Exhibit 10.3
EXECUTION COPY
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PURCHASE AGREEMENT
dated as of February 27, 1998
by and among
JTM INDUSTRIES, INC.,
POZZOLANIC RESOURCES, INC.
and
THE SELLERS NAMED HEREIN
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TABLE OF CONTENTS
Page
ARTICLE I
SALE OF PURCHASED STOCK; CLOSING......................................2
1.1 Sale and Purchase..............................................2
1.2 Purchase Price.................................................2
1.3 Closing........................................................2
1.4 Escrows........................................................2
ARTICLE II
RESERVED..............................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................3
3.1 Organization and Qualification.................................3
3.2 Capital Stock..................................................4
3.3 Authority Relative to this Agreement and the Operative
Agreements.....................................................4
3.4 Business.......................................................5
3.5 No Conflicts...................................................6
3.6 Governmental Approvals and Filings.............................6
3.7 Books and Records..............................................7
3.8 Financial Statements...........................................7
3.9 Absence of Changes.............................................7
3.10 No Undisclosed Liabilities.....................................9
3.11 Taxes..........................................................9
3.12 Legal Proceedings.............................................11
3.13 Compliance with Laws and Orders...............................11
3.14 Benefit Plans; ERISA..........................................11
3.15 Real Property.................................................12
3.16 Tangible Personal Property....................................13
3.17 Intellectual Property Rights..................................13
3.18 Contracts.....................................................13
3.19 Licenses......................................................15
3.20 Insurance.....................................................15
3.21 Affiliate Transactions........................................16
3.22 Employees; Labor Relations....................................16
3.23 Environmental Matters.........................................17
3.24 Substantial Customers and Suppliers...........................18
3.25 Accounts Receivable...........................................18
3.26 Other Negotiations; Brokers...................................19
3.27 Holding Company Act and Investment Company Act Status.........19
3.28 Restrictions on Conduct of Business...........................19
3.29 Bank and Brokerage Accounts; Investment Assets................19
3.30 Disclosure....................................................19
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF EACH SELLER.............20
4.1 Organization and Qualification................................20
4.2 Capacity Relative to this Agreement and the Operative
Agreements; Options ..........................................20
4.3 No Conflicts..................................................20
4.4 Governmental Approvals and Filings............................21
4.5 Taxes.........................................................21
4.6 Legal Proceedings.............................................21
4.7 Title to Common Stock.........................................22
4.8 Ownership.....................................................22
4.9 Other Negotiations; Brokers...................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER..............................23
5.1 Organization and Qualification................................23
5.2 Authority Relative to this Agreement and the Operative
Agreements..... ..............................................23
5.3 No Conflicts..................................................23
5.4 Governmental Approvals and Filings............................23
5.5 Legal Proceedings.............................................24
5.6 Brokers.......................................................24
5.7 Purchase for Investment.......................................24
5.8 Financing of Purchase Price...................................24
ARTICLE VI
COVENANTS............................................................24
6.1 Access to Information.........................................24
6.2 Conduct of Business...........................................25
6.3 Certain Restrictions..........................................26
6.4 Governmental and Other Approvals..............................26
6.5 Notice and Cure...............................................26
6.6 Audited Financial Statements..................................27
6.7 Efforts to Consummate Transaction.............................27
6.8 No Solicitations..............................................27
6.9 Noncompetition; Non Solicitation; Trade Secrets; Discoveries
and Works. ...................................................27
6.10 Buyer's Covenant..............................................30
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER; DELIVERIES AT THE CLOSING
.....................................................................31
7.1 Representations and Warranties.................................31
7.2 Performance....................................................31
7.3 Officers' Certificates.........................................31
7.4 Orders and Laws................................................31
7.5 Consents and Approvals.........................................32
7.6 Opinion of Sellers' Counsel....................................32
7.7 Operative Agreements...........................................32
7.8 Release of Claims..............................................32
7.9 Resignations...................................................32
7.10 Good Standing Certificates.....................................32
7.11 Transfer to BVI; Receipt of Purchased Stock and Minute Books...33
7.12 Payment of Indebtedness........................................33
7.13 Additional Requirements........................................33
7.14 Proceedings....................................................33
7.15 Completion of Diligence........................................33
7.16 Tax Status Certificate.........................................34
7.17 Audited Financial Statements...................................34
7.18 No Adverse Change..............................................34
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS; DELIVERIES AT THE CLOSING
......................................................................34
8.1 Representations and Warranties.................................34
8.2 Performance....................................................34
8.3 Officers' Certificates.........................................34
8.4 Orders and Laws................................................34
8.5 Governmental Consents and Approvals............................34
8.6 Opinion of Buyer's Counsel.....................................35
8.7 Operative Agreements...........................................35
8.8 Receipt of the Purchase Price..................................35
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS..............................................35
9.1 Survival of Representations, Warranties, Covenants
and Agreements.................................................35
ARTICLE X
INDEMNIFICATION.......................................................36
10.1 Indemnification................................................36
10.2 Method of Asserting Claims.....................................37
ARTICLE XI
CERTAIN TAX MATTERS...................................................39
11.1 Allocation of Tax Liability....................................39
11.2 Preparation and Filing of Tax Returns; Refunds.................40
11.3 Tax Contests...................................................41
11.4 Cooperation Regarding Tax Matters..............................42
11.5 Other Tax Covenants............................................43
11.6 Conflict.......................................................43
ARTICLE XII
DEFINITIONS...........................................................44
12.1 Definitions....................................................44
ARTICLE XIII
TERMINATION...........................................................55
13.1 Termination....................................................55
13.2 Effect of Termination..........................................55
ARTICLE XIV
MISCELLANEOUS.........................................................56
14.1 Notices........................................................56
14.2 Entire Agreement...............................................57
14.3 Expenses.......................................................57
14.4 Confidentiality................................................57
14.5 Further Assurances; Post-Closing Cooperation...................57
14.6 Certain Assets and Properties..................................57
14.7 Waiver.........................................................58
14.8 Amendment......................................................58
14.9 No Third Party Beneficiary.....................................58
14.10 No Assignment; Binding Effect..................................58
14.11 Limited Recourse...............................................58
14.12 Public Announcements...........................................58
14.13 Headings.......................................................59
14.14 Invalid Provisions.............................................59
14.15 Governing Law..................................................59
14.16 Consent to Jurisdiction and Service of Process.................59
14.17 Construction...................................................60
14.18 Counterparts...................................................60
ANNEX I Phase II Contract List
ANNEX II Refund Event Contract List
ANNEX III Finaning Commitment Letter
EXHIBIT A Form of Certificate of Sellers and the Company
EXHIBIT B Form of Secretary's Certificate
EXHIBIT C-1 Form of Opinion of Counsel to the Company, Subsidiaries and
Sellers (other than BVI)
EXHIBIT C-2 Form of Opinion of Counsel to BVI
EXHIBIT C-3 Form of Opinion of Counsel to Guarantor
EXHIBIT D Form of Assignment and Release of Claims
EXHIBIT E Form of FIRPTA Certificate
EXHIBIT F Form of Certificate of Buyer
EXHIBIT G Form of Opinion of Counsel to Buyer
EXHIBIT H Form of Phase II Escrow Agreement
EXHIBIT I Form of Tax Escrow Agreement
EXHIBIT J Form of Kokan Escrow Agreement
DISCLOSURE SCHEDULE
Section 3.1 - Organization and Qualification
Section 3.2 - Capital Stock
Section 3.4 - Business
Section 3.5 - No Conflicts
Section 3.6 - Governmental Approvals and Filings
Section 3.9 - Absence of Changes
Section 3.10 - No Undisclosed Liabilities
Section 3.11 - Taxes
Section 3.12 - Legal Proceedings
Section 3.13 - Compliance with Laws and Orders
Section 3.14 - Benefit Plans; ERISA
Section 3.15 - Real Property
Section 3.16 - Tangible Personal Property
Section 3.17 - Intellectual Property Rights
Section 3.18 - Contracts
Section 3.19 - Licenses
Section 3.20 - Insurance
Section 3.21 - Affiliate Transactions
Section 3.22 - Employees; Labor Relations
Section 3.23 - Environmental Matters
Section 3.24 - Substantial Customers and Suppliers
Section 3.25 - Accounts Receivable
Section 3.28 - Restrictions on Conduct of Business
Section 3.29 - Bank and Brokerage Accounts; Investment Assets
Section 4.3 - No Conflicts
Section 4.4 - Governmental Approvals and Filings
Section 4.5 - Taxes
Section 4.6 - Legal Proceedings
Section 4.8 - Ownership
THIS PURCHASE AGREEMENT, dated as of February 27, 1998 (the
"Effective Date"), is by and among JTM Industries, Inc., a Texas corporation
("Buyer"), Pozzolanic Resources, Inc., a Washington corporation (the "Company"),
and those Persons listed under the heading "Sellers" on the signature page
hereto (collectively, "Sellers" and each, "Seller").
WHEREAS, Gerald A. Peabody, Jr., Penelope A. Peabody and another
entity collectively own all the issued and outstanding shares of the capital
stock of the Company, consisting in the aggregate of 200 shares of Class A
Voting Shares, par value $1 per share ("Class A Stock"), 0 shares of Class B
Regular Dividend Shares, par value $1 per share ("Class B Stock"), 2,900 shares
of Class C Special Dividend Shares, par value $1 per share ("Class C Stock"),
and 5,800 shares of Class D Special Dividend Shares, par value $1 per share
("Class D Stock").
WHEREAS, prior to the Closing, one of the current stockholders of
the Company shall contribute (the "Contribution") all of its interest in Class A
Stock and Class D Stock to BVI.
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to
purchase from Sellers, all Class A Stock, Class B Stock, Class C Stock and Class
D Stock issued and outstanding as of the Effective Date (collectively, the
"Purchased Stock").
WHEREAS, the Company is the owner of all of the issued and
outstanding shares of common stock of (i) St. Helens Investments, Inc., a
Washington corporation doing business as Pozzolanic International ("St.
Helens"), (ii) Pozzolanic Northwest, Inc., a Washington corporation
("Northwest"), and (iii) Pozzolanic Northwest Bulk Carriers, Inc., a Washington
corporation ("PNBC").
WHEREAS, Northwest is the owner of (i) all of the issued and
outstanding shares of the preferred stock of St. Helens and (ii) all of the
issued and outstanding shares of Pozzolanic N.W. FSC Inc., a Guam corporation
("FSC") which shares of the FSC shall be sold by Northwest to Joe Dawson or his
Affiliate or Associate (the "FSC Disposition") prior to the Closing.
WHEREAS, the parties contemplate (i) that from the Effective Date
hereunder through the date (the "Phase I Completion Date") that is the earlier
of (A) the end of the second preceding Business Day prior to the Closing Date
and (B) such earlier date as is agreed to between the Company and the Buyer
(such period being herein referred to as "Phase I"), Buyer shall have access to
Phase I Material and (ii) that from the date (the "Phase II Commencement Date")
of payment of the Phase II Deposit until the Closing (such period being herein
referred to as "Phase II"), which Closing shall occur not later than the second
succeeding Business Day (which shall be the second succeeding calendar day)
following the Phase II Commencement Date (unless an extension is agreeable to
both Buyer and the Company), Buyer shall have access to Phase II Material.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties, intending to be legally bound,
hereto agree as follows (capitalized terms used and not otherwise defined herein
have the meanings set forth in Section 12.1):
ARTICLE I
SALE OF PURCHASED STOCK; CLOSING
1.1 Sale and Purchase. Each Seller individually agrees to sell and
transfer to Buyer, and Buyer agrees to purchase from each Seller, the Purchased
Stock at the Closing on the terms and subject to the conditions set forth in
this Agreement.
1.2 Purchase Price. The aggregate purchase price (the "Purchase
Price") for the Purchased Stock being purchased hereunder is $40,000,000 United
States dollars.
1.3 Closing. The purchase and sale of the Purchased Stock (the
"Closing") will take place at the offices of Morgan Lewis & Bockius LLP at 101
Park Avenue, NY, NY 10178, on March 4, 1998 at 10:00 A.M. local time, or at such
other place, date or time as Buyer and the Sellers shall mutually agree (the
"Closing Date"). At the Closing, Buyer will pay to each Seller, by wire transfer
of immediately available funds to such account as such Seller may reasonably
direct by notice delivered to Buyer at least three (3) Business Days prior to
the Closing Date, an amount equal to (i) the Purchase Price less the Tax Escrow
Funds multiplied by (ii) a fraction, the numerator of which is the number of
shares of Class C Stock and Class D Stock set forth opposite such Seller's name
on the signature page hereto and the denominator of which is the aggregate
shares of Class C Stock and Class D Stock. In accordance with the provisions of
the Phase II Escrow Agreement, the Phase II Deposit may be applied to the
payment of the Purchase Price. As provided in Section 1.4(c) below, at closing
$5,000,000 of the Purchase Price payable to BVI under this Section 1.3 will be
deposited with the BVI Escrow Agent under the BVI Escrow Agreement.
Simultaneously, Sellers will sell and transfer to Buyer the Purchased Stock free
and clear of all Liens, by delivering to Buyer (i) certificates representing the
Purchased Stock, together with all necessary instruments of transfer, in form
and substance reasonably satisfactory to Buyer, and (ii) stock certificates,
registered in the name of Buyer, representing the Purchased Stock. At the
Closing, there shall also be delivered the opinions, certificates and other
Contracts, documents and instruments to be delivered under Articles VII and
VIII.
1.4 Escrows.
(a) At the Closing, $900,000 of the Purchase Price in immediately
available funds (the "Tax Escrow Funds") will be delivered to The Chase
Manhattan Bank, N.A., as escrow agent (the "Tax Escrow Agent"), to be held in
accordance with the provisions of an escrow agreement substantially in the form
of Exhibit I hereto (the "Tax Escrow Agreement").
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(b) The Tax Escrow Funds shall be held by the Tax Escrow Agent in
escrow and applied towards the payment of any tax indemnification obligations of
the Sellers under Section 11.1 of this Agreement.
(c) At Closing, $5,000,000 of the Purchase Price payable to BVI
hereunder (the "BVI Escrow Funds"), will be delivered in immediately available
funds to an United Kingdom Affiliate of The Chase Bank of Manhattan, N.A., as
escrow agent (the "BVI Escrow Agent"), to be held until released in accordance
with the provisions of an escrow agreement substantially in the form of Exhibit
J hereto (the "BVI Escrow Agreement").
(d) The BVI Escrow Funds shall be held by the BVI Escrow Agent in
escrow and applied towards the payment by BVI or Guarantor of any
indemnification obligations of BVI or Guarantor under Article X or Article XI of
this Agreement or any guarantee obligations of Guarantor under the Guarantee
Agreement.
ARTICLE II
RESERVED
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Unless otherwise specified herein, each Seller hereby represents and
warrants, jointly and severally, to Buyer (i) that the statements contained in
Sections 3.1 (other than 3.1(a)(iv) with respect to the Subsidiaries), 3.2, 3.3,
3.4, 3.5(i), 3.5(ii), 3.8(a), 3.9(a), 3.9(b), 3.9(j), 3.9(l), 3.13, 3.18(b) and
3.18(c) of this Article III are true and correct as of the Effective Date, and
will be true and correct as of the Closing Date, (ii) that the statements
contained in the Sections of this Article III not otherwise identified in clause
(i) above (except with respect to Sections 3.17, 3.18(a) and 3.24 which will be
true and correct as of the Closing Date to the extent any such representation or
warranty relates to any Phase II Materials) will be true and correct as of the
Phase I Completion Date and the Closing Date (schedules called for in this
Article III that pertain to disclosure of (i) Phase I Materials and (ii) Phase
II Materials will be delivered prior to the Phase I Completion Date and prior to
the Closing Date, respectively), and (iii) as follows:
3.1 Organization and Qualification.
(a) Section 3.1(a) of the Disclosure Schedule contains an accurate
and complete list for the Company and each Subsidiary of its (i) name, (ii)
trade name(s), (iii) jurisdiction of incorporation, and (iv) each jurisdiction
where it is authorized to do business. The Company and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. The
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Company and each Subsidiary is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary. Prior to
the Effective Date, Sellers have caused to be delivered to Buyer true and
complete copies of the certificate or articles of incorporation or formation of
the Company and each Subsidiary, in each case as in effect on the Effective
Date. Sellers will have caused to be delivered to Buyer true and complete copies
of the by-laws of the Company prior to the Effective Date and each Subsidiary
prior to the Phase I Completion Date, in each case as in effect on the Effective
Date or the Phase I Completion Date, as applicable.
(b) With respect to the Company and each Subsidiary, the name of
each (i) member of the board of directors and (ii) officer (including
position(s) held) is listed in Section 3.1(b) of the Disclosure Schedule.
3.2 Capital Stock. The authorized capital stock of the Company
consists only of 1,000 shares of Class A Stock, 19,000 shares of Class B Stock,
15,000 shares of Class C Stock, and 15,000 shares of Class D Stock (the Class D
Stock together with Class A Stock, Class B Stock, and Class C Stock, the
"Capital Stock"). The only issued and outstanding shares of the Company are the
shares of Capital Stock as indicated on the signature page hereto, all of which
are validly issued, fully paid and nonassessable, and the issuance thereof was
in compliance with all applicable Laws. Except for the Capital Stock, no shares
of capital stock have been issued or reserved for issuance. On the Closing Date,
the Capital Stock will consist only of the shares of Purchased Stock. Section
3.2 of the Disclosure Schedule sets forth for the Company and each Subsidiary
(i) the amount of its authorized capital stock, (ii) the amount of its issued
and outstanding capital stock and (iii) the identity and the respective
ownership interests of the stockholders of the Company and each Subsidiary. All
of the outstanding equity interests of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and the issuance thereof
was in compliance with all applicable Laws, and, except as disclosed in Section
3.2 of the Disclosure Schedule, are owned, beneficially and of record, by the
Company, or Subsidiaries wholly owned, directly or indirectly by the Company,
free and clear of all Liens. There are no outstanding Options with respect to
the Company or any Subsidiary or agreements, arrangements or understandings to
issue Options with respect to the Company or any Subsidiary and there are no
preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of capital stock other
than the preemptive rights set forth in the articles of incorporation. Sellers
will disclaim all such preemptive rights in favor of Buyer at the Closing.
Sellers own the Purchased Stock beneficially and of record and free and clear of
all Liens. The delivery of the certificates representing the Purchased Stock
purchased hereunder to Buyer will transfer to Buyer good and valid title to the
Purchased Stock, free and clear of all Liens and the Purchased Stock will have
been duly authorized, validly issued, fully paid and nonassessable.
3.3 Authority Relative to this Agreement and the Operative
Agreements.
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(a) The Company has full corporate power and authority to execute
and deliver this Agreement and the Operative Agreements to which it is party and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Operative Agreements by the Company and the performance of its
obligations hereunder and thereunder and the consummation by the Company of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary actions by the board of directors of
the Company and by the stockholders of the Company, and no other action on the
part of the Company or any of its stockholders is necessary to authorize and
approve the execution, delivery and performance of this Agreement and the
Operative Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby. This Agreement and the Operative Agreements
have been duly and validly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
(b) Sellers Gerald A. Peabody, Jr. and Penelope A. Peabody represent
that they have full legal capacity to execute and deliver this Agreement and the
Operative Agreements to which they are parties and to perform their obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement and the Operative Agreements have been duly and
validly executed and delivered by said Sellers and constitute legal, valid and
binding obligations of the said Sellers enforceable against said Sellers in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
(c) BVI represents that it has the full corporate power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Operative Agreements to which BVI is a party
and the performance by BVI of its obligations hereunder and thereunder and the
consummation by BVI of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by all necessary actions by the
board of directors and by the stockholders of BVI, and no other action on the
part of BVI or any of its stockholders is necessary to authorize and approve the
execution, delivery and performance of this Agreement and the Operative
Agreements and the consummation by BVI of the transactions contemplated hereby
and thereby. This Agreement and the Operative Agreements have been duly and
validly executed and delivered by BVI and constitute legal, valid and binding
obligations of the said party enforceable against said party in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
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3.4 Business. Section 3.4 of the Disclosure Schedule lists material
lines of business other than the processing, purchase and sale of CCBs in the
ordinary course of business in which the Company and each Subsidiary is
participating or engaged or has participated or engaged in the three years
preceding the Effective Date. Except for the Subsidiaries, the Company holds no
equity, partnership, joint venture or other interest in any Person.
3.5 No Conflicts. The execution and delivery by each of the Company
and Sellers of this Agreement do not, and the execution and delivery by each of
the Company and Sellers of the Operative Agreements to which it, he or she is a
party, the performance by each of the Company and Sellers of its, his or her
respective obligations under this Agreement and such Operative Agreements and
the consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
(i) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of the Company and
the Subsidiaries;
(ii) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices referred to in Section 3.6 below or
disclosed in Section 3.6 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any Law or Order
applicable to the Company, any of its Subsidiaries or any of their respective
Assets and Properties; or
(iii) except as disclosed in Section 3.5 of the Disclosure Schedule,
(a) conflict with or result in a violation or breach of, (b) constitute (with or
without notice or lapse of time or both) a default under, (c) require the
Company, any of the Subsidiaries or any Seller to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (d) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(e) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Company, any of the
Subsidiaries or any of Sellers or any of their respective Assets and Properties
under any Contract or License to which the Company, any of the Subsidiaries, or
any of Sellers is a party or by which any of their respective Assets and
Properties is bound.
3.6 Governmental Approvals and Filings. Except as disclosed in
Section 3.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
the Company, any of the Subsidiaries or any of Sellers is required in connection
with the execution, delivery and performance of this Agreement or any of the
Operative Agreements to which it, he or she is a party or the consummation of
transactions contemplated hereby or thereby, provided that the Company and
Sellers make no representation as to whether any filing is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
6
as amended (the "Hart-Scott-Rodino Act"). The Company and Sellers shall make
available to Buyer such sales or asset data as may be necessary for Buyer to
determine whether such Hart-Scott-Rodino Act filing is required.
3.7 Books and Records. The minute books and other similar records of
the Company and the Subsidiaries to be provided to Buyer prior to the Phase I
Completion Date have been and will be maintained in accordance with sound
business practices and will contain a true and complete record of all action
taken at all meetings and by all written consents in lieu of meetings of the
stockholders, directors and committees of the boards of directors (or other
similar governing entities) of the Company and the Subsidiaries.
3.8 Financial Statements.
(a) Prior to the Effective Date, the Company has delivered to Buyer
true and complete copies of the audited consolidated balance sheets of the
Company as of December 31, 1994, December 31, 1995 and December 31, 1996 (the
"1996 Audited Balance Sheet") and the related consolidated statements of
operations and cash flows, together with the notes thereto, of the Company for
the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 (collectively, the "Audited Financial Statements"), setting forth, in each
case, in comparative form the corresponding figures for the corresponding dates
and periods of the previous fiscal year, together with reports of auditors
thereon, and (ii) the unaudited consolidated balance sheet of the Company as of
November 30, 1997, and the related consolidated statements of operations of the
Company for the eleven-month period ending November 30, 1997, setting forth, in
each case, in comparative form the corresponding figures for the corresponding
date and period of the previous fiscal year, certified on behalf of the Company
by the Chief Executive Officer of the Company (the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited Financial
Statements fairly present the consolidated financial position of the Company as
of the respective dates thereof, and the results of operations and cash flows
for the periods set forth therein, all in conformity with GAAP subject to normal
year-end adjustments in the case of the Unaudited Financial Statements.
(b) The results of the Company's operations for the fiscal year
ending December 31, 1997 are substantially in accordance with the business plan
of the Company for such fiscal year, which business plan will be delivered to
Buyer prior to the Phase I Completion Date.
(c) Prior to the Closing Date, the Company will deliver to Buyer
true and complete copies of the audited consolidated balance sheets of the
Company as of December 31, 1997 (the "1997 Audited Balance Sheet"), and the
related consolidated statements of operations and cash flow, together with the
notes thereto, setting forth in comparative form the corresponding figures for
the corresponding dates and periods of the previous fiscal year, together with
reports of auditors thereon (collectively, the "1997 Audited Financial
Statements"). The 1997 Audited Financial Statements fairly present the
consolidated financial position of the Company as of December 31,
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1997, and the results of operations and cash flows for the periods set forth
therein, all in conformity with GAAP.
3.9 Absence of Changes. From December 31, 1997 through the Closing
Date, there has not been, to the Knowledge of the Company, any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a material adverse change
in the Business or Condition of the Company. None of the other representations
or warranties set forth in this Agreement shall be deemed to limit the
foregoing. In addition, without limiting the foregoing, except as expressly
contemplated hereby and by the Operative Agreements and except as disclosed, or
as will be disclosed, in Section 3.9 of the Disclosure Schedule, there has not
occurred since December 31, 1997:
(a) (i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or equity interests) of the
Company or any Subsidiary, or (ii) any direct or indirect redemption, purchase
or other acquisition by the Company or any Subsidiary of any capital stock (or
equity interests) of the Company or any Subsidiary except consistent with the
terms of this Agreement, and the Operative Agreements;
(b) except for the execution, delivery and performance by the
Company or any Subsidiary of this Agreement and the Operative Agreements, and
the transactions contemplated hereby or thereby, (i) any change in the
authorized or issued capital stock of the Company or any Subsidiary, or (ii) any
issuance of either a right to acquire shares of or a security convertible into
capital stock of the Company or any Subsidiary;
(c) (i) any increase in the salaries, commissions, consulting fees,
or other compensation payable to any employees, consultants, directors or
officers of the Company or any Subsidiary except in the ordinary course of
business consistent with past practices, (ii) any payment of consideration of
any nature whatsoever (other than salaries, commissions, consulting fees,
bonuses or other compensation paid to any employees or consultants of the
Company or any Subsidiary) to any officer, director, stockholder, employee or
consultant of the Company or any Subsidiary, (iii) other than in the ordinary
course of business, any establishment or material modification of (A) targets,
goals, pools or similar provisions under or (B) salary ranges, increase
guidelines or similar provisions in respect of any Benefit Plan, employment
Contract or other employee compensation arrangement, or (iv) other than in the
ordinary course of business, any adoption, entering into, material amendment,
material modification or termination (partial or complete) of any Benefit Plan;
(d) (i) incurrence by the Company or any Subsidiary of Indebtedness
except in the ordinary course of business consistent with past practices or (ii)
any complete or partial discharge of any Indebtedness owing to the Company or
any Subsidiary;
(e) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the real or personal property or
equipment of the Company
8
or any Subsidiary which may have a material adverse affect on the Business or
Condition of the Company;
(f) any write-off or write-down of the Assets and Properties of the
Company or any Subsidiary in an aggregate amount exceeding $50,000;
(g) any purchase of or disposition of any Assets and Properties in
an aggregate amount exceeding $50,000, other than acquisitions or dispositions
of inventory or tangible personal property in the ordinary course of business
consistent with past practice and the terms of this Agreement, and the Operative
Agreements;
(h) any material amendment, waiver under or consent with respect to
(i) any Contract which is required to be disclosed in the Disclosure Schedule,
pursuant to Section 3.18(a), (ii) any License held by the Company or any
Subsidiary or (iii) any Intellectual Property;
(i) any capital expenditures or commitments for additions to
property, plant or equipment of the Company or any Subsidiary constituting
capital assets in an aggregate amount exceeding $50,000;
(j) any commencement or termination by the Company or any Subsidiary
of any line of business;
(k) any transaction by the Company or any Subsidiary with any
officer, director, stockholder, Affiliate or Associate of the Company or any
Subsidiary, other than pursuant to any Contract in effect on December 31, 1997
and disclosed to Buyer pursuant to Section 3.18(a)(viii) of the Disclosure
Schedule or other than pursuant to any contract of employment and listed
pursuant to Section 3.18(a)(i) of the Disclosure Schedule; or
(l) any material change in the accounting methods or procedures of
the Company or any Subsidiary.
3.10 No Undisclosed Liabilities. To the Knowledge of the Company,
except as (i) reflected or reserved against in the 1997 Audited Balance Sheet,
(ii) will be disclosed in Section 3.10 of the Disclosure Schedule, or (iii)
expressly contemplated hereby and by the Operative Agreements, there are no
Liabilities (other than Liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1997) of, relating to or
affecting the Company or any Subsidiary or any of their respective Assets and
Properties, (A) which in the aggregate are material to the Business or Condition
of the Company or (B) which are material and are for tort or for breach of
contract.
3.11 Taxes. Except as will be disclosed in Section 3.11 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
9
(a) All Tax Returns required to have been filed by or with respect
to the Company or any Subsidiary or any affiliated, combined, consolidated,
unitary or similar group of which the Company or any Subsidiary is or was a
member (a "Relevant Group") have been duly and timely filed, and each such Tax
Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by the Company or any Subsidiary or any Relevant Group (whether
or not reflected on a Tax Return) have been paid.
(b) All Tax Returns required to be filed by the Company or
Subsidiary covering periods which end on or before December 31, 1997 will
correctly reflect the income, franchise or other Tax liability and all other
information required to be reported thereon.
(c) The current liability for Taxes due by the Company or any
Subsidiary in the Unaudited Financial Statements for the period ended November
30, 1997, is believed by Sellers to be sufficient for all current Taxes paid or
to be paid at that date by the Company or any Subsidiary.
(d) The Company and any Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor or other third party.
(e) The Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it or any Subsidiary for any past
period. There is no dispute concerning any Tax liability of the Company or any
Subsidiary either (i) threatened, claimed or raised by any Taxing Authority or
(ii) of which the Company, any Subsidiary or any Seller is or reasonably should
be aware. There are no Liens for Taxes upon the Assets or Properties of the
Company or any Subsidiary. Section 3.11 of the Disclosure Schedule will indicate
those Tax Returns, if any, of the Company or any Subsidiary that have been
audited since January 1, 1992, and those Tax Returns of the Company or any
Subsidiary that currently are the subject of audit. The Company has delivered to
Buyer complete and correct copies of all federal, state, local and foreign
income Tax Returns filed by, all Tax examination reports and statements of
deficiencies assessed against or agreed to by, and any written ruling from or
agreement with a Taxing Authority received by, the Company or any Subsidiary
since January 1, 1992.
(f) Neither the Company nor any Subsidiary has any liability for
Taxes of any Person other than the Company or such Subsidiary (i) as a
transferee or successor, (ii) by Contract or (iii) otherwise.
(g) None of the Company or any of the Subsidiaries agreed to, is
required to, or reasonably expects that it might have to, make any adjustment
under Section 481 of the Code (or any comparable provision of state, local or
foreign law) by reason of a change in accounting method.
10
(h) With respect to the current taxable year, the Company has not
made any payments, nor is it obligated to make any payments, nor is it a party
to any agreement that under certain circumstances could require it to make any
payments, that are not deductible under Section 280G of the Code.
3.12 Legal Proceedings.
(a) Except as will be disclosed in Section 3.12(a) of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(i) there are no Actions or Proceedings pending or, to the
Knowledge of the Company, threatened, that either (A) are against, relating to
or affecting the Company, any Subsidiary or any Seller, or any of their
respective Assets and Properties, or (B) challenge the validity of the
transactions contemplated by this Agreement or the Operative Agreements; and to
the Knowledge of the Company there are no facts or circumstances that could
reasonably be expected to give rise to any such Action or Proceeding;
(ii) neither the Company nor any Subsidiary nor any Seller has
received notice, or has Knowledge, of any Orders outstanding against the
Company, any Subsidiary or any Seller;
(iii) neither the Company nor any Subsidiary nor any Seller
has received notice or has Knowledge, of (A) any defects, dangerous or
substandard conditions in the products or materials sold, distributed, or to be
sold or distributed by the Company or any Subsidiary that could cause bodily
injury, sickness, disease, death, or damage to property, or result in loss of
the use of property, if handled and used properly, or (B) any claim, suit,
demand for arbitration or notice seeking damages for any such event; and
(iv) the Company is not in default with respect to any Order
of any Governmental or Regulatory Authority and there are no unsatisfied
judgments against the Company.
(b) Prior to the Phase I Completion Date, the Company will deliver
to Buyer all responses of counsel (together with any updates provided by such
counsel) for the Company and the Subsidiaries to auditors' requests for
information regarding Actions or Proceedings pending or threatened against,
relating to or affecting the Company and the Subsidiaries during the three-year
period prior to the Phase I Completion Date. Section 3.12(b) of the Disclosure
Schedule will set forth all Actions or Proceedings relating to or affecting the
Company or any Subsidiary or any of its or their respective Assets and
Properties during the five-year period prior to the Effective Date which
resulted in judgments or settlements in excess of $50,000.
3.13 Compliance with Laws and Orders. To the Knowledge of the
Company, except as will be disclosed in Section 3.13 of the Disclosure Schedule,
neither the Company nor any Subsidiary is or has been at any time within the
last three years, or at any time prior to such date has
11
received notice that it is or has been, in material violation of or in material
default under, any Law or Order applicable to the Company or any Subsidiary or
any of their respective Assets and Properties.
3.14 Benefit Plans; ERISA. All Benefit Plans of the Company or any
Subsidiary will be listed in Section 3.14 of the Disclosure Schedule, and copies
of all documentation relating to such Benefit Plans will be delivered or made
available to Buyer. Except as disclosed in Section 3.14 of the Disclosure
Schedule: (a) each Benefit Plan and the administration and operation thereof
complies, and to the Knowledge of the Company has at all times complied, in all
material respects with the requirements of all applicable Law, including ERISA
and the Code; (b) each Benefit Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been
tax-exempt under Section 501(a) of the Code; (c) neither the Company nor any
Subsidiary is now, nor to the Knowledge of the Company at any time has been, a
member of a controlled group, as defined in Section 412(n)(6)(B) of the Code,
with any other enterprise; (d) neither the Company nor any Subsidiary presently
maintains or contributes to, nor at any time has maintained or contributed to
any employee pension benefit plan, as defined in Section 3(2) of ERISA, other
than the Pozzolanic Resources, Inc. Progress Sharing & Salary Savings Plan; (e)
neither the Company nor any Subsidiary has incurred any liability for any tax
imposed under Sections 4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA which could have a material adverse effect on the
Business or Condition of the Company; and (f) no suit, actions or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities) have been brought against or with respect to any Benefit Plan.
3.15 Real Property.
(a) Section 3.15(a) of the Disclosure Schedule will contain a true
and correct list of (i) the only two parcels of real property owned by the
Company and Subsidiaries, (ii) the parcels of real property occupied by the
Company and Subsidiaries as tenant, other than the "adjacent rail facilities"
occupied as tenant under 30-60 day leases (the "Leased Real Property" and
together with the Owned Real Property, the "Real Property"), and (iii) all Liens
relating to or affecting any parcel of Real Property.
(b) Section 3.15(b) of the Disclosure Schedule will contain a true
and correct list of the leases (and all amendments, modifications or extensions)
relating to the Leased Real Property and the Company will deliver to Buyer true
and complete copies of such leases (and all amendments, modifications or
extensions). None of the Company, any Subsidiary or any Seller has assigned,
sublet, transferred, hypothecated or otherwise disposed of their interest in any
Real Property Lease. To the Knowledge of the Company, no penalties are accrued
and unpaid under any Real Property Lease.
(c) Except as will be disclosed in Section 3.15(c) of the Disclosure
Schedule, there is (i) no claim, Action or Proceeding, actual or to the
Knowledge of the Company threatened,
12
against the Company, any Subsidiary or the Real Property by any Person which
would materially affect the future use, occupancy or value of the Real Property
or any part thereof and (ii) no condemnation or appropriation proceeding pending
or threatened against Real Property or the improvements thereon.
3.16 Tangible Personal Property. The Company and each Subsidiary is
in possession of and has good and marketable title to, or has valid leasehold
interests in or valid rights under Contract to use (except to the extent that
failure to have such possession, title, valid interest or valid rights would not
have a material adverse effect on the Business or Condition of the Company), the
tangible personal property used in the conduct of its business or otherwise
having market value exceeding $50,000 ("Relevant Tangible Personal Property"),
including all tangible personal property reflected on the 1997 Audited Financial
Statements and tangible personal property acquired since December 31, 1997 other
than property disposed of since such date in the ordinary course of business
consistent with past practice and the terms of this Agreement and the Operative
Agreements. To the Knowledge of the Company, all such Relevant Tangible Personal
Property referred to in the preceding sentence is free and clear of all Liens,
other than Permitted Liens and Liens that will be disclosed in Section 3.16 of
the Disclosure Schedule, and is adequate and suitable for the conduct by the
Company and the Subsidiaries of the business presently conducted by them, and is
in good working order and condition for the purpose of conducting the business,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
3.17 Intellectual Property Rights. The only Intellectual Property
owned or licensed for use by the Company or the Subsidiaries which is material
to the Business or Condition of the Company will be disclosed in Section 3.17(i)
of the Disclosure Schedule. The Company and the Subsidiaries have all right,
title and interest in each item of Intellectual Property disclosed in Section
3.17(i) of the Disclosure Schedule material to the Business or Condition of the
Company and, except as disclosed in Section 3.17(ii) of the Disclosure Schedule,
all such Intellectual Property is free and clear of all Liens, other than
Permitted Liens. No other Intellectual Property is used or necessary in the
conduct of the business of the Company and the Subsidiaries other than
Intellectual Property which in the aggregate is insignificant to the Business or
Condition of the Company. Except as disclosed in Section 3.17(ii) of the
Disclosure Schedule, the Company and the Subsidiaries have the right to use and
to transfer the Intellectual Property disclosed therein. Neither the Company nor
any Subsidiary has granted any license, agreement or other permission to a third
party to use such Intellectual Property. To the Knowledge of the Company,
neither it nor any Subsidiary is infringing on any Intellectual Property of any
other Person and no claim is pending or, to the Knowledge of the Company, has
been threatened with respect to the Company's or a Subsidiary's ownership,
validity, license or use of the Intellectual Property.
3.18 Contracts.
(a) Section 3.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and
13
accurate written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been delivered to
Buyer prior to the Phase I Completion Date; provided, that, Contracts identified
on Annex I hereto shall be made fully available to Buyer and Buyer's Advisors
prior to the Closing Date) to which the Company or any Subsidiary is a party or
by which any of their respective Assets and Properties is bound:
(i) Contracts (other than purchase orders issued in the ordinary
course of business) that are necessary to the operations of the business
including Contracts with customers, independent contractors, and distributors
that involve the payment or potential payment, pursuant to the terms of any such
Contract, by or to the Company or any Subsidiary of more than $10,000 and all
powers of attorney and comparable delegations of authority;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company or any Subsidiary to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company, any Subsidiary,
any Seller or prohibiting or limiting disclosure of confidential or proprietary
information;
(iii) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or unspecified
term, the name, position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (B) any written or
oral validly binding agreements involving an obligation of the Company or any
Subsidiary to make payments (with or without notice, passage of time or both) to
any Person in connection with, or as a consequence of, the transactions
contemplated hereby or by the Operative Agreements or to any employee who is
disclosed on Section 3.22(a) of the Disclosure Schedule, other than with respect
to salary or incentive compensation payments in the ordinary course of business
consistent with past practice;
(iv) all Contracts relating to Indebtedness of the Company or any
Subsidiary;
(v) all guarantees of any Indebtedness or other obligations of the
Company, any Subsidiary or any third Person;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties having a stated contract value of over
$50,000, other than dispositions or acquisitions in the ordinary course of
business consistent with past practice and the provisions of this Agreement and
the Operative Agreements, and (B) any Business Combination;
14
(vii) all Contracts between or among the Company or any Subsidiary,
on the one hand, and any current or former officer, director, stockholder,
Affiliate or Associate of the Company or any Subsidiary or any Associate of any
such officer, director, stockholder or Affiliate (other than the Company or any
Subsidiary), on the other hand, other than Contracts disclosed pursuant to
Section 3.18(a)(i);
(viii) any other Contracts involving either the receipt or the
payment by the Company or any Subsidiary of over $50,000, other than Contracts
made in the ordinary course of business consistent with past practices.
(b) To the Knowledge of the Company, each Contract required to be
disclosed in Section 3.18(a) of the Disclosure Schedule is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto. Except as disclosed in Section
3.18(b) of the Disclosure Schedule, none of the Company, any Subsidiary, any
Seller or, to the Knowledge of the Company, any other party to such Contract has
received notice that it is in violation or breach of or default under any such
Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract).
(c) Except as disclosed in Section 3.18(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to or bound by any
Contract that has been or could reasonably be expected to be, individually or in
the aggregate with any other such Contracts, materially adverse to the Business
or Condition of the Company.
3.19 Licenses. Section 3.19 of the Disclosure Schedule will contain
a true and complete list of all Licenses (including, without limitation, any
issued by the Federal Highway Administration or by the Department of
Transportation) used in and material to the business or operations of the
Company and the Subsidiaries, setting forth the owner, the function and the
expiration and renewal date of each. As soon as possible during Phase I, the
Company will deliver to Buyer true and complete copies of all such Licenses.
Except as will be disclosed in Section 3.19 of the Disclosure Schedule:
(a) the Company and the Subsidiaries own or validly hold all
Licenses that are material to their respective business or operations;
(b) each License listed in Section 3.19 of the Disclosure Schedule
is valid, binding and in full force and effect; and
(c) to the Knowledge of the Company, neither the Company nor any
Subsidiary is, or has received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in default) under any such
License.
3.20 Insurance. Section 3.20 of the Disclosure Schedule will contain
a true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the
15
annual premiums and payment terms thereof, the period of time covered thereby
and a brief description of the interests insured thereby) of all liability,
property, workers' compensation, directors' and officers' liability and other
insurance policies currently in effect that insure the business, operations or
employees of the Company and the Subsidiaries or affect or relate to the
ownership, use or operation of any of the Assets and Properties of the Company
or any Subsidiary and that (i) have been issued to the Company or any Subsidiary
or (ii) have been issued to any Person (other than the Company or any
Subsidiary) for the benefit of the Company or any Subsidiary. To the Knowledge
of the Company, each policy listed in Section 3.20 of the Disclosure Schedule is
valid and binding and in full force and effect, all premiums due thereunder have
been paid when due and no notice of cancellation or termination in respect of
any such policy has been received. To the Knowledge of the Company, the
insurance policies listed in Section 3.20 of the Disclosure Schedule are in
amounts and have coverages as required by any Contract to which the Company or
any Subsidiary is a party. Section 3.20 of the Disclosure Schedule contains a
list of all claims, individually or in the aggregate in excess of $100,000, made
within the three most recent fiscal years under any insurance policies covering
the Company and the Subsidiaries. The Company and any Subsidiary or any Seller
has not received notice that any insurer under any policy referred to in this
Section is denying liability with respect to a claim thereunder or defending
under a reservation of rights clause.
3.21 Affiliate Transactions.
(a) Except as will be disclosed in Section 3.21(a) of the Disclosure
Schedule, (i) to the Knowledge of the Company, there are no Liabilities between
the Company or any Subsidiary on the one hand, and any current or former
officer, director, stockholder, Affiliate (other than the Company and the
Subsidiaries) or Associate of the Company or any Subsidiary or any Associate of
any such officer, director, stockholder or Affiliate on the other, (ii) neither
the Company nor any Subsidiary provides or causes to be provided any assets,
services or facilities to any such current or former officer, director,
stockholder, Affiliate or Associate and (iii) neither the Company nor any
Subsidiary beneficially owns, directly or indirectly, any Investment Assets of
any such current or former officer, director, stockholder, Affiliate or
Associate.
(b) Except as will be disclosed in Section 3.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 3.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
3.22 Employees; Labor Relations.
(a) Section 3.22(a) of the Disclosure Schedule will contain a list
of the name of each officer, employee and consultant of the Company and the
Subsidiaries, together with such person's position or function, annual base
salary or wages and any incentives or bonus arrangement with respect to such
person. To the Knowledge of the Company, no person, with the exception of Gerald
A. Peabody, Jr., currently employed by the Company or any Subsidiary will or may
cease to be engaged by the Company or any Subsidiary, or will refuse offers of
engagement by the
16
Company or any Subsidiary, for any reason, including, without limitation,
because of the consummation of the transactions contemplated by this Agreement
and the Operative Agreements.
(b) Except as will be disclosed in Section 3.22(b) of the Disclosure
Schedule, (i) to the Knowledge of the Company, there are no material
controversies between the Company or any Subsidiary, on the one hand, and any
employee or consultant (other than the Company's or any Subsidiary's independent
tax, legal, employee benefit or accounting consultant) of the Company or any
Subsidiary, on the other hand, (ii) no employee of the Company or any Subsidiary
is presently a member of a collective bargaining unit or party to a collective
bargaining agreement or similar labor Contract relating to such employee's
employment with the Company or any Subsidiary and, to the Knowledge of the
Company there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of the Company or any
Subsidiary and (iii) no unfair labor practice complaint or sex or age
discrimination claim is pending against the Company or any Subsidiary before the
National Labor Relations Board or any other Governmental or Regulatory Authority
and to the Knowledge of the Company there are no facts or circumstances that
could reasonably be expected to give rise to such complaint or claim.
There has been no work stoppage, strike or other concerted action by
employees of the Company or any Subsidiary.
3.23 Environmental Matters.
(a) To the Knowledge of the Company, the Company and the
Subsidiaries have obtained and hold all necessary Environmental Permits, copies
of which will be attached hereto in Section 3.23(a) of the Disclosure Schedule.
(b) To the Knowledge of the Company, the Company and the
Subsidiaries are in compliance with all terms, conditions and provisions of all
applicable (i) Environmental Permits and (ii) Environmental Laws, except for
such noncompliance which would not have a material adverse effect on the
Business or Condition of the Company.
(c) To the Knowledge of the Company and with respect to previously
owned properties, except for such matters as individually or in the aggregate
would not have a material adverse effect on the Business or Condition of the
Company:
(i) there are no past or pending Environmental Claims against
the Company or any Subsidiary, and there are no facts or circumstances which
could reasonably be expected to form the basis for any Environmental Claim
against the Company or any Subsidiary;
(ii) there have been no Releases of Hazardous Materials at,
from, in, to, on, or under any Site, and no Hazardous Materials are present in,
on, about or migrating to or from any Site that could reasonably be expected to
give rise to an Environmental Claim against the Company or any Subsidiary,
except that, in the ordinary course of business, vehicles and equipment
17
fueled and lubricated with petroleum products have been and are involved in the
Company's operations, which may have caused de minimis surface releases of
petroleum products;
(iii) neither the Company, any Subsidiary, any predecessor of
the Company or any Subsidiary, nor any entity previously owned by the Company or
any Subsidiary, has transported or arranged for the treatment, storage,
handling, disposal, or transportation of any Hazardous Material to any off-Site
location which could result in an Environmental Claim against the Company or any
Subsidiary, except that, in the ordinary course of business, vehicles and
equipment fueled and lubricated with petroleum products have been and are
involved in the Company's operations, which may have caused de minimis surface
releases of petroleum products;
(iv) no Site is a current or proposed Environmental Clean-up
Site;
(v) there are no Liens, other than Permitted Liens, arising
under or pursuant to any Environmental Law on any Site and there are no facts,
circumstances, or conditions known to Sellers that could reasonably be expected
to restrict, encumber, or result in the imposition of special conditions under
any Environmental Law with respect to the ownership, occupancy, development,
use, or transferability of any Site; and
(vi) there are no active underground storage tanks at any
property currently owned by the Company or any Subsidiary, and there are no
underground storage tanks at any such property that have been closed or
abandoned by the Company or any Subsidiary.
3.24 Substantial Customers and Suppliers. Section 3.24(a) of the
Disclosure Schedule will list the 10 largest customers of the Company and the
Subsidiaries on the basis of revenues for goods sold or services provided for
the most recent fiscal year. Section 3.24(b) of the Disclosure Schedule will
list the 10 largest suppliers of the Company and the Subsidiaries on the basis
of cost of goods or services purchased for the most recent fiscal year. Except
as will be disclosed in Section 3.24(c) of the Disclosure Schedule, no such
customer or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company or any Subsidiary since December
31, 1997, or to the Knowledge of the Company, has threatened to cease or
materially reduce such purchases or sales or provision of services after the
Closing Date. Except as will be disclosed in Section 3.24(d) of the Disclosure
Schedule, to the Knowledge of the Company, no such customer or supplier is
threatened with bankruptcy or insolvency.
3.25 Accounts Receivable. Except as will be set forth in Section
3.25 of the Disclosure Schedule, the accounts and notes receivable of the
Company and the Subsidiaries reflected on the 1997 Audited Balance Sheet, and
all accounts and notes receivable arising subsequent to December 31, 1997, (i)
arose from sales transactions in the ordinary course of business consistent with
past practice and are payable on ordinary trade terms, (ii) to the Knowledge of
the Company, are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return
18
basis or subject to any other repurchase or return arrangement, (v) to the
Knowledge of the Company, are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the 1997 Audited Balance Sheet, and (vi) to
the Knowledge of the Company, are not the subject of any Actions or Proceedings
brought by or on behalf of the Company or any Subsidiary. Section 3.25 of the
Disclosure Schedule will set forth a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company or any Subsidiary. All steps reasonably necessary to render all such
security arrangements legal, valid, binding and enforceable, and to give and
maintain for the Company or any Subsidiary a perfected security interest in the
related collateral, have been taken.
3.26 Other Negotiations; Brokers. Neither the Company, nor any
Subsidiary, nor any Seller nor any of their respective Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company, any Subsidiary, any
Seller or any such Affiliate) has entered into any agreement or had any
discussions with any third party regarding any transaction involving the Company
or any Subsidiary which could result in the Company, Buyer or its stockholders
or any general partner, limited partner, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said third
party as a result of entering into this Agreement or the Operative Agreements or
consummating the transactions contemplated hereby or thereby. No agent, broker,
finder, investment banker, financial advisor or other similar Person will be
entitled to any fee, commission or other compensation in connection with the
transactions contemplated by this Agreement or the Operative Agreements on the
basis of any act or statement made by the Company, any Subsidiary, any Seller or
any of their respective Affiliates, or any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Company, any Subsidiary, any Seller or any such Affiliate.
3.27 Holding Company Act and Investment Company Act Status. Neither
the Company nor any Subsidiary is a "holding company" or a "public utility
company" as such terms are defined in the Public Utility Company Act of 1935, as
amended. Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.28 Restrictions on Conduct of Business. Except as provided in this
Agreement and as will be set forth in Section 3.28 of the Disclosure Schedule,
neither the Company nor any Subsidiary is prohibited or otherwise restricted
from conducting its business as presently conducted or intended to be conducted
by any Contract, any Governmental or Regulatory Authority or any Law.
3.29 Bank and Brokerage Accounts; Investment Assets. Section 3.29 of
the Disclosure Schedule will set forth (or will set forth not less than 10 days
prior to the Closing Date) (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company or any Subsidiary has an account or
19
safe deposit box or maintains a banking, custodial, trading or other similar
relationship; (b) a true and complete list and description of each such account,
box and relationship, indicating in each case the account number and the names
of the respective officers, employees, agents or other similar representatives
of the Company or any Subsidiary having signatory power with respect thereto;
and (c) a list of each Investment Asset, the name of the record and beneficial
owner thereof, the location of the certificates, if any, therefor, the maturity
date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
3.30 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Buyer pursuant to any provision
of this Agreement (including without limitation the Unaudited Financial
Statements), contains any statement of a material fact that to the Knowledge of
the Company is untrue.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Unless otherwise specified herein, each Seller represents and
warrants individually and severally to Buyer as follows:
4.1 Organization and Qualification. BVI represents and warrants that
it is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or formation. BVI represents and
warrants that is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of its
Assets or Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for failures to be so
qualified, licensed or admitted in good standing which, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the validity or enforceability of this Agreement or the Operative Agreements or
on the ability of BVI to perform its obligations hereunder or thereunder.
4.2 Capacity Relative to this Agreement and the Operative
Agreements; Options. Each Seller has the full legal capacity (or the full
corporate power, as the case may be) to execute and deliver this Agreement and
the Operative Agreements to which it, he or she is a party and to perform its,
his or her obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly and
validly executed and delivered by such Seller and constitutes, and upon the
execution and delivery by such Seller of the Operative Agreements to which it,
he or she is a party, such Operative Agreements will constitute, the legal,
valid and binding obligations of such Seller enforceable against it, him or her
in accordance with their respective terms.
4.3 No Conflicts. The execution and delivery by each Seller of this
Agreement does not, and the execution and delivery by such Seller of the
Operative Agreements to which such Seller is a party, the performance by such
party of its, his or her obligations under this Agreement
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and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 4.3 or disclosed in
Section 4.3 of the Disclosure Schedule, if any, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
such party or any Assets and Properties of such party; or
(b) except as disclosed in Section 4.3 of Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require such
party to obtain any consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of, (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the creation or imposition of any
Lien upon such party or any of the Assets and Properties of such party under,
any Contract or License to which such party is a party or by which any of the
Assets and Properties of such party is bound.
4.4 Governmental Approvals and Filings. Except as disclosed in
Section 4.4 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
any Seller is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements to which such
is a party or the consummation of transactions contemplated hereby or thereby.
4.5 Taxes. Except as disclosed in Section 4.5 of the Disclosure
Schedule, there is no dispute or claim concerning any Tax liability with respect
to items of income, gain, loss or deduction attributable to any of Sellers'
stock interest in the Company either (i) threatened, claimed or raised by any
taxing authority or (ii) of which such Seller is or reasonably should be aware.
4.6 Legal Proceedings.
(a) Except as disclosed in Section 4.6(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below), Gerald A.
Peabody, Jr. and Penelope A. Peabody represent and warrant jointly and severally
that:
(i) there are no Actions or Proceedings pending or, to the
knowledge of any of such Sellers threatened against, relating to or affecting
any of such Sellers or any of their respective Assets and Properties, as the
case may be, which (A) could reasonably be expected to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or making illegal any
of the transactions contemplated by this Agreement or any of the Operative
Agreements or otherwise result in a material diminution of the benefits
contemplated by this Agreement or any of the Operative Agreements to Buyer, or
(B) if determined adversely to any of such Sellers, could reasonably be expected
to result in (x) any injunction or other equitable relief against the Company
21
or any of such Sellers or (y) Losses by the Company individually, or in the
aggregate with Losses in respect of other such Actions or Proceedings, exceeding
$10,000;
(ii) there are no facts or circumstances known to such Sellers
that could reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) (i) above; and
(iii) such Sellers have not received notice, and are not
aware, of any Orders outstanding against the Company.
(b) Except as disclosed in Section 4.6(b) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below), BVI
represents and warrants that:
(i) there are no Actions or Proceedings pending or, to the
knowledge of such party threatened against, relating to or affecting such party
or any of its respective Assets and Properties, as the case may be, which (A)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement or any of the Operative Agreements or otherwise
result in a material diminution of the benefits contemplated by this Agreement
or any of the Operative Agreements to Buyer, or (B) if determined adversely to
such party, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company or such party or (y) Losses by the
Company or its Subsidiaries individually, or in the aggregate with Losses in
respect of other such Actions or Proceedings, exceeding $10,000;
(ii) there are no facts or circumstances known to such party
that could reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) (i) above; and
(iii)such party has not received notice, and is not aware, of
any Orders outstanding against the Company or its Subsidiaries.
4.7 Title to Common Stock. Gerald A. Peabody, Jr. and Penelope A.
Peabody represent and warrant jointly and severally on the one hand, and BVI
represents and warrants on the other hand, that Seller is or immediately
following the Contribution will be the record and beneficial owner of the shares
of Capital Stock indicated next to such Seller's name on the signature page
hereto, and immediately prior to Closing, such Seller will own such shares of
Capital Stock free and clear of all Liens (other than the rights of Buyer under
this Agreement), and the delivery of the stock certificates representing the
Purchased Stock owned by Buyer will transfer to Buyer good and valid title to
such shares of Purchased Stock free and clear of all Liens. From and after the
Closing, no Seller or any other Person (other than Buyer) will have any rights
whatsoever to the Capital Stock or any other securities of the Company, if any.
22
4.8 Ownership. Gerald A. Peabody, Jr. and Penelope A. Peabody
represent and warrant jointly and severally on the one hand, and BVI represents
on the other hand that except as disclosed in Section 4.8 of the Disclosure
Schedule, no Seller nor any of its, his or her Affiliates or Associates (other
than the Company), as the case may be, has any interest of any nature in any of
the Assets and Properties used for or related to the business or operations of
the Company or any of the Subsidiaries.
4.9 Other Negotiations; Brokers. No Seller or any of its Affiliates
(or any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of any Seller or any such
Affiliate) (i) has entered into any agreement that conflicts with any of the
transactions contemplated by this Agreement or any of the Operative Agreements
or (ii) has entered into any agreement or had any discussions with any third
party regarding any transaction involving the Company or any Subsidiary which
could result in the Company, Buyer or its stockholders or any general partner,
limited partner, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said third party as a result of
entering into this Agreement or the Operative Agreements or consummating the
transactions contemplated hereby or thereby. No agent, broker, finder,
investment banker, financial advisor or other similar Person will be entitled to
any fee, commission or other compensation in connection with the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by any Seller, any of its, his or her respective
Affiliates, or any investment banker, financial advisor, attorney, accountant or
other Person retained by or acting for or on behalf of such Seller or any such
Affiliate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
5.2 Authority Relative to this Agreement and the Operative
Agreements. Buyer has full corporate power and authority to enter into this
Agreement and the Operative Agreements to which it is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Operative Agreements to which it is a party by Buyer and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly and validly approved by Buyer's board of directors. This Agreement and
the Operative Agreements to which Buyer is a party have been duly and validly
executed and delivered by Buyer and constitute the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with their
respective terms.
23
5.3 No Conflicts. The execution and delivery by Buyer of this
Agreement do not, and the execution and delivery by Buyer of the Operative
Agreements to which Buyer is a party and the consummation of the transactions
contemplated hereby and thereby does not (i) conflict with or result in a
violation or breach of any of the terms, conditions or provisions of the
certificate of incorporation or by-laws of Buyer; (ii) conflict with or result
in a violation or breach of any of the terms, conditions or provisions of any
Law or Order applicable to Buyer and (iii) conflict with or result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, require Buyer to obtain any consent, approval or action
under the terms of, any Contract to which Buyer is a party the effect of which,
individually or in the aggregate, would reasonably be expected to have a
materially adverse effect on the Business or Condition of Buyer.
5.4 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Buyer is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
5.5 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Buyer, threatened against, relating to or affecting
Buyer or any of its Assets and Properties which (i) could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements or (ii) could
reasonably be expected, individually or in the aggregate with other such Actions
or Proceedings, to have a material adverse effect on the business or condition
of Buyer.
5.6 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement or the Operative Agreements on the basis of any act or statement made
by Buyer.
5.7 Purchase for Investment. The Purchased Stock will be acquired by
Buyer for its own account for the purpose of investment and not with a view to
the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
5.8 Financing of Purchase Price. Buyer has received a financing
commitment, attached hereto as Annex III, in an amount sufficient to consummate
the transaction contemplated by this Agreement.
24
ARTICLE VI
COVENANTS
With respect to Sections 6.1 through 6.9, each Seller, jointly and
severally, and (during the period from the Effective Date through the Closing)
the Company hereby covenants and agrees with Buyer that, at all times from and
after the Effective Date until the Closing Date each Seller and the Company
shall comply with all the covenants and provisions of this Article VI except to
the extent Buyer may otherwise consent in writing.
6.1 Access to Information.
(a) From the Effective Date to the Phase I Completion Date, Sellers
will, and will cause the Company, its Subsidiaries and the representatives of
the Company or its Subsidiaries to, (i) afford Buyer, its representatives and
prospective lenders and their representatives (collectively, "Buyer's Advisors")
full and free access to Phase I Material, (ii) furnish Buyer and Buyer's
Advisors with copies of all Contracts, Books and Records, and other existing
documents and data as Buyer may reasonably request consistent with the scope of
Phase I Material, (iii) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request consistent with the scope of Phase I Material and (iv) allow Buyer to
engage an environmental engineer to conduct an environmental investigation of
any property owned, operated or leased by the Company and its Subsidiaries
relating to the business, including but not limited to, subsurface soil,
groundwater, surface water or air sampling and analysis.
(b) From the Phase II Commencement Date through the Closing Date,
Sellers will, and will cause the Company, its Subsidiaries and the
representatives of the Company or its Subsidiaries to, (i) afford Buyer, and
Buyer's Advisors full and free access to Phase II Material, (ii) furnish Buyer
and Buyer's Advisors with copies of all Contracts, Books and Records, and other
existing documents and data consistent with the scope of Phase II Material, and
(iii) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information as Buyer may reasonably request
consistent with the scope of Phase II Material.
6.2 Conduct of Business. Except for the transactions contemplated by
this Agreement and the Operative Agreements, including without limitation the
FSC Disposition, from the Effective Date through the Closing Date, the Company
and its Subsidiaries shall conduct business only in the ordinary course
consistent with past practice and the terms of this Agreement and the Operative
Agreements. Without limiting the generality of the foregoing, the Company and
its Subsidiaries shall:
(a) use its best efforts to (i) preserve intact the business
organization and reputation of the Company and its Subsidiaries, (ii) keep
available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
employees and consultants of the Company and its Subsidiaries with the exception
of Gerald A. Peabody, Jr., (iii) maintain the Assets and Properties of the
Company and its
25
Subsidiaries in good working order and condition, ordinary wear and tear
excepted, (iv) maintain the goodwill of customers, suppliers, lenders and other
Persons with whom Sellers have significant business relationships with respect
to the Company and its Subsidiaries and (v) continue all current sales,
marketing and promotional activities relating to the business and operations of
the Company and the Subsidiaries;
(b) except to the extent required by applicable Law or except such
changes as are reasonably necessary and practicable so as to enable the Company
and its Subsidiaries to conduct its business in a manner consistent with current
practices, (i) cause the Books and Records of the Company and its Subsidiaries
to be maintained in the usual, regular and ordinary manner and (ii) not permit
any material change in the Company's and its Subsidiaries' (x) pricing,
investment, accounting, financial reporting, inventory, credit, allowance or Tax
practice or policy, or (y) method of calculating any bad debt, contingency or
other reserves for accounting, financial reporting or Tax purposes or (z) fiscal
year; and
(c) comply, in all material respects, with all Laws and Orders
applicable to the business and operations of the Company and its Subsidiaries
and, promptly following receipt thereof, furnish Buyer with copies of any notice
received from any Governmental or Regulatory Authority or other Person alleging
any material violation of any such Law or Order.
6.3 Certain Restrictions. Except for the transactions contemplated
by this Agreement and the Operative Agreements, from the Effective Date through
the Closing Date, the Company and its Subsidiaries, will refrain from, without
the prior consent of Buyer, (a) amending their certificates or articles of
organization or incorporation, limited liability company agreement or by-laws
(or other comparable charter documents) or taking any action with respect to any
such amendment or any reorganization, liquidation or dissolution of any such
entity; (b) taking any of the actions listed in Section 3.9 hereof; (c)
violating, breaching, or defaulting under, in any material respect, or taking or
failing to take any action that (with or without notice or lapse of time or
both) would constitute a material violation or breach of, or default under, any
term or provision of any Permit held or used by the Company or any Subsidiary or
any Contract to which the Company or any Subsidiary is a party or by which any
of its Assets and Properties is bound; (d) (i) taking or agreeing or committing
to take or omitting or agreeing or committing to omit any action that would make
any representation or warranty of the Company hereunder inaccurate in any
material respect; or (ii) taking any action or course of action inconsistent
with compliance with the covenants and agreements of the Company herein or which
might adversely affect the interests of Buyer hereunder; and (e) entering into
any agreement to engage in any of the activities listed in this Section 6.3.
6.4 Governmental and Other Approvals. Each Seller will (a) take all
reasonable steps necessary or desirable, and proceed diligently and in good
faith and use its best efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
on the part of any Seller, the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements and those
described in Sections 3.5 and 3.6 of the
26
Disclosure Schedule, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Buyer or such
Governmental or Regulatory Authorities or other Persons may reasonably request
and (c) cooperate with Buyer as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required to
consummate the transactions contemplated hereby and by the Operative Agreements.
The Company or each Seller will provide prompt notification to Buyer when any
such consent, approval, action, filing or notice referred to in this Section 6.4
is obtained, taken, made or given, as applicable, and will advise Buyer of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
6.5 Notice and Cure. Each Seller will promptly notify Buyer of, and
contemporaneously will provide Buyer with true and correct copies of any and all
information or documents relating to, and will use all commercially reasonable
efforts to cure before the Closing Date, any event, transaction or circumstance
occurring on or after the Effective Date that causes or will cause any covenant
or agreement to be breached or that renders or will render untrue any
representation or warranty contained in Article III or IV as if the same were
made on or as of the date of such event, transaction or circumstance. Nothing
contained in this Section 6.5 or any other notice shall affect the survival of
or modify, limit or create any exception to the representations, warranties,
covenants, and agreements of the Company and each Seller hereunder or the
conditions to the obligations of Buyer to close as set forth in Article VII or
Buyer's right to seek indemnity under Article X.
6.6 Audited Financial Statements. Sellers shall deliver to Buyer
prior to February 17, 1998, the 1997 Audited Financial Statements, all audited
by Ernst & Young LLP or other independent public accountants of recognized
national standing acceptable to Buyer and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the effect
that such financial statements fairly present in all material respects the
Business and Condition of the Company on a combined basis in accordance with
GAAP consistently applied.
6.7 Efforts to Consummate Transaction. Each Seller and the Company
shall take all reasonable action, and do all things reasonably necessary or
advisable in order to consummate the transactions contemplated by this Agreement
and the Operative Agreements including, without limitation, the satisfaction of
each condition to the obligation of Buyer pursuant to Article VII, and shall not
fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
6.8 No Solicitations. From the Effective Date until March 4, 1998,
or the earlier termination of this Agreement, no Seller or any Affiliate will
take (nor will any Seller authorize or permit any Affiliate or authorize or
permit any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of any Seller or any such
Affiliate to take) directly or indirectly, any action to initiate, assist,
solicit, receive, negotiate, encourage or
27
accept any offer or inquiry from any Person (a) to engage in any Business
Combination with respect to the Company or any Subsidiary, (b) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination with the Company or any Subsidiary or (c)
to furnish or cause to be furnished any information with respect to the Company
or any Subsidiary to any Person (other than as contemplated by Section 6.1) who
any Seller or any Affiliate (or any such Person acting for or on their behalf)
knows or has reason to believe is in the process of, or may be, considering any
Business Combination with the Company or any Subsidiary. If any Seller or any
such Affiliate (or any such Person acting for or on their behalf) receives from
any Person (other than Buyer or any other Person referred to in Section 6.1) any
offer, inquiry or informational request referred to above, such Seller will
promptly advise such Person, by written notice, of the terms of this Section 6.8
and will promptly, orally and in writing, advise Buyer of all the terms of such
offer, inquiry or request (including, without limitation, the identity of the
Person making such offer, inquiry or request) and deliver a copy of such notice
to Buyer.
6.9 Noncompetition; Non Solicitation; Trade Secrets; Discoveries and
Works.
(a) For a period of five years from the Closing Date, each of the
Sellers (collectively, for the purposes of Section 6.9, the "Non-Competing
Parties", and, individually, a "Non-Competing Party") will not (except as an
officer, director, stockholder, member, manager, employee, agent or consultant
of the Company, any Subsidiary or any Affiliate thereof) directly or indirectly,
own, manage, operate, join, or have a financial interest in, control or
participate in the ownership, management, operation or control of, or be
employed as an employee, agent or consultant, or in any other individual or
representative capacity whatsoever, or use or permit his or her name to be used
in connection with, or be otherwise connected in any manner with (i) any
business or enterprise engaged within the Canadian province of British Columbia
or any portion of the United States (whether or not such business is physically
located within British Columbia or the United States) in the design,
development, manufacture, distribution or sale of any products, or the provision
of any services, which the Company was designing, developing, manufacturing,
distributing, selling or providing at any time up to and including the Closing
Date or (ii) any business which is (A) providing coal combustion by-product
("CCB") management services, including the collection, storage, marketing,
removal, disposal of fly-ash and other CCBs, or (B) competitive with the
business carried on or planned by the Company at any time up to and including
the Closing Date, provided that the foregoing restriction shall not be construed
to prohibit (x) the marketing and sale of cement and (y) the ownership by any
Non-Competing Party together with its Affiliates and Associates, as the case may
be, of not more than 2% of any class of securities of any corporation which is
engaged in any of the foregoing businesses, having a class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on any national exchange or
in the over-the-counter market, provided further, that such ownership represents
a passive investment and that any such Non-Competing Party together with its
Affiliates and Associates or any group of Persons including such Non-Competing
Party together with its Affiliates and Associates in any way, either directly or
indirectly, does not manage or exercise control of any such corporation,
guarantees any of its
28
financial obligations, otherwise takes part in its business other than
exercising rights as a shareholder, or seeks to do any of the foregoing.
(b) For a period of five years from such Non-Competing Party's
termination of employment with the Company or any Subsidiary, each Non-Competing
Party agrees, with respect to any and all products sold by the Company in the
regular course of business at any time within five years prior to the Closing
Date, not to, directly or indirectly, whether for his or her own account or for
the account of any other individual or entity, solicit the trade, business or
patronage of, or sell any to, any Persons that were either customers of the
Company or any Subsidiary at or prior to the Effective Date, or prospective
customers with respect to whom a sales effort, presentation or proposal was made
or planning to be made by the Company or any Subsidiary at or prior to the
Effective Date. Such Non-Competing Party further agrees that during such
five-year period he or she shall not, directly or indirectly, (i) solicit or
provide financial incentives to any individual who was an employee or consultant
of the Company or any Subsidiary at any time during the time such Non-Competing
Party was employed by or an owner of securities of the Company, to terminate his
or her employment or consulting relationship with the Company or any Subsidiary
or to become employed by or a consultant to, direct or indirectly, such
Non-Competing Party, any of his or her Affiliates or any Person by which such
Non-Competing Party or any of his or her Affiliates is employed or a consultant
to or (ii) interfere in any other way with the employment, or other
relationship, of any employee or consultant of the Company or any Subsidiary.
(c) Each Non-Competing Party recognizes that it is in the legitimate
business interest of the Company and its Subsidiaries to restrict his or her
disclosure or use of Trade Secrets or other Confidential Information relating to
the Company and its Subsidiaries for any purpose other than in connection with
his or her performance of his or her duties to the Company and its Subsidiaries,
and to limit any potential appropriation of such Trade Secrets or other
Confidential Information by such Non-Competing Party. Such Non-Competing Party
therefore agrees that all Trade Secrets or other Confidential Information
relating to the Company and its Subsidiaries heretofore or in the future
obtained by such Non-Competing Party shall be considered confidential and the
proprietary information of the Company and its Subsidiaries. Such Non-Competing
Party shall not use or disclose, or authorize any other person or entity to use
or disclose, any Trade Secrets or other Confidential Information, other than as
necessary to further the business objectives of the Company and its
Subsidiaries. The term "Trade Secrets or other Confidential Information", by way
of example and without limitation, includes the whole or any portion or phase of
any scientific or technical information, design, process, procedure, formula,
machine, invention, improvement, manufacturing technique, manufacturing or test
data, confidential business or financial information, listing of names,
addresses, or telephone numbers, or other information relating to any business
or profession which is secret and of value. The term "Trade Secrets or other
Confidential Information", does not, however, include data or information that
is known or becomes known, through no action of the Non-Competing Parties, to
persons or entities other than the Company and its Subsidiaries, nor does it
include the general industry expertise and experience of the Non-Competing
Parties to the extent such does not include secret or proprietary information
relating to the Company.
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(d) All Discoveries and Works made or conceived by each
Non-Competing Party during his or her employment by or service as a director of
the Company or any Subsidiary, jointly or with others, that relate to the
present or anticipated activities of the Company or its Subsidiary, or are used
or usable by the Company or any Subsidiary shall be owned by the Company or any
Subsidiary. The term "Discoveries and Works" means Trade Secrets or other
Confidential Information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications, but, for the purposes of this Agreement, does
not include the name or mark "Pozzolanic" in geographic areas other than those
in which the Company was doing business as of the Effective Date. Such
Non-Competing Party shall (a) promptly notify, make full disclosure to, and
execute and deliver any documents requested by the Company or any Subsidiary, as
the case may be, to evidence or better assure title to Discoveries and Works in
the Company or any Subsidiary, as so requested, (b) renounce any and all claims,
including but not limited to claims of ownership and royalty, with respect to
all Discoveries and Works and all other property owned or licensed by the
Company or any Subsidiary, (c) assist the Company or any Subsidiary in obtaining
or maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all
Discoveries and Works, and (d) promptly execute, whether during his or her
employment with or service as a director of the Company or any Subsidiary or
thereafter, all applications or other endorsements necessary or appropriate to
maintain patents and other rights for the Company or any Subsidiary and to
protect the title of the Company or any Subsidiary thereto, including but not
limited to assignments of such patents and other rights. Any Discoveries and
Works which, within six months after the termination of such Non-Competing
Party's employment with or service as a director of the Company or any
Subsidiary, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by such Non-Competing Party and which
pertain to the business carried on or products or services being sold or
developed by the Company or any Subsidiary at the time of such termination
shall, as between such Non-Competing Party and the Company or any Subsidiary, as
the case may be, be presumed to have been made during such Non-Competing Party's
employment by or service as a director of the Company or any Subsidiary. Such
Non-Competing Party acknowledges that all Discoveries and Works shall be deemed
"works made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss.
101.
(e) Each Non-Competing Party agrees that Buyer's remedies at law for
any breach or threat of breach by him or her of any of the provisions of this
Section 6.9 will be inadequate, and that, in addition to any other remedy to
which Buyer may be entitled at law or in equity, Buyer shall be entitled to a
temporary or permanent injunction or injunctions or temporary restraining order
or orders to prevent breaches of the provisions of this Section 6.9 and to
enforce specifically the terms and provisions hereof, in each case without the
need to post any security or bond. Nothing herein contained shall be construed
as prohibiting Buyer from pursuing, in addition, any other remedies available to
the Company or any Subsidiary for such breach or threatened breach. A waiver by
Buyer of any breach of any provision hereof shall not operate or be construed as
a waiver of a breach of any other provision of this Agreement or of any
subsequent breach by such Non-Competing Party.
30
(f) It is expressly understood and agreed that although the parties
hereto consider the restrictions contained in this Section 6.9 hereof to be
reasonable for the purpose of preserving the goodwill, proprietary rights and
going concern value of the Company and the Subsidiaries, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Section 6.9 is an unenforceable
restriction on such Non-Competing Party's activities, the provisions of this
Section 6.9 shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the court
referred to above finds that any restriction contained in this Section 6.9 or
any remedy provided herein is unenforceable, and such restriction or remedy
cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of this Section 6.9 shall in no
respect limit or otherwise affect such Non-Competing Party's obligations under
other agreements with the Company or any Subsidiary or any of its respective
present or future Affiliates.
6.10 Buyer's Covenant.
(a) At the initiation of Phase II, Buyer shall deliver to The Chase
Manhattan Bank, N.A., as escrow agent (the "Phase II Escrow Agent"), $1,000,000
in immediately available funds (the "Phase II Deposit"), to be held and applied
by the Phase II Escrow Agent in accordance with the provisions of an escrow
agreement substantially in the form of Exhibit H hereto (the "Phase II Escrow
Agreement").
(b) The Phase II Deposit shall be held by the Phase II Escrow Agent
in escrow and managed pursuant to the terms of the Phase II Escrow Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER; DELIVERIES AT THE CLOSING
The obligations of Buyer hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Buyer in its sole discretion):
7.1 Representations and Warranties. Each of the representations and
warranties made in Articles III and IV herein shall be true and correct in all
material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects on and as of
such earlier date.
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7.2 Performance. Sellers and the Company shall have performed and
complied with each agreement, covenant and obligation required by this Agreement
to be so performed or complied with by Sellers or the Company, as the case may
be, at or before the Closing.
7.3 Officers' Certificates. Each of Sellers and the Company shall
have delivered to Buyer, a certificate, dated the Closing Date and executed by
the President of the Company, each Seller that is an individual and the
President or any Vice President of BVI, substantially in the form and to the
effect of Exhibit A hereto, (ii) certificates, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of the Company and BVI,
respectively, substantially in the form and to the effect of Exhibit B hereto
and (iii) a certificate of the Company's chief financial officer certifying (i)
the satisfaction on the Closing Date of Section 7.13 and (ii) that the assets of
the FSC have been transferred to Northwest.
7.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Buyer, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action (i) which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Buyer any Seller, the Company or any Subsidiaries, or
the transactions contemplated by this Agreement or any of the Operative
Agreements of any such Law; or (ii) wherein an unfavorable judgment, decree or
Order would prevent the carrying out of this Agreement or any of the Operative
Agreements or any of the transactions or events contemplated hereby or thereby,
declare unlawful the transactions or events contemplated by this Agreement or
present a risk of damages to Buyer.
7.5 Consents and Approvals. All (A) consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties hereto to perform their respective obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby and (B) consents (or in lieu
thereof waivers) and notices relating to the performance by Sellers of their
respective obligations under this Agreement and the Operative Agreements or
relating to the consummation of the transactions contemplated hereby and thereby
as are required under any Contract to which the Company, any Subsidiary or any
Seller is a party or by which any of their respective Assets and Properties are
bound and where the failure to obtain any such consent (or in lieu thereof
waiver) or deliver any such notice could be expected, individually or in the
aggregate with other such failures, to materially adversely affect Buyer or the
Business or Condition of the Company (i) shall have been duly obtained, made or
given in form and substance satisfactory to Buyer, (ii) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived or
otherwise impose any liabilities or restrictions on Buyer and (iii) shall be in
full force and effect. All terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
32
consummation of the transactions contemplated by this Agreement and the
Operative Agreements shall have occurred.
7.6 Opinion of Sellers' Counsel. Buyer shall have received the
opinion of (i) Bradley D. Stam, counsel to the Company, the Subsidiaries and
Sellers (other than BVI), (ii) counsel to BVI, and (iii) counsel to Guarantor,
in connection with this Agreement and the Operative Agreements to which it, he
or she is a party, dated the Closing Date, substantially in the form and to the
effect of Exhibits C-1, C-2 and C-3 hereto and to such further effect as Buyer
may reasonably request.
7.7 Operative Agreements. All Operative Agreements shall have been
duly executed and delivered by the respective parties thereto other than Buyer
and shall be in full force and effect, and the Tax Escrow Funds and the BVI
Escrow Funds shall have been deposited with the applicable escrow agents in
accordance with the Tax Escrow Agreement and the BVI Escrow Agreement.
7.8 Release of Claims. Each Seller shall have executed and delivered
to Buyer an Assignment and Release of Claims in the form of Exhibit D hereto.
7.9 Resignations. Sellers shall have delivered to Buyer duly signed
resignations, effective at the Closing, of each of the officers and directors of
the Company and its Subsidiaries.
7.10 Good Standing Certificates. Sellers shall have delivered to
Buyer (a) copies of the certificate or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto of
BVI, the Company and the Subsidiaries certified by the Secretary of State or
other appropriate government official of the jurisdiction of incorporation or
organization, (b) certificates from the Secretary of State or other appropriate
government official to the effect that BVI, the Company and each Subsidiary is
in good standing or subsisting in such jurisdiction of incorporation or
formation, listing all charter documents of BVI, the Company and each Subsidiary
on file and attesting to the payment of all franchise or similar Taxes, and (c)
certificates from the Secretary of State or other appropriate official in each
jurisdiction in which the Company and its Subsidiaries are qualified or admitted
to do business to the effect that the Company and its Subsidiaries are duly
qualified or admitted and in good standing in such jurisdiction.
7.11 Transfer to BVI; Receipt of Purchased Stock and Minute Books.
BVI shall provide Buyer evidence satisfactory to Buyer of the Contribution. The
Purchased Stock shall have been transferred to Buyer in accordance with the
terms of this Agreement. The minute books of each of the Company and its
Subsidiaries shall have been delivered to the location or locations designated
by Buyer.
7.12 Payment of Indebtedness. Sellers shall deliver to Buyer
evidence, satisfactory to Buyer, of the complete and absolute repayment,
discharge and extinguishment of all the outstanding Indebtedness of the Company
and its Subsidiaries.
33
7.13 Additional Requirements. Sellers shall deliver to Buyer
evidence, satisfactory to Buyer, that available cash of the Company shall remain
on hand, and such amount shall not be less than the sum of (a) $3,000,000, plus
(b) an amount necessary to satisfy the Expenses, which as of the Closing Date
will not exceed $150,000 plus (c) at Sellers' election, an amount sufficient to
pay the Company's liability for Taxes for Tax periods ending on or before
December 31, 1997, together with all costs and expenses (excluding internal
costs, such as staff time and internal expenses) incurred by the Company or its
Affiliates (other than members of the Seller Group) relating to the preparation
and filing of Tax Returns and payment of Taxes with respect to such Tax periods
minus (d) the total of material costs and freight charges paid by the Company,
prior to the Closing Date, with respect to fly ash in storage, as of the Closing
Date, at the Company's Sacramento, California terminal, provided, that the total
costs and charges under clause (d) shall not exceed $350,000. In the event that
the cash on hand shall be less than said total, the Purchase Price shall be
reduced, on a dollar-for-dollar basis, to the extent of such shortfall.
7.14 Proceedings. All proceedings to be taken on the part of either
Seller in connection with the transactions contemplated by this Agreement and
the Operative Agreements and all documents incident thereto shall be reasonably
satisfactory in form and substance to Buyer, and Buyer shall have received
copies of all such documents and other evidences as Buyer may reasonably request
in order to establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
7.15 Completion of Diligence. Buyer shall have been satisfied, in
its sole discretion, with (i) the results of its and its advisors' legal,
business, environmental and accounting due diligence investigations and (ii) its
and its advisors' review of complete disclosure schedules to the Agreement.
7.16 Tax Status Certificate. Buyer shall receive from the Company at
the Closing a duly executed certificate substantially in the form and to the
effect of Exhibit E.
7.17 Audited Financial Statements. The 1997 Audited Financial
Statements shall have been delivered to the Buyer on or before February 17,
1998.
7.18 No Adverse Change. There shall have occurred no material
adverse change in the Business or Condition of the Company since December 31,
1997.
7.19 Transfer of FSC's Assets. Buyer shall have been satisfied, in
its sole discretion, that all of the assets of the FSC, including but not
limited to a $150,000 receivable due to FSC, shall have been transferred to
Northwest in the form of a dividend.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS; DELIVERIES AT THE CLOSING
The obligations hereunder of Sellers are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by the Sellers, on the other hand, in
their sole discretion):
8.1 Representations and Warranties. Each of the representations and
warranties made by Buyer in this Agreement shall be true and correct on and as
of the Closing Date as though such representation or warranty was made on and as
of the Closing Date.
8.2 Performance. Buyer shall have performed and complied with each
agreement, covenant and obligation required by this Agreement to be so performed
or complied with by it at or before the Closing.
8.3 Officers' Certificates. Buyer shall have delivered to each
Seller a certificate, dated the Closing Date and executed by the President or
any Vice President of Buyer, substantially in the form and to the effect of
Exhibit F hereto, and a certificate, dated the Closing Date and executed by the
Secretary or Assistant Secretary of Buyer, substantially in the form and to the
effect of Exhibit B hereto.
8.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
8.5 Governmental Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties hereto to perform their respective obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby (a) shall have been duly obtained,
made or given, (b) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (c) shall be in full force and effect,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
8.6 Opinion of Buyer's Counsel. Sellers shall have received the
opinion of Morgan, Lewis & Bockius LLP, counsel to Buyer, in connection with
this Agreement and the Operative Agreements to which it is a party, dated the
Closing Date, substantially in the form and to the effect of Exhibit G hereto.
8.7 Operative Agreements. All Operative Agreements shall have been
duly executed by their respective parties other than Sellers and shall be in
full force and effect.
35
8.8 Receipt of the Purchase Price. In accordance with Article I,
Buyer shall have delivered to Sellers the Purchase Price less the Tax Escrow
Funds, the BVI Escrow Funds and the Phase II Deposit (which Phase II Deposit
shall be released to Sellers at Closing).
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
9.1 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Buyer and its Affiliates (whether or
not exercised) to investigate the affairs of each Seller, the Company or any
Subsidiary or any right of any party (whether or not exercised) to investigate
the accuracy of the representations and warranties of the other party contained
in this Agreement or the waiver of any provision hereof, each Seller and the
Company on the one hand, and Buyer, on the other, have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
contained in this Agreement. The representations, warranties, covenants and
agreements of each Seller, the Company and Buyer contained in this Agreement
will survive the Closing (a) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive) with respect to representations and warranties
contained in Sections 3.1 (organization), 3.2 (capital stock), 3.11 (taxes),
3.14 (benefit plans), 3.23 (environmental) and 3.30 (disclosure) (to the extent
it relates to the foregoing Sections) and 4.5 (taxes, and 4.7 (title to common
stock)), (b) until the fifteen-month anniversary of the Closing Date with
respect to all other representations and warranties and any covenant or
agreement to the extent performed, in whole or in part, on or prior to the
Closing, and (c) indefinitely with respect to all remaining covenants and
agreements, except that any representation, warranty, covenant or agreement that
would otherwise terminate in accordance with clause (a) or (b) above will
continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall
have been timely given under Article X on or prior to such termination date,
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article X, but only with respect to matters described in
the Claim Notice or Indemnity Notice.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification.
(a) Each party hereto (other than the Buyer) shall jointly and
severally indemnify Buyer and its stockholders and the general partners, limited
partners, officers, directors, employees, agents, stockholders and Affiliates of
each of them, in respect of, and hold each of them harmless from and against,
any and all Losses suffered, incurred or sustained by any of them or to which
any of them becomes subject, resulting from, arising out of or relating to any
36
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement by such party contained in this Agreement or
any of the Operative Agreements (including, without limitation, any certificate
delivered in connection herewith or therewith); provided, however, that if and
to the extent that any indemnification hereunder is unenforceable, Seller Group
shall make the maximum contribution to the payment and satisfaction of the
indemnified Losses as shall be permissible under applicable Laws; and further,
provided, that in the case of a representation, warranty, covenant or agreement
given or made solely by either BVI, on the one hand, or Gerald A. Peabody, Jr.
and Penelope A. Peabody, on the other hand, the aforementioned indemnification
responsibility for Losses suffered, incurred or sustained by any Indemnified
Parties on account of any misrepresentation or breach of warranty by said party
or nonfulfillment of or failure to perform any covenant or agreement on the part
of said party shall be several as between BVI and the Peabodys and joint and
several as between Gerald A. Peabody, Jr. and Penelope A. Peabody.
(b) Buyer agrees to indemnify Sellers in respect of, and hold each
of them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrep resentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Buyer contained in this Agreement or the Operative Agreements (including,
without limitation, any certificate delivered in connection herewith or
therewith). Buyer further agrees to indemnify Gerald A. Peabody, Jr. and
Penelope A. Peabody in respect of, and hold him or her harmless from and
against, any all losses suffered, incurred or sustained by him or her or to
which he or she becomes subject, resulting exclusively from, arising solely out
of acts or omissions of Buyer occurring post-Closing and relating solely to the
operations or business of the Company, except in respect of any legal
proceedings, Liabilities or other actual or potential Losses of which Sellers
had knowledge prior to the Closing, but which Sellers did not disclose to Buyer
prior to Closing.
(c) No amounts of indemnity shall be payable as a result of a claim
under Section 10.1(a) in respect of a misrepresentation or breach of warranty in
Article III or Article IV (other than a claim based upon fraud or willful or
criminal misconduct or pursuant to Sections 3.1, 3.2, and 3.30 (to the extent it
relates to the foregoing Sections) or Section 4.7, unless and until the
Indemnified Parties have suffered, incurred, sustained or become subject to
Losses with respect thereto in excess of $200,000 in the aggregate, in which
case the Indemnified Parties shall be entitled to seek indemnity for the entire
amount of such Losses.
(d) The joint and several indemnification obligations of Gerald A.
Peabody, Jr. and Penelope A. Peabody under Section 10.1 shall not exceed the
greater of $2,000,000 or 1/3 of the amount of the Loss claimed.
(e) No amounts of indemnity shall be payable as a result of a claim
under Section 10.1(b) in respect of a misrepresentation or breach of warranty in
Article V (other than a claim based upon fraud or willful or criminal misconduct
or pursuant to Section 5.1), unless and until the Indemnified Parties have
suffered, incurred, sustained or become subject to Losses with respect
37
thereto in excess of $200,000 in the aggregate, in which case the Indemnified
Parties shall be entitled to seek indemnity for the entire amount of such
Losses.
10.2 Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 10.1 will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 10.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a Claim Notice to the Indemnifying Party within 15 Business Days
after receipt by such Indemnified Party of written notice of the Third Party
Claim; provided, however, that failure to give such Claim Notice shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party after such assumption in connection with the defense thereof, but shall
continue to pay for any expenses of investigation or any Loss suffered. If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party. If (i)
the Indemnifying Party shall not assume the defense of a Third Party Claim with
counsel satisfactory to the Indemnified Party within 10 Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnified Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such reasonable fees, charges and disbursements, as and when incurred;
provided that if the Indemnifying Party shall not be actually prejudiced, the
Indemnified Party's right to assume the defense after 10 Business Days of any
Claim Notice shall not be limited by (i) above. Whether the Indemnifying Party
or the Indemnified Party controls the defense of any Third Party Claim, the
parties hereto shall cooperate in the defense thereof. Such cooperation shall
include the retention and provision to the counsel of the controlling party of
records and information which are reasonably relevant to such Third Party
38
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Indemnifying Party shall have the right to settle, compromise or discharge a
Third Party Claim (other than any such Third Party Claim in which criminal
conduct is alleged) without the Indemnified Party's consent if such settlement,
compromise or discharge (i) constitutes a complete and unconditional discharge
and release of the Indemnified Party, and (ii) provides for no relief other than
the payment of monetary damages and such monetary damages are paid in full by
the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 10.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice to the
Indemnifying Party with reasonable promptness following the Indemnified Party's
awareness of such claim. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been irreparably
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or fails
to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, then
the Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 10.1 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability with respect
to such claim, the Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute shall be
resolved by litigation commenced by the Indemnified Party within 180 days of end
of Resolution Period in a court of competent jurisdiction.
(d) Except with respect to matters involving fraud or criminal
misconduct, the rights accorded to Indemnified Parties hereunder shall be the
exclusive remedy for monetary damages available to the Indemnified Parties
against the Indemnifying Party with respect to any matter for which indemnity is
provided hereunder. Except as limited by the preceding sentence, each
Indemnified Party shall retain all rights that it may have at law or in equity,
under federal and state securities laws, or by separate agreement, including,
without limitation, under the Operative Agreements or otherwise.
(e) Notwithstanding anything contained in this Agreement to the
contrary, Liabilities of the Company and of Subsidiaries relating to this
Agreement or any Operative Agreement shall be the joint and several
responsibility solely of Sellers. No Seller shall be entitled to any
indemnification, right of contribution or other right of recovery from the
Company or any of the Subsidiaries in connection with any claim made by an
Indemnified Party hereunder.
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ARTICLE XI
CERTAIN TAX MATTERS
11.1 Allocation of Tax Liability.
(a) Subject to Section 11.1(b), Seller shall pay or cause to be
paid, and indemnifies each Tax Indemnitee, jointly and severally, and agrees to
protect, save and hold each Tax Indemnitee harmless from and against:
(i) any Tax imposed upon or relating to the Company for any
Tax period ending on or before December 31, 1997;
(ii) any Tax arising directly or indirectly from a breach of a
representation or warranty set out in Section 3.11 of this Agreement; and
(iii) with respect to any Tax period or portion thereof ending
after December 31, 1997 and on or before the Closing Date, any Tax arising
directly or indirectly from a breach of Section 6.2; provided, however, that an
election by the Company to be a "consenting corporation" within the meaning of
Section 341(f)(1) of the Code or comparable provisions of any state statutes
shall not be in breach of Section 6.2 or otherwise be a basis for
indemnification of any Tax Indemnitee under this Article XI.
(b) The Sellers' payment and indemnification obligation for any Tax
under Section 11.1(a) shall be reduced by, and shall not include, an amount
equal to the sum of:
(i) any actual reduction in the Company's current liability
for Tax (net of any actual increase in such liability) in any tax period ending
after the Closing Date arising from any adjustments to income or to any other
tax base required by the Final Determination resolving the Tax with respect to
which the Section 11.1(a) payment is to be made; and
(ii) any projected reduction in the Company's current or
future liability for Taxes (net of any projected increase in such liability) in
any tax period ending after the Closing Date arising from any adjustments to
income or to any other tax base required by the Final Determination resolving
the Tax with respect to which the Section 11.1(a) payment is to be made. This
projected reduction will be computed by applying the Company's upper marginal
tax rate for the year in which the indemnification payment is to be made to the
adjustment in the relevant tax base. The resulting amount will then be
discounted over the future portion of the reversal period at an annual rate of
12 percent.
Any dispute regarding the applicability or amount of reduction in Sellers'
obligations pursuant to this paragraph (b) shall be resolved by an independent
accounting firm jointly engaged by Sellers and Company. Each of Sellers and the
Company shall bear and pay one-half of the fees and other
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costs charged by the independent accounting firm, and the determination of the
independent accounting firm shall be final and binding on the parties hereto.
(c) Except as otherwise provided in Section 11.3(d), payment in full
of any amount due from Sellers under this Section 11.1 shall be made from the
Tax Escrow Funds, and, to the extent such Tax Escrow Funds are no longer
available, by Sellers, in each case, to the affected Tax Indemnitee in
immediately available funds at least five (5) Business Days before the date
payment of the Taxes to which such payment relates is due.
11.2 Preparation and Filing of Tax Returns; Refunds.
(a) Seller shall prepare or cause to be prepared, consistent with
past practices, all Tax Returns of, or that include, the Company or any
Subsidiary for all taxable periods that end on or before December 31, 1997 and
shall deliver such Tax Returns to the Company for filing. To the extent that the
amount reserved for pursuant to clause (d) of Section 7.13 is insufficient for
such payments, with respect to Tax Returns filed after the Closing, Seller shall
deliver funds to the Company sufficient to pay all Tax liabilities shown by such
Tax Returns to be due and all costs and expenses (excluding internal costs, such
as staff time and internal expenses) incurred by the Company or its Affiliates
(other than members of the Seller Group) with respect to the preparation and
filing of such Tax Returns. With respect to filings after the Effective Date,
Seller will allow Buyer an opportunity to review and comment upon such Tax
Returns (including any amended Returns) prior to filing.
(b) Buyer shall file or cause to be filed all Tax Returns of, or
that include, the Company or its Subsidiaries for taxable periods ending after
December 31, 1997.
(c) Any refund of Taxes (including any interest thereon) that
relates to the Company and that is attributable to a Tax period ending after
December 31, 1997, including any such refund or other benefit realized by the
Company that results from the carry forward of any tax attribute from a Tax
period ending on or before December 31, 1997, shall be the property of the
Company and shall be retained by the Company (or, if applicable, promptly paid
by Seller to the Company if any such refund (or interest thereon) is received by
Seller or Affiliates).
(d) If (i) after the Closing Date, the Company receives any refund
of Taxes (including any interest thereon) that relates to, and that was
previously paid by or on behalf of, the Company and that is attributable to a
Tax period ending on or before December 31, 1997 and (ii) the Tax was paid (A)
by any member of Seller Group (including by a payment to the Company pursuant to
Section 11.2(a)) or from the amount reserved for such Taxes pursuant to clause
(d) of Section 7.13 after the Closing Date, or (B) by any member of Seller Group
or the Company on or before the Closing Date, then the Company promptly shall
pay or cause to be paid to Seller the amount of such refund, but net of any
Taxes imposed on any Tax Indemnitee with respect thereto. If there is a
subsequent adjustment to any such refund, then any payment or payments
theretofore made with respect to such refund pursuant to this Section 11.2(d)
promptly shall be adjusted appropriately by
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means of a payment from Seller to the Company or the Company to Seller, as the
case may be. Except as provided in this Section 11.2(d), any refund of Taxes
that relates to the Company and that is attributable to a Tax period ending on
or before December 31, 1997 (such as a refund (x) for a tax period ending after
December 31, 1997, that relates to a tax attribute or tax basis item arising in
a Tax period ending on or before December 31, 1997, or (y) of a Tax that was
paid by the Company (without reimbursement by the Sellers or provision of a
reserved amount pursuant to clause (d) of Section 7.13) after the Closing Date)
shall be the property of the Company and shall be retained by or promptly paid
to the Company.
11.3 Tax Contests.
(a) If any Tax Authority or other person asserts a Tax Claim, then
the party hereto first receiving notice of such Tax Claim promptly shall provide
written notice thereof to the other party or parties hereto. Such notice shall
specify in reasonable detail the basis for such Tax Claim and shall include a
copy of any relevant correspondence received from the Tax Authority or other
person.
(b) If, within 30 calendar days after Seller receives or delivers,
as the case may be, notice of a Tax Claim, Seller provides to the Company an
Election Notice, then, subject to the provisions of this Section 11.4, Seller
shall have the right to defend or prosecute, at its sole cost, expense and risk,
such Tax Claim by all appropriate proceedings, which proceedings shall be
defended or prosecuted diligently by Seller to a Final Determination; provided,
however, that Seller shall not, without the prior written consent of the
Company, enter into any compromise or settlement of such Tax Claim that would
result in any Tax detriment to any Tax Indemnitee. So long as Seller is
defending or prosecuting a Tax Claim, the Company shall provide or cause to be
provided to Seller any information reasonably requested by Seller relating to
such Tax Claim, and the Company shall otherwise cooperate with Seller and its
representatives in good faith in order to contest effectively such Tax Claim.
Seller shall inform the Company of all developments and events relating to such
Tax Claim (including, without limitation, providing to the Company copies of all
written materials relating to such Tax Claim), and the Company or its authorized
representatives shall be entitled, at the expense of the Company, to attend, but
not participate in or control, all conferences, meetings and proceedings
relating to such Tax Claim.
(c) If, with respect to any Tax Claim, Seller fails to deliver an
Election Notice to the Company within the period provided in Section 11.4(b) or,
after delivery of such Election Notice, Seller fails diligently to defend or
prosecute such Tax Claim to a Final Determination, then the Company shall at any
time thereafter have the right (but not the obligation) to defend or prosecute,
at the sole cost, expense and risk of Seller, such Tax Claim. The Company shall
have full control of such defense or prosecution and such proceedings, including
any settlement or compromise thereof. If requested by the Company, Seller Group
shall cooperate in good faith with the Company and its authorized
representatives in order to contest effectively such Tax Claim. Seller may
attend, but not participate in or control, any defense, prosecution, settlement
or compromise of any Tax Claim controlled by the Company pursuant to this
Section 11.4(c), and shall
42
bear its own costs and expenses with respect thereto. In the case of any Tax
Claim that is defended or prosecuted by the Company pursuant to this Section
11.4(c), the Company shall, from time to time, be entitled to current payment
from Seller with respect to costs and expenses incurred by the Company in
connection with such defense or prosecution (including, without limitation,
reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on a Tax
Indemnitee as a result of receiving a payment from Seller pursuant to this
Section 11.4, but excluding any internal costs (e.g., staff time and internal
expenses) incurred by the Buyer, the Company, or any Subsidiary of the Buyer or
the Company) (collectively, "Associated Costs").
(d) In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by Seller pursuant to this Section 11.4, Seller shall pay to
the appropriate Tax Indemnitee, in immediately available funds, the full amount
of any Tax arising or resulting from such Tax Claim within five Business Days
after such Final Determination. In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Company pursuant to the terms of this
Section 11.4, Seller shall pay to the appropriate Tax Indemnitee, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim, together with any Associated Costs that have not theretofore been paid by
Seller to the Company, within five Business Days after such Final Determination.
In the case of any Tax Claim not covered by the two preceding sentences, Seller
shall pay to the appropriate Tax Indemnitee, in immediately available funds, the
full amount of any Tax arising or resulting from such Tax Claim (reduced as
required by Section 11.1(b)), together with any Associated Costs that have not
theretofore been paid by Seller to the Company, at least five Business Days
before the date payment of such Tax is due from any Tax Indemnitee.
(e) Notwithstanding anything contained in this Article XI to the
contrary, the rights of Seller under this Section 11.4 to defend or prosecute,
or to control the defense or prosecution of, any Tax Claim shall be no greater
than those rights that the Company would have to defend or prosecute, or to
control the defense or prosecution of, such Tax Claim.
11.4 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Tax Return, amended Tax Return or claim for refund, in determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant Tax Returns, together with
relevant accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by Tax Authorities and relevant
records concerning the ownership and Tax basis of property, which any such party
may possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide an explanation of any documents
or information so provided. Subject to the preceding sentences, each party
required to file Tax Returns pursuant to this Article XI shall bear all costs of
filing such Tax Returns.
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11.5 Other Tax Covenants.
(a) Without the prior written consent of Buyer, neither any Seller
nor any Affiliate of a Seller shall, to the extent it may affect or relate to
the Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Tax
Return, enter into any method of tax accounting, file any amended Tax Return,
enter into any closing agreement, settle any Tax claim, assessment or proposed
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would have
the effect of increasing any Tax liability of Buyer or the Company or of any
Affiliate of any such party for any Tax period ending after December 31, 1997.
(b) Without the prior written consent of Seller, neither Buyer nor
the Company shall, to the extent it may affect or relate to the Company, make or
change any tax election, file any amended Return, enter into any Closing
Agreement, settle any Tax claim, assessment or proposed assessment, surrender
any right to claim a Tax refund, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would affect a Tax period
ending on or before December 31, 1997.
(c) Seller shall be responsible for (and indemnify Buyer against)
any sales, transfer, recording or other similar tax imposed as a result of the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements; provided, that Buyer shall be responsible for applicable
New York State sales and transfer taxes.
11.6 Conflict. In the event of a conflict between the provisions of
this Article XI and any other provision of this Agreement, such provisions of
this Article XI shall control. Without limiting the foregoing, nothing in
Article X of this Agreement shall limit, modify or in any way affect the
provisions of this Article XI.
ARTICLE XII
DEFINITIONS
12.1 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"1996 Audited Balance Sheet" has the meaning ascribed to it in
Section 3.8(a).
"1997 Audited Balance Sheet" has the meaning ascribed to it in
Section 3.8(c).
"1997 Audited Financial Statements" has the meaning ascribed to it
in Section 3.8(c).
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"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 5% or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) any director, partner, officer, agent, employee or
relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended, modified or restated from time to time in accordance
with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Assignment and Release of Claims" means the assignment of Assets
and Properties used by the Company or the Subsidiaries and the release of claims
executed and delivered by each Seller, substantially in the form and to the
effect of Exhibit D hereto, as such assignment and release of claims may be
amended, modified or restated from time to time.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of 10% or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Associated Costs" has the meaning ascribed to it in Section
11.3(c).
"Audited Financial Statements" has the meaning ascribed to it in
Section 3.8(a).
"Benefit Plan" means any Plan established by the Company, any
Subsidiary or any predecessor or Affiliate of the Company or any Subsidiary,
existing at the Closing Date or prior
45
thereto, to which the Company or any Subsidiary contributes or has contributed,
or under which any employee, former employee or director of the Company or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business Combination" means, with respect to any Person, (i) any
merger, consolidation or combination to which such Person is a party, (ii) any
sale, dividend, split or other disposition of any capital stock or other equity
interests of such Person, (iii) any tender offer (including without limitation a
self-tender), exchange offer, recapitalization, liquidation, dissolution or
similar transaction, (iv) any sale, dividend or other disposition of all or a
material portion of the Assets and Properties of such Person or (v) the entering
into of any agreement or understanding, or the granting of any rights or
options, with respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company and its Subsidiaries.
"Buyer" has the meaning ascribed to it in the forepart of this
Agreement.
"Buyer's Advisors " has the meaning ascribed to it in Section 6.1.
"BVI" means Kokan Company Limited, a company organized under the
laws of the British Virgin Islands and its successors and assigns.
"BVI Escrow Agent" has the meaning ascribed to it in Section 1.4(c).
"BVI Escrow Agreement" has the meaning ascribed to it in Section
1.4(c).
"BVI Escrow Funds" has the meaning ascribed to it in Section 1.4(c).
"Capital Stock" has the meaning ascribed to it in Section 3.2.
"CCB" has the meaning ascribed to it in Section 6.9(a).
46
"Claim Notice" means written notification pursuant to Section
10.2(a) of a Third Party Claim as to which indemnity under Section 10.1 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party and for the Indemnified Party's claim against the
Indemnifying Party under Section 10.1.
"Class A Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class B Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class C Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class D Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Closing" has the meaning ascribed to it in Section 1.3.
"Closing Date" has the meaning ascribed to it in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement (and, unless the context otherwise requires, shall include any
predecessor of the Company).
"Contract" means any agreement, obligation, undertaking, lease,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral and whether expressed or implied).
"Contribution" has the meaning ascribed to it in the forepart of
this Agreement.
"Disclosure Schedule" means the schedules delivered to Buyer by or
on behalf of the Company and Sellers, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Discoveries and Works" has the meaning ascribed to it in Section
6.9(d).
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Effective Date" has the meaning ascribed to it in the forepart of
this Agreement.
"Election Notice" means a written notice provided by Seller in
respect of a Tax Claim to the effect that (i) Seller acknowledges its indemnity
obligation under this Agreement with respect
47
to such Tax Claim and (ii) Seller elects to contest, and to control the defense
or prosecution of, such Tax Claim at the sole risk and sole cost and expense of
Seller.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, (collectively,
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental or Regulatory Authority,
private person and citizens' group) based upon, alleging, asserting, or claiming
any actual or potential (i) violation of or liability under any Environmental
Law, (ii) violation of any Environmental Permit, or (iii) liability for
investigatory costs, cleanup costs, removal costs, remedial costs, response
costs, natural resource damages, property damage, personal injury, fines, or
penalties arising out of, based on, resulting from, or related to the presence,
Release, or threatened Release into the Environment, of any Hazardous Materials
at any location, including but not limited to any off-Site location to which
Hazardous Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened or suspected Release of a Hazardous
Material.
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety Laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, approvals, consents or authorizations required by
any Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor law and the rules and regulations promulgated
thereunder.
"Expenses" means all costs and expenses of the Company or any of the
Subsidiaries incurred in connection with this Agreement, the Operative
Agreements or the transactions contemplated hereby or thereby.
"Final Determination" means (i) a decision, judgment, decree or
other order by any court of competent jurisdiction, which decision, judgment,
decree or other order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"FSC" has the meaning ascribed to it in the forepart of this
Agreement.
"FSC Disposition" has the meaning ascribed to it in the forepart of
this Agreement.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include, without limitation, any
stock exchange, quotation service and the National Association of Securities
Dealers.
"Guarantee Agreement" means the Indemnification and Guarantee
Agreement dated as of the date hereof by and among the Company, Buyer and
Guarantor.
"Guarantor" means Greensburg Trust, a trust formed under the laws of
Hong Kong.
"Hart-Scott-Rodino Act" has the meaning ascribed to it in Section
3.6.
"Hazardous Material" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(B) any chemicals, materials, substances or wastes which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import,
under any Environmental Law; and (C) any other chemical, material,
49
substance or waste, exposure to which is now prohibited, limited or regulated by
any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article X.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article X.
"Indemnity Notice" means written notification pursuant to Section
10.2(c) of a claim for indemnity under Article X by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, copyrights and copyright rights, patents
and patent rights, brand names, product designs, product packaging, business and
product names, logos, slogans, rights of publicity, trade secrets, inventions,
processes, formulae, industrial models, processes, designs, specifications,
data, technology, methodologies, computer programs and any other confidential
and proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, trademarks, service marks and copyrights, and the
right to sue for past infringement, if any, in connection with any of the
foregoing, and all documents, disks and other media on which any of the
foregoing is stored.
"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"Knowledge" or "Knowledge of the Company" means (A) with respect to
representations and warranties set forth herein made as of the Effective Date
and for the period ending as of the Phase I Completion Date, the actual
knowledge of Gerald A. Peabody, Jr., and Penelope A. Peabody, (B) with respect
to representations and warranties set forth herein made as of the Phase I
Completion Date and for the period ending as of the Closing Date, the actual
knowledge of Clinton A. Kurtz, Gerald A. Peabody, Jr., and Penelope A. Peabody,
and (C) with respect to
50
representations and warranties set forth herein made as of the Closing Date, the
actual knowledge after due inquiry of Clinton A. Kurtz, Gerald A. Peabody, Jr.,
and Penelope A. Peabody after discussions with Renee Bertheau (Vice-President
Transportation), Denis Augustine (Vice-President Sales), Tom Fox (Vice-President
Product Development) and H.E. Coder (Operations Manager).
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, option, right of first refusal, restriction on
the exercise of any attribute of ownership, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include without limitation, all fees and
expenses, including, without limitation fees and expenses of attorneys, incurred
in connection with (i) the investigation or defense of any Third Party Claims or
(ii) asserting or disputing any rights under this Agreement or the
Indemnification and Guarantee Agreement dated as of the date hereof by and among
Buyer and the other parties named therein (the "Guarantee Agreement") against
any party hereto or otherwise).
"Non-Competing Party" has the meaning ascribed to it in Section
6.9(a).
"Northwest" has the meaning ascribed to it in the forepart of this
Agreement.
"Operative Agreements" means this Agreement, the Assignment and
Release of Claims, the BVI Escrow Agreement, the Phase II Escrow Agreement, the
Tax Escrow Agreement, the Guarantee Agreement and any other agreements to be
entered into in connection with the transactions contemplated by this Agreement.
51
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decision, ruling, decree,
injunction or similar order of any Governmental or Regulatory Authority (in each
such case whether preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, and (ii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not impair the value or marketability of
the property subject to such Lien or interfere with the use of such property in
the conduct of the business of the Company and which do not secure obligations
for money borrowed.
"Person" means any natural person, corporation, general or limited
partnership, limited liability company or partnership, proprietorship, other
business organization, estate, trust, union, association or Governmental or
Regulatory Authority.
"Phase I" has the meaning ascribed to it in the forepart of this
Agreement.
"Phase I Completion Date" has the meaning ascribed to it in the
forepart of this agreement.
"Phase I Material" shall mean (i) any and all documents and written
or oral information or data (other than Phase II Material) relating to the
Business or Condition of the Company, and (ii) information obtained from
communications with Gerald A. Peabody, Jr. or Clinton A. Kurtz.
"Phase II" has the meaning ascribed to it in the forepart of this
Agreement.
"Phase II Commencement Date" has the meaning ascribed to it in the
forepart of this Agreement.
"Phase II Deposit" has the meaning ascribed to it in Section
6.10(a).
"Phase II Escrow Agent" has the meaning ascribed to it in Section
6.10(a).
"Phase II Escrow Agreement" has the meaning ascribed to it in
Section 6.10(a).
52
"Phase II Material" means (i) any and all documents and written or
oral information or data relating to (A) the contents of the Contracts
identified on Annex I hereto, (B) the identities of the Company's and
Subsidiaries' customers, (C) the prices paid or charged by the Company and
Subsidiaries for products it sells or has sold in the ordinary course of
business, and (D) the costs charged by suppliers to the Company and its
Subsidiaries, and (ii) any information obtained from communications with
employees (including Gerald A. Peabody, Jr.) of the Company.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"PNBC" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Purchased Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Refund Event" means any of (i) a breach by the Company or any
Seller of Sections 6.1(b)(i), 6.1(b)(ii), 6.3(a), 6.3(b), provided, that, the
breach of Section 6.3(b) relates to or is descriptive of Sections 3.9(a),
3.9(b), 3.9(d) (excluding Indebtedness of the Company and its Subsidiaries
incurred under the current line of credit with US Bank of Washington, N.A.),
3.9(e) (to the extent involving uninsured damages and Losses in the aggregate
exceeding $100,000) and 3.9(g) (to the extent involving the disposition of
Assets and Properties having a value in the aggregate exceeding $100,000) and
3.9(k) (to the extent involving payments in the aggregate exceeding $100,000),
6.3(e) (to the extent such relates to activities listed in Section 6.3(a) or
6.3(b) as limited by the proviso contained in clause (i)) and 6.8 (resulting in
a failure to consummate the transactions contemplated hereby), as to which Buyer
did not have actual knowledge which it waived in writing prior to Phase II; or
(ii) the discovery that any Contract listed on Annex II hereto is not, or on the
Closing Date will not be, in full force and effect and constitute a legal, valid
and binding agreement of, enforceable in accordance with its terms against, each
party (other than the Company and its Subsidiaries) thereto, or any such
Contract by its terms will be terminated, breached or violated as a result of
the Company entering into this Agreement or the consummation of any of the
transactions contemplated hereby and Buyer terminates this Agreement in
accordance with Section 13.1, or (iii) the Company or any Seller terminates this
Agreement in violation of Section 13.1.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
53
"Relevant Group" has the meaning ascribed to it in Section 3.11(a).
"Resolution Period" means the period ending 60 calendar days
following receipt by an Indemnified Party of a dispute notice.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor law and the rules and regulations thereunder.
"Seller" or "Sellers" has the meaning ascribed to it in the forepart
of this Agreement.
"Seller Group" means any affiliated, combined, consolidated, unitary
or similar group of which the Company is or was, prior to the Closing Date, a
member for purposes of federal income taxation.
"Site" means any of the real properties currently or previously
owned by the Company or any Subsidiary, any predecessors of the Company or any
Subsidiary, or any entities previously owned by the Company or any Subsidiary,
including all soil, subsoil, surface waters and groundwater thereat.
"St. Helens" has the meaning ascribed to it in the forepart of this
Agreement.
"Subsidiary" means (i) with respect to the Company, any Person in
which the Company, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the Effective Date,
including, without limitation, each of St. Helens, Northwest, PNBC and FSC; and
(ii) with respect to any Person other than the Company, any Person which,
directly or indirectly through subsidiaries or otherwise, beneficially owns at
least 50% of either the equity interest in, or the voting control of, such
Person, whether or not existing on the Effective Date.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Claim" means any notice by any Tax Authority or other Person
that a Tax Return for a tax period ending on or before December 31, 1997 is to
be audited, examined or reviewed, and any claim with respect to Taxes
attributable to a tax period ending on or before December 31, 1997, made by any
Tax Authority or any Person, if such audit, examination, review or claim, if
pursued successfully, could serve as the basis for a claim for indemnification,
under this Agreement, of a Tax Indemnitee.
54
"Tax Escrow Agent" has the meaning ascribed to it in Section 1.4(a).
"Tax Escrow Agreement" has the meaning ascribed to it in Section
1.4(a).
"Tax Escrow Funds" shall have the meaning set forth in Section
1.4(a).
"Tax Indemnitee" means the Company, Buyer and their respective
stockholders (other than Sellers), and the general partners, limited partners,
officers, directors, employees, agents and Affiliates of each of them (other
than Sellers).
"Tax Returns" means any returns (including any information returns),
reports or statements required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party" shall mean any Person other than the parties hereto
and other than the Company.
"Third Party Claim" has the meaning ascribed to it in Section 10.2.
"Trade Secrets or other Confidential Information" has the meaning
ascribed to it in Section 6.9(c).
"Unaudited Financial Statements" has the meaning ascribed to it in
Section 3.8(a).
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
(c) Without limiting the phrase "Knowledge of the Company", when
used herein, the phrase "to the knowledge of" any Person, "to the best knowledge
of" any Person or any similar phrase, means (i) with respect to any Person who
is an individual, the actual knowledge of such Person, (ii) with respect to any
other Person, the actual knowledge of the directors, officers, members,
managers, general partners, and other similar Person in a similar position or
having similar powers and duties.
55
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
the Sellers, on the one hand, and Buyer, on the other hand;
(b) at any time before the Closing, by the Sellers, on the one hand,
or Buyer, on the other hand, in the event (i) of a material breach hereof or of
the Guarantee Agreement by the non-terminating party if such non-terminating
party fails to cure such breach within five (5) Business Days following
notification thereof by the terminating party or (ii) upon notification of the
non-terminating party by the terminating party that the satisfaction of any
condition to the terminating party's obligations under this Agreement becomes
impossible or impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied is not caused by a breach hereof
by the terminating party; and
(c) at any time after March 4, 1998, by the Sellers, on the one
hand, or Buyer, on the other hand, upon notification of the non-terminating
party by the terminating party if the Closing shall not have occurred on or
before such date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party.
13.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 13.1, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of each Seller, the
Company or Buyer, except that the provisions with respect to expenses in Section
14.3 and confidentiality in Section 14.4 will continue to apply following any
such termination; provided, however, that, notwithstanding any other provision
in this Agreement to the contrary, upon termination of this Agreement after the
Phase II Commencement Date for a Refund Event, the Buyer may recover the Phase
II Deposit in its entirety in accordance with the Phase II Escrow Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
56
(a) If to the Company, Pozzolanic Resources, Inc.
prior to Closing: 7525 SE 24th Street, Suite 630
Mercer Island, WA 98040
Facsimile No: (206) 232-5869
Attn: Gerald A. Peabody, Jr.
with a copy to: Bradley D. Stam
2038 139th Place S.E.
Bellevue, WA 98005-4036
Facsimile No: (425) 747-4378
(b) If to Buyer, to: JTM Industries, Inc.
127 South 500 East, Suite 675
Salt Lake City, UT 84102
Facsimile No: (801) 355-9167
Attn: Jean I. Everest II
with a copy to: Citicorp Venture Capital, Ltd.
399 Park Avenue - 14th Floor
New York, NY 10043
Facsimile No: (212) 888-2940
Attn: Joseph M. Silvestri
and with a copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No: (212) 309-6273
Attn: Philip H. Werner
(c) If to any Seller to the address as it appears in the records of
the Company.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the third Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided for in this Section, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other party
hereto.
57
14.2 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof; provided, that, Buyer shall remain bound by the confidentiality
agreement between Buyer and the Company in existence on the date hereof.
14.3 Expenses. Except as otherwise expressly provided in this
Agreement, the Company shall pay the costs and expenses of Sellers and Buyer
will pay its own costs and expenses incurred in connection with this Agreement,
the Operative Agreements, and the transactions contemplated hereby and thereby.
14.4 Confidentiality. Each Seller will hold in strict confidence
from any Person (other than any Affiliate of Buyer, representative of Buyer or
such Affiliate, or any Buyer's Advisors), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning Buyer or any of its
Affiliates furnished to it by the other party or such other party's
representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential.
14.5 Further Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing, Sellers shall execute and deliver to Buyer
such other documents and instruments, provide such materials and information and
take such other actions as Buyer may reasonably request to consummate the
transactions contemplated by this Agreement and the Operative Agreements and
otherwise to cause Sellers to fulfill each of their respective obligations under
this Agreement and the Operative Agreements.
14.6 Certain Assets and Properties. Each Seller hereby transfers,
conveys, assigns and delivers to the Company, free and clear of all Liens, all
of such Seller's respective Assets and Properties, if any, used, held for use or
related to the business or operations of the Company or the Subsidiaries.
14.7 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more
58
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
14.8 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of Buyer and
the Sellers.
14.9 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article X.
14.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any Seller or the Company without the prior written consent of
Buyer and any attempt to do so will be void. Buyer may assign any or all of its
rights, interests and obligations hereunder (including without limitation its
rights under Article X) to (i) the parent of or any wholly-owned Subsidiary of
Buyer, (ii) any post-Closing purchaser of all or a substantial part of the
Assets or Properties of Buyer or (iii) any financial institution providing
purchase money or other financing to Buyer from time to time as collateral
security for such financing, but no such assignment referred to in clause (i) or
(ii) above shall relieve the assigning party of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
14.11 Limited Recourse. Notwithstanding anything in this Agreement
to the contrary, (i) the obligations and liabilities of the parties hereunder
shall be without recourse to any stockholder of Buyer or any of such
stockholder's Affiliates, directors, employees, officers or agents and shall be
limited to the assets of such party and (ii) the stockholder of Buyer or any of
such stockholder's Affiliates, directors, employees, officers or agents have
made no (and shall not be deemed to have made any) representations, warranties
or covenants (express or implied) under or in connection with this Agreement.
14.12 Public Announcements. At all times at or before the Closing,
none of the parties hereto will issue or make any statements or releases to the
public with respect to this Agreement or the transactions contemplated hereby
without the consent of the other parties hereto, which consent in each case
shall not be unreasonably withheld. If any party hereto is unable to obtain the
approval of its public statement or release from the other parties hereto and
such statement or release is, in the opinion of legal counsel to such party,
required by Law in order to discharge such party's disclosure obligations, then
such party may make or issue the legally required statement or release and
promptly furnish the other parties hereto with a copy thereof. Each of Sellers
and Buyer will also obtain the other's prior approval of any press release to be
issued immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
59
14.13 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
14.14 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
14.15 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Washington,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Washington or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Washington.
14.16 Consent to Jurisdiction and Service of Process. EACH SELLER
AND THE COMPANY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF KING, STATE OF WASHINGTON AND IRREVOCABLY AGREES
THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE OPERATIVE
AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. THE COMPANY AND EACH SELLER ACCEPTS
FOR ITSELF AND HIMSELF (OR HERSELF) AND IN CONNECTION WITH ITS AND HIS (OR HER)
RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT OR THE OPERATIVE AGREEMENTS. EACH SELLER AND
THE COMPANY FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT
THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 15
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES
AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY OF THE
OTHER PARTIES HERETO
60
IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY
APPLICABLE LAW.
14.17 Construction. The parties hereto agree that this Agreement is
the product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
14.18 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature Page to Follow]
61
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the undersigned parties hereto as of the date first above written.
JTM INDUSTRIES, INC.
By:
-------------------------
Name:
Title:
SELLERS:
Shares of Capital Stock Transferred
-----------------------------------
Class A Class C Class D
------- ------- -------
-----------------------------
99 2900 ----- Gerald A. Peabody, Jr.
-----------------------------
1 ----- ----- Penelope A. Peabody
100 ----- 5800 KOKAN COMPANY LIMITED
By:
-------------------------
Name:
Title:
POZZOLANIC RESOURCES, INC.
-----------------------------
Name:
Title:
Annex I
Phase II Contract List
Power Plant Contracts
1. Jim Bridger Power Plant (purchase and resale of fly ash by St. Helens
Investments, Inc. ("St. Helens"); purchase and resale of bottom ash by St.
Helens with occasional sales to date)
2. Naughton Power Plant (purchase and resale of fly ash by St. Helens;
purchase and resale of bottom ash by St. Helens with occasional sales to
date)
3. I.P.S.C. Power Plant (purchase and resale of fly ash by St. Helens;
purchase and resale of bottom ash by St. Helens with no sales to date)
4. Craig Power Plant (purchase and resale of fly ash by St. Helens)
5. Hayden Power Plant (purchase and resale of fly ash occasionally by St.
Helens)
6. Centralia Power Plant (purchase and resale of fly ash by Pozzolanic
Northwest Inc. ("Northwest"))
7. Healy Power Plant (purchase and resale of fly ash by Northwest)
8. Dave Johnston Plant (purchase and resale of fly ash by St. Helens under
verbal agreement - no written agreement in effect)
9. Hunter Power Plant (purchase and resale of fly ash occasionally by St.
Helens; contract for bottom ash by St. Helens but no sales to date)
10. Huntington Power Plant (purchase and resale of fly ash by St. Helens but
not sales to date; contract for purchase and resale of bottom ash by St.
Helens)
11. Carbon Power Plant (purchase and resale of fly ash occasionally by St.
Helens; contract for purchase and resale of bottom ash sales by St. Helens
but no sales to date)
12. Laramie River Power Plant (purchase and resale of fly ash occasionally by
St. Helens)
Annex II
Refund Event Contract List
- --------------------------------------------------------------------------------
Fly Ash
Plant Contract End Date
- --------------------------------------------------------------------------------
Centralia February 28, 2012
with continuous extensions
under certain conditions
- --------------------------------------------------------------------------------
Jim Bridger May 31, 2008
and extended to May 31, 2013
if performing in accordance
with Agreement
- --------------------------------------------------------------------------------
I.P.S.C. January 2002
with minimum 5-year extension plan
under certain conditions
- --------------------------------------------------------------------------------
Craig July 31, 2006
- --------------------------------------------------------------------------------
Naughton March 12, 2000
with 5-year extensions
under certain conditions
- --------------------------------------------------------------------------------
Healy July 27, 2000
- --------------------------------------------------------------------------------
Annex III
Financing Commitment Letter
[Previously delivered to Seller]