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ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (this "Agreement")
is made and
entered into as of September 1, 1996 by and among Advanced
Materials, Inc., a
California corporation ("Buyer"), Gasket and Molded Products,
Inc., a Colorado
corporation ("Seller") and Richard S. Rouse, a shareholder of
Seller (the
"Shareholder") and Neal M. Price, a shareholder of Seller (as
to Section 5.3
only).
RECITALS
WHEREAS, subject to the terms and conditions hereof,
Seller desires to sell
all of its right, title and interest in and to the properties
and assets owned
or used or held for use by Seller, whether tangible or
intangible, of every kind
whatsoever, including all those relating to or used in
connection with, or
useful or necessary for the conduct of, or otherwise material
to, Seller's
business, wherever located, and the goodwill pertaining
thereto, except the
Excluded Assets (the "Assets"); and
WHEREAS, subject to the terms and conditions hereof, Buyer
desires to
purchase said Assets of Seller for the consideration specified
herein; and
WHEREAS, Shareholder has agreed to guarantee certain of
the obligations of
Seller hereunder.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
provisions set
forth below, and subject to the terms and conditions set forth
herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have
the meanings
indicated below:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in
Section 3.13.
"ADJUSTED PURCHASE PRICE" shall have the meaning set forth
in Section
2.5(b).
"AFFILIATE" shall mean, in respect of any specified
Person, any other
Person that, directly or indirectly, controls, is controlled
by, or is under
common control with, such specified Person or if such
specified Person bears a
familial relationship with such other Person (the terms
"controls," "controlled"
or "control" meaning the possession, directly or indirectly,
of the power to
direct or cause the direction of management policies of a
Person, whether
through the ownership of securities by contract or credit
arrangement, as
trustee or executor, or otherwise).
"AFFILIATED PARTIES" shall have the meaning set forth in
Section 7.1.
"AGENT" shall have the meaning set forth in Section
2.5(c).
"AGREEMENT" shall have the meaning set forth in the
Preamble.
"ASSETS" shall have the meaning set forth in the Preamble.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 2.3.
"BUYER" shall have the meaning set forth in the Preamble.
"BUYER'S WARRANTY COSTS" shall have the meaning set forth
in Section 5.4.
"CERCLA" shall have the meaning set forth within the
definition of
"Environmental Protection Laws"
"CLOSING" shall have the meaning set forth in Section 2.4.
"CLOSING DATE" shall have the meaning set forth in Section
2.4.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"CONTRACTS" shall have the meaning set forth in Section
2.1(c).
"EMPLOYMENT-RELATED AGREEMENTS" shall mean (i) any
employment, consulting,
collective bargaining or similar agreement, whether written or
oral, to which
Seller is a party or by which it is bound, (ii) any plan,
agreement or
arrangement sponsored by or contributed to by Seller,
including, without
limitation, any life and health insurance, hospitalization,
savings, bonus,
deferred compensation, incentive compensation, stock purchase,
stock option,
holiday, vacation, severance pay, sick pay, sick leave,
disability, educational
assistance, tuition refund, service award, company car,
scholarship, relocation,
fringe benefit, severance contracts, sales commissions,
automobile allowances or
insurance, supplemental, pension arrangements, and other
policies, practices or
commitments, whether written or unwritten, providing employee
or executive
compensation or benefits to employees of Seller, (iii) any
employee benefit plan
as defined in Section 3(3) of ERISA, and (iv) any arrangement
or understanding
for the payment of post-retirement benefits.
"EMPLOYEE BENEFIT PLANS" shall have the meaning set forth
in Section 3.18.
"ENVIRONMENTAL PROTECTION LAWS" shall mean all federal,
state, local and
foreign laws, statutes, regulations having the force and
effect of law, permits,
court decrees, judgments, injunctions and written orders
concerning (i) public
health and safety relating to toxic or hazardous substances or
(ii) pollution or
protection of the environment or natural resources, including,
without
limitation,
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the Comprehensive Environmental Response, Compensation, and
Liability Act
("CERCLA") (42 U.S.C. Section 9601 ET SEQ.); the Hazardous
Materials
Transportation Act (49 U.S.C. Section 1801 ET SEQ.); the
Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901
ET SEQ.); the
Clean Water Act (33 U.S.C. Section 1251 ET SEQ.); the Safe
Drinking Water Act
(14 U.S.C. Section 1401 ET SEQ.); the Toxic Substances Control
Act (15 U.S.C.
Section 2601 ET SEQ.), the Federal Insecticide, Fungicide, and
Rodenticide
Act (7 U.S.C. Section 136 ET SEQ.), the Clean Air Act (42
U.S.C. Section 7401
ET SEQ. ); the Emergency Planning and Community Right-to-Know
Act (42 U.S.C.
Sections 11001-11005, 11021-11023, and 11041-11050); the
Porter-Cologne Water
Quality Act (California Water Code Sections 13000-13999.19);
the Hazardous
Waste Control Law (California Health & Safety Code Sections
25100-25250.25);
the Safe Drinking Water and Toxic Enforcement Act (California
Health & Safety
Code Sections 25249.5-25249.13); California Health & Safety
Code Sections
25280-25299.81 (regarding Underground Storage of Hazardous
Substances) and
Sections 25500-25545 (regarding Hazardous Materials
Inventories and Emergency
Plans); the Hazardous Substance Account Act (California Health
& Safety Code
Sections 25300-25393); and California Health & Safety Code
Sections
39000-44384 regarding Air Resources; in each case including
the regulations
promulgated thereunder.
"EPA" shall mean the United States Environmental
Protection Agency, or any
successor United States governmental agency.
"EQUIPMENT" shall have the meaning set forth in Section
2.1(a).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as
the same may be amended from time to time.
"ERISA AFFILIATE" of Seller shall mean any other Person
that, together with
Seller as of the relevant measuring date under ERISA, was or
is required to be
treated as a single employer under Section 414 of the Code.
"EXCLUDED ASSETS" shall have the meaning set forth in
Section 2.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 2.3.
"FINANCIALS" shall have the meaning set forth in Section
5.3.
"GAAP" shall mean generally accepted accounting principles
as in effect at
the time in question.
"HOLD-BACK AMOUNT" shall have the meaning set forth in
Section 2.5(c).
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.3.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 7.3.
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"INDEPENDENT ACCOUNTING FIRM" shall have the meaning set
forth in Section
2.5(b).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set
forth in Section
3.16.
"INVENTORY" shall have the meaning set forth in Section
2.1(b).
"IRS" shall mean the Internal Revenue Service.
"LEASE" shall have the meaning set forth in Section 3.14.
"LICENSES" shall have the meaning set forth in Section
3.16.
"LOSSES" shall have the meaning set forth in Section 7.1.
"MATERIAL CONTRACTS" shall have the meaning set forth in
Section 3.19.
"PCBs" shall have the meaning set forth in the definition
of "Regulated
Substance."
"PERSON" shall mean any entity or natural person or any
corporation,
partnership, joint venture or other entity, whether or not a
legal entity.
"PRIME RATE" shall mean the reference rate as reported by
Wells Fargo Bank,
N.A.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.5(a).
"REAL PROPERTY" shall have the meaning set forth in
Section 3.14.
"RCRA" shall have the meaning set forth within the
definition of
"Environmental Protection Laws."
"REGULATED SUBSTANCE" shall mean any chemical or substance
subject to or
regulated under any Environmental Protection Law including,
without
limitation, any "pollutant or contaminant" or "hazardous
substance" as those
terms are defined in CERCLA, any "hazardous waste" as that
term is defined in
RCRA, and any other hazardous or toxic wastes, substances, or
materials,
petroleum (including crude oil and refined and unrefined
fractions thereof),
polychlorinated biphenyls ("PCBs"), infectious waste, special
waste,
pesticides, fungicides, solvents, herbicides, flammables,
explosives,
asbestos and asbestos-containing material, and radioactive
materials, whether
injurious by themselves or in combination with other
materials.
"RELATED PARTIES" shall have the meaning set forth in
Section 3.19(a)(v).
"RIGHTS" shall have the meaning set forth in Section
2.7(b).
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"SBA LOAN" shall have the meaning set forth in Section 2.3
"SELLER" shall have the meaning set forth in the Preamble.
"SHAREHOLDER" shall have the meaning set forth in the
Preamble.
"TAX" OR "TAXES" shall mean any and all taxes imposed or
required to be
collected by any federal, state or local taxing authority in
the United States,
or by any foreign taxing authority under any statute or
regulation, including,
without limitation, all income, gross receipts, sales, use,
personal property,
use and occupancy, business occupation, unemployment,
disability withholding,
mercantile, ad valorem, transfer, license, withholding,
payroll, employment,
excise, real estate, environmental, capital stock, franchise,
alternative or
add-on minimum, estimated or other tax of any kind whatsoever,
including any
interest, penalties and other additions thereto.
"TRANSACTIONS" shall mean, in respect of any party, all
transactions
contemplated by this Agreement that involve, relate to or
affect such party.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1 SALE OF ASSETS. Subject to the provisions of
this Agreement,
Seller agrees to sell and Buyer agrees to purchase, at the
Closing, all of
Seller's right, title and interest in and to the Assets,
including, without
limitation:
(a) All tangible assets, including without limitation,
the tangible assets
listed in Schedule 2.1(a), and further including all of
Seller's equipment,
machinery, tools, jigs and dies, computers, software and
furniture
(collectively, "Equipment");
(b) All inventory (the "Inventory"), including, without
limitation, the
Inventory listed in Schedule 2.1(b);
(c) All of the contracts, purchase orders, backlog and
agreements with
customers to which Seller is a party (the "Contracts"),
including, without
limitation, the contracts and agreements listed in Schedule
2.1(c);
(d) All goodwill;
(e) All patents, patent applications, trademarks,
trademark applications,
copyrights, licenses, trade secrets, data, designs, drawings,
specifications and
other documents, know-how and information and all files, books
and records with
respect thereto; and
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(f) All books and records, data and other information, in
whatever format,
whether on paper or computer disk or otherwise, in the
possession of Seller.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding
anything in this
Agreement to the contrary, there shall be excluded from the
Assets (the
"Excluded Assets") (i) a 1992 Dodge Caravan; (ii) a 1995 Dodge
Caravan; (iii)
two receivables aggregating no more than $10,000 from
Aerobafloor and Yukon
Fitness; (iv) certain inventory described on Schedule 2.2(iv)
hereof; and (v)
cash on hand and bank deposits at Closing.
SECTION 2.3 ASSUMPTION OF LIABILITIES.
(a) Subject to the provisions of this Agreement, Buyer
assumes and agrees
to pay or to discharge the following obligations of Seller
(the "Assumed
Liabilities"): (i) SBA Loan # GP750,241-30-06-DEN in the
amount (principal and
interest) of approximately $68,417 (the "SBA Loan"); and (ii)
accounts payable
and accrued expenses as at the date of Closing incurred in the
ordinary course
of business and not payable to any Affiliate of Seller or the
Shareholder, and
not including automobile loan payments relating to Seller's
1992 Dodge Caravan
and 1995 Dodge Caravan and in any event not to exceed (without
the consent of
Buyer) $55,000.
(b) Except as specifically assumed by Buyer pursuant to
the immediately
preceding sentence, Buyer shall not assume or have any
liability with respect to
any other obligation or liability of Seller, whether absolute,
accrued,
contingent or otherwise, and whether due or to become due (the
"Excluded
Liabilities"). Without limiting the previous sentence, the
parties acknowledge
that Buyer shall specifically not assume, in addition to all
other Excluded
Liabilities, any liability for Taxes payable by Seller or any
liability for any
legal, accounting or other fees or expenses incurred by Seller
in connection
with the negotiation and execution of this Agreement or any
related agreement.
The assumption of the Assumed Liabilities by Buyer hereunder
shall not enlarge
any rights of third parties under contracts or arrangements
with Buyer or Seller
and nothing herein shall prevent any party from contesting in
good faith with
any third party any of the Assumed Liabilities.
(c) Buyer acknowledges that it shall pay all obligations,
including Taxes
(other than any such taxes referred to in Section 2.9),
incurred by Buyer
following the Closing.
SECTION 2.4 TIME AND PLACE OF CLOSING. The closing
of the purchase
and sale provided for in this Agreement (herein called the
"Closing") shall be
held at the offices of Day Campbell & McGill at 3070 Bristol,
Suite 650, Costa
Mesa, California and shall be effective as of 12:01 a.m. on
September 1, 1996,
or at such other place or earlier or later date or time as may
be fixed by
mutual agreement of Buyer and Seller (the "Closing Date").
SECTION 2.5 PURCHASE PRICE: ADJUSTED PURCHASE PRICE.
(a) The aggregate purchase price (the "Purchase Price")
to be paid by
Buyer in consideration of the sale and transfer of the Assets
shall be $210,000,
minus the Assumed Liabilities.
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(b) As promptly as practicable after the Closing Date,
Buyer shall prepare
and deliver to Seller a statement of the adjusted purchase
price (the "Adjusted
Purchase Price") as at the Closing Date, which Adjusted
Purchase Price shall be
derived from a balance sheet as at the Closing Date prepared
in accordance with
generally accepted accounting principles, which balance sheet
shall show the
adjusted value of the Assumed Liabilities as of August 31,
1996, and which
Adjusted Purchase Price shall reflect the asset value of the
Assets, subject to
the following adjustments and net of the Assumed Liabilities
as of August 31,
1996: (A) only good and usable Inventory satisfying the
representation contained
in Section 3.20 hereof shall be included, and shall be valued
at a fair value
mutually agreed upon between the parties; (B) only Equipment
satisfying the
representation contained in Section 3.12 hereof shall be
included, and shall be
valued at fair market value mutually agreed upon between the
parties; (C) only
good and collectible Accounts Receivable satisfying the
representation contained
in Section 3.13 hereof shall be included; and (D) prepaid
taxes, expenses and
deposits shall be prorated as at the Closing Date.
(c) The Purchase Price shall be paid as follows:
(i) At the Closing Buyer shall deliver $150,000 of
the Purchase Price
to Pacific National Bank, as agent (the "Agent") pursuant to a
Fund Trust
Agreement in the form of Exhibit 2.5(c) attached hereto and
incorporated herein
by reference.
(ii) On September 15, 1996, Buyer and Seller shall
cause the Agent to
(x) pay to Seller the amount of the Adjusted Purchase Price,
minus $10,000 (the
"Hold-back Amount") and net of the amount of Assumed
Liabilities as of August
31, 1996, (y), direct a payment in the amount of the SBA Loan
to an account at
Norwest Bank against which Seller shall write a check to pay
off the SBA Loan,
and (z) distribute to Buyer the amount remaining thereafter,
and Buyer shall
thereafter pay other Assumed Liabilities when due.
(iii) On or before November 30, 1996, Buyer shall
cause Agent to pay
Seller the Hold-back Amount, adjusted downwards
dollar-for-dollar by the amount
of any and all Losses of Buyer or its Affiliates resulting
from (A) a breach of
any of Seller's or Shareholder's representations, warranties
or covenants
hereunder, (B) the amount of any other Losses payable by
Seller or Shareholder
to Buyer pursuant to Section 7.1 hereof; (C) the amount of any
Excluded
Liabilities actually paid by Buyer, and (D) the amount of any
Buyer's Warranty
Costs, and adjusted upwards dollar-for-dollar by the amount of
any and all
Losses of Seller resulting from (A) a breach of any of Buyer's
representations,
warranties and covenants hereunder, (B) the amount of any
other Losses payable
by Buyer to Seller pursuant to Section 7.2 hereof; or (C) the
amount of any
Assumed Liabilities actually paid by Seller. Seller shall
co-sign any
instructions to Agent pursuant to this Section 2.5(c)(iii).
(iv) At the time that distributions are made pursuant
to Section
2.5(c)(iii), above, Buyer shall pay Seller interest on the
Holdback Amount at
the Prime Rate from September 1, 1996 through such date of
payment.
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(d) All payments hereunder shall be in immediately
available funds and
shall be paid by wire transfer to an account designated by the
recipient
thereof.
SECTION 2.6 TRANSFER OF ASSETS.
(a) At the Closing, Seller shall deliver or cause to be
delivered to Buyer
good and sufficient instruments of transfer transferring to
Buyer title to all
the Assets. Such instruments of transfer (i) shall be in the
form and will
contain provisions not inconsistent with the provisions hereof
which are usual
and customary for transferring the type of property involved
under the laws of
the jurisdictions applicable to such transfers, (ii) shall be
in form and
substance reasonably satisfactory to Buyer and its counsel,
and (iii) shall
effectively vest in Buyer title to all the Assets free and
clear of all liens,
restrictions and encumbrances.
(b) At Closing Buyer shall further deliver to Buyer an
Assignment or
Novation of Lease assigning Seller's lease to its
manufacturing facility to
Buyer, such assignment or novation to be in form and substance
satisfactory to
Buyer in the form of Exhibit 2.6 hereof.
SECTION 2.7 DELIVERY OF RECORDS AND CONTRACTS: FURTHER
ASSURANCES.
(a) At the time of the Closing, subject to subsection (b)
below, Seller
shall deliver or cause to be delivered to Buyer all of
Seller's contracts,
commitments, agreements and rights which are included in the
Assets, with such
assignments thereof and consents to assignments as are
necessary to assure Buyer
of the full benefit of the same. Seller shall also deliver to
Buyer at the time
of the Closing all of Seller's business records, books and
other data, and
Seller shall take all requisite steps to put Buyer in actual
possession and
operating control of the Assets.
(b) If an attempted sale, conveyance, assignment,
transfer or delivery of
any contracts, claims, commitments, franchises, privileges,
permits, consents,
certificates, licenses or any other assets, rights or benefits
to be sold,
conveyed, assigned, transferred and delivered to Buyer which
are included in the
Assets (collectively, the "Rights") would be ineffective
without the consent of
any other person, and such consent has not been obtained on or
before the
Closing Date, this Agreement shall not constitute an
assignment or an attempted
assignment of such Right if such assignment or attempted
assignment would
constitute a breach thereof or be unlawful. In such case,
Seller shall use
commercially reasonable efforts to obtain, as soon as
practicable, the consent
of each such or other person in all cases in which such
consent is required, and
Seller and Buyer will cooperate in any reasonable arrangement
designed to enable
Seller to perform its obligations hereunder, and to provide
for the assumption
by Buyer of the benefits, risks and burdens of, any such
agreement consistent
with the provisions of this Agreement.
(c) Seller from time to time after the Closing at the
request of Buyer and
without further consideration shall execute and deliver
further instruments of
transfer and assignment and take such other action as Buyer
may reasonably
require to more effectively transfer and assign to, and vest
in, Buyer each of
the Assets.
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SECTION 2.8 ALLOCATION OF PURCHASE PRICE. Buyer and Seller
shall use best
efforts to agree to an allocation of the purchase price (and
all other
capitalized costs) among the Assets. Such allocation shall be
made in accordance
with the provisions of Section 1060 of the Code, and shall be
binding upon Buyer
and Seller for all federal and state income tax purposes.
SECTION 2.9 SALES AND TRANSFER TAXES. Seller represents
that there are no
sales or transfer taxes, fees or duties under applicable law
incurred in
connection with this Agreement or the Transactions
contemplated thereby.
Notwithstanding the foregoing, Buyer agrees to pay sales taxes
incurred in
connection with the Transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER
Sellers and Shareholder, jointly and severally, hereby
represent and warrant to
Buyer that:
SECTION 3.1 ORGANIZATION AND GOOD STANDING. Seller is a
corporation duly
organized, validly existing and in good standing under the
laws of the State of
Colorado with full corporate power and authority to own or
lease its properties
and to conduct its business in the manner and in the places
where such
properties are owned or leased or such business is currently
conducted. Seller
is qualified to do business and is in good standing in the
State of Colorado.
SECTION 3.2 LICENSES AND PERMITS. Schedule 3.2 lists all
permits,
registrations, licenses, franchises, certifications and other
approvals required
from federal, state or local authorities in order for Seller
to conduct and
operate its business as presently conducted.
SECTION 3.3 AUTHORITY: NO BREACH. Seller has all necessary
authority and
power to enter into this Agreement and to carry out the
Transactions
contemplated hereby. The execution, delivery and performance
by Seller of this
Agreement and the consummation by Seller of the Transactions
contemplated hereby
have been duly authorized by all necessary corporate action of
Seller, including
shareholder approvals, and no other action on the part of
Seller is required in
connection therewith. The Shareholder is under no legal
disability. This
Agreement constitutes the valid and binding obligation of
Seller and
Shareholder, enforceable against Sellers and Shareholder in
accordance with its
terms. The execution, delivery and performance by Seller of
this Agreement do
not, and the performance by Seller of the Transactions
contemplated hereby, will
not:
(i) violate any provision of the Articles of
Incorporation or by-laws
of Seller;
(ii) violate any laws of the United States, or any
state or other
jurisdiction applicable to Seller or require Seller to obtain
any approval,
consent or waiver of, or make any filing with, any person or
entity
(governmental or otherwise) that has not been obtained or
made;
9
(iii) result in a violation or any breach of,
constitute a default
(or an event which with notice or lapse of time or both would
become a default)
under, result in the acceleration of any indebtedness under or
performance
required by, result in any right of termination of, increase
any amounts payable
under, decrease any amounts receivable under, change any other
rights pursuant
to, or conflict with, any material note, bond, mortgage,
indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation
to which Seller is a party or by which it or its properties is
bound; or
(iv) result in the creation or imposition of any
lien, charge,
encumbrance or restriction upon any of the Assets.
SECTION 3.4 TITLE. Seller has good title to the Assets
(except the Real
Property) and on the Closing Date will transfer and convey
good and valid title
to such Assets to Buyer, free and clear of any liens,
encumbrances, pledges,
security interests, claims or rights of others of any kind or
nature whatsoever,
except as otherwise created by Buyer.
SECTION 3.5 SUBSIDIARIES. Seller does not have any
subsidiaries or any
other equity interest in any corporation, partnership or
similar entity that
relates in any way to Seller.
SECTION 3.6 FINANCIAL STATEMENTS. Schedule 3.6 contains
the following
financial statements of Seller (collectively, the
"Financials"): (a) the balance
sheet of Seller as of December 31, 1993, December 31, 1994 and
December 31,
1995, and the related statements of operations for the twelve
months then ended,
and (b) the balance sheet of Seller as of July 15, 1996, and
the related
statement of operations for the period from January 1, 1996
through July 15,
1996. Each of the balance sheets and statement of operations
constituting part
of the Financials have been prepared in accordance with GAAP
consistently
applied with prior periods, are complete and correct and
fairly present the
financial condition and results of operations of Seller for
the periods
indicated thereon, and contain and reflect reserves for all
liabilities and
obligations of any nature, whether absolute, contingent or
otherwise, except for
reserves not required to be maintained under GAAP. The
Financials do contain any
items of extraordinary or nonrecurring income or any other
income not earned in
the ordinary course of business.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES. Since December 31,
1995, there has
not occurred:
(a) Any adverse change in the assets, liabilities
(whether absolute,
accrued, contingent or otherwise), condition (financial or
otherwise), results
of operations, business or prospects of Seller not reflected
in the Financials
and that has resulted in or may result in a loss to Seller of
more than $5,000
in the aggregate;
(b) Any guarantee by Seller of any obligation, or any
mortgage, pledge or
encumbrance on any of the properties or assets of Seller;
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(c) Any amendment or modification of any Material
Contract, or any
termination of any agreement that would have been a Material
Contract were such
agreement in existence on the date hereof;
(d) Any transaction by Seller, whether or not covered by
the foregoing,
not in the ordinary course of business, including, without
limitation, any
purchase or sale of any assets;
(e) Any alteration in the manner of keeping the books,
accounts or records
of or pertaining to Seller, or in the accounting practices
therein reflected;
(f) Any loss or threatened loss of a customer or
customers;
(g) Any damage or destruction to, or loss of, any assets
or property
owned, leased or used by Seller (whether or not covered by
insurance); or
(h) Any agreement to do any of the things described in
the preceding
subsections (a) - (g) of this Section 3.7.
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
reflected in the
Financials, there are no liabilities of Seller, whether
absolute, accrued,
contingent or otherwise, and whether due or to become due.
SECTION 3.9 LOSS CONTRACTS. Seller does not have any
Contracts on which
Seller expects to lose money. As used in this Section, "lose
money" means that
the sales price for products under the purchase agreement,
order or contract is
less than the sum of Seller's cost of goods sold, including
labor, materials and
overhead.
SECTION 3.10 PROGRESS AND OTHER PAYMENTS. Seller has not
received any
unliquidated progress payments, milestone payments, advance
payments, deposits
or other similar payments from customers with respect to the
Contracts.
SECTION 3.11 LETTERS OF CREDIT, BONDS, ETC. (a) Seller is
not the
beneficiary of any letters of credit, performance or other
bonds, or any other
financial instruments guaranteeing the payment or performance
of any third party
under any Contract, and (b) Seller is not required to provide
any letter of
credit, performance or other bond, or any other financial
instrument for the
purpose of guaranteeing Seller's payment or performance under
any Contract.
SECTION 3.12 MACHINERY, EQUIPMENT AND OTHER PERSONAL
PROPERTY. Seller owns
all of the Equipment. All such Equipment is sold "as is, where
is," but is
sufficient to carry on the business of Seller in the normal
course as it is
presently conducted.
11
SECTION 3.13 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) All of Seller's accounts receivable ("Accounts
Receivable") are
properly reflected on its books and records, are valid
receivables subject to no
disputes, setoffs or counterclaims, are current and
collectible, and will be
collected in accordance with their terms at their recorded
amounts. Schedule
3.13 is an accurate aging of Seller's Accounts Receivable at
August 31, 1996.
(b) All of the Assumed Liabilities were incurred in the
ordinary course of
business and none is payable to any Affiliate of Seller or the
Shareholder or
any Affiliate of the Shareholder.
SECTION 3.14 REAL PROPERTY. Seller does not own any real
property. Each
lease (a "Lease") of real property relating to Seller (the
"Real Property") is
valid, binding, enforceable and in full force and effect, and
will be novated in
favor of Buyer as at Closing. No default or breach has
occurred under any Lease,
and no event has occurred which, with the passage of time or
giving of notice or
both, would constitute a breach or default thereunder or would
cause the
acceleration of any obligation of any party thereto or the
creation of a lien or
encumbrance upon any asset of Seller. All such Real Property,
including all
buildings, fixtures, mechanical systems (including electrical,
plumbing and
heating), and roof and structural systems, are in good
operating condition and
repair, ordinary wear and tear excepted. No material
expenditures are required
or anticipated to be required to be made by Seller for the
repair or maintenance
of any improvements presently on any such Real Property. Such
Real Property
currently is served by such gas, electricity, water, sewage
and waste disposal
and/or other utilities as are adequate to operate such
facility as it is
currently operated.
SECTION 3.15 ENVIRONMENTAL MATTERS.
(a) Seller has complied and is in compliance in all
material respects with
all applicable Environmental Protection Laws pertaining to any
of its properties
and assets (including the Real Property) at which the business
of Seller has
ever been conducted, and the use and ownership thereof, and to
the operation of
Seller. No violation by Seller is being alleged of any
applicable Environmental
Protection Law relating to any of the properties and assets at
which the
business of Seller has ever been conducted (including the Real
Property) or the
use or ownership thereof, or to the operation of Seller.
(b) (i) Neither Seller nor any other Person (including
any tenant or
subtenant) has caused or taken any action that will result in,
and Seller is not
subject to, any material liability or obligation on the part
of Seller or any of
its Affiliates, relating to (A) the environmental conditions
on, under, or about
the Real Property or other properties or assets owned, leased,
operated or used
by Seller or any predecessor thereto at the present time or in
the past,
including without limitation, the air, soil and groundwater
conditions at such
properties or (B) the past or present use, management,
handling, transport,
treatment, generation, storage, disposal or release of any
Regulated Substance.
12
(ii) Seller has disclosed and made available to the Buyer
all information,
including, without limitation, all studies, analyses and test
results, in the
possession, custody or control of or otherwise known to any
Seller relating to
(A) the environmental conditions on, under or about the Real
Property or other
properties or assets owned, leased, operated or used by Seller
or any
predecessor in interest thereto at the present time or in the
past, and (B) any
Regulated Substance used, managed, handled, transported,
treated, generated,
stored or released by Seller or any other Person on, under,
about or from the
Real Property, and (C) the use or operation of any of the
properties and assets
of Seller, and (D) Seller.
SECTION 3.16 INTANGIBLE PERSONAL PROPERTY.
(a) Seller has no: (i) patent, patent application,
copyright, copyright
application, trademark, trademark application (in any such
case, whether
registered or to be registered in the United States of America
or elsewhere),
process, invention, trade secret, trade name, computer
program, formula and
customer list (collectively, the "Intangible Personal
Property"), or (ii) any
licenses or similar agreements or arrangements ("Licenses") to
which Seller is a
party either as licensee or licensor for each such item of
Intangible Personal
Property.
(b) There have been no actions or other judicial or
adversary proceedings
involving Seller concerning any item of Intangible Personal
Property, and, to
the knowledge of Seller, no such action or proceeding is
threatened and no claim
or other demand has been made by any Person relating to any
item of Intangible
Personal Property.
(c) Seller has the right and authority to use each item
of Intangible
Personal Property in connection with the conduct of its
businesses in the
manner presently conducted and to convey such right and
authority, and such use
does not conflict with, infringe upon or violate any patent,
copyright,
trademark or registration of any other person or entity.
(d) There are no outstanding or, to the knowledge of
Seller, threatened
disputes or disagreements with respect to any License.
(e) No employee of Seller is in violation of any term of
any employment
contract, proprietary information and inventions, agreement,
non-competition
agreement, or any other contract or agreement relating to the
relationship of
any such employee with Seller or, to the actual knowledge of
Seller, any
previous employer.
(f) The conduct by Seller of its business, and the
manufacture and sale by
Seller of its products, does not conflict with, infringe upon
or violate any
patent, copyright, trademark or registration of any other
person or entity.
SECTION 3.17 LABOR AND EMPLOYMENT AGREEMENTS. Seller is
not a party to or
bound by any collective bargaining agreement and there are no
labor unions or
other organizations representing, purporting to represent or
attempting to
represent any employees of Seller. Since January 1, 1993,
13
there has not occurred or, to the best knowledge of Seller
after due inquiry,
been threatened any material strike, slowdown, picketing, work
stoppage,
concerted refusal to work overtime or other similar labor
activity with respect
to any employees of Seller. There are no labor disputes
currently subject to any
grievance procedure, arbitration or litigation and there is no
representation
petition pending, or to the best knowledge of Seller after due
inquiry,
threatened with respect to any employee of Seller. Seller has
complied with all
provisions of applicable law pertaining to the employment of
employees,
including, without limitation, all such laws relating to labor
relations, equal
employment, fair employment practices, entitlements,
prohibited discrimination
or other similar employment practices or acts, except for any
failure so to
comply that, individually or together with all such other
failures, has not and
will not result in a liability or obligation on the part of
the Buyer, and has
not had or resulted in, and will not have or result in, an
adverse effect on the
business, operations or prospects of Seller.
SECTION 3.18 EMPLOYEE BENEFIT PLANS: ERISA. Other than a
SEP plan Seller
does not maintain or contribute to (i) any employee pension
benefit plan as
defined in Section 3(2) of ERISA, (ii) any employee welfare
benefit plan as
defined in Section 3(a) of ERISA, (iii) any profit sharing,
pension, deferred
compensation, bonus, stock option, stock purchase, severance
or incentive plan
or agreement, (iv) any plan or policy providing for "fringe
benefits" to its
employees, including but not limited to vacation, paid
holidays, personal leave,
employee discount, educational benefit or similar programs, or
(v) any other
Employment-Related Agreements, in any case under which
employees or former
employees of Seller primarily employed in connection with the
operation of
Seller are eligible to participate or derive a benefit
(collectively, "Employee
Benefit Plans"). Seller has no liabilities to any person under
its SEP plan.
Seller has not made contributions to, has never been a member
of a controlled
group which has contributed to and has never been under common
control with an
employer that contributed to any multi employer plan as
defined in Section 3(37)
of ERISA. Seller has provided Buyer with true and correct
copies of all Employee
Benefit Plans.
SECTION 3.19 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on
other Schedules,
Schedule 3.19(a) sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related
entities) between Seller and any customer or supplier in
excess of $5,000 and
all agreements and blanket purchase orders extending beyond
one year;
(ii) All agreements that create or continue any
claim, lien, charge or
encumbrance against, or right of any third party with respect
to, any of the
Assets;
(iii) All agreements by which Seller leases any
capital equipment and
all other leases involving Seller as lessee or lessor;
(iv) All agreements to which Seller is a party not in
the ordinary
course of business;
14
(v) All agreements to which Seller, on the one hand,
and any of
Seller's Affiliates (all such Affiliates being collectively
referred to hereon
as "Related Parties"), on the other hand, are parties or by
which they are bound
that relates to or is connected in any way with Seller or its
operations,
business or prospects;
(vi) All contracts or commitments relating to
commission arrangements
with others;
(vii) All license agreements, whether as licensor
or licensee;
(viii) All agreements between Seller and its sales
representatives,
distributors and dealers;
(ix) All agreements between Seller and its customers
relating to
volume rebates or price reductions;
(x) All other agreements to which Seller is a party
or by which it is
bound and that involve $5,000 or more or that extend for a
period of one year or
more; and
(xi) All other agreements to which Seller is a party
or by which it is
bound and that are or may be material to the assets,
liabilities (whether
absolute, accrued, contingent or otherwise), condition
(financial or otherwise),
results of operations, business or prospects of Seller.
As used in this Section 3.19, the word "agreement" includes
both oral and
written contracts, leases, understandings, arrangements and
all other
agreements. The term "Material Contracts" means the agreements
of Seller
required to be disclosed or Schedule 3.19(a), including
agreements specifically
identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid
and binding and are enforceable in accordance with their terms
in favor of
Seller. There are no liabilities of any party to any Material
Contract arising
from any breach or default of any provision thereof and no
event has occurred
that, with the passage of time or the giving of notice or
both, would constitute
a breach or default by any party thereto.
(c) Seller has fulfilled all material obligations
required pursuant to
each Material Contract to have been performed by Seller prior
to the date
hereof, and Seller has no reason to believe that Seller will
not be able to
fulfill, when due, all of its obligations under the Material
Contracts that
remain to be performed after the date hereof.
(d) Seller has maintained and continues to maintain good
relations with
its customers, and agents of, and suppliers to Seller, and
Seller has no reason
to believe that such relations will in the foreseeable future
deteriorate or
suffer any changes adverse to Seller.
15
SECTION 3.20 INVENTORY. The Inventory is good and
merchantable material, of
a quantity and quality saleable in the ordinary course of
business of Seller, is
not defective, and is carried on the books and records of
Seller at the lower of
cost or market consistent with the past practices of Seller.
The quantities of
all Inventory are reasonable and justified in the present
circumstances, and
have been maintained at a level consistent with meeting
delivery dates on firm
customer backlog at least since December 31, 1995.
SECTION 3.21 ABSENCE OF CERTAIN BUSINESS PRACTICES.
Neither Seller nor any
employee, agent or other person acting on Seller's behalf,
including, but not
limited to, any Seller, has, directly or indirectly, given or
agreed to give any
gift or similar benefit to any customer, supplier, competitor
or governmental
employee or official (domestic or foreign) relating in any way
to the business
of Seller (i) that would subject Seller to any damage or
penalty in any civil,
criminal or governmental litigation or proceeding, or (ii)
that, if not given in
the past, would have had an adverse effect on the business of
Seller.
SECTION 3.22 TRANSACTIONS WITH RELATED PARTIES. Except as
set forth on
Schedule 3.22, (i) there have been no transactions by Seller
with any Related
Party since April 1, 1994 and (ii) there are no agreements or
understandings now
in effect between Seller and any Related Party, in either case
that relates to
or is connected in any way with Seller or its operations,
business or prospects.
In addition, none of the transactions with any Related Parties
that have
occurred since April 1, 1994 has provided to Seller assets,
income, financing or
business on a basis significantly more or less favorable than
that available
from unaffiliated persons. Schedule 3.22 also (i) states the
amounts due from
Seller to any Related Party and the amounts due from any
Related Party to
Seller, (ii) describes the transactions out of which such
amounts due arose and
(iii) describes any interest of any Seller or Related Party in
any supplier or
customer of, or any other entity that has had business
dealings with, Seller
since April 1, 1994. After the Closing, there will be no
obligations or other
liabilities, including inter-company obligations, between
Seller, on the one
hand, and Seller or any Related Party, on the other hand,
other than pursuant to
this Agreement.
SECTION 3.23 COMPLIANCE WITH LAWS. The operation, conduct
and ownership of
the property or business of Seller are being, and at all times
have been,
conducted, in all material respects, in full compliance with
all federal, state,
local and other (domestic and foreign) laws, rules,
regulations and ordinances
and all judgments and orders of any court, arbitrator or
governmental authority
applicable to it.
SECTION 3.24 LITIGATION. There is no legal,
administrative, arbitration or
other proceeding, or any governmental investigation, pending
or, to the
knowledge of Seller, threatened against or otherwise affecting
Seller, or any of
its assets, and Seller is not aware of any fact that might
reasonably be
expected to form the basis for any such proceeding or
investigation relating in
any way to Seller.
16
SECTION 3.25 TAXES. Except to the extent a breach hereof
could not have an
adverse effect on the business, operations or prospects of
Seller or the value
of the Assets:
(a) Seller has timely filed all Tax returns and reports
required to have
been filed by it for all taxable periods ending on or prior to
the date hereof,
and has paid all Taxes due to any taxing authority with
respect to all taxable
periods ending on or prior to the date hereof, or otherwise
attributable to all
periods prior to the date hereof. The Tax returns and reports
filed are true and
correct in all material respects and reflect accurately all
liability for Taxes
for the periods covered thereby;
(b) Seller has not received notice that the IRS or any
other taxing
authority has asserted against Seller any deficiency or claim
for additional
Taxes in connection therewith;
(c) All Tax deficiencies asserted or assessed against
Seller have been paid
or finally settled and no issue has been raised by the IRS or
any other taxing
authority in any examination which, by application of the same
or similar
principles, reasonably could be expected to result in a
proposed deficiency for
any other period not so examined. Further, no state of facts
exists or has
existed which would constitute grounds for the assessment of
any liability for
Taxes with respect to periods which have not been examined by
the IRS or any
other taxing authority;
(d) There is no pending or, to the knowledge of Seller,
threatened action,
audit, proceeding, or investigation with respect to (i) the
assessment or
collection of Taxes or (ii) a claim for refund made by Seller
with respect to
Taxes previously paid;
(e) All amounts that are required to be collected or
withheld by Seller,
or with respect to Taxes of Seller, have been duly collected
or withheld: all
such amounts that are required to be remitted to any taxing
authority have been
duly remitted;
(f) Seller has not waived any statute of limitations with
respect to the
assessment of any Tax; and
(g) There are no liens for Taxes due and payable upon any
Assets.
SECTION 3.26 INSURANCE. Schedule 3.26 sets forth a
complete and correct
list of all insurance policies and of all claims made by
Seller on any liability
or other insurance policies (or to the extent Seller is self
insured that would
have been made on such policies) during the past five years
(other than workers'
compensation claims). Schedule 3.26 is a complete and correct
list of all
insurance currently in place (or, to the extent Seller is
self-insured, would
have been in place and is reserved for or otherwise formally
or informally
provided for) and accurately sets forth the coverages,
deductible amounts,
carriers and expiration dates thereof relating to or in
connection with Seller.
No notice or other communication has been received by Seller
from any insurance
company within the five years preceding the date hereof
canceling or materially
amending or materially increasing the annual or other premiums
payable under any
of its insurance policies relating to or in connection with
17
Seller, and, to the knowledge of Seller, no such cancellation,
amendment or
increase of premiums is threatened. Such insurance will cover
any liability
arising out of any injury to persons or property as a result
of products
designed, used, manufactured, sold or leased, or any services
performed by,
Seller for a period of at least three years, or Seller will
obtain discontinued
product liability coverage for such period.
SECTION 3.27 NO POWERS OF ATTORNEY OR SURETYSHIPS. With
respect to Seller,
(i) Seller has not granted any general or special powers of
attorney and (ii)
Seller does not have any obligation or liability (whether
actual, contingent or
otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor,
obligor on an asset or income maintenance agreement or
otherwise in respect of
the obligation of any person, corporation, partnership, joint
venture,
association, organization or other entity.
SECTION 3.28 BROKERAGE FEES. No Person is entitled to any
brokerage or
finder's fee or other commission from Seller in respect of
this Agreement or the
Transactions.
SECTION 3.29 PRODUCT WARRANTY AND LIABILITY. Each product
of Seller
designed, used, manufactured, sold or leased by Seller and all
services
performed by Seller have been in conformity with all
applicable contractual
commitments and all express and implied warranties, and Seller
has no liability
and there is no basis for any present or future action, suit
or proceeding
giving rise to any liability, for replacement or repair
thereof or other damages
in connection therewith, subject only to returns of product
for warranty in the
ordinary course of business not exceeding one percent (1%) of
sales of Seller in
any calendar year. Seller does not have any liability, and
there is no basis for
any present or future action, suit or proceeding giving rise
to any liability,
arising out of any injury to persons or property as a result
of any products
designed, used, manufactured, sold or leased or any services
performed by
Seller. Seller has not received any notice that an action,
suit or proceeding
has been, or in the future may be, made alleging that products
or services of
Seller are or were defective or deficient in any way.
SECTION 3.30 CONSENTS AND APPROVALS. Except as set forth
in Schedule 3.30,
the execution and delivery of this Agreement by Seller do not,
and the
performance of the Transactions contemplated by this Agreement
by Seller will
not, require any filing with or notification to, or any
consent, approval,
authorization or permit from, any governmental or regulatory
authority or any
other Person.
SECTION 3.31 DISCLOSURE. The information provided by
Seller in connection
with this Agreement, including, without limitation, the
schedules hereto, and in
any other writing pursuant hereto does not and will not
contain any untrue
statement of a material fact or omit to state a material fact
required to be
stated herein or therein or necessary to make the statements
and facts contained
herein or therein, in light of the circumstances under which
they are made, not
false or misleading. Copies of all documents heretofore or
hereafter delivered
or made available by Seller to Buyer pursuant hereto were or
will be complete
and accurate records of such documents.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and
Shareholder that:
SECTION 4.1 ORGANIZATION. Buyer is a corporation duly
organized, validly
existing and in good standing under the laws of the State of
California, with
full corporate power and authority to own or lease its
properties and to conduct
its business in the manner and in the places where such
properties are owned or
leased or such business is currently conducted.
SECTION 4.2 AUTHORITY OF BUYER. Buyer has all necessary
authority and power
to enter into this Agreement and to carry out the Transactions
contemplated
hereby. The execution, delivery and performance by Buyer of
this Agreement and
the consummation of the Transactions contemplated hereby have
been duly
authorized by all necessary corporate action of Buyer and no
other action on the
part of Buyer is required in connection therewith. This
Agreement constitutes
the valid and binding obligation of Buyer, enforceable in
accordance with its
terms. The execution, delivery and performance by Buyer of
this Agreement do
not, and the performance by Buyer of the Transactions
contemplated hereby will
not:
(i) violate any provision of the Articles of
Incorporation or by-laws of
Buyer;
(ii) violate any laws of the United States, or any state
or other
jurisdiction applicable to Buyer or require Buyer to obtain
any approval,
consent or waiver of, or make any filing with, any person or
entity
(governmental or otherwise) that has not been obtained or
made; or
(iii) result in a violation or any breach of, constitute
a default (or an
event which with notice or lapse of time or both would become
a default) under,
result in the acceleration of any indebtedness under or
performance required by,
result in any right of termination of, increase any amounts
payable under,
decrease any amounts receivable under, change any other rights
pursuant to, or
conflict with, any material note, bond, mortgage, indenture,
contract,
agreement, lease, license, permit, franchise or other
instrument or obligation
to which Buyer is a party or by which it or its properties is
bound.
SECTION 4.3 OWNERSHIP OF CAPITAL STOCK OF BUYER. Advanced
Materials Group,
Inc., a Nevada corporation, owns beneficially and of record
all of the issued
and outstanding shares of Buyer.
SECTION 4.4 SUFFICIENT FUNDS. Buyer has and will have
funds sufficient to
satisfy the sums due at Closing as set forth in this Agreement
and to perform
and discharge the Assumed Liabilities.
SECTION 4.5 BROKERAGE FEES. No Person is entitled to any
brokerage or
finder's fee or other commission from Buyer in respect of this
Agreement or the
Transactions.
19
SECTION 4.6 DISCLOSURE. The information provided by Buyer
in this Agreement
and in any other writing furnished pursuant hereto does not
and will not contain
an untrue statement of a material fact or omit to state a
material fact required
to be stated herein or therein or necessary to make the
statements and facts
contained herein or therein, in light of the circumstances
under which they are
made, not false or misleading. Copies of all documents
heretofore or hereafter
delivered or made available by Buyer to Seller pursuant hereto
were or will be
complete and accurate records of such documents.
ARTICLE V
CERTAIN AGREEMENTS AND UNDERSTANDINGS
SECTION 5.1 USE OF NAME. Buyer acknowledges that it is not
acquiring an
interest in the name "Gasket and Molded Products" and Buyer
covenants and agrees
that it shall not use such name; provided that Buyer may use
the name "Gasket
and Molded Products" and any trademarks related thereto to the
extent such name
or mark is printed or otherwise appears on Inventory or other
Assets, or in
connection with any public announcement of the purchase by
Buyer of the Assets,
or for a period of three months following the Closing to the
extent Buyer
desires to utilize any sales brochures previously published by
Seller.
SECTION 5.2 COLLECTION OF ASSETS. Subsequent to the
Closing, Seller agrees
that it will promptly transfer or deliver to Buyer from time
to time, any
assets, cash or other property that Seller may discover or
receive with respect
to any contracts, commitments, sales orders, purchase orders
or any other items
included in the Assets.
SECTION 5.3 AGREEMENT NOT TO COMPETE.
(a) From the Closing Date to and including the fifth
anniversary of the
Closing Date (or, in the case of Richard S. Rouse, the fifth
anniversary of the
termination of his employment with the Company), Seller and
Shareholder and Neal
M. Price hereby agree that he or it and its Affiliates shall
not, directly or
indirectly, engage or be interested in any business that
competes with, and
shall not, directly or indirectly, have any interest in, own,
manage, operate,
control, be connected with as a stockholder (other than as a
stockholder of less
than five percent (5%) of the issued and outstanding stock of
a publicly held
corporation), joint venturer, or otherwise engage or invest or
participate in,
any business that competes with the business of Seller as
conducted on the date
hereof in any county or any other political subdivision of any
of the following
states: California, Oregon, Texas, Colorado, Utah, New Mexico,
Arizona and
Wyoming. All of the parties agree that the duration and area
for which the
covenant not to compete set forth in this Section 5.3 is to be
effective are
reasonable. In the event that any court determines that the
time period or the
geographical areas provided for in this Section 5.3, or both
of them, are
unreasonable and that such covenant is to that extent
unenforceable, such
covenant shall remain in full force and effect for the
greatest time period and
in the greatest geographical area that would not render it
unenforceable. The
parties intend that this covenant shall
20
be deemed to be a series of separate covenants, one for each
and every county of
each and every state of the United States of America where
this covenant is
intended to be effective.
(b) The parties agree that damages would be an inadequate
remedy for Buyer
in the event of a breach or threatened breach of this
Agreement and thus, in any
such event, Buyer may, either with or without pursuing any
potential damage
remedies, immediately obtain and enforce an injunction
prohibiting any of Seller
or any Shareholder or its Affiliates from violating this
Agreement.
SECTION 5.4 PRODUCT WARRANTY MATTERS.
(a) As stated in Section 2.3, Buyer is not assuming any
liabilities or
obligations of Seller for defective products or breach of
warranty arising from
or relating to the design, use, manufacture, testing, sale or
lease of any
products of Seller by Seller prior to the Closing Date.
However, from the
Closing Date until the date of final disbursement of funds
referred to in
Section 2.5(c)(iii), Buyer will provide warranty service on
behalf of Seller, in
accordance with Buyer's normal business practices, with
respect to warranties on
products of Seller sold by Seller prior to the Closing Date
(the "Pre-Closing
Warranties"). Seller shall reimburse Buyer for all of Buyer's
costs of labor and
materials, including overhead allocated to the cost of such
labor and materials
in accordance with Buyer's standard practices (collectively,
"Buyer's Warranty
Costs"), with respect to Buyer's performance in accordance
with the Pre-Closing
Warranties.
(b) Buyer shall provide to Seller such information and
documentation as
Seller reasonably requests in order for Seller to calculate
the amount of
Buyer's Warranty Costs owed by Seller to Buyer. Seller shall
provide to Buyer
such information and documentation as Buyer reasonably
requests in order for
Seller to provide warranty service in accordance with Section
5.4(a) with
respect to Pre-Closing Warranties.
SECTION 5.5 CONDUCT OF BUSINESS. From the date hereof to
the Closing Date,
except as expressly permitted or required by this Agreement or
as otherwise
consented to by the Buyer in writing, Seller will:
(a) carry on the business of Seller in, and only in, the
ordinary course,
in substantially the same manner as heretofore conducted, and
use all reasonable
efforts to preserve intact its present business organization,
maintain its
properties in good operating condition and repair, keep
available the services
of its present significant employees, and preserve its
relationship with
customers, suppliers and others having business dealings with
it, to the end
that the goodwill and going business of Seller shall be in all
material respects
unimpaired following the Closing;
(b) pay accounts payable and other obligations of Seller
when they become
due and payable in the ordinary course of business consistent
with prior
practice;
21
(c) perform in all material respects all of its
obligations under all
Contracts and other agreements and instruments relating to or
affecting Seller
or the Assets, and comply in all material respects with all
laws applicable to
the Assets or Seller;
(d) not enter into or assume any material agreement,
contract or
instrument relating to Seller, or enter into or permit any
material amendment,
supplement, waiver or other modification in respect thereof;
(e) not grant (or commit to grant) any increase in the
compensation
(including incentive or bonus compensation) of any employee
employed in the
operation of Seller or institute, adopt or amend (or commit to
institute, adopt
or amend) any compensation or benefit plan, policy, program or
arrangement or
collective bargaining agreement applicable to any such
employee; and
(f) not take any action or omit to take any action, which
action or
omission would result in a breach of any of the
representations and warranties
set forth in Section 3.7.
SECTION 5.6 NO SOLICITATION. During the term of this
Agreement, none of
Seller, any of its Affiliates or any Person acting on its or
their behalf shall
(i) solicit or encourage any inquiries or proposals for, or
enter into any
discussions with respect to, the acquisition of any properties
and assets held
for use in connection with, necessary for the conduct of, or
otherwise material
to, Seller or (ii) furnish or cause to be furnished any
non-public information
concerning Seller to any Person (other than the Buyer and its
agents and
representatives), other than in the ordinary course of
business or pursuant to
applicable law and after prior written notice to the Buyer.
Seller shall not
sell, transfer or otherwise dispose of, grant any option or
proxy to any Person
with respect to, create any lien upon, or transfer any
interest in, any Asset,
other than in the ordinary course of business and consistent
with this
Agreement.
SECTION 5.7 ACCESS AND INFORMATION. So long as this
Agreement remains in
effect, Seller will (and will cause each of its Affiliates and
their respective
accountants, counsel, consultants, employees and agents) give
Buyer and Buyer's
accountants, counsel, consultants, employees and agents, full
access during
normal business hours to, and furnish them with all documents,
records, work
papers and information with respect to, all of such Person's
properties, assets,
books, contracts, commitments, reports and records relating to
Seller, as Buyer
shall from time to time reasonably request. In addition,
Seller will permit
Buyer and its accountants, counsel, consultants, employees
and agents
reasonable access to such personnel of Seller during normal
business hours as
may be necessary or useful to the Buyer in its review of the
properties, assets
and business affairs of Seller and the above-mentioned
documents, records and
information. Seller will keep Buyer generally informed as to
the affairs of
Seller.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Except as required by
applicable law,
Seller shall not, and it shall not permit any Affiliate to,
make any public
announcement in respect of this Agreement or the transactions
contemplated
hereby without the prior written consent of Buyer.
22
SECTION 5.9 FURTHER ACTIONS.
(a) Seller agrees to use its best efforts to take all
actions and to do
all things necessary, proper or advisable to consummate the
transactions
contemplated hereby by the Closing Date.
(b) Seller will, as promptly as practicable, file or
supply, or cause to
be filed or supplied, all applications, notifications and
information required
to be filed or supplied by it pursuant to applicable law in
connection with the
transactions contemplated hereby.
(c) Seller, as promptly as practicable, will use all
reasonable efforts to
obtain, or cause to be obtained, all consents (including,
without limitation,
all governmental approvals and any consents required under any
Contract and all
consents listed on Schedule 3.30) necessary to be obtained in
order to
consummate the sale and transfer of the Assets.
(d) At all times prior to the Closing, Seller shall
promptly notify Buyer
in writing of any fact, condition, event or occurrence that
will or may result
in the failure of any of the conditions contained in Section
6.2 to be
satisfied, promptly upon either of them becoming aware of
same.
SECTION 5.10 EMPLOYEES. Buyer agrees promptly following
the Closing to
offer employment as an employee-at-will to each person
employed by Seller on the
date preceding the Closing Date at the same salary and wage
rate as then in
effect for such employee as reflected in the books and records
of Seller,
provided that Buyer may adopt or put into effect different
work and benefit
policies and Employee Benefit Plans at Buyer's sole
discretion. Seller shall be
responsible for any severance benefits due to any of its
employees who do not
accept employment with Buyer. Buyer will provide those
employees who accept
service with Buyer a service date as at Closing equal to their
service date with
Seller, and such persons will become eligible for medical
benefits under Buyer's
plans on the first day of the fourth calendar month following
the Closing Date.
Prior to such date of coverage, such employees will receive
medical coverage
under the provisions of Seller's existing health insurance
coverage at Buyer's
cost, and Seller hereby covenants to Buyer that such
continuing coverage is
permitted under such plans. Any employee contributions
previously withheld by
Seller to offset Seller's cost of providing such extended
coverage shall be
withheld from such continuing employees by Buyer for the
period during which
such employees are employed by Buyer but are receiving medical
coverage pursuant
to Seller's existing plan, and such monies shall be remitted
to Seller as soon
as reasonably practicable. After the Closing Buyer shall
provide a pool equal to
7% of gross wages paid to such continuing employees (other
than Shareholder) to
be distributed among such employees (other than Shareholder)
at the discretion
of Shareholder as wage or salary increases.
SECTION 5.11 ACCOUNTS RECEIVABLE. In the event that all
Accounts
Receivable are not collected by Buyer within 120 days after
the Closing Date,
despite reasonable efforts by Buyer to so collect (which
shall not include
resort to, or threat of, litigation), Seller promptly shall
purchase such
accounts receivable from Buyer for an amount equal to the
aggregate
outstanding balance thereof.
23
SECTION 5.12 FINANCING STATEMENTS. Seller shall cause
Norwest Bank and
any other creditor to file termination statements closing all
open financing
statements presently on file covering any of the Assets.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.1 CONDITIONS TO SELLER OBLIGATIONS. The
obligation of Seller to
consummate the transactions to be performed by it in
connection with the Closing
is subject to satisfaction of the following conditions:
(a) The representations and warranties of Buyer set forth
herein shall be
true and correct at and as of the Closing Date;
(b) Buyer shall have performed and complied with all of
its covenants
hereunder through the Closing;
(c) No action, suit, or proceeding shall be pending or
threatened before
any court or quasi-judicial or administrative agency of any
federal, state,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(i) prevent
consummation of any of the transactions contemplated by this
Agreement or (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling,
or charge shall be in effect);
(d) Buyer shall have delivered to Seller a certificate to
Seller a
certificate to the effect that each of the conditions
specified above in Section
6.1(a)-(c) is satisfied in all respects;
(e) Buyer shall deliver to Seller: (i) the Purchase Price
to the extent
deliverable in accordance with Section 2.5; and (ii) a Fund
Trust Agreement in
the form of Exhibit 2.5(c) hereto; and
(f) All actions to be taken by Buyer in connection with
consummation of
the transactions contemplated hereby and all certificates,
opinions,
instruments, and other documents required to effect the
transactions
contemplated hereby will be satisfactory in form and substance
to Seller. Seller
may waive any condition specified in Section 6.1 if it
executes a writing so
stating at or prior to the Closing.
SECTION 6.2 CONDITIONS TO BUYER OBLIGATIONS. The
obligation of the Buyer to
consummate the transactions to be performed by it in
connection with the Closing
is subject to satisfaction of the following conditions:
24
(a) The representations and warranties of Seller set
forth herein shall be
true and correct at and as of the Closing Date;
(b) Seller shall have performed and complied with all of
its covenants
hereunder through the Closing;
(c) Seller shall have procured all of the consents and
approvals specified
in Schedule 3.30;
(d) No action, suit, or proceeding shall be pending of
threatened before
any court or quasi-judicial or administrative agency of any
federal, state,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(i) prevent
consummation of any of the transactions contemplated by this
Agreement, (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded
following consummation, or (iii) affect adversely the right of
Buyer to own the
Assets or to operate Seller.
(e) Seller shall have delivered to Buyer a certificate to
the effect that
each of the conditions specified above in Section 6.2(a)-(d)
is satisfied in all
respects;
(f) Seller shall deliver to Buyer (i) a Bill of Sale;
(ii) copies of
termination statements terminating all open UCC-1 financing
statements; (iii) an
Assignment or Novation of Lease as described in Section 2.7(b)
hereof; and (iii)
a Fund Trust Agreement in the form of Exhibit 2.5(c) hereto;
(g) Buyer shall have entered into an employment agreement
with Richard S.
Rouse in the form of Exhibit 6.2(g) hereto and otherwise
satisfactory to Buyer
in its sole discretion;
(h) Buyer shall be satisfied with the results of its due
diligence
investigation, in its sole discretion;
(i) Buyer shall have received an opinion of Donald Glenn
Peterson, Esq.,
counsel to Seller, in the form of Exhibit 6.2(i) hereto and
otherwise in form
and substance satisfactory to Buyer in its sole discretion;
and
(j) All actions to be taken by Seller in connection with
consummation of
the transactions contemplated hereby and all certificates,
opinions,
instruments, and other documents required to effect the
transactions
contemplated hereby will be satisfactory in form and substance
to Buyer. Buyer
may waive any condition specified in this Section 6.2 if it
executes a writing
so stating at or prior to the Closing.
25
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 INDEMNIFICATION BY SELLER AND SHAREHOLDER.
Seller and
Shareholder shall, jointly and severally, indemnify and hold
harmless Buyer and
each of its Affiliates, directors, officers, employees,
attorneys, agents,
representatives, successors and assigns (collectively, the
"Affiliated Parties")
in respect of any and all claims, losses, damages,
liabilities, declines in
value, penalties, interest, costs and expenses (including,
without limitation,
any attorneys', accountants' and consultants' fees and other
expenses, including
any such expenses incurred in connection with investigating,
defending against
or settling any such claims) (collectively, "Losses")
reasonably incurred by
Buyer or its Affiliated Parties, in connection with, or
resulting from, each and
all of the following:
(a) Any breach of any representation or warranty made by
Seller or
Shareholder in this Agreement or pursuant hereto or in any
document or
instrument delivered by Seller or Shareholder pursuant hereto;
(b) Any misrepresentation contained in any written
statement or
certificate furnished by any Seller or Shareholder pursuant to
this Agreement or
in connection with the Transactions;
(c) Any breach of any covenant, agreement or obligation
of Seller or
Shareholder contained in this Agreement or any other document
or instrument
contemplated by this Agreement or delivered pursuant hereto;
(d) Any failure by Seller or Shareholder to perform and
discharge any of
the Excluded Liabilities;
(e) (i) Any violation by Seller of any Environmental
Protection Laws (as
amended or supplemented from time to time) prior to the
Closing Date, (ii) any
liabilities arising under Environmental Protection Laws (as
amended or
supplemented from time to time) as a result of the conduct of
the business of
Seller prior to the Closing Date, (iii) any contamination of
soil, groundwater
or other environmental media by or with any Regulated
Substance on, in or under
the Real Property or, as a result of the operation of Seller's
business, about
the Real Property; and (iv) any matters described in Section
3.15, whether or
not Seller had knowledge of such matters;
(f) (i) Any Taxes of Seller or its Affiliates, whether
relating to
periods before or after the Closing Date, (ii) any Taxes
arising in connection
with the Transactions, and (iii) any liability of Seller for
Taxes of any other
Person, as a transferee or successor, by contract or
otherwise;
(g) Any injury to persons or death or property damage
resulting from
or contributed to, by any products designed, manufactured,
sold or leased by
Seller, or any services performed, or actions taken, by Seller
prior to the
Closing Date;
26
(h) Any liability to any employee, former employee or
beneficiary of any
of them arising under the provisions of the Consolidated
Omnibus Budget
Reconsolidation Act of 1985, as amended, with respect to any
qualifying event,
as defined in Section 4980B of the Code, occurring through the
Closing Date; and
(i) Any violation of any laws, rules or regulations
relating to United
States government contracts or subcontracts, including the
Federal Acquisition
Regulations and related cost accounting standards, including
without limitation
any such laws or regulations relating to defective pricing.
No claim, demand, suit or cause of action shall be brought
against Seller
or Shareholder under Sections 7.1(a) or (b) unless and until
the aggregate
amount of claims under such Sections 7.1(a) or (b) exceeds
$5,000, in which
event Buyer and its Affiliated Parties shall be entitled to
indemnification from
Seller or Shareholder for all claims hereunder relating back
to the first
dollar. Notwithstanding the foregoing, such limitations do not
apply to the
indemnification obligations of Seller or Shareholder set forth
in Sections
7.1(c), (d), (e), (f), (g), (h) or (i).
SECTION 7.2 INDEMNIFICATION BY BUYER. Buyer shall
indemnify and hold
harmless Seller in respect of any and all Losses, reasonably
incurred by
Seller, in connection with, or resulting from, each and all of
the following:
(a) Any breach of any representation or warranty made by
Buyer in this
Agreement or pursuant hereto or in any document or instrument
delivered by
Seller; or
(b) Any misrepresentation contained in any written
statement or
certificate furnished by Buyer pursuant to this Agreement or
in connection with
the Transactions; or
(c) Any breach of any covenant, agreement or obligation
of Buyer contained
in this Agreement or any other document or instrument
contemplated by this
Agreement or delivered pursuant hereto.
No claim, demand, suit or cause of action shall be brought
against Buyer
under Sections 7.2(a) or (b) unless and until the aggregate
amount of claims
under such Sections 7.2(a) or (b) exceeds $5,000, in which
event, Seller shall
be entitled to indemnification from Buyer for all claims
hereunder relating back
to the first dollar. Notwithstanding the foregoing, such
limitations do not
apply to the indemnification obligations of Buyer set forth in
Section 7.2(c).
SECTION 7.3 CLAIMS FOR INDEMNIFICATION. Whenever any
claim shall arise
for indemnification hereunder, the party entitled to
indemnification (the
"indemnified party") shall promptly notify the party obligated
to provide
indemnification (the "indemnifying party") of the claim and,
when known, the
facts constituting the basis for such claim; PROVIDED,
HOWEVER, that the
failure to so notify the indemnifying party shall not relieve
the
indemnifying party of its obligation hereunder to the extent
such failure
does not materially prejudiced the indemnifying party. In the
event of any
claim for indemnification hereunder resulting from or in
connection with any
claim or legal
27
proceedings by a third party, the notice to the indemnifying
party shall
specify, if known, the amount or an estimate of the amount of
the liability
arising therefrom.
SECTION 7.4 DEFENSE CLAIMS. In connection with any claim
giving rise to
indemnity hereunder resulting from or arising out of any claim
or legal
proceeding by a person who is not a party to this Agreement,
the indemnifying
party at its sole cost and expense and with counsel reasonably
satisfactory to
the indemnified party may, upon written notice to the
indemnified party, assume
the defense of any such claim or legal proceeding if (a) the
indemnifying party
acknowledges to the indemnified party in writing, within
fifteen (15) days after
receipt of notice from the indemnified party, its obligations
to indemnify the
indemnified party with respect to all elements of such claim,
(b) the
indemnifying party provides the indemnified party with
evidence reasonably
acceptable to the indemnified party that the indemnifying
party will have the
financial resources to defend against such third-party claim
and fulfill its
indemnification obligations hereunder, (c) the third-party
claim involves only
money damages and does not seek an injunction or other
equitable relief, and (d)
settlement or an adverse judgment of the third-party claim is
not in the good
faith judgment of the indemnified party, likely to establish a
pattern or
practice adverse to the continuing business interests of the
indemnified party.
The indemnified party shall be entitled to participate in (but
not control) the
defense of any such action, with its counsel and at its own
expense; PROVIDED,
HOWEVER, that if there are one or more legal defenses
available to the
indemnified party that conflict with those available to the
indemnifying party,
or if the indemnifying party fails to take reasonable steps
necessary to defend
diligently the claim after receiving notice from the
indemnified party that it
believes the indemnifying party has failed to do so, the
indemnified party may
assume the defense of such claim; PROVIDED, FURTHER, that the
indemnified party
may not settle such claim without the prior written consent of
the indemnifying
party, which consent may not be unreasonably withheld. If the
indemnified party
assumes the defense of the claim, the indemnifying party shall
reimburse the
indemnified party for the reasonable fees and expenses of
counsel retained by
the indemnified party and the indemnifying party shall be
entitled to
participate in (but not control) the defense of such claim,
with its counsel and
at its own expense. If the indemnifying party thereafter seeks
to question the
manner in which the indemnified party defended such third
party claim or the
amount or nature of any such settlement, the indemnifying
party shall have the
burden to prove by a preponderance of the evidence that the
indemnified party
did not defend or settle such third party claim in a
reasonably prudent manner.
The parties agree to render, without compensation, to each
other such assistance
as they may reasonably require of each other in order to
insure the proper and
adequate defense of any action, suit or proceeding, whether or
not subject to
indemnification hereunder.
SECTION 7.5 INTEREST. Any amount of money owed by an
indemnifying party
to an indemnified party hereunder shall be paid with interest,
at an annual
rate equal to the Prime Rate then in effect, from the date
that the loss or
damage was sustained or cash disbursement made by the
indemnified party until
such amount is paid by the indemnifying party.
SECTION 7.6 MANNER OF INDEMNIFICATION. All
indemnification payments
hereunder shall be effected by payment of cash or delivery of
a certified or
official bank check in the amount of the indemnification
liability.
28
SECTION 7.7 ADDITIONAL LIMITATIONS ON INDEMNIFICATION.
(a) No claim for indemnification shall be made by Buyer
pursuant to
Sections 7.1(a), 7.1(b) or 7.1(c) or by Seller pursuant to
Sections 7.2(a),(b)
or (c) if made more than three (3) years after the Closing
Date, provided,
however, that claims for indemnification may be made by Buyer
pursuant to
Sections 7.1(a), 7.1(b) or 7.1(c) with respect to the
representations and
warranties made in Section 3.14 and Section 3.21 hereof for a
period equal to
the relevant statutes of limitation.
(b) Notwithstanding the foregoing, the limitations set
forth in Section
7.7(a) do not apply to the indemnification obligations of
Seller set forth in
Sections 7.1(d), 7.1(e), 7.1(f), 7.1(g), 7 1(h) and 7.1(i).
(c) Notwithstanding the provisions of this Section 7.9 to
the effect that
an indemnifying party's obligations under such section shall
expire at specified
times set forth herein, such obligations shall continue (i) as
to any matter as
to which a claim is submitted in writing to the indemnifying
party prior to such
specified time and identified as a claim for indemnification
pursuant to this
Agreement and (ii) as to any matter that is based upon faud by
the indemnifying
party, until such time as such claims and matters are
resolved.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated
at any time prior
to the Closing Date:
(a) by the written agreement of the Buyer and Seller;
(b) by either Seller or Buyer by written notice to the
other party if the
Closing contemplated hereby shall not have been consummated
pursuant hereto by
5:00 p.m. Los Angeles time on September 30, 1996, unless such
date shall be
extended by the mutual written consent of Seller and Buyer;
(c) by Buyer by written notice to Seller if (i) the
representations and
warranties of Seller shall not have been true and correct in
all respects as of
the date when made or (ii) if any of the conditions set forth
in Section 6.2
shall not have been, or if it becomes apparent that any of
such conditions will
not be, fulfilled by 5:00 p.m. Los. Angeles time on September
30, 1996, unless
such failure shall be due to the failure of Buyer to perform
or comply with any
of the covenants, agreements or conditions hereof to be
performed or complied
with by it prior to the Closing; or
(d) by Seller by written notice to Buyer if (i) the
representations and
warranties of Buyer shall not have been true and correct in
all respects as of
the date when made or (ii) if any of the conditions set forth
in Section 6.1
shall not have been, or if it becomes apparent that any of
such
29
conditions will not be, fulfilled by 5:00 p.m. Los Angeles
time on
September 30, 1996, unless such failure shall be due to the
failure of Seller to
perform or comply with any of the covenants, agreements or
conditions hereof to
be performed or complied with by it prior to the Closing.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the
termination of this
Agreement pursuant to the provisions of Section 8.1, this
Agreement shall become
void and have no effect, without any liability to any Person
in respect hereof
or of the transactions contemplated hereby on the part of any
party hereto, or
any of its directors, officers, employees, agents,
consultants, representatives,
advisers, stockholders or Affiliates except for any liability
resulting from
such party's breach of this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 BULK SALES LAW. Seller represents that there
is no applicable
bulk sales law in connection with the transfer of the Assets
under this
Agreement.
SECTION 9.2 FEES AND EXPENSES.
(a) Seller, on the one hand, and Buyer, on the other
hand, will bear their
own expenses in connection with the negotiation and the
consummation of the
Transactions contemplated by this Agreement, including,
without limitation, any
broker's commission or finder's fee incurred by such party.
(b) Seller will pay all costs incurred, whether at or
subsequent to the
Closing, in connection with the transfer of the Assets to
Buyer as contemplated
by this Agreement, including without limitation, all sales,
use, excise, real
property and other transfer taxes and charges applicable to
such transfer and
all costs of obtaining or transferring permits, registrations,
applications and
other tangible and intangible properties.
SECTION 9.3 NOTICES. All notices, requests, demands and
other
communications hereunder shall be in writing and shall be
deemed given if
delivered personally or by facsimile transmission (with
subsequent letter
confirmation by mail) or three days after being mailed by
certified or
registered mail, postage prepaid, return receipt requested, to
the parties,
their successors in interest or their assignees at the
following addresses, or
at such other addresses as the parties may designate by
written notice in the
manner aforesaid:
IF TO BUYER: Advanced Materials, Inc.
------------ 20211 S. Susana Road
Rancho Dominguez, California
90221
Telecopy: (310)
763-6869
Attention: President
30
With a concurrent copy to: Day Campbell & McGill
3070 Bristol, Suite 650
Costa Mesa, California 92626
Telecopy: (714)
429-2901
Attention: Leonard J.
McGill, Esq.
IF TO SELLER OR SHAREHOLDER: Gasket and Molded Products,
Inc.
---------------------------- 8218 E. Lakeshore Drive
Parker, Colorado 80134
Telecopy: (303)
841-2933
Attention: Richard S.
Rouse
With a concurrent copy to: Donald Glenn Peterson, Esq.
4242 E. Amherst Avenue
Denver, Colorado 80222-6702
Telecopy: (303)
758-1091
SECTION 9.4 ASSIGNABILITY AND PARTIES IN INTEREST. This
Agreement shall not
be assignable by any of the parties. This Agreement shall
inure to the benefit
of and be binding upon the parties and their respective
permitted successors and
assigns.
SECTION 9.5 GOVERNING LAW. This Agreement shall be
governed by, and
construed and enforced in accordance with, the internal law,
and not the law
pertaining to conflicts or choice of law, of the State of
Colorado.
SECTION 9.6 COUNTERPARTS. This Agreement may be executed
in several
counterparts, each of which shall be deemed an original, but
all of which shall
constitute one and the same instrument.
SECTION 9.7 COMPLETE AGREEMENT. This Agreement, the
Exhibits and Schedules
and the documents delivered or to be delivered pursuant to
this Agreement
contain or will contain the entire agreement among the parties
with respect to
the Transactions and shall supersede all previous oral and
written and all
contemporaneous oral negotiations, commitments and
understandings.
SECTION 9.8 MODIFICATIONS. AMENDMENTS AND WAIVERS. This
Agreement may be
modified, amended or otherwise supplemented only by a writing
signed by all of
the parties. No waiver of any right or power hereunder shall
be deemed effective
unless and until a writing waiving such right or power is
executed by the party
waiving such right or power.
SECTION 9.9 DUE DILIGENCE INVESTIGATION; KNOWLEDGE. All
representations and
warranties contained herein that are made to the knowledge of
a party shall
require that such party make reasonable investigation and
inquiry with respect
thereto to ascertain the correctness and validity thereof.
Without limiting the
foregoing sentence, when any fact is stated to be to the
"knowledge of
Seller," such reference shall mean that Seller knows or should
have known of the
existence or non-
31
existence of such fact based upon a reasonable investigation
and inquiry of the
employees, accountants and attorneys of Seller.
SECTION 9.10 LIMIT ON INTEREST. Notwithstanding anything
in this Agreement
to the contrary, no party shall be obligated to pay interest
at a rate higher
than the maximum rate permitted by applicable law. In the
event that an interest
rate provided in this Agreement exceeds the maximum rate
permitted by applicable
law, such interest rate shall be deemed to be reduced to such
maximum
permissible rate.
SECTION 9.11 ATTORNEYS' FEES AND COSTS. Should any party
institute any
action or proceeding in any court to enforce any provision of
this Agreement,
the prevailing party shall be entitled to receive from the
losing party
reasonable attorneys' fees and costs incurred in such action
or proceeding,
whether or not such action or proceeding is prosecuted to
judgment.
SECTION 9.12 FURTHER ASSURANCES. Each party shall execute
and deliver such
further instruments and take such further actions as any other
party may
reasonably request in order to carry out the intent of this
Agreement and to
consummate the Transactions.
SECTION 9.13 CONTRACT INTERPRETATION: CONSTRUCTION OF
AGREEMENT.
(a) The headings contained in this Agreement are for
reference purposes
only and shall not affect in any way the meaning or
interpretation of this
Agreement. Article, section, exhibit, schedule, preamble,
recital and party
references are to this Agreement unless otherwise stated.
(b) No party, nor its respective counsel, shall be
deemed the drafter
of this Agreement for purposes of construing the provisions of
this Agreement,
and all language in all parts of this Agreement shall be
construed in accordance
with its fair meaning, and not strictly for or against any
party.
SECTION 9.14 ARBITRATION. Except as otherwise provided in
Section 5.4 and
subject to Section 9.5, any controversy, dispute or claim
arising under or
related to this Agreement shall be settled by arbitration
conducted in Los
Angeles, California in accordance with the then existing
Commercial Arbitration
Rules of the American Arbitration Association, and judgment
upon any award
rendered by the arbitrator may be entered by any federal or
state court having
jurisdiction thereof. The parties expressly provide that the
provisions of
Section 1283.05 of the California Code of Civil Procedure are
incorporated into,
and made a part of, this Section 9.14. The decision of the
arbitrator shall be
final and binding upon the parties. The arbitrator shall be
authorized to award
any relief, whether legal or equitable, to the party so
entitled to such relief.
(b) In respect of any action, suit or other proceeding
relating to the
enforcement of the award rendered by the arbitrator pursuant
to this Section
9.14, each party hereby irrevocably submits to the
non-exclusive jurisdiction
of any state or federal court located in the County of Los
Angeles, State of
California. EACH PARTY HEREBY WAIVES ANY RIGHT EACH MAY HAVE
TO
32
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT
IS NOT SUBJECT TO
THE JURISDICTION OF THE AFORESAID COURTS, OR TO OBJECT TO
VENUE TO THE EXTENT
THAT ANY ACTION, SUIT OR OTHER PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS
SECTION 9.14.
SECTION 9.15 GUARANTEE OF OBLIGATIONS. The Shareholder
hereby agrees that
he is fully liable for each and every obligation, covenant or
liability of
Seller under this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of
the date first above written.
BUYER
-----
ADVANCED MATERIALS, INC., a
California corporation
By: /s/ Dave Lasnier
-------------------------------
Name: Dave Lasnier
Title: Executive Vice President/
General Manager
SELLER
------
GASKET AND MOLDED PRODUCTS, INC.,
a Colorado
corporation
By: /s/ Richard S. Rouse
-------------------------------
Name: Richard S. Rouse
Title: President
SHAREHOLDER
-----------
/s/ Richard S. Rouse
----------------------------------
Name: Richard S. Rouse
NEAL M. PRICE
-------------
(as to Section 5.3 only)
/s/ Neal M. Price
----------------------------------
Name: Neal M. Price
33
LIST OF EXHIBITS
Exhibit 2.5(c) Fund Trust Agreement
Exhibit 2.6 Assignment or
Novation of Lease
Exhibit 6.2(g) Employment Agreement
Exhibit 6.2(i) Opinion of Counsel
LIST OF SCHEDULES
Schedule 2.1(a) Equipment List
Schedule 2.1(b) Inventory List
Schedule 2.1(c) Contract List
Schedule 2.2(iv) Excluded Inventory
Schedule 3.2 Permits and Licenses
Schedule 3.6 Financials
Schedule 3.13 Receivables Aging
Schedule 3.19(a) Material Contracts
Schedule 3.22 Related Party
Transactions
Schedule 3.26 Insurance
Schedule 3.30 Consents RequiredASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (this "Agreement")
is made and
entered into as of September 1, 1996 by and among Advanced
Materials, Inc., a
California corporation ("Buyer"), Gasket and Molded Products,
Inc., a Colorado
corporation ("Seller") and Richard S. Rouse, a shareholder of
Seller (the
"Shareholder") and Neal M. Price, a shareholder of Seller (as
to Section 5.3
only).
RECITALS
WHEREAS, subject to the terms and conditions hereof,
Seller desires to sell
all of its right, title and interest in and to the properties
and assets owned
or used or held for use by Seller, whether tangible or
intangible, of every kind
whatsoever, including all those relating to or used in
connection with, or
useful or necessary for the conduct of, or otherwise material
to, Seller's
business, wherever located, and the goodwill pertaining
thereto, except the
Excluded Assets (the "Assets"); and
WHEREAS, subject to the terms and conditions hereof, Buyer
desires to
purchase said Assets of Seller for the consideration specified
herein; and
WHEREAS, Shareholder has agreed to guarantee certain of
the obligations of
Seller hereunder.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
provisions set
forth below, and subject to the terms and conditions set forth
herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have
the meanings
indicated below:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in
Section 3.13.
"ADJUSTED PURCHASE PRICE" shall have the meaning set forth
in Section
2.5(b).
"AFFILIATE" shall mean, in respect of any specified
Person, any other
Person that, directly or indirectly, controls, is controlled
by, or is under
common control with, such specified Person or if such
specified Person bears a
familial relationship with such other Person (the terms
"controls," "controlled"
or "control" meaning the possession, directly or indirectly,
of the power to
direct or cause the direction of management policies of a
Person, whether
through the ownership of securities by contract or credit
arrangement, as
trustee or executor, or otherwise).
"AFFILIATED PARTIES" shall have the meaning set forth in
Section 7.1.
"AGENT" shall have the meaning set forth in Section
2.5(c).
"AGREEMENT" shall have the meaning set forth in the
Preamble.
"ASSETS" shall have the meaning set forth in the Preamble.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 2.3.
"BUYER" shall have the meaning set forth in the Preamble.
"BUYER'S WARRANTY COSTS" shall have the meaning set forth
in Section 5.4.
"CERCLA" shall have the meaning set forth within the
definition of
"Environmental Protection Laws"
"CLOSING" shall have the meaning set forth in Section 2.4.
"CLOSING DATE" shall have the meaning set forth in Section
2.4.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"CONTRACTS" shall have the meaning set forth in Section
2.1(c).
"EMPLOYMENT-RELATED AGREEMENTS" shall mean (i) any
employment, consulting,
collective bargaining or similar agreement, whether written or
oral, to which
Seller is a party or by which it is bound, (ii) any plan,
agreement or
arrangement sponsored by or contributed to by Seller,
including, without
limitation, any life and health insurance, hospitalization,
savings, bonus,
deferred compensation, incentive compensation, stock purchase,
stock option,
holiday, vacation, severance pay, sick pay, sick leave,
disability, educational
assistance, tuition refund, service award, company car,
scholarship, relocation,
fringe benefit, severance contracts, sales commissions,
automobile allowances or
insurance, supplemental, pension arrangements, and other
policies, practices or
commitments, whether written or unwritten, providing employee
or executive
compensation or benefits to employees of Seller, (iii) any
employee benefit plan
as defined in Section 3(3) of ERISA, and (iv) any arrangement
or understanding
for the payment of post-retirement benefits.
"EMPLOYEE BENEFIT PLANS" shall have the meaning set forth
in Section 3.18.
"ENVIRONMENTAL PROTECTION LAWS" shall mean all federal,
state, local and
foreign laws, statutes, regulations having the force and
effect of law, permits,
court decrees, judgments, injunctions and written orders
concerning (i) public
health and safety relating to toxic or hazardous substances or
(ii) pollution or
protection of the environment or natural resources, including,
without
limitation,
2
the Comprehensive Environmental Response, Compensation, and
Liability Act
("CERCLA") (42 U.S.C. Section 9601 ET SEQ.); the Hazardous
Materials
Transportation Act (49 U.S.C. Section 1801 ET SEQ.); the
Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901
ET SEQ.); the
Clean Water Act (33 U.S.C. Section 1251 ET SEQ.); the Safe
Drinking Water Act
(14 U.S.C. Section 1401 ET SEQ.); the Toxic Substances Control
Act (15 U.S.C.
Section 2601 ET SEQ.), the Federal Insecticide, Fungicide, and
Rodenticide
Act (7 U.S.C. Section 136 ET SEQ.), the Clean Air Act (42
U.S.C. Section 7401
ET SEQ. ); the Emergency Planning and Community Right-to-Know
Act (42 U.S.C.
Sections 11001-11005, 11021-11023, and 11041-11050); the
Porter-Cologne Water
Quality Act (California Water Code Sections 13000-13999.19);
the Hazardous
Waste Control Law (California Health & Safety Code Sections
25100-25250.25);
the Safe Drinking Water and Toxic Enforcement Act (California
Health & Safety
Code Sections 25249.5-25249.13); California Health & Safety
Code Sections
25280-25299.81 (regarding Underground Storage of Hazardous
Substances) and
Sections 25500-25545 (regarding Hazardous Materials
Inventories and Emergency
Plans); the Hazardous Substance Account Act (California Health
& Safety Code
Sections 25300-25393); and California Health & Safety Code
Sections
39000-44384 regarding Air Resources; in each case including
the regulations
promulgated thereunder.
"EPA" shall mean the United States Environmental
Protection Agency, or any
successor United States governmental agency.
"EQUIPMENT" shall have the meaning set forth in Section
2.1(a).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as
the same may be amended from time to time.
"ERISA AFFILIATE" of Seller shall mean any other Person
that, together with
Seller as of the relevant measuring date under ERISA, was or
is required to be
treated as a single employer under Section 414 of the Code.
"EXCLUDED ASSETS" shall have the meaning set forth in
Section 2.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 2.3.
"FINANCIALS" shall have the meaning set forth in Section
5.3.
"GAAP" shall mean generally accepted accounting principles
as in effect at
the time in question.
"HOLD-BACK AMOUNT" shall have the meaning set forth in
Section 2.5(c).
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.3.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 7.3.
3
"INDEPENDENT ACCOUNTING FIRM" shall have the meaning set
forth in Section
2.5(b).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set
forth in Section
3.16.
"INVENTORY" shall have the meaning set forth in Section
2.1(b).
"IRS" shall mean the Internal Revenue Service.
"LEASE" shall have the meaning set forth in Section 3.14.
"LICENSES" shall have the meaning set forth in Section
3.16.
"LOSSES" shall have the meaning set forth in Section 7.1.
"MATERIAL CONTRACTS" shall have the meaning set forth in
Section 3.19.
"PCBs" shall have the meaning set forth in the definition
of "Regulated
Substance."
"PERSON" shall mean any entity or natural person or any
corporation,
partnership, joint venture or other entity, whether or not a
legal entity.
"PRIME RATE" shall mean the reference rate as reported by
Wells Fargo Bank,
N.A.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.5(a).
"REAL PROPERTY" shall have the meaning set forth in
Section 3.14.
"RCRA" shall have the meaning set forth within the
definition of
"Environmental Protection Laws."
"REGULATED SUBSTANCE" shall mean any chemical or substance
subject to or
regulated under any Environmental Protection Law including,
without
limitation, any "pollutant or contaminant" or "hazardous
substance" as those
terms are defined in CERCLA, any "hazardous waste" as that
term is defined in
RCRA, and any other hazardous or toxic wastes, substances, or
materials,
petroleum (including crude oil and refined and unrefined
fractions thereof),
polychlorinated biphenyls ("PCBs"), infectious waste, special
waste,
pesticides, fungicides, solvents, herbicides, flammables,
explosives,
asbestos and asbestos-containing material, and radioactive
materials, whether
injurious by themselves or in combination with other
materials.
"RELATED PARTIES" shall have the meaning set forth in
Section 3.19(a)(v).
"RIGHTS" shall have the meaning set forth in Section
2.7(b).
4
"SBA LOAN" shall have the meaning set forth in Section 2.3
"SELLER" shall have the meaning set forth in the Preamble.
"SHAREHOLDER" shall have the meaning set forth in the
Preamble.
"TAX" OR "TAXES" shall mean any and all taxes imposed or
required to be
collected by any federal, state or local taxing authority in
the United States,
or by any foreign taxing authority under any statute or
regulation, including,
without limitation, all income, gross receipts, sales, use,
personal property,
use and occupancy, business occupation, unemployment,
disability withholding,
mercantile, ad valorem, transfer, license, withholding,
payroll, employment,
excise, real estate, environmental, capital stock, franchise,
alternative or
add-on minimum, estimated or other tax of any kind whatsoever,
including any
interest, penalties and other additions thereto.
"TRANSACTIONS" shall mean, in respect of any party, all
transactions
contemplated by this Agreement that involve, relate to or
affect such party.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1 SALE OF ASSETS. Subject to the provisions of
this Agreement,
Seller agrees to sell and Buyer agrees to purchase, at the
Closing, all of
Seller's right, title and interest in and to the Assets,
including, without
limitation:
(a) All tangible assets, including without limitation,
the tangible assets
listed in Schedule 2.1(a), and further including all of
Seller's equipment,
machinery, tools, jigs and dies, computers, software and
furniture
(collectively, "Equipment");
(b) All inventory (the "Inventory"), including, without
limitation, the
Inventory listed in Schedule 2.1(b);
(c) All of the contracts, purchase orders, backlog and
agreements with
customers to which Seller is a party (the "Contracts"),
including, without
limitation, the contracts and agreements listed in Schedule
2.1(c);
(d) All goodwill;
(e) All patents, patent applications, trademarks,
trademark applications,
copyrights, licenses, trade secrets, data, designs, drawings,
specifications and
other documents, know-how and information and all files, books
and records with
respect thereto; and
5
(f) All books and records, data and other information, in
whatever format,
whether on paper or computer disk or otherwise, in the
possession of Seller.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding
anything in this
Agreement to the contrary, there shall be excluded from the
Assets (the
"Excluded Assets") (i) a 1992 Dodge Caravan; (ii) a 1995 Dodge
Caravan; (iii)
two receivables aggregating no more than $10,000 from
Aerobafloor and Yukon
Fitness; (iv) certain inventory described on Schedule 2.2(iv)
hereof; and (v)
cash on hand and bank deposits at Closing.
SECTION 2.3 ASSUMPTION OF LIABILITIES.
(a) Subject to the provisions of this Agreement, Buyer
assumes and agrees
to pay or to discharge the following obligations of Seller
(the "Assumed
Liabilities"): (i) SBA Loan # GP750,241-30-06-DEN in the
amount (principal and
interest) of approximately $68,417 (the "SBA Loan"); and (ii)
accounts payable
and accrued expenses as at the date of Closing incurred in the
ordinary course
of business and not payable to any Affiliate of Seller or the
Shareholder, and
not including automobile loan payments relating to Seller's
1992 Dodge Caravan
and 1995 Dodge Caravan and in any event not to exceed (without
the consent of
Buyer) $55,000.
(b) Except as specifically assumed by Buyer pursuant to
the immediately
preceding sentence, Buyer shall not assume or have any
liability with respect to
any other obligation or liability of Seller, whether absolute,
accrued,
contingent or otherwise, and whether due or to become due (the
"Excluded
Liabilities"). Without limiting the previous sentence, the
parties acknowledge
that Buyer shall specifically not assume, in addition to all
other Excluded
Liabilities, any liability for Taxes payable by Seller or any
liability for any
legal, accounting or other fees or expenses incurred by Seller
in connection
with the negotiation and execution of this Agreement or any
related agreement.
The assumption of the Assumed Liabilities by Buyer hereunder
shall not enlarge
any rights of third parties under contracts or arrangements
with Buyer or Seller
and nothing herein shall prevent any party from contesting in
good faith with
any third party any of the Assumed Liabilities.
(c) Buyer acknowledges that it shall pay all obligations,
including Taxes
(other than any such taxes referred to in Section 2.9),
incurred by Buyer
following the Closing.
SECTION 2.4 TIME AND PLACE OF CLOSING. The closing
of the purchase
and sale provided for in this Agreement (herein called the
"Closing") shall be
held at the offices of Day Campbell & McGill at 3070 Bristol,
Suite 650, Costa
Mesa, California and shall be effective as of 12:01 a.m. on
September 1, 1996,
or at such other place or earlier or later date or time as may
be fixed by
mutual agreement of Buyer and Seller (the "Closing Date").
SECTION 2.5 PURCHASE PRICE: ADJUSTED PURCHASE PRICE.
(a) The aggregate purchase price (the "Purchase Price")
to be paid by
Buyer in consideration of the sale and transfer of the Assets
shall be $210,000,
minus the Assumed Liabilities.
6
(b) As promptly as practicable after the Closing Date,
Buyer shall prepare
and deliver to Seller a statement of the adjusted purchase
price (the "Adjusted
Purchase Price") as at the Closing Date, which Adjusted
Purchase Price shall be
derived from a balance sheet as at the Closing Date prepared
in accordance with
generally accepted accounting principles, which balance sheet
shall show the
adjusted value of the Assumed Liabilities as of August 31,
1996, and which
Adjusted Purchase Price shall reflect the asset value of the
Assets, subject to
the following adjustments and net of the Assumed Liabilities
as of August 31,
1996: (A) only good and usable Inventory satisfying the
representation contained
in Section 3.20 hereof shall be included, and shall be valued
at a fair value
mutually agreed upon between the parties; (B) only Equipment
satisfying the
representation contained in Section 3.12 hereof shall be
included, and shall be
valued at fair market value mutually agreed upon between the
parties; (C) only
good and collectible Accounts Receivable satisfying the
representation contained
in Section 3.13 hereof shall be included; and (D) prepaid
taxes, expenses and
deposits shall be prorated as at the Closing Date.
(c) The Purchase Price shall be paid as follows:
(i) At the Closing Buyer shall deliver $150,000 of
the Purchase Price
to Pacific National Bank, as agent (the "Agent") pursuant to a
Fund Trust
Agreement in the form of Exhibit 2.5(c) attached hereto and
incorporated herein
by reference.
(ii) On September 15, 1996, Buyer and Seller shall
cause the Agent to
(x) pay to Seller the amount of the Adjusted Purchase Price,
minus $10,000 (the
"Hold-back Amount") and net of the amount of Assumed
Liabilities as of August
31, 1996, (y), direct a payment in the amount of the SBA Loan
to an account at
Norwest Bank against which Seller shall write a check to pay
off the SBA Loan,
and (z) distribute to Buyer the amount remaining thereafter,
and Buyer shall
thereafter pay other Assumed Liabilities when due.
(iii) On or before November 30, 1996, Buyer shall
cause Agent to pay
Seller the Hold-back Amount, adjusted downwards
dollar-for-dollar by the amount
of any and all Losses of Buyer or its Affiliates resulting
from (A) a breach of
any of Seller's or Shareholder's representations, warranties
or covenants
hereunder, (B) the amount of any other Losses payable by
Seller or Shareholder
to Buyer pursuant to Section 7.1 hereof; (C) the amount of any
Excluded
Liabilities actually paid by Buyer, and (D) the amount of any
Buyer's Warranty
Costs, and adjusted upwards dollar-for-dollar by the amount of
any and all
Losses of Seller resulting from (A) a breach of any of Buyer's
representations,
warranties and covenants hereunder, (B) the amount of any
other Losses payable
by Buyer to Seller pursuant to Section 7.2 hereof; or (C) the
amount of any
Assumed Liabilities actually paid by Seller. Seller shall
co-sign any
instructions to Agent pursuant to this Section 2.5(c)(iii).
(iv) At the time that distributions are made pursuant
to Section
2.5(c)(iii), above, Buyer shall pay Seller interest on the
Holdback Amount at
the Prime Rate from September 1, 1996 through such date of
payment.
7
(d) All payments hereunder shall be in immediately
available funds and
shall be paid by wire transfer to an account designated by the
recipient
thereof.
SECTION 2.6 TRANSFER OF ASSETS.
(a) At the Closing, Seller shall deliver or cause to be
delivered to Buyer
good and sufficient instruments of transfer transferring to
Buyer title to all
the Assets. Such instruments of transfer (i) shall be in the
form and will
contain provisions not inconsistent with the provisions hereof
which are usual
and customary for transferring the type of property involved
under the laws of
the jurisdictions applicable to such transfers, (ii) shall be
in form and
substance reasonably satisfactory to Buyer and its counsel,
and (iii) shall
effectively vest in Buyer title to all the Assets free and
clear of all liens,
restrictions and encumbrances.
(b) At Closing Buyer shall further deliver to Buyer an
Assignment or
Novation of Lease assigning Seller's lease to its
manufacturing facility to
Buyer, such assignment or novation to be in form and substance
satisfactory to
Buyer in the form of Exhibit 2.6 hereof.
SECTION 2.7 DELIVERY OF RECORDS AND CONTRACTS: FURTHER
ASSURANCES.
(a) At the time of the Closing, subject to subsection (b)
below, Seller
shall deliver or cause to be delivered to Buyer all of
Seller's contracts,
commitments, agreements and rights which are included in the
Assets, with such
assignments thereof and consents to assignments as are
necessary to assure Buyer
of the full benefit of the same. Seller shall also deliver to
Buyer at the time
of the Closing all of Seller's business records, books and
other data, and
Seller shall take all requisite steps to put Buyer in actual
possession and
operating control of the Assets.
(b) If an attempted sale, conveyance, assignment,
transfer or delivery of
any contracts, claims, commitments, franchises, privileges,
permits, consents,
certificates, licenses or any other assets, rights or benefits
to be sold,
conveyed, assigned, transferred and delivered to Buyer which
are included in the
Assets (collectively, the "Rights") would be ineffective
without the consent of
any other person, and such consent has not been obtained on or
before the
Closing Date, this Agreement shall not constitute an
assignment or an attempted
assignment of such Right if such assignment or attempted
assignment would
constitute a breach thereof or be unlawful. In such case,
Seller shall use
commercially reasonable efforts to obtain, as soon as
practicable, the consent
of each such or other person in all cases in which such
consent is required, and
Seller and Buyer will cooperate in any reasonable arrangement
designed to enable
Seller to perform its obligations hereunder, and to provide
for the assumption
by Buyer of the benefits, risks and burdens of, any such
agreement consistent
with the provisions of this Agreement.
(c) Seller from time to time after the Closing at the
request of Buyer and
without further consideration shall execute and deliver
further instruments of
transfer and assignment and take such other action as Buyer
may reasonably
require to more effectively transfer and assign to, and vest
in, Buyer each of
the Assets.
8
SECTION 2.8 ALLOCATION OF PURCHASE PRICE. Buyer and Seller
shall use best
efforts to agree to an allocation of the purchase price (and
all other
capitalized costs) among the Assets. Such allocation shall be
made in accordance
with the provisions of Section 1060 of the Code, and shall be
binding upon Buyer
and Seller for all federal and state income tax purposes.
SECTION 2.9 SALES AND TRANSFER TAXES. Seller represents
that there are no
sales or transfer taxes, fees or duties under applicable law
incurred in
connection with this Agreement or the Transactions
contemplated thereby.
Notwithstanding the foregoing, Buyer agrees to pay sales taxes
incurred in
connection with the Transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER
Sellers and Shareholder, jointly and severally, hereby
represent and warrant to
Buyer that:
SECTION 3.1 ORGANIZATION AND GOOD STANDING. Seller is a
corporation duly
organized, validly existing and in good standing under the
laws of the State of
Colorado with full corporate power and authority to own or
lease its properties
and to conduct its business in the manner and in the places
where such
properties are owned or leased or such business is currently
conducted. Seller
is qualified to do business and is in good standing in the
State of Colorado.
SECTION 3.2 LICENSES AND PERMITS. Schedule 3.2 lists all
permits,
registrations, licenses, franchises, certifications and other
approvals required
from federal, state or local authorities in order for Seller
to conduct and
operate its business as presently conducted.
SECTION 3.3 AUTHORITY: NO BREACH. Seller has all necessary
authority and
power to enter into this Agreement and to carry out the
Transactions
contemplated hereby. The execution, delivery and performance
by Seller of this
Agreement and the consummation by Seller of the Transactions
contemplated hereby
have been duly authorized by all necessary corporate action of
Seller, including
shareholder approvals, and no other action on the part of
Seller is required in
connection therewith. The Shareholder is under no legal
disability. This
Agreement constitutes the valid and binding obligation of
Seller and
Shareholder, enforceable against Sellers and Shareholder in
accordance with its
terms. The execution, delivery and performance by Seller of
this Agreement do
not, and the performance by Seller of the Transactions
contemplated hereby, will
not:
(i) violate any provision of the Articles of
Incorporation or by-laws
of Seller;
(ii) violate any laws of the United States, or any
state or other
jurisdiction applicable to Seller or require Seller to obtain
any approval,
consent or waiver of, or make any filing with, any person or
entity
(governmental or otherwise) that has not been obtained or
made;
9
(iii) result in a violation or any breach of,
constitute a default
(or an event which with notice or lapse of time or both would
become a default)
under, result in the acceleration of any indebtedness under or
performance
required by, result in any right of termination of, increase
any amounts payable
under, decrease any amounts receivable under, change any other
rights pursuant
to, or conflict with, any material note, bond, mortgage,
indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation
to which Seller is a party or by which it or its properties is
bound; or
(iv) result in the creation or imposition of any
lien, charge,
encumbrance or restriction upon any of the Assets.
SECTION 3.4 TITLE. Seller has good title to the Assets
(except the Real
Property) and on the Closing Date will transfer and convey
good and valid title
to such Assets to Buyer, free and clear of any liens,
encumbrances, pledges,
security interests, claims or rights of others of any kind or
nature whatsoever,
except as otherwise created by Buyer.
SECTION 3.5 SUBSIDIARIES. Seller does not have any
subsidiaries or any
other equity interest in any corporation, partnership or
similar entity that
relates in any way to Seller.
SECTION 3.6 FINANCIAL STATEMENTS. Schedule 3.6 contains
the following
financial statements of Seller (collectively, the
"Financials"): (a) the balance
sheet of Seller as of December 31, 1993, December 31, 1994 and
December 31,
1995, and the related statements of operations for the twelve
months then ended,
and (b) the balance sheet of Seller as of July 15, 1996, and
the related
statement of operations for the period from January 1, 1996
through July 15,
1996. Each of the balance sheets and statement of operations
constituting part
of the Financials have been prepared in accordance with GAAP
consistently
applied with prior periods, are complete and correct and
fairly present the
financial condition and results of operations of Seller for
the periods
indicated thereon, and contain and reflect reserves for all
liabilities and
obligations of any nature, whether absolute, contingent or
otherwise, except for
reserves not required to be maintained under GAAP. The
Financials do contain any
items of extraordinary or nonrecurring income or any other
income not earned in
the ordinary course of business.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES. Since December 31,
1995, there has
not occurred:
(a) Any adverse change in the assets, liabilities
(whether absolute,
accrued, contingent or otherwise), condition (financial or
otherwise), results
of operations, business or prospects of Seller not reflected
in the Financials
and that has resulted in or may result in a loss to Seller of
more than $5,000
in the aggregate;
(b) Any guarantee by Seller of any obligation, or any
mortgage, pledge or
encumbrance on any of the properties or assets of Seller;
10
(c) Any amendment or modification of any Material
Contract, or any
termination of any agreement that would have been a Material
Contract were such
agreement in existence on the date hereof;
(d) Any transaction by Seller, whether or not covered by
the foregoing,
not in the ordinary course of business, including, without
limitation, any
purchase or sale of any assets;
(e) Any alteration in the manner of keeping the books,
accounts or records
of or pertaining to Seller, or in the accounting practices
therein reflected;
(f) Any loss or threatened loss of a customer or
customers;
(g) Any damage or destruction to, or loss of, any assets
or property
owned, leased or used by Seller (whether or not covered by
insurance); or
(h) Any agreement to do any of the things described in
the preceding
subsections (a) - (g) of this Section 3.7.
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
reflected in the
Financials, there are no liabilities of Seller, whether
absolute, accrued,
contingent or otherwise, and whether due or to become due.
SECTION 3.9 LOSS CONTRACTS. Seller does not have any
Contracts on which
Seller expects to lose money. As used in this Section, "lose
money" means that
the sales price for products under the purchase agreement,
order or contract is
less than the sum of Seller's cost of goods sold, including
labor, materials and
overhead.
SECTION 3.10 PROGRESS AND OTHER PAYMENTS. Seller has not
received any
unliquidated progress payments, milestone payments, advance
payments, deposits
or other similar payments from customers with respect to the
Contracts.
SECTION 3.11 LETTERS OF CREDIT, BONDS, ETC. (a) Seller is
not the
beneficiary of any letters of credit, performance or other
bonds, or any other
financial instruments guaranteeing the payment or performance
of any third party
under any Contract, and (b) Seller is not required to provide
any letter of
credit, performance or other bond, or any other financial
instrument for the
purpose of guaranteeing Seller's payment or performance under
any Contract.
SECTION 3.12 MACHINERY, EQUIPMENT AND OTHER PERSONAL
PROPERTY. Seller owns
all of the Equipment. All such Equipment is sold "as is, where
is," but is
sufficient to carry on the business of Seller in the normal
course as it is
presently conducted.
11
SECTION 3.13 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) All of Seller's accounts receivable ("Accounts
Receivable") are
properly reflected on its books and records, are valid
receivables subject to no
disputes, setoffs or counterclaims, are current and
collectible, and will be
collected in accordance with their terms at their recorded
amounts. Schedule
3.13 is an accurate aging of Seller's Accounts Receivable at
August 31, 1996.
(b) All of the Assumed Liabilities were incurred in the
ordinary course of
business and none is payable to any Affiliate of Seller or the
Shareholder or
any Affiliate of the Shareholder.
SECTION 3.14 REAL PROPERTY. Seller does not own any real
property. Each
lease (a "Lease") of real property relating to Seller (the
"Real Property") is
valid, binding, enforceable and in full force and effect, and
will be novated in
favor of Buyer as at Closing. No default or breach has
occurred under any Lease,
and no event has occurred which, with the passage of time or
giving of notice or
both, would constitute a breach or default thereunder or would
cause the
acceleration of any obligation of any party thereto or the
creation of a lien or
encumbrance upon any asset of Seller. All such Real Property,
including all
buildings, fixtures, mechanical systems (including electrical,
plumbing and
heating), and roof and structural systems, are in good
operating condition and
repair, ordinary wear and tear excepted. No material
expenditures are required
or anticipated to be required to be made by Seller for the
repair or maintenance
of any improvements presently on any such Real Property. Such
Real Property
currently is served by such gas, electricity, water, sewage
and waste disposal
and/or other utilities as are adequate to operate such
facility as it is
currently operated.
SECTION 3.15 ENVIRONMENTAL MATTERS.
(a) Seller has complied and is in compliance in all
material respects with
all applicable Environmental Protection Laws pertaining to any
of its properties
and assets (including the Real Property) at which the business
of Seller has
ever been conducted, and the use and ownership thereof, and to
the operation of
Seller. No violation by Seller is being alleged of any
applicable Environmental
Protection Law relating to any of the properties and assets at
which the
business of Seller has ever been conducted (including the Real
Property) or the
use or ownership thereof, or to the operation of Seller.
(b) (i) Neither Seller nor any other Person (including
any tenant or
subtenant) has caused or taken any action that will result in,
and Seller is not
subject to, any material liability or obligation on the part
of Seller or any of
its Affiliates, relating to (A) the environmental conditions
on, under, or about
the Real Property or other properties or assets owned, leased,
operated or used
by Seller or any predecessor thereto at the present time or in
the past,
including without limitation, the air, soil and groundwater
conditions at such
properties or (B) the past or present use, management,
handling, transport,
treatment, generation, storage, disposal or release of any
Regulated Substance.
12
(ii) Seller has disclosed and made available to the Buyer
all information,
including, without limitation, all studies, analyses and test
results, in the
possession, custody or control of or otherwise known to any
Seller relating to
(A) the environmental conditions on, under or about the Real
Property or other
properties or assets owned, leased, operated or used by Seller
or any
predecessor in interest thereto at the present time or in the
past, and (B) any
Regulated Substance used, managed, handled, transported,
treated, generated,
stored or released by Seller or any other Person on, under,
about or from the
Real Property, and (C) the use or operation of any of the
properties and assets
of Seller, and (D) Seller.
SECTION 3.16 INTANGIBLE PERSONAL PROPERTY.
(a) Seller has no: (i) patent, patent application,
copyright, copyright
application, trademark, trademark application (in any such
case, whether
registered or to be registered in the United States of America
or elsewhere),
process, invention, trade secret, trade name, computer
program, formula and
customer list (collectively, the "Intangible Personal
Property"), or (ii) any
licenses or similar agreements or arrangements ("Licenses") to
which Seller is a
party either as licensee or licensor for each such item of
Intangible Personal
Property.
(b) There have been no actions or other judicial or
adversary proceedings
involving Seller concerning any item of Intangible Personal
Property, and, to
the knowledge of Seller, no such action or proceeding is
threatened and no claim
or other demand has been made by any Person relating to any
item of Intangible
Personal Property.
(c) Seller has the right and authority to use each item
of Intangible
Personal Property in connection with the conduct of its
businesses in the
manner presently conducted and to convey such right and
authority, and such use
does not conflict with, infringe upon or violate any patent,
copyright,
trademark or registration of any other person or entity.
(d) There are no outstanding or, to the knowledge of
Seller, threatened
disputes or disagreements with respect to any License.
(e) No employee of Seller is in violation of any term of
any employment
contract, proprietary information and inventions, agreement,
non-competition
agreement, or any other contract or agreement relating to the
relationship of
any such employee with Seller or, to the actual knowledge of
Seller, any
previous employer.
(f) The conduct by Seller of its business, and the
manufacture and sale by
Seller of its products, does not conflict with, infringe upon
or violate any
patent, copyright, trademark or registration of any other
person or entity.
SECTION 3.17 LABOR AND EMPLOYMENT AGREEMENTS. Seller is
not a party to or
bound by any collective bargaining agreement and there are no
labor unions or
other organizations representing, purporting to represent or
attempting to
represent any employees of Seller. Since January 1, 1993,
13
there has not occurred or, to the best knowledge of Seller
after due inquiry,
been threatened any material strike, slowdown, picketing, work
stoppage,
concerted refusal to work overtime or other similar labor
activity with respect
to any employees of Seller. There are no labor disputes
currently subject to any
grievance procedure, arbitration or litigation and there is no
representation
petition pending, or to the best knowledge of Seller after due
inquiry,
threatened with respect to any employee of Seller. Seller has
complied with all
provisions of applicable law pertaining to the employment of
employees,
including, without limitation, all such laws relating to labor
relations, equal
employment, fair employment practices, entitlements,
prohibited discrimination
or other similar employment practices or acts, except for any
failure so to
comply that, individually or together with all such other
failures, has not and
will not result in a liability or obligation on the part of
the Buyer, and has
not had or resulted in, and will not have or result in, an
adverse effect on the
business, operations or prospects of Seller.
SECTION 3.18 EMPLOYEE BENEFIT PLANS: ERISA. Other than a
SEP plan Seller
does not maintain or contribute to (i) any employee pension
benefit plan as
defined in Section 3(2) of ERISA, (ii) any employee welfare
benefit plan as
defined in Section 3(a) of ERISA, (iii) any profit sharing,
pension, deferred
compensation, bonus, stock option, stock purchase, severance
or incentive plan
or agreement, (iv) any plan or policy providing for "fringe
benefits" to its
employees, including but not limited to vacation, paid
holidays, personal leave,
employee discount, educational benefit or similar programs, or
(v) any other
Employment-Related Agreements, in any case under which
employees or former
employees of Seller primarily employed in connection with the
operation of
Seller are eligible to participate or derive a benefit
(collectively, "Employee
Benefit Plans"). Seller has no liabilities to any person under
its SEP plan.
Seller has not made contributions to, has never been a member
of a controlled
group which has contributed to and has never been under common
control with an
employer that contributed to any multi employer plan as
defined in Section 3(37)
of ERISA. Seller has provided Buyer with true and correct
copies of all Employee
Benefit Plans.
SECTION 3.19 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on
other Schedules,
Schedule 3.19(a) sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related
entities) between Seller and any customer or supplier in
excess of $5,000 and
all agreements and blanket purchase orders extending beyond
one year;
(ii) All agreements that create or continue any
claim, lien, charge or
encumbrance against, or right of any third party with respect
to, any of the
Assets;
(iii) All agreements by which Seller leases any
capital equipment and
all other leases involving Seller as lessee or lessor;
(iv) All agreements to which Seller is a party not in
the ordinary
course of business;
14
(v) All agreements to which Seller, on the one hand,
and any of
Seller's Affiliates (all such Affiliates being collectively
referred to hereon
as "Related Parties"), on the other hand, are parties or by
which they are bound
that relates to or is connected in any way with Seller or its
operations,
business or prospects;
(vi) All contracts or commitments relating to
commission arrangements
with others;
(vii) All license agreements, whether as licensor
or licensee;
(viii) All agreements between Seller and its sales
representatives,
distributors and dealers;
(ix) All agreements between Seller and its customers
relating to
volume rebates or price reductions;
(x) All other agreements to which Seller is a party
or by which it is
bound and that involve $5,000 or more or that extend for a
period of one year or
more; and
(xi) All other agreements to which Seller is a party
or by which it is
bound and that are or may be material to the assets,
liabilities (whether
absolute, accrued, contingent or otherwise), condition
(financial or otherwise),
results of operations, business or prospects of Seller.
As used in this Section 3.19, the word "agreement" includes
both oral and
written contracts, leases, understandings, arrangements and
all other
agreements. The term "Material Contracts" means the agreements
of Seller
required to be disclosed or Schedule 3.19(a), including
agreements specifically
identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid
and binding and are enforceable in accordance with their terms
in favor of
Seller. There are no liabilities of any party to any Material
Contract arising
from any breach or default of any provision thereof and no
event has occurred
that, with the passage of time or the giving of notice or
both, would constitute
a breach or default by any party thereto.
(c) Seller has fulfilled all material obligations
required pursuant to
each Material Contract to have been performed by Seller prior
to the date
hereof, and Seller has no reason to believe that Seller will
not be able to
fulfill, when due, all of its obligations under the Material
Contracts that
remain to be performed after the date hereof.
(d) Seller has maintained and continues to maintain good
relations with
its customers, and agents of, and suppliers to Seller, and
Seller has no reason
to believe that such relations will in the foreseeable future
deteriorate or
suffer any changes adverse to Seller.
15
SECTION 3.20 INVENTORY. The Inventory is good and
merchantable material, of
a quantity and quality saleable in the ordinary course of
business of Seller, is
not defective, and is carried on the books and records of
Seller at the lower of
cost or market consistent with the past practices of Seller.
The quantities of
all Inventory are reasonable and justified in the present
circumstances, and
have been maintained at a level consistent with meeting
delivery dates on firm
customer backlog at least since December 31, 1995.
SECTION 3.21 ABSENCE OF CERTAIN BUSINESS PRACTICES.
Neither Seller nor any
employee, agent or other person acting on Seller's behalf,
including, but not
limited to, any Seller, has, directly or indirectly, given or
agreed to give any
gift or similar benefit to any customer, supplier, competitor
or governmental
employee or official (domestic or foreign) relating in any way
to the business
of Seller (i) that would subject Seller to any damage or
penalty in any civil,
criminal or governmental litigation or proceeding, or (ii)
that, if not given in
the past, would have had an adverse effect on the business of
Seller.
SECTION 3.22 TRANSACTIONS WITH RELATED PARTIES. Except as
set forth on
Schedule 3.22, (i) there have been no transactions by Seller
with any Related
Party since April 1, 1994 and (ii) there are no agreements or
understandings now
in effect between Seller and any Related Party, in either case
that relates to
or is connected in any way with Seller or its operations,
business or prospects.
In addition, none of the transactions with any Related Parties
that have
occurred since April 1, 1994 has provided to Seller assets,
income, financing or
business on a basis significantly more or less favorable than
that available
from unaffiliated persons. Schedule 3.22 also (i) states the
amounts due from
Seller to any Related Party and the amounts due from any
Related Party to
Seller, (ii) describes the transactions out of which such
amounts due arose and
(iii) describes any interest of any Seller or Related Party in
any supplier or
customer of, or any other entity that has had business
dealings with, Seller
since April 1, 1994. After the Closing, there will be no
obligations or other
liabilities, including inter-company obligations, between
Seller, on the one
hand, and Seller or any Related Party, on the other hand,
other than pursuant to
this Agreement.
SECTION 3.23 COMPLIANCE WITH LAWS. The operation, conduct
and ownership of
the property or business of Seller are being, and at all times
have been,
conducted, in all material respects, in full compliance with
all federal, state,
local and other (domestic and foreign) laws, rules,
regulations and ordinances
and all judgments and orders of any court, arbitrator or
governmental authority
applicable to it.
SECTION 3.24 LITIGATION. There is no legal,
administrative, arbitration or
other proceeding, or any governmental investigation, pending
or, to the
knowledge of Seller, threatened against or otherwise affecting
Seller, or any of
its assets, and Seller is not aware of any fact that might
reasonably be
expected to form the basis for any such proceeding or
investigation relating in
any way to Seller.
16
SECTION 3.25 TAXES. Except to the extent a breach hereof
could not have an
adverse effect on the business, operations or prospects of
Seller or the value
of the Assets:
(a) Seller has timely filed all Tax returns and reports
required to have
been filed by it for all taxable periods ending on or prior to
the date hereof,
and has paid all Taxes due to any taxing authority with
respect to all taxable
periods ending on or prior to the date hereof, or otherwise
attributable to all
periods prior to the date hereof. The Tax returns and reports
filed are true and
correct in all material respects and reflect accurately all
liability for Taxes
for the periods covered thereby;
(b) Seller has not received notice that the IRS or any
other taxing
authority has asserted against Seller any deficiency or claim
for additional
Taxes in connection therewith;
(c) All Tax deficiencies asserted or assessed against
Seller have been paid
or finally settled and no issue has been raised by the IRS or
any other taxing
authority in any examination which, by application of the same
or similar
principles, reasonably could be expected to result in a
proposed deficiency for
any other period not so examined. Further, no state of facts
exists or has
existed which would constitute grounds for the assessment of
any liability for
Taxes with respect to periods which have not been examined by
the IRS or any
other taxing authority;
(d) There is no pending or, to the knowledge of Seller,
threatened action,
audit, proceeding, or investigation with respect to (i) the
assessment or
collection of Taxes or (ii) a claim for refund made by Seller
with respect to
Taxes previously paid;
(e) All amounts that are required to be collected or
withheld by Seller,
or with respect to Taxes of Seller, have been duly collected
or withheld: all
such amounts that are required to be remitted to any taxing
authority have been
duly remitted;
(f) Seller has not waived any statute of limitations with
respect to the
assessment of any Tax; and
(g) There are no liens for Taxes due and payable upon any
Assets.
SECTION 3.26 INSURANCE. Schedule 3.26 sets forth a
complete and correct
list of all insurance policies and of all claims made by
Seller on any liability
or other insurance policies (or to the extent Seller is self
insured that would
have been made on such policies) during the past five years
(other than workers'
compensation claims). Schedule 3.26 is a complete and correct
list of all
insurance currently in place (or, to the extent Seller is
self-insured, would
have been in place and is reserved for or otherwise formally
or informally
provided for) and accurately sets forth the coverages,
deductible amounts,
carriers and expiration dates thereof relating to or in
connection with Seller.
No notice or other communication has been received by Seller
from any insurance
company within the five years preceding the date hereof
canceling or materially
amending or materially increasing the annual or other premiums
payable under any
of its insurance policies relating to or in connection with
17
Seller, and, to the knowledge of Seller, no such cancellation,
amendment or
increase of premiums is threatened. Such insurance will cover
any liability
arising out of any injury to persons or property as a result
of products
designed, used, manufactured, sold or leased, or any services
performed by,
Seller for a period of at least three years, or Seller will
obtain discontinued
product liability coverage for such period.
SECTION 3.27 NO POWERS OF ATTORNEY OR SURETYSHIPS. With
respect to Seller,
(i) Seller has not granted any general or special powers of
attorney and (ii)
Seller does not have any obligation or liability (whether
actual, contingent or
otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor,
obligor on an asset or income maintenance agreement or
otherwise in respect of
the obligation of any person, corporation, partnership, joint
venture,
association, organization or other entity.
SECTION 3.28 BROKERAGE FEES. No Person is entitled to any
brokerage or
finder's fee or other commission from Seller in respect of
this Agreement or the
Transactions.
SECTION 3.29 PRODUCT WARRANTY AND LIABILITY. Each product
of Seller
designed, used, manufactured, sold or leased by Seller and all
services
performed by Seller have been in conformity with all
applicable contractual
commitments and all express and implied warranties, and Seller
has no liability
and there is no basis for any present or future action, suit
or proceeding
giving rise to any liability, for replacement or repair
thereof or other damages
in connection therewith, subject only to returns of product
for warranty in the
ordinary course of business not exceeding one percent (1%) of
sales of Seller in
any calendar year. Seller does not have any liability, and
there is no basis for
any present or future action, suit or proceeding giving rise
to any liability,
arising out of any injury to persons or property as a result
of any products
designed, used, manufactured, sold or leased or any services
performed by
Seller. Seller has not received any notice that an action,
suit or proceeding
has been, or in the future may be, made alleging that products
or services of
Seller are or were defective or deficient in any way.
SECTION 3.30 CONSENTS AND APPROVALS. Except as set forth
in Schedule 3.30,
the execution and delivery of this Agreement by Seller do not,
and the
performance of the Transactions contemplated by this Agreement
by Seller will
not, require any filing with or notification to, or any
consent, approval,
authorization or permit from, any governmental or regulatory
authority or any
other Person.
SECTION 3.31 DISCLOSURE. The information provided by
Seller in connection
with this Agreement, including, without limitation, the
schedules hereto, and in
any other writing pursuant hereto does not and will not
contain any untrue
statement of a material fact or omit to state a material fact
required to be
stated herein or therein or necessary to make the statements
and facts contained
herein or therein, in light of the circumstances under which
they are made, not
false or misleading. Copies of all documents heretofore or
hereafter delivered
or made available by Seller to Buyer pursuant hereto were or
will be complete
and accurate records of such documents.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and
Shareholder that:
SECTION 4.1 ORGANIZATION. Buyer is a corporation duly
organized, validly
existing and in good standing under the laws of the State of
California, with
full corporate power and authority to own or lease its
properties and to conduct
its business in the manner and in the places where such
properties are owned or
leased or such business is currently conducted.
SECTION 4.2 AUTHORITY OF BUYER. Buyer has all necessary
authority and power
to enter into this Agreement and to carry out the Transactions
contemplated
hereby. The execution, delivery and performance by Buyer of
this Agreement and
the consummation of the Transactions contemplated hereby have
been duly
authorized by all necessary corporate action of Buyer and no
other action on the
part of Buyer is required in connection therewith. This
Agreement constitutes
the valid and binding obligation of Buyer, enforceable in
accordance with its
terms. The execution, delivery and performance by Buyer of
this Agreement do
not, and the performance by Buyer of the Transactions
contemplated hereby will
not:
(i) violate any provision of the Articles of
Incorporation or by-laws of
Buyer;
(ii) violate any laws of the United States, or any state
or other
jurisdiction applicable to Buyer or require Buyer to obtain
any approval,
consent or waiver of, or make any filing with, any person or
entity
(governmental or otherwise) that has not been obtained or
made; or
(iii) result in a violation or any breach of, constitute
a default (or an
event which with notice or lapse of time or both would become
a default) under,
result in the acceleration of any indebtedness under or
performance required by,
result in any right of termination of, increase any amounts
payable under,
decrease any amounts receivable under, change any other rights
pursuant to, or
conflict with, any material note, bond, mortgage, indenture,
contract,
agreement, lease, license, permit, franchise or other
instrument or obligation
to which Buyer is a party or by which it or its properties is
bound.
SECTION 4.3 OWNERSHIP OF CAPITAL STOCK OF BUYER. Advanced
Materials Group,
Inc., a Nevada corporation, owns beneficially and of record
all of the issued
and outstanding shares of Buyer.
SECTION 4.4 SUFFICIENT FUNDS. Buyer has and will have
funds sufficient to
satisfy the sums due at Closing as set forth in this Agreement
and to perform
and discharge the Assumed Liabilities.
SECTION 4.5 BROKERAGE FEES. No Person is entitled to any
brokerage or
finder's fee or other commission from Buyer in respect of this
Agreement or the
Transactions.
19
SECTION 4.6 DISCLOSURE. The information provided by Buyer
in this Agreement
and in any other writing furnished pursuant hereto does not
and will not contain
an untrue statement of a material fact or omit to state a
material fact required
to be stated herein or therein or necessary to make the
statements and facts
contained herein or therein, in light of the circumstances
under which they are
made, not false or misleading. Copies of all documents
heretofore or hereafter
delivered or made available by Buyer to Seller pursuant hereto
were or will be
complete and accurate records of such documents.
ARTICLE V
CERTAIN AGREEMENTS AND UNDERSTANDINGS
SECTION 5.1 USE OF NAME. Buyer acknowledges that it is not
acquiring an
interest in the name "Gasket and Molded Products" and Buyer
covenants and agrees
that it shall not use such name; provided that Buyer may use
the name "Gasket
and Molded Products" and any trademarks related thereto to the
extent such name
or mark is printed or otherwise appears on Inventory or other
Assets, or in
connection with any public announcement of the purchase by
Buyer of the Assets,
or for a period of three months following the Closing to the
extent Buyer
desires to utilize any sales brochures previously published by
Seller.
SECTION 5.2 COLLECTION OF ASSETS. Subsequent to the
Closing, Seller agrees
that it will promptly transfer or deliver to Buyer from time
to time, any
assets, cash or other property that Seller may discover or
receive with respect
to any contracts, commitments, sales orders, purchase orders
or any other items
included in the Assets.
SECTION 5.3 AGREEMENT NOT TO COMPETE.
(a) From the Closing Date to and including the fifth
anniversary of the
Closing Date (or, in the case of Richard S. Rouse, the fifth
anniversary of the
termination of his employment with the Company), Seller and
Shareholder and Neal
M. Price hereby agree that he or it and its Affiliates shall
not, directly or
indirectly, engage or be interested in any business that
competes with, and
shall not, directly or indirectly, have any interest in, own,
manage, operate,
control, be connected with as a stockholder (other than as a
stockholder of less
than five percent (5%) of the issued and outstanding stock of
a publicly held
corporation), joint venturer, or otherwise engage or invest or
participate in,
any business that competes with the business of Seller as
conducted on the date
hereof in any county or any other political subdivision of any
of the following
states: California, Oregon, Texas, Colorado, Utah, New Mexico,
Arizona and
Wyoming. All of the parties agree that the duration and area
for which the
covenant not to compete set forth in this Section 5.3 is to be
effective are
reasonable. In the event that any court determines that the
time period or the
geographical areas provided for in this Section 5.3, or both
of them, are
unreasonable and that such covenant is to that extent
unenforceable, such
covenant shall remain in full force and effect for the
greatest time period and
in the greatest geographical area that would not render it
unenforceable. The
parties intend that this covenant shall
20
be deemed to be a series of separate covenants, one for each
and every county of
each and every state of the United States of America where
this covenant is
intended to be effective.
(b) The parties agree that damages would be an inadequate
remedy for Buyer
in the event of a breach or threatened breach of this
Agreement and thus, in any
such event, Buyer may, either with or without pursuing any
potential damage
remedies, immediately obtain and enforce an injunction
prohibiting any of Seller
or any Shareholder or its Affiliates from violating this
Agreement.
SECTION 5.4 PRODUCT WARRANTY MATTERS.
(a) As stated in Section 2.3, Buyer is not assuming any
liabilities or
obligations of Seller for defective products or breach of
warranty arising from
or relating to the design, use, manufacture, testing, sale or
lease of any
products of Seller by Seller prior to the Closing Date.
However, from the
Closing Date until the date of final disbursement of funds
referred to in
Section 2.5(c)(iii), Buyer will provide warranty service on
behalf of Seller, in
accordance with Buyer's normal business practices, with
respect to warranties on
products of Seller sold by Seller prior to the Closing Date
(the "Pre-Closing
Warranties"). Seller shall reimburse Buyer for all of Buyer's
costs of labor and
materials, including overhead allocated to the cost of such
labor and materials
in accordance with Buyer's standard practices (collectively,
"Buyer's Warranty
Costs"), with respect to Buyer's performance in accordance
with the Pre-Closing
Warranties.
(b) Buyer shall provide to Seller such information and
documentation as
Seller reasonably requests in order for Seller to calculate
the amount of
Buyer's Warranty Costs owed by Seller to Buyer. Seller shall
provide to Buyer
such information and documentation as Buyer reasonably
requests in order for
Seller to provide warranty service in accordance with Section
5.4(a) with
respect to Pre-Closing Warranties.
SECTION 5.5 CONDUCT OF BUSINESS. From the date hereof to
the Closing Date,
except as expressly permitted or required by this Agreement or
as otherwise
consented to by the Buyer in writing, Seller will:
(a) carry on the business of Seller in, and only in, the
ordinary course,
in substantially the same manner as heretofore conducted, and
use all reasonable
efforts to preserve intact its present business organization,
maintain its
properties in good operating condition and repair, keep
available the services
of its present significant employees, and preserve its
relationship with
customers, suppliers and others having business dealings with
it, to the end
that the goodwill and going business of Seller shall be in all
material respects
unimpaired following the Closing;
(b) pay accounts payable and other obligations of Seller
when they become
due and payable in the ordinary course of business consistent
with prior
practice;
21
(c) perform in all material respects all of its
obligations under all
Contracts and other agreements and instruments relating to or
affecting Seller
or the Assets, and comply in all material respects with all
laws applicable to
the Assets or Seller;
(d) not enter into or assume any material agreement,
contract or
instrument relating to Seller, or enter into or permit any
material amendment,
supplement, waiver or other modification in respect thereof;
(e) not grant (or commit to grant) any increase in the
compensation
(including incentive or bonus compensation) of any employee
employed in the
operation of Seller or institute, adopt or amend (or commit to
institute, adopt
or amend) any compensation or benefit plan, policy, program or
arrangement or
collective bargaining agreement applicable to any such
employee; and
(f) not take any action or omit to take any action, which
action or
omission would result in a breach of any of the
representations and warranties
set forth in Section 3.7.
SECTION 5.6 NO SOLICITATION. During the term of this
Agreement, none of
Seller, any of its Affiliates or any Person acting on its or
their behalf shall
(i) solicit or encourage any inquiries or proposals for, or
enter into any
discussions with respect to, the acquisition of any properties
and assets held
for use in connection with, necessary for the conduct of, or
otherwise material
to, Seller or (ii) furnish or cause to be furnished any
non-public information
concerning Seller to any Person (other than the Buyer and its
agents and
representatives), other than in the ordinary course of
business or pursuant to
applicable law and after prior written notice to the Buyer.
Seller shall not
sell, transfer or otherwise dispose of, grant any option or
proxy to any Person
with respect to, create any lien upon, or transfer any
interest in, any Asset,
other than in the ordinary course of business and consistent
with this
Agreement.
SECTION 5.7 ACCESS AND INFORMATION. So long as this
Agreement remains in
effect, Seller will (and will cause each of its Affiliates and
their respective
accountants, counsel, consultants, employees and agents) give
Buyer and Buyer's
accountants, counsel, consultants, employees and agents, full
access during
normal business hours to, and furnish them with all documents,
records, work
papers and information with respect to, all of such Person's
properties, assets,
books, contracts, commitments, reports and records relating to
Seller, as Buyer
shall from time to time reasonably request. In addition,
Seller will permit
Buyer and its accountants, counsel, consultants, employees
and agents
reasonable access to such personnel of Seller during normal
business hours as
may be necessary or useful to the Buyer in its review of the
properties, assets
and business affairs of Seller and the above-mentioned
documents, records and
information. Seller will keep Buyer generally informed as to
the affairs of
Seller.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Except as required by
applicable law,
Seller shall not, and it shall not permit any Affiliate to,
make any public
announcement in respect of this Agreement or the transactions
contemplated
hereby without the prior written consent of Buyer.
22
SECTION 5.9 FURTHER ACTIONS.
(a) Seller agrees to use its best efforts to take all
actions and to do
all things necessary, proper or advisable to consummate the
transactions
contemplated hereby by the Closing Date.
(b) Seller will, as promptly as practicable, file or
supply, or cause to
be filed or supplied, all applications, notifications and
information required
to be filed or supplied by it pursuant to applicable law in
connection with the
transactions contemplated hereby.
(c) Seller, as promptly as practicable, will use all
reasonable efforts to
obtain, or cause to be obtained, all consents (including,
without limitation,
all governmental approvals and any consents required under any
Contract and all
consents listed on Schedule 3.30) necessary to be obtained in
order to
consummate the sale and transfer of the Assets.
(d) At all times prior to the Closing, Seller shall
promptly notify Buyer
in writing of any fact, condition, event or occurrence that
will or may result
in the failure of any of the conditions contained in Section
6.2 to be
satisfied, promptly upon either of them becoming aware of
same.
SECTION 5.10 EMPLOYEES. Buyer agrees promptly following
the Closing to
offer employment as an employee-at-will to each person
employed by Seller on the
date preceding the Closing Date at the same salary and wage
rate as then in
effect for such employee as reflected in the books and records
of Seller,
provided that Buyer may adopt or put into effect different
work and benefit
policies and Employee Benefit Plans at Buyer's sole
discretion. Seller shall be
responsible for any severance benefits due to any of its
employees who do not
accept employment with Buyer. Buyer will provide those
employees who accept
service with Buyer a service date as at Closing equal to their
service date with
Seller, and such persons will become eligible for medical
benefits under Buyer's
plans on the first day of the fourth calendar month following
the Closing Date.
Prior to such date of coverage, such employees will receive
medical coverage
under the provisions of Seller's existing health insurance
coverage at Buyer's
cost, and Seller hereby covenants to Buyer that such
continuing coverage is
permitted under such plans. Any employee contributions
previously withheld by
Seller to offset Seller's cost of providing such extended
coverage shall be
withheld from such continuing employees by Buyer for the
period during which
such employees are employed by Buyer but are receiving medical
coverage pursuant
to Seller's existing plan, and such monies shall be remitted
to Seller as soon
as reasonably practicable. After the Closing Buyer shall
provide a pool equal to
7% of gross wages paid to such continuing employees (other
than Shareholder) to
be distributed among such employees (other than Shareholder)
at the discretion
of Shareholder as wage or salary increases.
SECTION 5.11 ACCOUNTS RECEIVABLE. In the event that all
Accounts
Receivable are not collected by Buyer within 120 days after
the Closing Date,
despite reasonable efforts by Buyer to so collect (which
shall not include
resort to, or threat of, litigation), Seller promptly shall
purchase such
accounts receivable from Buyer for an amount equal to the
aggregate
outstanding balance thereof.
23
SECTION 5.12 FINANCING STATEMENTS. Seller shall cause
Norwest Bank and
any other creditor to file termination statements closing all
open financing
statements presently on file covering any of the Assets.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.1 CONDITIONS TO SELLER OBLIGATIONS. The
obligation of Seller to
consummate the transactions to be performed by it in
connection with the Closing
is subject to satisfaction of the following conditions:
(a) The representations and warranties of Buyer set forth
herein shall be
true and correct at and as of the Closing Date;
(b) Buyer shall have performed and complied with all of
its covenants
hereunder through the Closing;
(c) No action, suit, or proceeding shall be pending or
threatened before
any court or quasi-judicial or administrative agency of any
federal, state,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(i) prevent
consummation of any of the transactions contemplated by this
Agreement or (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling,
or charge shall be in effect);
(d) Buyer shall have delivered to Seller a certificate to
Seller a
certificate to the effect that each of the conditions
specified above in Section
6.1(a)-(c) is satisfied in all respects;
(e) Buyer shall deliver to Seller: (i) the Purchase Price
to the extent
deliverable in accordance with Section 2.5; and (ii) a Fund
Trust Agreement in
the form of Exhibit 2.5(c) hereto; and
(f) All actions to be taken by Buyer in connection with
consummation of
the transactions contemplated hereby and all certificates,
opinions,
instruments, and other documents required to effect the
transactions
contemplated hereby will be satisfactory in form and substance
to Seller. Seller
may waive any condition specified in Section 6.1 if it
executes a writing so
stating at or prior to the Closing.
SECTION 6.2 CONDITIONS TO BUYER OBLIGATIONS. The
obligation of the Buyer to
consummate the transactions to be performed by it in
connection with the Closing
is subject to satisfaction of the following conditions:
24
(a) The representations and warranties of Seller set
forth herein shall be
true and correct at and as of the Closing Date;
(b) Seller shall have performed and complied with all of
its covenants
hereunder through the Closing;
(c) Seller shall have procured all of the consents and
approvals specified
in Schedule 3.30;
(d) No action, suit, or proceeding shall be pending of
threatened before
any court or quasi-judicial or administrative agency of any
federal, state,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would
(i) prevent
consummation of any of the transactions contemplated by this
Agreement, (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded
following consummation, or (iii) affect adversely the right of
Buyer to own the
Assets or to operate Seller.
(e) Seller shall have delivered to Buyer a certificate to
the effect that
each of the conditions specified above in Section 6.2(a)-(d)
is satisfied in all
respects;
(f) Seller shall deliver to Buyer (i) a Bill of Sale;
(ii) copies of
termination statements terminating all open UCC-1 financing
statements; (iii) an
Assignment or Novation of Lease as described in Section 2.7(b)
hereof; and (iii)
a Fund Trust Agreement in the form of Exhibit 2.5(c) hereto;
(g) Buyer shall have entered into an employment agreement
with Richard S.
Rouse in the form of Exhibit 6.2(g) hereto and otherwise
satisfactory to Buyer
in its sole discretion;
(h) Buyer shall be satisfied with the results of its due
diligence
investigation, in its sole discretion;
(i) Buyer shall have received an opinion of Donald Glenn
Peterson, Esq.,
counsel to Seller, in the form of Exhibit 6.2(i) hereto and
otherwise in form
and substance satisfactory to Buyer in its sole discretion;
and
(j) All actions to be taken by Seller in connection with
consummation of
the transactions contemplated hereby and all certificates,
opinions,
instruments, and other documents required to effect the
transactions
contemplated hereby will be satisfactory in form and substance
to Buyer. Buyer
may waive any condition specified in this Section 6.2 if it
executes a writing
so stating at or prior to the Closing.
25
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 INDEMNIFICATION BY SELLER AND SHAREHOLDER.
Seller and
Shareholder shall, jointly and severally, indemnify and hold
harmless Buyer and
each of its Affiliates, directors, officers, employees,
attorneys, agents,
representatives, successors and assigns (collectively, the
"Affiliated Parties")
in respect of any and all claims, losses, damages,
liabilities, declines in
value, penalties, interest, costs and expenses (including,
without limitation,
any attorneys', accountants' and consultants' fees and other
expenses, including
any such expenses incurred in connection with investigating,
defending against
or settling any such claims) (collectively, "Losses")
reasonably incurred by
Buyer or its Affiliated Parties, in connection with, or
resulting from, each and
all of the following:
(a) Any breach of any representation or warranty made by
Seller or
Shareholder in this Agreement or pursuant hereto or in any
document or
instrument delivered by Seller or Shareholder pursuant hereto;
(b) Any misrepresentation contained in any written
statement or
certificate furnished by any Seller or Shareholder pursuant to
this Agreement or
in connection with the Transactions;
(c) Any breach of any covenant, agreement or obligation
of Seller or
Shareholder contained in this Agreement or any other document
or instrument
contemplated by this Agreement or delivered pursuant hereto;
(d) Any failure by Seller or Shareholder to perform and
discharge any of
the Excluded Liabilities;
(e) (i) Any violation by Seller of any Environmental
Protection Laws (as
amended or supplemented from time to time) prior to the
Closing Date, (ii) any
liabilities arising under Environmental Protection Laws (as
amended or
supplemented from time to time) as a result of the conduct of
the business of
Seller prior to the Closing Date, (iii) any contamination of
soil, groundwater
or other environmental media by or with any Regulated
Substance on, in or under
the Real Property or, as a result of the operation of Seller's
business, about
the Real Property; and (iv) any matters described in Section
3.15, whether or
not Seller had knowledge of such matters;
(f) (i) Any Taxes of Seller or its Affiliates, whether
relating to
periods before or after the Closing Date, (ii) any Taxes
arising in connection
with the Transactions, and (iii) any liability of Seller for
Taxes of any other
Person, as a transferee or successor, by contract or
otherwise;
(g) Any injury to persons or death or property damage
resulting from
or contributed to, by any products designed, manufactured,
sold or leased by
Seller, or any services performed, or actions taken, by Seller
prior to the
Closing Date;
26
(h) Any liability to any employee, former employee or
beneficiary of any
of them arising under the provisions of the Consolidated
Omnibus Budget
Reconsolidation Act of 1985, as amended, with respect to any
qualifying event,
as defined in Section 4980B of the Code, occurring through the
Closing Date; and
(i) Any violation of any laws, rules or regulations
relating to United
States government contracts or subcontracts, including the
Federal Acquisition
Regulations and related cost accounting standards, including
without limitation
any such laws or regulations relating to defective pricing.
No claim, demand, suit or cause of action shall be brought
against Seller
or Shareholder under Sections 7.1(a) or (b) unless and until
the aggregate
amount of claims under such Sections 7.1(a) or (b) exceeds
$5,000, in which
event Buyer and its Affiliated Parties shall be entitled to
indemnification from
Seller or Shareholder for all claims hereunder relating back
to the first
dollar. Notwithstanding the foregoing, such limitations do not
apply to the
indemnification obligations of Seller or Shareholder set forth
in Sections
7.1(c), (d), (e), (f), (g), (h) or (i).
SECTION 7.2 INDEMNIFICATION BY BUYER. Buyer shall
indemnify and hold
harmless Seller in respect of any and all Losses, reasonably
incurred by
Seller, in connection with, or resulting from, each and all of
the following:
(a) Any breach of any representation or warranty made by
Buyer in this
Agreement or pursuant hereto or in any document or instrument
delivered by
Seller; or
(b) Any misrepresentation contained in any written
statement or
certificate furnished by Buyer pursuant to this Agreement or
in connection with
the Transactions; or
(c) Any breach of any covenant, agreement or obligation
of Buyer contained
in this Agreement or any other document or instrument
contemplated by this
Agreement or delivered pursuant hereto.
No claim, demand, suit or cause of action shall be brought
against Buyer
under Sections 7.2(a) or (b) unless and until the aggregate
amount of claims
under such Sections 7.2(a) or (b) exceeds $5,000, in which
event, Seller shall
be entitled to indemnification from Buyer for all claims
hereunder relating back
to the first dollar. Notwithstanding the foregoing, such
limitations do not
apply to the indemnification obligations of Buyer set forth in
Section 7.2(c).
SECTION 7.3 CLAIMS FOR INDEMNIFICATION. Whenever any
claim shall arise
for indemnification hereunder, the party entitled to
indemnification (the
"indemnified party") shall promptly notify the party obligated
to provide
indemnification (the "indemnifying party") of the claim and,
when known, the
facts constituting the basis for such claim; PROVIDED,
HOWEVER, that the
failure to so notify the indemnifying party shall not relieve
the
indemnifying party of its obligation hereunder to the extent
such failure
does not materially prejudiced the indemnifying party. In the
event of any
claim for indemnification hereunder resulting from or in
connection with any
claim or legal
27
proceedings by a third party, the notice to the indemnifying
party shall
specify, if known, the amount or an estimate of the amount of
the liability
arising therefrom.
SECTION 7.4 DEFENSE CLAIMS. In connection with any claim
giving rise to
indemnity hereunder resulting from or arising out of any claim
or legal
proceeding by a person who is not a party to this Agreement,
the indemnifying
party at its sole cost and expense and with counsel reasonably
satisfactory to
the indemnified party may, upon written notice to the
indemnified party, assume
the defense of any such claim or legal proceeding if (a) the
indemnifying party
acknowledges to the indemnified party in writing, within
fifteen (15) days after
receipt of notice from the indemnified party, its obligations
to indemnify the
indemnified party with respect to all elements of such claim,
(b) the
indemnifying party provides the indemnified party with
evidence reasonably
acceptable to the indemnified party that the indemnifying
party will have the
financial resources to defend against such third-party claim
and fulfill its
indemnification obligations hereunder, (c) the third-party
claim involves only
money damages and does not seek an injunction or other
equitable relief, and (d)
settlement or an adverse judgment of the third-party claim is
not in the good
faith judgment of the indemnified party, likely to establish a
pattern or
practice adverse to the continuing business interests of the
indemnified party.
The indemnified party shall be entitled to participate in (but
not control) the
defense of any such action, with its counsel and at its own
expense; PROVIDED,
HOWEVER, that if there are one or more legal defenses
available to the
indemnified party that conflict with those available to the
indemnifying party,
or if the indemnifying party fails to take reasonable steps
necessary to defend
diligently the claim after receiving notice from the
indemnified party that it
believes the indemnifying party has failed to do so, the
indemnified party may
assume the defense of such claim; PROVIDED, FURTHER, that the
indemnified party
may not settle such claim without the prior written consent of
the indemnifying
party, which consent may not be unreasonably withheld. If the
indemnified party
assumes the defense of the claim, the indemnifying party shall
reimburse the
indemnified party for the reasonable fees and expenses of
counsel retained by
the indemnified party and the indemnifying party shall be
entitled to
participate in (but not control) the defense of such claim,
with its counsel and
at its own expense. If the indemnifying party thereafter seeks
to question the
manner in which the indemnified party defended such third
party claim or the
amount or nature of any such settlement, the indemnifying
party shall have the
burden to prove by a preponderance of the evidence that the
indemnified party
did not defend or settle such third party claim in a
reasonably prudent manner.
The parties agree to render, without compensation, to each
other such assistance
as they may reasonably require of each other in order to
insure the proper and
adequate defense of any action, suit or proceeding, whether or
not subject to
indemnification hereunder.
SECTION 7.5 INTEREST. Any amount of money owed by an
indemnifying party
to an indemnified party hereunder shall be paid with interest,
at an annual
rate equal to the Prime Rate then in effect, from the date
that the loss or
damage was sustained or cash disbursement made by the
indemnified party until
such amount is paid by the indemnifying party.
SECTION 7.6 MANNER OF INDEMNIFICATION. All
indemnification payments
hereunder shall be effected by payment of cash or delivery of
a certified or
official bank check in the amount of the indemnification
liability.
28
SECTION 7.7 ADDITIONAL LIMITATIONS ON INDEMNIFICATION.
(a) No claim for indemnification shall be made by Buyer
pursuant to
Sections 7.1(a), 7.1(b) or 7.1(c) or by Seller pursuant to
Sections 7.2(a),(b)
or (c) if made more than three (3) years after the Closing
Date, provided,
however, that claims for indemnification may be made by Buyer
pursuant to
Sections 7.1(a), 7.1(b) or 7.1(c) with respect to the
representations and
warranties made in Section 3.14 and Section 3.21 hereof for a
period equal to
the relevant statutes of limitation.
(b) Notwithstanding the foregoing, the limitations set
forth in Section
7.7(a) do not apply to the indemnification obligations of
Seller set forth in
Sections 7.1(d), 7.1(e), 7.1(f), 7.1(g), 7 1(h) and 7.1(i).
(c) Notwithstanding the provisions of this Section 7.9 to
the effect that
an indemnifying party's obligations under such section shall
expire at specified
times set forth herein, such obligations shall continue (i) as
to any matter as
to which a claim is submitted in writing to the indemnifying
party prior to such
specified time and identified as a claim for indemnification
pursuant to this
Agreement and (ii) as to any matter that is based upon faud by
the indemnifying
party, until such time as such claims and matters are
resolved.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated
at any time prior
to the Closing Date:
(a) by the written agreement of the Buyer and Seller;
(b) by either Seller or Buyer by written notice to the
other party if the
Closing contemplated hereby shall not have been consummated
pursuant hereto by
5:00 p.m. Los Angeles time on September 30, 1996, unless such
date shall be
extended by the mutual written consent of Seller and Buyer;
(c) by Buyer by written notice to Seller if (i) the
representations and
warranties of Seller shall not have been true and correct in
all respects as of
the date when made or (ii) if any of the conditions set forth
in Section 6.2
shall not have been, or if it becomes apparent that any of
such conditions will
not be, fulfilled by 5:00 p.m. Los. Angeles time on September
30, 1996, unless
such failure shall be due to the failure of Buyer to perform
or comply with any
of the covenants, agreements or conditions hereof to be
performed or complied
with by it prior to the Closing; or
(d) by Seller by written notice to Buyer if (i) the
representations and
warranties of Buyer shall not have been true and correct in
all respects as of
the date when made or (ii) if any of the conditions set forth
in Section 6.1
shall not have been, or if it becomes apparent that any of
such
29
conditions will not be, fulfilled by 5:00 p.m. Los Angeles
time on
September 30, 1996, unless such failure shall be due to the
failure of Seller to
perform or comply with any of the covenants, agreements or
conditions hereof to
be performed or complied with by it prior to the Closing.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the
termination of this
Agreement pursuant to the provisions of Section 8.1, this
Agreement shall become
void and have no effect, without any liability to any Person
in respect hereof
or of the transactions contemplated hereby on the part of any
party hereto, or
any of its directors, officers, employees, agents,
consultants, representatives,
advisers, stockholders or Affiliates except for any liability
resulting from
such party's breach of this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 BULK SALES LAW. Seller represents that there
is no applicable
bulk sales law in connection with the transfer of the Assets
under this
Agreement.
SECTION 9.2 FEES AND EXPENSES.
(a) Seller, on the one hand, and Buyer, on the other
hand, will bear their
own expenses in connection with the negotiation and the
consummation of the
Transactions contemplated by this Agreement, including,
without limitation, any
broker's commission or finder's fee incurred by such party.
(b) Seller will pay all costs incurred, whether at or
subsequent to the
Closing, in connection with the transfer of the Assets to
Buyer as contemplated
by this Agreement, including without limitation, all sales,
use, excise, real
property and other transfer taxes and charges applicable to
such transfer and
all costs of obtaining or transferring permits, registrations,
applications and
other tangible and intangible properties.
SECTION 9.3 NOTICES. All notices, requests, demands and
other
communications hereunder shall be in writing and shall be
deemed given if
delivered personally or by facsimile transmission (with
subsequent letter
confirmation by mail) or three days after being mailed by
certified or
registered mail, postage prepaid, return receipt requested, to
the parties,
their successors in interest or their assignees at the
following addresses, or
at such other addresses as the parties may designate by
written notice in the
manner aforesaid:
IF TO BUYER: Advanced Materials, Inc.
------------ 20211 S. Susana Road
Rancho Dominguez, California
90221
Telecopy: (310)
763-6869
Attention: President
30
With a concurrent copy to: Day Campbell & McGill
3070 Bristol, Suite 650
Costa Mesa, California 92626
Telecopy: (714)
429-2901
Attention: Leonard J.
McGill, Esq.
IF TO SELLER OR SHAREHOLDER: Gasket and Molded Products,
Inc.
---------------------------- 8218 E. Lakeshore Drive
Parker, Colorado 80134
Telecopy: (303)
841-2933
Attention: Richard S.
Rouse
With a concurrent copy to: Donald Glenn Peterson, Esq.
4242 E. Amherst Avenue
Denver, Colorado 80222-6702
Telecopy: (303)
758-1091
SECTION 9.4 ASSIGNABILITY AND PARTIES IN INTEREST. This
Agreement shall not
be assignable by any of the parties. This Agreement shall
inure to the benefit
of and be binding upon the parties and their respective
permitted successors and
assigns.
SECTION 9.5 GOVERNING LAW. This Agreement shall be
governed by, and
construed and enforced in accordance with, the internal law,
and not the law
pertaining to conflicts or choice of law, of the State of
Colorado.
SECTION 9.6 COUNTERPARTS. This Agreement may be executed
in several
counterparts, each of which shall be deemed an original, but
all of which shall
constitute one and the same instrument.
SECTION 9.7 COMPLETE AGREEMENT. This Agreement, the
Exhibits and Schedules
and the documents delivered or to be delivered pursuant to
this Agreement
contain or will contain the entire agreement among the parties
with respect to
the Transactions and shall supersede all previous oral and
written and all
contemporaneous oral negotiations, commitments and
understandings.
SECTION 9.8 MODIFICATIONS. AMENDMENTS AND WAIVERS. This
Agreement may be
modified, amended or otherwise supplemented only by a writing
signed by all of
the parties. No waiver of any right or power hereunder shall
be deemed effective
unless and until a writing waiving such right or power is
executed by the party
waiving such right or power.
SECTION 9.9 DUE DILIGENCE INVESTIGATION; KNOWLEDGE. All
representations and
warranties contained herein that are made to the knowledge of
a party shall
require that such party make reasonable investigation and
inquiry with respect
thereto to ascertain the correctness and validity thereof.
Without limiting the
foregoing sentence, when any fact is stated to be to the
"knowledge of
Seller," such reference shall mean that Seller knows or should
have known of the
existence or non-
31
existence of such fact based upon a reasonable investigation
and inquiry of the
employees, accountants and attorneys of Seller.
SECTION 9.10 LIMIT ON INTEREST. Notwithstanding anything
in this Agreement
to the contrary, no party shall be obligated to pay interest
at a rate higher
than the maximum rate permitted by applicable law. In the
event that an interest
rate provided in this Agreement exceeds the maximum rate
permitted by applicable
law, such interest rate shall be deemed to be reduced to such
maximum
permissible rate.
SECTION 9.11 ATTORNEYS' FEES AND COSTS. Should any party
institute any
action or proceeding in any court to enforce any provision of
this Agreement,
the prevailing party shall be entitled to receive from the
losing party
reasonable attorneys' fees and costs incurred in such action
or proceeding,
whether or not such action or proceeding is prosecuted to
judgment.
SECTION 9.12 FURTHER ASSURANCES. Each party shall execute
and deliver such
further instruments and take such further actions as any other
party may
reasonably request in order to carry out the intent of this
Agreement and to
consummate the Transactions.
SECTION 9.13 CONTRACT INTERPRETATION: CONSTRUCTION OF
AGREEMENT.
(a) The headings contained in this Agreement are for
reference purposes
only and shall not affect in any way the meaning or
interpretation of this
Agreement. Article, section, exhibit, schedule, preamble,
recital and party
references are to this Agreement unless otherwise stated.
(b) No party, nor its respective counsel, shall be
deemed the drafter
of this Agreement for purposes of construing the provisions of
this Agreement,
and all language in all parts of this Agreement shall be
construed in accordance
with its fair meaning, and not strictly for or against any
party.
SECTION 9.14 ARBITRATION. Except as otherwise provided in
Section 5.4 and
subject to Section 9.5, any controversy, dispute or claim
arising under or
related to this Agreement shall be settled by arbitration
conducted in Los
Angeles, California in accordance with the then existing
Commercial Arbitration
Rules of the American Arbitration Association, and judgment
upon any award
rendered by the arbitrator may be entered by any federal or
state court having
jurisdiction thereof. The parties expressly provide that the
provisions of
Section 1283.05 of the California Code of Civil Procedure are
incorporated into,
and made a part of, this Section 9.14. The decision of the
arbitrator shall be
final and binding upon the parties. The arbitrator shall be
authorized to award
any relief, whether legal or equitable, to the party so
entitled to such relief.
(b) In respect of any action, suit or other proceeding
relating to the
enforcement of the award rendered by the arbitrator pursuant
to this Section
9.14, each party hereby irrevocably submits to the
non-exclusive jurisdiction
of any state or federal court located in the County of Los
Angeles, State of
California. EACH PARTY HEREBY WAIVES ANY RIGHT EACH MAY HAVE
TO
32
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT
IS NOT SUBJECT TO
THE JURISDICTION OF THE AFORESAID COURTS, OR TO OBJECT TO
VENUE TO THE EXTENT
THAT ANY ACTION, SUIT OR OTHER PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS
SECTION 9.14.
SECTION 9.15 GUARANTEE OF OBLIGATIONS. The Shareholder
hereby agrees that
he is fully liable for each and every obligation, covenant or
liability of
Seller under this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of
the date first above written.
BUYER
-----
ADVANCED MATERIALS, INC., a
California corporation
By: /s/ Dave Lasnier
-------------------------------
Name: Dave Lasnier
Title: Executive Vice President/
General Manager
SELLER
------
GASKET AND MOLDED PRODUCTS, INC.,
a Colorado
corporation
By: /s/ Richard S. Rouse
-------------------------------
Name: Richard S. Rouse
Title: President
SHAREHOLDER
-----------
/s/ Richard S. Rouse
----------------------------------
Name: Richard S. Rouse
NEAL M. PRICE
-------------
(as to Section 5.3 only)
/s/ Neal M. Price
----------------------------------
Name: Neal M. Price
33
LIST OF EXHIBITS
Exhibit 2.5(c) Fund Trust Agreement
Exhibit 2.6 Assignment or
Novation of Lease
Exhibit 6.2(g) Employment Agreement
Exhibit 6.2(i) Opinion of Counsel
LIST OF SCHEDULES
Schedule 2.1(a) Equipment List
Schedule 2.1(b) Inventory List
Schedule 2.1(c) Contract List
Schedule 2.2(iv) Excluded Inventory
Schedule 3.2 Permits and Licenses
Schedule 3.6 Financials
Schedule 3.13 Receivables Aging
Schedule 3.19(a) Material Contracts
Schedule 3.22 Related Party
Transactions
Schedule 3.26 Insurance
Schedule 3.30 Consents Required
