Exhibits hereto are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Section 10.6 Assignment; Amendment of Agreement. This Agreement shall be
-----------------------------------
binding upon the respective successors and assigns of the parties hereto. This
Agreement may not be assigned by any party hereto without the prior written
consent of all other parties hereto. This Agreement may be amended only by
written agreement of the parties hereto, duly executed and delivered by an
authorized representative of each of the parties hereto. Notwithstanding the
forgoing, the Purchaser shall have the right to assign its rights and
obligations under this Agreement, in whole or in part, to an affiliate without
consent.
Section 10.7 Governing Law. This Agreement shall be governed by and
--------------
construed and enforced in accordance with the internal laws of the State of New
York applicable to contracts made in that State, without giving effect to the
conflicts of laws principles thereof.
Section 10.8 Failure to Close. If for any reason this Agreement is
-----------------
terminated prior to the Closing, the Purchaser shall return to the Shareholders
all documents and other information, including all originals and all copies
thereof, theretofore delivered to the Purchaser by the Shareholders or the
Company. The Purchaser shall not retain copies of any such documents or other
information, and shall not thereafter disclose to any person for any purpose or
use any
31
information conveyed to the Purchaser in connection with the transactions
contemplated by this Agreement, except for such information which was: (a)
possessed by the Purchaser prior to the disclosure thereof by the Shareholders
or the Company; (b) disclosed to the Purchaser by an independent third party
without a violation of any obligation of confidentiality on the part of such
third party to the Shareholders or the Company; or (c) ascertainable from public
or published information or trade sources.
Section 10.9 Further Assurances. Each party agrees that it will execute
-------------------
and deliver, or cause to be executed and delivered, on or after the date of this
Agreement, all such other instruments and will take all reasonable actions as
may be necessary to transfer and convey the Shares to the Purchaser, on the
terms herein contained, to consummate the transactions contemplated hereby, and
to effectuate the provisions and purposes hereof.
Section 10.10 No Third Party Rights. This Agreement is not intended and
---------------------
shall not be construed to create any rights in any parties other than the
Company, the Shareholders and the Purchaser and no person shall assert any
rights as third party beneficiary hereunder.
Section 10.11 Non-Waiver. The failure in any one or more instances of a
----------
party hereto to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege in this
Agreement conferred, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
Section 10.12 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to affect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 10.13 Incorporation of Exhibits and Schedules. The Exhibits and
----------------------------------------
Schedules hereto are incorporated into this Agreement and shall be deemed a part
hereof as if set forth herein in full. References herein to "this Agreement" and
the words "herein," "hereof" and words of similar import refer to this Agreement
(including its Exhibits and Schedules) as an entirety. In the event of any
conflict between the provisions of this Agreement and any such Exhibit or
Schedule, the provisions of this Agreement shall control.
Section 10.14 Release by Shareholders. As partial consideration for this
-----------------------
Agreement, and other good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, subject to and effective upon the Closing, each
of the Shareholders, on behalf of themselves and their respective successors,
assigns, legal representatives, executors, administrators and estates,
representatives, agents, financial advisors and attorneys (collectively,
32
the "Releasors"), hereby unconditionally remises, releases and forever
discharges the Company and its successors and assigns and all of their
respective officers, directors, stockholders, agents and advisors (collectively,
the "Company Releasees") from any and all debts, demands, actions, causes of
action, suits, assessments, contracts, obligations, losses, damages and other
claims and liabilities, in law or in equity, which any of the Releasors now has
or ever had, whether known or unknown, against the Company Releasees, or any of
them, from the beginning of the world to the date hereof for or by reason of any
event, occurrence, matter, cause or thing whatsoever, including, without
limitation, any and all Indebtedness, compensation, dividends, distributions or
other amounts of any nature owed or alleged to be owed by the Company to such
Shareholder, whether in their capacity as an employee, consultant or stockholder
of the Company or otherwise.
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LEFT BLANK -SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Company, the Purchaser and the Shareholders have
duly executed and delivered this Agreement as of the day and year first above
written.
COMPANY:
CHELATED MINERALS CORPORATION
By:
------------------------------------
Name: Bruce R. Sherman
Title:
------------------------------------
SHAREHOLDERS:
ALBERT AND VERLA RICHARDS LTD, PARTNERSHIP
By:
------------------------------------
Suzanne R. Sherman, general partner
By:
------------------------------------
Ruth Ellen R. Bean, general partner
By:
------------------------------------
Name: Bruce R. Sherman
By:
------------------------------------
Name: Suzanne R. Sherman
By:
------------------------------------
Name: Frank Ciaramella
By:
------------------------------------
Name: Frank D'Angelo
S-1
CORPORATION OF THE PRESIDENT OF THE CHURCH OF JESUS
CHRIST OF LATTER-DAY SAINTS
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
By:
------------------------------------
Name: Katie H. Mitchell
PURCHASER:
BALCHEM MINERALS CORPORATION
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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