-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hx50PJrnIGHjCB9TZnII+WJKDcJxXp/uuduwxIRsrYfuZ6TO+8UI1rYc5K1wHrSk APd+7t1grNVhmRzZ3rLVcA== 0001020488-00-000053.txt : 20000503 0001020488-00-000053.hdr.sgml : 20000503 ACCESSION NUMBER: 0001020488-00-000053 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 35 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 DATE AS OF CHANGE: 20000502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISG RESOURCES INC CENTRAL INDEX KEY: 0001063018 STANDARD INDUSTRIAL CLASSIFICATION: 3312 IRS NUMBER: 742164490 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-56217 FILM NUMBER: 589494 BUSINESS ADDRESS: STREET 1: 136 EAST SOUTH TEMPLE STREET 2: SUITE 1300 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 BUSINESS PHONE: 8012369700 MAIL ADDRESS: STREET 1: 136 EAST SOUTH TEMPLE STREET 2: SUITE 1300 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 FORMER COMPANY: FORMER CONFORMED NAME: JTM INDUSTRIES INC DATE OF NAME CHANGE: 19980604 10-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee required] For the Fiscal Year Ended December 31, 1999 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No fee required] For the transition period from N/A to N/A ------ ----- Commission File Number ---------------------- ISG RESOURCES, INC. ------------------------------------- (Exact name of Registrant as specified in its charter) Utah 87-0327982 -------------- ------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111 -------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 236-9700 ----------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: 10% Senior Subordinated Notes Due 2008 --------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ _ _ ] The aggregate market value of the voting stock held by non-affiliates of the registrant on March 29, 2000 was approximately $0. The number of shares of Common Stock outstanding on March 29, 2000 was 100 shares. Documents Incorporated by Reference: See Item 14(a) List of Exhibits PART I Item 1. Business General Development of Business ISG Resources, Inc., a Utah corporation (the "Company"), is a wholly owned subsidiary of Industrial Services Group, Inc. ("ISG"). ISG was formed in September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October 14, 1997. In 1998, JTM acquired the stock of Pozzolanic Resources, Inc. ("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales Company, d.b.a. U. S. Ash Company, together with two affiliated companies, U.S. Stabilization, Inc. and Flo Fil Company, Inc., (collectively, "U.S. Ash"), and Fly Ash Products, Inc. ("Fly Ash Products"). Effective January 1, 1999, JTM, Pozzolanic, PPA, U.S. Ash, Fly Ash Products and their wholly owned subsidiaries merged with and into the Company (the "Merger"). Pneumatic Trucking, Inc., a wholly owned subsidiary of Michigan Ash Sales Company, was not merged into the Company. Consequently, Pneumatic became a wholly owned subsidiary of the Company. On January 7, 1999, the Company acquired all of the outstanding stock of Best Masonry and Tool Supply ("Best") for approximately $13,300,000 in cash and paid off outstanding debt of Best totaling approximately $2,400,000. On May 27, 1999, the Company acquired all of the outstanding stock of Mineral Specialties, Inc. ("Specialties") for approximately $1,314,000 in cash. On June 2, 1999, the Company acquired all of the outstanding stock of Irvine Fly Ash, Inc. ("Irvine") for approximately $6,321,000 in cash. On October 26, 1999, the Company acquired all of the outstanding stock of Lewis W. Osborne, Inc. ("Osborne") and United Terrazzo Supply Co., Inc. ("Terrazzo") for approximately $1,219,000 in cash. On November 29, 1999, the Company sold all of the outstanding stock of Pneumatic Trucking, Inc., a wholly owned subsidiary of the Company, for approximately $750,000 in cash. On December 1, 1999, the Company acquired all of the outstanding stock of Magna Wall, Inc. ("Magna Wall") for approximately $1,542,000 in cash. Description of Business The Company operates two principal business segments: coal combustion product (CCP) management and building materials manufacturing and distribution. See Footnote 8 in the consolidated financial statements and notes thereto included elsewhere herein for segment reporting information. The CCP division purchases, removes and sells fly ash and other by-products of coal combustion to producers and consumers of building materials and construction related products throughout the United States. Based upon available information, the Company believes it is now the largest manager and marketer of CCPs in North America. The Company enters into long-term CCP management contracts, primarily with coal-fired electric generating utilities. These utilities are required to manage, or contract to manage, CCPs in accordance with state and federal environmental regulations. In addition, the Company provides similar materials management services for other industrial clients. The building materials division manufactures and distributes building materials to residential and commercial contractors, primarily in Texas, California, Georgia and Florida. While the 1998 acquisition strategy focused on geographical diversification of the CCP division, the 1999 acquisition strategy focused on vertical integration into selected building products manufacturers (especially in key geographical areas) that utilize significant amounts of CCPs as raw materials in their products. This strategy has secured an outlet for a portion of previously unutilized CCPs while promoting the increased use of CCPs as components of building products in the future. Unlike most of its competitors, the Company has dedicated significant resources to the acquisition and development of new technologies for the use of CCPs in building products applications. Principal Products and their Markets by Division - - ------------------------------------------------- CCP Division The Company uses CCPs and other industrial materials to make products that primarily replace manufactured or mined materials, such as portland cement, lime, agricultural gypsum, fired lightweight aggregate, granite aggregate or limestone. The Company's focus on CCPs and related industrial materials development has also created a variety of applications, such as fillers in asphalt shingles and related products, that extend beyond the traditional uses of CCPs and related industrial materials. For purposes of this report, the Company's CCP-related products are broken down into traditional products and value-added products. Traditional products are those products that the Company and its competitors within the industry historically produce with the CCPs. Value-added products are newer products that have been developed to utilize CCPs and related materials, which in the past were deemed waste products and usually were sent to landfills. The primary CCPs managed by the Company are fly ash and bottom ash. Fly ash is the fine residue and bottom ash is the fraction composed of the heavier particles that result from the combustion of coal. Utilities firing boilers with coal first pulverize the coal and then blow the pulverized coal into a burning chamber where it immediately ignites to heat the boiler tubes. The heavier bottom ash falls to the bottom of the burning chamber while the lighter fly ash remains suspended in the exhaust gases. Before leaving the exhaust stack, the fly ash particles are generally removed by an electrostatic precipitator, bag house or other method. The bottom ash is hydraulically conveyed to a collection area, while the fly ash is pneumatically conveyed to a storage silo. Fly ash is a pozzolan that, in the presence of water, will combine with an activator (lime, portland cement or kiln dust) to produce a cement-like material. It is this characteristic that allows fly ash to act as a cost-competitive substitute for other more expensive cementitious building materials. Concrete manufacturers can typically use fly ash as a substitute for 15% to 40% of their cement requirements, depending on the quality of the fly ash and the proposed end-use application for the concrete. In addition to its cost-benefit, fly ash provides greater structural strength and durability in certain construction applications, such as road construction. Bottom ash is utilized as an aggregate in concrete block construction and for road base construction. According to the American Coal Ash Association (the "ACAA"), of the approximately 107 million tons of CCPs that were generated in the United States during 1998, fly ash accounted for approximately 58%, bottom ash accounted for approximately 16% and flue gas desulphurization waste ("scrubber sludge") and boiler slag accounted for approximately 26%. Traditional Products and Applications Traditional CCP products are industrial materials that generally require minimal processing or additives to fulfill their intended applications. The Company typically provides these products to its customers directly from its clients' sites. The Company has been successful in selling significant portions of the CCPs and other industrial materials it manages to traditional markets (e.g., the use of fly ash as pozzolan in portland cement concrete and the use of bottom ash as a lightweight aggregate). The following is a brief description of the CCP division's traditional products: Fly ash is used as (i) a pozzolan to partially replace portland cement in ready-mix concrete and concrete products (e.g., concrete pipe); (ii) an additive to portland cement to produce I-P cement and blended cements; (iii) an additive in downhole cementing of oil wells; and (iv) a primary constituent in flowable grout used to fill voids under concrete slabs and underground tank voids. Bottom ash is used as (i) raw feed stock for the manufacture of portland cement clinker; (ii) a lightweight aggregate for concrete and concrete block; (iii) a filler in the manufacture of clay brick; and (iv) an aggregate in asphaltic concrete. It can also be mixed with salt as an additive for ice and snow control or used as backfill for pipe bedding and dry bed material. Fluidized bed ash is used (i) for stabilization in mud drying; (ii) as a reagent to solidify liquid wastes in petrochemical and related areas; and (iii) for soil stabilization to create more solid foundations for vertical construction. Scrubber sludge is used as cement stabilized road base material and can be processed to be used in wallboard manufacture. Boiler slag is used for a variety of applications, including roofing shingles and cement. Cement and lime kiln dust and related industrial minerals are used as cementitious binders for chemical fixation/solidification of hazardous and non-hazardous wastes, soil stabilization and chemical processes. Value-added Products and Applications To diversify its product offerings and ensure that it productively uses the CCPs, the Company also develops and markets value-added products made from CCPs and related industrial materials, and it continues to expand the breadth of markets for these products. Through its research and development program and certain licenses, the Company has broadened the end use market for CCPs and related industrial materials by introducing several proprietary products made from previously non-marketable materials. The Company sells and distributes its products to cement plants, ready-mix concrete plants, road contractors, carpet manufacturers, roofing shingle producers, soil stabilization firms, utility companies and waste management firms. Several of its proprietary products have been utilized by government agencies such as the Department of Transportation, the Federal Aviation Administration, the Army Corps of Engineers and the U.S. Bureau of Mines. The following is a list of the Company's value added products and applications: Powerlite(R) is a pyrite free bottom ash which, when processed by the Company, produces a high quality aggregate for the concrete block industry. Powerlite(R) has exhibited superior flow characteristics, often making it more economical to use than other aggregates. The Company has provided customers in the Atlanta, Georgia area with more than two million tons of Powerlite(R) in the past 15 years. SAM(TM) (Stabilized Aggregate Material) is manufactured by the Company by combining several industrial materials received from clients and transforming them into a well-graded replacement for natural aggregate. SAM(TM) can be used in many other applications, such as road base, sub-base, parking areas, drainage media and rip-rap. Pozzalime(TM)/Envira-Cement(R) are the Company's lime-based pozzolanic materials that contain significant moisture-reduction properties. Pozzalime(TM) and Envira-Cement(R) have been successfully utilized in road-base construction, road-sub-base construction, chemical fixation, soil stabilization, moisture reduction, mud drying, pH adjustments, acid neutralization, sewage treatment and mine reclamation. Gypcem(R) is the Company's processed gypsum, registered and exclusively sold by the Company, that has characteristics allowing it to be used in the manufacture of portland cement. With considerable handling capabilities, the product is often more economical to use than conventional mined gypsum. Under a long-term contract with Dupont, the Company designed, constructed and currently operates an on-site processing facility for the 100,000 tons of Gypcem(R) produced each year. Peanut Maker(R) is a gypsum landplaster developed by the Company for use in the agricultural market as a soil enhancer. The Company has transformed this previously unmarketable material into Peanut Maker(R), a beneficial-use, value-added product. Peanut Maker(R) has been used on over 60,000 acres of peanut crops annually for the past 10 years. It continues to be in demand because of its high calcium content. The disassociation rate afforded by Peanut Maker(R) makes it more effective and economical than traditional calcium supplements. It has been a recommended source of calcium by the Virginia and North Carolina Extension Services since its invention. ALSIL(R)/Orbaloid(R) are industrial fillers developed by the Company from processed client-generated materials for use in filler applications such as roofing shingles, carpet and mat backing, and ceramic products. The Company has two U.S. patents and one Canadian patent for the use of ALSIL(R) in roofing shingles. The Company has secured multiple contracts with various shingle manufacturers, with one agreement extending for the life of the customer's manufacturing plant. Flexbase(TM) is a mixture of fly ash and scrubber sludge which the Company processes to form a road-base material. Stabil-Fill(TM) is a lime-stabilized fly ash that the Company has developed and sold for use as a fill material in lieu of natural borrow materials. The resulting mixture is lightweight and compacts with standard construction equipment. Applications include commercial or industrial property development, roadway embankment and subgrade for parking lots, airport runways, golf courses or driving ranges, and athletic fields. Redi-Fill(TM)/Flo Fil(R) are the Company's processed fly ash and bottom ash, sold for use as a structural fill and ready-mixed flowable fill. In addition to these value added products, the Company uses its traditional products for non-traditional applications. Non-traditional applications of fly ash include: (i) use as mineral filler to replace fine aggregate in bituminous coatings for roads (asphalt surface); (ii) use as a primary constituent in flowable fill to backfill around in-ground pipes and structures; (iii) for stabilization of soils with high plasticity or low load bearing abilities; (iv) to produce a filler grade material for a variety of products; and (v) as a binder with calcium sulfate to replace limestone road base materials. Building Materials Division The building materials division operates principally in Texas, California, Georgia and Florida. Its products include standard masonry and construction materials and supplies, as well as packaged products, many of which incorporate technologies acquired or developed by the Company. Selected packaged products sold today based on the Company's owned and leased technologies include: MagnaWall One Coat Stucco Best One Coat Stucco Best Masonry Cement Type N Best Scratch and Brown Stucco Cement Best White Masonry Cement Type N Best Masonry Cement Type S Best Mortar Cement Type N Best Finish Stucco Hill Country Mortar Type N Important Developments since Fiscal Year End On March 2, 2000, the Company acquired directly and indirectly through ISG Manufactured Products, Inc., a newly formed wholly owned subsidiary of the Company, 100% of the partnership interests in Don's Building Supply L.L.P. ("Don's") for a purchase price of $6,000,000 in cash. The Company expects the purchase price to increase or decrease within sixty days of the closing date based on 1999 EBITDA, as defined, and working capital as of February 29, 2000. Don's is engaged in the retail and wholesale distribution of construction materials to residential and commercial contractors primarily in the State of Texas. New Product Development New product development costs consist of scientific research and development and market development expenditures. The Company spent $1,796,032 for the year ended December 31, 1999 on research and development activities covering basic scientific research and application of scientific advances to the development of new and improved products and processes. The Company spent $370,186 for the year ended December 31, 1999 on market development activities related to new and improved products and processes identified during research and development activities. The Company expenses all new product development costs when they are incurred. The Company incurred insignificant new product development costs in the years ended December 31, 1998 and 1997. In an effort to maximize the percentage of products marketed to end users and minimize the amount of materials landfilled, the Company's focused research and development efforts have created or caused the Company to acquire the rights to various new technologies. Three of the most promising of these new technologies are as follows: Dynastone(R) is a revolutionary new technology to manufacture acid and sulfate resistant concrete pipe. This technology presents an opportunity to concrete pipe manufacturers to reclaim sales lost to plastic pipe and to reduce pipe production costs. ABC Cement(R) is a technology to produce rapid setting, high strength pozzolan type concretes using fly ash. The product transforms into a rapid set, high-strength concrete. ISG Cellular Concrete is a fiber reinforced, non-autoclaved cellular concrete which utilizes large quantities of CCPs and requires low energy and capital cost to produce. This technology produces an aerated concrete panel or block with excellent flexural strength, insulation and flame resistance. It is ideal for use in mass-produced housing applications. Competitive Business Conditions Coal is the largest indigenous fossil fuel resource in the United States, with current U.S. annual coal production in excess of one billion tons. Approximately 80% of the coal produced is for electric power generation, and its use has grown by almost 25% over the last decade. The combustion of coal provides cost-effective electricity generation, but results in a high percentage of residual material, which serves as the "raw material" for the CCP industry. The industry manages these CCPs and related materials by developing end-use markets for certain CCPs and providing storage and disposal services for the remainder of such materials. In order to sustain its position as a leader in the CCP management industry, the Company relies on and continues to implement the following competitive strengths: Leading Market Position. The Company believes it is a party to more CCP management contracts and manages more CCP tonnage than any of its competitors. The Company has aggressively penetrated its service areas and has won contracts based on its "one-stop" approach to CCP and other industrial materials management services. This approach combines the Company's marketing, materials handling and technological capabilities to lower the client's cost of managing CCPs and other industrial materials in accordance with applicable state and federal regulations. Geographic Diversification. The Company believes it is the only company in the CCP management industry with a national scope. This national scope provides the Company with several significant competitive benefits, including mitigation of the effects of cyclical regional economies and weather patterns. In addition, the Company's national scope and storage capabilities will create incremental revenue through the ability to shift products among regions to meet market demand while minimizing transportation costs. Value-Added Products and Services. The Company's new product development efforts have broadened the end-use market for CCPs and other recyclable industrial materials. The Company has successfully introduced new patented or trademarked products made from previously non-marketable materials through proprietary processes. These product development efforts have reduced the materials management cost to the Company's clients and improved the Company's revenue mix and margins. Strong Client Relationships. At December 31, 1999, the Company had contractual relationships with eleven of the fifteen largest coal powered electrical utilities in the United States, based on total electricity revenues. The Company has maintained long-term contracts with certain utilities since 1978, and experienced a renewal or extension rate of greater than 90% since current management completed the acquisition of JTM in 1997. The Company's clients rely on its marketing, materials handling and technological capabilities to extend the useful life of their landfill sites by creatively managing and marketing a broader range of CCPs than competitors. Source and Availability of Raw Materials The Company's primary raw materials are CCPs. As long as the majority of electricity generated in this country comes from the use of coal-fired generation, the Company believes it will have an adequate supply of raw materials. Dependence on Limited Customers The Company works with a large number of customers and has long-term contracts with most such customers. The Company's core business is based on long-term materials management contracts with power producers and industrial clients. As of December 31, 1999, the Company had 97 materials management contracts, 25 of which generated more than $1.0 million of annual revenues each. Typical contract terms are from five to fifteen years. The Company is focused on serving its current client base and plans to aggressively target additional contract opportunities to increase both tonnage under management and revenues. Intellectual Property The Company owns and has obtained licenses to various domestic and foreign patents and trademarks related to its products and processes. While these patents and trademarks in the aggregate are important to the Company's competitive position, no single patent or trademark is material to the Company. The Company's license agreements generally have a duration that coincides with the patents covered thereby. Government Approval None. Effect of Existing or Probable Government Regulation None. Cost of Compliance with Environmental Laws None. Employees The Company has a total of 633 employees, of which 601 are full-time employees. Item 2. Properties The Company operates its corporate headquarters in Salt Lake City, Utah in offices leased under a three-year lease expiring in July 2001. The total amount of leased space in the corporate headquarters is 12,202 square feet. Due to the Company's national scope of operations, it has a number of other properties used in its operations. The following table sets forth certain information regarding the Company's other principal facilities as of December 31, 1999: Lease Location Function Ownership Termination Date --------- ---------- ----------- ------------------ Bay City, MI Offices Leased August 31, 2000 Kennesaw, GA Offices Leased January 31, 2004 Delle, UT Storage Silos Leased November 1, 2001 Fargo, ND Fly Ash Storage Leased Month to Month Good Spring, PA Silo Facility Leased Month to Month Taylorsville, GA Lab Facility Owned Doraville, GA Terminal Facility Leased August 11, 2005 Leland, NC Transfer Facility Owned Franklin, VA Structural Fill Owned Clinton, TN Structural Fill Owned Centralia, WA Storage Facility Owned Ogden, UT Storage Facility Owned Oregon City, OR Offices Leased Month to Month Fresno, CA Terminal Facility Leased March 31, 2002 Allentown, PA Offices Leased February 28, 2001 Pomona, CA Rail Terminal Owned Tukwilla, WA Offices Leased June 30, 2004 Houston, TX Offices Leased August 30, 2004 Sacramento, CA Terminal Facility Leased February 22, 2003 Stafford, TX Offices Leased April 30, 2003 Management believes its facilities are in good condition and that the facilities are adequate for its operating needs for the foreseeable future without significant modifications or capital investment. Item 3. Legal Proceedings The Company is a defendant in various lawsuits which are incidental to the Company's business. Management, after consultation with its legal counsel, believes that any potential liability as a result of these matters will not have a material effect upon the Company's results of operations or financial position. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common stock is not publicly traded and is wholly owned by ISG. Item 6. Selected Financial Data The following table sets forth summary consolidated financial information of the Company for each of the five years in the period ended December 31, 1999. Such information was derived from the audited consolidated financial statements and notes thereto and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere herein. The selected consolidated financial information for the periods prior to October 14, 1997 set forth below is not comparable to subsequent periods due to the step-up in basis resulting from the acquisition of JTM by ISG in 1997. Additionally, the 1999 and 1998 information set forth below may not be comparable due to accounting for the 1998 and 1999 acquisitions using the purchase method of accounting and, therefore, only including information for each acquisition from the respective acquisition date.
2 1/2 Months 9 1/2 Months Year Ended Year Ended Ended Ended Years Ended December 31, December 31, December 31, October 13, December 31, 1999 1998 1997 1997 1996 1995 ------ ------- ------ ------ ------ ------- Statement of Income Data: Revenue $ 156,205 $ 117,293 $ 12,643 $ 51,295 $ 62,841 $ 64,986 Cost of products and services sold, excl. depr. 108,664 80,116 9,365 40,701 52,268 51,489 Depreciation and amortization 13,091 9,141 908 5,279 2,285 2,265 Selling, general and administrative expenses 18,962 14,145 1,256 3,633 5,667 9,692 New Product Development Costs 2,166 - - - - - Income from Operations 13,321 13,891 1,114 1,682 2,621 1,540 Interest Expense 13,392 9,338 628 4,160 4,853 4,081 Net income (loss) before income taxes 285 4,808 517 (2,478) (2,232) (2,541) Net income (loss) (362) 2,259 265 (3,090) (1,870) (2,096) Balance Sheet Data: Working capital (deficiency) 8,972 6,786 (21,648) (43,594) (45,804) (42,268) Total assets 220,463 191,732 73,270 58,396 62,950 61,779 Total debt 133,500 110,000 - - - - Shareholder's equity 27,162 27,524 25,265 3,623 6,713 8,033 Other Data: Cash flows from operating activities 10,204 8,210 1,843 521 603 (1,115) Cash flows from investing activities (33,369) (86,623) (19) (681) (3,869) (4,586) Cash flows from financing activities 23,165 75,344 1,189 957 2,844 (4,113) EBITDA (1) 26,768 23,287 2,054 6,961 4,906 3,805 EBITDA margin 17.1% 19.9% 16.2% 13.6% 7.8% 5.9% Capital expenditures 8,791 8,574 19 681 4,357 4,589 Ratio of earnings to fixed charges (2) 1.02x 1.42x 1.49x 0.56x 0.68x 0.58x Deficit of earnings to fixed charges - - - (2,478) (2,232) (2,541)
(1) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered as an alternative to net income or any other GAAP measure of performance as an indicator of the Company's performance or to cash flows provided by operating, investing or financing activities as an indicator of cash flows or a measure of liquidity. Management believes that EBITDA is a useful adjunct to net income and other measurements under GAAP in evaluating the Company's ability to service its debt and is a conventionally used financial indicator. However, due to possible inconsistencies in the method of calculating EBITDA, the EBITDA measures presented may not be comparable to other similarly titled measures of other companies. (2) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations plus fixed charges. Fixed charges include interest, whether expensed or capitalized, amortization of debt expense and that portion of rental expense which is representative of the interest factor in these rentals. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto of ISG Resources, Inc. and its predecessor, JTM Industries, Inc. and other financial information appearing elsewhere herein. General The Company is a manager and marketer of CCPs in North America. The Company also manufactures and distributes building materials to residential and commercial contractors. The Company generates revenues from marketing and distributing products to its customers and providing materials management, engineering and construction services to its clients. The Company was founded in 1997 upon the acquisition of JTM by ISG (the "JTM Acquisition"). In 1998, the Company acquired Pozzolanic, PPA, the US Ash Group and Fly Ash Products (the "1998 Acquisitions"). In 1999, the Company acquired Specialties and Irvine in the CCP division and Best, Osborne, Terrazzo and Magna Wall in the building materials division (the "1999 Acquisitions"). The Company's strategic objectives include the maintenance and expansion of long-term contractual relationships with electric utilities, the increase in product sales and applications through cross-marketing and vertical integration, and further technological advances. Seasonality The Company's business is subject to seasonal fluctuation. The Company's need for working capital accelerates moderately during the middle of the year, and accordingly, total debt levels tend to peak in the second and third quarters, and decline in the fourth quarter of the year. The amount of revenue generated during the middle of the year generally depends upon a number of factors, including the level of road and other construction using concrete, weather conditions affecting the level of construction, general economic conditions, and other factors beyond the Company's control. Results of Operations Year Ended December 31, 1999 compared to Year Ended December 31, 1998 Product Revenues. Product revenues increased to $120.3 million in 1999 from $83.0 million in 1998, an increase of $37.3 million or 44.9%. This increase is primarily due to three factors: (1) a full year of revenue in 1999 for the 1998 Acquisitions as compared to 1998, which only included revenue from the respective dates of acquisition forward; (2) the revenue added by the 1999 Acquisitions; and (3) internal growth in the CCP division, primarily as a result of price increases and value growth. Service Revenues. Service revenues increased to $35.9 million in 1999 from $34.2 million in 1998, an increase of $1.7 million or 5.0%. This increase is primarily due to an increase in construction related services and other disposal services. Cost of Products Sold, Excluding Depreciation. Cost of products sold, excluding depreciation, was $83.4 million in 1999 as compared to $51.9 million in 1998, resulting in cost of products sold, excluding depreciation, as a percentage of product revenues of 69.3% and 62.5% for the respective periods. The decrease in product margins is primarily due to lower margins on product revenues derived from the 1999 Acquisitions. Cost of Services Sold, Excluding Depreciation. Cost of services sold, excluding depreciation was $25.2 million in 1999 as compared to $28.2 million in 1998, resulting in cost of services sold, excluding depreciation, as a percentage of service revenues of 70.2% and 82.5% for the respective periods. The increase in service margins is primarily due to three factors: (1) a change in product mix toward higher margin construction services; (2) a decrease in sub-contracted construction costs due to the same services being performed by personnel employed by the Company in 1999; and (3) a decrease in disposal rail costs due to improvements in rail car scheduling and efficiency. Depreciation and Amortization. Depreciation and amortization was $13.1 million in 1999 as compared to $9.1 million in 1998, an increase of $4.0 million or 44.0%. This increase is due primarily to three factors: an increase in amortization expense of goodwill related to the 1999 Acquisitions, a full year's amortization expense for 1998 Acquisitions, and an increase in depreciation expense related to new acquisitions of property, plant and equipment during 1999. Selling, General and Administrative Expenses. Selling, general and administrative expenses (SG&A) increased $4.9 million or 34.8% to $19.0 million in 1999 as compared to $14.1 million in 1998. This increase is primarily due to four factors: (1) a full year of SG&A in 1999 for the 1998 Acquisitions as compared to 1998, which only included SG&A from the respective dates of acquisition forward; (2) the SG&A added by the 1999 Acquisitions; (3) severance charges associated with the Acquisitions; and (4) an increase in sales and marketing efforts. New Product Development. New product development costs consist of scientific research and development and market development expenditures. The Company spent $1.8 million for the year ended December 31, 1999 on research and development activities covering basic scientific research and application of scientific advances to the development of new and improved products and processes. The Company spent $0.4 million for the year ended December 31, 1999 on market development activities related to promising new and improved products and processes identified during research and development activities. The Company incurred insignificant new product development costs in the year ended December 31, 1998. Interest Expense. Interest expense was $13.4 million and $9.3 million in 1999 and 1998, respectively, an increase of $4.1 million or 44.1%. The increase is due primarily to an increase in the Company's outstanding indebtedness resulting from the 1999 Acquisitions. Income Tax Expense. Income tax expense was $0.6 million and $2.5 million in 1999 and 1998, respectively, resulting in effective tax rates of 227.1% and 53.0%. The increase in the effective tax rate in 1999 is primarily due to a decrease in pre-tax income and the increase in non-deductible amortization of goodwill recorded for the 1999 Acquisitions. Net Income (loss). As a result of the factors discussed above, the net loss for 1999 was $0.4 million as compared to 1998 net income of $2.3 million. Fiscal Year 1998 Compared to 2 1/2 Months Ended December 31, 1997 and 9 1/2 Months Ended October 13, 1997 For purposes of discussing the results of operations, fiscal year 1998 is compared to the period from the JTM Acquisition date to December 31, 1997 and the period from January 1, 1997 to the JTM Acquisition date, which reflects the results of the predecessor company. Revenues. Revenues were $117.3 million, $12.6 million and $51.3 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in average monthly revenues of $9.8 million, $5.0 million and $5.4 million for the respective periods. The increase in the average monthly revenues in 1998 is due primarily to the 1998 Acquisitions. Cost of Products Sold, Excluding Depreciation. Cost of products sold, excluding depreciation, was $51.9 million, $4.9 million and $20.7 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in cost of products sold, excluding depreciation, as a percentage of product revenues of 62.5%, 68.9% and 80.8% for the respective periods. The improvement in margins is due to two factors: (1) change in product mix from lower margin product sold to the former parent in the pre-acquisition period as opposed to higher margin product sold to third parties in the post-acquisition period, and (2) price increases. Cost of Services Sold, Excluding Depreciation. Cost of services sold, excluding depreciation was $28.2 million, $4.5 million and $20.0 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in a relatively constant cost of services sold, excluding depreciation, as a percentage of service revenues of 82.4%, 80.6% and 77.9% for the respective periods. Depreciation and Amortization. Depreciation and amortization was $9.1 million, $0.9 million and $5.3 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in average monthly depreciation and amortization of $0.8 million, $0.4 million and $0.6 million, for the respective periods. The 9 1/2 months ended October 13, 1997 includes a $3.3 million goodwill write-off by the Company's former parent in connection with the JTM Acquisition. Excluding this write-off, average monthly depreciation and amortization for this period would have been $0.2 million. The increase in average monthly depreciation and amortization for the 2 1/2 months ended December 31, 1997 over the 9 1/2 months ended October 13, 1997, before the goodwill write-off discussed above, is due primarily to the amortization of goodwill, contracts, patents and assembled workforce, which were recorded at fair value upon the JTM Acquisition, as well as the accelerated amortization rate of goodwill by the Company after its acquisition by ISG. The increase in average monthly depreciation and amortization for fiscal year 1998 over the 2 1/2 months ended December 31, 1997 is due primarily to the amortization of goodwill, contracts and assembled workforce, which were recorded at fair value upon the 1998 Acquisitions. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") were $14.1 million, $1.3 million and $3.6 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively. For the 9 1/2 months ended October 13, 1997, management fees were allocated to the Company by Laidlaw based upon the Company's share of Laidlaw's consolidated revenue. The allocated charges may not be indicative of the expenses the Company would have incurred if Laidlaw had not provided the services. The increase in SG&A in fiscal year 1998 is due primarily to three factors: (1) costs associated with the reorganization of the Company (i.e., consulting, travel, employee relocation) after the 1998 Acquisitions; (2) increased sales and marketing efforts; and (3) an increase in management incentive compensation. Interest Expense. Interest expense was $9.3 million, $0.6 million and $4.2 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in average monthly interest expense of $0.8 million, $0.2 million and $0.4 million for the respective periods. The decrease in the average monthly interest expense in the 2 1/2 months ended December 31, 1997 as compared to the 9 1/2 months ended October 13, 1997 is due primarily to a decrease in the Company's outstanding indebtedness resulting from the elimination of the intercompany indebtedness to Laidlaw upon the JTM Acquisition. The increase in the average monthly interest expense in fiscal year 1998 is due primarily to the issuance of Senior Subordinated Notes in April 1998. Income Tax Expense. Income tax expense was $2.5 million , $0.3 million and $0.6 million in fiscal year 1998, the 2 1/2 months ended December 31, 1997 and the 9 1/2 months ended October 13, 1997, respectively, resulting in effective tax rates of 53.0%, 48.8% and (24.7%). The negative effective tax rate in the 9 1/2 months ended October 13, 1997 is due primarily to the large goodwill write-off discussed above which was not deductible for tax purposes. The increase in the effective tax rate from the 2 1/2 months ended December 31, 1997 to fiscal year 1998 is due primarily to the increase in non-deductible amortization of goodwill recorded upon the 1998 Acquisitions. Net Income (Loss). As a result of the factors discussed above, net income increased to $2.3 million and $0.3 million in fiscal year 1998 and the 2 1/2 months ended December 31, 1997, respectively, as compared to a net loss of $3.0 million in the 9 1/2 months ended October 13, 1997. Liquidity and Capital Resources The Company financed the JTM Acquisition, the 1998 Acquisitions and the 1999 Acquisitions through the proceeds from the issuance of $100.0 million of 10% Senior Subordinated Notes due 2008 and borrowings on its Secured Credit Facility. Operating and capital expenditures have been financed primarily through cash flows from operations and borrowings under the Secured Credit Facility. At December 31, 1999, the Company had no cash or cash equivalents and $16.5 million available under the Secured Credit Facility. In addition, the Company had working capital of approximately $9.0 million, an increase of $2.2 million from December 31, 1998 due to an increase in Trade Accounts Receivable and Inventories offset in part by an increase in Accounts Payable. Most of the changes in Accounts Receivable, Inventory and Accounts Payable are reflective of the acquisitions mentioned elsewhere herein. The Company intends to make capital expenditures over the next several years principally to construct storage, loading and processing facilities for CCPs and to replace existing capital equipment. During 1999, capital expenditures amounted to approximately $8.8 million. Capital expenditures made in the ordinary course of business will be funded by cash flow from operations and borrowings under the Secured Credit Facility. The Company anticipates that its principal use of cash will be for working capital requirements, debt service requirements and capital expenditures. Based upon current and anticipated levels of operations, the Company believes that its cash flow from operations, together with amounts available under the Secured Credit Facility, will be adequate to meet its anticipated requirements for working capital, capital expenditures and interest payments for the next several years. There can be no assurance, however, that cash flow from operations will be sufficient to service the Company's debt and the Company may be required to refinance all or a portion of its existing debt or obtain additional financing. These increased borrowings may result in higher interest payments. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained. The inability to obtain additional financing could have a material adverse effect on the Company. The Year 2000 Issue In general, the Year 2000 issue relates to computers and other systems being unable to distinguish between the years 1900 and 2000 because they use two digits, rather than four, to define the applicable year. Systems that fail to properly recognize such information were expected to generate erroneous data or cause a system to fail possibly resulting in a disruption of operations. The Company's products do not incorporate such date coding so the Company's efforts to address the Year 2000 issue fell into the following three areas: (i) the Company's information technology ("IT") systems; (ii) the Company's non-IT systems (i.e., machinery, equipment and devices which utilize technology which is "built in" such as embedded microcontrollers); and (iii) third-party customers. The Company worked to successfully resolve the potential impact of the Year 2000 issue on the processing of date-sensitive data by the Company's computerized information systems. Specifically, the Company installed new accounting and financial software and during 1999 that performed as expected with no known glitches. The Company also acquired and installed Year 2000 compliant software upgrades in all scales used in its operations. The Company is analyzing all other IT and non-IT systems to determine if any other modifications or upgrades are necessary. The amount charged to expense during the year ended December 31, 1999, as well as the amounts anticipated to be charged to expense related to the Year 2000 computer modifications, have not been and are not expected to be material to the Company's financial position, results of operations or cash flows. The Company also evaluated and took steps to resolve Year 2000 compliance issues that may have been created by customers, suppliers and financial institutions with whom the Company does business. Because many of the Company's suppliers are heavily regulated utilities with mandated year 2000 compliance, the Company did not expect these suppliers to experience problems. The foregoing statements are based upon management's current assumptions. However, there can be no guarantee that these assumptions have addressed all relevant uncertainties. New Accounting Pronouncements In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The effective date of SAB 101 is the second fiscal quarter ending after December 15, 1999. This SAB clarifies proper methods of revenue recognition given certain circumstances surrounding sales transactions. The Company continues to evaluate the impact of SAB 101, but believes it is in compliance with the provisions of the SAB and accordingly, does not expect SAB 101 to have a material effect on its financial statements. Forward-Looking Information Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations and other items of this Form 10-K may contain forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may relate but not be limited to projections of revenues, income or loss, capital expenditures, plans for growth and future operations, financing needs, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. When used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations", and elsewhere in this Form 10-K the words "estimates", "expects", "anticipates", "forecasts", "plans", "intends" and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Item 7a. Qualitative and Quantitative Disclosures about Market Risk In 1997, the SEC issued new rules (Item 305 of Regulation S-K) which requires disclosure of material risks as defined by Item 305, related to market risk sensitive financial instruments. As defined, the Company currently has market risk sensitive instruments related to interest rates. As disclosed in Note 4 of the audited consolidated financial statements, the Company has outstanding long-term debt of $133,500,000 at December 31, 1999. The Company currently has an average maturity of eight years for long-term debt, $100,000,000 of which is at a fixed rate of 10% and $33,500,000 of which is at a rate averaging 8.1% for the year ended December 31, 1999 as compared to 8.5% for the year ended December 31, 1998. The Company does not have significant exposure to changing interest rates on long-term debt because interest rates for the majority of the debt is fixed. The Company has not undertaken any additional actions to cover interest rate market risk and is not a party to any other interest rate market risk management activities. A hypothetical 10% change in market interest rates over the next year would not impact the Company's earnings or cash flows as the interest rate on the majority of the long-term debt is fixed. A 10% change in market interest rates would not have a material effect on the fair value of the Company's publicly traded long-term debt. The Company does not purchase or hold any derivative financial instruments for trading purposes. Item 8. Financial Statements and Supplementary Data The audited financial statements for the year ending December 31, 1999 are attached hereto at pages F-1 through F-31. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The Company's directors and executive officers, and their respective ages and positions with the Company, are set forth below in tabular form. Biographical information on each person is set forth following the tabular information. There are no family relationships between any of the Company's directors or executive officers. The Company's board of directors is currently comprised of two members, each of whom is elected for a term of one year. Executive officers are chosen by and serve at the discretion of the board of directors. Name Age Position with Company - - ---- --- ----------------------- R Steve Creamer...... 48 Chairman of the Board and Chief Executive Officer Raul A. Deju......... 54 President and Chief Operating Officer J.I. Everest, II..... 43 Chief Financial Officer, Treasurer, and Assistant Secretary Clinton W. Pike...... 47 Executive Vice President Brett A. Hickman..... 38 Senior Vice President, General Counsel and Secretary Joseph M. Silvestri.. 38 Director R Steve Creamer. Mr. Creamer is the Chairman of the Board and Chief Executive Officer of the Company and ISG. Immediately prior to his employment with the Company, Mr. Creamer was CEO (from 1992 to 1997) and the founder of ECDC Environmental L.C., the largest rail-served industrial waste management facility in North America. Prior to that, Mr. Creamer served as CEO of Creamer & Noble, an engineering firm based in St. George, Utah. He earned a B.S. degree in Civil and Environmental Engineering from Utah State University in 1973. Mr. Creamer is a Professional Engineer. Raul A. Deju. Dr. Deju is the President and Chief Operating Officer of the Company and ISG. Dr. Deju served as a Director of Rockwell Hanford Operations through 1981, Senior Vice President of International Technologies, Inc. through 1987 and Regional President of several subsidiaries of WMX Technologies, Inc. through 1995. Dr. Deju served as Chairman and CEO of DGL International through 1997, and Board Chairman of Isadra, Inc. Dr. Deju has been on the Board of Directors of various national and international WMX subsidiaries, Advanced Sciences, Inc. and Isadra, Inc. Dr. Deju is a member of ISG's Boards of Directors. Dr. Deju is an advisor to a committee of the U.S. Secretary of Commerce and has served on the U.S. Environmental Protection Agency Advisory Committee. Dr. Deju received a B.S. degree in Mathematics and Physics in 1966 and a Ph.D. degree in Engineering Geology in 1969 from the New Mexico Institute of Mining and Technology. J.I. Everest, II. Mr. Everest is the Chief Financial Officer, Treasurer and Assistant Secretary of the Company and ISG. He is responsible for all financial functions of the Company. Immediately prior to his employment with the Company, he served as Vice President of Finance for ECDC Environmental, Inc. (from 1993 to 1997). From 1988 to 1993, Mr. Everest was Director of Financial Analysis/Treasury of USPCI, Inc. Mr. Everest earned an M.B.A. degree (Finance Concentration) in 1994 from the University of Texas at Austin and a B.B.A. degree from Southern Methodist University in 1979. Mr. Everest is a C.P.A. Clinton W. Pike. Mr. Pike is the Executive Vice President of Manufactured Products. Since he began his service in 1990, Mr. Pike has served as Vice President of Business Development for the Company, establishing the Business and Product Development Program, and spearheading nontraditional business advancement and growth through acquisitions and the development of new markets. Prior to his service with the Company, he was Coordinator, Fuel and Ash Quality with Georgia Power Company, where he directed a total CCP management program. Mr. Pike earned a B.S. degree in Biology (Chemistry minor) from Georgia Southwestern College in 1974. Brett A. Hickman. Mr. Hickman is the Senior Vice President, General Counsel and Secretary of the Company. From December 1993 until February 1998, Mr. Hickman was General Counsel, Western Division of Laidlaw Environmental Services, Inc. Prior to that, Mr. Hickman was an attorney with Davis & Lavender in Columbia, South Carolina. Mr. Hickman earned a B.A. degree in Political Science from The Citadel in 1983 and a J.D. degree from the University of South Carolina in 1986. Joseph M. Silvestri. Mr. Silvestri has been a director of the Company since its acquisition by ISG. Mr. Silvestri has been employed by Citibank Venture Capital Ltd. (CVC) since 1990 and has served as a Vice President there since 1995. Mr. Silvestri is a director of ISG, International Media Group, Polyfibron Technologies, Frozen Specialties, Glenoit Mills, Euramax and Triumph Group. Compliance with Section 16(a) of the Securities Exchange Act of 1934. Section 16(a) of the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, require the Company's executive officers and directors, and persons who beneficially own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers Automated Quotations System and to furnish the Company with copies thereof. None of the Company's executive officers and directors and ten-percent owners of ISG own any shares in the Company. Accordingly, no such reports have been, or need to be, filed. Item 11. Executive Compensation The following table shows the compensation paid by the Company to its current Chairman and Chief Executive Officer, and the Company's other most highly paid executive officers.
Summary Compensation Table Annual Compensation Other Annual Name and Principal Position(1) Fiscal Year Salary (2) Bonus Compensation (3) ------------------------------- ----------- --------- ------- ----------------- R Steve Creamer (4) 1999 $260,000 $34,667 $5,000 Chairman, Chief Executive Officer 1998 193,747 130,000 5,150 1997 24,231 0 0 Raul A. Deju (4) 1999 250,016 33,333 5,000 President and Chief Operating Officer 1998 182,869 121,338 5,150 1997 23,710 0 0 J.I. Everest, II (4) 1999 204,561 26,667 5,000 Chief Financial Officer, Treasurer and 1998 145,934 108,337 8,092 Assistant Secretary 1997 28,647 0 0 Clinton W. Pike 1999 166,862 65,000 5,000 Executive Vice President 1998 160,461 191,700 106,886 1997 149,255 119,492 4,374 Brett Hickman 1999 150,010 20,000 5,000 Senior Vice President, General Counsel and 1998 75,003 104,000 4,500 Secretary
(1) Positions indicated were as of December 31, 1999. (2) Includes amounts, if any, deferred by the named individual for the period in question pursuant to Section 401(k) of the Internal Revenue Code under the Company's 401(k) Savings Plan (the "401(k) Plan"). (3) Amounts shown under Other Annual Compensation include amounts paid by the Company as matching and/or profit sharing contributions to the 401(k) Plan, but do not include perquisites and other personal benefits provided to each of the named executives, the aggregate value of which did not exceed the lesser of $50,000 or 10% of any such named executive's annual salary and bonus. (4) Mr. Creamer, Mr. Deju and Mr. Everest have been employed with the Company since October 14, 1997, and the 1997 salary reflects the two and a half months they worked for the Company in 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management The Company is wholly owned by ISG. The following table sets forth the number of shares of ISG's common stock beneficially owned as of March 29, 2000, (i) by each person who is known by the Company to own beneficially more than 5% of the Company's common stock, (ii) by each director and director nominee, (iii) by each of the Company's named executive officers, and (iv) by all directors, director nominees and executive officers, as a group, as reported by each such person.
Beneficial Ownership of Beneficial Ownership of Common Stock Preferred Stock ------------ --------------- Name and Address of Beneficial Owner Number of Number of ------------------------------------ Shares Percent Shares Percent ------ ------- ------ ------- Citicorp Venture Capital, Ltd. (1)........................... 187,425 37.9 26,813 38.3 R Steve Creamer (2)(3)....................................... 150,266 30.4 25,351 36.2 J.I. Everest, II (3)......................................... 49,467 10.0 6,925 9.9 CCT Partners IV, LP (4)...................................... 33,075 6.7 4,732 6.8 Raul A. Deju ................................................ 45,317 9.2 2,023 2.9 Joseph M. Silvestri.......................................... 980 0.2 140 0.2 Brett A. Hickman............................................. 4,950 1.0 700 1.0 Clinton W. Pike (5).......................................... - All directors and executive officers as a group (6 persons) (2)(3)(5)........................................ 250,980 50.8 35,139 50.2
(1) The address of Citicorp Venture Capital, Ltd. is: 399 Park Avenue, 14th Floor, New York, NY 10043. (2) Includes 112,700 shares owned by Mr. Creamer's adult son and three minor children. (3) Messrs. Creamer and Everest beneficially own shares in ISG through RACT, Inc., a Utah corporation ("RACT"), which directly owns shares in ISG. The business address of RACT is: 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111. (4) The address of CCT Partners IV, LP is the same as that of Citicorp Venture Capital, Ltd. (5) Mr. Pike, pursuant to his employment contract, has been granted an economic interest in one percent of all outstanding shares of the Company's stock as of the date of his employment agreement. Item 13. Certain Relationships and Related Transactions None. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements See Index to Financial Statements on page F-1. 2. Financial Statement Schedules All financial statement schedules have been omitted because either they are not required or the information required to be set forth therein is included in the consolidated financial statements or notes thereto. 3. Exhibits F-1 INDEX TO FINANCIAL STATEMENTS ISG Resources, Inc. and Subsidiaries Audited Consolidated Financial Statements as of December 31, 1999 and 1998 and for the Years Ended December 31, 1999 and 1998 and the Period From October 14, 1997 to December 31, 1997: Report of Independent Auditors............................. F-2 Consolidated Balance Sheets................................ F-3 Consolidated Statements of Operations...................... F-5 Consolidated Statements of Shareholder's Equity............ F-6 Consolidated Statements of Cash Flows...................... F-7 Notes to Consolidated Financial Statements................. F-8 JTM Industries, Inc. and Subsidiary (Predecessor to ISG Resources, Inc.) Audited Consolidated Financial Statements for the Period From January 1, 1997 to October 13, 1997: Report of Independent Accountants.......................... F-22 Consolidated Statement of Loss and Accumulated Deficit..... F-23 Consolidated Statement of Cash Flows....................... F-24 Notes to Consolidated Financial Statements................. F-25 F-2 Report of Independent Auditors The Board of Directors ISG Resources, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of ISG Resources, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, shareholder's equity and cash flows for the years ended December 31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ISG Resources, Inc. and Subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for the years ended December 31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997 in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Salt Lake City, Utah March 3, 2000 F-3 ISG Resources, Inc. and Subsidiaries Consolidated Balance Sheets December 31 1999 1998 Assets Current assets: Accounts receivable: Trade, net of allowance for doubtful accounts of $329,000 in 1999 and $170,000 in 1998 $ 21,167,616 $ 14,975,729 Retainage receivable 176,000 660,609 Other 502,058 296,966 Deferred tax asset 316,161 251,355 Inventories 4,055,425 387,258 Other current assets 829,661 645,969 Total current assets 27,046,921 17,217,886 Property, plant and equipment: Land and improvements 4,371,197 1,736,384 Buildings and improvements 6,839,777 3,610,621 Vehicles and other operating equipment 27,189,160 20,090,872 Furniture, fixtures and office equipment 1,161,456 494,753 39,561,590 25,932,630 Accumulated depreciation (7,893,374) (3,562,086) 31,668,216 22,370,544 Construction in progress 1,915,972 5,768,564 33,584,188 28,139,108 Other assets: Intangible assets, net 153,952,547 140,835,640 Debt issuance costs, net 4,826,010 5,192,893 Other assets 1,052,845 346,209 Total assets $ 220,462,511 $191,731,736 ----------------------------------------------================================ F-4 December 31 1999 1998 ------------------------------------- Liabilities and shareholder's equity Current liabilities: Accounts payable $ 10,409,583 $ 4,066,487 Accrued expenses: Payroll 1,288,732 1,801,657 Interest 2,190,471 2,106,054 Other 1,828,537 1,534,971 Income taxes payable 1,705,678 422,963 Other current liabilities 652,119 500,000 ----------------- ------------- Total current liabilities 18,075,120 10,432,132 Long-term debt 133,500,000 110,000,000 Deferred tax liabilities 39,158,249 41,286,434 Payable to Industrial Services Group 643,983 - Other liabilities 1,923,355 2,488,954 Commitments and contingencies Shareholder's equity: Common stock, no par in 1999 and par value of $1 per share in 1998; 100 shares authorized, issued and outstanding 25,000,050 100 Additional paid-in capital - 24,999,950 Retained earnings 2,161,754 2,524,166 ------------------------------------- Total shareholder's equity 27,161,804 27,524,216 ------------------------------------- Total liabilities and shareholder's equity $ 220,462,511 $191,731,736 ===================================== See accompanying notes. F-5 ISG Resources, Inc. and Subsidiaries Consolidated Statements of Operations Period from October 14 to Year ended December 31 December 31 1999 1998 1997 --------------------------------------------- Revenues: Product revenues $ 20,319,575 $ 83,048,721 $ 7,059,063 Service revenues 35,885,697 34,243,854 5,583,981 --------------------------------------------- 156,205,272 117,292,575 12,643,044 Costs and expenses: Cost of products sold, excluding depreciation 83,442,725 51,878,447 4,864,226 Cost of services sold, excluding depreciation 25,221,695 28,237,385 4,500,892 Depreciation and amortization 13,091,131 9,140,938 908,619 Selling, general and administrative expenses 18,962,157 14,144,765 1,255,680 New product development 2,166,218 - - --------------------------------------------- 142,883,926 103,401,535 11,529,417 --------------------------------------------- 13,321,346 13,891,040 1,113,627 Interest income 44,100 183,113 31,286 Interest expense (13,391,944) (9,338,059) (627,704) Miscellaneous income, net 311,675 72,386 - --------------------------------------------- Income before income tax expense 285,177 4,808,480 517,209 Income tax expense 647,589 2,549,026 252,497 --------------------------------------------- Net income (loss) $ (362,412) $ 2,259,454 $ 264,712 ============================================= See accompanying notes. F-6 ISG Resources, Inc. and Subsidiaries Consolidated Statements of Shareholder's Equity Additional Total Common Paid-In Retained Shareholder's Stock Capital Earnings Equity -------------------------------------------------- Balance at October 14, 1997 $100 $23,811,429 $ - 23,811,529 Cash contribution - 1,188,521 - 1,188,521 Net income - - 264,712 264,712 -------------------------------------------------- Balance at December 31, 1997 100 24,999,950 264,712 25,264,762 Net income - - 2,259,454 2,259,454 -------------------------------------------------- Balance at December 31, 1998 100 24,999,950 2,524,166 27,524,216 Change to no par value 24,999,950 (24,999,950) - - Net loss - - (362,412) (362,412) -------------------------------------------------- Balance at December 31, 1999 $25,000,050 $ - $ 2,161,754 $27,161,804 ================================================== See accompanying notes.
F-7 ISG Resources, Inc. and Subsidiaries Consolidated Statements of Cash Flows Period from October 14 to Year ended December 31 December 31 1999 1998 1997 ---------------------------------- Operating activities Net income (loss) $ (362,412)$ 2,259,454 $264,712 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 13,091,131 9,140,938 908,619 Amortization of debt issuance costs 702,032 463,585 - Deferred income taxes (2,229,539) (1,697,407) (276,245) Loss on sale of assets 24,168 46,513 - Gain on sale of subsidiary (333,749) - - Changes in operating assets and liabilities: Receivables (2,755,382) (1,479,648) 691,534 Inventories (1,733,832) 231,658 - Other current and non-current assets (879,189) (91,603) (22,569) Accounts payable 4,485,877 (606,834)(1,035,993) Income taxes payable 1,257,583 (245,447) 528,742 Accrued expenses (929,504) 759,326 755,913 Other current and non-current liabilities (132,821) (570,491) 28,387 ---------------------------------- Net cash provided by operating activities 10,204,363 8,210,044 1,843,100 Investing activities Purchase of businesses, net of cash acquired (24,866,989)(77,753,012) - Proceeds from sale of subsidiary 750,000 - - Additions to intangible assets (877,349) (691,847) - Purchases of property, plant and equipment (8,790,870) (8,574,086) (19,491) Proceeds from sales of property, plant and equipment 415,994 396,399 - ----------------------------------- Net cash used in investing activities (33,369,214)(86,622,546) (19,491) Financing activities Proceeds from long-term debt 127,000,000 154,000,000 - Payments on long-term debt (103,500,000)(73,000,000) - Debt issuance costs (335,149) (5,656,478) - Cash contributions - - 1,188,521 ---------------------------------- Net cash provided by financing activities 23,164,851 75,343,522 1,188,521 ---------------------------------- Net (decrease) increase in cash and cash equivalents - (3,068,980)3,012,130 Cash and cash equivalents at beginning of period - 3,068,980 56,850 ----------------------------------- Cash and cash equivalents at end of period $ - $ - $3,068,980 =================================== Cash paid for interest $ 12,605,495 $ 7,396,124 $ - =================================== Cash paid for income taxes $ 902,123 $ 3,989,414 $ - =================================== See accompanying notes.
F-8 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1999 1. Basis of Presentation ISG Resources, Inc., a Utah corporation (the "Company"), is a wholly owned subsidiary of Industrial Services Group, Inc. ("ISG"). ISG was formed in September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October 14, 1997. In 1998, JTM acquired the stock of Pozzolanic Resources, Inc. ("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales Company, d.b.a. U. S. Ash Company, together with two affiliated companies, U.S. Stabilization, Inc. and Flo Fil Company, Inc., (collectively, "U.S. Ash"), and Fly Ash Products, Inc. ("Fly Ash Products") (collectively, the "1998 Acquisitions"). Effective January 1, 1999, JTM, Pozzolanic, PPA, U.S. Ash, Fly Ash Products and their wholly owned subsidiaries merged with and into the Company (the "Merger"). Pneumatic Trucking, Inc., a wholly owned subsidiary of Michigan Ash Sales Company, was not merged into the Company. Consequently, Pneumatic became a wholly owned subsidiary of the Company. On January 7, 1999, the Company acquired all of the outstanding stock of Best Masonry and Tool Supply ("Best") for approximately $13,300,000 in cash and paid off outstanding debt of Best totaling approximately $2,400,000. On May 27, 1999, the Company acquired all of the outstanding stock of Mineral Specialties, Inc. ("Specialties") for approximately $1,314,000 in cash. On June 2, 1999, the Company acquired all of the outstanding stock of Irvine Fly Ash, Inc. ("Irvine") for approximately $6,321,000 in cash. On October 26, 1999, the Company acquired all of the outstanding stock of Lewis W. Osborne, Inc. ("Osborne") and United Terrazzo Supply Co., Inc. ("Terrazzo") for approximately $1,219,000 in cash. On December 1, 1999, the Company acquired all of the outstanding stock of Magna Wall, Inc. ("Magna Wall") for approximately $1,542,000 in cash. Each of the above acquisitions was accounted for under the purchase method of accounting and, accordingly the results of operations of each acquisition have been included in the consolidated financial statements since the respective date of acquisition. The purchase prices of the above acquisitions were allocated based on estimated fair values of assets and liabilities at the respective dates of acquisition. Goodwill resulting from the difference between the purchase prices plus acquisition costs and the net assets of the companies acquired in 1999 totaled approximately $20,073,000. All recorded goodwill is being amortized on a straight-line basis over 20 to 25 years. F-9 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. Basis of Presentation (continued) The following pro forma combined financial information reflects operations as if all of the above acquisitions and the related financing transactions had occurred as of January 1, 1998. The pro forma combined financial information is presented for illustrative purposes only, does not purport to be indicative of the Company's results of operations as of the date hereof and is not necessarily indicative of what the Company's actual results of operations would have been had the acquisitions and the financing transactions been consummated on such date. Year Ended December 31 1999 1998 ------------------- ------------------- Revenues $ 164,840,000 $ 155,313,000 Net loss $ (409,878) $ (1,652,000) On November 29, 1999, the Company sold all of the outstanding stock of Pneumatic Trucking, Inc., a wholly owned subsidiary of the Company, for approximately $750,000 in cash. The Company recognized a gain of approximately $334,000 on this sale which is included in miscellaneous income in the consolidated statement of operations. 2. Description of Business and Summary of Significant Accounting Policies Description of Business The Company operates two principal lines of business: coal combustion product (CCP) management and building materials manufacturing and distribution. The CCP division purchases, removes and sells fly ash and other by-products of coal combustion to producers and consumers of building materials and construction related products throughout the United States. The building materials division manufactures and distributes masonry construction materials to residential and commercial contractors in Texas, California, Georgia and Florida. Principles of Consolidation These financial statements reflect the consolidated financial position and results of operations of ISG Resources, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior years' amounts to conform to the current year presentation. Revenue Recognition Revenue from the sale of products is recognized primarily upon passage of title to the customer, which generally coincides with physical delivery and acceptance. CCP product revenues generally include transportation charges associated with delivering the material. F-10 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Description of Business and Summary of Significant Accounting Policies (continued) Revenue Recognition (continued) Service revenues include revenues earned under long-term contracts to dispose of residual materials created by coal-fired power generation and revenues earned in conjunction with certain construction-related projects, which are incidental to the primary business. Typical long-term disposal contracts are from five to fifteen years. Service revenues under the long-term contracts are recognized concurrent with the removal of the material and are typically based on the number of tons of material removed at an established price per ton. The construction-related projects are generally billed on a time and materials basis; therefore, the revenues and costs are recognized when the time is incurred and the materials are used. Cost of CCP products sold are primarily amounts paid to the utility companies to purchase product and transportation costs of delivering the product to the customer. Cost of services sold includes landfill fees and transportation charges to deliver the product to the landfill. Overhead charges incurred by a facility which generates both product and service revenues are allocated to cost of products sold and cost of services sold based on the percentage of revenue. Concentrations of Credit Risk Concentrations of credit risk in accounts receivable are limited due to the large number of customers comprising the Company's customer base throughout the United States. No single customer provides 10 percent or more of the Company's revenue. The Company performs ongoing credit evaluations of its customers, but does not require collateral to support customer accounts receivable. Historically, the Company has not had significant uncollectible accounts. New Product Development New product development costs consist of scientific research and development and market development expenditures. Expenditures of $1,796,032 for the year ended December 31, 1999 were made for research and development activities covering basic scientific research and application of scientific advances to the development of new and improved products and processes. Expenditures of $370,186 for the year ended December 31, 1999 were made for market development activities related to promising new and improved products and processes identified during research and development activities. The Company expenses all new product development costs when they are incurred. The Company incurred no new product development costs in the year ended December 31, 1998 or the period from October 14, 1997 to December 31, 1997. F-11 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Description of Business and Summary of Significant Accounting Policies (continued) Inventories The Company accounts for inventory balances using the lower of cost or market method on a first-in, first-out basis. Inventories consist of the following at December 31: 1999 1998 --------------------- --------------------- Raw materials $ 234,073 $ - Finished goods 3,821,352 387,258 --------------------- --------------------- $4,055,425 $ 387,258 ===================== ===================== Property, Plant and Equipment Property, plant and equipment acquired in the acquisitions described above were recorded at estimated fair value at the dates of the respective acquisitions. Property, plant and equipment acquired subsequent thereto, renewals and betterments are recorded at cost. Maintenance and repairs are expensed as incurred. Depreciation is provided over the estimated useful lives or lease terms, if less, using the straight-line method as follows: Land improvements 1 to 20 years Buildings and improvements 3 to 40 years Vehicles and other operating equipment 2 to 12 years Furniture, fixtures and office equipment 1 to 7 years Depreciation expense was approximately $4,996,000, $3,281,000 and $454,000 for the years ended December 31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997, respectively. Intangible Assets Intangible assets consist of goodwill, contracts, patents and licenses, and assembled workforce. Amortization expense was approximately $8,095,000, $5,860,000 and $455,000 for the years ended December 31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997, respectively. Amortization is provided over the estimated period of benefit, using the straight-line method as follows: Goodwill 20 to 25 years Contracts 10 to 20 years Patents and licenses 13 to 19 years Assembled workforce 8 years F-12 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Description of Business and Summary of Significant Accounting Policies (continued) Debt Issuance Costs Debt issuance costs relate to costs incurred with the issuance of the Senior Subordinated Notes and the Secured Credit Facility. These costs are being amortized to interest expense over the respective lives of the debt issues on a straight-line basis. Amortization expense was approximately $702,000, $464,000 and $0 for the years ended December 31, 1999 and 1998 and the period from October 14, 1997 to December 31, 1997, respectively. Income Taxes Deferred tax assets and liabilities are provided for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes. Fair Value of Financial Instruments Financial instruments included in various categories within the accompanying balance sheet consist of the following at December 31: 1999 1998 ---------------------------------------------------- Carrying Fair Carrying Fair Value Value Value Value --------------------------------------- ------------ Short-term assets $ 21,845,674 $ 21,845,674 $ 15,933,304 $ 15,933,304 Short-term liabilities 16,369,442 16,369,442 10,009,169 10,009,169 Long-term debt: Senior subordinated notes 100,000,000 85,000,000 100,000,000 99,000,000 Secured credit facility 33,500,000 33,500,000 10,000,000 10,000,000 Other liabilities 1,613,393 1,255,000 2,103,856 1,531,000 The carrying value of short-term assets and liabilities approximate fair value due to the short-term nature of the instruments. The carrying value of the secured credit facility approximates the fair value due to the variable interest rate features of the instrument. The fair value of the senior subordinated notes is based on quoted market prices. The fair value of other liabilities is based on the present value of future cash flows discounted at the Company's incremental borrowing rate. F-13 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Description of Business and Summary of Significant Accounting Policies (continued) Long-lived Assets Management evaluates the carrying value of all long-lived assets to determine recoverability when indicators of impairment are present based generally on an analysis of undiscounted cash flows compared to net book value. The Company also evaluates amortization periods of assets, including goodwill and other intangible assets, to determine if events or circumstances warrant revised estimates of useful lives. Management believes no material impairment in the value of long-lived assets exists at December 31, 1999. Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Intangible Assets Intangible assets consist of the following at December 31: 1999 1998 ------------------- ------------------ Goodwill $ 64,313,512 $ 44,018,454 Contracts 98,522,146 97,960,644 Patents and licenses 2,787,431 2,471,584 Assembled work force 2,700,233 2,700,233 ------------------- ------------------ 168,323,322 147,150,915 Less accumulated amortization (14,370,775) (6,315,275) ------------------- ------------------ $153,952,547 $140,835,640 =================== ================== 4. Long-term Debt Secured Credit Facility On March 4, 1998, the Company obtained a Secured Credit Facility provided by a syndicate of banks. The Secured Credit Facility enables the Company to obtain revolving secured loans from time to time to finance certain permitted acquisitions, to pay fees and expenses incurred in connection with certain acquisitions, to repay existing indebtedness, and for working capital and general corporate purposes. F-14 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Long-term Debt (continued) Secured Credit Facility (continued) At the Company's option, the revolving secured loans may be maintained as (a) Eurodollar Loans (as defined) which will bear interest at a rate equal to the quotient obtained by dividing LIBOR (as defined) by one minus the reserve requirement for such Eurodollar Loan, plus a margin of 250 basis points or (b) Base Rate Loans (as defined) which will have an interest rate equal to the higher of (i) the Bank of America prime rate and (ii) the federal funds rate plus 0.5%, plus a margin of 125 basis points. The Company will also pay certain fees with respect to any unused portion of the Secured Credit Facility. The Secured Credit Facility has a term of five and one-half years from the date of initial funding, is guaranteed by ISG and existing and future subsidiaries of the Company (the "Guarantors"), and is secured by a first priority perfected security interest in all of the capital stock of the Company and all of the capital stock of each of the Guarantors, as well as certain present and future assets and properties of the Company and any domestic subsidiaries. The Secured Credit Facility requires the Company to maintain a maximum leverage ratio, a minimum interest coverage ratio and minimum consolidated net worth and certain other financial and nonfinancial covenants, all as defined within the agreement. The Company was in compliance with all such covenants at December 31, 1999. On April 30, 1999, the Secured Credit Facility was increased to $50,000,000 from $35,000,000. At December 31, 1999, $33,500,000 was outstanding, with $16,500,000 unused and available, under the Secured Credit Facility. Senior Subordinated Notes On April 22, 1998, the Company completed a private placement of $100,000,000 aggregate principal amount of 10% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes") to finance the 1998 Acquisitions. Interest on the Senior Subordinated Notes is payable semi-annually on April 15 and October 15 of each year. The Senior Subordinated Notes will mature on April 15, 2008 and are guaranteed fully and unconditionally and on a joint and several basis by all of the Company's existing and future restricted subsidiaries, as defined in the indenture. The Senior Subordinated Notes are redeemable at the option of the Company at various times throughout the term of the Senior Subordinated Notes at redemption prices specified in the indenture. F-15 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Long-term Debt (continued) Senior Subordinated Notes (continued) Upon the occurrence of a change of control or an asset sale as defined in the indenture, the Company is required to make an offer to repurchase all or part of the Senior Subordinated Notes at prices specified in the indenture. The payment of principal, interest, and liquidated damages as defined in the indenture, if any, on the Senior Subordinated Notes is subordinated in right of payment to the prior payment of all senior indebtedness as defined in the indenture, whether outstanding on the date of the indenture or thereafter incurred. The indenture for the Company's Senior Subordinated Notes contains various limitations on the incurrence of additional indebtedness, the issuance of preferred stock, consolidations or mergers, sales of assets, and restricted payments, including dividends, for the Company and restricted subsidiaries as defined in the indenture. In connection with the private placement of the Senior Subordinated Notes, the Company entered into the Registration Rights Agreement pursuant to which the Company was required to file an exchange offer registration statement with the Securities and Exchange Commission which was declared effective by the Securities and Exchange Commission on September 4, 1998. The aggregate maturities of all long-term debt for the five years subsequent to December 31, 1999 are as follows: $0 in 2000-2002, $33,500,000 in 2003, $0 in 2004 and $100,000,000 thereafter. 5. Employee Benefit Plan Prior to April 1, 1998, eligible employees of the Company were able to participate in a 401(k) savings plan (the "JTM Plan") sponsored by an affiliate of the former owner of JTM. Under the terms of the JTM plan, the Company was required to match employee contributions, as defined, up to 3% of the employees' compensation. Expenses related to the JTM plan were approximately $59,000 for the period from January 1, 1998 to March 31, 1998 and $44,000 for the period from October 14, 1997 to December 31, 1997. Subsequent to April 1, 1998, eligible employees of the Company may participate in a 401(k) savings plan (the "ISG Plan") sponsored by ISG. The ISG Plan requires the Company to match employee contributions, as defined, up to 6% of the employees' compensation. Expenses related to the ISG Plan were approximately $458,000 and $265,000 for the year ended December 31, 1999 and the period from April 1, 1998 to December 31, 1998, respectively. F-16 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Income Taxes Income tax expense (benefit) consists of the following: Period from October 14 to Year ended December 31 December 31 1999 1998 1997 ---------------------------------------------------------- Current: U.S. Federal $ 2,150,860 $3,542,755 $ 459,626 State 726,268 703,678 69,116 ---------------------------------------------------------- 2,877,128 4,246,433 528,742 Deferred: U.S. Federal (1,847,270) (1,416,129) (240,135) State (382,269) (281,278) (36,110) ---------------------------------------------------------- (2,229,539) (1,697,407) (276,245) Total: U.S. Federal 303,590 2,126,626 219,491 State 343,999 422,400 33,006 ---------------------------------------------------------- $647,589 $2,549,026 $ 252,497 ========================================================== Reconciliation of income tax expense at the U.S. statutory rate to the Company's tax expense is as follows: Period from October 14 to Year ended December 31 December 31 1999 1998 1997 ------------------------------------------- 35% of income before income tax $ 99,812 $ 1,682,968 $ 181,023 Add: Non-deductible goodwill 901,551 527,208 42,702 Other, net (353,774) 338,850 28,772 ------------------------------------------- $ 647,589 $ 2,549,026 $ 252,497 =========================================== F-17 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Income Taxes (continued) The major components of the deferred tax assets and liabilities as of December 31 are as follows: 1999 1998 -------------------------------------- Deferred Tax Assets: Bad debt reserves $ 128,602 $ 66,572 Accruals not currently deductible for tax purposes 362,217 307,883 -------------------------------------- Total gross deferred tax assets 490,819 374,455 Deferred Tax Liabilities: Fixed asset basis differences 2,980,762 3,040,703 Intangible asset basis differences 36,274,790 38,363,602 Other 77,355 5,229 -------------------------------------- Total gross deferred tax liabilities 39,332,907 41,409,534 -------------------------------------- Net deferred tax liabilities $ (38,842,088) $(41,035,079) ====================================== 7. Commitments and Contingencies Lease Obligations Certain facilities and equipment are leased under non-cancelable operating leases, which generally have renewal terms, expiring in various years through 2006. Future minimum payments under leases with initial terms of one year or more consisted of the following at December 31, 1999: 2000 $ 5,006,179 2001 4,446,385 2002 3,418,469 2003 2,413,442 2004 1,203,922 Thereafter 595,361 ------------------- Total minimum lease payments $ 17,083,758 =================== Total rental expense was approximately $7,595,000 for the year ended December 31, 1999, $6,113,000 for the year ended December 31, 1998 and $1,259,000 for the period from October 14, 1997 to December 31, 1997. F-18 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Commitments and Contingencies (continued) Sale and Purchase Commitments The Company's contracts with its customers and suppliers require the Company to make minimum sales and purchases over ensuing years, approximated as follows: Minimum Minimum Sales Purchases ------------------------------------ 2000 $ 363,000 $ 6,387,000 2001 371,000 6,911,000 2002 120,000 7,173,000 2003 120,000 3,042,000 2004 120,000 1,842,000 Thereafter - 10,174,000 ------------------------------------ $ 1,094,000 $ 35,529,000 ==================================== Minimum sales and purchases under contracts with minimum requirements approximated $806,000 and $5,930,000, respectively, for the year ended December 31, 1999 and $800,000 and $4,523,000, respectively, for the year ended December 31, 1998 and $249,000 and $318,000, respectively, for the period from October 14, 1997 to December 31, 1997. Royalty Commitments In connection with a 1998 acquisition, the Company agreed to pay a minimum of $500,000 per year commencing in 1999 and continuing through 2003 for royalties related to the sale of certain Class C fly ash. The current portion of this liability is recorded in other current liabilities and the long-term portion is recorded in other long-term liabilities in the accompanying balance sheets. In 1999, the Company entered into a license agreement for certain technology for which the Company agreed to pay a minimum of $200,000 in 2001, $300,000 in 2002, $400,000 in 2003 and $500,000 per year thereafter for as long as the license agreement is effective. The payments are for future royalties on net sales and sub-license or royalty revenue received related to this license and will be expensed in the period the related revenue is recognized. F-19 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Commitments and Contingencies (continued) Legal Proceedings There are various legal proceedings against the Company arising in the normal course of business. While it is not currently possible to predict or determine the outcome of these proceedings, it is the opinion of management that the outcome will not have a material adverse effect on the Company's results of operations, financial position or liquidity. Employment Agreements The Company has employment agreements with certain of its employees. The terms of these agreements begin to expire in 2000 with annual extensions to be exercised by mutual consent of both parties. Without considering these extensions, these employment agreements provide for total annual base compensation of approximately $2,256,000 in 2000, $1,301,000 in 2001, $771,000 in 2002 and $134,000 in 2003. Medical Insurance Effective April 1, 1998, the Company established a self-funded medical insurance plan for its employees with stop-loss coverage for amounts in excess of $40,000 per individual and approximately $1,530,000 in the aggregate for the current plan period ended December 31, 1999. The Company has contracted with a third-party administrator to assist in the payment and administration of claims. Insurance claims are recognized as expenses when incurred, including an estimate of costs incurred but not reported at the balance sheet dates. In the accompanying balance sheets, $112,000 and $324,000 has been accrued as of December 31, 1999 and 1998, respectively, related to this liability. 8. Reportable Segments As discussed in note 2, the Company operates in two reportable segments: the CCP division and the building materials division. The CCP division consists primarily of three operating units that manage and market CCPs in North America. The building materials division consists of four legal entities, Best, Osborne, Terrazzo and Magna Wall. The Company's two reportable segments are managed separately based on fundamental differences in their operations. The Company evaluates performance based on profit or loss from operations before depreciation, amortization, income taxes and interest expense (EBITDA). The Company derives a majority of its revenues from CCP sales and the chief operating decision makers rely on EBITDA to assess the performance of the segments and make decisions about resources to be allocated to the segments. Accordingly, EBITDA is included in the information reported below. Certain expenses are maintained at the Company's corporate F-20 ISG Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 8. Reportable Segments (continued) headquarters and are not allocated to the segments. Such expenses primarily include interest expense, corporate overhead costs, certain non-recurring gains and losses and intangible asset amortization. Inter-segment sales are generally accounted for at cost and are eliminated in consolidation. The building materials division includes financial data for Best from January 1 through December 31, 1999, Osborne and Terrazzo for the period from October 26 to December 31, 1999 and Magna Wall for the month of December 1999. Amounts included in the "Other" column include financial information for the Company's corporate, R&D and other administrative business units. The Company did not report segment information prior to the year ended December 31, 1999, as it operated in only one significant business segment prior to 1999. Information about reportable segments, and reconciliation of such information to the consolidated totals as of and for the year ended December 31, 1999, is as follows: Building Consolidated CCP Materials Other Total ------------ -------------- ------------- --------------- Revenue $134,631,711 $20,821,159 $ 752,402 $156,205,272 EBITDA 32,096,154 2,811,482 (8,139,384) 26,768,252 Total Assets 49,929,505 6,683,098 163,849,908 220,462,511 Expenditures for PP&E 7,520,689 350,610 919,571 8,790,870 The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Segment assets reflect those specifically attributable to the individual segments and include accounts receivable, inventory and property, plant and equipment. All other assets are included in the "Other" column. 9. Related Party Transactions The Company's parent, ISG, files a consolidated income tax return including the Company and all of its subsidiaries. As the Company records all tax payments and receipts, a payable to ISG for $643,983 has been recorded to reflect amounts owed to ISG relating to ISG's interest deductions included in the 1998 consolidated tax return filed in 1999. F-21 10. Subsequent Event On March 2, 2000, the Company acquired directly and indirectly through ISG Manufactured Products, Inc., a newly formed wholly owned subsidiary of the Company, 100% of the partnership interests in Don's Building Supply L.L.P. ("Don's") for a purchase price of $6,000,000 in cash. The Company expects the purchase price to increase or decrease within sixty days of the closing date based on 1999 EBITDA, as defined, and working capital as of February 29, 2000. Don's is engaged in the retail and wholesale distribution of construction materials to residential and commercial contractors. F-22 Report of Independent Accountants --------------------------------- To the Board of Directors and Shareholders of JTM Industries, Inc: In our opinion, the consolidated statements of loss and accumulated deficit and cash flows for the period from January 1, 1997 to October 13, 1997 (appearing on pages F-23 through F-31 in this Form 10-K) present fairly, in all material respects, the results of operations and cash flows of JTM Industries, Inc. and its subsidiary for the period from January 1, 1997 to October 13, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of JTM Industries, Inc. for any period subsequent to October 13, 1997. PRICEWATERHOUSECOOPERS LLP February 16, 1998 Charlotte, North Carolina F-23 JTM INDUSTRIES, INC. CONSOLIDATED STATEMENT OF LOSS AND ACCUMULATED DEFICIT ($000's omitted) Period from January 1 to October 13, 1997 ------------------- Revenues: Product revenues........................................... $ 25,613 Service revenues........................................... 25,682 ------------------- 51,295 Cost of product revenues, excluding depreciation........... 20,702 Cost of service revenues, excluding depreciation........... 19,999 Depreciation and amortization.............................. 5,279 Selling, general and administrative expenses................ 3,633 ------------------- Income from operations..................................... 1,682 Intercompany interest expense.............................. 4,160 Interest expense............................................ - ------------------- (2,478) Income tax expense......................................... (612) ------------------- Net loss................................................... (3,090) Accumulated deficit - beginning of period.................. (3,966) ------------------- Accumulated deficit - end of period....................... $ (7,056) =================== The accompanying notes are an integral part of these financial statements. F-24 JTM INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS ($000's omitted) Period from January 1 to October 13, 1997 ------------------ Net Cash Provided By (Used In): Operating activities......................................... $ 521 Investing activities......................................... (681) ------------------ Net cash used by operating and investing activities.......... (160) Non-cash activities.......................................... (797) ------------------ (957) Intercompany notes payable - beginning of period............. (48,450) ------------------ Intercompany notes payable - end of period................... $ (49,407) ================== Operating activities: Net loss..................................................... $ (3,090) Items not affecting cash: Loss on disposal of fixed assets........................... 305 Depreciation and amortization.............................. 5,279 Deferred income taxes...................................... 150 Cash provided by (used in) financing working capital: Trade and other accounts receivable........................ (1,898) Other current assets....................................... 87 Accounts payable and accrued liabilities................... (312) ------------------ Net cash provided by operating activities.................... $ 521 ================== Investing activities: Purchase of fixed assets..................................... $ (681) Proceeds from sale of fixed and other assets................. - ------------------ Net cash used in investing activities........................ $ (681) ================== Supplemental cash flow information: Noncash transaction: Transfers of fixed assets from parent................... $ 107 Accounts payable related to fixed assets................ - Cash paid (received) for: Interest................................................ $ 4,160 Income taxes to (from) parent........................... $ 462 The accompanying notes are an integral part of these financial statements. F-25 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($000's Omitted) 1. Basis of Presentation of Financial Statements These financial statements reflect the consolidated financial position and results of operations of JTM Industries, Inc. and its subsidiary, KBK Enterprises, Inc. ("the Company") which until October 13, 1997 was an indirect wholly owned subsidiary of Laidlaw Inc. The Company is involved in materials management services to coal combustion by-products (CCPs) producing utilities and marketing products derived from CCPs, principally in the United States. Interest expense associated with intercompany financing by the Company's former parent, Laidlaw, Inc. ("Laidlaw"), has been charged to the Company based on prime rate plus 2% on the average outstanding balance. The Company is included in the consolidated tax return of Laidlaw. Income taxes have been calculated using applicable income tax rates on a separate return basis. 2. Summary of Significant Accounting Policies a) Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States and all figures are represented in U.S. dollars, as the Company's operating assets are located in the United States. The preparation of financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect reported amounts of income and expenses and disclosure of contingencies. Future events could alter such estimates in the near term. b) Consolidation The consolidated financial statements include the accounts of JTM Industries, Inc. and KBK Enterprises, Inc., its subsidiary company. All significant intercompany transactions are eliminated. F-26 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ($000's Omitted) 2. Summary of Significant Accounting Policies (Continued) c) Fixed assets Fixed assets are recorded at cost. Depreciation and amortization of other property and equipment is provided substantially on a straight-line basis over their estimated useful lives which are as follows: Buildings....................... 20 to 40 years Vehicles and other.............. 3 to 15 years The company periodically reviews the carrying values of its fixed assets to determine whether such values are recoverable. Any resulting write-downs are charged against income. Depreciation expense amounts to $1,191 for the period from January 1, 1997 to October 13, 1997. d) Other assets Goodwill is amortized on a straight-line basis over forty years. The amount of any impairment is charged against income. During the period from January 1, 1997 to October 13, 1997, in connection with the planned sale of the Company, Laidlaw wrote down the assets of the Company to fair value which resulted in a charge against goodwill of $3,300. e) Income taxes Deferred income taxes are provided for all significant temporary differences arising from recognizing certain expenses and certain closure accruals in different periods for income tax and financial reporting purposes. f) Revenue Material revenues are earned by marketing products created by coal-fired power generation and related industrial materials to consumers of building materials and construction related products. Generally, material is obtained from coal-fired electric utilities and is immediately delivered to the customer, eliminating the need to inventory products. Therefore, no inventory exists at October 13, 1997. Material revenues are recognized when the material is delivered to the customer. F-27 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ($000's Omitted) 2. Summary of Significant Accounting Policies (Continued) f) Revenue (continued) Service revenues are earned under long-term contracts to dispose of residual materials created by coal-fired power generation. Typical contract terms are from five to fifteen years. Service revenues are recognized concurrent with the removal of the material and are typically based on the number of tons of material removed at an established price per ton. Costs of product revenues primarily include amounts paid to the utilities to purchase the product and transportation charges related to delivering the product to the customer. Cost of service revenues primarily include landfill fees and transportation charges related to delivering the product to the landfill. Overhead charges incurred by a facility which generates both product and service revenues are allocated to cost of product revenues and cost of service revenues based on the percentage of each type of revenue to total revenues. Cost of product revenues and cost of service revenues are recognized concurrent with the recognition of the related revenue. g) Concentration of Credit Risk Concentrations of credit risk in accounts receivable are limited, due to the large number of customers comprising the Company's customer base throughout the United Sates. The Company performs ongoing credit evaluations of its customers, but does not require collateral to support customer accounts receivable. The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers, historical trends, and other relevant information. 3. Benefit Plans Eligible employees of the Company may participate in a 401(k) savings plan sponsored by Laidlaw. The 401(k) plan requires the Company to match employee contributions as defined, up to 3% of the employees' compensation. Expenses related to the 401(k) plan were approximately $294 for the period from January 1, 1997 to October 13, 1997. F-28 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ($000's Omitted) 4. Lease Commitments Rental expense incurred under operating leases amounted to $4,334 for the period from January 1, 1997 to October 13, 1997. Rentals payable under operating leases for premises and equipment as of October 13, 1997 are as follows: 1998........................................................... $ 4,518 1999........................................................... 3,264 2000........................................................... 1,553 2001........................................................... 1,440 2002........................................................... 753 Thereafter..................................................... 1,600 --------------- $ 13,128 =============== 5. Legal proceedings The Company has various outstanding legal matters arising from the normal course of business. Although the final outcome cannot be predicted with certainty, the Company believes the ultimate disposition of the matters will not have a material impact on the Company's financial position. 6. Related party transactions Included in the financial statements are related party transactions between the Company and Laidlaw. These related party transactions are as follows: Period from January 1 to October 13, 1997 ---------------------- Management fees................... $ 491 Administrative fees............... $ 249 Intercompany sales................ $ 2,814 Allocated insurance expense....... $ 515 Interest expense.................. $ 4,160 F-29 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ($000's Omitted) 6. Related party transactions (Continued) Management and administrative fees have been allocated to the Company based upon the Company's share of Laidlaw's consolidated revenue. Management and administrative fees are charged by Laidlaw to each of its operating groups in order to recover its general and administrative costs. The services provided by Laidlaw include treasury, taxation and insurance. The allocated charges may not be indicative of the expenses the Company would have incurred if Laidlaw had not provided the services. On May 9, 1997, all of the outstanding shares of the Company were transferred from LESI to Laidlaw Transportation, Inc., a direct, wholly owned subsidiary of Laidlaw. In preparation for the disposal of the Company, certain closure liabilities amounting to $1,650 were transferred to Laidlaw, net of the related deferred tax asset of $578. Additionally, a long-term receivable in the amount of $1,008, net of an allowance of $963, was transferred to Laidlaw. A deferred tax asset of $337 related to the allowance was also transferred to Laidlaw. 7. Income taxes The components of income tax expense for the period from January 1, 1997 to October 13, 1997 are as follows: Current federal provision (benefit).............. $ 421 Current state provision.......................... 41 Deferred federal provision....................... 150 --------------------- Total income tax provision (benefit)............. $ 612 ===================== F-30 JTM INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ($000's Omitted) 7. Income taxes (continued) Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Components of deferred tax liabilities and assets at October 13, 1997 are as follows: Deferred tax assets: Allowance for bad debts.......................... $ 142 Closure reserve.................................. 97 Other accrued liabilities........................ 91 Deferred tax liabilities: Fixed assets..................................... (1) -------------------- Net deferred tax assets............................ $ 329 ==================== The difference between the federal statutory tax rate and the effective tax rate on continuing operations for the period from January 1, 1997 to October 13, 1997 are as follows: Federal statutory tax rate.............................. 35.0% Goodwill amortization not deductible for tax purposes... (57.7%) State income taxes...................................... (1.1%) Other items - net....................................... (0.9%) ---------------- Effective tax rate...................................... (24.7%) ================ 8. Accrued closure costs The Company, in the normal course of its business, expends funds for remediation of certain property. The Company does not expect these expenditures to have a materially adverse effect on its financial condition or results of operations, since its business is based upon compliance with environmental laws and regulations and its services are priced accordingly. The method by which these costs are accrued involves estimating the total site restoration costs, determining the total volume of materials the site will hold, and accruing the site restoration costs concurrently with the filling of the site. The total anticipated site restoration costs are approximately $1,900. 9. Subsequent Event On October 14, 1997, Laidlaw, Inc. sold all of the outstanding shares of the Company for $5,817,000 in cash, a $29,000,000 senior bridge note and a $17,500,000 9% Junior Subordinated Promissory Note due 2005. Exhibits **2.1 Plan of Merger for January 1, 1999 Merger. **2.2 Plan of Merger for July 31, 1999 Merger. *3.1 Articles of Incorporation of JTM Industries, Inc. *3.1a Articles of Amendment of Articles of Incorporation of JTM Industries, Inc. *3.2 By Laws of JTM Industries, Inc. *3.3 Articles of Incorporation of KBK Enterprises, Inc. *3.4 By Laws of KBK Enterprises, Inc. *3.5 Articles of Incorporation of Pozzolanic Resources, Inc. *3.6 By Laws of Pozzolanic Resources, Inc. *3.7 Articles of Incorporation of Power Plant Aggregates of Iowa, Inc. *3.8 By Laws of Power Plant Aggregates of Iowa, Inc. *3.9 Articles of Incorporation of Michigan Ash Sales Company, d.b.a. U.S. Ash Company. *3.10 By Laws of Michigan Ash Sales Company, d.b.a. U.S. Ash Company. *3.11 Articles of Incorporation of Flo Fil Co., Inc. *3.12 By Laws of Flo Fil Co., Inc. *3.13 Articles of Incorporation of U.S. Stabilization, Inc. *3.14 By Laws of U.S. Stabilization, Inc. *3.15 Articles of Incorporation of Fly Ash Products, Inc. *3.16 By Laws of Fly Ash Products, Inc. **3.17 Articles of Incorporation of ISG Resources, Inc. **3.18 Bylaws of ISG Resources, Inc. **3.19 Articles of Merger for ISG Resources, Inc. (1/1/99 Merger) **3.20 Articles of Merger filed in Texas. (1/1/99 Merger) **3.21 Articles of Merger filed in Pennsylvania. (1/1/99 Merger) **3.22 Articles of Merger for Pozzolanic Resources, Inc. (1/1/99 Merger) **3.23 Articles of Merger for St. Helens Investments, Inc. (1/1/99 Merger) **3.24 Articles of Merger for Pozzolanic Northwest, Inc. (1/1/99 Merger) **3.25 Articles of Merger for Pozzolanic Northwest Bulk Carriers, Inc. (1/1/99 Merger) **3.26 Articles of Merger filed in Iowa. (1/1/99 Merger) **3.27 Articles of Merger filed in Michigan. (1/1/99 Merger) **3.28 Articles of Merger filed in Arkansas. (1/1/99 Merger) **3.29 Articles of Merger for ISG Resources, Inc. (1/1/99 Merger) **3.30 Articles of Merger filed in Montana. (7/1/99 Merger) **3.31 Articles of Merger filed in Ohio. (7/1/99 Merger) *4.1 Indenture, dated as of April 22, 1998, by and among JTM Industries, Inc., the Subsidiary Guarantors and U.S. Bank National Association, as Trustee. *5.1 Opinion and consent of Morgan, Lewis & Bockius LLP as to the legality of the securities being registered. *10.1 Purchase Agreement dated as of April 17, 1998 by and among JTM Industries, Inc., the Subsidiary Guarantors and NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp. *10.2 Registration Rights Agreement dated as of April 22, 1998, by and among JTM Industries, Inc., the Subsidiary Guarantors and NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp. *10.3 Purchase Agreement dated as of February 27, 1998 by and among JTM Industries, Inc., Pozzolanic Resources, Inc. and Gerald Peabody, Penelope Peabody and Kokan Company Limited. *10.4 Stock Purchase Agreement from Power Plant Aggregates of Iowa, Inc. *10.5 Purchase Agreement dated as of March 1998 between JTM Industries, Inc. and Jack Wirt. *10.6 Purchase Agreement dated as of March 27, 1998, between JTM Industries, Inc., Donald A. Thomas, Phyllis S. Thomas and Donald W. Birge. *10.7 Secured Credit Facility dated March 4, 1998 among JTM Industries, Inc. and a syndicate of banks with NationsBank, N.A., as administrative agent, and Canadian Imperial Bank of Commerce, as documentation agent. *10.8 First Amendment dated as of May 29, 1998 to the Credit Agreement dated March 4, 1998 among JTM Industries, Inc. and a syndicate of banks with NationsBank, N.A. as administrative agent, and Canadian Imperial Bank of Commerce, as documentation agent. **10.9 Stock Purchase Agreement dated January 1999, among ISG Resources, Inc., James M. Isaac and Tommy C. Isaac. **10.10 Purchase Agreement dated October 26, 1999, between ISG Resources, Inc. and Mary Ellen Dentis, Trustee. **10.11 Purchase Agreement dated November 1999, among ISG Resources, Inc. and Bill E. Nichols, John W. Nichols and Debbie Dickie **10.12 Stock Purchase Agreement between William Leslie & ISG Resources, Inc. **10.13 Partnership Regulations for Don's Building Supply, LLP. **10.14 Employment Agreement between JTM Industries, Inc. (predecessor to ISG Resources, Inc.) and Clinton W. Pike, Sr. **10.14(a) Amendment to Mr. Pike's Employment Agreement. **10.14(b) Second Amendment to Mr. Pike's Employment Agreement. **10.15 Employment Agreement between ISG Resources, Inc. and R Steve Creamer. **10.16 Employment Agreement between ISG Resources, Inc. and Raul A. Deju. **10.17 Employment Agreement between ISG Resources, Inc. and Jean I. Everest, II. **10.18 Employment Agreement between ISG Resources, Inc. and Brett A. Hickman. **10.19 Stock Purchase Agreement dated October 1999 between ISG Resources, Inc. and WEBE Enterprises, Ltd. **10.20 Stock Purchase Agreement dated June 2, 1999 between Koch Carbon, Inc. and ISG Resources, Inc. **12.1 Statement re Computation of Ratio of Earnings to Fixed Charges. *21.1 Subsidiaries of ISG Resources, Inc. **21.2 Subsidiaries of the Registrant (As of March 30, 2000) *24 Powers of Attorney. *25.1 Statement of Eligibility of U.S. Bank National Association, as Trustee, on Form T-1. **27.1 Financial Data Schedule. *99.1 Form of Letter of Transmittal respecting the exchange of the 10% Senior Subordinated Notes due 2008 which have been registered under the United States Securities Act of 1933 for 10% Senior Subordinated Notes due 2008. *99.2 Form of Notice of Guaranteed Delivery. ----------- * Previously Filed. ** Filed herewith. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ISG Resources, Inc. (Registrant) Date: March 30, 2000 By: /s/ R Steve Creamer -------------------------------- R Steve Creamer, Chairman and Chief Executive Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ R Steve Creamer Chairman and Chief Executive Officer March 30,2000 - - ------------------ R Steve Creamer /s/ Raul A Deju President and Chief Operating Officer March 30,2000 - - --------------- Raul A. Deju /s/ J.I. Everest, II Chief Financial Officer, Treasurer and March 30,2000 - - --------------------- Assistant Secretary J.I. Everest, II /s/ Joseph M. Silvestri Director March 30, 2000 - - ----------------------- Joseph M. Silvestri EX-2.1 2 PLAN OF MERGER FOR JANUARY 1, 1999 PLAN OF MERGER This Plan of Merger dated November __, 1998 (the "Plan") was duly adopted and approved by the board of directors and recommended to the shareholders of each of the constituent corporations identified in Article I below, pursuant to the corporate laws of each such constituent corporation's state of incorporation. RECITALS WHEREAS, the respective boards of directors of each of the constituent corporations identified in Article I below (the "Constituent Corporations") deem it advisable and in the best interest of each such corporation and its respective shareholders for each Constituent Corporation to be merged with and into ISG Resources, Inc., a Utah corporation ("ISG Resources"), in the manner contemplated herein. WHEREAS, the respective boards of directors of each Constituent Corporation have adopted resolutions approving this Plan and have recommended that this Plan and the merger contemplated by this Plan be approved and adopted by the shareholders of the respective Constituent Corporations. PLAN NOW, THEREFORE, in consideration of the premises and the agreements contained herein, the Constituent Corporations agree as follows: ARTICLE I The name of each Constituent Corporation to the merger and its respective state of incorporation is set forth below: ========================================== ================================ Name of Constituent Corporation State of Incorporation ------------------------------------------ -------------------------------- ISG Resources, Inc. Utah ------------------------------------------ -------------------------------- JTM Industries, Inc. Texas ------------------------------------------ -------------------------------- KBK Enterprises, Inc. Pennsylvania ------------------------------------------ -------------------------------- Pozzolanic Resources, Inc. Washington ------------------------------------------ -------------------------------- St. Helens Investments, Inc. Washington ----------------------------------------- -------------------------------- Pozzolanic Northwest, Inc. Washington ------------------------------------------ -------------------------------- Pozzolanic Northwest Bulk Carriers, Inc. Washington ------------------------------------------ -------------------------------- Power Plant Aggregates of Iowa, Inc. Iowa ------------------------------------------ -------------------------------- Midwest Fly Ash & Materials, Inc. Iowa ------------------------------------------ -------------------------------- Livestock Waste Management, Inc. Iowa ------------------------------------------ -------------------------------- Michigan Ash Sales Company Michigan ------------------------------------------ -------------------------------- U.S. Stabilization, Inc. Michigan ------------------------------------------ -------------------------------- FLO FIL Co., Inc. Michigan ------------------------------------------ -------------------------------- Fly Ash Products, Inc. Arkansas ========================================== ================================ ARTICLE II The designation and number of outstanding shares of each class and series of stock for each Constituent Corporation is set forth in the following table. Each class and series identified voted on the Plan separately as a class. ========================== ================================== ================== Number of Shares Corporation Designation of Shares Outstanding - - -------------------------- ---------------------------------- ------------------ ISG Resources, Inc. Common Stock 100 - - -------------------------- ---------------------------------- ------------------ JTM Industries, Inc. Common Stock 100 - - -------------------------- ---------------------------------- ------------------ KBK Enterprises, Inc. Common Stock 450 - - -------------------------- ---------------------------------- ------------------ Pozzolanic Resources, Inc. Class A Common Stock 200 Special Dividend Class C. Stock 2,900 Special Dividend Class D Stock 5,800 - - -------------------------- ---------------------------------- ------------------ St. Helens Investments, Class A Voting Common Stock 100 Inc. Class B Nonvoting Common Stock 3,000 Special Dividend Class C Stock 775,000 - - -------------------------- ---------------------------------- ------------------ Pozzolanic Northwest, Inc. Voting Common Stock 200 Nonvoting Common Stock 300 Preferred Capital A Stock 2,900 Preferred Capital B Stock 5,800 - - -------------------------- ---------------------------------- ------------------ Pozzolanic Northwest Bulk Class A Voting Common Stock 500 Carriers, Inc. Class B Regular Dividend Stock 60,000 - - -------------------------- ---------------------------------- ------------------ Power Plant Aggregates of Common Stock 230 Iowa, Inc. - - -------------------------- ---------------------------------- ------------------ Midwest Fly Ash & Common Stock 100 Materials, Inc. - - -------------------------- ---------------------------------- ------------------ Livestock Waste Common Stock 1 Management, Inc. - - -------------------------- ---------------------------------- ------------------ Michigan Ash Sales Company Common Stock 1,000 - - -------------------------- ---------------------------------- ------------------ U.S. Stabilization, Inc. Common Stock 1,000 - - -------------------------- ---------------------------------- ------------------ FLO FIL Co,. Inc. Common Stock 1,000 - - -------------------------- ---------------------------------- ------------------ Fly Ash Products, Inc. Common Stock 900 ========================== ================================== ================== ARTICLE III The Constituent Corporations shall be merged into a single corporation by merging into and with ISG Resources, the surviving corporation, which shall survive the merger, pursuant to the provisions of the Utah Revised Business Corporation Act. Upon such merger the separate corporate existence of each Constituent Corporation other than ISG Resources shall cease and ISG Resources shall become the owner without transfer, of all rights and property of the Constituent Corporations, and ISG Resources shall become subject to all the debts and liabilities of the Constituent Corporations in the same manner as if it had incurred them. ARTICLE IV The name of the surviving corporation shall be "ISG Resources, Inc." On the effective date of the merger, which shall be January 1, 1999 (the "Effective Date"), the Articles of Incorporation of ISG Resources as in effect on the Effective Date, shall become the Articles of Incorporation of the surviving corporation. On the Effective Date, the By-laws of ISG Resources, as in effect on the Effective Date, shall become the By-laws of the surviving corporation. ARTICLE V Each of the Constituent Corporations, including ISG Resources, is a direct or indirect wholly owned subsidiary of Industrial Services Group, Inc., a Delaware corporation ("Industrial Services"), and the merger is being consummated as a part of a reorganization plan for Industrial Services. Industrial Services has waived any right to receive shares of the surviving corporation in substitution or exchange for shares of each of the Constituent Corporations owned directly or indirectly by Industrial Services. Accordingly, the surviving corporation shall not issue its common stock in substitution or exchange for any shares of common stock of any Constituent Corporation. The shares of each Constituent Corporation, except for the shares of ISG Resources that were owned by Industrial Services prior to the merger, shall be cancelled on the Effective Date. ARTICLE VI This Plan shall be submitted to the shareholders of each of the Constituent Corporations for their approval in the manner provided by the applicable laws of the state of incorporation for each such Constituent Corporation. After approval by the shareholders of each Constituent Corporation, Articles of Merger, together with a copy of this Plan, shall be filed as required by the applicable laws of the state of incorporation of each of the Constituent Corporations. ARTICLE VII The merger may be abandoned at any time (before or after this Plan shall have been approved by the shareholders of the Constituent Corporations) prior to the Effective Date by any Constituent Corporation in the manner determined by such corporation's board of directors. ARTICLE VIII The articles of incorporation of the corporation that is the surviving corporation in the merger are attached to this Plan of Merger and made a part hereof. IN WITNESS WHEREOF, the undersigned corporations have executed this Agreement and Plan of Merger as of the date specified above. ISG RESOURCES, INC., KBK ENTERPRISES, INC., a Utah corporation a Pennsylvania corporation By: By: ------------------------------- ----------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer JTM INDUSTRIES, INC., POZZOLANIC RESOURCES, INC., a Texas corporation a Washington corporation By: By: -------------------------------- ----------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer ST. HELENS INVESTMENTS, INC., MIDWEST FLYASH & MATERIALS, a Washington corporation INC., an Iowa corporation By: ------------------------------ By: R Steve Creamer ----------------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer POZZOLANIC NORTHWEST, INC., LIVESTOCK WASTE MANAGEMENT, a Washington corporation INC., an Iowa corporation By: ------------------------------- By: R Steve Creamer ----------------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer POZZOLANIC NORTHWEST BULK MICHIGAN ASH SALES COMPANY CARRIERS, INC., a Michigan corporation a Washington corporation By: By: ---------------------------- ------------------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer POZZOLANIC INT'L FISK, INC., U.S. STABILIZATION, INC., a Washington corporation a Michigan corporation By: By: ---------------------------------- ----------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer POWER PLANT AGGREGATES OF FLO FIL CO., INC., IOWA, INC., a Michigan corporation an Iowa corporation By: By: ----------------------------- ------------------------------------ R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer FLY ASH PRODUCTS, INC., an Arkansas corporation By: ---------------------------- R Steve Creamer Chief Executive Officer EX-2.2 3 PLAN OF MERGER FOR JULY 31,1999 AGREEMENT AND PLAN OF MERGER OF MINERAL SPECIALTIES, INC. AND IRVINE FLY ASH, INC. WITH AND INTO ISG RESOURCES, INC. This Agreement and Plan of Merger is dated July _____, 1999, by and among ISG Resources, Inc., a Utah corporation ("ISG"), Mineral Specialties, Inc., a Montana corporation ("Mineral"), and Irvine Fly Ash, Inc., an Ohio corporation ("Irvine") (Mineral and Irvine) may in the alternative be referenced individually as the "Subsidiary" or collectively as the "Subsidiaries") and is effective on July 31, 1999 (the "Effective Date"). ISG is a corporation duly organized and existing under the laws of the state of Utah. Mineral is a corporation duly organized and existing under the laws of the state of Montana, having 630 common shares, par value of $10.00 per share, issued and outstanding. Irvine is a corporation duly organized and existing under the laws of the state of Ohio, having 500 common shares, par value $1.00 per share, issued and outstanding. WHEREAS, ISG owns each issued and outstanding share of the stock of each Subsidiary; and WHEREAS, the Board of Directors of ISG deems it advisable, for the general welfare and advantage of ISG and each Subsidiary, that each Subsidiary merge with and into ISG; NOW THEREFORE, the parties agree, in accordance with the provisions of the Revised Business Corporation Act of the state of Utah, the Montana Business Corporation Act and the Ohio General Corporation Law, that each Subsidiary shall be, and hereby is, merged with and into ISG (the "Merger"), and that the terms and conditions of the Merger and the mode of carrying the Merger into effect and the manner of canceling the shares of each of the Subsidiaries, shall be as set forth. ARTICLE I. Corporate Existence of Surviving Corporation Except as otherwise specifically set forth in this agreement, the identity, existence, purposes, powers, franchises, rights and immunities of ISG shall continue unaffected and unimpaired by the Merger, and the corporate identity, existence, purposes, powers, franchises, rights and immunities of each Subsidiary shall be merged into ISG and ISG shall become the "Surviving Corporation." The organization of each Subsidiary, except insofar as it may be continued by statute, shall cease on the Effective Date. ARTICLE II. Articles and Bylaws of Surviving Corporation The Articles of Incorporation and bylaws of ISG, as they shall exist on the Effective Date, shall be the Articles of Incorporation and bylaws of the Surviving Corporation until they shall be amended or repealed. ARTICLE III. Directors and Officers of Surviving Corporation The directors of ISG as of the Effective Date shall be the directors of the Surviving Corporation until their successors are elected and qualified. The officers of ISG as of the Effective Date shall be the officers of the Surviving Corporation until their successors are appointed by the board of directors of the Surviving Corporation. ARTICLE IV. Manner of Converting Shares of the Subsidiary Corporations into Shares of the Surviving Corporation ISG waives any right to receive shares of common stock of the Surviving Corporation in substitution or exchange for shares of common stock of each Subsidiary owned by ISG. Accordingly, the Surviving Corporation shall not issue any shares in substitution or exchange for any shares of common stock of each Subsidiary owned by ISG on the effective date of this agreement and plan. The shares of each Subsidiary held by ISG shall be cancelled on the Effective Date. ARTICLE V. Miscellaneous Provisions A. In accordance with the provisions of Section 16-10a-1104 of the Revised Business Corporation Act of the state of Utah and applicable foreign statutes, ISG shall not submit this agreement and plan to the respective shareholders of the Constituent Corporations. The President of ISG shall sign, acknowledge, file and record this agreement and plan, in accordance with the Revised Business Corporation Act of the state of Utah, the Business Corporation Act of the state of Montana and the General Corporation Law of the state of Ohio. This agreement and plan shall take effect and be deemed and taken to be the agreement and act of Merger of ISG and each Subsidiary and the Merger shall be and become effective immediately upon the start of business on the Effective Date, every shareholder having duly waived the mailing requirement of Section 16-10a-1104(5) of the Business Corporation Act of the state of Utah. B. Anything in this agreement or elsewhere to the contrary notwithstanding, this agreement may be abandoned at any time prior to its filing and recording by the resolution under the authority of the board of directors of ISG. C. If at any time the Surviving Corporation shall deem or be advised that any further assignments or assurances in law or things are necessary or desirable to vest or to perfect or confirm, of record or otherwise, in the Surviving Corporation the title to any property of the Subsidiaries acquired or to be acquired by reason of or as a result of the Merger, each Subsidiary and its proper officers and directors shall and will execute and deliver any and all such proper deeds, assignments and assurances in law and do all things necessary or proper so to vest, perfect or confirm title to such property in the Surviving Corporation and otherwise to carry out the purposes of this agreement. D. The Surviving Corporation agrees that it may be served with process in the states of Montana and Ohio in any proceeding for enforcement of any obligation of a Subsidiary or for enforcement of any obligation of the Surviving Corporation arising from the Merger, and appoints the respective Secretaries of State of the states of Montana and Ohio as its agent to accept service of process in any such suit or other proceeding. The address to which a copy of such process shall be mailed by said Secretary of State is 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111. E. The Surviving Corporation shall pay all the expenses of carrying this agreement into effect and of accomplishing the Merger. F. For the convenience of the parties and to facilitate the filing or recording of this agreement, any number of counterparts may be executed, and each such executed counterpart shall be deemed to be an original instrument. The boards of directors of ISG and the Subsidiaries have duly caused this agreement to be signed by their President. ISG RESOURCES, INC. By: ----------------------------------- Brett A. Hickman, Senior Vice President and Secretary IRVINE FLY ASH, INC. MINERAL SPECIALTIES, INC. By: By: ------------------------------------ -------------------------- Brett A. Hickman, Senior Vice President Brett A. Hickman, Senior Vice and Secretary President and Secretary EX-3.(I).17 4 ARTICLES OF INCORPORATION OF ISG RESOURCES,INC. ARTICLES OF INCORPORATION OF ISG RESOURCES, INC. The undersigned natural person of the age of 18 years or older, acting as incorporator of a corporation under the Utah Revised Business Corporation Act (as it may be amended from time to time, the "Act"), adopts the following Articles of Incorporation for such corporation: ARTICLE I NAME The name of this corporation is "ISG Resources, Inc." (the "Corporation"). ARTICLE II PURPOSE The Corporation is organized to engage in any lawful act or activity for which corporations may be organized under the Act. ARTICLE III AUTHORIZED CAPITAL 3.1 The total number of shares the Corporation is authorized to issue is 10,000,000, no par value, which shall be divided into two classes as follows: 2,000,000 Preferred Shares and 8,000,000 Common Shares. 3.2 The preferences, limitations and relative rights of each class of shares (to the extent established hereby), and the express grant of authority to the board of directors to amend these articles of incorporation to divide the Preferred Shares into series, to establish and modify the preferences, limitations and relative rights of the Preferred Shares, and to otherwise make changes affecting the capitalization of the Corporation, subject to certain limitations and procedures and as permitted by Section 16-10a-602 of the Act, are as follows: A. Common Shares. 1. Each outstanding Common Share shall be entitled to one vote on each matter to be voted on by the shareholders of the Corporation. 2. Subject to any rights that may be conferred upon any Preferred Shares, upon dissolution the holders of Common Shares then outstanding shall be entitled to receive the net assets of the Corporation. Such net assets shall be divided among and paid to the holders of Common Shares, on a pro-rata basis, according to the number of Common Shares held by them. 3. Subject to any rights that may be conferred upon any shares of Preferred Shares, dividends may be paid on the outstanding Common Shares if, as and when declared by the board of directors, out of funds legally available therefor. 4. All rights accruing to the outstanding shares of the Corporation not expressly provided for to the contrary herein or in the Corporation's bylaws or in any amendment hereto or thereto shall be vested in the Common Shares. B. Preferred Shares. The board of directors, without shareholder action, may amend the Corporation's articles of incorporation, pursuant to the authority granted to the board of directors by Section 16-10a-1002(1)(e) of the Act, to do any of the following: 1. designate and determine, in whole or in part, the preferences, limitations and relative rights, within the limits set forth in section 16-10a-601 of the Act, of the Preferred Shares before the issuance of any Preferred Shares; 2. create one or more series of Preferred Shares, fix the number of shares of each such series (within the total number of authorized Preferred Shares available for designation as a part of such series), and designate and determine, in whole or in part, the preferences, limitations, and relative rights of each series of Preferred Shares, within the limits set forth in Section 16-10a-601 of the Act, all before the issuance of any shares of such series; 3. alter or revoke the preferences, limitations and relative rights granted to or imposed upon the Preferred Shares (before the issuance of any Preferred Shares), or upon any wholly unissued series of Preferred Shares; or 4. increase or decrease the number of shares constituting any series of Preferred Shares, the number of shares of which was originally fixed by the board of directors, either before or after the issuance of shares of the series, provided that the number may not be decreased below the number of shares of such series then outstanding, or increased above the total number of authorized Preferred Shares available for designation as a part of such series. ARTICLE IV REGISTERED OFFICE AND AGENT The street address of the initial registered office of the Corporation is 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111. The name of the Corporation's initial registered agent at that address is Brett A. Hickman. ARTICLE V INITIAL BOARD OF DIRECTORS The Corporation's board of directors shall consist of at least two persons, with the precise number to be specified in accordance with the bylaws of the Corporation. The names and addresses of the initial directors, who shall serve until the first annual meeting of the shareholders or until their successors are elected and have qualified are: Joseph M. Silvestri 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 R Steve Creamer 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 ARTICLE VI LIMITATION OF LIABILITY OF DIRECTORS To the fullest extent permitted by the Act or any other applicable law as now in effect or as may hereafter be amended, a director of this Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for any action taken or any failure to take any action as a director. No amendment to or repeal of this Article VI shall apply to or have any effect on the liability or alleged liability of any director of this Corporation for or with respect to any action or failure to act by such director occurring prior to such amendment or repeal. ARTICLE VII INDEMNIFICATION 7.1 The Corporation shall indemnify and advance expenses to the directors and officers of the Corporation to the fullest extent permitted by applicable law. Without limiting the generality of the foregoing, the Corporation shall indemnify and advance expenses to the directors and officers of the Corporation in all cases in which a corporation may indemnify and advance expenses to a director or officer under sections 16-10a-902 and 16-10a-904, respectively, of the Act. The Corporation shall consider and act expeditiously as possible upon any and all requests by a director or officer for indemnification or advancement of expenses. 7.2 The board of directors may indemnify and advance expenses to any employee or agent of the Corporation who is not a director or officer of the Corporation to any extent consistent with public policy, as determined by the general or specific actions of the board of directors. 7.3 By action of the board of directors, notwithstanding any interest of the directors in such action, the Corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary or agent of the Corporation, against any liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary or agent, whether or not the Corporation would have the power to indemnify such person under the applicable provisions of the Act. 7.4 No amendment to or repeal of this Article VII shall affect the right of any of the Corporation's directors, officers, employees or agents to indemnification for any liability or alleged liability for or with respect to any action or failure to take any action by such person occurring prior to such amendment or repeal. ARTICLE VIII INCORPORATOR The name and address of the incorporator is: William R. Gray 201 South Main, Suite 1800 Salt Lake City, UT 84111 DATED this ____ day of July, 1998. ------------------------------ William R. Gray, Incorporator ACKNOWLEDGEMENT OF REGISTERED AGENT The undersigned hereby accepts and acknowledges appointment as initial registered agent of the Corporation named above. Brett A. Hickman EX-3.(II).18 5 BYLAWS OF ISG RESOURCES, INC. BYLAWS OF ISG RESOURCES, INC. Adopted by Resolution dated September 30, 1998 ARTICLE I OFFICES 1.1 Business Offices. The principal office of the corporation shall be located in Salt Lake City, Utah. The corporation may have such other offices, either within or without Utah, as the board of directors may designate or as the business of the corporation may require from time to time. 1.2 Registered Office. The registered office of the corporation required to be kept by the Utah Revised Business Corporation Act (as it may be amended from time to time, the Act) shall be located within the State of Utah and may be, but need not be, identical with the principal office. The address of the registered office may be changed from time to time. ARTICLE II SHAREHOLDERS 2.1 Annual Meeting. The annual meeting of the shareholders shall be held on such date and time as shall be fixed by the board of directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the state of Utah, such meeting shall be held on the next succeeding business day. 2.2 Special Meetings. Special meetings of the shareholders, for an purpose or purposes described in the meeting notice, may be called by the president or by the board of directors, and shall be called by the president at the written request of the holders of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the meeting. 2.3 Place of Meeting. The board of directors may designate any place, either within or without the State of Utah, as the place of meeting for any annual or any special meeting of the shareholders. If no designation is made by the directors, the place of meeting shall be the principal office of the corporation in the state of Utah. 2.4 Notice of Meeting. (a) Content and Mailings Requirements. Written notice stating the date, time and place of each annual or special shareholder meeting shall be delivered no fewer than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, the board of directors, or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting and to any other shareholder entitled by the Act or the articles of incorporation to receive notice of the meeting. Notice of special shareholder meetings shall include a description of the purpose or purposes for which the meeting is called. (b) Effective Date. Written notice shall be deemed to be effective at the earlier of: (1) when mailed, if addressed to the shareholder's address shown in the corporation's current record of shareholders; (2) when received; (3) five days after it is mailed; or (4) on the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee. (c) Effect of Adjournment. If any shareholder meeting is adjourned to a different date, time or place, notice need not be given of the new date, time and place, if the new date, time and place is announced at the meeting before adjournment. But if a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of this section to those persons who are shareholders as of the new record date. 2.5 Waiver of Notice. (a) Written Waiver. A shareholder may waive any notice required by the Act, the articles of incorporation or the bylaws, by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice) for inclusion in the minutes or filing with the corporate records. (b) Attendance at Meetings. A shareholder's attendance at a meeting: (1) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting because of lack of notice or effective notice; and (2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. 2.6 Record Date. (a) Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any distribution, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a date as the record date. Such record date shall not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is so fixed by the board for the determination of shareholders entitled to notice of, or to vote at, a meeting of shareholders, the record date for determination of such shareholders shall be at the close of business on the day before the first notice is delivered to shareholders. If no record date is fixed by the board for the determination of shareholders entitled to receive a distribution, the record date shall be the date the board authorizes the distribution. If no record date is fixed by the board for the determination of shareholders entitled to take action without a meeting, the record date shall be the date the first shareholder signs a consent. (b) Effect of Adjournment. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 2.7 Shareholder List. After fixing a record date for a shareholders' meeting, the corporation shall prepare a list of the names of its shareholders entitled to be given notice of the meeting. The list must be arranged by voting group and within each voting group by class or series of shares, must be alphabetical within each class or series, and must show the address of, and the number of shares held by, each shareholder. The shareholder list must be available for inspection by any shareholder, beginning on the earlier of ten days before the meeting for which the list was prepared or two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting and any adjournment thereof. The list shall be available at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. 2.8 Shareholder Quorum and Voting Requirements. (a) Quorum. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or the Act provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. (b) Voting Groups. If the articles of incorporation or the Act provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group. If the articles of incorporation or the Act provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter. (c) Shareholder Action. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or the Act require a greater number of affirmative votes. Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. 2.9 Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy which is executed in writing by the shareholder or which is executed by his or her duly authorized attorney-in-act. Such proxy shall be filed with the secretary of the corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution unless otherwise provided in the proxy. 2.10 Voting of Shares. Unless otherwise provided in the articles of incorporation or by applicable law, each outstanding share, regardless of class, is entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. Except as provided by specific court order, no shares of the corporation owned, directly or indirectly, by a second corporation, domestic or foreign, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting if a majority of the shares entitled to vote for the election of directors of such second corporation are held by the corporation. The prior sentence shall not limit the power of the corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. 2.11 Meetings by Telecommunications. Any or all shareholders may participate in an annual or special meeting by, or conduct the meeting through the use of, any means of communication by which all shareholders participating may hear each other during the meeting. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting. 2.12 Action Without a Meeting. (a) Written Consent. Any action which may be taken at a meeting of the shareholders may be taken without a meeting and without prior notice if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote with respect to the subject matter thereof were present and voted. Action taken under this section has the same effect as action taken at a meeting of shareholders and may be described as such in any document. (b) Post-Consent Notice. Unless the written consents of all shareholders entitled to vote have been obtained, notice of any shareholder approval without a meeting shall be given at least ten days before the consummation of the action authorized by such approval to (i) those shareholders entitled to vote who have not consented in writing, and (ii) those shareholders not entitled to vote and to whom the Act requires that notice of the proposed action be given. Any such notice must contain or be accompanied by the same material that is required under the Act to be sent in a notice of meeting at which the proposed action would have been submitted to the shareholders for action. (c) Effective Date and Revocation of Consents. No action taken pursuant to this section shall be effective unless all written consents on which the corporation relies for the taking of an action are received by the corporation within a 60-day period and not revoked. Such action is effective as of the date the last written consent necessary to effect the action is received, unless all of the written consents specify a later date as the effective date of the action. If the corporation has received written consents signed by all shareholders entitled to vote with respect to the action, the effective date of the action may be any date that is specified in all the written consents as the effective date of the action. Any such writing may be received by the corporation by electronically transmitted facsimile or other form of communication providing the corporation with a complete copy thereof, including a copy of the signatures thereto. Any shareholder giving a written consent pursuant to this section may revoke the consent by a signed writing describing the action and stating that the consent is revoked, provided that such writing is received by the corporation prior to the effective date of the action. (d) Unanimous Consent for Election of Directors. Notwithstanding subsection (a) of this section, directors may not be elected by written consent unless such consent is unanimous by all shares entitled to vote for the election of directors. ARTICLE III BOARD OF DIRECTORS 3.1 General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. 3.2 Number, Tenure and Qualifications. The authorized number of directors shall be not less than two nor more than eleven. The current number of directors shall be within the limits specified above, as determined (or as amended from time-to-time) by resolution adopted by the directors. Each director shall hold office until the next annual meeting of shareholders or until the director's earlier death, resignation or removal. However, if a director's term expires, the director shall continue to serve until his or her successor shall have been elected and qualified, or until there is a decrease in the number of directors. Directors do not need to be residents of Utah or shareholders of the corporation. 3.3 Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders, for the purpose of appointing officers and transacting such other business as may come before the meeting. The board of directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. 3.4 Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any director. The person authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors. 3.5 Notice of Special Meetings. Notice of the date, time and place of any special director meeting shall be given at least two days previously thereto either orally or in writing. Oral notice shall be effective when communicated in a comprehensive manner. Written notice is effective as to each director at the earlier of: (a) when received; (b) five days after deposited in the United States mail, addressed to the director's address shown in the records of the corporation; or (c) the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the director. Any director may waive notice of any meeting before or after the date and time of the meeting stated in the notice. Except as provided in the next sentence, the waiver must be in writing and signed by the director entitled to the notice. A director's attendance at or participation in a meeting shall constitute a waiver of notice of such meeting, unless the director at the beginning of the meeting, or promptly upon his arrival, objects to holding the meeting or transacting business at the meeting because of lack of or defective notice, and does not thereafter vote for or assent to action taken at the meeting. Unless required by the articles of incorporation, neither the business to be transacted at, nor the purpose of, any special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. 3.6 Quorum and Voting. (a) Quorum. A majority of the number of directors prescribed by resolution adopted pursuant to section 3.2 of these bylaws, or if no number is prescribed, the number in office immediately before the meeting begins, shall constitute a quorum for the transaction of business at any meeting of the board of directors, unless the articles of incorporation require a greater number. (b) Voting. The act of the majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the board of directors unless the articles of incorporation require a greater percentage. (c) Presumption of Assent. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless: (1) the director objects at the beginning of the meeting, or promptly upon his or her arrival, to holding or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting; (2) the director contemporaneously requests that his or her dissent or abstention as to any specific action be entered in the minutes of the meeting; or (3) the director causes written notice of his or her dissent or abstention as to any specific action be received by the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken. 3.7 Meetings by Telecommunications. Any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. 3.8 Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if all the directors consent to such action in writing. Action taken by written consent is effective when the last director signs the consent, unless, prior to such time, any director has revoked a consent by a signed writing received by the corporation, or unless the consent specifies a different effective date. A signed consent has the effect of an action taken at a meeting of directors and may be described as such in any document. 3.9 Resignation. A director may resign at any time by giving a written notice of resignation to the corporation. Such a resignation is effective when the notice is received by the corporation unless the notice specifies a later effective date, and the acceptance of such recognition shall not be necessary to make it effective. 3.10 Removal. The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause unless the articles of incorporation provide that directors may only be removed with cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director. A director may be removed only if the number of votes cast to remove him or her exceeds the number of votes cast not to remove him or her. 3.11 Vacancies. Unless the articles of incorporation provide otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the shareholders may fill the vacancy. During such time that the shareholders fail or are unable to fill such vacancies then and until the shareholders act: (1) the board of directors may fill the vacancy; or (2) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. If the vacant office was held by a director elected by a voting group of shareholders: (1) if one or more directors are elected by the same voting group, only such directors are entitled to vote to fill the vacancy if it is filled by the directors; and (2) only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. 3.12 Compensation. By resolution of the board of directors, each director may be paid his or her expenses, if any, of attendance at each meeting of the board of directors and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 3.13 Committees. The board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee must have two or more members, who serve at the pleasure of the board of directors. Those sections of this Article III which govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and their members. ARTICLE IV OFFICERS 4.1 Number. The corporation shall have the officers designated from time to time by the board of directors. Each of the corporation's officers shall be appointed by the board of directors. If specifically authorized by the board of directors, an officer may appoint one or more officers or assistant officers. The same individual may simultaneously hold more than one office in the corporation. 4.2 Appointment and Term of Office. The officers of the corporation shall be appointed by the board of directors for a term as determined by the board of directors. The designation of a specified term does not grant to the officer any contract rights, and the board can remove the officer at any time prior to the termination of such term. If no term is specified, the officer shall hold office until he or she resigns, dies or until he or she is removed in the manner provided in section 4.3 of these bylaws. 4.3 Removal. Any officer or agent may be removed by the board of directors at any time, with or without cause. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Appointment of an officer or agent shall not of itself create contract rights. 4.4 Resignation. Any officer may resign at any time, subject to any rights or obligation under any existing contracts between the officer and the corporation, by giving notice to the president or board of directors. An officer's resignation shall be effective when received by the corporation, unless the notice specifies a later effective date, and the acceptance of such resignation shall not be necessary to make it effective. 4.5 Authority and Duties of Officers. The following provisions of this section 4.5 describe in general terms the duties of the officers described in subsections 4.5(a) through (e) if designated by the board of directors. This section shall not require the corporation to have any of the officers described below. In addition to the duties set forth below, each officer of the corporation shall exercise such powers and perform such duties as may be required by law and/or the board of directors. (a) Chief Executive Officer The chief executive officer shall, subject to the control of the board of directors, in general supervise and control all of the business and affairs of the corporation. Unless there is a chairman of the board, the chief executive officer shall, when present, preside at all meetings of the shareholders and of the board of directors. The chief executive officer may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. In general, the chief executive officer shall perform all duties incident to the office of the chief executive officer and such other duties as may be prescribed by the board of directors from time to time. (b) President and Chief Operating Officer. The president and chief operating officer shall, subject to the direction of the chief executive officer and the board of directors, in general supervise and control all of the internal, day-to-day business and affairs of the corporation. The president and chief operating officer shall see that all orders of the chief executive officer and resolutions of the board of directors are carried into effect as they pertain to the day-to-day business and operations of the corporation, and, in addition, shall have all of the powers and perform all of the duties generally appertaining to the office of the president of the corporation. The president and chief operating officer shall make annual reports and submit the same to the chief executive officer and board of directors and to the shareholders at their annual meeting, showing the condition and affairs of the corporation. He or she shall from time to time make such recommendations to the chief executive officer, the board of directors, and such other persons as he or she thinks proper and shall bring before the chief executive officer and the board of directors such information as may be required or appropriate, relating to the business and affairs of the corporation. (c) Vice-President. If appointed, the vice-president (or if there is more than one, each vice-president) shall assist the chief executive officer and the president and shall perform such duties as may be assigned to him or her by the chief executive officer, the president or by the board of directors. If appointed, in the absence of the president or in the event of his death, inability or refusal to act, the vice-president (or in the event there is more than one vice-president, the vice-presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. (d) Treasurer and Chief Financial Officer. The treasurer and chief financial officer shall: (i) have charge and custody of and be responsible for all funds and securities of the corporation; (ii) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies, or other depositaries as shall be selected by the board of directors; and (iii) in general, perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned by the chief executive officer, the president or by the board of directors. If required by the board of directors, the treasurer and chief financial officer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the board of directors shall determine. (e) Secretary. The secretary shall: (i) keep the minutes of the proceedings of the shareholders, the board of directors and any committees of the board in one or more books provided for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (iii) be custodian of the corporate records; (iv) when requested or required, authenticate any records of the corporation; (v) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (vi) sign with the president, or a vice-president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; (vii) have general charge of the stock transfer books of the corporation; and (viii) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned by the chief executive officer, the chief operating officer, the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to the supervision of the secretary. 4.6 Salaries. The salaries of the officers shall be fixed from time to time by the board of directors. ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES 5.1 Indemnification of Directors and Officers. The corporation shall indemnify and advance expenses to the directors and officers of the corporation to the fullest extent permitted by applicable law. Without limiting the generality of the foregoing, the corporation shall indemnify and advance expenses to the directors and officers of the corporation in all cases in which a corporation may indemnify and advance expenses to a director and officer under sections 16-10a-902 and 16-10a-904, respectively, of the Act. The corporation shall consider and act expeditiously as possible upon any and all requests by a director or officer for indemnification or advancement of expenses. 5.2 Indemnification of Agents and Employees Who Are Not Directors. The board of directors may indemnify and advance expenses to any employee or agent of the corporation who is not a director or officer of the corporation to any extent consistent with public policy, as determined by the general or specific actions of the board of directors. 5.3 Insurance. By action of the board of directors, notwithstanding any interest of the directors in such action, the corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary or agent of the corporation, against any liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary or agent, whether or not the corporation would have the power to indemnify such person under the applicable provisions of the Act. ARTICLE VI SHARES 6.1 Issuance of Shares. The corporation may issue the number of shares of each class or series of shares authorized by the articles of incorporation. The issuance or sale by the corporation of any of its authorized shares of any class shall be made only upon authorization by the board of directors, unless otherwise provided by statute. The board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts or arrangements for services to be performed, or other securities of the corporation. Shares shall be issued for such consideration as shall be fixed from time to time by the board of directors. 6.2 Certificates for Shares. (a) Content. Shares may but need not be represented by certificates in such form as determined by the board of directors and stating on their face, at a minimum, the name of the corporation and that it is formed under the laws of the state of Utah, the name of the person to whom issued, and the number and class of shares and the designation of the series, if any, the certificate represents. Such certificates shall be signed (either manually or by facsimile) by the president or a vice-president and by the secretary or an assistant secretary and may be sealed with a corporate seal or a facsimile thereof. Each certificate for shares shall be consecutively numbered or otherwise identified. (b) Legend as to Class or Series. If the corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series (and the authority of the board of directors to determine variations for future series) must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge. (c) Shareholder List. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. (d) Transferring Shares. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed, or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe. 6.3 Shares Without Certificates. The board of directors may authorize the issuance of some or all of the shares of any or all of its classes or series without certificates. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates under section 6.2 of these bylaws. 6.4 Registration of the Transfer of Shares. Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation. In order to register a transfer, the record owner shall surrender the shares to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand in the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. ARTICLE VII MISCELLANEOUS 7.1 Inspection of Records by Shareholders and Directors. A shareholder or director of a corporation is entitled to inspect and copy, during regular business hours at the corporation's principal office, any of the records of the corporation required to be maintained by the corporation under the Act, if such person gives the corporation written notice of the demand at least five business days before the date on which such a person wishes to inspect and copy. The scope of such inspection right shall be as provided under the Act. 7.2 Corporate Seal. The board of directors may provide a corporate seal which may be circular in form and have inscribed thereon any designation including the name of the corporation, the state of incorporation, and the words "Corporate Seal." 7.3 Amendments. The corporation's board of directors may amend or repeal the corporation's bylaws at any time unless: (a) the articles of incorporation or the Act reserve this power exclusively to the shareholders in whole or part; or (b) the shareholders, in adopting, amending or repealing a particular bylaw, provide expressly that the board of directors may not amend or repeal that bylaw; or (c) the bylaw either establishes, amends or deletes a greater shareholder quorum or voting requirement. Any amendment which changes the voting or quorum requirement for the board must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever are greater. 7.4 Fiscal Year. The fiscal year of the corporation shall be established by the board of directors. [End of Bylaws] EX-3.(I).19 6 ARTICLES OF MERGER FOR ISG RESOURCES, INC. JANUARY ARTICLES OF MERGER OF ISG RESOURCES, INC. Pursuant to the provisions of section 16-10a-1105 of the Utah Revised Business Corporation Act, ISG Resources, Inc., a Utah corporation (the "Corporation"), the surviving corporation in the merger, hereby adopts and files these Articles of Merger. FIRST: A true and correct copy of the Plan of Merger (the "Plan") is attached hereto and made a part hereof. Pursuant to the Plan, each constituent corporation, will merge with and into the Corporation. SECOND: The name and state of incorporation of each corporation which is a party to this merger, the designation and number of outstanding shares of each such corporation, and the number of shares voted for and against the Plan, are set forth in the following table:
- - --------------------------------------- -------------------- --------------------- ----------------- ----------------- Designation And Shares Voted Shares Voted Number of For the Against the Plan State of Outstanding Shares Plan Name of Corporation Incorporation ISG Resources, Inc. Utah 100 Common Shares 100 0 JTM Industries, Inc. Texas 100 shares of 100 0 Common Stock KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0 Common Stock Pozzolanic Resources, Inc. Washington 200 shares of 200 0 Class A Common Stock 2,900 shares of 2,900 0 Special Dividend Class C Stock 5,800 shares of 5,800 0 Special Dividend Class D Stock St. Helens Investments, Inc. Washington 100 shares of 100 0 Class A Voting Common Stock 3,000 shares of 3,000 0 Class B Non-Voting Common Stock 775,000 shares of 775,000 0 Special Dividend Class C Stock Pozzolanic Northwest, Inc. Washington 200 shares of 200 0 Voting Common Stock 300 shares of 300 0 Non-Voting Common Stock 2,900 shares of 2,900 0 Preferred Capital A Stock 5,800 shares of 5,800 0 Preferred Capital B Stock Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0 Inc. Voting Class A Common Stock 60,000 shares of 60,000 0 Class B Regular Dividend Stock Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0 Common Stock Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0 Common Stock Livestock Waste Management, Inc. Iowa 1 share of Common 1 0 Stock Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0 Common Stock U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0 Common Stock FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0 Common Stock Fly Ash Products, Inc. Arkansas 900 shares of 900 0 Common Stock - - --------------------------------------- -------------------- --------------------- ----------------- ---------
THIRD: The shareholders of each of the constituent corporations in the merger unanimously approved the Plan. The designation and number of outstanding shares of each constituent corporation, and the number of shares voted for and against the plan by class, is set forth in the table in paragraph Second above. FOURTH: The effective date of the merger shall be January 1, 1999. IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on this ___ day of November, 1998. ISG RESOURCES, INC. By:_________________________________ R Steve Creamer Chief Executive Officer EX-3.(I).20 7 ARTICLES OF MERGER FILED IN TEXAS (1/1/99 MERGER) CERTIFICATE OF MERGER FOR THE MERGER OF JTM INDUSTRIES, INC. (a Texas corporation) WITH AND INTO ISG RESOURCES, INC. (a Utah corporation) Pursuant to the provisions of section 5.04 of the Texas Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), the surviving corporation in the merger, hereby delivers these Articles of Merger for filing on behalf of each or the undersigned corporations. FIRST: A true and correct copy of the Plan of Merger (the "Plan") is attached hereto and made a part hereof. Pursuant to the Plan, each constituent corporation, will merge with and into the Corporation. SECOND: The name and state of incorporation of each corporation which is a party to this merger, the designation and number of outstanding shares of each such corporation, and the number of shares voted for and against the Plan, are set forth in the following table:
- - --------------------------------------- -------------------- --------------------- ----------------- ----------------- Designation And Shares Voted Shares Voted State of Number of For the Against the Plan Name of Corporation Incorporation Outstanding Shares Plan ISG Resources, Inc. Utah 100 shares of 100 0 Common Stock JTM Industries, Inc. Texas 100 shares of 100 0 Common Stock KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0 Common Stock Pozzolanic Resources, Inc. Washington 200 shares of 200 0 Class A Common Stock 2,900 shares of 2,900 0 Special Dividend Class C Stock 5,800 shares of 5,800 0 Special Dividend Class D Stock St. Helens Investments, Inc. Washington 100 shares of 100 0 Class A Voting Common Stock 3,000 shares of 3,000 0 Class B Non-Voting Common Stock 775,000 shares of 775,000 0 Special Dividend Class C Stock Pozzolanic Northwest, Inc. Washington 200 shares of 200 0 Voting Common Stock 300 shares of 300 0 Non-Voting Common Stock 2,900 shares of 2,900 0 Preferred Capital A Stock 5,800 shares of 5,800 0 Preferred Capital B Stock Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0 Inc. Voting Class A Common Stock 60,000 shares of 60,000 0 Class B Regular Dividend Stock Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0 Common Stock Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0 Common Stock Livestock Waste Management, Inc. Iowa 1 share of Common 1 0 Stock Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0 Common Stock U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0 Common Stock FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0 Common Stock Fly Ash Products, Inc. Arkansas 900 shares of 900 0 Common Stock - - --------------------------------------- -------------------- --------------------- ----------------- -----------------
THIRD: The Plan has been authorized by all action required by the Act and by its constituent documents for each domestic constituent corporation and, for each foreign corporation, by all action required by the laws under which it was incorporated and its constituent documents. FOURTH: The shareholders of each of the constituent corporations in the merger unanimously approved the Plan. The designation and number of outstanding shares of each constituent corporation, and the number of shares voted for and against the plan by class, is set forth in the table in paragraph Second above. The shareholders of each domestic corporation in the merger approved the Plan by their unanimous written consent given in accordance with section 9.10(1) of the Act. FIFTH: The effective date of the merger shall be January 1, 1999. SIXTH: The Plan will be furnished by the surviving corporation, on request and without cost, to any shareholder of any constituent corporation. SEVENTH: ISG Resources, Inc., a Utah corporation, the surviving corporation, hereby claims responsibility for any and all fees and franchise taxes owed by JTM Industries, Inc. to the State of Texas. IN WITNESS WHEREOF, the undersigned corporations have executed these Articles of Merger on this ___ day of November, 1998. ISG RESOURCES, INC., POZZOLANIC NORTHWEST, INC., a Utah corporation a Washington corporation By: By: ------------------------------ -------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer JTM INDUSTRIES, INC., POZZOLANIC NORTHWEST BULK a Texas corporation CARRIERS, INC., a Washington corporation By: ---------------------------- By: R Steve Creamer -------------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer KBK ENTERPRISES, INC., POZZOLANIC INT'L FISK, INC., a Pennsylvania corporation a Washington corporation By: By: --------------------------- ------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer POZZOLANIC RESOURCES, INC., POWER PLANT AGGREGATES OF a Washington corporation IOWA, INC., an Iowa corporation By: -------------------------- By: R Steve Creamer ------------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer ST. HELENS INVESTMENTS, INC., MIDWEST FLYASH & MATERIALS, a Washington corporation INC., an Iowa corporation By: ----------------------------- By: R Steve Creamer --------------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer LIVESTOCK WASTE MANAGEMENT, INC., an Iowa corporation By: --------------------------- R Steve Creamer Chief Executive Officer MICHIGAN ASH SALES COMPANY a Michigan corporation By: ---------------------------- R Steve Creamer Chief Executive Officer U.S. STABILIZATION, INC., a Michigan corporation By: -------------------------- R Steve Creamer Chief Executive Officer FLO FIL CO., INC., a Michigan corporation By: -------------------------- R Steve Creamer Chief Executive Officer FLY ASH PRODUCTS, INC., an Arkansas corporation By: ------------------------- R Steve Creamer Chief Executive Officer EX-3.(I).21 8 ARTICLES OF MERGER FILED IN PENNSYLVANIA (1/1/99) ARTICLES FOR THE MERGER OF KBK ENTERPRISES, INC. WITH AND INTO ISG RESOURCES, INC. Pursuant to Section 1926 of the Pennsylvania Business Corporation Law, the undersigned corporations hereby adopt and file the following articles of merger for the merger of KBK Enterprises, Inc., a Pennsylvania company, and the other corporations that have executed these Articles of Merger, with and into ISG Resources, Inc., a Utah corporation: FIRST: The surviving corporation in the merger is ISG Resources, Inc., a corporation organized under the laws of the State of Utah (the "Surviving Corporation"). The Surviving Corporation is qualified to do business in the State of Pennsylvania and its registered office in Pennsylvania is CT Corporation System in Philadelphia County. SECOND: The name and address of the registered office of each domestic business corporation and qualified foreign business corporation, which are parties to the merger, are: KBK Enterprises, Inc., a Pennsylvania corporation 1635 Market Street Philadelphia, PA 19103 Entity Number 765271 JTM Industries, Inc., a Texas corporation qualified to do business in Pennsylvania 1635 Market Street Philadelphia, PA 19103 THIRD: The Plan of Merger (the "Plan") is to be effective on January 1, 1999. FOURTH: The Plan was adopted by the domestic corporation that is a party to the merger by the unanimous vote of its stockholders in accordance with the requirements of the Pennsylvania Business Corporation Law. The Plan was authorized, adopted or approved, as the case may be, by each of the foreign corporations in accordance with the laws of the jurisdiction in which it is incorporated. FIFTH: The complete Plan is attached to these Articles of Merger and is made a part hereof. IN WITNESS WHEREOF, the undersigned corporations have adopted these Articles of Merger on November ____, 1998. ISG RESOURCES, INC., POZZOLANIC INT'L FISK, INC., a Utah corporation a Washington corporation By: By: ------------------------ ---------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer JTM INDUSTRIES, INC., ST. HELENS INVESTMENTS, INC., a Texas corporation a Washington corporation By: By: -------------------------- ---------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer KBK ENTERPRISES, INC., POZZOLANIC NORTHWEST, INC., a Pennsylvania corporation a Washington corporation By: By: -------------------------- ---------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer POZZOLANIC RESOURCES, INC., POZZOLANIC NORTHWEST BULK a Washington corporation CARRIERS, INC., a Washington corporation By: -------------------------- By: R Steve Creamer ---------------------- Chief Executive Officer R Steve Creamer Chief Executive Officer POWER PLANT AGGREGATES OF FLO FIL CO., INC., IOWA, INC., a Michigan corporation an Iowa corporation By: By: ---------------------------- -------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer MIDWEST FLYASH & MATERIALS, FLY ASH PRODUCTS, INC., INC., an Arkansas corporation an Iowa corporation By: By: ------------------------------- --------------------------- R Steve Creamer R Steve Creamer Chief Executive Officer Chief Executive Officer LIVESTOCK WASTE MANAGEMENT, INC., an Iowa corporation By: --------------------------- R Steve Creamer Chief Executive Officer MICHIGAN ASH SALES COMPANY a Michigan corporation By: -------------------------- R Steve Creamer Chief Executive Officer U.S. STABILIZATION, INC., a Michigan corporation By: ------------------------------ R Steve Creamer Chief Executive Officer EX-3.(I).22 9 ARTICLES OF MERGER FOR POZZOLANIC RESOURCES, INC. ARTICLES OF MERGER FOR POZZOLANIC RESOURCES, INC., (a Washington corporation) AND ISG RESOURCES, INC., (a Utah corporation) Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), hereby adopts and files the following Articles of Merger as the surviving corporation to the merger of Pozzolanic Resources, Inc., a Washington corporation, with and into the Corporation: FIRST: The Plan of Merger (the "Plan") is attached hereto and is made a part hereof. SECOND: The Plan was duly approved by the shareholders of each foreign constituent corporation in the merger pursuant to the laws of each such corporation's state of incorporation and each domestic constituent corporation has complied with sections 23B.11.010 through 23B.11.040 of the Act. THIRD: The shareholders of each domestic constituent corporation approved the Plan by their unanimous written consent in accordance with section 23B.07.040(1)(a)(i) of the Act. DATED as of November _____, 1998. ISG RESOURCES, INC., a Utah corporation By: -------------------------- R Steve Creamer Chief Executive Officer (An officer's title) EX-3.(I).23 10 ARTICLES OF MERGER FOR ST. HELENS INVESTMENTS ARTICLES OF MERGER FOR ST. HELENS INVESTMENTS, INC. (a Washington corporation) AND ISG RESOURCES, INC., (a Utah corporation) Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), hereby adopts and files the following Articles of Merger as the surviving corporation to the merger of St. Helens Investments, Inc. dba Pozzolanic International, a Washington corporation, with and into the Corporation: FIRST: The Plan of Merger (the "Plan") is attached hereto and is made a part hereof. SECOND: The Plan was duly approved by the shareholders of each foreign constituent corporation in the merger pursuant to the laws of each such corporation's state of incorporation and each domestic constituent corporation has complied with sections 23B.11.010 through 23B.11.040. THIRD: The shareholders of the Corporation and each domestic constituent corporation approved the Plan by their unanimous written consent in accordance with section 23B.07.040(1)(a)(i) of the Act. DATED as of November _____, 1998. ISG RESOURCES, INC., a Utah corporation By: ----------------------- R Steve Creamer Chief Executive Officer (An officer's title) EX-3.(I).24 11 ARTICLES OF MERGER FOR POZZOLANIC NORTHWEST, INC. ARTICLES OF MERGER FOR POZZOLANIC NORTHWEST, INC., (a Washington corporation) AND ISG RESOURCES, INC., (a Utah corporation) Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), hereby adopts and files the following Articles of Merger as the surviving corporation to the merger of Pozzolanic Northwest, Inc., a Washington corporation, with and into the Corporation: FIRST: The Plan of Merger (the "Plan") is attached hereto and is made a part hereof. SECOND: The Plan was duly approved by the shareholders of each foreign constituent corporation in the merger pursuant to the laws of each such corporation's state of incorporation and each domestic constituent corporation has complied with sections 23B.11.010 through 23B.11.040 of the Act and has duly approved the Plan pursuant to section 23B.11.030 of the Act. THIRD: The shareholders of each domestic constituent corporation approved the Plan by their unanimous written consent in accordance with section 23B.07.040(1)(a)(i) of the Act. DATED as of November _____, 1998. ISG RESOURCES, INC., a Utah corporation By: ----------------------------- R Steve Creamer Chief Executive Officer (An officer's title) EX-3.(I).25 12 ARTICLES FOR MERGER FOR POZZOLANIC NORTHWEST BULK ARTICLES OF MERGER FOR POZZOLANIC NORTHWEST BULK CARRIERS, INC., (a Washington corporation) AND ISG RESOURCES, INC., (a Utah corporation) Pursuant to the provisions of sections 23B.11.070 and 23B.11.050 of the Washington Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), hereby adopts and files the following Articles of Merger as the surviving corporation to the merger of Pozzolanic Northwest Bulk Carriers, Inc., a Washington corporation, with and into the Corporation: FIRST: The Plan of Merger (the "Plan") is attached hereto and is made a part hereof. SECOND: The Plan was duly approved by the shareholders of each foreign constituent corporation in the merger pursuant to the laws of each such corporation's state of incorporation and each domestic constituent corporation has complied with sections 23B.11.010 through 23B.11.040 of the Act and has duly approved the Plan pursuant to section 23B.11.030 of the Act. THIRD: The shareholders of each domestic constituent corporation approved the Plan by their unanimous written consent in accordance with section 23B.07.040(1)(a)(i) of the Act. DATED as of November _____, 1998. ISG RESOURCES, INC., a Utah corporation By: ------------------------ R Steve Creamer Chief Executive Officer (An officer's title) EX-3.(I).26 13 ARTICLES OF MERGER FILED IN IOWA (1/1/99 MERGER) ARTICLES OF MERGER FOR THE MERGER OF POWER PLANT AGGREGATES OF IOWA, INC. MIDWEST FLY ASH & MATERIALS, INC. AND LIVESTOCK WASTE MANAGEMENT, INC. WITH AND INTO ISG RESOURCES, INC. Pursuant to the provisions of section 490.1105 of the Iowa Business Corporation Act, ISG Resources, Inc., a Utah corporation (the "Corporation"), the surviving corporation in the merger, hereby adopts and files these Articles of Merger. FIRST: A true and correct copy of the Plan of Merger (the "Plan") is attached hereto and made a part hereof. Pursuant to the Plan, each constituent corporation, will merge with and into the Corporation. SECOND: The name and state of incorporation of each corporation which is a party to this merger, the designation and number of outstanding shares of each such corporation, and the number of shares voted for and against the Plan, are set forth in the following table:
- - --------------------------------------- -------------------- --------------------- ----------------- ----------------- Designation And Shares Voted Shares Voted State of Number of For the Against the Plan Name of Corporation Incorporation Outstanding Shares Plan ISG Resources, Inc. Utah 100 shares of 100 0 Common Stock JTM Industries, Inc. Texas 100 shares of 100 0 Common Stock KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0 Common Stock Pozzolanic Resources, Inc. Washington 200 shares of 200 0 Class A Common Stock 2,900 shares of 2,900 0 Special Dividend Class C Stock 5,800 shares of 5,800 0 Special Dividend Class D Stock St. Helens Investments, Inc. Washington 100 shares of 100 0 Class A Voting Common Stock 3,000 shares of 3,000 0 Class B Non-Voting Common Stock 775,000 shares of 775,000 0 Special Dividend Class C Stock Pozzolanic Northwest, Inc. Washington 200 shares of 200 0 Voting Common Stock 300 shares of 300 0 Non-Voting Common Stock 2,900 shares of 2,900 0 Preferred Capital A Stock 5,800 shares of 5,800 0 Preferred Capital B Stock Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0 Inc. Voting Class A Common Stock 60,000 shares of 60,000 0 Class B Regular Dividend Stock Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0 Common Stock Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0 Common Stock Livestock Waste Management, Inc. Iowa 1 share of Common 1 0 Stock Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0 Common Stock U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0 Common Stock FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0 Common Stock Fly Ash Products, Inc. Arkansas 900 shares of 900 0 Common Stock - - --------------------------------------- -------------------- --------------------- ----------------- -----------------
THIRD: The shareholders of each of the constituent corporations in the merger unanimously approved the Plan. The designation and number of outstanding shares of each constituent corporation, and the number of shares voted for and against the plan by class, is set forth in the table in paragraph Second above. FOURTH: The effective date of the merger shall be January 1, 1999. IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on this ___ day of November, 1998. ISG RESOURCES, INC., a Utah corporation By: --------------------------- R Steve Creamer Chief Executive Officer EX-3.(I).27 14 ARTICLES OF MERGER FILED IN MICHIGAN (1/1/99) CERTIFICATE OF MERGER FOR THE MERGER OF FLO FIL CO., INC., U.S. STABILIZATION, INC. AND MICHIGAN ASH SALES COMPANY WITH AND INTO ISG RESOURCES, INC. Pursuant to the provisions of section 450.1707 of the Michigan Business Corporation Act, the undersigned Michigan corporations hereby execute and file this Certificate of Merger on behalf of each corporation. FIRST: A true and correct copy of the Plan of Merger (the "Plan") is attached hereto and made a part hereof. Pursuant to the Plan, each constituent corporation, will merge with and into ISG Resources, Inc., a Utah Corporation (the "Corporation"). SECOND: The name and state of incorporation of each corporation which is a party to this merger, the designation and number of outstanding shares of each such corporation, and the number of shares voted for and against the Plan, are set forth in the following table:
- - --------------------------------------- -------------------- --------------------- ----------------- ----------------- Designation And Shares Voted Shares Voted State of Number of For the Against the Plan Name of Corporation Incorporation Outstanding Shares Plan ISG Resources, Inc. Utah 100 shares of 100 0 Common Stock JTM Industries, Inc. Texas 100 shares of 100 0 Common Stock KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0 Common Stock Pozzolanic Resources, Inc. Washington 200 shares of 200 0 Class A Common Stock 2,900 shares of 2,900 0 Special Dividend Class C Stock 5,800 shares of 5,800 0 Special Dividend Class D Stock St. Helens Investments, Inc. Washington 100 shares of 100 0 Class A Voting Common Stock 3,000 shares of 3,000 0 Class B Non-Voting Common Stock 775,000 shares of 775,000 0 Special Dividend Class C Stock Pozzolanic Northwest, Inc. Washington 200 shares of 200 0 Voting Common Stock 300 shares of 300 0 Non-Voting Common Stock 2,900 shares of 2,900 0 Preferred Capital A Stock 5,800 shares of 5,800 0 Preferred Capital B Stock Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0 Inc. Voting Class A Common Stock 60,000 shares of 60,000 0 Class B Regular Dividend Stock Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0 Common Stock Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0 Common Stock Livestock Waste Management, Inc. Iowa 1 share of Common 1 0 Stock Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0 #005309 Common Stock U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0 #168092 Common Stock FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0 #394832 Common Stock Fly Ash Products, Inc. Arkansas 900 shares of 900 0 Common Stock - - --------------------------------------- -------------------- --------------------- ----------------- -----------------
THIRD: The Plan has been adopted by the boards of directors of each constituent corporation in accordance with section 703a, with respect to the domestic corporations involved in the merger, and in accordance with the respective laws of the states of incorporation of each of the other constituent corporations. FOURTH: The shareholders of each of the constituent corporations in the merger unanimously approved the Plan. The designation and number of outstanding shares of each constituent corporation, and the number of shares voted for and against the plan by class, is set forth in the table in paragraph Second above. Pursuant to section 703a, the shareholders of each domestic corporation in the merger approved the Plan by their unanimous written consent as provided by section 450.1407 of the Michigan Business Corporation Act. FIFTH: The effective date of the merger shall be January 1, 1999. SIXTH: The Plan will be furnished by the surviving corporation, on request and without cost, to any shareholder of any constituent corporation. IN WITNESS WHEREOF, the undersigned corporations have caused this Certificate of Merger to be executed on this ___ day of November, 1998. FLO FIL CO., INC. By: -------------------------- R Steve Creamer Chief Executive Officer U.S. STABILIZATION, INC. By: -------------------------- R Steve Creamer Chief Executive Officer MICHIGAN ASH SALES COMPANY By: -------------------------- R Steve Creamer Chief Executive Officer EX-3.(I).28 15 ARTICLES OF MERGER FILED IN ARKANSAS (1/1/99) ARTICLES OF MERGER FOR THE MERGER OF FLY ASH PRODUCTS, INC. WITH AND INTO ISG RESOURCES, INC. Pursuant to the provisions of section 4-27-1105 of the Arkansas - 1987 Business Corporation Act, ISG Resources, Inc., a Utah corporation (the "Corporation"), the surviving corporation in the merger, hereby adopts and files these Articles of Merger. FIRST: A true and correct copy of the Plan of Merger (the "Plan") is attached hereto and made a part hereof. Pursuant to the Plan, each constituent corporation, will merge with and into the Corporation. SECOND: The name and state of incorporation of each corporation which is a party to this merger, the designation and number of outstanding shares of each such corporation, and the number of shares voted for and against the Plan, are set forth in the following table:
- - --------------------------------------- -------------------- --------------------- ----------------- ----------------- Designation And Shares Voted Shares Voted State of Number of For the Against the Plan Name of Corporation Incorporation Outstanding Shares Plan ISG Resources, Inc. Utah 100 shares of 100 0 Common Stock JTM Industries, Inc. Texas 100 shares of 100 0 Common Stock KBK Enterprises, Inc. Pennsylvania 450 shares of 450 0 Common Stock Pozzolanic Resources, Inc. Washington 200 shares of 200 0 Class A Common Stock 2,900 shares of 2,900 0 Special Dividend Class C Stock 5,800 shares of 5,800 0 Special Dividend Class D Stock St. Helens Investments, Inc. Washington 100 shares of 100 0 Class A Voting Common Stock 3,000 shares of 3,000 0 Class B Non-Voting Common Stock 775,000 shares of 775,000 0 Special Dividend Class C Stock Pozzolanic Northwest, Inc. Washington 200 shares of 200 0 Voting Common Stock 300 shares of 300 0 Non-Voting Common Stock 2,900 shares of 2,900 0 Preferred Capital A Stock 5,800 shares of 5,800 0 Preferred Capital B Stock Pozzolanic Northwest Bulk Carriers, Washington 500 shares of 500 0 Inc. Voting Class A Common Stock 60,000 shares of 60,000 0 Class B Regular Dividend Stock Power Plant Aggregates of Iowa, Inc. Iowa 230 shares of 230 0 Common Stock Midwest Fly Ash & Materials, Inc. Iowa 100 shares of 100 0 Common Stock Livestock Waste Management, Inc. Iowa 1 share of Common 1 0 Stock Michigan Ash Sales Company Michigan 1,000 shares of 1,000 0 Common Stock U.S. Stabilization, Inc. Michigan 1,000 shares of 1,000 0 Common Stock FLO FIL Co., Inc. Michigan 1,000 shares of 1,000 0 Common Stoc Fly Ash Products, Inc. Arkansas 900 shares of 900 0 Common Stock - - --------------------------------------- -------------------- --------------------- ----------------- -----------------
THIRD: The shareholders of each of the constituent corporations in the merger unanimously approved the Plan. The designation and number of outstanding shares of each constituent corporation, and the number of shares voted for and against the plan by class, is set forth in the table in paragraph Second above. FOURTH: The effective date of the merger shall be January 1, 1999. IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on this ___ day of November, 1998. ISG RESOURCES, INC., a Utah corporation By: -------------------------- R Steve Creamer Chief Executive Officer EX-3.(I).29 16 ARTICLES OF MERGER FOR ISG RESOURCES, INC (1/1/99) ARTICLES OF MERGER OF MINERAL SPECIALTIES, INC. AND IRVINE FLY ASH, INC. WITH AND INTO ISG RESOURCES, INC. Pursuant to the provisions of section 16-10a-1104 of the Utah Revised Business Corporation Act (the "Act"), ISG Resources, Inc., a Utah corporation (the "Corporation"), hereby adopts and files the following Articles of Merger relating to the merger of Mineral Specialties, Inc., a Montana corporation, and Irvine Fly Ash, Inc., an Ohio corporation (individually, the "Subsidiary" and collectively, the "Subsidiaries"), with and into the Corporation, with the Corporation being the surviving corporation. FIRST: The name and place of incorporation of each corporation which is a party to this merger are as follows: Name of Corporation Place of Incorporation ------------------- ---------------------- ISG Resources, Inc. Utah Mineral Specialties, Inc. Montana Irvine Fly Ash, Inc. Ohio SECOND: A true and correct copy of the Agreement and Plan of Merger between the Subsidiaries and the Corporation is attached hereto as Exhibit "A" (the "Plan"). Pursuant to the Plan, each Subsidiary will merge with and into the Corporation. THIRD: Immediately prior to the merger, the Corporation owned 100% of the outstanding shares of each Subsidiary. FOURTH: The Corporation is the surviving corporation of the merger and all the provisions of section 16-10a-1103(7) of the Act were met with respect to the merger. Therefore, in accordance, with section 16-10a-1104(3) of the Act, the shareholders of the Corporation and Subsidiaries are not required to vote on the Plan. FIFTH: The effective date of the merger is July 31, 1999. The Corporation is the sole shareholder of each Subsidiary. Accordingly, the mailing requirements of section 16-10a-1104(4) of the Act are inapplicable and the effective date complies with section 16-10a-1104(5) of the Act. IN WITNESS WHEREOF, the undersigned executed these Articles of Merger on this day of July, 1999. ISG RESOURCES, INC. By: ------------------------ Brett A. Hickman Senior Vice President and Secretary EX-3.(I).30 17 ARTICLES OF MERGER FILED IN MONTANA (7/1/99MERGER) AGREEMENT AND PLAN OF MERGER OF MINERAL SPECIALTIES, INC. AND IRVINE FLY ASH, INC. WITH AND INTO ISG RESOURCES, INC. This Agreement and Plan of Merger is dated July _____, 1999, by and among ISG Resources, Inc., a Utah corporation ("ISG"), Mineral Specialties, Inc., a Montana corporation ("Mineral"), and Irvine Fly Ash, Inc., an Ohio corporation ("Irvine") (Mineral and Irvine) may in the alternative be referenced individually as the "Subsidiary" or collectively as the "Subsidiaries") and is effective on July 31, 1999 (the "Effective Date"). ISG is a corporation duly organized and existing under the laws of the state of Utah. Mineral is a corporation duly organized and existing under the laws of the state of Montana, having 630 common shares, par value of $10.00 per share, issued and outstanding. Irvine is a corporation duly organized and existing under the laws of the state of Ohio, having 500 common shares, par value $1.00 per share, issued and outstanding. WHEREAS, ISG owns each issued and outstanding share of the stock of each Subsidiary; and WHEREAS, the Board of Directors of ISG deems it advisable, for the general welfare and advantage of ISG and each Subsidiary, that each Subsidiary merge with and into ISG; NOW THEREFORE, the parties agree, in accordance with the provisions of the Revised Business Corporation Act of the state of Utah, the Montana Business Corporation Act and the Ohio General Corporation Law, that each Subsidiary shall be, and hereby is, merged with and into ISG (the "Merger"), and that the terms and conditions of the Merger and the mode of carrying the Merger into effect and the manner of canceling the shares of each of the Subsidiaries, shall be as set forth. ARTICLE I. Corporate Existence of Surviving Corporation Except as otherwise specifically set forth in this agreement, the identity, existence, purposes, powers, franchises, rights and immunities of ISG shall continue unaffected and unimpaired by the Merger, and the corporate identity, existence, purposes, powers, franchises, rights and immunities of each Subsidiary shall be merged into ISG and ISG shall become the "Surviving Corporation." The organization of each Subsidiary, except insofar as it may be continued by statute, shall cease on the Effective Date. ARTICLE II. Articles and Bylaws of Surviving Corporation The Articles of Incorporation and bylaws of ISG, as they shall exist on the Effective Date, shall be the Articles of Incorporation and bylaws of the Surviving Corporation until they shall be amended or repealed. ARTICLE III. Directors and Officers of Surviving Corporation The directors of ISG as of the Effective Date shall be the directors of the Surviving Corporation until their successors are elected and qualified. The officers of ISG as of the Effective Date shall be the officers of the Surviving Corporation until their successors are appointed by the board of directors of the Surviving Corporation. ARTICLE IV. Manner of Converting Shares of the Subsidiary Corporations into Shares of the Surviving Corporation ISG waives any right to receive shares of common stock of the Surviving Corporation in substitution or exchange for shares of common stock of each Subsidiary owned by ISG. Accordingly, the Surviving Corporation shall not issue any shares in substitution or exchange for any shares of common stock of each Subsidiary owned by ISG on the effective date of this agreement and plan. The shares of each Subsidiary held by ISG shall be cancelled on the Effective Date. ARTICLE V. Miscellaneous Provisions A. In accordance with the provisions of Section 16-10a-1104 of the Revised Business Corporation Act of the state of Utah and applicable foreign statutes, ISG shall not submit this agreement and plan to the respective shareholders of the Constituent Corporations. The President of ISG shall sign, acknowledge, file and record this agreement and plan, in accordance with the Revised Business Corporation Act of the state of Utah, the Business Corporation Act of the state of Montana and the General Corporation Law of the state of Ohio. This agreement and plan shall take effect and be deemed and taken to be the agreement and act of Merger of ISG and each Subsidiary and the Merger shall be and become effective immediately upon the start of business on the Effective Date, every shareholder having duly waived the mailing requirement of Section 16-10a-1104(5) of the Business Corporation Act of the state of Utah. B. Anything in this agreement or elsewhere to the contrary notwithstanding, this agreement may be abandoned at any time prior to its filing and recording by the resolution under the authority of the board of directors of ISG. C. If at any time the Surviving Corporation shall deem or be advised that any further assignments or assurances in law or things are necessary or desirable to vest or to perfect or confirm, of record or otherwise, in the Surviving Corporation the title to any property of the Subsidiaries acquired or to be acquired by reason of or as a result of the Merger, each Subsidiary and its proper officers and directors shall and will execute and deliver any and all such proper deeds, assignments and assurances in law and do all things necessary or proper so to vest, perfect or confirm title to such property in the Surviving Corporation and otherwise to carry out the purposes of this agreement. D. The Surviving Corporation agrees that it may be served with process in the states of Montana and Ohio in any proceeding for enforcement of any obligation of a Subsidiary or for enforcement of any obligation of the Surviving Corporation arising from the Merger, and appoints the respective Secretaries of State of the states of Montana and Ohio as its agent to accept service of process in any such suit or other proceeding. The address to which a copy of such process shall be mailed by said Secretary of State is 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111. E. The Surviving Corporation shall pay all the expenses of carrying this agreement into effect and of accomplishing the Merger. F. For the convenience of the parties and to facilitate the filing or recording of this agreement, any number of counterparts may be executed, and each such executed counterpart shall be deemed to be an original instrument. The boards of directors of ISG and the Subsidiaries have duly caused this agreement to be signed by their President. ISG RESOURCES, INC. By: --------------------------------- Brett A. Hickman, Senior Vice President and Secretary IRVINE FLY ASH, INC. MINERAL SPECIALTIES, INC. By: By: ----------------------------------- ---------------------------- Brett A. Hickman, Senior Vice President Brett A. Hickman, Senior Vice and Secretary President and Secretary EX-3.(I).31 18 ARTICLES OF MERGER FILED IN OHIO (7/1/99 MERGER) Prescribed by J. Kenneth Blackwell Expedite this form [X] Yes Please obtain fee amount and mailing instructions from the Forms Inventory List (using the 3 digit form # located at the bottom of this form). To obtain the Forms Inventory List or for assistance, please call Customer Service: Central Ohio: (614) 466-3910 Toll Free: 1-877-SOS-FILE (1-877-767-3453) CERTIFICATE OF MERGER In accordance with the requirements of Ohio law, the undersigned corporations, banks, savings banks, savings and loan, limited liability companies, limited partnerships and/or partnerships with limited liability, desiring to effect a merger, set forth the following facts: I. Surviving Entity A. The name of the entity surviving the merger is: ISG RESOURCES, INC. B. Name Change: As a result of this merger, the name of the surviving entity has been changed to the following: C. The surviving entity is a: (Please check the appropriate box and fill in the appropriate blanks) [ ] Domestic (Ohio) for-profit corporation, charter number _____________ [ ] Domestic (Ohio) non-profit corporation, charter number _____________ [X] oreign (Non-Ohio) corporation incorporated under the laws of the state/country of _Utah_ and licensed to transact business in the State of Ohio under license number _1032651_ [ ] Foreign (Non-Ohio) corporation incorporated under the laws of the state/country of ______ and NOT licensed to transact business in the State of Ohio [ ] Domestic (Ohio) limited liability company, with registration number ________ [ ] Foreign (Non-Ohio) limited liability company organized under the laws of the state/country of ________ and registered to do business in the State of Ohio under registration number ____________ [ ] Foreign (Non-Ohio) limited liability company organized under the laws of the state/country of ________ and NOT registered to do business in the State of Ohio. [ ] Domestic (Ohio) limited partnership, with registration number _____. [ ] Foreign (Non-Ohio) limited partnership organized under the laws of the state/country of _________ and registered to do business in the State of Ohio under registration number _______. [ ] Foreign (Non-Ohio) limited partnership organized under the laws of the state/country of _________ and NOT registered to do business in the State of Ohio. [ ] Domestic (Ohio) partnership having limited liability, with the registration number ___________. [ ] Foreign (Non-Ohio) partnership having limited liability organized under the laws of the state/country of _________ and registered to business in the state of Ohio under the registration number _____________. II. Merging Entities The name, charger/license/registration number, type of entity, state/country of incorporation or organization, respectively, of which is a party to the merger are as follows: (If this is insufficient space to reflect all merging entities, please attach a separate sheet listing the merging entities.) Name State/Country of Organization Type of Entity ISG Resources, Inc. Utah Corporation Irvine Fly Ash, Inc. Ohio Corporation Mineral Specialties, Inc. Montana Corporation III. Merger Agreement on File The name and mailing address of the person or entity from whom/which eligible persons may obtain a copy of the agreement of merger upon written request: ISG Resources, Inc. 136 East South Temple, Suite 1300 Attn: Curtis Brown (street and number) (name) Salt Lake City Utah 84111 (city, village or township) (state) (zip code) IV. Effective Date of Merger This merger is to be effective on: _July 31, 1999_ (if a date is specified, the date must be a date on or after the date of filing; the effective date of the merger cannot be earlier than the date of filing, if no date is specified, the date of filing will be the effective date of the merger). V. Merger Authorized The laws of the state or country under which each constituent entity exists, permits this merger. This merger was adopted, approved and authorized by each of the constituent entities in compliance with the laws of the state under which it is organized, and the persons signing this certificate on behalf of the constituent entities are duly authorized to do so. IV. Statutory Agent The name and address of the surviving entity's statutory agent upon whom any process, notice or demand may be served is: ________________________ ________________________________ (name) (street and number) ________________________, Ohio ________________________________ (city, village or township) (zip code) (This item MUST be completed if the surviving entity is a foreign entity which is not licensed, registered or otherwise authorized to conduct business in the state of Ohio.) Acceptance of Agent The undersigned, named herein as the statutory agent for the above referenced surviving entity, hereby acknowledges and accepts the appointment of statutory agent for said entity. /s/ ------------------ Signature of Agent (The acceptance of agent must be completed by domestic surviving entities if through this merger the statutory agent for the surviving entity has changed or the named agent differs in any way from the name currently on record with the Secretary of State.) VII. Statement of Merger Upon filing, or upon such later date as specified herein, the merging entity/entities listed herein shall merge into the listed surviving entity. VIII.Amendments The articles of incorporation, articles of organization, certificate of limited partnership or registration of partnership having limited liability (circle appropriate term) of the surviving domestic entity have been amended. Please see attached "Exhibit A." (Please note, if there will be no change please state "no change"). IX. Qualification or Licensure of Foreign Surviving Entity A. The listed surviving foreign corporation, bank, savings bank, savings and loan, limited liability company, limited partnership, or partnership having limited liability desires to transact business in Ohio as a foreign corporation, bank, savings bank, savings and loan, limited liability company, limited partnership, or partnership having limited liability, and hereby appoints the following as its statutory agent upon whom process, notice or demand against the entity may be served in the state of Ohio. The name and complete address of the statutory agent is: _________________________ ______________________________ (name) (street and number) ________________________, Ohio _______________________________ (city, village or township) (zip code) The subject surviving foreign corporation, bank, savings bank, savings and loan, limited liability company, limited partnership, or partnership having limited liability irrevocably consents to service of process on the statutory agent listed above as long as the authority of the agent continues, and to service of process upon the Secretary of State of Ohio if the agent cannot be found, if the corporation, bank, savings bank, savings and loan, limited liability company, limited partnership, or partnership having limited liability fails to designate another agent when required to do so, or if the foreign corporation's, bank's, savings bank's, savings and loan's, limited liability company's, limited partnership's, or partnership having limited liability's license or registration to do business in Ohio expires or is canceled. B. The qualifying entity also states as follows: (Complete only if applicable) 1. Foreign Notice Under Section 1703.031 (If the qualifying entity is a foreign bank, savings bank, or savings and loan, then the following information must be completed.) a. The name of the Foreign Nationally/Federally charted bank, savings bank, or savings and loan association is __________. b. The name(s) of any Trade Name(s) under which the corporation will conduct business: _____________________________________. c. The location of the main office (non-Ohio) shall be: __________________________________________________- (street address) __________________________ _______ _______ ________ (city, township or village) (county) (state) (zip code) d. The principal office location in the state of Ohio shall be: _______________________________ (street address) _________________________ ________ _______ _________ (city, township or village) (county) (state) (zip code) (Please note, if there will not be an office in the state of Ohio, please list none.) e. The corporation will exercise the following purpose(s) in the state of Ohio: (Please provide a brief summary of the business to be conducted; a general clause is not sufficient) _________________________________________ 2. Foreign Qualifying Limited Liability Company (If the qualifying entity is a foreign limited liability company, the following information must be completed.) a. The name of the limited liability company in its state of organization/registration is _______________________________ b. The name under which the limited liability company desires to transact business in Ohio is _______________________________ c. The limited liability company was organized or registered on ___________ under the laws of the state/country of ___________ d. The address to which interested persons may direct requests for copies of the articles of organization, operating agreement, bylaws, or other chart documents of the company is: _____________________________________ (street address) _______________________ ________ __________ (city, township or village) (state) (zip code) 3. Foreign Qualifying Limited Partnership (If the qualifying entity is a foreign limited partnership, the following information must be completed). a. The name of the limited partnership is _____________________ b. The limited partnership was formed on ____________________ c. The address of the office of the limited partnership in its state/country of organization is: ________________________________________ (street address) _________________________ ________ ______ ________ (city, township or village) (county) (state) (zip code) d. The limited partnership's principal office address is: ________________________________________ (street address) _________________________ ________ ______ ________ (city, township or village) (county) (state) (zip code) e. The names and business or residence addresses of the General partners of the partnerships are as follows: Name Address _____________________ _______________________ (If insufficient space to cover this item, please attach a separate sheet listing the general partners and their respective addresses) f. The address of the office where a list of the names and business or residence addresses of the limited partners and their respective capital contributions is to be maintained is: ________________________________________ (street address) _________________________ ________ ______ ________ (city, township or village) (county) (state) (zip code) The limited partnership hereby certifies that it shall maintain said records until the registration of the limited partnership in Ohio is canceled or withdrawn. 4. Foreign Qualifying Partnership Having Limited Liability a. The name of the partnership shall be ________________________ b. Please complete the following appropriate section (either item b1 or b2): 1. The address of the partnership's principal office in Ohio is: __________________________________________ (street name and number) _____________________, Ohio ___________ (city, township or village) (zip code) (If the partnership does not have a principal office in Ohio, then items b2 and item c must be completed) 2. The address of the partnership's principal office (Non-Ohio): _______________________________________ (street address) _______________________ ______ ________ (city, township or village) (state) (zip code) c. The name and address of a statutory agent for service of process in Ohio is as follows: _______________________ ______________________________ (name) (street address) _________________________, Ohio ________________ (city, township or village) (zip code) d. Please indicate the state or jurisdiction in which the Foreign Limited Liability Partnership has been formed ____________________________________ e. The business which the partnership engages in is: ________________________________________________ The undersigned constituent entities have caused this certificate of merger to be signed by its duly authorized officers, partners and representatives on the date(s) stated below. ISG Resources, Inc. Irvine Fly Ash, Inc. ------------------ -------------------- (Exact name of entity) (Exact name of entity) By: /s/ Brett A. Hickman By: /s/ Brett A. Hickman ----------------------- ---------------------- Its: Brett A. Hickman, Sr. V.P. Its: Brett A. Hickman, Sr. V.P. & Secretary & Secretary Date: ______________________ Date: ______________________ Mineral Specialties, Inc. ------------------------ (Exact name of entity) By: /s/ Brett A. Hickman -------------------- Its: Brett A. Hickman, Sr. V.P. & Secretary Date: ______________________ EX-10.9 19 STOCK PURCHASE AGREEMENT - ISAAC STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") is dated January __, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser") 11 and James M. Isaac and Tommy C. Isaac, individuals residing in the state of Texas (individually a "Seller" and collectively the "Sellers"). RECITALS The Sellers own and desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, all of the issued and outstanding shares of capital stock of J. Marvin Isaac Interests, Inc., d/b/a Best Masonry & Tool Supply (the "Company"), a Texas corporation. The issued and outstanding capital stock of the Company is referred to herein as the "Purchased Stock." Unless otherwise defined in this Agreement, the capitalized terms used in this, Agreement have the meanings given in Article VIII below. In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1 SALE OF PURCHASED STOCK; CLOSING 1.1 Purchase and Sale. On the terms and conditions set forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase from the Sellers, the Purchased Stock. 1.2 Consideration. 1.2.1 The consideration (the "Consideration") for the Purchased Stock is comprised of: (i) $13,300,000.00 IN CASH, subject to increase (riot decrease) as set forth in Section 1.2.2 below (the "Deferred Consideration"); and (ii) as "Additional Consideration", the Purchaser shall also pay to the Sellers at closing the sum of $2,400,000.00 IN CASH to retire all of the indebtedness of the Company due to the Sellers (the "Shareholder Debt"). 1.2.2 The consideration will increase (and thus, the amount of the Deferred Consideration is determined), dollar for dollar, equal to the amount of increase in the Company's net book value (the "Net Book Value") (defined as total assets less liabilities) during the period from July 31, 1998, to the Closing Date (the amount of the Additional Consideration paid to retire the Shareholder Debt shall not be included in the Net Book Value calculation on either date). To determine whether an adjustment is appropriate, Sellers shall (within thirty days of the Closing Date) provide to Purchaser with financial statements of the Company that are prepared in a manner consistent with the determination of the Net Book Value as of July 31, 1998, indicating the Net Book Value as of the Closing Date (the "Sellers' Calculation") . Purchaser shall make the Company records available, as necessary, to make such calculation. If Purchaser (by notice to Sellers within thirty (30) days of receipt of Sellers' Calculation) disagrees with the Sellers' Calculation ("Sellers' Objection Notice"), then Purchaser and the Sellers shall submit the matter to Ernst & Young and Mr. Andrew M. Rossi for resolution in accordance with GAAP on a basis consistent with Sellers' Financial Statements. If, within thirty (30) days of the dispute being submitted to them, Ernst & Young and Mr. Rossi are unable to agree as to how the dispute should be resolved, then the parties shall submit the matter to Arbitration as provided in Article 10 of this Agreement. If Ernst & Young and Mr. Rossi are able to agree as to how the dispute should be resolved, they will jointly prepare and deliver a report to all parties which will detail whether a Consideration adjustment is necessary. The report will be final and binding on both parties, absent fraud or clear error. If Seller fails to furnish Sellers' Calculations within 45 days following the Closing, subject to reasonable extensions due to the lack of Purchaser's cooperation, Sellers' Calculation is deemed to be $350,000.00, subject to Purchaser timely objecting to same pursuant to Sellers' Objection Notice. 1.3 Closing. The Closing (the "Closing") of the purchase and sale of the Purchased Stock will take place at the offices of Sellers' attorney, Stephen L. Brochstein, Esquire, One Riverway, Suite 1950, Houston, Texas 77056, on the date hereof (the "Closing Date"). 1.4 Payment of Consideration and Additional Consideration. At the Closing, Purchaser will pay the Consideration and the Additional Consideration to the Sellers by wire transfer to such account as the Sellers may direct by written notice delivered to Purchaser by the Sellers before the Closing Date. Simultaneously, the Sellers will sell and convey to Purchaser the Purchased Stock free and clear of all Liens, by delivering to Purchaser a stock certificate, registered in the name of Purchaser, representing the Purchased Stock. At the Closing, the parties shall also deliver the certificates, documents and instruments to be delivered pursuant to this Agreement. 1.5 Deferred Consideration. If the Purchaser fails to timely give notice to Seller that it disagrees with the Sellers' Calculation, then within thirty (30) days after delivery of the Sellers' Calculation (or determination pursuant to Section 1.2), the Purchaser will deliver to the sellers cash in the amount of the adjustment specified therein. If the Purchaser timely disagrees with the Sellers' Calculation, the Purchaser will deliver to the Sellers cash equal to the undisputed portion of the adjustment specified in the report, if any. The Purchaser shall also pay interest, at the rate of eight percent (8%) per annum, on the unpaid principal amount of the Deferred Consideration from the Closing Date to the earlier of the date of payment or forty-five (45) days following the date of the Closing, and thereafter, until paid, the unpaid balance will accrue interest at the rate of eighteen (18%) percent per annum, but not to exceed the maximum lawful rate. 1.6 Payment of the Deferred Consideration. The first $350,000 of the Deferred consideration (to the extent the proper amount of the Deferred Consideration is sufficient) shall be paid equally to Jamar Management Services, Inc. and Tomco Management Services, Inc., both Texas corporations owned by the Sellers, as consideration for the termination of existing management contracts with those management companies deemed terminated as of the Closing Dates, and the balance, if any, paid to the Sellers. Payment of the Additional Consideration shall not reduce the amount of the Deferred Consideration payable to Seller. ARTICLE II 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers represent and warrant to Purchaser that: (i) the "Seller Financial Statements" described in section 2.4 are materially accurate and complete, and prepared in accordance with generally accepted accounting principles (11GAAP11); discrepancy or difference between the Seller Financial Statements and the Ernst & Young findings are not the subject of any warranty or representation on the part of Sellers and Purchaser acquires the Purchased Stock subject to any possible difference (and the Sellers shall not be deemed to be in breach of any representation or warranty set forth herein due to such differences or any resulting change in the statements of operations or financial position of the Company as a result of the Ernst & Young findings) ; i: ii) the Company has no "Indebtedness" other than as set forth on the Seller Financial Statements or the "Interim Statements" (and similar type obligations through the Closing Date) and the Shareholder Debt has been satisfied; (iii) the Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Texas and has full corporate power and authority to conduct its business; (iv) the Company is duly qualified, licensed and admitted to do business in Texas and Georgia; (v) the Purchased Stock consists of the following number of shares of capital stock: 1,000 shares of common stock, par value ($1.00) per share; (vi) the Sellers have full authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby; (vii) this Agreement has been duly and validly executed and delivered by the Sellers and constitutes the legal, valid and binding obligations of the Sellers, enforceable against them in accordance with its terms; (viii) the Sellers have delivered to Purchaser true and complete copies of the certificate or articles of incorporation and by-laws (or other comparable corporate charter documents) of the Company, including all amendments thereto effected through the Closing Date (the "Initial Corporate Documents"); and (ix) the Purchased Stock constitutes all of the issued and outstanding shares of capital stock of the Company. The shares of Purchased Stock are validly issued, fully paid and nonassessable, issued in compliance with all applicable Laws, and no additional shares of capital stock have been reserved for issuance. There are no outstanding Options with respect to the stock of the Company or agreements, arrangements or understandings to issue options with respect to the Company, nor are there any preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of the capital stock of the Company. The Sellers are the record and beneficial owners of all of the shares of Purchased Stock, free and clear of all Liens. The delivery to Purchaser of" the certificates representing the Purchased Stock will transfer to Purchaser good and valid title to all shares of the Purchased Stock, free and clear of all Liens, and written restrictions that the Sellers and/or the Company may be party to, and after such transfer the Purchased Stock, in the hands of Purchaser, will have been duly authorized, validly issued, fully paid and nonassessable. From and after the Closing, no Seller nor any other Person (other than the Purchaser or its successors or assigns, or any person claiming by or through them), except to the extent attributable, directly or indirectly, to Purchaser, will, as of the Closing Date, have any rights whatsoever with respect to the Purchased Stock or to any other securities of the Company. In addition, Sellers, to their actual knowledge, (Sellers having no duty or obligation of independent investigation of any kind) , hereby represent and warrant to Purchaser as follows with respect to the following acts or occurrences during the last three years (or such shorter applicable period as hereafter provided) subject to the limitations of Section 2.26: 2.1 No Conflicts. As of the Closing Date, the execution and delivery by the Sellers of this Agreement does not, and the consummation of the transactions contemplated hereby will not, except to the extent attributable, directly or indirectly, to Purchaser or its successors or assigns, or due to any Laws or Orders applicable to Purchaser exclusively arising due to this transaction: 2.1.1 conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Initial Corporate Documents; 2.1.2 conflict with or result in a violation or breach of any term or provision of any Laws or Order applicable to any of the Sellers or to the Company, or any of their Assets; or 2.1.3 except as disclosed in Section 2.1 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require any of the Sellers or the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (vi) result in the creation or imposition of any Lien upon the Company or any of its Assets under, any written Tiaterial contract or License to which any of the Sellers or the Company is a party or by which any of their respective Assets is bound, except for such conflicts, violations, breaches, defaults, consents, approvals, actions, filings, notices ! terminations, cancellations, accelerations, modifications, additional rights or entitlements or Liens that, individually or in the aggregate, (A) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company, and (B) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of any of the Sellers or the Company to perform its obligations hereunder. 2.2 Governmental Approvals and Filings. Except as disclosed in Section 2.2 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Sellers or the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of transactions contemplated herein, except to the extent attributable!, directly or indirectly, to Purchaser, or any Laws or Orders applicable to Purchaser. Notwithstanding any provision to the contrary, the Sellers make no representation whatsoever regarding the necessity of a filing under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 : . as amended, or any similar or related Laws or orders, and Purchaser shall indemnify, defend and hold Sellers harmless from any claim relating thereto. 2.3 Books and Records. The minute books and other similar records of the Company provided to Purchaser upon execution of this Agreement contain a true and materially accurate record of the mattes set forth therein. 2.4 Financial Statements. The Sellers have caused the Company to furnish to Purchaser true and correct copies of (i) the reviewed but Unaudited Financial Statements of the Company for the periods ending July 31, 1997 and July 31, 1998 prepared in accordance with GAAP (the "Seller Financial Statements") and (ii) the unaudited internal balance sheets and statements of operations certified as materially true and correct by the chief financial officer of the Company for the period from August 1, 1998 through November 30, 1998 (the "Interim Statements") . The Seller Financial Statements and the Interim Financial Statements (both of which are attached as Exhibit A) fairly represent the financial condition and results of operations of the Company as of their respective dates and for the periods referred to, all in accordance with GAAP. The Company engaged Ernst & Young to perform the Company's certain due diligence procedures with respect to financial records and other matters prior to the Closing, at Purchaser's request and expense (and the Purchaser shall pay the fees associated with such review). Sellers make no representation or warranty regarding the findings of' Ernst & Young and advise Purchaser that the results thereof may be in conflict with the aforesaid books and records of the Company and the Sellers will have no liability for those differences. Further, the Sellers represent and warrant that, as of the Closing Date, the Net Book Value of the Company shall be at least equal to the Net Book Value of the Company as of July 31, 1998 (per GAAP). 2.5 Absence of Changes. Since July 31, 1998, sellers have not received written notice that there has been any undisclosed material adverse change or event or development, which, individually or together with other such events, including any positive related events, could reasonably be expected to result in a material adverse change, in the business or condition of the Company as of the Closing. In addition, except as expressly contemplated hereby, including any matter covered by the preceding sentence, and except as otherwise disclosed by the books and records of the Company (the Seller Financial Statements and the Interim Statements being deemed to be part of the books and records of the Company) or otherwise in section 2.5 of the Disclosure Schedule, Sellers have received no written notice since July 31, 1998: 2.5.1 any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock (or other equity interests) of the Company or any direct or indirect redemption, purchase or other acquisition by the Company of any such capital stock (or other equity interests) of the Company; 2.5.2 any authorization, issuance, sale or other disposition by the Company of any shares of its capital stock (or other equity interests) , or any modification or amendment of any right of any holder of any outstanding shares of capital stock (or other equity interests) of the Company; 2.5.3 any uninsured physical damage, destruction or other casualty loss (not covered by insurance) affecting any of the Assets of the Company in an aggregate amount exceeding $50,000; 2.5.4 any undisclosed capital expenditures or commitments for additions to property, plant or equipment of the Company constituting capital assets in an aggregate amount exceeding $100,000; 2.5.5 any transactions by the Company with any of its officers, directors, stockholders or Affiliates, involving in the aggregate more than $50,000 other than pursuant to a Contract or arrangement in effect on July 31, 1998 and disclosed to Purchaser pursuant to Section 2.13.1.6. Contracts of employment are verbal except for those listed pursuant to Section 2.13.1 of the Disclosure Schedule; or 2.5.6 any entering into of a binding agreement to do or engage in any of the foregoing for the time period indicated above. 2.6 Taxes. 2.6.1 Except as disclosed in Section 2.6 of the Disclosure Schedule and subject to Section 6.3 of this Agreement, all Tax Returns required to have been filed by or with respect to the Company with any Taxing Authority have been duly and timely filed, and each such Tax Return correctly and completely reflects the income, franchise or other Tax liability and all other information required to be reported thereon. The Company is not and has never been a member of any affiliated, combined, consolidated, unitary or similar group with respect to the filing of tax returns with respect to any Taxing Authority. All income taxes owed by the Company (whether or not shown on any Tax Return) have been paid through the period ending July 31, 1998. All monies required to be withheld by the Company from employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld through the period ending July 31, 1998, and either duly and timely paid to the appropriate Taxing Authority or (if not yet due for payment) set aside in accounts for such purposes (Purchaser agreeing to pay same, as due for the period indicated above). The Company has no liability for Taxes for any Person other than the Company, except as shown in the Seller Financial Statements or the Interim Statements. 2.6. 2 The taxes due as of July 31, 1998, have been paid. 2.6.3 The Company is not a party to any existing written agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. The Company has not received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. 2.6.4 Except as set forth in Section 2.6.4 (being the IRS disputed proposed penalty of $2,000), the Sellers have not received written notice since January 1, 1996 that any Taxing Authority is asserting against the Company any deficiency, claim or liability for additional Taxes or any adjustment of Taxes. The Federal income Tax Returns of the Company for the 3-year period ending July 31, 1998 disclose (in accordance with Section 6662(d) (2) (B) of the Code) all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of section 6662(d) of the Code. The Sellers have delivered to Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since July 31, 1996. The Sellers have not received written notice after January 1, 1996, that there are any Liens for Taxes upon the Assets of the Company. 2.6.5 Except as arising in the ordinary course of business or as otherwise disclosed in section 2.6 of the Disclosure Schedule, or otherwise disclosed to Purchaser, the Sellers have not received written notice since January 1, 1996 that the Company is (i) a party to or bound by any obligations under any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject to any election under sections 338(e) or 341(f) of the Code or the regulations thereunder, (iii) required to make, any adjustment under section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (iv) subject to any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of section 280G of the Code, (v) has ever been, a "United States real property holding corporation" within the meaning of section 897 (c) (2) of the Code, (vi) a party to any "safe harbor lease" that is subject to the provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning of section 460 of the Code, (vii) a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, or (viii) a member of any affiliated, consolidated, combined, unitary or similar group for any Tax purpose. 2.7 Legal Proceedings. 2.7. 1 Except as disclosed in Section 2.7 of the Disclosure Schedule (with paragraph references corresponding to those set forth below) : 2.7.1.1 Sellers have not received any written notice that there are any material lawsuits, actions or proceedings pending or threatened, against the Company, or any of its Assets which (A) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement or otherwise result in a material diminution of the benefits contemplated by this Agreement to Purchaser, or (B) if determined adversely to the Company, could reasonably be expected to result in (x) any injunction or other equitable relief against the Company, or (y) Losses by the Company, individually or in the aggregate with Losses in respect of other such actions or proceedings, exceeding $50,000 (any such claim less than $50,000 not being deemed to be material); 2.7.1.2 The Sellers have not received written notice during the last six months of any material defects, dangerous or substandard conditions in the products or materials manufactured, sold, distributed, or to be manufactured, sold or distributed by the Company that could cause substantial bodily injury, sickness, disease, death, or damage to property, or result in loss of use of property, or any claim, suit, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, or damage to property, or loss of use or property. 2.7.2 Section 2.7 of the Disclosure Schedule sets forth all known actions or proceedings relating to or affecting the Company or its Assets during the period commencing January 1, 1996, and ending upon the Closing Date. 2.8 Compliance with Laws and Orders. Except as disclosed in Section 2.8 of the Disclosure Schedule or otherwise, the Sellers have not received since January 1, 1996 any written notice (or any actual verbal notice from a reliable source within the 90 day period preceding the date of this Agreement) that the Company is or has been at any time since such date, in material violation of or in default under, any Law or order applicable to the Company or any of its Assets which remains uncured. In furtherance and not limitation of the foregoing, neither the Sellers nor the Company has violated any federal or state securities law in connection with the offer, sale or purchase of any securities prior to this Agreement (and unrelated to this transaction). 2.9 Benefit Plans; ERISA. All active Benefit Plans relating to the Company are listed in Section 2.9 of the Disclosure Schedule, and copies of al:_ documentation relating to such Benefit Plans during the last three years have been delivered or made available to Purchaser (including copies of written Benefit Plans, written descriptions of oral Benefit Plans, summary plan descriptions, trust agreements, the three most recent annual returns, employee communications, and IRS determination letters). Except as disclosed in Section 2.9 of the Disclosure Schedule, the Sellers have not received written notice of any uncured violations of any of the following since January 1, 1996: 2.9.1 each Benefit Plan, and the administration thereof, complies, and has at all times complied, with the requirements of all applicable Law, including ERISA and the Code, and each Benefit Plan intended to qualify under section 401(a) of the Code has been so qualified, and each trust which forms a part of any such plan has at all times since its adoption been tax-exempt under section 501(a) of the Code; 2.9.2 no Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of section 302 of ERISA or section 412 of the Code; 2.9.3 no direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company under Title IV of ERISA to any party with respect to any Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA affiliate; 2. 9. 4 the "amount of unfunded benefit liabilities" within the meaning of section 4001(a) (18) of ERISA does not exceed zero with respect to any Benefit Plan subject to Title IV of ERISA; 2. 9. 5 no "reportable event" (within the meaning of section 4043 of ERISA.) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA affiliate; 2.9.6 no Benefit Plan is a multiemployer plan within the meaning of section 3(37) of ERISA; 2.9.7 Neither the Company nor any ERISA affiliate has incurred any liability for any Tax imposed under section 4971 through 4980B of the Code or civil liability under section 502(i) or (1) of ERISA; 2.9.8 no benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested or payable by reason of any transaction contemplated under this Agreement; 2 .9 no Tax has been incurred under section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto); 2.9.10 no Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws requiring continuation of benefits coverage following termination of employment; 2.9.11 no suit, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought with respect to any Benefit Plan and there are not facts or circumstances known to any the Sellers or the Company that could reasonably be expected to give rise to any such suit, action or other litigation; and 2.9.12 all known contributions to Benefit Plans that were required to be made under such Benefit Plans prior to December 31, 1998 have been made, and all known benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, all of which accruals under unfunded Benefit Plans are as disclosed in Section 2.9 of the Disclosure Schedule, and the Company has performed all material obligations required to be performed under all Benefit Plans. 2.10 Real Property. 2.10.1 Section 2.10.1 of the Disclosure Schedule contains a true and correct list of (i) each parcel of real property owned (the "Owned Real Property") by the Company, (ii) each parcel of real property leased or subleased or otherwise occupied by the Company as tenant or subtenant (the "Leased Real Property"; together with the owned Real Property, the "Real Property") together with a true and correct list of all such leases, subleases or other similar agreements and any amendments, modifications or extensions thereto (the "Real Property Leases") , and (iii) all Liens relating to or affecting any parcel of Real Property, in each case identifying the owner, lessor and lessee thereof, except for liens in favor of Sellers which will be satisfied as of the Closing as a result of the retirement of Shareholder Debt as contemplated hereby. Notwithstanding any provision to the contrary, all Real Property which is owned or leased is subject to all matters of record applicable thereto (other than mortgage-type liens) , and matters that a correct survey thereof would reflect. 2.10.2 Subject to Section 2.10.1, the Company has good and marketable title to its Owned Real Property, free and clear of all Liens, other than as specifically listed in Section 2.10.2 of the Disclosure Schedule or matters of record (other than mortgage-type liens) or that a survey of such property would reflect. 2.10.3 Subject to the terms of its leases (and Section 2.10.1), the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to the Leased Real Property for the full term of the lease thereof. Except as set forth in Section 2.10.3 of the Disclosure Schedule, the Sellers have not received any specific notice of any uncured default (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder which is presently uncured. The Company has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in any Real Property Lease, unless; disclosed by the Sellers to Purchaser. Notwithstanding the foregoing or anything to the contrary, Sellers make no representation or warranty regarding (i) oral leases including, without limitation, any representation or warranty as their enforceability; or (ii) a master lease where the Company is a sublessee. 2.10.4 The Sellers shall deliver to Purchaser, to the extent reasonably available, upon the execution of this Agreement true and complete copies of all (i) title policies, mortgages, deeds of trust, deeds, leases, easements, restrictive covenants, certificates of occupancy, and similar documents, and all amendments thereto concerning the Owned Real Property, and (ii) Real Property Leases and all other documents referred to in clause (i) of this paragraph with respect to the Leased Real Property. 2.10.5 Except as disclosed in Section 2.10.5 of the Disclosure Schedule, have not received written notice of any pending or threatened condemnation or appropriation proceedings, pending or threatened against Real Property or the improvements thereon. 2.10.6 The Sellers have not received written notice of any specific written claim, action or proceeding, actual or threatened in writing, against the Company or the Real Property by any Person which would materially affect the future use, occupancy or value of the Real Property or any part thereof. 2.11 Tangible Personal Property. Except as disclosed in Section 2.11 of the Disclosure Schedule, the company is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under contract to use, all tangible personal property used in the conduct of its business, during the last 12 months, including all tangible personal property reflected on the Seller Financial Statements and tangible personal property acquired since July 31, 1998 other than (i) property disposed of since such date in the ordinary course of business consistent with past practice and the terms of this Agreement, or otherwise disclosed. All such tangible personal property is free and clear of all Liens, other than Liens disclosed in Section 2.13 of the Disclosure Schedule. 2.12 Intellectual Property Rights. The Sellers have not received written notice after January 1, 1996 that the Company is infringing on any intellectual property of any Person, and no litigation is pending and no claim has been made or, to the knowledge of any the Sellers or of the Company, has been threatened to such effect. The Company owns no patents, trademarks or other intellectual property (other than common law rights, trade secrets, and assumed name reservations) . If it is subsequently determined that the Sellers, or either of them, own any intellectual property which relates to the business' conducted by the Company, the Sellers shall assign their respective right, title and interest in and to such intellectual property to the Purchaser or its designee. 2.13 Contracts. 2.13.1 Section 2.13.1 of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts of a substantial nature currently in effect (true and complete copies, or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement), to which the Company is a party or by which any of its Assets is bound in a material way: 2.13.1.1 (A) all written Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified term (other than (i) with Trans Management Company (Georgia plant manager) which remain in effect after the Closing, and (ii) at-will agreements); and (B) any written commitments involving an obligation of the Company to make substantial payments to any Person in connection with, or as a consequence of, the transactions contemplated hereby or to any employee, other than with respect to salary or incentive compensation payments in the ordinary course of business consistent with past practice; 2.13.1.2 all Contracts with any Person containing any provision or covenant prohibiting or limiting the ability of the Company to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or prohibiting or limiting disclosure of confidential or proprietary information, of a material nature; 2.13.1.3 all management, partnership, joint venture, shareholders' or other similar Contracts with any Person which is to survive the Closing; 2.13.1.4 all guarantees of the Indebtedness of the Company or any third Person; 2.13.1.5 all Contracts relating to the future disposition or acquisition of any Assets, other than dispositions or acquisitions in the ordinary course of business consistent with past practice or the provisions of this Agreement; 2.13.1.6 all Contracts between or among the Company and any of the Sellers, any current or former officer, director, stockholder or Affiliate of the Company or of any such officer, director, stockholder or Affiliate, on the other hand, which is to survive the Closing, other than Contracts disclosed pursuant to Section 2.13.1.6; 2.13.1.7 any existing collective bargaining or similar labor Contracts; 2.13.1.8 all Contracts which are to survive the Closing that (A) limit or contain restrictions on the ability of the Company to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets or to change the lines of business, (B) require the Company to maintain specified financial ratios or levels of net worth or other indicia of financial condition or (C) require the Company to maintain insurance in certain amounts or with certain coverages; and 2.13.1.9 subject to Section 2.19 of this Agreement, all other Contracts, including but not limited to Contracts with customers, that involve the payment or potential payment, pursuant to the terms of any such Contract, by or to the Company of more than $50,000 and all powers of attorney and comparable delegations of authority. 2.13.2 Each Contract required to be disclosed in Section 2.13.1 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto; and except as disclosed in Section 2.13.2 of the Disclosure Schedule, Sellers have not received written notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be violation or breach of or default under any such Contract). 2.14 Licenses. Section 2.14 of the Disclosure Schedule contains a true and complete list of all Licenses, other than sales tax permits, used in and material to the business or operations of the Company; 2.14.1 the Company owns or validly holds all such Licenses; 2.14.2 each license listed in Section 2.14 of the Disclosure Schedule is valid, binding and in full force and effect; 2.14.3 the Sellers are not aware that the Company received any written notice during the last 12 months that the company is in default (or with the giving of notice of lapse of time or both, would be in default) under any such License; and 2.14.4 the transactions contemplated in this Agreement will not violate any such License or give any other party thereto rights to terminate the License or change the terms thereof. 2.15 Insurance. Section 2.15 of the Disclosure Schedule contains a true and complete list of all existing insurance policies in effect (other than medical or disability insurance or insurance relating to the Plans), each of which is in force and effect on this date. The Sellers have not received written notice during the last 12 months that any insurer under any policy referred to in this Section is denying liability with respect to a claim thereunder or defending under a reservation of rights clause. Section 2.15 of the Disclosure Schedule contains a list of all claims made under any insurance policies covering the Company since January 1, 1996. 2.16 Affiliate Transactions. Except for the Shareholder Debt and the Purchase]7'S obligation to pay the Deferred Consideration, (i) there are no Liabilities between the Company and any current or former officer, director, stockholder, Affiliate of the Company or any Affiliate of any such officer, director, stockholder or Affiliate, and (ii) the Company does not provide or cause to be provided any assets, services or facilities to any such current or former officer, director, stockholder or Affiliate. 2.17 Employees; Labor Relations. Sellers have not received written notice after January 1, 1996 of (i) any pending or threatened unfair labor practice complaints against the company before the National Labor Relations Board or comparable or similar state agency, or any grievance or arbitration proceeding arising out of under collective bargaining agreements, (ii) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Sellers, threatened against the Company, and (iii) no union representation question exists with respect to the employees of' the Company or, to the actual written knowledge of the Sellers, no union organization activities are taking place. 2.18 Environmental Matters. 2.18.1 Except as disclosed in Section 2.18.1 of the Disclosure Schedule: 2. 18. 1. 1 The Sellers have not received, since January 1, 1996, any citation, directive, inquiry, notice, order, summons, warning, or other similar communications that relates to any alleged, actual, or potential uncured violation or failure to comply with any Environmental Law, or of any written Environmental, Health, and Safety Liabilities with respect. to any of the Facilities or any other Assets in which the Company had an interest since January 1, 1996, or with respect to any Facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Sellers, the Company, or any other Person f or whose conduct it or they are or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 2.18.2 The Sellers have not received, since January 1, 1996, written notice that there has been any Release since January 1, 1996 of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, in violation of any Environmental Law where the Company would be liable, or from or by any other properties and assets (whether real, personal, or mixed) in which the Company has Dr had an interest. 2.18.3 The Sellers do not have in their possession any written reports, studies, analyses, tests, and monitoring pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning non-compliance by the Company or any other Person for whose conduct it or they are or may be held responsible, with Environmental Laws, with respect to the Facilities. 2.18.4 There have been no known written environmental investigations, studies, audits, tests, reviews or other analyses conducted by, on behalf of, or which are in the possession of the Sellers, arising since January 1, 1996, with respect to any Asset of the Company prior to execution of this Agreement. 2.19 Substantial Customers and Suppliers. Section 2.19.1 of the Disclosure Schedule lists the ten (10) largest customers of the Company on the basis of revenues for goods sold or services provided for the twelve mont*..11 period ending July 31, 1998. Section 2.19.2 of the Disclosure Schedule lists the ten (10) largest suppliers of the company on the basis; of cost of goods or services purchased during the twelve month period ending July 31, 1998. 2.20 Accounts Receivable. Except as set forth in section 2.20 of the Disclosure Schedule, the accounts and notes receivable of the Company reflected on the balance sheets included in the Interim Financial Statements for the period ended December 31, 1998, and all accounts and notes receivable arising subsequent to such date, (i) arose from bona fide sales transactions in the ordinary course of business consistent with past practice and are payable on customary trade terms, (ii) are not subject to any known valid set-off or counterclaim, (iii) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangements, and (iv) are not subject of any Actions or Proceedings brought by or on behalf of the Company to which Sellers have actual written notice since January 1, 1996. 2.21 Other Negotiations; Brokers. No agent, broker, finder, investment banker, financial advisor or other Person will be entitled, by or through the Sellers or the Company, to any fee, commission or other compensation in connection with the transactions contemplated by this Agreement on the basis of any act or statement made by the Sellers, the Company or any of their respective Affiliates, or any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers, the Company, or any such Affiliate. 2.22 Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Company Act of 1935, as amended. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.23 Bank and Brokerage Accounts. Section 2.23 of the Disclosure Schedule sets; forth (a) a list of the names and locations of all banks, securities brokers and other financial institutions at which the Company has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; and (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of all persons having signatory power and respect thereto. 2.24 Exemption from Registration. Except to the extent attributable, directly or indirectly, to Purchaser, or Laws applicable to Seller, the offer and sale of the Purchased Stock made pursuant to this Agreement are exempt from the registration requirements of the Securities Act. Neither any the Sellers, nor the Company nor any Person authorized to act on behalf of any of the foregoing has, to Sellers, actual written knowledge, in connection with the offering of the Purchased Stock, engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 501 (c) under the Securities Act) , (ii) any action involving a public offering within the meaning of section 4(2) of the Securities Act, or (iii) any action that would require the registration under the Securities Act of the offering and sale of the Purchased Stock pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. 2.25 Disclosure. The representations and warranties contained in this Agreement, and the statements contained in the Disclosure Schedule or in the certificates, lists and other writings furnished to Purchaser pursuant to any provision of this Agreement (including the Sellers' Financial Statements and the Interim Statements), when taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein and therein, in the light of the circumstances under which they were made, not misleading. 2.26 Limited Survival of Representations, Warranties, Covenants and Agreements. Notwithstanding any provision to the contrary: (i) except as provided in the first grammatical paragraph of Section 2 to the contrary, Sellers make no representation beyond their actual knowledge and have assumed no duty of independent investigation of any kind pursuant to the numbered subsections of this Section 2 (2.1 through 2.24) ; (ii) even though the Purchaser may investigate the affairs of the Company and attempt to confirm the accuracy of the representations and warranties of the Sellers, the Purchaser, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Sellers contained in this Agreement, but only to the extent not discovered, by the Purchaser, to be inaccurate prior to the Closing; and (iii) all such representations, warranties, covenants and agreements will survive the Closing, for a period `of eighteen (18) months only. Any such claim must be timely pursued pursuant to Article IX only. ARTICLE III 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER The Purchaser represents and warrants to Sellers that: (i) the Purchaser has full authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby; and (ii) this Agreement has been duly and validly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligations of the Purchaser, enforceable against Purchaser in accordance with its terms. In addition, Purchaser, to its best knowledge, represents and warrants to the Sellers as follows: 3.1 No Conflicts. The execution and delivery by Purchaser of this Agreement does not, and the performance by Purchaser of its obligations under this Agreement and the consummation of the transactions contemplated hereby, do not and will not: 3.1.1 conflict or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or by-laws of Purchaser; 3.1.2 subject to obtaining the consents, approvals and actions, making the filings and giving- the notices disclosed in Section 3.4 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Law or order applicable to Purchaser or its Assets and Properties; or 3.1.3 (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, or (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of any Contract or License to which Purchaser is a party, or by which it is bound. 3.2 Governmental Approvals and Filings. No consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement to which it is a party or the consummation of the transactions contemplated herein. 3.3 Legal Proceedings. There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets which (i) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, or (ii) could reasonably be expected, individually or in the aggregate with other such Actions or Proceedings, to have a material adverse effect on the business or condition of Purchaser. 3.4 Brokers. No agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement on the basis of any act or statement made by Purchaser. 3.5 Purchase for Investment. The Purchased Stock will be acquired by Purchaser for its own account for the purpose of investment and not with a view to the resale or distribution of all or any part of the Purchased Stock in violation of the Securities Act. 3.6 Survival of Representations, Warranties. Covenants and Agreements. Even though the Sellers may investigate the affairs of the Purchaser and confirm the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the Sellers, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Purchaser contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing for a period of eighteen (18) months only. Any such claim must be timely pursued pursuant to Article 10 only. 3.7 Existing Line of Credit. Purchaser, for itself and the Company, and their successors and assigns, agree not to utilize the line of credit previously available to the Company from Merrill Lynch Financial services or any affiliate. 3.8 The Company Obligations. The Purchaser will cause the Company to perform all of its post-closing duties, liabilities and obligations hereunder. ARTICLE IV 4 COVENANT'S BY THE SELLERS 4.1 Noncompetition; Non solicitation. 4.1.1 For a period of five (5) years from the Closing Date, each of the Sellers, alone or in conjunction with any other Person, or directly or indirectly through their present or future Affiliates, will not directly or indirectly own, manage, operate, join, be employed by, have a financial interest in, control or participate in the ownership, management, operation or control of, or use or permit his name to be used in connection with any business or enterprise engaged in the design, development, manufacture, distribution or sale of any products, or the provision of any services involving, in a material way, masonry tools and products (including, but not limited to, the manufacture, sale and/or distribution of bagged and/or bulk masonry products such as mortar mix, blended cement, stucco, acrylic finish), which the Company was designing, developing, manufacturing, distributing, selling or providing at any time prior to and up to and including the Closing Date anywhere in the United States of America, provided that the foregoing restriction shall not be construed to prohibit the ownership, in the aggregate, of not more than two percent (2%) of any class of securities of any corporation which is engaged in any of the businesses or enterprises described above, having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, which securities are publicly owned and regularly traded on any national exchange or in the over-the-counter market. 4.1.2 For a period of five (5) years from the closing Date, each of the Sellers shall not knowingly and intentionally directly or through an Affiliate, in a material and adverse way, (i) directly and intentionally influence any individual who is an employee of the Company as of the Closing, to terminate his or her employment with the Company, (ii) interfere in any other way with the employment, of any employee of the Company (while employed by the Company) or (iii) cause or attempt to cause (or participate in any way in any discussion or negotiation concerning) (x) any client, customer or supplier of the Company or (y) any prospective client, customer or supplier of the Company from engaging in business with the Company. This Section 4.1.2 does not apply to conversations between Debbie Cooper and the Sellers. 4.1.3 The Sellers agree that Purchaser's remedies at law for any breach or threat of breach by it of any of the provisions of this section 4.1 will be inadequate, and that, in addition to any other remedy to which Purchaser may be entitled at law or in equity, Purchaser shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining orders or orders to prevent breaches of the provisions of this Section 4.1 and to enforce specifically the terms and provisions hereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting Purchaser from pursuing, in addition, any other remedies available to it for such breach or threatened breach. A waiver by the Purchaser of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provisions of this Agreement or of any subsequent breach thereof. Any breach or purported breach of Sections 4.1.1 or 4.1.,2, or any other provision of this Agreement, shall not be a basis to withhold any payment due to Sellers pursuant to Article I, including the payment of the Deferred Consideration, when due. 4.1.4 The parties hereto consider the restrictions contained in this Section 4.1 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, but if a final judicial determination is made by a tribunal having jurisdiction that the time or territory or any other restriction contained in this Section 4.1 is an unenforceable restriction on the sellers, activities, the provisions of this Section 4.1 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the tribunal referred to above finds that any restriction contained in this Section 4.1 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. The provisions of this Section 4.1 shall in no respect limit or otherwise affect the Seller's obligations under other agreements with the Company. 4.2 Investigation by Purchaser. 4.2.1 Sellers afforded Purchaser and Purchaser's accountants, Ernst & Young, and their respective representatives access to all contracts, books and records, and all other documents and data of the Company, including formulas and manufacturing procedural instructions; of the Company and certain other documents and data that the Sellers disclosed prior to the Closing, such as certain of the vendors of the Company or prices paid for certain products connected with certain formulas, manufacturing processes, bagging operations and acrylic stucco division processes and operations, as well as employee files and records. Sellers do not endorse the Ernst & Young findings if and to the extent in conflict with Sellers' books and records. ARTICLE V 5 DELIVERABLES 5.1 Deliveries by Sellers. At the Closing, Sellers and the Company have delivered or caused to be delivered to the Purchaser, all duly and properly executed (where applicable) the following: 5.1.1 Representations and Warranties. A certification that each of the representations and warranties made by the Sellers in this Agreement, except as provided herein to the contrary (including results of Purchaser's due diligence) shall, unless waived, be true and correct in all material respects as of the date of this Agreement. 5.1.2 Regulatory Consents and Approvals. All consents, approvals and, actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby, if any. 5.1.3 Third Party Consents. Any consents (or waivers) identified i-1-i Section 2.5 of the Disclosure Schedule, and all other consents (or waivers) to the performance by the Purchaser of its obligations under this Agreement, or to the consummation for the transactions contemplated hereby as are required under any Contract or License to which the Purchaser is a party or by which any of its Assets are bound and where the failure to obtain any such consent (or in lieu thereof waiver) could reasonably be expected, individually or in the aggregate with other such failures, to materially adversely affect the Purchaser or the business or condition of the Company or otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement. 5.1.4 Sellers' Certificates. The Sellers shall have delivered tc Purchaser (i) certificates, dated the Closing Date and executed by an executive officer of the Company, in the form and to the effect of Exhibit B hereto and (ii) certificates, dated the Closing Date and executed by the chief financial officer of the Company, in the form of Exhibit C hereto. 5.1.5 Resignations of Officers and Directors. The resignations of all current officers and directors of the Company, effective as of the Closing Date. 5.1.6 Disclosure Schedule. The Disclosure Schedule, updated and current through the Closing Date. 5.1.7 Receipt of Purchased Stock. Certificates representing the Purchased Stock have been transferred to Purchaser in accordance with the terms of this Agreement. 5.1.8 Payment of Indebtedness. A release executed by Sellers confirming payment of the Consideration and the Additional Consideration acknowledging that all Shareholder Debt has been cancelled or otherwise paid in full, and is of no further force and effect. All other Indebtedness owing by the Company, and not reflected by the Seller Financial Statements or the Interim Statements has been retired, released or repaid except the Deferred Consideration shall be payable following the Closing as provided in Section 1.5. 5.2 Deliveries by Purchaser. At the Closing, the Purchaser has delivered or caused to be delivered to the Sellers, all duly and properly executed (where applicable) the following: 5.2.1 Representations and Warranties. A certification that each of ` the representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects as of the date of this Agreement. 5.2.2 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby, if any. 5.2.3 officers' certificate. Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and executed by the president or vice-president or other officer of Purchaser, substantially in the form and to the effect of Exhibit D hereto. ARTICLE VI 6 INDEMNIFICATION; TAX MATTERS 6.1 Indemnification. 6.1.1 Except as provided in Section 6.1.3, the Sellers will indemnify the Company, the Purchaser and its stockholders and the officers, directors, employees, agents and Affiliates, in respect of, and hold each of them harmless from and against, any and all Losses actually suffered, incurred or sustained by any of them, or resulting from any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or written agreement on the part of the Sellers contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 6.1.2 Purchaser will indemnify the Sellers in respect of, and hold him harmless from and against, any and all Losses actually suffered, incurred or sustained by him or to which he becomes subject, resulting from, arising out of or relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 6.1.3 The indemnification obligations of the Sellers set forth in this Article VI shall apply only after the aggregate amount of such obligations exceeds the sum of $50,000.00. If, and only after, the aggregate amount of such obligations exceeds the sum of $50,000-00, then such obligations shall include the first $50,000.00. 6.2 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 6.1 will be asserted and resolved as follows: 6.2.1 In order for an Indemnified Party to be entitled to any indemnification provided for under Section 6.1 in respect of, arising out of or involving a claim or demand made against the Indemnified ?arty (a "Claim"), the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by such Indemnified Party of written notice of the Third Party Claim; Provided, that failure to give such claim Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. 6.2.2 If a Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnifying Party, which counsel must be reasonably satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, but shall continue to pay for any expenses of investigation or any Loss suffered. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. If, and during such period that (i) the Indemnifying Party shall not assume the defense of a Third Party claim with counsel reasonably satisfactory to the Indemnified Party within 10 Business Days of any Claim Notice or (ii) legal counsel for the Indemnified Party notifies the Indemnifying Party that there are or may be legal defenses available to the Indemnifying Party or to other Indemnified Parties which are different from or additional to those available to the Indemnified Party, which., if the Indemnified Party and the Indemnifying Party were to be represented by the same counsel, would constitute a conflict of interest for such counsel or prejudice prosecution of the defenses available to such Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense of a Third Party Claim and fail to diligently prosecute such defense, then in each such case the Indemnified Party, by notice to the Indemnifying Party, may employ its own counsel and control the defense of the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees, charges and disbursements of counsel employed by the Indemnified Party, and the Indemnified Party shall be promptly reimbursed for any such fees, charges and disbursements, as and when incurred. Whether the Indemnifying Party or the Indemnified Party control the defense of any Third Party Claim, the parties hereto shall cooperate in the defense thereof. Such cooperation shall include the retention and provision to the counsel of the controlling party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation or any material provided hereunder. The Indemnifying Party shall have the right to settle, compromise or discharge a Third Party Claim (other than any such Third Party Claim in which criminal conduct is alleged) without the Indemnified Party's consent if such settlement, compromise or discharge (i) constitutes a complete and unconditional discharge and release of the Indemnified Party, and (ii) provides for no relief other than the payment of monetary damage and such monetary damages are paid in full by the Indemnifying Party. 6.2.3 In the event any Indemnified Party should have a claim under 11;ection 6.1 against any Indemnifying Party that does not involve a third party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 6.1 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within thirty (30) days, such dispute shall be resolved as provided in Article IX hereof. 6.3 Allocation of Tax Liability. 6.3.1. Except to the extent a reserve for Taxes is reflected on the Sellers' Financial Statements or the Interim Statements, `the Sellers shall be responsible for and pay and shall indemnify and hold harmless Purchaser and the Company with respect to (i) any and all Taxes imposed on the Company, or for which the Company is liable with respect to any periods ending on or before December 31, 1998; provided, that in the case of any adjustment to any item of loss or expense for any such years, which gives rise to corresponding and offsetting items of loss or expense in subsequent years the benefit of which is or will be actually realized by the Company or its successors or assigns including by reason of any increase in a net operating loss, the Seller's obligations shall be limited to the amount of interest (computed at the appropriate statutory rates) and penalties actually paid to the appropriate taxing authorities by the Company as a result of such timing differences in the case of audit adjustments, or at a rate of eight percent (8~) per annum in the case of other adjustments, (ii) without duplication (subject to the same proviso) , all Taxes arising out of a breach of the representations, warranties or covenants contained herein (to the extent not constituting a Non-Material Claim), (iii) any Tax liability resulting from any ongoing state audits that exceed, in the aggregate,, any reserve therefore set forth on the Sellers, Financial Statements or the Interim Statements, and (iv) any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified hereunder. 6.3.2 From and after January 1, 1999, Purchaser shall cause the Company to prepare, or cause to be prepared, and shall file, or cause to be filed, all reports and returns of the Company required to be filed, and timely and fully pay all such Taxes. . Purchaser shall cause the Company to timely pay the appropriate taxing authorities the Taxes shown to be due and payable on all Tax Returns of the Company filed after the Closing Date, concurrent with the filing of such Tax Returns. Tax: Returns of the company for a period ending on or before the Closing Date shall be prepared on a basis consistent with the Tax Returns filed. by the Company for previous taxable periods, subject to the requirements of applicable law. 6.4 Tax Contests. 6.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then the party hereto first receiving notice of such Tax Claim shall promptly provide written notice thereof to the other parties hereto. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received, from time to time, as received from the Taxing Authority or other Person. 6.4.2 If, within 30 calendar days after any the Sellers receives or delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the Purchaser an Election Notice, then subject to the provisions of this Section 7.4, the Sellers shall defend or prosecute, at their S01E! Cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall defended or prosecuted diligently by the Sellers to a Final Determination; provided, that the Sellers shall not, without the prior written consent of the Company, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to the Company. So long as the Sellers are defending or prosecuting a Tax Claim with respect to the Company, or as otherwise reasonably required by Sellers in conjunction with filing or amending of tax returns, the Company shall promptly provide or cause to be provided to the Sellers any information reasonably requested by the Sellers relating to such Tax Claim, and shall otherwise cooperate with the Sellers and their representatives in good faith in order to contest effectively such Tax Claim. The Sellers shall inform the Company of all developments and events relating to such Tax claim (including, without limitation, providing to the Company copies of all written materials relating to such Tax Claim) and the Company or its authorized representatives shall be entitled, at the expense of the Company, to attend, but not to participate in or control, all conferences, meetings and proceedings relating to such Tax Claim. 6.4.3 If, with respect to any Tax Claim, the Sellers fail to deliver an Election Notice to the Company within the period provided in Section 6.4.2 or, after delivery of such Election Notice to the Company, the Sellers fail diligently to defend or prosecute such Tax Claim to a Final Determination, then upon not less than ten (10) days written notice of its intention to do so (thus giving the Sellers 10 days notice and opportunity to cure), the Company shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at. the sole cost, expense and risk of the Sellers, such Tax Claim, to the extent reasonably necessary. The Company shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof, provided they act reasonably and in good faith and keep Sellers reasonably informed. If requested by the Company, the Sellers shall cooperate in good faith with the Company and its authorized representatives in order to contest effectively such Tax Claim. The Sellers may attend, but not participate in or control, any defense, prosecution, settlement or compromise of any Tax Claim controlled by the Company pursuant to this Section 6.4.3, and shall bear their own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by the Company pursuant to this Section 6.4.3, the Company shall, from time to time, be entitled to receive current payments from the Sellers with respect to costs and expenses incurred by the Company, to the extent reasonable in amount, in connection with such defense or prosecution (including, without limitation, reasonable attorneys', accountants" and experts" fees and disbursements, settlement costs, court costs and any other costs or expenses for investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as a result of receiving a payment from the Sellers pursuant to this Section 6.4) (collectively "Associated Costs"). 6.4 In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Sellers pursuant to this Section 6.4, the Sellers shall pay to the appropriate Tax Indemnitees, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim within five Business Days after such Final Determination. In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Company pursuant to and in substantial compliance with the terms of this Section 6.4, the Sellers shall pay to the appropriate Tax Indemnitee, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim, together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, within five Business Days after such Final Determination, subject to any right of appeal. In the case of any Tax Claim not: covered by the two preceding sentences, the Sellers shall pay to the Company, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim (calculated after taking into account any actual reduction in the current liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting from such payment or such Tax Claim) , together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, at least five Business Days before the-date payment of such Tax is due from any Tax Indemnitee. 6.4.5 Notwithstanding anything contained in this Article VII to the contrary, the rights of the Sellers under this Section 6.4 to defend or prosecute,. or to control the defense or prosecution of, any Tax Claim shall be no greater than those rights that the Company would have to defend or prosecute, or to control the defense or prosecution of, such Tax Claim. 6.5 Cooperation Regarding Tax Matters. Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to the other parties hereto and the Company such cooperation and information as any of them reasonably may request related to the filing of any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules, workpapers and relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Article VII shall bear all costs of filing such Tax Returns. 6.6 Other Tax Covenants. 6.6.1 Without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed, neither the Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect or relate to the Company, make or change any tax election, change any annual tax accounting period, adopt or change any method of tax accounting, file any amended Tax Return, enter into any method of tax accounting, enter into any closing agreement, settle any Tax Claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of increasing any post-closing Tax Liability of the Purchaser, of the Company or any Affiliate of Purchaser. 6.6.2 Without the prior written consent of a Seller, neither the Purchaser nor the Company shall, to the extent it may affect or relate tc the Company, make or change any tax election, file any amended Tax Return, enter into any closing Agreement, settle any Tax claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would affect a Pre-Closing Tax Period, unless required by applicable law. 6.6.3 So long as any books, records and files retained by the Sellers or and his Affiliates relating to the business of the Company or the books, records and files delivered to the control of the Purchaser pursuant to this Agreement to the extent they relate to the operations of the Company prior to the Closing Date, remain in existence and are available, each party (at its own expense) shall have the right upon prior notice to inspect and to make copies of the same at any time during business hours for any proper purpose. The Purchaser and the Sellers and their respective Affiliates shall use reasonable efforts not to destroy or allow the destruction of any such books, records and files without first: providing 60 days' written notice of intention to destroy to the other, and allowing such other party to take possession of such records. The Purchaser shall cause the Company to maintain relevant tax records for all at least three years following the end of the applicable tax year, or such greater period while in dispute, or then subject to audit. 6.7 Conflict. In the event of a conflict between the provisions of Sections 6.3 through 6.7 of this Article VI and any other provision of this Agreement, such provisions of this Article VI shall control. ARTICLE VII 7 DEFINITIONS 7.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below: "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation or audit. "Affiliate" means, as applied to any Person, (a) any other Person directly or indirectly owning, owned by, controlling, controlled by or under common control with, that Person, (b) any director, partner, officer, agent, employee or relative of such Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agreement" means this Purchase Agreement, the Exhibits and the Disclosure Schedule and the certificates delivered in connection herewith, as the same may be amended from time to time in accordance with the terms hereof. "Assets" of any Person means all assets and properties of every kind, nature, character and description, including goodwill and other tangibles, operated, owned or leased by such Person, including cash and cash equivalents, investments, accounts and notes receivable, chattel paper, documents, instruments, real estate, equipment, inventory, goods and intellectual property. "Associated Costs" has the meaning ascribed to it in Section 7.4.3. "Benefit Plan" means any Plan, existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the Company or under which any employee, former employee or director of the Company or any beneficiary thereof is covered, is eligible for =overage or has benefit rights. "Books and Records" means all files, documents, instruments, papers, books and records relating to the Company, including financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans. "Claim" has the meaning ascribed to it in Section 6.2-1. "Claim Notice" means written notification pursuant to Section 7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought by an Indemnified Party. "Closing" and "Closing Date" have the meaning ascribed to them in Section 1.3. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Company" has the meaning ascribed to it in the first recital of this Agreement (and shall include all predecessors and subsidiaries of the Company). "Consideration" has the meaning ascribed to it in Section 1.2.1. "Contract" means any agreement, lease, evidence of indebtedness, mortgage, indenture, security agreement or other contract (whether written or oral). "Deferred Consideration" has the meaning ascribed to it in "Disclosure Schedule" means the schedules delivered to Purchaser by or on behalf of the Company and the Sellers, and the schedules delivered by or on behalf of Purchaser, containing lists, descriptions, exceptions and other information and materials as are required to be included therein pursuant to this Agreement. "Dispute Period" means the period ending thirty (30) calendar days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "Election Notice" means a written notice provided by the Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their indemnity obligation under this Agreement with respect to such Tax Claim and (ii) the Sellers elect to contest, and to control the defense or prosecution of, such Tax Claim at their sole risk and sole cost and expense. "Environment" means all air, surface water, groundwater, drinking water supply, stream sediments, or land, including soil, land surface or subsurface strata, all fish, wildlife, biota and all other environmental medium or natural resources. "Environmental, Health and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law and consisting of or relating to (i) any environmental, health or safety matters or conditions (including on-site or off-site contamination., occupational safety and health, and regulation of chemical substances or products) ; (ii) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (iii) financial responsibility under Environmental Law or Occupational Safety and Health Law for clean-up costs or corrective action, including any investigation, clean-up, removal, containment, or other remediation or response actions required by Environmental Law or Occupational Safety and Health Law (whether or not such clean-up has been required or requested by any governmental body or any other Person) and for any natural resource damages; or (iv) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action" include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended (CERCLA). "Environmental Law" means all federal, state, local and foreign environmental, health and safety laws, common law orders, decrees, judgments, codes and ordinances and all rules and regulations promulgated thereunder, civil or criminal, including, without limitation, Laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the Environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid, toxic or hazardous substances or wastes. "Environmental Permit" means any federal, state, local, provincial, or foreign permits, licenses, approvals, consent or authorizations required by any Governmental or Regulatory Authority under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental or Regulatory Authority under any applicable Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures or equipment (including motor vehicles, tank cars and rolling stock) currently or formerly owned or operated by the Company. "Final Determination" means (i) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other Order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired, (ii) a closing agreement entered into under Section 7121 of the Code or any other settlement agreement entered into in connection with an administrative or judicial proceeding, (iii) the expiration of the time for instituting suit with respect to a claimed deficiency or (iv) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto. "GAAP" means generally accepted accounting principles of the United States, consistently applied. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Hazardous Activity" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including-any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company. "Hazardous Material" means (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (ii) any chemicals, materials, substances or wastes which are now or hereafter become defined as or included in the definition of "hazardous substances,11 "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes,," "toxic substances," "toxic pollutants" or words of similar import, under any Environmental Law; and (iii) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental or Regulatory Authority. "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business, as reflected by the Books and Records), (iv) under capital (as opposed to real estate) leases, (v) long term debt and (vi) in the nature of guarantees of the obligations described in clauses (i) through (v) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article VII. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article VII. "Indemnity Notice" means written notification pursuant to Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim. "Interim Statements" has the meaning ascribed to it in Section 2.4. "Laws" means all laws, statutes, rules, regulations, ordinances arid other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 2.15. "Liabilities" means all Indebtedness, obligations and other liabilities (or contingencies that have not yet become liabilities) of a Person (whether absolute, accrued, contingent (or based upon any contingency) , known or unknown, fixed or otherwise, or whether due or to become due). "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" means any and all damages, fines, fees, penalties, deficiencies, diminution in value of investment, losses and expenses, including without limitation, interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (such fees and expenses to include all fees and expenses, such as fees and expenses of attorneys, incurred in connection with (i) the investigation or defense of any Third Party Claims or (ii) asserting or disputing any rights under this Agreement against any party hereto or otherwise). "Net Book Value" has the meaning ascribed to it in Section "Occupational Safety and Health Law" means any Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies) , designed to provide safe and healthful working conditions. "Option" with respect to any Person means any security, right, subscription, warrant, option, "phantom" stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of such Person, or (ii) receive any benefits or rights similar to those enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including without limitation, any rights to participate in the equity, income or election of directors or officers of such Person. "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 2.15. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Plan" means any bonus, compensation, pension, profit sharing, retirement, stock purchase or cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Post-Closing Period" means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. ` "Pre-Closing Period" means any taxable period or portion thereof that is not a Post-Closing Period. "Consideration and Additional Consideration" have the meaning ascribed to it in Section 1.2. "Purchased Stock" has the meaning ascribed to it on the first page of this Agreement. "Purchaser" has the meaning ascribed to it in the first paragraph of - - -this Agreement. "Real Property" has the meaning ascribed to it in Section 2.15. "Real Property Leases" has the meaning ascribed to it in Section 2.15. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous Material into the Environment. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Seller" and the "Sellers" have the meaning ascribed to them on the first page of this Agreement. "Seller Financial Statement" in Section 2.4. "Sellers' Calculation" has the meaning ascribed to it in Section 1.2.2. "Shareholder Debt" has the meaning ascribed to it in Section 1.2.1. "Subsidiary" means any Person in which another Person, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least fifty percent (50%) of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof. Unless the context otherwise requires a different interpretation, references to a "Subsidiary" mean a Subsidiary of the Company. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Claim" means any written claim with respect to Taxes attributable to a Pre-Closing Period made by any Taxing Authority or any Person that, if pursued successfully, could serve as the basis for a claim for indemnification, under this Agreement, of Purchaser the Company and other Indemnified Parties specified in Section 7.1 of this Agreement. "Tax Indemnity" means the Company, the Purchaser and their respective stockholders, officers, directors, employees, agents and Affiliates of each of them (other than the Sellers). "Tax Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax. "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. 7.2 Interpretation of Agreement. 7.2.1 Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; (v) the word "including" does not imply any limitation to the item or matter mentioned; and (vi) the phrases "ordinary course of business" and "ordinary course of business consistent with past practice" refer to the business and practice of the Company. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. 7.2.2 When used herein, the phrase "to the knowledge of" any Person, 11to the best knowledge of" any Person or any similar phrase, means (i) with respect to any Person who is an individual, the actual knowledge of such Person, (ii) with respect to any other Person, the actual knowledge of the directors, officers, managers, and other similar Persons in a similar position or having similar powers and duties, in either case without any duty of independent investigation of any kind. ARTICLE IX 8 MISCELLANEOUS 8.1 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or mailed by prepaid first class certified mail, return receipt requested, or sent by prepaid courier, to the parties at the following addresses: If to Purchaser, to: -------------------- ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 Attn.: Sr. Vice President and General Counsel If to the Sellers, to: ---------------------- Mr. James M. Isaac and Mr. Tommy C. Isaac 134 Mockingbird P.O. Box 768 Livingston, Texas 77351 Flatonia, Texas 78941 With copies to Sellers' attorney: -------------------------------- Stephen L. Brochstein, Esquire BROCHSTEIN, SLOBIN & CHAPMAN, P.C. One Riverway, Ste. 1950 Houston, Texas; 77056 and to Sellers' accountant: --------------------------- Mr. Andrew M. Rossi A.M. ROSSI, PLLC 1458 Campbell Rd., Ste. 150 Houston, Texas 77055 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given -upon delivery, (ii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt and (iv) if delivered by courier to the address as provided for in this Section, be deemed given on the earlier of the second Business Day following the date sent by such courier or upon receipt. Any party from time to time may change its address or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 8. 2 Entire Agreement. This Agreement (including the Exhibits hereto and the Disclosure Schedule) supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof. 8.3 Expenses. Except as otherwise expressly provided in this Agreement (including without limitation as provided in Article VII) , each party will pay its own costs and expenses incurred in connection with this Agreement, and the transactions contemplated hereby and thereby; provided, the Sellers will pay all expenses relating hereto of the Company incurred in respect of the period prior to the Closing; other than Ernst & Young. 8.4 Confidentiality. Purchaser and the Sellers will hold in strict confidence from any Person (other than its Affiliates or representatives) all documents and information concerning the other party hereto or any of its Affiliates furnished to it by or on behalf of the other party in connection with this Agreement or the transactions contemplated hereby, except to the extent the disclosing party can demonstrate that such documents or information was (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. Such covenant of confidentiality will remain in effect unless a party is compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law. This section is meant to supplement the section entitled "Confidentiality" in that certain Letter Agreement between the Purchaser and the Sellers dated November 13, 1998 (the "Letter Agreement"). Any conflict between the provisions of this section and the "Confidentiality" section of the Letter Agreement shall be resolved in accordance with the provisions of the Letter Agreement. 8.5 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the Purchaser or the Sellers shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to cause the Purchaser or the Sellers to fulfill their obligations under this Agreement. The Sellers shall also, for a reasonable period of time (not to exceed ninety (90) days), cooperate with Purchaser by continuing to provide any welfare benefit plan, payroll services plan, operational service, or other service of any nature being provided to the Company by the Sellers or any business entity owned, managed or controlled, in any manner, by the Sellers. All of such services shall be provided at the cost of Sellers, plus ten percent (10%) , and be payable by Purchaser and the Company upon demand. 8.6 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 8.7 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of the parties hereto. 8.8 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of t ` he parties to confer third-party beneficiary rights, and this Agreement: does not confer any such rights, upon any other Person other than any Person entitled to indemnity under Article VII. 8.9 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by either party without the prior written consent of the other party(ies) and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and. assigns. 8. 10 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 8.11 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will. not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 8. 12 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Texas. 8.13 Limited Recourse of Purchaser. Regardless of anything in this Agreement to the contrary, (i) obligations and liabilities of Purchaser hereunder shall be without recourse to any stockholder of Purchaser or any of such stockholder's Affiliates, directors, employees, officers or agents, except and to the extent such third party is a successor or assign of Purchaser, and shall be limited to the assets of such party and (ii) the stockholders of Purchaser, except and to the extent such third party is a successor or assign of Purchaser, have made no (and shall not be deemed to have made any) representations, warranties or covenants (express or implied) under or in connection with this Agreement or any other Operative Agreement, subject to further written agreement by such obligor. 8. 14 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 8.15 Limited Recourse of Sellers. 8.15.1 No Reliance. Purchaser acknowledges and agrees that upon the Closing Purchaser shall have had ample opportunity to review documents concerning the Company and its Assets and Liabilities (collectively, the "Property") and to conduct physical inspections, including specifically, without limitation, inspections regarding the environmental condition of the Real Property and the Assets, the Purchaser hereby represents, warrants and agrees that as of the Closing, Purchaser shall have (a) examined the Property and will be familiar with the physical condition thereof; and (b) conducted such investigations of the Property (including without limitation the environmental condition thereof) as Purchaser has deemed necessary to satisfy itself as to the condition of the Property and the existence or nonexistence, or curative action to be taken with respect to, any hazardous or toxic substances on or discharged from the Property, (c) neither Sellers, nor any of their affiliates, agents, officers, employees or representatives of any of the foregoing have made or will make any verbal or written representations, warranties, promises or guarantees whatsoever to Purchaser, expressed or implied, other than as provided in this Agreement or in any other closing documents executed by the Seller to be bound thereby, and in particular, that no such representations, warranties, *guarantees or promises have been or will be made with respect to the physical condition, operation, or any other matter or thing affecting or related to the Property, and (d) Purchaser has not relied and will not rely upon any representations, warranties, guarantees or promises or upon any statements made or any information provided concerning the Property provided or made by Seller or its predecessors, or any of their respective agents and representatives, other than as provided in this Agreement or :-n the Closing Documents executed by the Seller to be bound thereby and subject thereto. Purchaser has elected to purchase the Company only after having made and relied solely on its own independent investigation, inspection, analysis, appraisal and evaluation and the facts and circumstances related thereto. ACCORDINGLY, AND SUBJECT TO THE PROCEEDING PROVISIONS OF THIS SECTION 8.15, PURCHASER ACKNOWLEDGES AND AGREES THAT THE PROPERTY IS ACCEPTED "AS IS, WHERE IS, WITH ALL FAULTS", AND SELLER OTHERWISE EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY. WITHOUT LIMITING THE GENERALITY OF THE PRECEDING SENTENCE OR ANY OTHER DISCLAIMER SET FORTH HEREIN, BUT SUBJECT TO ANY EXPRESS REPRESENTATIONS MADE IN THIS AGREEMENT OR IN ANY CLOSING DOCUMENTS EXECUTED BY THE SELLER TO BE BOUND THEREBY, SELLERS AND PURCHASER HEREBY AGREE THAT SELLERS HAVE NOT MADE AND ARE NOT MAKING ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO (A) THE NATURE OR CONDITION, PHYSICAL OR OTHERWISE, OF THE PROPERTY OR ANY ASPECT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF HABITABILITY, SUITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE, (B) THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE IMPROVEMENTS OR THE STATE OF REPAIR OR LACK OF REPAIR OF ANY OF THE IMPROVEMENTS, (C) THE SOIL CONDITIONS, DRAINAGE CONDITIONS, TOPOGRAPHICAL FEATURES, ACCESS TO PUBLIC RIGHTS-OF-WAY, AVAILABILITY OF UTILITIES OR OTHER CONDITIONS OR CIRCUMSTANCES WHICH AFFECT OR MAY AFFECT THE PROPERTY OR ANY USE TO WHICH PURCHASER MAY PUT THE PROPERTY, (E) ANY ENVIRONMENTAL, GEOLOGICAL, METEOROLOGICAL, STRUCTURAL, OR OTHER CONDITION OR HAZARD OR THE ABSENCE THEREOF HERETOFORE, NOW OR HEREAFTER AFFECTING IN ANY MANNER THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE ABSENCE OF ASBESTOS OR ANY ENVIRONMENTALLY HAZARDOUS SUBSTANCE ON, IN, UNDER OR ADJACENT TO THE PROPERTY, (I) THE COMPLIANCE OF THE PROPERTY OR THE OPERATION OR USE OF THE PROPERTY WITH ANY APPLICABLE RESTRICTIVE COVENANTS, OR WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL BODY (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ANY ZONING LAWS OR REGULATIONS, ANY BUILDING CODES, ANY ENVIRONMENTAL LAWS, AND THE AMERICANS WITH DISABILITIES ACT OF 1990, 42 U.S.C. 12101 ET SEQ. PURCHASER RECOGNIZES AND AGREES TF~AT UPON CLOSING PURCHASER SHALL OTHERWISE BEAR THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, VIOLATIONS OF ANY APPLICABLE LAWS, CONSTRUCTION DEFECTS, AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLERS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLERS BY REASON OF OR ARISING OUT OF ANY VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING ANY ENVIRONMENTAL LAWS), CONSTRUCTION DEFECTS, PHYSICAL CONDITIONS, AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY WITH THE EXCEPTION OF THOSE MATTERS SET FORTH IN THIS AGREEMENT AND IN ANY CLOSING DOCUMENT, SIGNED BY A SELLER. ARTICLE IX 9 DISPUTE RESOLUTION 9.1 In the event there is a dispute under this Agreement, the disagreeing parties shall meet with one another and diligently attempt to resolve their disagreements. If they are unable to do so, then upon request of either party to the dispute made within twenty (20) days of the failure of negotiations, they will arbitrate the dispute, utilizing the process Set forth below 9.2 Any dispute, controversy or claim arising out of or relating to this Agreement, including those pertaining to indemnities and taxes, shall be submitted for determination by a board of three (3) arbitrators to be selected for each such controversy so arising as follows: The party desiring arbitration (the "Petitioner") shall notify the other party (the "Respondent") to such effect and shall submit the name of an arbitrator and state the "Question" or "Questions". The Respondent shall within ten (10) business days thereafter select an arbitrator and notify the Petitioner of the name of such arbitrator. If Respondent shall fail to name an arbitrator within said ten (10) days, then the Petitioner shall have the right to apply to the person who is then Senior Judge (in term of service) of the United States District Court having jurisdiction for the Southern District of Texas, Houston Division, for the appointment of an arbitrator for or on behalf of the Respondent, and in such case the arbitrator appointed by the person who is such Judge shall act as if named by the Respondent. Within ten (10) days after the appointment of the second arbitrator, the two arbitrators shall choose the third arbitrator. In the event said two arbitrators should fail to choose the third arbitrator within said ten (10) days, then either Petitioner or Respondent shall have the right, upon reasonable notice to the other party, to apply to the person who is such Judge for the appointment of a third arbitrator, and in such case the arbitrator so appointed by such Judge shall act as the third arbitrator. Should any arbitrator be or become unable or unwilling to act, another shall be selected in the same manner. 9.3 The Question to be decided by the arbitrators shall be stated in writing in the written request for arbitration, and the jurisdiction of the arbitrators shall be limited to a decision of the Question so stated in writing. The board of arbitrators so chosen shall proceed immediately, after reasonable notice to the Parties hereto, to hear and determine the Question or Questions in dispute. The arbitrators shall be impartial. The' arbitration shall be conducted in Houston, Texas in accordance with the most recent commercial arbitration rules promulgated by the American Arbitration Association, except as may be provided for herein to the contrary. The arbitrators are relieved from judicial formalities, and shall make their award with a view toward effecting the general intent of this Agreement. The decision of the majority shall be final and binding upon the Parties. The Petitioner shall submit its brief to the arbitrators within fifteen (15) days after notice of the election of the third arbitrator. Upon receipt of the Petitioner's brief, the Respondent shall have fifteen (15) days to file a reply brief. On receipt of the Respondent's brief, the Petitioner shall have seven (7) days to file a rebuttal brief. The Respondent shall have seven (7) days. from the receipt of the Petitioner's rebuttal to file its rebuttal brief. The arbitrators may extend the time for filing of briefs at the request of either Party. The arbitration hearing shall be concluded within three (3) days unless otherwise ordered by the arbitrators and the award thereon shall be made within three (3) days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all Parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. 9.4 The decision of the arbitrators shall be in writing and signed by such arbitrators, or a majority of them, and shall be final and binding upon the Parties hereto as to the Question or Questions so submitted to and determined by such arbitrators. Each Party shall bear the fees and expenses of the arbitrator selected by or for such Party, the fees and expenses of counsel, witness and employees of the Parties hereof and all other costs and expenses incurred exclusively for the benefit of the Party incurring the same shall be borne by the Party incurring such fees or expenses. The Party to be responsible for paying all other fees and expenses, including but without limitation, compensation for the third arbitrator, shall be determined by the decision of the arbitrators as a part of the award. The Parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising during the period of this Letter Agreement and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination or expiration of this Letter Agreement. Nothing herein contained shall be deemed to give the arbitrators any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Letter Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth on the first page hereof. PURCHASER ISG RESOURCES, INC. /s/ J. I. Everest II ----------------------- By: J. I. Everest II Its: Treasurer & CFO SELLERS JAMES M. ISAAC /s/James M. Isaac -------------------- James M. Isaac TOMMY C. ISAAC /s/ Tommy C. Isaac -------------------- Tommy C. Isaac EXHIBIT A Sellers' Financial Statements For Period Ending July 31, 1998 and the Interim Statements EXHIBIT B Sellers' Officer's Certificate We, the undersigned, being the President and Vice President of J. Marvin Isaac Interests, Inc., d/b/a Best Masonry & Tool Supply, a Texas corporation (the "Company"), do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section 5.1.8 of the Stock Purchase Agreement dated as of January 7, 1999 (the "Agreement") between James M. Isaac and Tommy C. Isaac (collectively the "Sellers") and ISG Resources, Inc., a Utah corporation (the "Purchaser"). Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings given to them in the Agreement. 2. Attached hereto as Exhibit B-1 is a correct and complete copy of the Articles of Incorporation of the Company, as in effect on the date hereof. 3. Attached hereto as Exhibit B-2 is a correct and complete copy of the By-Laws of the Company, as in effect on the date hereof. 4. Attached hereto as Exhibit B-3 is a correct and complete copy of the Certificate of Good Standing of the Company, as in effect on the date hereof. 5. Attached hereto as Exhibit B-4 is a schedule of persons that have been duly elected (or appointed) or qualified, and/or that have acted, as officers of the Company (to and including the date hereof), each holding the respective offices set forth opposite their names; and the signatures set forth on Exhibit B-4 opposite their names are the genuine signatures of such officers executing the Agreement and any other agreements or documents on behalf of the Company in connection with the Closing under the Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of January 7, 1999. J. MARVIN ISAAC INTERESTS, INC., d/b/a BEST MASONRY & TOOL SUPPLY __________________ By:_______________ Its: President J. MARVIN ISAAC INTERESTS, INC., d/b/a BEST MASONRY & TOOL SUPPLY __________________ By:_______________ Its: Vice President EXHIBIT C Officer's Certificate We, the undersigned, the President and Vice President of J. Marvin Isaac Interests, Inc., d/b/a Best Masonry & Tool Supply, a Texas corporation (the "Company"), do hereby certify that: 1. This Certificate is being delivered as of the Closing pursuant to Section 5.1.8 of the Stock Purchase Agreement dated as of January 6, 1999 (the "Agreement") between James M. Isaac and Tommy C. Isaac (collectively the "Sellers") and ISG Resources, Inc., a Utah corporation (the "Purchaser"). Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings given to them in the Agreement. 2. We are familiar with the Company's finances and capitalization. 3. The Sellers have provided the Purchaser with Seller's Financial Statements for the period Ending July 31, 1998 and Financial Statements for the period August 1, 1998 through December 31, 1998 (the "Interim Statements"), collectively, the "Statements". 4. The Statements fairly represent the Company's financial condition and operations as of and through the respective dates and periods therein delineated, and the results of the Company's operations and changes in financial position for the periods then ended, and have been prepared as set forth in Section 2.4 of the Agreement. 5. As of the Closing, no material adverse change in the financial condition or operations of the Company has occurred from that shown on the Statements, except as may be contemplated in the Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate to be effective as of January 7, 1999. J. MARVIN ISAAC INTERESTS, INC., d/b/a BEST MASONRY & TOOL SUPPLY ______________________ By:___________________ Its: President J. MARVIN ISAAC INTERESTS, INC., d/b/a BEST MASONRY & TOOL SUPPLY _______________________ By:____________________ Its: Vice President EXHIBIT D Purchaser's Officer's Certificate The undersigned, the Vice President, Treasurer and Chief Financial Officer of ISG Resources, Inc., a Utah corporation (the "Purchaser"), hereby certifies that: 1. This Certificate is being delivered at the Closing today pursuant to Section 5.2 of the Stock Purchase Agreement dated as of January 7, 1999 (the "Agreement") between James M. Isaac and Tommy C. Isaac (collectively the "Sellers") and the Purchaser. Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings given to them in the Agreement. 2. Attached hereto is a correct and complete copy of the authorization of the Board of Directors of the Purchaser authorizing the consummation of the transactions described in the Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of January 7, 1999. ISG RESOURCES, INC. _______________________ By: J.I. Everest, II EX-10.10 20 PURCHASE AGREEMENT - MARY ELLEN DENTIS, TRUSTEE PURCHASE AGREEMENT This Purchase Agreement (this "Agreement") is dated October 26, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990, an individual residing in the state of California and Judith O. Garcia, as Trustee of the Osborne Trust, also an individual residing in the state of California (Mrs. Dentis and Mrs. Garcia may be individually referred to as a "Seller" or collectively as the "Sellers"). RECITALS The Sellers own and desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, all of the issued and outstanding shares of capital stock of Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc., both California corporations, as well as 1.3 acres, more or less, of real property located at 16005 Phoebe Avenue, La Mirada, California (the "Real Property"), more particularly described on the attached Exhibit A. The authorized capital stock issued and outstanding of both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. is referred to herein as the "Purchased Stock." Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. will be collectively referred to in this Agreement as the "Company". Whenever a statement, representation, warranty or covenant is made by or about the "Company" it is understood that the statement, representation, warranty or covenant is made by or about both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. Unless otherwise defined in this Agreement, the capitalized terms used in this Agreement have the meanings given in Article VIII below. In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1 SALE OF PURCHASED STOCK and REAL PROPERTY; CLOSING 1.1 Purchase and Sale. At the Closing, on the terms and conditions set forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase from the Sellers, the Purchased Stock and the Real Property. 1.2 Purchase Price. 1.2.1 The purchase price (the "Purchase Price") for the Purchased Stock and Real Property will be one million eight hundred thousand dollars ($1,800,000.00) (subject to adjustment as described below) and will be paid in cash at the Closing. The Purchase Price shall be allocated as follows: 1.2.1.1 For the Real Property - $700,000.00; 1.2.1.2 For the Lewis W. Osborne, Inc. stock - $900,000.00 1.2.1.3 For the United Terrazzo, Inc. stock - $200,000.00. 1.2.2 Commencing the first business day following the Closing Date, Purchaser, with the cooperation of Sellers, shall prepare a balance sheet for the Company reflecting the consolidated financial condition of Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. as of the end of business day on October 31, 1999 (the "Closing Date Balance Sheet"). Such Closing Date Balance Sheet will be prepared on a basis consistent with GAAP as consistently applied during the past two years by the Company's certified public accountants, except as set forth below. On the basis of the Closing Date Balance Sheet and within forty-five (45) days of the Closing Date, the Purchaser, with the cooperation of the Sellers, shall calculate the consolidated adjusted net worth of the Company as of the Closing Date ("Adjusted Net Worth"): 1.2.2.1 The trade accounts receivable shall be the actual accounts receivable less the accounts receivable that were more than 90 days old on the Closing Date. No reserve for doubtful accounts shall be required in either the Closing Date Balance Sheet or for the calculation of the Adjusted Net Worth; 1.2.2.2 The final inventory value shall be obtained by the parties taking a joint physical inventory on the Closing Date to arrive at the final inventory as of the Closing Date. The final inventory shall be evaluated at the Company's replacement cost, but not lower than the actual cost of the inventory paid by the Company; and 1.2.2.3 No reserve or accounts payable for the Casmalia Disposal Site Superfund liabilities shall be required in either the Closing Date Balance Sheet or for the calculation of the Adjusted Net Worth. Within forty-five (45) days following the Closing Date, the Purchaser shall deliver to the Sellers the Closing Date Balance Sheet and a statement reflecting the Adjusted Net Worth (collectively, the "Final Statement"). The Purchaser shall provide Sellers with access to copies of the work papers and other relevant documents to verify the entries contained in the Final Statement. The Sellers shall have a period of thirty (30) days after delivery of the Final Statement to review it and make any objections the Seller may have in writing to the Purchaser. If written objections to the Final Statement are delivered to the Purchaser within such thirty (30) day period, then the Purchaser and Sellers shall negotiate in good faith in an effort to resolve the matter or matters in dispute. Following such good faith effort, any unresolved matter shall be submitted to dispute resolution pursuant to the provisions of Section 1.6. 1.2.3 The Base Net Worth is defined herein as the sum of One Million One Hundred Nine Thousand One Hundred and Seventy Nine Dollars ($1,109,179.00) which is the consolidated net worth of the Company as of June 30, 1999. To the extent the Adjusted Net Worth is less than the Base Net Worth, one-half of the difference shall be paid to Purchaser by Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and one-half of the difference shall be paid to Purchaser by Judith O. Garcia, Trustee of the Osborne Trust. To the extent the Adjusted Net Worth exceeds the Base Net Worth, Purchaser shall pay one-half the difference to Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and one-half of the difference to Judith O. Garcia, Trustee of the Osborne Trust. Said payments shall be made within ten (10) days of Sellers accepting the Final Statement or within ten (10) days of a resolution under section 1.6. 1.3 Closing. The Closing (the "Closing" or "Closing Date") of the purchase and sale of the Purchased Stock will take place at the offices of Ferruzzo & Ferruzzo, 2114 North Broadway, Santa Ana, California with the ancillary escrow closing simultaneously taking place at Chicago Title, 16969 Von Karman, Irvine, California 92606, for the transfer of the Real Property, or at such other place as Purchaser and the Sellers shall mutually agree, at 9:00 A.M. local time, on October 26, 1999. 1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the Purchase Price to the Sellers by wire transfer to such account(s) as the Sellers may direct by written notice delivered to Purchaser by the Sellers at least three (3) Business Days before the Closing Date as follows: 1.4.1 To Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990: for the Real Property $350,000 for the Purchased Stock $595,000 --------- Total $945,000 1.4.2 To Judith O. Garcia, Trustee of the Osborne Trust for the Real Property $350,000 for the Purchased Stock $505,000 --------- Total $855,000. Simultaneously, the Sellers will sell and convey to Purchaser the Purchased Stock and the Real Property free and clear of all Liens, by delivering to Purchaser stock certificates, registered in the name of Purchaser, representing the Purchased Stock, and a Grant Deed conveying title to the Real Property. At the Closing, the parties shall also deliver the opinions, certificates, contracts, documents and instruments to be delivered pursuant to this Agreement. The Parties shall open an ancillary escrow with Chicago Title for the transfer of the Real Property and shall execute escrow instructions as prepared by Chicago Title consistent with this Agreement. 1.5 Real Property Provisions. 1.5.1 The transfer of the Real Property shall be consummated through an escrow established with Chicago Title Insurance Company. The Closing Date of the escrow will be October 26, 1999. 1.5.2 On the close of escrow, title shall vest in Purchaser. 1.5.3 Sellers shall by Grant Deed convey to Purchaser a fee simple interest free and clear of all title defects, liens, encumbrances, deeds of trust, and mortgages, except real property taxes, a lien not delinquent, and other exceptions approved by Purchaser ("Permitted Exceptions"). Sellers shall procure a California Land Title Association standard policy of title insurance in the amount of $700,000 to be paid by Purchaser issued by Chicago Title Insurance Co. showing title vested in Purchaser with only the Permitted Exceptions. 1.5.4 There shall be no prorations since the Company is responsible for the taxes and insurance. 1.5.5 Sellers shall pay all costs and expenses of clearing title, preparing, executing, acknowledging and delivering the Grant Deed and shall pay any transfer taxes. Purchaser shall pay the recording fees (except those in connection with clearing title) the premium for the title insurance policy and all fees and costs for any new financing. Sellers and Purchaser shall each pay half of the escrow fees. 1.5.6 Sellers shall have Chicago Title prepare a preliminary title report and deliver same to Purchaser for review. Purchaser shall within five (5) days of receipt of said report approve of it or notify Sellers in writing of any objections. Sellers may at Sellers election correct these matters or elect to notify Purchaser that the matters will not be corrected. Upon receipt of notice that the matters will not be corrected, Purchaser may waive the objections and accept the title as is or terminate the entire Agreement without liability on either parties part. All exceptions approved by Purchaser are Permitted Exceptions. 1.5.7 Notwithstanding Article II, Sellers disclaim the making of any representations or warranties, express or implied, regarding the Real Property and Purchaser shall purchase the Real Property in its "As Is" condition on the Closing Date. 1.6 Dispute Resolution. 1.5.8 In the event Purchaser and Sellers do not agree with the determination of the Adjusted Net Worth and/or the Closing Date Balance Sheet within sixty (60) days of the Closing Date, Purchaser and Sellers shall submit the specific disagreement to a national independent public accountant firm (a "Big 5 Firm") acceptable to Purchaser and to Sellers for resolution. Such Big 5 Firm to be selected by Purchaser and Sellers, but excluding any Big 5 Firm presently used or previously used by Purchaser or Sellers or the Company. 1.5.9 Purchaser and Sellers shall cause the Big 5 Firm selected, within forth-five (45) days after its selection, to resolve such disagreement, which resolution shall be binding on all of the parties. The fees and expenses of such Big 5 Firm shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Sellers. 1.5.10 In the event the parties are unable to select a Big 5 Firm acceptable to Purchaser and Sellers or in the event the Big 5 Firm selected fails or refuses to act or resolve the dispute or refuses the proposed engagement, then either Purchaser or Sellers can demand arbitration before the American Arbitration Association under the Commercial Arbitration Rules and Regulations in Orange County California. The arbitrator must have an accounting background, preferably be a Certified Public Accountant and be familiar with the purchase and sale of businesses. ARTICLE II 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers, to their best knowledge, hereby represent and warrant to Purchaser as follows: 2.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of California and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets. The Company is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, (i) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company and (ii) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or any other agreement to which the Company is a party or on the ability of the Sellers or the Company to perform their obligations hereunder or thereunder. The Sellers have delivered to Purchaser true and complete copies of the certificate or articles of incorporation and by-laws (or other comparable corporate charter documents) of the Company, including all amendments thereto effected through the Closing Date. 2.2 Capital Stock. The Purchased Stock consists of the following number of shares of capital stock: The authorized capital structure of Lewis W. Osborne, Inc. consists of 25,000 shares of voting common stock with a par value of $1.00 per share of which 12,296 shares are issued and outstanding. Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 owns 6,764 shares of Lewis W. Osborne, Inc. and Judith O. Garcia, Trustee of the Osborne Trust owns 5,532 shares of Lewis W. Osborne, Inc. The authorized capital structure of United Terrazzo Supply Co., Inc. consists of 800 shares of voting common stock with a par value of $250 per share of which 16 shares are issued and outstanding. Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 owns 8 shares of United Terrazzo Supply Co., Inc. and Judith O. Garcia, Trustee of the Osborne Trust owns 8 shares of United Terrazzo Supply Co., Inc. The Purchased Stock constitutes all of the issued and outstanding shares of capital stock of the Company. The shares of Purchased Stock are validly issued, fully paid and nonassessable, issued in compliance with all applicable Laws and no additional shares of capital stock have been reserved for issuance. There are no outstanding Options with respect to the stock of the Company or agreements, arrangements or understandings to issue Options with respect to the Company, nor are there any preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of the capital stock of the Company. The Sellers are the record and beneficial owners of all of the shares of Purchased Stock, free and clear of all Liens. The delivery to Purchaser of the certificates representing the Purchased Stock will transfer to Purchaser good and valid title to all shares of the Purchased Stock, free and clear of all Liens, and restrictions and after such transfer the Purchased Stock, in the hands of Purchaser, will have been duly authorized, validly issued, fully paid and nonassessable. From and after the Closing, no Seller nor any other Person (other than the Purchaser) will have any rights whatsoever with respect to the Purchased Stock or to any other securities of the Company. 2.3 Authority Relative to This Agreement. The Sellers have full authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Sellers and constitutes the legal, valid and binding obligations of the Sellers, enforceable against them in accordance with its terms. 2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure Schedule lists all lines of business in which the Company is participating or engaged or has participated or engaged in the preceding three years. The name of each director and officer of the Company, and the position with the Company held by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds no equity, partnership, joint venture or other interest in any Person. 2.5 No Conflicts. The execution and delivery by the Sellers of this Agreement does not, and the consummation of the transactions contemplated hereby will not: 2.5.1 conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable corporate charter documents) of the Company; 2.5.2 conflict with or result in a violation or breach of any term or provision of any Laws or Order applicable to any of the Sellers, to the Real Property, or to the Company, or any of their Assets; or 2.5.3 except as disclosed in Section 2.5 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require any of the Sellers or the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (f) result in the creation or imposition of any Lien upon the Real Property, the Company or any of its Assets under, any Contract or License to which any of the Sellers or the Company is a party or by which any of their respective Assets is bound except for such conflicts, violations, breaches, defaults, consents, approvals, actions, filings, notices, terminations, cancellations, accelerations, modifications, additional rights or entitlements or Liens that, individually or in the aggregate, (A) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company, and (B) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of any of the Sellers or the Company to perform its obligations hereunder. 2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Sellers or the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of transactions contemplated herein. 2.7 Books and Records. The minute books and other similar records of the Company to be provided to Purchaser upon execution of this Agreement contain a true and complete record, in all material respects, of all action taken by the stockholders, the board of directors and committees of the boards of directors (or other similar governing entities) of the Company. 2.8 Financial Statements. The Sellers have caused the Company to furnish to Purchaser true and complete copies of the complied but unaudited financial statements of the Company for the periods ending June 30, 1999, along with the related internal balance sheets and statements of operations and cash flows certified as true and correct by the chief financial officer of the Company. All of these statements, opinions, etc. (collectively referred to herein as the "Financial Statements") are in accordance with the Books and Records of the Company and fairly and accurately present the financial position of the Company as of the dates thereof, for the periods covered thereby and the results of operations and cash flows of the Company for the periods set forth therein, all in conformity with GAAP as consistently applied by the Company's Certified Public Accountants during the last two years and except as specifically noted in the notes thereto and in section 2.8 of the Disclosure Schedule. Further, the Sellers represent and warrant that, as of the Closing Date, the Adjusted Net Worth shall be not less than 95% of the Base Net Worth. 2.9 Absence of Changes. Since June 30, 1999, there has not been any material adverse change or any event or development, which, individually or together with other such events, could reasonably be expected to result in a material adverse change, in the business or condition of the Company. In addition, except as expressly contemplated hereby and except as disclosed in Section 2.9 of the Disclosure Schedule, there has not occurred since June 30, 1999: 2.9.1 any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock (or other equity interests) of the Company or any direct or indirect redemption, purchase or other acquisition by the Company of any such capital stock (or other equity interests) of the Company; 2.9.2 any authorization, issuance, sale or other disposition by the Company of any shares of its capital stock (or other equity interests), or any modification or amendment of any right of any holder of any outstanding shares of capital stock (or other equity interests) of the Company; 2.9.3 (i) any increase in salary, rate of commissions or rate of consulting fees of any employee or consultant of the Company; (ii) any payment of consideration of any nature whatsoever (other than salary, commissions or consulting fees paid to any employee or consultant of the Company) to any officer, director, stockholder, employee or consultant of the Company; (iii) any establishment or modification of (A) targets, goals, pools or similar provisions under any Benefit Plan, employment contract or other employee compensation arrangement or (B) salary ranges, increase guidelines or similar provisions in respect of any Benefit Plan, employment contract or other employee compensation arrangement; or (iv) any adoption, entering into, amendment, modification or termination (partial or complete) of any Benefit Plan; 2.9.4 (i) incurrences by the Company of Indebtedness or (ii) any voluntary purchase, cancellation, prepayment or complete or partial discharge in advance of a scheduled payment date with respect to, or waiver of any right of the Company under, any Indebtedness of or owing to the Company; 2.9.5 any physical damage, destruction or other casualty loss (whether or not covered by insurance) affecting any of the Assets of the Company in an aggregate amount exceeding $10,000; 2.9.6 any write-off or write-down of or any determination to write off or write down any of the Assets of the Company; 2.9.7 any purchase of any Assets of any Person or disposition of, or incurrence of a Lien on, any Company Assets, other than acquisitions or dispositions of inventory in the ordinary course of business by the Company consistent with past practice; 2.9.8 any entering into, amendment, modification, termination (partial or complete) or granting of a waiver under or giving any consent with respect to (i) any Contract which is required (or had it been in effect on the date hereof would have been required) to be disclosed in the Disclosure Schedule pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any intellectual property rights owned by the Company; 2.9.9 any capital expenditures or commitments for additions to property, plant or equipment of the Company constituting capital assets in an aggregate amount exceeding $10,000; 2.9.10 any commencement, termination or change by the Company of any line of business; 2.9.11 any transaction by the Company with any of its officers, directors, stockholders or Affiliates, other than pursuant to a Contract or arrangement in effect on July 1, 1998 and disclosed to Purchaser pursuant to Section 2.18.1.8 or other than pursuant to any Contract of employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule; 2.9.12 any entering into of an agreement to do or engage in any of the foregoing; or 2.9.13 any change in the accounting methods or procedures of the Company or any other transaction involving or development affecting the Company outside the ordinary course of business. 2.10 No Undisclosed Liabilities. Except as reflected or reserved against in the June 30, 1999 balance sheet included in the Financial Statements or as incurred in the ordinary course of business from June 30, 1999 through the Closing Date or as disclosed in Section 2.10 of the Disclosure Schedule, the Company has no Liabilities, nor are there any Liabilities relating to or affecting the Company or any of its Assets. 2.11 Taxes. 2.11.1 Except as disclosed in Section 2.11 of the Disclosure Schedule, all Tax Returns required to have been filed by or with respect to the Company and/or the Real Property with any Taxing Authority have been duly and timely filed, and each such Tax Return correctly and completely reflects the income, franchise or other Tax liability and all other information required to be reported thereon. The Company is not and has never been a member of any affiliated, combined, consolidated, unitary or similar group with respect to the filing of tax returns or otherwise with respect to any Taxing Authority. All Taxes owed by the Company or related to the real Property (whether or not shown on any Tax Return) have been paid. All monies required to be withheld by the Company from employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld, and either duly and timely paid to the appropriate Taxing Authority or (if not yet due for payment) set aside in accounts for such purposes. The Company has no liability for Taxes for any Person other than the Company. 2.11.2 The provisions for current Taxes in the Financial Statements are sufficient for the payments of all accrued and unpaid Taxes not yet due and payable as of their dates, whether or not disputed. As of the Closing Date, such provisions, as adjusted for the passage of time through the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet due and payable of the Company. 2.11.3 The Company is not a party to any agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. The Company has not received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. 2.11.4 No Taxing Authority is now asserting or threatening to assert against the Company any deficiency, claim or liability for additional Taxes or any adjustment of Taxes, and there is no reasonable basis for any such assertion of which any of the Sellers or the Company is or reasonably should be aware. No issues have been raised in any examination by any Taxing Authority with respect to the Company which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. The federal income Tax Returns of the Company disclose (in accordance with Section 6662(d)(2)(B) of the Code) all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of section 6662(d) of the Code. No claim has ever been made by any Taxing Authority in a jurisdiction in which the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Section 2.11 of the Disclosure Schedule lists all federal, state, local and foreign income Tax Returns filed by or with respect to the Company for all taxable periods ended on or after December 31, 1996, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since December 31, 1996. There are no Liens for Taxes upon the Assets of the Company and/or the real Property. 2.11.5 Except as disclosed in Section 2.11 of the Disclosure Schedule, the Company is not (i) a party to or bound by any obligations under any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject to any election under sections 338(e) or 341(f) of the Code or the regulations thereunder, (iii) required to make, or reasonably expects that it might have to make, any adjustment under section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (iv) subject to any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of section 280G of the Code, (v) and at no time has ever been, a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is subject to the provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning of section 460 of the Code, (vii) a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, or (viii) nor has it ever been, a member of any affiliated, consolidated, combined, unitary or similar group for any Tax purpose. 2.12 Legal Proceedings. 2.12.1 Except as disclosed in Section 2.12 of the Disclosure Schedule (with paragraph references corresponding to those set forth below): 2.12.1.1 there are no actions or proceedings pending or, to the knowledge of the Sellers or the Company, threatened against, relating to or affecting the Company, the Real Property, or any of its Assets which (A) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement or otherwise result in a material diminution of the benefits contemplated by this Agreement to Purchaser, or (B) if determined adversely to the Company, could reasonably be expected to result in (x) any injunction or other equitable relief against the Company, or (y) Losses by the Company, individually or in the aggregate with Losses in respect of other such actions or proceedings, exceeding $10,000; 2.12.1.2 there are no facts or circumstances known to the Sellers or to the Company that could reasonably be expected to give rise to any action or proceeding that would be required to be disclosed pursuant to clause 2.12.1.1 above; 2.12.1.3 neither the Sellers nor the Company has received notice, or is aware of any Orders or lawsuits outstanding against the Company; and 2.12.1.4 neither the Sellers nor the Company has received notice or is aware of any defects, dangerous or substandard conditions in the products or materials manufactured, sold, distributed, or to be manufactured, sold or distributed by the Company that could cause bodily injury, sickness, disease, death, or damage to property, or result in loss of use of property, or any claim, suit, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, or damage to property, or loss of use or property. 2.12.2 Prior to the execution of this Agreement, the Sellers and the Company have delivered all responses of counsel for the Company to auditors' requests for information regarding actions or proceedings pending or threatened against, relating to or affecting the Company during the period commencing January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth all actions or proceedings relating to or affecting the real Property, the Company or its Assets during the period commencing January 1, 1996 prior to the date hereof. 2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13 of the Disclosure Schedule, neither the Sellers nor the Company has received at any time since January 1, 1996 any notice that the Company is or has been at any time since such date, in violation of or in default under, any Law or Order applicable to the Real Property, the Company or any of its Assets. In furtherance and not limitation of the foregoing, neither the Sellers nor the Company has violated any federal or state securities law in connection with the offer, sale or purchase of any securities. 2.14 Benefit Plans; ERISA. All Benefit Plans relating to the Company are listed in Section 2.14 of the Disclosure Schedule, and copies of all documentation relating to such Benefit Plans have been delivered or made available to Purchaser (including copies of written Benefit Plans, written descriptions of oral Benefit Plans, summary plan descriptions, trust agreements, the three most recent annual returns, employee communications, and IRS determination letters). Except as disclosed in Section 2.14 of the Disclosure Schedule: 2.14.1 each Benefit Plan, and the administration thereof, complies, and has at all times complied, with the requirements of all applicable Law, including ERISA and the Code, and each Benefit Plan intended to qualify under section 401(a) of the Code has at all times since its adoption been so qualified, and each trust which forms a part of any such plan has at all times since its adoption been tax-exempt under section 501(a) of the Code; 2.14.2 no Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of section 302 of ERISA or section 412 of the Code; 2.14.3 no direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company under Title IV of ERISA to any party with respect to any Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA affiliate; 2.14.4 the "amount of unfunded benefit liabilities" within the meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan subject to Title IV of ERISA; 2.14.5 no "reportable event" (within the meaning of section 4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA affiliate since the effective date of said section 4043; 2.14.6 no Benefit Plan is a multiemployer plan within the meaning of section 3(37) of ERISA; 2.14.7 Neither the Company nor any ERISA affiliate has incurred any liability for any Tax imposed under section 4971 through 4980B of the Code or civil liability under section 502(i) or (l) of ERISA; 2.14.8 no benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested or payable by reason of any transaction contemplated under this Agreement; 2.14.9 no Tax has been incurred under section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto); 2.14.10 no Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws requiring continuation of benefits coverage following termination of employment; 2.14.11 no suit, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought or, to the knowledge of any Seller or the Company, threatened against or with respect to any Benefit Plan and there are not facts or circumstances known to any the Sellers or the Company that could reasonably be expected to give rise to any such suit, action or other litigation; and 2.14.12 all contributions to Benefit Plans that were required to be made under such Benefit Plans have been made, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, all of which accruals under unfunded Benefit Plans are as disclosed in Section 2.14 of the Disclosure Schedule, and the Company has performed all material obligations required to be performed under all Benefit Plans. 2.15 Property. 2.15.1 Section 2.15.1 of the Disclosure Schedule contains a true and correct list of (i) each parcel of real property owned (the "Owned Real Property") by the Company, (ii) each parcel of real property leased or subleased or otherwise occupied by the Company as tenant or subtenant (the "Leased Real Property"; together with the Owned Real Property, the "Property") together with a true and correct list of all such leases, subleases or other similar agreements and any amendments, modifications or extensions thereto (the "Property Leases"), and (iii) all Liens relating to or affecting any parcel of Property, in each case identifying the owner, lessor and lessee thereof. 2.15.2 The Sellers or the Company have good and marketable title to the Real Property and the Owned Real Property, free and clear of all Liens, other than as specifically listed in Section 2.15.2 of the Disclosure Schedule. 2.15.3 Subject to the terms of its leases, the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to the Leased Real Property for the full term of the lease thereof. Each Property Lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company and of each other Person that is a party thereto, and except as set forth in Section 2.15.3 of the Disclosure Schedule, there is no, and neither the Sellers nor the Company, has knowledge of any, or has received any, notice of any default (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder. The Company has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in any Property Lease. No penalties are accrued and unpaid under any Property Lease. 2.15.4 The Sellers shall deliver to Purchaser upon the execution of this Agreement true and complete copies of all (i) title policies, mortgages, deeds of trust, deeds, leases, easements, restrictive covenants, certificates of occupancy, and similar documents, and all amendments thereto concerning the Real Property and/or the Owned Real Property, and (ii) Property Leases and all other documents referred to in clause (i) of this paragraph with respect to the Leased Real Property. 2.15.5 Except as disclosed in Section 2.15.5 of the Disclosure Schedule, the improvements on the Real Property and the Property are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are adequate and suitable for the purposes for which they are presently being used and, to the knowledge of each of the Sellers and of the Company, there are no condemnation or appropriation proceedings pending or threatened against Property or the improvements thereon. 2.15.6 Neither the Sellers nor the Company has any knowledge of any claim, action or proceeding, actual or threatened, against the Company, the Real Property or the Property by any Person which would materially affect the future use, occupancy or value of the Real Property or the Property or any part thereof. 2.16 Tangible Personal Property. The Company is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under contract to use, all tangible personal property used in the conduct of its business, including all tangible personal property reflected on the Financial Statements and tangible personal property acquired since June 30, 1999 other than property disposed of since such date in the ordinary course of business consistent with past practice and the terms of this Agreement. All such tangible personal property is free and clear of all Liens, other than Liens disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing Date, is adequate and suitable for the conduct by the Company of the business presently conducted by it, and is in good working order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws. 2.17 Intellectual Property Rights. The Company has interests in or uses only the intellectual property described in Section 2.17 of the Disclosure Schedule. The Company either has all right, title and interest in or a valid and binding license to use such intellectual property. No other intellectual property is used in or necessary to the conduct of the business of the Company. All registrations, pending applications, registered rights and executed agreements related to intellectual property are listed in Section 2.17 of the Disclosure Schedule. Except as disclosed therein, (i) the Company has the right to use the intellectual property described therein, (ii) all registrations on behalf of the Company with and applications to Governmental or Regulatory Authorities in respect of such intellectual property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by the Company to maintain their validity or effectiveness, (iii) all copyrightable materials used by the Company are works-for-hire and are owned by the Company, (iv) there are no restrictions on the direct or indirect transfer of any License, or any interest therein, held by the Company in respect of such intellectual property, (v) the Sellers have delivered, or have caused the Company to deliver, to Purchaser prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in such intellectual property, which documentation is accurate and complete and sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret, (vi) the Sellers and the Company have taken reasonable security measures to protect the secrecy, confidentiality and value of their trade secrets, (vii) neither the Sellers nor the Company is, or has received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any License to use such intellectual property and (viii) neither the Sellers nor the Company has any knowledge that such intellectual property is being infringed by any other Person. To the knowledge of the Sellers and the Company, the Company is not infringing any intellectual property of any Person, and no litigation is pending and no claim has been made or, to the knowledge of any the Sellers or of the Company, has been threatened to such effect. 2.18 Contracts. 2.18.1 Section 2.18.1 of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies, or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement), to which the Company is a party or by which any of its Assets is bound. 2.18.1.1 (A) all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified or unspecified term, the name, position and rate of compensation of each Person party to such a Contract and the expiration date of each such Contract; and (B) any written or unwritten representations, commitments, promises, communications or courses of conduct involving an obligation of the Company to make payments (with or without notice, passage of time or both) to any Person in connection with, or as a consequence of, the transactions contemplated hereby or to any employee, other than with respect to salary or incentive compensation payments in the ordinary course of business consistent with past practice; 2.18.1.2 all Contracts with any Person containing any provision or covenant prohibiting or limiting the ability of the Company to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or prohibiting or limiting disclosure of confidential or proprietary information; 2.18.1.3 all partnership, joint venture, shareholders' or other similar Contracts with any Person; 2.18.1.4 all Contracts relating to Indebtedness of the Company; 2.18.1.5 all Contracts relating to the Real Property; 2.18.1.6 all Contracts with independent contractors, distributors, dealers, manufacturers' representatives, sales agencies or franchisees; 2.18.1.7 all guarantees of any Indebtedness or other obligations of the Company or any third Person; 2.18.1.8 all Contracts relating to the future disposition or acquisition of any Assets, other than dispositions or acquisitions in the ordinary course of business consistent with past practice and the provisions of this Agreement; 2.18.1.9 all Contracts between or among the Company and any of the Sellers, any current or former officer, director, stockholder or Affiliate of the Company or of any such officer, director, stockholder or Affiliate, on the other hand, other than Contracts disclosed pursuant to Section 2.18.1.8; 2.18.1.10 all collective bargaining or similar labor Contracts; 2.18.1.11 all Contracts that (A) limit or contain restrictions on the ability of the Company to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets or to change the lines of business, (B) require the Company to maintain specified financial ratios or levels of net worth or other indicia of financial condition or (C) require the Company to maintain insurance in certain amounts or with certain coverages; and 2.18.1.12 all other Contracts, including but not limited to Contracts with customers, that involve the payment or potential payment, pursuant to the terms of any such Contract, by or to the Company of more than $10,000 and all powers of attorney and comparable delegations of authority. 2.18.2 Each Contract required to be disclosed in Section 2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure Schedule, neither the Company nor, to the knowledge of any the Sellers, any other party to such Contract is, or has received notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be violation or breach of or default under any such Contract). 2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure Schedule, the Company is not a party to or bound by any Contract that has been or could reasonably be expected to be, individually or in the aggregate with any other such Contracts, materially adverse to the business or condition of the Company. 2.18.4 To the extent any of the guaranties for the benefit of the Company or any of its Assets are not integrated with Contracts disclosed in Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, or each party thereto; and neither the guarantor thereunder nor, to the knowledge of the Sellers or the Company or any other party to such guaranty is, or has received notice that it is, in violation or breach of or default under any such guaranty (or with notice or lapse of time or both, would be in violation or breach of default under any such guaranty). 2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and complete list of all Licenses used in and material to the business or operations of the Company, setting forth the owner, the function and the expiration and renewal date of each. Prior to the execution of this Agreement, the Sellers or the Company have delivered to Purchaser true and complete copies of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure Schedule: 2.19.1 the Company owns or validly holds all Licenses that are material to its respective business or operations; 2.19.2 each license listed in Section 2.19 of the Disclosure Schedule is valid, binding and in full force and effect; 2.19.3 neither the Sellers nor the Company is, or has received any notice that it is in default (or with the giving of notice of lapse of time or both, would be in default) under any such License; and 2.19.4 the transactions contemplated in this Agreement will not violate any such License or give any other party thereto rights to terminate the License or change the terms thereof. 2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true and complete list (including the names of the insurers, the expiration dates thereof, the period of time covered thereby and a brief description of the interests insured thereby) of all liability, property, workers' compensation, directors' and officers' liability and other insurance policies currently in effect that insure the business, operations or employees of the Company or affect or relate to the ownership, use or operation of any of the Assets of the Company and that (i) have been issued to the Company, or (ii) have been issued to any Person (other than the Company) for the benefit of the Company. Each policy listed in Section 2.20 of the Disclosure Schedule is valid and binding and in full force and effect, all premiums due thereunder have been paid when due and neither the Sellers nor the Company or the Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company does not know of any reason or state of facts that could lead to the cancellation of such policies. Section 2.20 of the Disclosure Schedule contains a list of all claims made under any insurance policies covering the Company since January 1, 1996. Neither the Sellers nor the Company have received notice that any insurer under any policy referred to in this Section is denying liability with respect to a claim thereunder or defending under a reservation of rights clause. 2.21 Affiliate Transactions. Except for the Shareholder Debt, (i) there are no Liabilities between the Company and any current or former officer, director, stockholder, Affiliate of the Company or any Affiliate of any such officer, director, stockholder or Affiliate, and (ii) the Company does not provide or cause to be provided any assets, services or facilities to any such current or former officer, director, stockholder or Affiliate. 2.22 Employees; Labor Relations. The Company is not engaged in any unfair labor practice. There is (i) no unfair labor practice complaint pending or, to the knowledge of the Sellers or the Company, threatened against the Company before the National Labor Relations Board or comparable or similar state agency, and no grievance or arbitration proceeding arising out of under collective bargaining agreements is so pending or, to the knowledge of the Sellers or of the Company, threatened against the Company, (ii) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the Company, threatened against the Company, and (iii) no union representation question exists with respect to the employees of the Company or, to the knowledge of the Sellers or the Company, no union organization activities are taking place. 2.23 Environmental Matters. 2.23.1 The Company has obtained and holds all necessary Environmental Permits, and all necessary Environmental Permits related to the operations conducted on the Real Property have been obtained by the owner of the Real Property. 2.23.2 Except as disclosed in Section 2.23.2 of the Disclosure Schedule, to the best knowledge of the Sellers: 2.23.2.1 The Company is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. Neither the Sellers nor the Company has any basis to expect, nor has any of them or any other Person for whose conduct they may be held to be responsible received, any actual or threatened Order, notice, or other communication from (A) any Governmental Body or private citizen acting in the public interest, or (B) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company has had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by the Company or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 2.23.2.2 There are no pending or, to the knowledge of the Sellers or the Company, threatened claims, encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting the Real Property or any of the Facilities or any other properties and assets (whether real, personal, or mixed) in which the Sellers or the Company has or had an interest. 2.23.2.3 Neither the Sellers nor the Company has knowledge of or any basis to expect, nor has any of them or any other Person for whose conduct they are or may be held responsible received any citation, directive, inquiry, notice, Order, summons, warning, or other communications that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any Environmental, Health, and Safety Liabilities with respect to the Real Property or any of the Facilities or any other Assets in which the Company had an interest , or with respect to any Facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Sellers, the Company, or any other Person for whose conduct it or they are or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 2.23.2.4 Neither the Company nor any other Person for whose conduct it may be held responsible, has any Environmental, Health, and Safety Liabilities with respect to the Real Property or any Facilities or with respect to any other Assets (whether real, personal, or mixed) in which the Company (or any predecessor thereof), has or had an interest, or at any property geologically or hydrologically adjoining the Facilities or any such Assets. 2.23.3 There are no Hazardous Materials present on or in the Environment at the Real Property or the Facilities or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facilities or such adjoining property, or incorporated into any structure therein or thereon. Neither the Company nor any other Person for whose conduct it may be held responsible, or any other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Real Property or the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Sellers or the Company has or had an interest except in full compliance with all applicable Environmental Laws. 2.23.4 There has been no Release or, to the knowledge of the Sellers or of the Company, any threat of Release of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which the Company has or had an interest, or any geologically or hydrologically adjoining property. 2.23.5 The Sellers have delivered to Purchaser true and complete copies and results of any reports, studies, analyses, tests, and monitoring possessed or initiated by the Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Real Property or the Facilities, or concerning compliance by the Sellers, the Company or any other Person for whose conduct it or they are or may be held responsible, with Environmental Laws. 2.23.6 There are no Liens arising under or pursuant to any Environmental Law on the Real Property or any Owned Real Property or Leased Real Property and there are no facts, circumstances, or conditions that could reasonably be expected to restrict, encumber, or result in the imposition of special conditions that could reasonably be expected to restrict, encumber, or result in the imposition of special conditions under any Environmental Law with respect to the ownership, occupancy, development, use, or transferability of any Property. 2.23.7 There are no (i) underground storage tanks, active or abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing material, at the Real property or any Property. 2.23.8 There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by, on behalf of, or which are in the possession of the Sellers or the Company with respect to any Asset of, or property that is adjacent to an Asset of the Company which have not been delivered to Purchaser prior to execution of this Agreement. 2.24 Substantial Customers and Suppliers. Section 2.24.1 of the Disclosure Schedule lists the ten (10) largest customers of the Company on the basis of revenues for goods sold or services provided for the twelve month period ending June 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the ten (10) largest suppliers of the Company on the basis of cost of goods or services purchased during the twelve month period ending June 30, 1999. Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of the Sellers and the Company, no such customer or supplier is insolvent or threatened with bankruptcy or insolvency. 2.25 Accounts Receivable. Except as set forth in Section 2.25 of the Disclosure Schedule, the accounts and notes receivable of the Company reflected on the balance sheets included in the Financial Statements for the period ended December 31, 1998, and all accounts and notes receivable arising subsequent to such date, (i) arose from bona fide sales transactions in the ordinary course of business consistent with past practice and are payable on ordinary trade terms, (ii) are legal, valid and binding obligations of the respective debtors enforceable in accordance with their respective terms, (iii) are not subject to any valid set-off or counterclaim, (iv) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangements, and (v) are not subject of any Actions or Proceedings brought by or on behalf of the Company. Section 2.25 of the Disclosure Schedule sets forth (x) a description of any security arrangements and collateral securing the repayment or other satisfaction of receivables of the Company and (y) all jurisdictions in which the records relating to accounts and notes receivable are located. 2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company, nor any of their respective Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers or the Company or any such Affiliate) have entered into any agreement or had any discussions with any third party regarding any transaction involving the Company which could result in the Company, the Purchaser or its stockholders, or any officer, director, employee, agent or Affiliate of any of them, being subject to any claim for liability to said third party as a result of entering into this Agreement or consummating the transactions contemplated hereby or thereby. No agent, broker, finder, investment banker, financial advisor or other Person will be entitled to any fee, commission or other compensation in connection with the transactions contemplated by this Agreement on the basis of any act or statement made by the Sellers, the Company or any of their respective Affiliates, or any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers, the Company, or any such Affiliate. 2.27 Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Company Act of 1935, as amended. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure Schedule sets forth (a) a list of the names and locations of all banks, securities brokers and other financial institutions at which the Company has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; and (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of all persons having signatory power and respect thereto. 2.29 Exemption from Registration. The offer and sale of the Purchased Stock made pursuant to this Agreement are exempt from the registration requirements of the Securities Act. Neither any the Sellers, nor the Company nor any Person authorized to act on behalf of any of the foregoing has, in connection with the offering of the Purchased Stock, engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 501(c) under the Securities Act), (ii) any action involving a public offering within the meaning of section 4(2) of the Securities Act, or (iii) any action that would require the registration under the Securities Act of the offering and sale of the Purchased Stock pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. 2.30 Disclosure. The representations and warranties contained in this Agreement, and the statements contained in the Disclosure Schedule or in the certificates, lists and other writings furnished to Purchaser pursuant to any provision of this Agreement (including the Financial Statements), when taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein and therein, in the light of the circumstances under which they were made, not misleading. 2.31 Survival of Representations, Warranties, Covenants and Agreements. Even though the Purchaser may investigate the affairs of the Company and attempt to confirm the accuracy of the representations and warranties of the Sellers, the Purchaser, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Sellers contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE III 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser, to its best knowledge, represents and warrants to the Sellers as follows: 3.1 Organization and Qualification. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. Purchaser is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of Purchaser to perform its obligations hereunder or thereunder. 3.2 Authority Relative to this Agreement. Purchaser has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly approved by its board of directors and no other corporate proceedings on the part of Purchaser or its stockholders are necessary to authorize the execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. 3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement does not, and the performance by Purchaser of its obligations under this Agreement and the consummation of the transactions contemplated hereby, do not and will not: 3.3.1 conflict or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or by-laws of Purchaser; 3.3.2 subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.4 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or its Assets and Properties; or 3.3.3 except as disclosed in Section 3.3.3 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, or (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of any Contract or License to which Purchaser is a party, or by which it is bound. 3.4 Governmental Approvals and Filings. Except as disclosed in Section 3.4 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement to which it is a party or the consummation of the transactions contemplated herein. 3.5 Legal Proceedings. There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets which (i) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, or (ii) could reasonably be expected, individually or in the aggregate with other such Actions or Proceedings, to have a material adverse effect on the business or condition of Purchaser. 3.6 Brokers. No agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement on the basis of any act or statement made by Purchaser. 3.7 Purchase for Investment. The Purchased Stock will be acquired by Purchaser for its own account for the purpose of investment and not with a view to the resale or distribution of all or any part of the Purchased Stock in violation of the Securities Act. 3.8 Survival of Representations, Warranties, Covenants and Agreements. Even though the Sellers may investigate the affairs of the Purchaser and confirm the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the Sellers, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Purchaser contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE IV 4 COVENANTS BY THE SELLERS AND PURCHASER 4.1 Regulatory and Other Approvals. The Sellers and Purchaser shall, and the Sellers shall cause the Company to, (a) take all necessary or desirable steps and proceed diligently and in good faith and use its diligent efforts, as promptly as practicable, to obtain all consents, approvals or actions of, to make all filings with and to give all notices to, Governmental or Regulatory Authorities or any other Person required to consummate the transactions contemplated hereby and those described in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request and (c) cooperate with Purchaser as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to, Governmental or Regulatory Authorities or other Persons required of Purchaser to consummate the transactions contemplated hereby. The Sellers will provide prompt notification to Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 4.2 Investigation by Purchaser. 4.2.1 From the date of this Agreement until the date on which either Party provides the other Party with written notice that this Agreement is terminated (the "Termination Date"), or until the Closing, whichever is earlier, the Sellers will afford Purchaser's agents, employees, representatives and accountants, and their representatives, access to the contracts, books and records, and all other documents and data of the Company. Purchaser acknowledges that certain of the books and records are highly confidential and their disclosure will not be made except as provided herein due to the Sellers' confidentiality and proprietary concerns. 4.3 Accounts Receivable. 4.3.1 At the Closing, the Company shall assign to the Sellers, without recourse, all accounts receivable (including all accounts receivable that have been written off as being uncollectible) of the Company which are more than ninety (90) days old on the Closing Date. 4.3.2 Sellers agree to indemnify and hold harmless the Purchaser from and against any losses resulting from the failure of the Company to collect any account receivable which was taken into account as an asset in determining the Adjusted Net Worth and not otherwise assigned to Sellers pursuant to Section 4.3.1 hereof (hereinafter a "Warranted Receivable"). In the event the Company shall fail to collect any Warranted Receivable within ninety (90) days after the Closing Date ("Collection Period"), Purchaser shall have the right to exchange for the assignment to the Sellers, without recourse, of unpaid Warranted Receivables having an aggregate face amount equal to the amount paid to Purchaser by Sellers under this indemnity. 4.3.3 Purchaser covenants and agrees that from and after the Closing it will cause the Company to exercise prompt and diligent efforts in good faith to collect all accounts receivable of the Company in existence immediately before the Closing, provided, however, that neither Purchaser nor the Company shall be required to initiate legal proceedings to collect any such account. The Company will use reasonably diligent efforts to assist Sellers to collect any such accounts transferred to them by the Company, and Sellers shall reimburse the Company for any out of pocket costs it shall incur incident to such efforts. In the event the Company shall collect in whole or in part any such account which has been transferred to the Sellers, the Company will transfer the amount collected to the Sellers within ten (10) days following receipt thereof by the Company. ARTICLE V 5 CLOSING CONDITIONS 5.1 Condition to the Obligations of the Purchaser. The obligations of Purchaser hereunder to purchase the Purchased Stock and the Real Property are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by Purchaser in its sole discretion): 5.1.1 Representations and Warranties. Each of the representations and warranties made by the Sellers in this Agreement shall, unless waived, be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.1.2 Performance. The Sellers shall have performed and complied with, unless waived, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by them at or before the Closing. 5.1.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or which could reasonably be expected to otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to Purchaser. 5.1.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall be in form and substance reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any condition that has not been satisfied or waived, and (v) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation for the transactions contemplated by this Agreement shall have occurred. 5.1.5 Third Party Consents. Any consents (or waivers) identified in Section 2.5 of the Disclosure Schedule, and all other consents (or waivers) to the performance by the Purchaser of its obligations under this Agreement, or to the consummation for the transactions contemplated hereby as are required under any Contract or License to which the Purchaser is a party or by which any of its Assets are bound and where the failure to obtain any such consent (or in lieu thereof waiver) could reasonably be expected, individually or in the aggregate with other such failures, to materially adversely affect the Purchaser or the business or condition of the Company or otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall be in form and substance satisfactory to the Purchaser in its sole discretion, (iii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iv) shall be in full force and effect. 5.1.6 Purchaser's Investigation. Purchaser shall not have discovered, as a result of its investigation and review pursuant to Section 4.2 hereof, any condition (financial or otherwise) relating in any way to the Real Property, the Company, its Assets, business or prospects, that convinces Purchaser, in its sole discretion, that it is not advisable to complete the Closing. 5.1.7 Sellers' Certificates. The Sellers shall have delivered to Purchaser (i) certificates, dated the Closing Date and executed by an executive officer of the Company, substantially in the form and to the effect of Exhibit B-1 hereto and (ii) certificates, dated the Closing Date and executed by the chief financial officer of the Company, substantially in the form of Exhibit B-2 hereto. 5.1.8 Resignations of Officers and Directors. The Sellers shall have delivered to Purchaser the resignations of all current officers and directors of the Company, effective as of the Closing Date. 5.1.9 Opinion of Counsel. Purchaser shall have received the opinions of Ferruzzo & Ferruzzo, counsel to the Company and Mary E. Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990, and Bewley, Lassleben & Miller, LLP counsel to Judith O. Garcia in connection with this Agreement, dated the Closing Date, substantially in the form and to the effect of Exhibit C hereto, and to such further effect as Purchaser may reasonably request. 5.1.10 Disclosure Schedule. The Sellers shall have delivered to Purchaser a copy of the Disclosure Schedule, updated and current through the Closing Date. 5.1.11 Good Standing Certificates. The Sellers shall have delivered to Purchaser (i) copies of the certificate or articles of incorporation (or other comparable corporate charter documents), including all amendments thereto of the Company certified by the applicable Secretary of State or other appropriate governmental official, (ii) certificates from the applicable Secretary of State or other appropriate governmental official to the effect that the Company is in good standing in such jurisdiction, listing all charter documents of the Company on file and attesting to its payment of all franchise or similar Taxes, and (iii) certificates from the Secretary of State or other appropriate official in each jurisdiction in which the Company is qualified or admitted to do business to the effect that the Company is duly qualified or admitted in good standing in such jurisdiction. 5.1.12 Receipt of Purchased Stock. Certificates representing the Purchased Stock shall have been transferred to Purchaser in accordance with the terms of this Agreement. 5.1.13 Receipt of Grant Deed. The Sellers shall present the Purchaser with a Grant Deed, with all transfer stamps affixed thereon, conveying the Real Property, with all improvements situated thereon, to the Purchaser, free and clear of all liens and encumbrances except for those approved by Purchaser referred to as Permitted Exceptions in accordance with the terms of this Agreement. 5.1.14 No Adverse Change. There shall have occurred no material adverse change in the business or financial condition of the Company between June 30, 1999 and the Closing Date. 5.2 Conditions to the Obligations of the Sellers. The obligations of the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by the Sellers in theirs sole discretion): 5.2.1 Representations and Warranties. Each of the representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.2.2 Performance. Purchaser shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing. 5.2.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Orders or Laws restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5.2.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall not be subject to the satisfaction or any condition that has not been satisfied or waived, and (iii) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have occurred. 5.2.5 Officers' Certificates. Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and executed by the president or vice-president or other officer of Purchaser, substantially in the form and to the effect of Exhibit D hereto. 5.2.6 Opinion of Counsel. The Sellers shall have received the opinion of Brett A. Hickman, Esquire, counsel of the Purchaser in connection with this Agreement, dated the Closing Date, substantially in the form and to the effect of Exhibit E hereto. ARTICLE VI 6 TERMINATION 6.1 Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated: 6.1.1 by Purchaser or the Sellers for their respective convenience; 6.1.2 by Purchaser or by the Sellers if a material breach of any provision of this Agreement has been committed by the other party and such breach has not been waived; 6.1.3 (i) by Purchaser if any of the conditions in Section 5.1 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Purchaser to comply with its obligations under this Agreement) and Purchaser has not waived such condition on or before the Closing Date, or (ii) by the Sellers, if any of the conditions in Section 5.2 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of the Sellers to comply with his obligations under this Agreement) and the Sellers has not waived such condition on or before the Closing Date; 6.1.4 by mutual consent of Purchaser and the Sellers; or 6.1.5 by Purchaser or by the Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before October 26, 1999, or such later date as the parties may agree upon. 6.2 Effect of Termination. Each party's right of termination under Section 6.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 6.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article X will survive; provided, however, that if this Agreement is terminated by a party because of a breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies (including specific performance) will survive such termination unimpaired. ARTICLE VII 7 INDEMNIFICATION; TAX MATTERS 7.1 Indemnification. 7.1.1 The Sellers will indemnify the Company, the Purchaser and their respective stockholders and the officers, directors, employees, agents and Affiliates of each of them in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Sellers contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 7.1.2 Purchaser will indemnify the Sellers in respect of, and hold them harmless from and against, any and all Losses suffered, incurred or sustained by him or to which he becomes subject, resulting from, arising out of or relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 7.2 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 7.1 will be asserted and resolved as follows: 7.2.1 In order for an Indemnified Party to be entitled to any indemnification provided for under Section 7.1 in respect of, arising out of or involving a claim or demand made by any Person not a party to this Agreement against the Indemnified Party (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by such Indemnified Party of written notice of the Third Party Claim; provided, that failure to give such Claim Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. 7.2.2 If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnifying Party, which counsel must be reasonably satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, but shall continue to pay for any expenses of investigation or any Loss suffered. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party shall not assume the defense of a Third Party claim with counsel satisfactory to the Indemnified Party within five Business Days of any Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the Indemnifying Party that there are or may be legal defenses available to the Indemnifying Party or to other Indemnified Parties which are different from or additional to those available to the Indemnified Party, which, if the Indemnified Party and the Indemnifying Party were to be represented by the same counsel, would constitute a conflict of interest for such counsel or prejudice prosecution of the defenses available to such Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense of a Third Party Claim and fail to diligently prosecute such defense, then in each such case the Indemnified Party, by notice to the Indemnifying Party, may employ its own counsel and control the defense of the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees, charges and disbursements of counsel employed by the Indemnified Party, and the Indemnified Party shall be promptly reimbursed for any such fees, charges and disbursements, as and when incurred. Whether the Indemnifying Party or the Indemnified Party control the defense of any Third Party Claim, the parties hereto shall cooperate in the defense thereof. Such cooperation shall include the retention and provision to the counsel of the controlling party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation or any material provided hereunder. The Indemnifying Party shall have the right to settle, compromise or discharge a Third Party Claim (other than any such Third Party Claim in which criminal conduct is alleged) without the Indemnified Party's consent if such settlement, compromise or discharge (i) constitutes a complete and unconditional discharge and release of the Indemnified Party, and (ii) provides for no relief other than the payment of monetary damage and such monetary damages are paid in full by the Indemnifying Party. 7.2.3 In the event any Indemnified Party should have a claim under Section 7.1 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within thirty (30) days, such dispute shall be resolved as provided in Article X hereof. 7.2.4 Any payment made by the Indemnifying Party to the Indemnified Party in respect to any Third Party Claim or other claim shall be net of any insurance proceeds realized by and paid to the Indemnified Party in respect to such claims. The Indemnified Party shall make insurance claims relating to any claim for which it is seeking Indemnification pursuant to this Article VII. In computing the amount of indemnification due to the Indemnifying Party there shall be deducted therefrom an amount equal to the net actual income tax savings, if any, demonstrably resulting to the Indemnified Party from the income tax deduction or deferral, if any, to the which the Indemnified Party becomes entitled as a consequence of any loss, claim, damage, liability, cost, expenses or deficiency giving rise to indemnification. 7.2.5 All claims for indemnification must be asserted within eighteen (18) months of the Closing Date except for tax liability under Section 7.3 which shall be made prior to the termination of the Statute of Limitations for tax claims and for claims under sections 2.1, 2.2, 2.3 and 2.11 which may be made at any time. 7.2.6 Notwithstanding the foregoing, the maximum amount of indemnification collectively payable by the Sellers arising under Article VII hereof in no event shall exceed three hundred thousand dollars ($300,000), except for claims arising from fraud or intentional misrepresentation where the maximum amount of indemnification shall be the Purchase Price for the Purchased Shares. Moreover, the Purchaser shall not be entitled to receive indemnification for any matter (except for taxes under section 7.3) unless and until the aggregate of the claims for such indemnification asserted pursuant to Section 7.1 exceeds Fifty Thousand Dollars ($50,000), in such event the Sellers shall be liable for the entire amount asserted, including the first Fifty Thousand Dollars ($50,000). 7.3 Allocation of Tax Liability. 7.3.1 In the case of Taxes with respect to or payable by the Company with respect to a period that includes but does not end on the Closing Date, the allocation of such Taxes between the Pre-Closing Period and the Post-Closing Period shall be made on the basis of an interim closing of the books of the Company as of the close of business on the Closing Date. In the case of (i) franchise Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding and (ii) ad valorem Taxes, in either situation attributable to any taxable period that includes but does not end on the Closing Date, the portion of such Taxes attributable to the Pre-Closing Period shall be the amount of such Taxes for the entire taxable period, multiplied by a fraction the numerator of which is the number of days in such taxable period ending on and including the Closing Date and the denominator of which is the entire number of days in such taxable period; provided, that if any Company Asset is sold or otherwise transferred prior to the Closing Date, then ad valorem Taxes pertaining to such property, asset or other right shall be attributed entirely to the Pre-Closing Period. 7.3.2 Except to the extent a reserve for Taxes is reflected on the Financial Statements, the Sellers shall be responsible for and pay and shall indemnify and hold harmless Purchaser and the Company with respect to (i) any and all Taxes imposed on any of the Company, or for which the Company is liable with respect to any periods ending on or before the Closing Date; provided, that in the case of any adjustment to any item of loss or expense for any such years, which gives rise to corresponding and offsetting items of loss or expense in subsequent years the benefit of which is or will be actually realized by the Company (other than upon liquidation of the Company) including by reason of any increase in a net operating loss, the Sellers's obligations shall be limited to the amount of interest (computed at the appropriate statutory rates) and penalties actually paid to the appropriate taxing authorities by the Company as a result of such timing differences in the case of audit adjustments, or at a rate of eight percent (8%) per annum in the case of other adjustments, (ii) without duplication (subject to the same proviso), all Taxes arising out of a breach of the representations, warranties or covenants contained herein, (iii) any Tax liability resulting from any ongoing state audits that exceed, in the aggregate, any reserve therefore set forth on the Financial Statements, and (iv) any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified hereunder. 7.3.3 From and after the Closing Date, Purchaser shall cause the Company to prepare, or cause to be prepared, and shall file, or cause to be filed, all reports and returns of the Company required to be filed. Purchaser shall cause the Company to pay the appropriate taxing authorities the Taxes shown to be due and payable on all Tax Returns of the Company filed after the Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the Company for a period ending on or before the Closing Date shall be prepared on a basis consistent with the Tax Returns filed by the Company for previous taxable periods, subject to the requirements of applicable law. 7.4 Tax Contests. 7.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then the party hereto first receiving notice of such Tax Claim shall promptly provide written notice thereof to the other parties hereto. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other Person. 7.4.2 If, within 30 calendar days after any the Sellers receives or delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the Purchaser an Election Notice, then subject to the provisions of this Section 7.4, the Sellers shall defend or prosecute, at their sole cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall defended or prosecuted diligently by the Sellers to a Final Determination; provided, that the Sellers shall not, without the prior written consent of the Company, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to the Company. So long as the Sellers are defending or prosecuting a Tax Claim, with respect to the Company, the Company shall provide or cause to be provided to the Sellers any information reasonably requested by the Sellers relating to such Tax Claim, and shall otherwise cooperate with the Sellers and their representatives in good faith in order to contest effectively such Tax Claim. The Sellers shall inform the Company of all developments and events relating to such Tax Claim (including, without limitation, providing to the Company copies of all written materials relating to such Tax Claim) and the Company or its authorized representatives shall be entitled, at the expense of the Company, to attend, but not to participate in or control, all conferences, meetings and proceedings relating to such Tax Claim. 7.4.3 If, with respect to any Tax Claim, the Sellers fails to deliver an Election Notice to the Company within the period provided in Section 7.4.2 or, after delivery of such Election Notice to the Company, the Sellers fail diligently to defend or prosecute such Tax Claim to a Final Determination, then the Company shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at the sole cost, expense and risk of the Sellers, such Tax Claim. The Company shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by the Company, the Sellers shall cooperate in good faith with the Company and its authorized representatives in order to contest effectively such Tax Claim. The Sellers may attend, but not participate in or control, any defense, prosecution, settlement or compromise of any Tax Claim controlled by the Company pursuant to this Section 7.4.3, and shall bear their own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by the Company pursuant to this Section 7.4.3, the Company shall, from time to time, be entitled to receive current payments from the Sellers with respect to costs and expenses incurred by the Company in connection with such defense or prosecution (including, without limitation, reasonable attorneys', accountants' and experts' fees and disbursements, settlement costs, court costs and any other costs or expenses for investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as a result of receiving a payment from the Sellers pursuant to this Section 7.4) (collectively "Associated Costs"). 7.4.4 In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitees, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim within five Business Days after such Final Determination. In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitee, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim, together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, within five Business Days after such Final Determination. In the case of any Tax Claim not covered by the two preceding sentences, the Sellers shall pay to the Company, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim (calculated after taking into account any actual reduction in the current liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting from such payment or such Tax Claim), together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, at least five Business Days before the date payment of such Tax is due from any Tax Indemnitee. 7.4.5 Notwithstanding anything contained in this Article VII to the contrary, the rights of the Sellers under this Section 7.4 to defend or prosecute, or to control the defense or prosecution of, any Tax Claim shall be no greater than those rights that the Company would have to defend or prosecute, or to control the defense or prosecution of, such Tax Claim. 7.5 Cooperation Regarding Tax Matters. Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to the other parties hereto and the Company such cooperation and information as any of them reasonably may request related to the filing of any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules, workpapers and relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Article VII shall bear all costs of filing such Tax Returns. 7.6 Payment of Transfer Taxes and Fees. The Sellers shall pay all sales, use, transfer, stamp, documentary or similar Taxes imposed upon or arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the Company and their Affiliates with respect to such Taxes. The Sellers shall file all necessary documentation and Tax Returns with respect to such Taxes and provide to Purchaser copies of all such Tax Returns. 7.7 Other Tax Covenants. 7.7.1 Without the prior written consent of Purchaser, neither the Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect or relate to the Company, make or change any tax election, change any annual tax accounting period, adopt or change any method of tax accounting, file any amended Tax Return, enter into any method of tax accounting, enter into any closing agreement, settle any Tax Claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of increasing any post-closing Tax Liability of the Purchaser, of the Company or any Affiliate of Purchaser. 7.7.2 Without the prior written consent of the Sellers, neither the Purchaser nor the Company shall, to the extent it may affect or relate to the Company, make or change any tax election, file any amended Tax Return, enter into any closing Agreement, settle any Tax claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would affect a Pre-Closing Tax Period, unless required by applicable law. 7.7.3 So long as any books, records and files retained by the Sellers or and his Affiliates relating to the business of the Company or the books, records and files delivered to the control of the Purchaser pursuant to this Agreement to the extent they relate to the operations of the Company prior to the Closing Date, remain in existence and are available, each party (at its own expense) shall have the right upon prior notice to inspect and to make copies of the same at any time during business hours for any proper purpose. The Purchaser and the Sellers and their respective Affiliates shall use reasonable efforts not to destroy or allow the destruction of any such books, records and files without first providing 60 days= written notice of intention to destroy to the other, and allowing such other party to take possession of such records. 7.8 Conflict. In the event of a conflict between the provisions of Sections 7.3 through 7.7 of this Article VII and any other provision of this Agreement, such provisions of this Article VII shall control. ARTICLE VIII 8 DEFINITIONS 8.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below: "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation or audit. "Affiliate" means, as applied to any Person, (a) any other Person directly or indirectly owning, owned by, controlling, controlled by or under common control with, that Person, (b) any director, partner, officer, agent, employee or relative of such Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agreement" means this Purchase Agreement, the Exhibits and the Disclosure Schedule and the certificates delivered in connection herewith, as the same may be amended from time to time in accordance with the terms hereof. "Assets" of any Person means all assets and properties of every kind, nature, character and description, including, but not limited to, the Real Property, goodwill and other tangibles, operated, owned or leased by such Person, including cash and cash equivalents, investments, accounts and notes receivable, chattel paper, documents, instruments, real estate, equipment, inventory, goods and intellectual property. "Associated Costs" has the meaning ascribed to it in Section 7.4.3. "Benefit Plan" means any Plan, existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the Company or under which any employee, former employee or director of the Company or any beneficiary thereof is covered, is eligible for coverage or has benefit rights. "Books and Records" means all files, documents, instruments, papers, books and records relating to the Company, including financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans. "Claim Notice" means written notification pursuant to Section 7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought by an Indemnified Party. "Closing" and "Closing Date" have the meaning ascribed to them in Section 1.3. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Company" has the meaning ascribed to it in the first recital of this Agreement (and shall include all predecessors and subsidiaries of the Company). "Contract" means any agreement, lease, evidence of indebtedness, mortgage, indenture, security agreement or other contract (whether written or oral). "Disclosure Schedule" means the schedules delivered to Purchaser by or on behalf of the Company and the Sellers, and the schedules delivered by or on behalf of Purchaser, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein pursuant to this Agreement. "Dispute Period" means the period ending thirty (30) calendar days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "Election Notice" means a written notice provided by the Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their indemnity obligation under this Agreement with respect to such Tax Claim and (ii) the Sellers elect to contest, and to control the defense or prosecution of, such Tax Claim at their sole risk and sole cost and expense. "Environment" means all air, surface water, groundwater, drinking water supply, stream sediments, or land, including soil, land surface or subsurface strata, all fish, wildlife, biota and all other environmental medium or natural resources. "Environmental, Health and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under any Environmental Law and consisting of or relating to (i) any environmental, health or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (ii) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law; (iii) financial responsibility under Environmental Law for clean-up costs or corrective action, including any investigation, clean-up, removal, containment, or other remediation or response actions required by Environmental Law (whether or not such clean-up has been required or requested by any governmental body or any other Person) and for any natural resource damages; or (iv) any other compliance, corrective, investigative, or remedial measures required under Environmental Law. The terms "removal," "remedial," and "response action" include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended (CERCLA). "Environmental Law" means all federal, state, local and foreign environmental, health and safety laws, common law orders, decrees, judgments, codes and ordinances and all rules and regulations promulgated thereunder, civil or criminal, including, without limitation, Laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the Environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid, toxic or hazardous substances or wastes. "Environmental Permit" means any federal, state, local, provincial, or foreign permits, licenses, approvals, consent or authorizations required by any Governmental or Regulatory Authority under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental or Regulatory Authority under any applicable Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures or equipment (including motor vehicles, tank cars and rolling stock) currently or formerly owned or operated by the Company. "Final Determination" means (i) a decision, judgment, decree or other Order by any court of competent jurisdiction, which decision, judgment, decree or other Order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired, (ii) a closing agreement entered into under Section 7121 of the Code or any other settlement agreement entered into in connection with an administrative or judicial proceeding, (iii) the expiration of the time for instituting suit with respect to a claimed deficiency or (iv) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto. "Financial Statements" has the meaning ascribed to it in Section 2.8. "GAAP" means generally accepted accounting principles of the United States, consistently applied. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Hazardous Activity" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company. "Hazardous Material" means (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (ii) any chemicals, materials, substances or wastes which are now or hereafter become defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import, under any Environmental Law; and (iii) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental or Regulatory Authority. "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases, (v) long term debt and (vi) in the nature of guarantees of the obligations described in clauses (i) through (v) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article VII. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article VII. "Indemnity Notice" means written notification pursuant to Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 2.15. "Liabilities" means all Indebtedness, obligations and other liabilities (or contingencies that have not yet become liabilities) of a Person (whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due). "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" means any and all damages, fines, fees, penalties, deficiencies, losses and expenses, including without limitation, interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (such fees and expenses to include all fees and expenses, such as fees and expenses of attorneys, incurred in connection with (i) the investigation or defense of any Third Party Claims or (ii) asserting or disputing any rights under this Agreement against any party hereto or otherwise). "Option" with respect to any Person means any security, right, subscription, warrant, option, "phantom" stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of such Person, or (ii) receive any benefits or rights similar to those enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including without limitation, any rights to participate in the equity, income or election of directors or officers of such Person. "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 2.15. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Plan" means any bonus, compensation, pension, profit sharing, retirement, stock purchase or cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Post-Closing Period" means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. "Pre-Closing Period" means any taxable period or portion thereof that is not a Post-Closing Period. "Purchase Price" has the meaning ascribed to it in Section 1.2. "Purchased Stock" has the meaning ascribed to it on the first page of this Agreement. "Purchaser" has the meaning ascribed to it in the first paragraph of this Agreement. "Property" has the meaning ascribed to it in Section 2.15. "Real Property Leases" has the meaning ascribed to it in Section 2.15. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous Material into the Environment. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Seller" and the "Sellers" have the meaning ascribed to them on the first page of this Agreement. "Subsidiary" means any Person in which another Person, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least fifty percent (50%) of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof. Unless the context otherwise requires a different interpretation, references to a "Subsidiary" mean a Subsidiary of the Company. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Claim" means any written claim with respect to Taxes attributable to a Pre-Closing Period made by any Taxing Authority or any Person that, if pursued successfully, could serve as the basis for a claim for indemnification, under this Agreement, of Purchaser, the Company and other Indemnified Parties specified in Section 7.1 of this Agreement. "Tax Indemnitee" means the Company, the Purchaser and their respective stockholders, officers, directors, employees, agents and Affiliates of each of them (other than the Sellers). "Tax Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax. "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. "Third Party Claim" has the meaning ascribed to it in Section 7.2. 8.2 Interpretation of Agreement. 8.2.1 Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; (v) the word "including" does not imply any limitation to the item or matter mentioned; and (vi) the phrases "ordinary course of business" and "ordinary course of business consistent with past practice" refer to the business and practice of the Company. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. 8.2.2 When used herein, the phrase "to the knowledge of" any Person, "to the best knowledge of" any Person or any similar phrase, means the actual knowledge of such Person or the actual knowledge of Mr. Gerald Steward, General Manager of the Company and/or Mr. Frank Maggio, Plant Manager of the Company. ARTICLE IX 9 MISCELLANEOUS 9.1 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or mailed by prepaid first class certified mail, return receipt requested, or sent by prepaid courier, to the parties at the following addresses: If to Purchaser, to: ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 Attn.: Sr. Vice President and General Counsel If to the Sellers, to: Mary E. Dentis Copy To: Thomas G. Ferruzzo, Esq. #1 Sea Cove Lane Ferruzzo & Ferruzzo Newport Beach, CA 92660 2114 North Broadway Santa Ana, CA 92607 Judith O. Garcia Copy To: Edward L. Miller, Esq. 8440 La Bajada Brewley, Lassleben & Miller, LLP Whittier, CA 90605 13215 East Penn Street Suite 510, Whittier Square Whittier, CA 90602 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt and (iv) if delivered by courier to the address as provided for in this Section, be deemed given on the earlier of the second Business Day following the date sent by such courier or upon receipt. Any party from time to time may change its address or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 9.2 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof. 9.3 Expenses. Except as otherwise expressly provided in this Agreement (including without limitation as provided in Article VII), each party will pay its own costs and expenses incurred in connection with this Agreement, and the transactions contemplated hereby and thereby; provided, the Sellers will pay all expenses relating hereto of the Company incurred in respect of the period prior to the Closing. 9.4 Confidentiality. Purchaser and the Sellers will hold in strict confidence from any Person (other than its Affiliates or representatives) all documents and information concerning the other party hereto or any of its Affiliates furnished to it by or on behalf of the other party in connection with this Agreement or the transactions contemplated hereby, except to the extent the disclosing party can demonstrate that such documents or information was (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. Such covenant of confidentiality will remain in effect unless a party is compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law. 9.5 Set-Off. If from time to time and at any time any party shall be entitled (as either agreed upon by the parties or finally adjudicated in a court of competent jurisdiction) to be paid any amount under the provisions of Section 7.1, such party shall be entitled, if it so elects, to set off such amount against any amounts owing to the other party. 9.6 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the Purchaser or the Sellers shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement. 9.7 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 9.8 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of the parties hereto. 9.9 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person other than any Person entitled to indemnity under Article VII. 9.10 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by either party without the prior written consent of the other party(ies) and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 9.11 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 9.12 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 9.13 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of California. 9.14 Limited Recourse. Regardless of anything in this Agreement to the contrary, (i) obligations and liabilities of Purchaser hereunder shall be without recourse to any stockholder of Purchaser or any of such stockholder's Affiliates, directors, employees, officers or agents and shall be limited to the assets of such party and (ii) the stockholders of Purchaser have made no (and shall not be deemed to have made any) representations, warranties or covenants (express or implied) under or in connection with this Agreement or any other Operative Agreement. 9.15 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 9.16 Disclosure Schedule. The Disclosure in the Disclosure Schedule must relate to the representations and warranties in the Section of the Agreement to which they expressly relate except to the extent that the relevance to such other representations and warranties is manifest on the face of the Disclosure Schedule. ARTICLE X 10 MEDIATION In the event there is a dispute under this Agreement, the disagreeing parties shall meet with one another and diligently attempt to resolve their disagreements. If they are unable to do so, then upon request of either party to the dispute made within twenty (20) days of the failure of negotiations, they will mediate the dispute, utilizing an impartial mediator pursuant to the rules of the American Arbitration Association ("AAA") or any other reputable organization that sponsors mediation. If, after thirty (30) days the mediation is not successful, or if no mediation has been elected, then any party to the dispute may file a legal action in any court of competent jurisdiction to resolve the dispute. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth on the first page hereof. PURCHASER ISG RESOURCES, INC. ____________________ By:_________________ Its:________________ SELLERS MARY E. DENTIS, AS TRUSTEE OF THE MARY ELLEN DENTIS REVOCABLE INTERVIVOS TRUST, u/d/t OCTOBER 19, 1990 _______________ Mary E. Dentis As Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 JUDITH O. GARCIA, AS TRUSTEE OF THE OSBORNE TRUST ____________________ Judith O. Garcia As Trustee of the Osborne Trust Exhibit A Description of Real Property See attached. Exhibit B Sellers' Certificate Exhibit B-1 Sellers' Officers' Certificate I, the undersigned, the President of Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. (collectively the "Company"), both California corporations,, do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section 5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990, and Judith O. Garcia, as Trustee of the Osborne Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer"). Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. Attached hereto as Exhibit B-1-a is a correct and complete copy of the Articles of Incorporation of the Company, as in effect on the date hereof. 3. Attached hereto as Exhibit B-1-b is a correct and complete copy of the By-Laws of the Company, as in effect on the date hereof. 4. Attached hereto as Exhibit B-1-c is a correct and complete copy of the Certificates of Good Standing of the Company, as in effect on the date hereof. 5. Attached hereto as Exhibit B-1-d is a schedule of persons that have been duly elected (or appointed) or qualified, and/or that have acted, as officers of the Company (to and including the date hereof), each holding the respective offices set forth opposite their names; and the signatures set forth on Exhibit B-1-d opposite their names are the genuine signatures of such officers executing the Agreement and any other agreements or documents on behalf of the Company in connection with the Closing under the Agreement. 6. Each of the representations and warranties made by the Sellers in the Agreement are true and correct in all material respects as of the date of the Agreement, and there has occurred no material adverse change in the business or financial condition of the Company between June 30, 1999 and the Closing Date. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of October 26, 1999. _____________________________ By: Mary E. Dentis, President Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. EXHIBIT B-1-d Name Title Signature Mary E. Dentis President, ____________ CFO and Director Judith O. Garcia Vice President ____________ and Director Kathleen Dentis Roman Secretary ____________ and Director Exhibit B Sellers' Certificate Exhibit B-2 Chief Financial Officer's Certificate I, the undersigned, the Chief Financial Officer of Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. (collectively the "Company"), both California corporations, do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section 5.1.7 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the Osborne Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer"). Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. I am familiar with the Company's finances and capitalization. 3. The Company has provided the Purchaser with the Financial Statements as provided in the Agreement. 4. The Financial Statements accurately present the Company's financial condition and the results of operations, changes in stockholders' equity and cash flow of the Company as of and through the respective dates and periods therein delineated, and the results of the Company's operations and changes in financial position for the periods then ended, and have been prepared in accordance with GAAP, applied on a consistent basis. 5. As of the Closing Date, no material adverse change in the financial condition or operations of the Company will have occurred from that shown on the Financial Statements. 6. The authorized capital structure of Lewis W. Osborne, Inc. consists of 25,000 shares of voting common stock with a par value of $1.00 per share of which 12,296 shares are issued and outstanding. Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 owns 6,764 shares of Lewis W. Osborne, Inc. and Judith O. Garcia, Trustee of the Osborne Trust owns 5,532 shares of Lewis W. Osborne, Inc. The authorized capital structure of United Terrazzo Supply Co., Inc. consists of 800 shares of voting common stock with a par value of $250 per share of which 16 shares are issued and outstanding. Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 owns 8 shares of United Terrazzo Supply Co., Inc. and Judith O. Garcia, Trustee of the Osborne Trust owns 8 shares of United Terrazzo Supply Co., Inc. 7. There are no outstanding options, warrants, calls, subscriptions, commitments, agreements or other rights to purchase or dispose of Company common stock or other securities which are, or may at any time be, convertible into stock or other securities in the Company. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of October 26, 1999. _________________________ By: Mary E. Dentis, CFO Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. Exhibit C Sellers' Counsel's Opinion Opinion of Counsel to Sellers On Ferruzzo & Ferruzzo Leterhead March 27, 2000 Brett A. Hickman, Esq. Sr. Vice President and General Counsel ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, Utah 84111 Re: The Purchase of the Capital Stock of Lewis W. Osborne, Inc. and United Terrazzo Supply, Inc. by ISG Resources, Inc. Dear Mr. Hickman: We have acted as counsel to Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 (sometimes referred to herein as "Seller"), Lewis W. Osborne, Inc., and United Terrazzo Supply Co., Inc., both California corporations, in connection with the Purchase Agreement dated October 26, 1999 (the "Agreement") between the Seller, Judith O. Garcia, as Trustee of the Osborne Trust, and ISG Resources, Inc., a Utah corporation ("Buyer"). This is the opinion contemplated by Section 5.1.9 of the Agreement. All capitalized terms used in this opinion without definition have the respective meanings given to them in the Agreement or the Accord referred to below. This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord; and this Opinion Letter should be read in conjunction therewith. The law covered by the opinions expressed herein is limited to the Federal Law of the United Sates and the Law of the State of California. We note that various issues concerning the Osborne Trust are addressed in the opinion of Edward L. Miller, Esq., of the Law Firm of Bewley, Lassleben & Miller, LLP, attached hereto, and we express no opinion with respect to those matters. The opinions hereafter expressed are subject to the following further qualifications and exceptions: 1. Stock Certificate Nos. 5 and 7 of United Terrazzo Supply Co., Inc. were issued to A. Corradini and Sons. Stock Certificate No. 5 was redeemed by the Corporation on November 1, 1964. Stock Certificate No. 7 was issued on October 26, 1962, and also redeemed by the Corporation on November 1, 1964. We are unable to trace any authorized issue beyond the initial 12 shares and, therefore, offer no opinion relating to the issuance of the shares reflected by Stock Certificate Nos. 5 and 7. 2. Shares issued to John A. Harris are reflected by Certificate Nos. 6 and 8. The original certificates are in the stock book but are not endorsed back over to the Corporation. As such, we offer no opinion as to the owner of those shares. Based on the foregoing, our opinion is as follows: 1. The Agreement is enforceable against the Seller. 2. The authorized capital structure of Lewis W. Osborne, Inc. consists of 25,000 shares of voting common stock with a par value of $1 per share, of which 12,296 shares are issued and outstanding. Mary E. Dentis owns 6,764 shares of Lewis W. Osborne, Inc. 3. The authorized capital structure of United Terrazzo Supply Co., Inc. consists of 800 shares of voting common stock with a par value of $250 per share, of which 16 shares are issued and outstanding. Mary E. Dentis owns 8 shares of United Terrazzo Supply Co., Inc. 4. Both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. are corporations duly organized, validly existing and in good standing under the laws of the State of California, with full corporate power and authority to own its properties and to engage in its business as presently conducted or contemplated. All of the outstanding shares of capital stock of both Lewis W. Osborne, Inc. and United Terrazzo Supply Co., Inc. have been duly authorized and validly issued and are fully paid and non-assessable, and were not issued in violation of the preemptive rights of any Person. 5. Neither the execution and delivery of the Agreement nor the consummation of any or all of the related transactions (a) violates any provision of the certificate of incorporation or bylaws (or other governing instrument) of either Lewis W. Osborne, Inc. or United Terrazzo Supply Co., Inc. 6. No consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority is required in connection with the execution, delivery and performance of the Agreement or the consummation of any related transaction(s). 7. We hereby confirm to you that, except as set forth in the Disclosure Schedule, we have no actual knowledge of any Actions or Proceedings by or before any court or Governmental Authority pending or overtly threatened against or involving Lewis W. Osborne, Inc., or United Terrazzo Supply Co., Inc., or that questions or challenges the validity of the Agreement or any action taken or to be taken by Lewis W. Osborne, Inc., or United Terrazzo Supply Co., Inc., pursuant to the Agreement or in connection with any related transactions. To our actual knowledge, neither Lewis W. Osborne, Inc., nor United Terrazzo Supply Co., Inc. is subject to any judgment, order or decree having prospective effect. The Accord is changed for purposes of this Opinion Letter pursuant to '21 of the Accord as follows: 1. The Primary Lawyer Group shall include all lawyers presently at our firm who have given substantive attention to the affairs of the Seller, Lewis W. Osborne, Inc., and/or United Terrazzo Supply Co., Inc., since 1992. 2. Accord '19(e) is deleted. We understand that ISG Resources, Inc. is receiving a copy of this opinion in connection with the purchase of stock and real property contemplated by the Agreement and agree that ISG Resources, Inc. may rely on this opinion. Very truly yours, FERRUZZO & FERRUZZO By THOMAS G. FERRUZZO ds cc: Mary E. Dentis Edward Miller, Esq. Exhibit D Purchaser's Officer's Certificate I, the undersigned, the Sr. Vice President, General Counsel and Secretary of ISG Resources, Inc., a Utah corporation (the "Purchaser"), do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section 5.2.5 of the Purchase Agreement dated October 26, 1999 (the "Agreement") between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the Osborne Trust (the "Sellers") and ISG Resources, Inc., a Utah corporation ("Buyer"). Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. Each of the representations and warranties made by the Purchaser in the Agreement are true and correct in all material respects as of the date of the Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of October 26, 1999. ISG RESOURCES, INC. _______________________ By: Brett A. Hickman Its: Sr. Vice President, General Counsel and Secretary Exhibit E Purchaser's Counsel's Opinion March 27, 2000 Mrs. Mary E. Dentis #1 Sea Cove Lane Newport Beach, CA 92660 Mrs. Judith O. Garcia 8440 La Bajada Whittier, CA 90605 Ladies: I am Sr. Vice President and General Counsel of ISG Resources, Inc., a Utah corporation ("Purchaser") and have acted as counsel to Purchaser in connection with the Purchase Agreement dated October 26, 1999 (the "Agreement") between Mary Ellen Dentis, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and Judith O. Garcia, as Trustee of the Osborne Trust (collectively the "Sellers") and the Purchaser. This is the opinion contemplated by Section 5.2.6 of the Agreement. All capitalized terms used in this opinion without definition have the respective meanings given to them in the Agreement or the Accord referred to below. This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, and this Opinion Letter should be read in conjunction therewith. The law covered by the opinions expressed herein is limited to the laws of the United States. Based on the foregoing, my opinion is as follows: 1. The Agreement is enforceable against the Purchaser. 2. Neither the execution and delivery of the Agreement nor the performance of the Purchaser's obligations thereunder (a) violates any provision of the certificate of incorporation or bylaws (or other governing instrument) of the Purchaser, (b) breaches or constitutes a default (or an event that, with notice or lapse of time or both, would constitute a default) under any agreement or commitment to which the Purchaser is party or (c) violates any statute, law, regulation or rule, or any judgment, decree or order of any court or Governmental Authority applicable to the Purchaser. Sincerely, Brett A. Hickman BAH/hs cc: Thomas G. Ferruzzo, Esq. Edward L. Miller, Esq. Disclosure Schedule THE DISCLOSURE SCHEDULE OF LEWIS W. OSBORNE, INC. AND UNITED TERRAZZO SUPPLY CO., INC. The Disclosure Schedule of LEWIS W. OSBORNE, INC. and UNITED TERRAZZO SUPPLY CO., INC. (both sometimes referred to as the "Company") has been prepared and is being delivered by the Sellers pursuant to that certain Stock Purchase Agreement dated as of the 26th day of October, 1999, by and among ISG RESOURCES, INC., MARY ELLEN DENTIS, as Trustee of the Mary Ellen Dentis Revocable Intervivos Trust, u/d/t October 19, 1990 and JUDITH O. GARCIA, Trustee of the Osborne Family Trust (the "Agreement"). Pursuant to Section 9.16 of the Agreement, any disclosure in this Disclosure Schedule, and in any supplement hereto, shall relate to the Section of the Agreement to which it refers, except to the extent that the relevance to such other section is manifest on the face of the Disclosure Schedule. Any capitalized terms set forth in any Section of this Disclosure Schedule and not otherwise defined shall have the meaning ascribed to it in the Agreement. SECTION 2.4 Lines of Business the Company is Participating 1. Building materials 2. Blending 3. Packaging sales of cement 4. Aggregates 5. Divider strip 6. Grinding and polishing machines 7. Grinding and polishing stones 8. Cleaners and sealers SECTION 2.6 Consents None. SECTION 2.8 Exceptions to GAAP 1. The attorney fees and costs and accountant fees with respect to this transaction have been paid by the Company and expensed without any allocation between Shareholder and the Company. 2. The Financial Statements do not accrue vacation or sick leave for employees. SECTION 2.9 Changes Since June 30, 1999 1. The Company has not had any adverse material effects when reviewed as a whole, expenses have increased in some areas and decreased in others. 2. The Company's top ten accounts are listed in Schedule 2.24.1. 3. The Company has disposed of 3 tanks (2 large and 1 small) that were beyond the end of their useful lives. 4. There has been changes in compensation for 3 employees (Nick Reeves, Truck Driver, Tony Avila, Shop Foreman, and Frank Maggio, Plant Foreman). There are no other raises planned or promised. 5. In connection with increased Medical plan (Kaiser) costs, the Company has decided not to increase employee contributions to the cost of this plan. SECTION 2.10 Undisclosed Liabilities The Company makes no representation or warranty with respect to any computer hardware or software and its ability to recognize the year 2000. SECTION 2.11 Taxes None. SECTION 2.12 Legal Proceedings 1. The Casmalia Disposal Site (see Section 2.23.2). 2. Notice to Comply dated February 8, 1996, issued by the South Coast Air Quality Management District, attached hereto (see Section 2.13). 3. Failure to have a permit to operate air pressure tank since expiration of prior permit (see Section 2.13). 4. In 1995 the Company was informed that another company was using the name Osborne Building Supply, Inc. A cease and desist letter was sent by the Company. A response was sent June 27, 1995 whereby Osborne Building Supply, Inc. alleged it had the exclusive right to use such name. The Company has been informed that Osborne Building Supply, Inc. is now out of business. SECTION 2.13 Compliance With Laws 1. The Company has not maintained an Injury Illness Prevention Program, but will have one in place at the time of Closing. 2. The Company has not maintained a Hazardous Communications Program, but will have one in place at the time of Closing. 3. The Company has not had a valid permit to operate its Air Pressure Tank. The Company has applied for a renewal. Attached hereto is a copy of the prior permit. 4. In 1996, the Company received a Notice to Comply from the South Coast Air Quality Management District to "submit an application for cement blending station." An application was immediately filed and the appropriate fees paid; however, no permit was ever issued. The Company has contacted the A.Q.M.D., who is processing the application. 5. The Company's Employee Handbook is out of date. SECTION 2.14 Employee Benefit Plans Salaried employees - Medical, the company pays 80% Paid Vacations Paid Holidays 5 days paid sick leave Hourly employees - Medical, the company pays 80% Paid Vacations Paid Holidays The medical plan is with Kaiser SECTION 2.15 Owned Real Property and Leased Real Property The Company owns no real property. The property which the Company occupies is owned by the Stockholders, Mary E. Dentis and Judith O. Garcia. We do not have a lease, but are on a month-to-month rental. The amount of the rental is $8,666 per month and is paid in the following manner: $2,000 from United Terrazzo: $ 1,000 to Mary Dentis $ 1,000 to Judith Garcia, Trustee $6,666 from Lewis W. Osborne: $ 3,000 to Judith Garcia, Trustee $ 3,666 to Mary Dentis The amount paid to the owners from Lewis W. Osborne is being taken out of the AAA. SECTION 2.15.2 Real Property Liens Storm drain easement Chevron pipeline easement Those set forth in the Preliminary Title Report issued by Chicago Title Insurance Company. SECTION 2.15.3 Exceptions to Enforceability of Leases None. SECTION 2.15.5 Real Property Condition The building was built prior to 1978 and, as such, may contain asbestos containing materials, lead-based paint, and other products now considered hazardous. SECTION 2.16 Personal Property Liens None. SECTION 2.17 Intellectual Property None. SECTION 2.18.1 Contracts At-will employment contracts. Toll Manufacturing Agreement. Packaging Agreement with CTS Cement Manufacturing. SECTION 2.18.2 Default Notices None. SECTION 2.18.3 Materially Adverse Contracts None. SECTION 2.19 Licenses 1. Permit to Operate Liquified Petroleum Gas Tank 2. Permit to Operate Air Pressure Tank (see Section 2.13) 3. Permit to Operate Cement Blending Station (see Section 2.13) 4. City of La Mirada Business Licenses for United Terrazzo Supply Co., Inc. and Lewis W. Osborne, Inc. 5. California State Board of Equalization Seller=s Permit 6. Permits Issued by the South Coast Air Quality Management District listed on the attached APermit Renewals@ letter. SECTION 2.20 Insurance Sherman Parent Insurance Package/Auto/Workers' Comp #CCP56373901 claim auto 96-97 amount $ 346.00. No other claims in this time period since 1/01/96. Health insurance with Kaiser. SECTION 2.23.2 Environmental Matters We have a letter of final closure for underground tank removal. Unsettled claim for soil that was sent to the Casmalia site in 1987. The Company has paid $62,500 to have this dirt hauled and remediated. The Company exercised a settlement option as set forth in the Casmalia Disposal Site Administrative Order,U.S. EPA Docket No. 99-02(a), and sent in the sum of $77,983 as settlement. See Section 2.15.5. See Section 2.13. SECTION 2.24.1 Customers COMPANY TYPE OF BUSINESS YTD % OF SALES SALES - - ------- --------------- -------- -------- CORR01 TERRAZZO $ 203,277.68 11.1 HOCK01 POOL PLASTERING $ 118,956.56 6.5 CHEM01 BLENDS $ 114,599.78 6.3 WEST06 BLENDS $ 111,412.03 6.1 SCOF01 FLY ASH $ 103,770.55 5.7 PACI03 BLOCK WALLS $ 83,311.44 4.6 PAYN01 TERRAZZO $ 77,043.50 4.2 ADVA02 TERRAZZO $ 73,888.10 4.0 MOLI01 TERRAZZO $ 53,158.34 2.9 ASSO01 TERRAZZO $ 40,581.95 2.2 SECTION 2.24.2 Suppliers California Portland Cement Manhattan American Lehigh Cement Riverside Cement Oglebay Norton Sand Fribel International Heritage Glass Tesco Products Atlas Abrasives Specialty Minerals SECTION 2.25 Accounts Receivable None. SECTION 2.28 Bank Accounts Cerritos Valley Bank (562) 868-3221 12100 Firestone Blvd. Norwalk, Ca 90650-2971 Lewis W. Osborne, Inc. Checking Account #001005154 United Terrazzo Supply Checking Account #001010859 Signors on the above: Mary Dentis Gerald Steward Kathleen Roman United Terrazzo Money Market Account #1049879 Signors on the above: Mary Dentis Kathy Roman EX-10.11 21 PURCHASE AGREEMENT -- NICHOLS, NICHOLS & DICKEY STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") is dated December 1, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and Bill E. Nichols, John W. Nichols and Debbie Nichols Dickey, individuals residing in the state of Texas (individually a "Seller" and collectively the "Sellers"). RECITALS The Sellers own and desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, all of the issued and outstanding shares of capital stock of Magna Wall, Inc. (the "Company"), a Texas corporation. The authorized capital stock of the Company is referred to herein as the "Purchased Stock." Unless otherwise defined in this Agreement, the capitalized terms used in this Agreement have the meanings given in Article VIII below. In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth herein. ARTICLE I 1. SALE OF PURCHASED STOCK; CLOSING 1.1 Purchase and Sale. At the Closing, on the terms and conditions set forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase from the Sellers, the Purchased Stock. 1.2 Purchase Price. 1.2.1 The purchase price (the "Purchase Price") for the Purchased Stock is one million five hundred thousand dollars ($1,500,000.00) in cash, subject to adjustment as set forth in Section 1.2.2 below. 1.2.2 The Purchase Price will increase or decrease, on a dollar for dollar basis, based on changes in the Company's net asset value (the "Net Asset Value") (defined as total assets less liabilities) during the period September 30, 1999 to the Closing Date. To determine whether an adjustment is appropriate, Sellers shall (within thirty days of the Closing Date) provide the Purchaser with financial statements of the Company indicating the Net Asset Value as of the Closing Date (the "Sellers' Calculation"). If Purchaser (within thirty days of receiving the Sellers' Calculation) disagrees with the Sellers' Calculation, then Purchaser will promptly engage an independent accounting firm to review the financial condition of the Company as of the Closing on a basis consistent with the Financial Statements as described in Article 2.8 below. Within forty-five (45) days after the matter is referred to the accounting firm, the accounting firm will prepare and deliver a report to all parties which will detail whether a Purchase Price adjustment is necessary. The report will be final and binding on both parties, absent fraud or clear error. 1.3 Closing. The Closing (the "Closing") of the purchase and sale of the Purchased Stock will take place at the offices of Donald L. Cuba, Wells Fargo Bank Building, 8700 Crownhill Boulevard, Suite 105, San Antonio, Texas 78209 at 11:00 A.M. on December 1, 1999, or at such other place as Purchaser and the Sellers shall mutually agree. 1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the Purchase Price to the Sellers by wire transfer to such account as the Sellers may direct by written notice delivered to Purchaser by the Sellers at least three (3) Business Days before the Closing Date. Simultaneously, the Sellers will sell and convey to Purchaser the Purchased Stock free and clear of all Liens, by delivering to Purchaser a stock certificate, registered in the name of Purchaser, representing the Purchased Stock. At the Closing, the parties shall also deliver the opinions, certificates, contracts, documents and instruments to be delivered pursuant to this Agreement. 1.5 Post Closing Payment. 1.5.1 If the Purchaser agrees with the Sellers' Calculation, then within twenty (20) days after delivery of the Sellers' Calculation, the Purchaser will deliver to the Sellers cash in the amount of the adjustment specified therein. 1.5.2 If the Purchaser disagrees with the Sellers' Calculation then, within twenty (20) days after delivery of the report by the independent accounting firm referred to in Section 1.2.2: (i) if the report indicates that an upward adjustment is appropriate, the Purchaser will deliver to the Sellers cash in the amount of the adjustment specified in the report, absent fraud or clear error; or (ii) if the report indicates that an downward adjustment is appropriate, the Sellers will deliver to the Purchaser cash in the amount of the adjustment specified in the report, absent fraud or clear error ARTICLE II 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers, to their best actual knowledge, hereby represent and warrant to Purchaser as follows: 2.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Texas and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets. The Company is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, (i) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company and (ii) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or any other agreement to which it is a party or on the ability of the Sellers or the Company to perform their obligations hereunder or thereunder. The Sellers have delivered to Purchaser true and complete copies of the certificate or articles of incorporation and by-laws (or other comparable corporate charter documents) of the Company, including all amendments thereto effected through the Closing Date. 2.2 Capital Stock. The Purchased Stock consists of 1,000 shares of common stock, par value $1.00 per share. The Purchased Stock constitutes all of the issued and outstanding shares of capital stock of the Company. The shares of Purchased Stock are validly issued, fully paid and nonassessable, issued in compliance with all applicable Laws and no additional shares of capital stock have been reserved for issuance. There are no outstanding Options with respect to the stock of the Company or agreements, arrangements or understandings to issue Options with respect to the Company, nor are there any preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of the capital stock of the Company. The Sellers are the record and beneficial owners of all of the shares of Purchased Stock, free and clear of all Liens. The delivery to Purchaser of the certificates representing the Purchased Stock will transfer to Purchaser good and valid title to all shares of the Purchased Stock, free and clear of all Liens, and restrictions and after such transfer the Purchased Stock, in the hands of Purchaser, will have been duly authorized, validly issued, fully paid and nonassessable. From and after the Closing, no Seller nor any other Person (other than the Purchaser) will have any rights whatsoever with respect to the Purchased Stock or to any other securities of the Company. 2.3 Authority Relative to This Agreement. The Sellers have full authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Sellers and constitutes the legal, valid and binding obligations of the Sellers, enforceable against them in accordance with its terms. 2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure Schedule lists all lines of business in which the Company is participating or engaged or has participated or engaged in the preceding three years. The name of each director and officer of the Company, and the position with the Company held by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds no equity, partnership, joint venture or other interest in any Person. 2.5 No Conflicts. The execution and delivery by the Sellers of this Agreement does not, and the consummation of the transactions contemplated hereby will not: 2.5.1 conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable corporate charter documents) of the Company; 2.5.2 subject to obtaining the consents, approvals and actions, making the filings and giving the notices referred to in Section 2.6 below or disclosed in Section 2.6 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Laws or Order (to the extent such conflict would result in a claim of more than $10,000.00 against the Company) applicable to any of the Sellers or to the Company, or any of their Assets; or 2.5.3 except as disclosed in Section 2.5 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require any of the Sellers or the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (f) result in the creation or imposition of any Lien upon the Company or any of its Assets under, any Contract or License to which any of the Sellers or the Company is a party or by which any of their respective Assets is bound except for such conflicts, violations, breaches, defaults, consents, approvals, actions, filings, notices, terminations, cancellations, accelerations, modifications, additional rights or entitlements or Liens that, individually or in the aggregate, (A) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company, and (B) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of any of the Sellers or the Company to perform its obligations hereunder. 2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Sellers or the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of transactions contemplated herein. 2.7 Books and Records. The minute books and other similar records of the Company to be provided to Purchaser upon execution of this Agreement contain a true and complete record, in all material respects, of all action taken by the stockholders, the board of directors and committees of the boards of directors (or other similar governing entities) of the Company. 2.8 Financial Statements. Set forth in Section 2.8 of the Disclosure Statement are (a) the unaudited statements of income, of the Company for the period ended Septempber 30, 1999 and (b) an unaudited balance sheet of the Company as at September 30, 1999 (the "Balance Sheet")(collectively referred to herein as the "the Financial Statements"). The Financial Statements fairly present the financial condition of the Company as of the dates thereof and the earnings for the periods indicated, all in accordance sound accounting principles, consistently applied, and are consistent with the books and records of the Company. 2.9 Absence of Changes. Since September 30, 1999, there has not been any material adverse change or any event or development, which, individually or together with other such events, could reasonably be expected to result in a material adverse change, in the business or condition of the Company. In addition, except as expressly contemplated hereby and except as disclosed in Section 2.9 of the Disclosure Schedule, there has not occurred since September 30, 1999: 2.9.1 any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock (or other equity interests) of the Company or any direct or indirect redemption, purchase or other acquisition by the Company of any such capital stock (or other equity interests) of the Company; 2.9.2 any authorization, issuance, sale or other disposition by the Company of any shares of its capital stock (or other equity interests), or any modification or amendment of any right of any holder of any outstanding shares of capital stock (or other equity interests) of the Company; 2.9.3 (i) any increase in salary, rate of commissions or rate of consulting fees of any employee or consultant of the Company; (ii) any payment of consideration of any nature whatsoever (other than salary, commissions or consulting fees paid to any employee or consultant of the Company) to any officer, director, stockholder, employee or consultant of the Company; (iii) any establishment or modification of (A) targets, goals, pools or similar provisions under any Benefit Plan, employment contract or other employee compensation arrangement or (B) salary ranges, increase guidelines or similar provisions in respect of any Benefit Plan, employment contract or other employee compensation arrangement; or (iv) any adoption, entering into, amendment, modification or termination (partial or complete) of any Benefit Plan; 2.9.4 (i) incurrences by the Company of Indebtedness or (ii) any voluntary purchase, cancellation, prepayment or complete or partial discharge in advance of a scheduled payment date with respect to, or waiver of any right of the Company under, any Indebtedness of or owing to the Company; 2.9.5 any physical damage, destruction or other casualty loss (whether or not covered by insurance) affecting any of the Assets of the Company in an aggregate amount exceeding $10,000; 2.9.6 any write-off or write-down of or any determination to write off or write down any of the Assets of the Company; 2.9.7 any purchase of any Assets of any Person or disposition of, or incurrence of a Lien on, any Company Assets, other than acquisitions or dispositions of inventory in the ordinary course of business by the Company consistent with past practice; 2.9.8 other than in the ordinary course of business, any entering into, amendment, modification, termination (partial or complete) or granting of a waiver under or giving any consent with respect to (i) any Contract which is required (or had it been in effect on the date hereof would have been required) to be disclosed in the Disclosure Schedule pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any intellectual property rights owned by the Company; 2.9.9 any capital expenditures or commitments for additions to property, plant or equipment of the Company constituting capital assets in an aggregate amount exceeding $10,000; 2.9.10 any commencement, termination or change by the Company of any line of business; 2.9.11 any transaction by the Company with any of its officers, directors, stockholders or Affiliates, other than pursuant to a Contract or arrangement in effect on September 30, 1999 and disclosed to Purchaser pursuant to Section 2.18.1.8 or other than pursuant to any Contract of employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule; 2.9.12 any entering into of an agreement to do or engage in any of the foregoing, including without limitation with respect to any merger, sale of substantially all assets or other business combination not otherwise restricted by the foregoing paragraphs; or 2.9.13 any change in the accounting methods or procedures of the Company or any other transaction involving or development affecting the Company outside the ordinary course of business. 2.10 No Undisclosed Liabilities. Except as reflected or reserved against in the September 30, 1999 balance sheet included in the Financial Statements or as disclosed in Section 2.10 of the Disclosure Schedule, and subject to the limitation contained in 7.1.1 with respect to claims having insurance coverage, the Company has no Liabilities, nor are there any Liabilities relating to or affecting the Company or any of its Assets. 2.11 Taxes. 2.11.1 Except as disclosed in Section 2.11 of the Disclosure Schedule, all Tax Returns required to have been filed by or with respect to the Company with any Taxing Authority have been duly and timely filed, and each such Tax Return correctly and completely reflects the income, franchise or other Tax liability and all other information required to be reported thereon. The Company is not and has never been a member of any affiliated, combined, consolidated, unitary or similar group with respect to the filing of tax returns or otherwise with respect to any Taxing Authority. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. All monies required to be withheld by the Company from employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld, and either duly and timely paid to the appropriate Taxing Authority or (if not yet due for payment) set aside in accounts for such purposes. The Company has no liability for Taxes for any Person other than the Company (i) solely as a present or former member of a consolidated group, (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise. 2.11.2 The provisions for current Taxes in the Financial Statements are sufficient for the payments of all accrued and unpaid Taxes not yet due and payable as of their dates, whether or not disputed. As of the Closing Date, such provisions, as adjusted for the passage of time through the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet due and payable of the Company. 2.11.3 The Company is not a party to any agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. The Company has not received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. 2.11.4 No Taxing Authority is now asserting or threatening to assert against the Company any deficiency, claim or liability for additional Taxes or any adjustment of Taxes, and there is no reasonable basis for any such assertion of which any of the Sellers or the Company is or reasonably should be aware. No issues have been raised in any examination by any Taxing Authority with respect to the Company which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. The federal income Tax Returns of the Company disclose (in accordance with Section 6662(d)(2)(B) of the Code) all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of section 6662(d) of the Code. No claim has ever been made by any Taxing Authority in a jurisdiction in which the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Section 2.11 of the Disclosure Schedule lists all federal, state, local and foreign income Tax Returns filed by or with respect to the Company for all taxable periods ended on or after December 31, 1998, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since January 1, 1996. There are no Liens for Taxes upon the Assets of the Company. 2.11.5 Except as disclosed in Section 2.11 of the Disclosure Schedule, the Company is not (i) a party to or bound by any obligations under any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject to any election under sections 338(e) or 341(f) of the Code or the regulations thereunder, (iii) required to make, or reasonably expects that it might have to make, any adjustment under section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (iv) subject to any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of section 280G of the Code, (v) and at no time has ever been, a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is subject to the provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning of section 460 of the Code, (vii) a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, or (viii) nor has it ever been, a member of any affiliated, consolidated, combined, unitary or similar group for any Tax purpose. 2.12 Legal Proceedings. 2.12.1 Except as disclosed in Section 2.12 of the Disclosure Schedule (with paragraph references corresponding to those set forth below): 2.12.1.1 there are no actions or proceedings pending or, to the knowledge of the Sellers or the Company, threatened against, relating to or affecting the Company, or any of its Assets which (A) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement or otherwise result in a material diminution of the benefits contemplated by this Agreement to Purchaser, or (B) if determined adversely to the Company, could reasonably be expected to result in (x) any injunction or other equitable relief against the Company, or (y) Losses by the Company, individually or in the aggregate with Losses in respect of other such actions or proceedings, exceeding $10,000; 2.12.1.2 there are no facts or circumstances known to the Sellers or to the Company that could reasonably be expected to give rise to any action or proceeding that would be required to be disclosed pursuant to clause 2.12.1.1 above; 2.12.1.3 neither the Sellers nor the Company has received notice, or is aware of any Orders or lawsuits outstanding against the Company; and 2.12.1.4 neither the Sellers nor the Company has received notice or is aware of any defects, dangerous or substandard conditions in the products or materials manufactured, sold, distributed, or to be manufactured, sold or distributed by the Company that could cause bodily injury, sickness, disease, death, or damage to property, or result in loss of use of property, or any claim, suit, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, or damage to property, or loss of use or property. 2.12.2 Prior to the execution of this Agreement, the Sellers and the Company have delivered all responses of counsel for the Company to auditors' requests for information regarding actions or proceedings pending or threatened against, relating to or affecting the Company during the period commencing January 1, 1996. Section 2.12.2 of the Disclosure Schedule sets forth all actions or proceedings relating to or affecting the Company or its Assets during the period commencing January 1, 1996 prior to the date hereof. 2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13 of the Disclosure Schedule, neither the Sellers nor the Company has received at any time since January 1, 1996 any notice that the Company is or has been at any time since such date, in violation of or in default under, any Law or Order applicable to the Company or any of its Assets. In furtherance and not limitation of the foregoing, neither the Sellers nor the Company has violated any federal or state securities law in connection with the offer, sale or purchase of any securities. 2.14 Benefit Plans; ERISA. The Company has in existence a defined benefit plan (the "Plan") and copies of all documentation relating to the Plan have been delivered or made available to Purchaser (including copies of the Plan, summary plan descriptions, trust agreements, the three most recent annual returns, employee communications, and IRS determination letters); The Plan terminates on December 31,1999; there are no other benefit plans of any nature. 2.14.1 The Plan, and the administration thereof, complies, and has at all times complied in all material respects, with the requirements of all applicable Law, including ERISA and the Code, and the Plan intended to qualify under section 401(a) of the Code has at all times since its adoption been so qualified, and each trust which forms a part of any such plan has at all times since its adoption been tax-exempt under section 501(a) of the Code; 2.14.2 all "accumulated funding deficiency" within the meaning of section 302 of ERISA or section 412 of the Code shall be eliminated prior to termination of the Company's defined benefit plan; 2.14.3 no direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company under Title IV of ERISA to any party with respect to any Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA affiliate; 2.14.4 the "amount of unfunded benefit liabilities" within the meaning of section 4001(a)(18) of ERISA does not or will not upon termination of the Plan exceed zero with respect to any Benefit Plan subject to Title IV of ERISA; 2.14.5 other than termnimation of the Plan effective December 31, 1999 no other "reportable event" (within the meaning of section 4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA affiliate since the effective date of said section 4043; proper notice of termination has been given to all employees; 2.14.6 the Plan is not a multiemployer plan within the meaning of section 3(37) of ERISA; 2.14.7 Neither the Company nor any ERISA affiliate has incurred any liability for any Tax imposed under section 4971 through 4980B of the Code or civil liability under section 502(i) or (l) of ERISA; 2.14.8 no benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested or payable by reason of any transaction contemplated under this Agreement; 2.14.9 no Tax has been incurred under section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto); 2.14.10 the Plan does not provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws requiring continuation of benefits coverage following termination of employment; 2.14.11 no suit, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought or, to the knowledge of any Seller or the Company, threatened against or with respect to the Plan and there are not facts or circumstances known to any the Sellers or the Company that could reasonably be expected to give rise to any such suit, action or other litigation; and 2.14.12 all contributions to the Plans that were required to be made under the Plan have been or will be made prior to termination, and all benefits accrued (including any unfunded contributions) under the Plan have been or will be paid, accrued or otherwise adequately reserved in accordance with GAAP, and the Company has performed all material obligations required to be performed under all Benefit Plans. 2.15 Real Property. The Company owns no real property. 2.16 Tangible Personal Property. The Company is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under contract to use, all tangible personal property used in the conduct of its business, including all tangible personal property reflected on the Financial Statements and tangible personal property acquired since September 30, 1999 other than property disposed of since such date in the ordinary course of business consistent with past practice and the terms of this Agreement. All such tangible personal property is free and clear of all Liens, other than Liens disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing Date, is adequate and suitable for the conduct by the Company of the business presently conducted by it, and is in good working order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws. 2.17 Intellectual Property Rights. The Company has interests in or uses only the intellectual property described in Section 2.17 of the Disclosure Schedule. The Company either has all right, title and interest in or a valid and binding license to use such intellectual property. No other intellectual property is used in or necessary to the conduct of the business of the Company. All registrations, pending applications, registered rights and executed agreements related to intellectual property are listed in Section 2.17 of the Disclosure Schedule. Except as disclosed therein, (i) the Company has the right to use the intellectual property described therein, (ii) all registrations on behalf of the Company with and applications to Governmental or Regulatory Authorities in respect of such intellectual property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by the Company to maintain their validity or effectiveness, (iii) all copyrightable materials used by the Company are works-for-hire and are owned by the Company, (iv) there are no restrictions on the direct or indirect transfer of any License, or any interest therein, held by the Company in respect of such intellectual property, (v) the Sellers has delivered, or has caused the Company to deliver, to Purchaser prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in such intellectual property, which documentation is accurate and complete and sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret, (vi) the Sellers and the Company have taken reasonable security measures to protect the secrecy, confidentiality and value of their trade secrets, (vii) neither the Sellers nor the Company is or has received any notice that it is in default (or with the giving of notice or lapse of time or both, would be in default) under any License to use such intellectual property and (viii) neither the Sellers nor the Company has any knowledge that such intellectual property is being infringed by any other Person. To the knowledge of the Sellers and the Company, the Company is not infringing any intellectual property of any Person, and no litigation is pending and no claim has been made or, to the knowledge of any the Sellers or of the Company, has been threatened to such effect. 2.18 Contracts. 2.18.1 Section 2.18.1 of the Disclosure Schedule contains a true and complete list of every Contract or other arrangements (true and complete copies, or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, of which have been delivered to Purchaser prior to the execution of this Agreement), to which the Company is a party, a guarantor or by which any of its Assets is bound. 2.18.2 Each Contract disclosed in Section 2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure Schedule, neither the Company nor, to the knowledge of any the Sellers, any other party to such Contract is, or has received notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be violation or breach of or default under any such Contract). 2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure Schedule, the Company is not a party to or bound by any Contract that has been or could reasonably be expected to be, individually or in the aggregate with any other such Contracts, materially adverse to the business or condition of the Company. 2.18.4 To the extent any of the guaranties for the benefit of the Company or any of its Assets are not integrated with Contracts disclosed in Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, or each party thereto; and neither the guarantor thereunder nor, to the knowledge of the Sellers or the Company or any other party to such guaranty is, or has received notice that it is, in violation or breach of or default under any such guaranty (or with notice or lapse of time or both, would be in violation or breach of default under any such guaranty). 2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and complete list of all Licenses used in and material to the business or operations of the Company, setting forth the owner, the function and the expiration and renewal date of each. Prior to the execution of this Agreement, the Sellers or the Company have delivered to Purchaser true and complete copies of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure Schedule: 2.19.1 the Company owns or validly holds all Licenses that are material to its respective business or operations; 2.19.2 each license listed in Section 2.19 of the Disclosure Schedule is valid, binding and in full force and effect; 2.19.3 neither the Sellers nor the Company is, or has received any notice that it is in default (or with the giving of notice of lapse of time or both, would be in default) under any such License; and 2.19.4 the transactions contemplated in this Agreement will not violate any such License or give any other party thereto rights to terminate the License or change the terms thereof. 2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true and complete list (including the names of the insurers, the expiration dates thereof, the period of time covered thereby and a brief description of the interests insured thereby) of all liability, property, workers' compensation, directors' and officers' liability and other insurance policies currently in effect that insure the business, operations or employees of the Company or affect or relate to the ownership, use or operation of any of the Assets of the Company and that (i) have been issued to the Company, or (ii) have been issued to any Person (other than the Company) for the benefit of the Company. Each policy listed in Section 2.20 of the Disclosure Schedule is valid and binding and in full force and effect, all premiums due thereunder have been paid when due and neither the Sellers nor the Company or the Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company does not know of any reason or state of facts that could lead to the cancellation of such policies. The insurance policies listed in Section 2.20 of the Disclosure Schedule (i) in light of the business, operations and Assets of the Company are in amounts and have coverages that are reasonable and customary for Persons engaged in such businesses and operations and having such Assets and (ii) are in amounts and have coverages as required by any Contract to which the Company is a party. Section 2.20 of the Disclosure Schedule contains a list of all claims made under any insurance policies covering the Company since January 1, 1996. Neither the Sellers nor the Company have received notice that any insurer under any policy referred to in this Section is denying liability with respect to a claim thereunder or defending under a reservation of rights clause. Since January 1, 1996, the Company has maintained, in light of its business, location, operations and Assets, at all times, without interruption appropriate insurance, in scope and amount of coverages. 2.21 Affiliate Transactions. There are no Liabilities between the Company and any current or former officer, director, stockholder, Affiliate of the Company or any Affiliate of any such officer, director, stockholder or Affiliate, and the Company does not provide or cause to be provided any assets, services or facilities to any such current or former officer, director, stockholder or Affiliate. 2.22 Employees; Labor Relations. The Company is not engaged in any unfair labor practice. There is (i) no unfair labor practice complaint pending or, to the knowledge of the Sellers or the Company, threatened against the Company before the National Labor Relations Board or comparable or similar state agency, and no grievance or arbitration proceeding arising out of under collective bargaining agreements is so pending or, to the knowledge of the Sellers or of the Company, threatened against the Company, (ii) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the Company, threatened against the Company, and (iii) no union representation question exists with respect to the employees of the Company or, to the knowledge of the Sellers or the Company, no union organization activities are taking place. 2.23 Environmental Matters. The Company operates no facilities. The Company has conducted its business and its operations in full compliance with all Environmental Laws; and, is not in violation of or liable under any Environmental Law. 2.24 Substantial Customers and Suppliers. Section 2.24.1 of the Disclosure Schedule lists the ten (10) largest customers of the Company on the basis of revenues for goods sold or services provided for the twelve month period ending September 30, 1999. Section 2.24.2 of the Disclosure Schedule lists the ten (10) largest suppliers of the Company on the basis of cost of goods or services purchased during the twelve month period ending September 30, 1999. Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of the Sellers and the Company, no such customer or supplier is insolvent or threatened with bankruptcy or insolvency. 2.25 Accounts Receivable. Except as set forth in Section 2.25 of the Disclosure Schedule, the accounts and notes receivable of the Company reflected on the balance sheets included in the Financial Statements for the period ended September 30, 1999, and all accounts and notes receivable arising subsequent to such date, (i) arose from bona fide sales transactions in the ordinary course of business consistent with past practice and are payable on ordinary trade terms, (ii) are legal, valid and binding obligations of the respective debtors enforceable in accordance with their respective terms, (iii) are not subject to any valid set-off or counterclaim, (iv) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangements, and (v) are not subject of any Actions or Proceedings brought by or on behalf of the Company. Section 2.25 of the Disclosure Schedule sets forth (x) a description of any security arrangements and collateral securing the repayment or other satisfaction of receivables of the Company and (y) all jurisdictions in which the records relating to accounts and notes receivable are located. 2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company, nor any of their respective Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers or the Company or any such Affiliate) have entered into any agreement or had any discussions with any third party regarding any transaction involving the Company which could result in the Company, Purchaser or its stockholders, or any officer, director, employee, agent or Affiliate of any of them, being subject to any claim for liability to said third party as a result of entering into this Agreement or consummating the transactions contemplated hereby or thereby. No agent, broker, finder, investment banker, financial advisor or other Person will be entitled to any fee, commission or other compensation in connection with the transactions contemplated by this Agreement on the basis of any act or statement made by the Sellers, the Company or any of their respective Affiliates, or any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers, the Company, or any such Affiliate. 2.27 Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Company Act of 1935, as amended. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure Schedule sets forth (a) a list of the names and locations of all banks, securities brokers and other financial institutions at which the Company has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; and (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of all persons having signatory power and respect thereto. 2.29 Exemption from Registration. The offer and sale of the Purchased Stock made pursuant to this Agreement are exempt from the registration requirements of the Securities Act. Neither any the Sellers, nor the Company nor any Person authorized to act on behalf of any of the foregoing has, in connection with the offering of the Purchased Stock, engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 501(c) under the Securities Act), (ii) any action involving a public offering within the meaning of section 4(2) of the Securities Act, or (iii) any action that would require the registration under the Securities Act of the offering and sale of the Purchased Stock pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. 2.30 Disclosure. The representations and warranties contained in this Agreement, and the statements contained in the Disclosure Schedule or in the certificates, lists and other writings furnished to Purchaser pursuant to any provision of this Agreement (including the Financial Statements), when taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein and therein, in the light of the circumstances under which they were made, not misleading. 2.31 Survival of Representations, Warranties, Covenants and Agreements. Even though the Purchaser may investigate the affairs of the Company and attempt to confirm the accuracy of the representations and warranties of the Sellers, the Purchaser, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Sellers contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE III 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser, to its best actual knowledge, represents and warrants to the Sellers as follows: 3.1 Organization and Qualification. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of Utah. Purchaser is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of Purchaser to perform its obligations hereunder or thereunder. 3.2 Authority Relative to this Agreement. Purchaser has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly approved by its board of directors and no other corporate proceedings on the part of Purchaser or its stockholders are necessary to authorize the execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. 3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement does not, and the performance by Purchaser of its obligations under this Agreement and the consummation of the transactions contemplated hereby, do not and will not: 3.3.1 conflict or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or by-laws of Purchaser; 3.3.2 subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.4 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or its Assets and Properties; or 3.3.3 except as disclosed in Section 3.3.3 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, or (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of any Contract or License to which Purchaser is a party, or by which it is bound. 3.4 Governmental Approvals and Filings. Except as disclosed in Section 3.4 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement to which it is a party or the consummation of the transactions contemplated herein. 3.5 Legal Proceedings. There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets which (i) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, or (ii) could reasonably be expected, individually or in the aggregate with other such Actions or Proceedings, to have a material adverse effect on the business or condition of Purchaser. 3.6 Brokers. No agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement on the basis of any act or statement made by Purchaser. 3.7 Purchase for Investment. The Purchased Stock will be acquired by Purchaser for its own account for the purpose of investment and not with a view to the resale or distribution of all or any part of the Purchased Stock in violation of the Securities Act. 3.8 Survival of Representations, Warranties, Covenants and Agreements. Even though the Sellers may investigate the affairs of the Purchaser and confirm the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the Sellers, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Purchaser contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE IV 4 COVENANTS BY THE SELLERS 4.1 Noncompetition; Non Solicitation. 4.1.1 For a period of five (5) years from the Closing Date, each of the Sellers, alone or in conjunction with any other Person, or directly or indirectly through their present or future Affiliates, will not directly or indirectly own, manage, operate, join, be employed by, have a financial interest in, control or participate in the ownership, management, operation or control of, or use or permit his name to be used in connection with, or be otherwise connected in any manner with any business or enterprise engaged in the design, development, manufacture, distribution or sale of any products, or the provision of any services related to those which the Company was designing, developing, manufacturing, distributing, selling or providing at any time prior to and up to and including the Closing Date anywhere in the United States of America, provided that with respect to John W. Nichols the foregoing restriction shall only apply to businesses or enterprises engaged in manufacturing, distributing and/or selling one-coat stucco, and not to businesses or enterprises engaged in the use of said product provided that the foregoing restriction shall not be construed to prohibit the ownership, in the aggregate, of not more than two percent (2%) of any class of securities of any corporation which is engaged in any of the businesses or enterprises described above, having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, which securities are publicly owned and regularly traded on any national exchange or in the over-the-counter market. Furthermore, this Covenant shall not apply to Debbie Nichols Dickey. 4.1.1 For a period of five (5) years from the Closing Date, the Sellers shall not directly or indirectly, or through an Affiliate, (i) influence any individual who was an employee or consultant of the Company at any time, to terminate his or her employment or consulting relationship with the Company, (ii) interfere in any other way with the employment, or other relationship, of any employee or consultant of the Company or (iii) cause or attempt to cause (or participate in any way in any discussion or negotiation concerning) (x) any client, customer or supplier of the Company or (y) any prospective client, customer or supplier of the Company from engaging in business with the Company. 4.1.2 The Sellers agree that Purchaser's remedies at law for any breach or threat of breach by it of any of the provisions of this Section 4.1 will be inadequate, and that, in addition to any other remedy to which Purchaser may be entitled at law or in equity, Purchaser shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining orders or orders to prevent breaches of the provisions of this Section 4.1 and to enforce specifically the terms and provisions hereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting Purchaser from pursuing, in addition, any other remedies available to it for such breach or threatened breach. A waiver by the Purchaser of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provisions of this Agreement or of any subsequent breach thereof. 4.1.3 The parties hereto consider the restrictions contained in this Section 4.1 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, but if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in this Section 4.1 is an unenforceable restriction on the Sellers' activities, the provisions of this Section 4.1 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the court referred to above finds that any restriction contained in this Section 4.1 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. The provisions of this Section 4.1 shall in no respect limit or otherwise affect the Sellers's obligations under other agreements with the Company. 4.2 Regulatory and Other Approvals. The Sellers shall, and shall cause the Company to, (a) take all necessary or desirable steps and proceed diligently and in good faith and use diligent efforts, as promptly as practicable, to obtain all consents, approvals or actions of, to make all filings with and to give all notices to, Governmental or Regulatory Authorities or any other Person required to consummate the transactions contemplated hereby and those described in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request and (c) cooperate with Purchaser as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to, Governmental or Regulatory Authorities or other Persons required of Purchaser to consummate the transactions contemplated hereby. The Sellers will provide prompt notification to Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 4.3 Investigation by Purchaser. 4.3.1 From the date of this Agreement until the date on which either Party provides the other Party with written notice that this Agreement is terminated (the "Termination Date"), or until the Closing, whichever is earlier, the Sellers will afford Purchaser its employees, agents, accountants and other representatives access to the Books and Records of the Company, as well as employee files and records, not including product formulas, customer lists, etc. 4.3.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's investigation proceeds. To the extent that any such product formulas, customer lists, etc. are not furnished to Purchaser immediately, the same shall nevertheless be furnished to Purchaser immediately prior to the Closing. In any event, if any of this information is disclosed to Purchaser prior to or at the Closing, Purchaser shall have the option to terminate this Agreement, at its sole discretion, if the information discloses any matter which leads Purchaser to the conclusion that it should not close the transaction contemplated herein. 4.4 Investigation by Purchaser. 4.4.1 From the date of this Agreement until the date on which either Party provides the other Party with written notice that this Agreement is terminated (the "Termination Date"), or until the Closing, whichever is earlier, the Sellers will afford Purchaser its employees, agents, accountants and other representatives access to the Books and Records of the Company, as well as employee files and records, not including product formulas, customer lists, etc. 4.4.2 Sellers will advise Purchaser what is not being disclosed as Purchaser's investigation proceeds. To the extent that any such product formulas, customer lists, etc. are not furnished to Purchaser immediately, the same shall nevertheless be furnished to Purchaser immediately prior to the Closing. In any event, if any of this information is disclosed to Purchaser prior to or at the Closing, Purchaser shall have the option to terminate this Agreement, at its sole discretion, if the information discloses any matter which leads Purchaser to the conclusion that it should not close the transaction contemplated herein. ARTICLE V 5 CLOSING CONDITIONS 5.1 Condition to the Obligations of the Purchaser. The obligations of Purchaser hereunder to purchase the Purchased Stock are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by Purchaser in its sole discretion): 5.1.1 Representations and Warranties. Each of the representations and warranties made by the Sellers in this Agreement shall, unless waived, be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.1.2 Performance. The Sellers shall have performed and complied with, unless waived, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by them at or before the Closing. 5.1.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or which could reasonably be expected to otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to Purchaser. 5.1.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall be in form and substance reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any condition that has not been satisfied or waived, and (v) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation for the transactions contemplated by this Agreement shall have occurred. 5.1.5 Third Party Consents. Any consents (or waivers) identified in Section 2.5 of the Disclosure Schedule, and all other consents (or waivers) to the performance by the Purchaser of its obligations under this Agreement, or to the consummation for the transactions contemplated hereby as are required under any Contract or License to which the Purchaser is a party or by which any of its Assets are bound and where the failure to obtain any such consent (or in lieu thereof waiver) could reasonably be expected, individually or in the aggregate with other such failures, to materially adversely affect the Purchaser or the business or condition of the Company or otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall be in form and substance satisfactory to the Purchaser in its sole discretion, (iii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iv) shall be in full force and effect. 5.1.6 Purchaser's Investigation. Purchaser shall not have discovered, as a result of its investigation and review pursuant to Section 4.3 hereof, any condition (financial, legal or otherwise) relating in any way to the Company, its Assets, business or prospects, that convinces Purchaser, in its sole discretion, that it is not advisable to complete the Closing. 5.1.7 Sellers' Certificates. The Sellers shall have delivered to Purchaser (i) certificates, dated the Closing Date and executed by an executive officer of the Company, substantially in the form and to the effect of Exhibit B hereto and (ii) certificates, dated the Closing Date and executed by the chief financial officer of the Company, substantially in the form of Exhibit C hereto. 5.1.8 Resignations of Officers and Directors. The Sellers shall have delivered to Purchaser the resignations of all current officers and directors of the Company, effective as of the Closing Date. 5.1.9 Opinion of Counsel. Purchaser shall have received the opinion of Donald L. Cuba, Esquire, counsel to the Company in connection with this Agreement, dated the Closing Date, substantially in the form and to the effect as Purchaser may reasonably request. 5.1.10 Disclosure Schedule. The Sellers shall have delivered to Purchaser a copy of the Disclosure Schedule, updated and current through the Closing Date. 5.1.11 Good Standing Certificates. The Sellers shall have delivered to Purchaser (i) copies of the certificate or articles of incorporation (or other comparable corporate charter documents), including all amendments thereto of the Company certified by the applicable Secretary of State or other appropriate governmental official, (ii) certificates from the applicable Secretary of State or other appropriate governmental official to the effect that the Company is in good standing in such jurisdiction, listing all charter documents of the Company on file and attesting to its payment of all franchise or similar Taxes, and (iii) certificates from the Secretary of State or other appropriate official in each jurisdiction in which the Company is qualified or admitted to do business to the effect that the Company is duly qualified or admitted in good standing in such jurisdiction. 5.1.12 Receipt of Purchased Stock. Certificates representing the Purchased Stock shall have been transferred to Purchaser in accordance with the terms of this Agreement. 5.1.13 No Adverse Change. There shall have occurred no material adverse change in the business or financial condition of the Company between September 30, 1999 and the Closing Date. 5.1.14 Employment Agreements. Purchaser shall have received Employment Agreements satisfactory to Purchaser, between the Company and any key employees of the Company that Purchaser deems necessary. 5.2 Conditions to the Obligations of the Sellers. The obligations of the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by the Sellers in theirs sole discretion): 5.2.1 Representations and Warranties. Each of the representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.2.2 Performance. Purchaser shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing. 5.2.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Orders or Laws restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5.2.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall not be subject to the satisfaction or any condition that has not been satisfied or waived, and (iii) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have occurred. 5.2.5 Officers' Certificates. Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and executed by the president or vice-president or other officer of Purchaser, substantially in the form and to the effect of Exhibit "D" hereto. 5.2.6 Employment Agreements. Purchaser shall have delivered to Sellers an Employment Agreement satisfactory to Sellers, between the Company and Bill Nichols. ARTICLE VI 6 TERMINATION 6.1 Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated: 6.1.1 by Purchaser or by the Sellers if a material breach of any provision of this Agreement has been committed by the other party and such breach has not been waived; 6.1.2 (i) by Purchaser if any of the conditions in Section 5.1 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Purchaser to comply with its obligations under this Agreement) and Purchaser has not waived such condition on or before the Closing Date, or (ii) by the Sellers, if any of the conditions in Section 5.2 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of the Sellers to comply with his obligations under this Agreement) and the Sellers has not waived such condition on or before the Closing Date; 6.1.3 by Purchaser for its convenience at any time prior to Closing; 6.1.4 by mutual consent of Purchaser and the Sellers; or 6.1.5 by Purchaser or by the Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before December 1, 1999, or such later date as the parties may agree upon. 6.2 Effect of Termination. Each party's right of termination under Section 6.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 6.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article X will survive; provided, however, that if this Agreement is terminated by a party because of a breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies (including specific performance) will survive such termination unimpaired. ARTICLE VII 7 INDEMNIFICATION; TAX MATTERS 7.1 Indemnification. 7.1.1 The Sellers will indemnify the Company, the Purchaser and their respective stockholders and the officers, directors, employees, agents and Affiliates of each of them in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Sellers contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). Notwithstanding anything contained in this agreement to the contrary, claims for indemnity arising or resulting from the sale or manufacture of products, including product failure or failure of performance, unknown and undisclosed by Sellers shall only be made, to the extent and only to the extent that such claim or occurrence is covered by insurance and Sellers in no way shall be personally liable for any claim, judgment, amount, award, or liability whatsoever for any amount of such claim which may exceed the amount of said insurance coverage. The limitation set forth in the immediately preceding sentence shall not limit the liability of the Sellers for claims made pursuant to any other representation or warranty set forth in this Agreement or for any claims known to the Sellers or any of them as of the date of this Agreement and not disclosed in the Disclosure Schedules. 7.1.2 Purchaser will indemnify the Sellers in respect of, and hold them harmless from and against, any and all Losses suffered, incurred or sustained by them or to which they become subject, resulting from, arising out of or relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 7.2 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 7.1 will be asserted and resolved as follows: 7.2.1 In order for an Indemnified Party to be entitled to any indemnification provided for under Section 7.1 in respect of, arising out of or involving a claim or demand made by any Person not a party to this Agreement against the Indemnified Party (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by such Indemnified Party of written notice of the Third Party Claim; provided, that failure to give such Claim Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. 7.2.2 If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnifying Party, which counsel must be reasonably satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, but shall continue to pay for any expenses of investigation or any Loss suffered. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party shall not assume the defense of a Third Party claim with counsel satisfactory to the Indemnified Party within five Business Days of any Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the Indemnifying Party that there are or may be legal defenses available to the Indemnifying Party or to other Indemnified Parties which are different from or additional to those available to the Indemnified Party, which, if the Indemnified Party and the Indemnifying Party were to be represented by the same counsel, would constitute a conflict of interest for such counsel or prejudice prosecution of the defenses available to such Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense of a Third Party Claim and fail to diligently prosecute such defense, then in each such case the Indemnified Party, by notice to the Indemnifying Party, may employ its own counsel and control the defense of the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees, charges and disbursements of counsel employed by the Indemnified Party, and the Indemnified Party shall be promptly reimbursed for any such fees, charges and disbursements, as and when incurred. Whether the Indemnifying Party or the Indemnified Party control the defense of any Third Party Claim, the parties hereto shall cooperate in the defense thereof. Such cooperation shall include the retention and provision to the counsel of the controlling party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation or any material provided hereunder. The Indemnifying Party shall have the right to settle, compromise or discharge a Third Party Claim (other than any such Third Party Claim in which criminal conduct is alleged) without the Indemnified Party's consent if such settlement, compromise or discharge (i) constitutes a complete and unconditional discharge and release of the Indemnified Party, and (ii) provides for no relief other than the payment of monetary damage and such monetary damages are paid in full by the Indemnifying Party. 7.2.3 In the event any Indemnified Party should have a claim under Section 7.1 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within thirty (30) days, such dispute shall be resolved as provided in Article X hereof. 7.2.4 Notwithstanding anything to the contrary in this agreement Sellers will indemnify and hold harmless Purchaser under this Article 7 without limitation dollar for dollar against any Loss suffered, incurred or sustained by it or which it becomes subject to resulting from, arising out of or relating to the lawsuit referred to in Disclosure Schedule 2.12.1.1, and/or the matters referred to in Disclosure Schedule 2.10. 7.3 Allocation of Tax Liability. 7.3.1 In the case of Taxes with respect to or payable by the Company with respect to a period that includes but does not end on the Closing Date, the allocation of such Taxes between the Pre-Closing Period and the Post-Closing Period shall be made on the basis of an interim closing of the books of the Company as of the close of business on the Closing Date. In the case of (i) franchise Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding and (ii) ad valorem Taxes, in either situation attributable to any taxable period that includes but does not end on the Closing Date, the portion of such Taxes attributable to the Pre-Closing Period shall be the amount of such Taxes for the entire taxable period, multiplied by a fraction the numerator of which is the number of days in such taxable period ending on and including the Closing Date and the denominator of which is the entire number of days in such taxable period; provided, that if any Company Asset is sold or otherwise transferred prior to the Closing Date, then ad valorem Taxes pertaining to such property, asset or other right shall be attributed entirely to the Pre-Closing Period. 7.3.2 Except to the extent a reserve for Taxes is reflected on the Financial Statements, the Sellers shall be responsible for and pay and shall indemnify and hold harmless Purchaser and the Company with respect to (i) any and all Taxes imposed on any of the Company, or for which the Company is liable with respect to any periods ending on or before the Closing Date; provided, that in the case of any adjustment to any item of loss or expense for any such years, which gives rise to corresponding and offsetting items of loss or expense in subsequent years the benefit of which is or will be actually realized by the Company (other than upon liquidation of the Company) including by reason of any increase in a net operating loss, the Sellers's obligations shall be limited to the amount of interest (computed at the appropriate statutory rates) and penalties actually paid to the appropriate taxing authorities by the Company as a result of such timing differences in the case of audit adjustments, or at a rate of eight percent (8%) per annum in the case of other adjustments, (ii) without duplication (subject to the same proviso), all Taxes arising out of a breach of the representations, warranties or covenants contained herein, (iii) any Tax liability resulting from any ongoing state audits that exceed, in the aggregate, any reserve therefore set forth on the Financial Statements, and (iv) any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified hereunder. 7.3.3 From and after the Closing Date, Purchaser shall cause the Company to prepare, or cause to be prepared, and shall file, or cause to be filed, all reports and returns of the Company required to be filed. Purchaser shall cause the Company to pay the appropriate taxing authorities the Taxes shown to be due and payable on all Tax Returns of the Company filed after the Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the Company for a period ending on or before the Closing Date shall be prepared on a basis consistent with the Tax Returns filed by the Company for previous taxable periods, subject to the requirements of applicable law. 7.4 Tax Contests. 7.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then the party hereto first receiving notice of such Tax Claim shall promptly provide written notice thereof to the other parties hereto. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other Person. 7.4.2 If, within 30 calendar days after any the Sellers receives or delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the Purchaser an Election Notice, then subject to the provisions of this Section 7.4, the Sellers shall defend or prosecute, at their sole cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall defended or prosecuted diligently by the Sellers to a Final Determination; provided, that the Sellers shall not, without the prior written consent of the Company, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to the Company. So long as the Sellers are defending or prosecuting a Tax Claim, with respect to the Company, the Company shall provide or cause to be provided to the Sellers any information reasonably requested by the Sellers relating to such Tax Claim, and shall otherwise cooperate with the Sellers and their representatives in good faith in order to contest effectively such Tax Claim. The Sellers shall inform the Company of all developments and events relating to such Tax Claim (including, without limitation, providing to the Company copies of all written materials relating to such Tax Claim) and the Company or its authorized representatives shall be entitled, at the expense of the Company, to attend, but not to participate in or control, all conferences, meetings and proceedings relating to such Tax Claim. 7.4.3 If, with respect to any Tax Claim, the Sellers fails to deliver an Election Notice to the Company within the period provided in Section 7.4.2 or, after delivery of such Election Notice to the Company, the Sellers fail diligently to defend or prosecute such Tax Claim to a Final Determination, then the Company shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at the sole cost, expense and risk of the Sellers, such Tax Claim. The Company shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by the Company, the Sellers shall cooperate in good faith with the Company and its authorized representatives in order to contest effectively such Tax Claim. The Sellers may attend, but not participate in or control, any defense, prosecution, settlement or compromise of any Tax Claim controlled by the Company pursuant to this Section 7.4.3, and shall bear their own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by the Company pursuant to this Section 7.4.3, the Company shall, from time to time, be entitled to receive current payments from the Sellers with respect to costs and expenses incurred by the Company in connection with such defense or prosecution (including, without limitation, reasonable attorneys', accountants' and experts' fees and disbursements, settlement costs, court costs and any other costs or expenses for investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as a result of receiving a payment from the Sellers pursuant to this Section 7.4) (collectively "Associated Costs"). 7.4.4 In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitees, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim within five Business Days after such Final Determination. In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitee, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim, together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, within five Business Days after such Final Determination. In the case of any Tax Claim not covered by the two preceding sentences, the Sellers shall pay to the Company, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim (calculated after taking into account any actual reduction in the current liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting from such payment or such Tax Claim), together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, at least five Business Days before the date payment of such Tax is due from any Tax Indemnitee. 7.4.5 Notwithstanding anything contained in this Article VII to the contrary, the rights of the Sellers under this Section 7.4 to defend or prosecute, or to control the defense or prosecution of, any Tax Claim shall be no greater than those rights that the Company would have to defend or prosecute, or to control the defense or prosecution of, such Tax Claim. 7.4.6 Cooperation Regarding Tax Matters. Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to the other parties hereto and the Company such cooperation and information as any of them reasonably may request related to the filing of any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules, workpapers and relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Article VII shall bear all costs of filing such Tax Returns. 7.6 Payment of Transfer Taxes and Fees. The Sellers shall pay all sales, use, transfer, stamp, documentary or similar Taxes imposed upon or arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the Company and their Affiliates with respect to such Taxes. The Sellers shall file all necessary documentation and Tax Returns with respect to such Taxes and provide to Purchaser copies of all such Tax Returns. 7.7 Other Tax Covenants. 7.7.1 Without the prior written consent of Purchaser, neither the Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect or relate to the Company, make or change any tax election, change any annual tax accounting period, adopt or change any method of tax accounting, file any amended Tax Return, enter into any method of tax accounting, enter into any closing agreement, settle any Tax Claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of increasing any post-closing Tax Liability of the Purchaser, of the Company or any Affiliate of Purchaser. 7.7.2 Without the prior written consent of the Sellers, neither the Purchaser nor the Company shall, to the extent it may affect or relate to the Company, make or change any tax election, file any amended Tax Return, enter into any closing Agreement, settle any Tax claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would affect a Pre-Closing Tax Period, unless required by applicable law. 7.7.3 So long as any books, records and files retained by the Sellers or and his Affiliates relating to the business of the Company or the books, records and files delivered to the control of the Purchaser pursuant to this Agreement to the extent they relate to the operations of the Company prior to the Closing Date, remain in existence and are available, each party (at its own expense) shall have the right upon prior notice to inspect and to make copies of the same at any time during business hours for any proper purpose. The Purchaser and the Sellers and their respective Affiliates shall use reasonable efforts not to destroy or allow the destruction of any such books, records and files without first providing 60 days? written notice of intention to destroy to the other, and allowing such other party to take possession of such records. 7.8 Conflict. In the event of a conflict between the provisions of Sections 7.3 through 7.7 of this Article VII and any other provision of this Agreement, such provisions of this Article VII shall control. ARTICLE VIII 8 DEFINITIONS 8.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below: "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation or audit. "Affiliate" means, as applied to any Person, (a) any other Person directly or indirectly owning, owned by, controlling, controlled by or under common control with, that Person, (b) any director, partner, officer, agent, employee or relative of such Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agreement" means this Purchase Agreement, the Exhibits and the Disclosure Schedule and the certificates delivered in connection herewith, as the same may be amended from time to time in accordance with the terms hereof. "Assets" of any Person means all assets and properties of every kind, nature, character and description, including goodwill and other tangibles, operated, owned or leased by such Person, including cash and cash equivalents, investments, accounts and notes receivable, chattel paper, documents, instruments, real estate, equipment, inventory, goods and intellectual property. "Associated Costs" has the meaning ascribed to it in Section 7.4.3. "Financial Statements" has the meaning ascribed to it in Section 2.8. "Benefit Plan" means any Plan, existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the Company or under which any employee, former employee or director of the Company or any beneficiary thereof is covered, is eligible for coverage or has benefit rights. "Books and Records" means all files, documents, instruments, papers, books and records relating to the Company, including financial statements, Tax Returns and related work papers and letters from accountants, attorneys, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, legal files, retrieval programs, operating data and plans and environmental studies and plans. "Claim Notice" means written notification pursuant to Section 7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought by an Indemnified Party. "Closing" and "Closing Date" have the meaning ascribed to them in Section 1.3. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Company" has the meaning ascribed to it in the first recital of this Agreement (and shall include all predecessors and subsidiaries of the Company). "Contract" means any written or oral agreement, lease, guaranty, evidence of indebtedness, mortgage, indenture, security agreement or other contract of any nature whatsoever. "Disclosure Schedule" means the schedules delivered to Purchaser by or on behalf of the Company and the Sellers, and the schedules delivered by or on behalf of Purchaser, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein pursuant to this Agreement. "Dispute Period" means the period ending thirty (30) calendar days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "Election Notice" means a written notice provided by the Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their indemnity obligation under this Agreement with respect to such Tax Claim and (ii) the Sellers elect to contest, and to control the defense or prosecution of, such Tax Claim at their sole risk and sole cost and expense. "Environment" means all air, surface water, groundwater, drinking water supply, stream sediments, or land, including soil, land surface or subsurface strata, all fish, wildlife, biota and all other environmental medium or natural resources. "Environmental, Health and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law and consisting of or relating to (i) any environmental, health or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (ii) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (iii) financial responsibility under Environmental Law or Occupational Safety and Health Law for clean-up costs or corrective action, including any investigation, clean-up, removal, containment, or other remediation or response actions required by Environmental Law or Occupational Safety and Health Law (whether or not such clean-up has been required or requested by any governmental body or any other Person) and for any natural resource damages; or (iv) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action" include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended (CERCLA). "Environmental Law" means all federal, state, local and foreign environmental, health and safety laws, common law orders, decrees, judgments, codes and ordinances and all rules and regulations promulgated thereunder, civil or criminal, including, without limitation, Laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the Environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid, toxic or hazardous substances or wastes. "Environmental Permit" means any federal, state, local, provincial, or foreign permits, licenses, approvals, consent or authorizations required by any Governmental or Regulatory Authority under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental or Regulatory Authority under any applicable Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures or equipment (including motor vehicles, tank cars and rolling stock) currently or formerly owned or operated by the Company. "Final Determination" means (i) a decision, judgment, decree or other Order by any court of competent jurisdiction, which decision, judgment, decree or other Order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired, (ii) a closing agreement entered into under Section 7121 of the Code or any other settlement agreement entered into in connection with an administrative or judicial proceeding, (iii) the expiration of the time for instituting suit with respect to a claimed deficiency or (iv) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto. "Financial Statements" has the meaning ascribed to it in Section 2.8. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases, (v) long term debt and (vi) in the nature of guarantees of the obligations described in clauses (i) through (v) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article VII. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article VII. "Indemnity Notice" means written notification pursuant to Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim. "Knowledge" on the part of any person or company means actual knowledge of the person or a director of the Company of the event or notice to be attributed to the person or Company. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 2.15. "Liabilities" means all Indebtedness, obligations and other liabilities (or contingencies that have not yet become liabilities) of a Person (whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due). "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" means any and all damages, fines, fees, penalties, deficiencies, diminution in value of investment, losses and expenses, including without limitation, interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (such fees and expenses to include all fees and expenses, such as fees and expenses of attorneys, incurred in connection with (i) the investigation or defense of any Third Party Claims or (ii) asserting or disputing any rights under this Agreement against any party hereto or otherwise). "Occupational Safety and Health Law" means any Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions. "Option" with respect to any Person means any security, right, subscription, warrant, option, "phantom" stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of such Person, or (ii) receive any benefits or rights similar to those enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including without limitation, any rights to participate in the equity, income or election of directors or officers of such Person. "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 2.15. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Plan" means any bonus, compensation, pension, profit sharing, retirement, stock purchase or cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Post-Closing Period" means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. "Pre-Closing Period" means any taxable period or portion thereof that is not a Post-Closing Period. "Purchase Price" has the meaning ascribed to it in Section 1.2. "Purchased Stock" has the meaning ascribed to it on the first page of this Agreement. "Purchaser" has the meaning ascribed to it in the first paragraph of this Agreement. "Real Property" has the meaning ascribed to it in Section 2.15. "Real Property Leases" has the meaning ascribed to it in Section 2.15. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous Material into the Environment. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Seller" and the "Sellers" have the meaning ascribed to them on the first page of this Agreement. "Subsidiary" means any Person in which another Person, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least fifty percent (50%) of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof. Unless the context otherwise requires a different interpretation, references to a "Subsidiary" mean a Subsidiary of the Company. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Claim" means any written claim with respect to Taxes attributable to a Pre-Closing Period made by any Taxing Authority or any Person that, if pursued successfully, could serve as the basis for a claim for indemnification, under this Agreement, of Purchaser, the Company and other Indemnified Parties specified in Section 7.1 of this Agreement. "Tax Indemnitee" means the Company, the Purchaser and their respective stockholders, officers, directors, employees, agents and Affiliates of each of them (other than the Sellers). "Tax Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax. "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. "Third Party Claim" has the meaning ascribed to it in Section 7.2. 8.2 Interpretation of Agreement. 8.2.1 Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; (v) the word "including" does not imply any limitation to the item or matter mentioned; and (vi) the phrases "ordinary course of business" and "ordinary course of business consistent with past practice" refer to the business and practice of the Company. 8.2.2 When used herein, the phrase "to the knowledge of" any Person, "to the best knowledge of" any Person or any similar phrase, means (i) with respect to any Person who is an individual, the actual knowledge of such Person, (ii) with respect to any other Person, the actual knowledge of the directors, officers, managers, and other similar Persons in a similar position or having similar powers and duties, and (iii) in the case of each of (i) and (ii), the knowledge of facts that such individuals should have after reasonable inquiry. ARTICLE IX 9 MISCELLANEOUS 9.1 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or mailed by prepaid first class certified mail, return receipt requested, or sent by prepaid courier, to the parties at the following addresses: If to Purchaser, to: ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 Attn.: Sr. Vice President and General Counsel If to the Sellers, to: Bill E. Nichols John W. Nichols Debbie Nichols Dickey 29521 No Le Hace 13489 Landfair Rd. 10951 Laureate, #1208 Fair Oaks Ranch, Texas 78015 San Diego, California 92130 San Antonio, Tx 78249 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt and (iv) if delivered by courier to the address as provided for in this Section, be deemed given on the earlier of the second Business Day following the date sent by such courier or upon receipt. Any party from time to time may change its address or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 9.2 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof. 9.3 Expenses. Except as otherwise expressly provided in this Agreement (including without limitation as provided in Article VII), each party will pay its own costs and expenses incurred in connection with this Agreement, and the transactions contemplated hereby and thereby; provided, the Sellers will pay all expenses relating to the closing hereof of the Company incurred in respect of the period prior to the Closing. 9.4 Confidentiality. Purchaser and the Sellers will hold in strict confidence from any Person (other than its Affiliates or representatives) all documents and information concerning the other party hereto or any of its Affiliates furnished to it by or on behalf of the other party in connection with this Agreement or the transactions contemplated hereby, except to the extent the disclosing party can demonstrate that such documents or information was (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. Such covenant of confidentiality will remain in effect unless a party is compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law. 9.5 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the Purchaser or the Sellers shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to causethe Purchaser or the Sellers to fulfill their obligations under this Agreement. 9.6 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 9.7 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of the parties hereto. 9.8 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person other than any Person entitled to indemnity under Article VII. 9.9 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by either party without the prior written consent of the other party(ies) and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 9.10 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 9.11 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 9.12 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Texas. 9.14 Limited Recourse. Regardless of anything in this Agreement to the contrary, (i) obligations and liabilities of Purchaser hereunder shall be without recourse to any stockholder of Purchaser or any of such stockholder's Affiliates, directors, employees, officers or agents and shall be limited to the assets of such party and (ii) the stockholders of Purchaser have made no (and shall not be deemed to have made any) representations, warranties or covenants (express or implied) under or in connection with this Agreement or any other Operative Agreement. 9.15 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. ARTICLE X 10 MEDIATION In the event there is a dispute under this Agreement, the disagreeing parties shall meet with one another and diligently attempt to resolve their disagreements. If they are unable to do so, then upon request of either party to the dispute made within twenty (20) days of the failure of negotiations, they will mediate the dispute, utilizing an impartial mediator pursuant to the rules of the American Arbitration Association ("AAA") or any other reputable organization that sponsors mediation. If, after thirty (30) days the mediation is not successful, or if no mediation has been elected, then any party to the dispute may file a legal action in any court of competent jurisdiction to resolve the dispute. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth on the first page hereof. PURCHASER ISG RESOURCES, INC. _________________ By: _____________ Its: ____________ SELLERS BILL E. NICHOLS JOHN W. NICHOLS ________________ _____________________ Bill E. Nichols John W. Nichols DEBORAH N. DICKEY _____________________ Deborah N. Dickey EX-10.12 22 STOCK PURCHASE AGREEMENT -- WILLIAM LESLIE STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") is dated May__ , 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __ . Leslie, an individual residing in the state of Montana and __________ (individually a "Seller" and collectively the "Sellers"). RECITALS The Sellers own and desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, all of the issued and outstanding shares of capital stock of Mineral Specialties, Inc. (the "Company"), a Montana corporation. The authorized capital stock of the Company is referred to herein as the "Purchased Stock." Unless otherwise defined in this Agreement, the capitalized terms used in this Agreement have the meanings given in Article VIII below. In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1 SALE OF PURCHASED STOCK; CLOSING 1.1 Purchase and Sale. At the Closing, on the terms and conditions set forth in this Agreement, the Sellers will sell to Purchaser, and Purchaser will purchase from the Sellers, the Purchased Stock. 1.2 Purchase Price and Additional Purchase Price. 1.2.1 The purchase price (the "Purchase Price") for the Purchased Stock is $__________ in cash, subject to adjustment as set forth in Section 1.2.2 below. 1.2.2 Additionally, the Purchaser shall pay the Seller a royalty of five percent (5%) (the "Additional Purchase Price") of the Purchaser's sales of fly ash generated at the Colstrip facility should the ash generated at that facility become marketable. The royalty will be calculated using the F.O.B. plant price, less any processing costs incurred by the Purchaser and less any payments made by the Purchaser to the utility, and will be paid for a period of five (5) years from the date on which such sales begin. 1.2.3 The Purchase Price will increase dollar for dollar equal to the amount of increase in the Company's net book value (the "Net Book Value") (defined as total assets less liabilities) during the period ___________ to the Closing Date . To determine whether an adjustment is appropriate, Sellers shall (within thirty days of the Closing Date) provide the Purchaser with financial statements of the Company indicating the Net Book Value as of the Closing Date (the "Sellers' Calculation"). If Purchaser (within thirty days of receiving the Sellers' Calculation") disagrees with the Sellers' Calculation, then Purchaser will promptly engage an independent accounting firm to review the financial condition of the Company as of the Closing in accordance with GAAP, on a basis consistent with the Financial Statements. Within forty-five (45) days after the matter is referred to the accounting firm, the accounting firm will prepare and deliver a report to all parties which will detail whether a Purchase Price adjustment is necessary. The report will be final and binding on both parties, absent fraud or clear error. 1.3 Closing. The Closing (the "Closing") of the purchase and sale of the Purchased Stock will take place at the offices of __________________ , or at such other place as Purchaser and the Sellers shall mutually agree, at 10:00 A.M. local time, on the latest to occur of the following dates (the "Closing Date"): 1.3.1 June ___ , 1999; 1.3.2 Two days after the date on which all conditions precedent to the closing specified herein are satisfied; 1.3.3 Two days after the receipt by Purchaser or Seller of a written termination of the waiting period issued by the Federal Trade Commission or the United States Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), or the expiration of the waiting period described therein; or 1.3.4 Such other date as the parties shall agree upon. 1.4 Payment of Purchase Price. At the Closing, Purchaser will pay the Purchase Price to the Sellers by wire transfer to such account as the Sellers may direct by written notice delivered to Purchaser by the Sellers at least three (3) Business Days before the Closing Date. Simultaneously, the Sellers will sell and convey to Purchaser the Purchased Stock free and clear of all Liens, by delivering to Purchaser a stock certificate, registered in the name of Purchaser, representing the Purchased Stock. At the Closing, the parties shall also deliver the opinions, certificates, contracts, documents and instruments to be delivered pursuant to this Agreement. 1.5 Post Closing Payment. If the Purchaser agrees with the Seller's Calculation, then within twenty (20) days after delivery of the Sellers' Calculation, the Purchaser will deliver to the Sellers cash in the amount of the adjustment specified therein. If the Purchaser disagrees with the Sellers' Calculation, within twenty (20) days after delivery of the report by the independent accounting firm referred to in Section 1.2.2, the Purchaser will deliver to the Sellers cash in the amount of the adjustment specified in the report, if any, absent fraud or clear error. ARTICLE II 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers, to their best knowledge, hereby represent and warrant to Purchaser as follows: 2.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Montana and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets. The Company is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, (i) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company and (ii) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or any other agreement to which it is a party or on the ability of the Sellers or the Company to perform their obligations hereunder or thereunder. The Sellers have delivered to Purchaser true and complete copies of the certificate or articles of incorporation and by-laws (or other comparable corporate charter documents) of the Company, including all amendments thereto effected through the Closing Date. 2.2 Capital Stock. The Purchased Stock consists of the following number of shares of capital stock: ___ shares of common stock, par value $___ per share, and ______ shares of preferred stock, par value $____ per share The Purchased Stock constitutes all of the issued and outstanding shares of capital stock of the Company. The shares of Purchased Stock are validly issued, fully paid and nonassessable, issued in compliance with all applicable Laws and no additional shares of capital stock have been reserved for issuance. There are no outstanding Options with respect to the stock of the Company or agreements, arrangements or understandings to issue Options with respect to the Company, nor are there any preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of the capital stock of the Company. The Sellers are the record and beneficial owners of all of the shares of Purchased Stock, free and clear of all Liens. The delivery to Purchaser of the certificates representing the Purchased Stock will transfer to Purchaser good and valid title to all shares of the Purchased Stock, free and clear of all Liens, and restrictions and after such transfer the Purchased Stock, in the hands of Purchaser, will have been duly authorized, validly issued, fully paid and nonassessable. From and after the Closing, no Seller nor any other Person (other than the Purchaser) will have any rights whatsoever with respect to the Purchased Stock or to any other securities of the Company. 2.3 Authority Relative to This Agreement. The Sellers have full authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Sellers and constitutes the legal, valid and binding obligations of the Sellers, enforceable against them in accordance with its terms. 2.4 Subsidiaries; Company; Business. Section 2.4 of the Disclosure Schedule lists all lines of business in which the Company is participating or engaged or has participated or engaged in the preceding three years. The name of each director and officer of the Company, and the position with the Company held by each, are listed in Section 2.4 of the Disclosure Schedule. The Company holds no equity, partnership, joint venture or other interest in any Person. 2.5 No Conflicts. The execution and delivery by the Sellers of this Agreement does not, and the consummation of the transactions contemplated hereby will not: 2.5.1 conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable corporate charter documents) of the Company; 2.5.2 subject to obtaining the consents, approvals and actions, making the filings and giving the notices referred to in Section 2.6 below or disclosed in Section 2.6 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Laws or Order applicable to any of the Sellers or to the Company, or any of their Assets; or 2.5.3 except as disclosed in Section 2.5 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require any of the Sellers or the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under, or (f) result in the creation or imposition of any Lien upon the Company or any of its Assets under, any Contract or License to which any of the Sellers or the Company is a party or by which any of their respective Assets is bound except for such conflicts, violations, breaches, defaults, consents, approvals, actions, filings, notices, terminations, cancellations, accelerations, modifications, additional rights or entitlements or Liens that, individually or in the aggregate, (A) are not having and could not be reasonably expected to have a material adverse effect on the business or condition of the Company, and (B) could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of any of the Sellers or the Company to perform its obligations hereunder. 2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6 of the Disclosure Schedule, and other than filings with the Federal Trade Commission and the United States Department of Justice under HSR, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Sellers or the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of transactions contemplated herein. 2.7 Books and Records. The minute books and other similar records of the Company to be provided to Purchaser upon execution of this Agreement contain a true and complete record, in all material respects, of all action taken by the stockholders, the board of directors and committees of the boards of directors (or other similar governing entities) of the Company. 2.8 Financial Statements. The Sellers have caused the Company to furnish to Purchaser true and complete copies of (i) the unaudited financial statements of the Company as of December 31, 1998 and (ii) unaudited financial statements of the Company for the period January 1, 1999 through May 31, 1998, along with the related statements of operations and cash flows, accompanied by the opinions thereon of ____________ , independent certified public accountants, together with the notes thereto, certified by the chief financial officer of the Company. All of these statements, opinions, etc. (collectively referred to herein as the "Financial Statements") are in accordance with the Books and Records of the Company and fairly and accurately present the financial position of the Company as of the dates thereof, for the periods covered thereby and the results of operations and cash flows of the Company for the periods set forth therein, all in conformity with GAAP, except as specifically noted in the notes thereto. Further, the Sellers represent and warrant that, as of the Closing Date, the Net Book Value of the Company shall be at least equal to the Net Book Value of the Company as of December 31, 1998. 2.9 Absence of Changes. Since December 31, 1998, there has not been any material adverse change or any event or development, which, individually or together with other such events, could reasonably be expected to result in a material adverse change, in the business or condition of the Company. In addition, except as expressly contemplated hereby and except as disclosed in Section 2.9 of the Disclosure Schedule, there has not occurred since December 31, 1998: 2.9.1 any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock (or other equity interests) of the Company or any direct or indirect redemption, purchase or other acquisition by the Company of any such capital stock (or other equity interests) of the Company; 2.9.2 any authorization, issuance, sale or other disposition by the Company of any shares of its capital stock (or other equity interests), or any modification or amendment of any right of any holder of any outstanding shares of capital stock (or other equity interests) of the Company; 2.9.3 (i) any increase in salary, rate of commissions or rate of consulting fees of any employee or consultant of the Company; (ii) any payment of consideration of any nature whatsoever (other than salary, commissions or consulting fees paid to any employee or consultant of the Company) to any officer, director, stockholder, employee or consultant of the Company; (iii) any establishment or modification of (A) targets, goals, pools or similar provisions under any Benefit Plan, employment contract or other employee compensation arrangement or (B) salary ranges, increase guidelines or similar provisions in respect of any Benefit Plan, employment contract or other employee compensation arrangement; or (iv) any adoption, entering into, amendment, modification or termination (partial or complete) of any Benefit Plan; 2.9.4 (i) incurrences by the Company of Indebtedness or (ii) any voluntary purchase, cancellation, prepayment or complete or partial discharge in advance of a scheduled payment date with respect to, or waiver of any right of the Company under, any Indebtedness of or owing to the Company; 2.9.5 any physical damage, destruction or other casualty loss (whether or not covered by insurance) affecting any of the Assets of the Company in an aggregate amount exceeding $10,000; 2.9.6 any write-off or write-down of or any determination to write off or write down any of the Assets of the Company; 2.9.7 any purchase of any Assets of any Person or disposition of, or incurrence of a Lien on, any Company Assets, other than acquisitions or dispositions of inventory in the ordinary course of business by the Company consistent with past practice; 2.9.8 any entering into, amendment, modification, termination (partial or complete) or granting of a waiver under or giving any consent with respect to (i) any Contract which is required (or had it been in effect on the date hereof would have been required) to be disclosed in the Disclosure Schedule pursuant to Section 2.18.1, (ii) any License held by the Company, or (iii) any intellectual property rights owned by the Company; 2.9.9 any capital expenditures or commitments for additions to property, plant or equipment of the Company constituting capital assets in an aggregate amount exceeding $10,000; 2.9.10 any commencement, termination or change by the Company of any line of business; 2.9.11 any transaction by the Company with any of its officers, directors, stockholders or Affiliates, other than pursuant to a Contract or arrangement in effect on December 31, 1998 and disclosed to Purchaser pursuant to Section 2.18.1.8 or other than pursuant to any Contract of employment and listed pursuant to Section 2.18.1 of the Disclosure Schedule; 2.9.12 any entering into of an agreement to do or engage in any of the foregoing, including without limitation with respect to any merger, sale of substantially all assets or other business combination not otherwise restricted by the foregoing paragraphs; or 2.9.13 any change in the accounting methods or procedures of the Company or any other transaction involving or development affecting the Company outside the ordinary course of business. 2.10 No Undisclosed Liabilities. Except as reflected or reserved against in the December 31, 1998 balance sheet included in the Financial Statements or as disclosed in Section 2.10 of the Disclosure Schedule, the Company has no Liabilities, nor are there any Liabilities relating to or affecting the Company or any of its Assets. 2.11 Taxes. 2.11.1 Except as disclosed in Section 2.11 of the Disclosure Schedule, all Tax Returns required to have been filed by or with respect to the Company with any Taxing Authority have been duly and timely filed, and each such Tax Return correctly and completely reflects the income, franchise or other Tax liability and all other information required to be reported thereon. The Company is not and has never been a member of any affiliated, combined, consolidated, unitary or similar group with respect to the filing of tax returns or otherwise with respect to any Taxing Authority. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. All monies required to be withheld by the Company from employees, independent contractors, creditors or other third parties for Taxes have been collected or withheld, and either duly and timely paid to the appropriate Taxing Authority or (if not yet due for payment) set aside in accounts for such purposes. The Company has no liability for Taxes for any Person other than the Company (i) solely as a present or former member of a consolidated group, (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise. 2.11.2 The provisions for current Taxes in the Financial Statements are sufficient for the payments of all accrued and unpaid Taxes not yet due and payable as of their dates, whether or not disputed. As of the Closing Date, such provisions, as adjusted for the passage of time through the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet due and payable of the Company. 2.11.3 The Company is not a party to any agreement extending, or having the effect of extending, the time within which to file any Tax Return or the period of assessment or collection of any Taxes. The Company has not received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. 2.11.4 No Taxing Authority is now asserting or threatening to assert against the Company any deficiency, claim or liability for additional Taxes or any adjustment of Taxes, and there is no reasonable basis for any such assertion of which any of the Sellers or the Company is or reasonably should be aware. No issues have been raised in any examination by any Taxing Authority with respect to the Company which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. The federal income Tax Returns of the Company disclose (in accordance with Section 6662(d)(2)(B) of the Code) all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of section 6662(d) of the Code. No claim has ever been made by any Taxing Authority in a jurisdiction in which the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Schedule 2.11 of the Disclosure Schedule lists all federal, state, local and foreign income Tax Returns filed by or with respect to the Company for all taxable periods ended on or after December 31, 1998, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by or with respect to, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since December 31, 1996. There are no Liens for Taxes upon the Assets of the Company. 2.11.5 Except as disclosed in Section 2.11 of the Disclosure Schedule, the Company is not (i) a party to or bound by any obligations under any tax sharing, tax indemnity or similar agreement or arrangement, (ii) subject to any election under sections 338(e) or 341(f) of the Code or the regulations thereunder, (iii) required to make, or reasonably expects that it might have to make, any adjustment under section 481 of the Code (or any comparable provision of state, local or foreign law) by reason of a change in accounting method or otherwise, (iv) subject to any agreement or arrangement that could result separately or in the aggregate in the payment of any "excess parachute payments" within the meaning of section 280G of the Code, (v) and at no time has ever been, a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code, (vi) a party to any "safe harbor lease" that is subject to the provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning of section 460 of the Code, (vii) a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes, or (viii) nor has it ever been, a member of any affiliated, consolidated, combined, unitary or similar group for any Tax purpose. 2.12 Legal Proceedings. 2.12.1 Except as disclosed in Section 2.12 of the Disclosure Schedule (with paragraph references corresponding to those set forth below): 2.12.1.1 there are no actions or proceedings pending or, to the knowledge of the Sellers or the Company, threatened against, relating to or affecting the Company, or any of its Assets which (A) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement or otherwise result in a material diminution of the benefits contemplated by this Agreement to Purchaser, or (B) if determined adversely to the Company, could reasonably be expected to result in (x) any injunction or other equitable relief against the Company, or (y) Losses by the Company, individually or in the aggregate with Losses in respect of other such actions or proceedings, exceeding $10,000; 2.12.1.2 there are no facts or circumstances known to the Sellers or to the Company that could reasonably be expected to give rise to any action or proceeding that would be required to be disclosed pursuant to clause 2.12.1.1 above; 2.12.1.3 neither the Sellers nor the Company has received notice, or is aware of any Orders or lawsuits outstanding against the Company; and 2.12.1.4 neither the Sellers nor the Company has received notice or is aware of any defects, dangerous or substandard conditions in the products or materials manufactured, sold, distributed, or to be manufactured, sold or distributed by the Company that could cause bodily injury, sickness, disease, death, or damage to property, or result in loss of use of property, or any claim, suit, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, or damage to property, or loss of use or property. 2.12.2 Prior to the execution of this Agreement, the Sellers and the Company have delivered all responses of counsel for the Company to auditors' requests for information regarding actions or proceedings pending or threatened against, relating to or affecting the Company during the period commencing January 1, 1995. Section 2.12.2 of the Disclosure Schedule sets forth all actions or proceedings relating to or affecting the Company or its Assets during the period commencing January 1, 1995 prior to the date hereof. 2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13 of the Disclosure Schedule, neither the Sellers nor the Company has received at any time since January 1, 1995 any notice that the Company is or has been at any time since such date, in violation of or in default under, any Law or Order applicable to the Company or any of its Assets. In furtherance and not limitation of the foregoing, neither the Sellers nor the Company has violated any federal or state securities law in connection with the offer, sale or purchase of any securities. 2.14 Benefit Plans; ERISA. All Benefit Plans relating to the Company are listed in Section 2.14 of the Disclosure Schedule, and copies of all documentation relating to such Benefit Plans have been delivered or made available to Purchaser (including copies of written Benefit Plans, written descriptions of oral Benefit Plans, summary plan descriptions, trust agreements, the three most recent annual returns, employee communications, and IRS determination letters). Except as disclosed in Section 2.14 of the Disclosure Schedule: 2.14.1 each Benefit Plan, and the administration thereof, complies, and has at all times complied, with the requirements of all applicable Law, including ERISA and the Code, and each Benefit Plan intended to qualify under section 401(a) of the Code has at all times since its adoption been so qualified, and each trust which forms a part of any such plan has at all times since its adoption been tax-exempt under section 501(a) of the Code; 2.14.2 no Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of section 302 of ERISA or section 412 of the Code; 2.14.3 no direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company under Title IV of ERISA to any party with respect to any Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA affiliate; 2.14.4 the "amount of unfunded benefit liabilities" within the meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan subject to Title IV of ERISA; 2.14.5 no "reportable event" (within the meaning of section 4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA affiliate since the effective date of said section 4043; 2.14.6 no Benefit Plan is a multiemployer plan within the meaning of section 3(37) of ERISA; 2.14.7 Neither the Company nor any ERISA affiliate has incurred any liability for any Tax imposed under section 4971 through 4980B of the Code or civil liability under section 502(i) or (l) of ERISA; 2.14.8 no benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested or payable by reason of any transaction contemplated under this Agreement; 2.14.9 no Tax has been incurred under section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto); 2.14.10 no Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws requiring continuation of benefits coverage following termination of employment; 2.14.11 no suit, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought or, to the knowledge of any Seller or the Company, threatened against or with respect to any Benefit Plan and there are not facts or circumstances known to any the Sellers or the Company that could reasonably be expected to give rise to any such suit, action or other litigation; and 2.14.12 all contributions to Benefit Plans that were required to be made under such Benefit Plans have been made, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, all of which accruals under unfunded Benefit Plans are as disclosed in Section 2.14 of the Disclosure Schedule, and the Company has performed all material obligations required to be performed under all Benefit Plans. 2.15 Real Property. 2.15.1 Section 2.15.1 of the Disclosure Schedule contains a true and correct list of (i) each parcel of real property owned (the "Owned Real Property") by the Company, (ii) each parcel of real property leased or subleased or otherwise occupied by the Company as tenant or subtenant (the "Leased Real Property"; together with the Owned Real Property, the "Real Property") together with a true and correct list of all such leases, subleases or other similar agreements and any amendments, modifications or extensions thereto (the "Real Property Leases"), and (iii) all Liens relating to or affecting any parcel of Real Property, in each case identifying the owner, lessor and lessee thereof. 2.15.2 The Company has good and marketable title to its Owned Real Property, free and clear of all Liens, other than as specifically listed in Section 2.15.2 of the Disclosure Schedule. 2.15.3 Subject to the terms of its leases, the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to the Leased Real Property for the full term of the lease thereof. Each Real Property Lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company and of each other Person that is a party thereto, and except as set forth in Section 2.15.3 of the Disclosure Schedule, there is no, and neither the Sellers nor the Company, has knowledge of any, or has received any, notice of any default (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder. The Company has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in any Real Property Lease. No penalties are accrued and unpaid under any Real Property Lease. 2.15.4 The Sellers shall deliver to Purchaser upon the execution of this Agreement true and complete copies of all (i) title policies, mortgages, deeds of trust, deeds, leases, easements, restrictive covenants, certificates of occupancy, and similar documents, and all amendments thereto concerning the Owned Real Property, and (ii) Real Property Leases and, to the extent reasonably available, all other documents referred to in clause (i) of this paragraph with respect to the Leased Real Property. 2.15.5 Except as disclosed in Section 2.15.5 of the Disclosure Schedule, the improvements on the Real Property are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are adequate and suitable for the purposes for which they are presently being used and, to the knowledge of each of the Sellers and of the Company, there are no condemnation or appropriation proceedings pending or threatened against Real Property or the improvements thereon. 2.15.6 Neither the Sellers nor the Company has any knowledge of any claim, action or proceeding, actual or threatened, against the Company or the Real Property by any Person which would materially affect the future use, occupancy or value of the Real Property or any part thereof. 2.16 Tangible Personal Property. The Company is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under contract to use, all tangible personal property used in the conduct of its business, including all tangible personal property reflected on the Financial Statements and tangible personal property acquired since December 31, 1998 other than property disposed of since such date in the ordinary course of business consistent with past practice and the terms of this Agreement. All such tangible personal property is free and clear of all Liens, other than Liens disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing Date, is adequate and suitable for the conduct by the Company of the business presently conducted by it, and is in good working order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws. 2.17 Intellectual Property Rights. The Company has interests in or uses only the intellectual property described in Section 2.17 of the Disclosure Schedule. The Company either has all right, title and interest in or a valid and binding license to use such intellectual property. No other intellectual property is used in or necessary to the conduct of the business of the Company. All registrations, pending applications, registered rights and executed agreements related to intellectual property are listed in Section 2.17 of the Disclosure Schedule. Except as disclosed therein, (i) the Company has the right to use the intellectual property described therein, (ii) all registrations on behalf of the Company with and applications to Governmental or Regulatory Authorities in respect of such intellectual property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by the Company to maintain their validity or effectiveness, (iii) all copyrightable materials used by the Company are works-for-hire and are owned by the Company, (iv) there are no restrictions on the direct or indirect transfer of any License, or any interest therein, held by the Company in respect of such intellectual property, (v) the Sellers has delivered, or has caused the Company to deliver, to Purchaser prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in such intellectual property, which documentation is accurate and complete and sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret, (vi) the Sellers and the Company have taken reasonable security measures to protect the secrecy, confidentiality and value of their trade secrets, (vii) neither the Sellers nor the Company is or has received any notice that it is in default (or with the giving of notice or lapse of time or both, would be in default) under any License to use such intellectual property and (viii) neither the Sellers nor the Company has any knowledge that such intellectual property is being infringed by any other Person. To the knowledge of the Sellers and the Company, the Company is not infringing any intellectual property of any Person, and no litigation is pending and no claim has been made or, to the knowledge of any the Sellers or of the Company, has been threatened to such effect. 2.18 Contracts. 2.18.1 Section 2.18.1 of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies, or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement), to which the Company is a party or by which any of its Assets is bound. 2.18.1.1 (A) all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified or unspecified term, the name, position and rate of compensation of each Person party to such a Contract and the expiration date of each such Contract; and (B) any written or unwritten representations, commitments, promises, communications or courses of conduct involving an obligation of the Company to make payments (with or without notice, passage of time or both) to any Person in connection with, or as a consequence of, the transactions contemplated hereby or to any employee, other than with respect to salary or incentive compensation payments in the ordinary course of business consistent with past practice; 2.18.1.2 all Contracts with any Person containing any provision or covenant prohibiting or limiting the ability of the Company to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or prohibiting or limiting disclosure of confidential or proprietary information; 2.18.1.3 all partnership, joint venture, shareholders' or other similar Contracts with any Person; 2.18.1.4 all Contracts relating to Indebtedness of the Company; 2.18.1.5 all Contracts with independent contractors, distributors, dealers, manufacturers' representatives, sales agencies or franchisees; 2.18.1.6 all guarantees of any Indebtedness or other obligations of the Company or any third Person; 2.18.1.7 all Contracts relating to the future disposition or acquisition of any Assets, other than dispositions or acquisitions in the ordinary course of business consistent with past practice and the provisions of this Agreement; 2.18.1.8 all Contracts between or among the Company and any of the Sellers, any current or former officer, director, stockholder or Affiliate of the Company or of any such officer, director, stockholder or Affiliate, on the other hand, other than Contracts disclosed pursuant to Section 2.18.1.8; 2.18.1.9 all collective bargaining or similar labor Contracts; 2.18.1.10 all Contracts that (A) limit or contain restrictions on the ability of the Company to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets or to change the lines of business, (B) require the Company to maintain specified financial ratios or levels of net worth or other indicia of financial condition or (C) require the Company to maintain insurance in certain amounts or with certain coverages; and 2.18.1.11 all other Contracts, including but not limited to Contracts with customers, that involve the payment or potential payment, pursuant to the terms of any such Contract, by or to the Company of more than $10,000 and all powers of attorney and comparable delegations of authority. 2.18.2 Each Contract required to be disclosed in Section 2.18.1 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto; and except as disclosed in Section 2.18.2 of the Disclosure Schedule, neither the Company nor, to the knowledge of any the Sellers, any other party to such Contract is, or has received notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be violation or breach of or default under any such Contract). 2.18.3 Except as disclosed in Section 2.18.3 of the Disclosure Schedule, the Company is not a party to or bound by any Contract that has been or could reasonably be expected to be, individually or in the aggregate with any other such Contracts, materially adverse to the business or condition of the Company. 2.18.4 To the extent any of the guaranties for the benefit of the Company or any of its Assets are not integrated with Contracts disclosed in Section 2.18.1 to the Disclosure Schedule, each such guaranty is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, or each party thereto; and neither the guarantor thereunder nor, to the knowledge of the Sellers or the Company or any other party to such guaranty is, or has received notice that it is, in violation or breach of or default under any such guaranty (or with notice or lapse of time or both, would be in violation or breach of default under any such guaranty). 2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and complete list of all Licenses used in and material to the business or operations of the Company, setting forth the owner, the function and the expiration and renewal date of each. Prior to the execution of this Agreement, the Sellers or the Company have delivered to Purchaser true and complete copies of all such Licenses. Except as disclosed in Section 2.19 of the Disclosure Schedule: 2.19.1 the Company owns or validly holds all Licenses that are material to its respective business or operations; 2.19.2 each license listed in Section 2.19 of the Disclosure Schedule is valid, binding and in full force and effect; 2.19.3 neither the Sellers nor the Company is, or has received any notice that it is in default (or with the giving of notice of lapse of time or both, would be in default) under any such License; and 2.19.4 the transactions contemplated in this Agreement will not violate any such License or give any other party thereto rights to terminate the License or change the terms thereof. 2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true and complete list (including the names of the insurers, the expiration dates thereof, the period of time covered thereby and a brief description of the interests insured thereby) of all liability, property, workers' compensation, directors' and officers' liability and other insurance policies currently in effect that insure the business, operations or employees of the Company or affect or relate to the ownership, use or operation of any of the Assets of the Company and that (i) have been issued to the Company, or (ii) have been issued to any Person (other than the Company) for the benefit of the Company. Each policy listed in Section 2.20 of the Disclosure Schedule is valid and binding and in full force and effect, all premiums due thereunder have been paid when due and neither the Sellers nor the Company or the Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company does not know of any reason or state of facts that could lead to the cancellation of such policies. The insurance policies listed in Section 2.20 of the Disclosure Schedule (i) in light of the business, operations and Assets of the Company are in amounts and have coverages that are reasonable and customary for Persons engaged in such businesses and operations and having such Assets and (ii) are in amounts and have coverages as required by any Contract to which the Company is a party. Section 2.20 of the Disclosure Schedule contains a list of all claims made under any insurance policies covering the Company since January 1, 1995. Neither the Sellers nor the Company have received notice that any insurer under any policy referred to in this Section is denying liability with respect to a claim thereunder or defending under a reservation of rights clause. Since January 1, 1995, the Company has maintained, in light of its business, location, operations and Assets, at all times, without interruption appropriate insurance, in scope and amount of coverages. 2.21 Affiliate Transactions. Except for the Shareholder Debt, (i) there are no Liabilities between the Company and any current or former officer, director, stockholder, Affiliate of the Company or any Affiliate of any such officer, director, stockholder or Affiliate, and (ii) the Company does not provide or cause to be provided any assets, services or facilities to any such current or former officer, director, stockholder or Affiliate. 2.22 Employees; Labor Relations. The Company is not engaged in any unfair labor practice. There is (i) no unfair labor practice complaint pending or, to the knowledge of the Sellers or the Company, threatened against the Company before the National Labor Relations Board or comparable or similar state agency, and no grievance or arbitration proceeding arising out of under collective bargaining agreements is so pending or, to the knowledge of the Sellers or of the Company, threatened against the Company, (ii) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Sellers or the Company, threatened against the Company, and (iii) no union representation question exists with respect to the employees of the Company or, to the knowledge of the Sellers or the Company, no union organization activities are taking place. 2.23 Environmental Matters. 2.23.1 The Company has obtained and holds all necessary Environmental Permits. 2.23.2 Except as disclosed in Section 2.23.2 of the Disclosure Schedule, to the best knowledge of the Sellers with no duty of independent investigation: 2.23.2.1 The Company is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. Neither the Sellers nor the Company has any basis to expect, nor has any of them or any other Person for whose conduct they may be held to be responsible received, any actual or threatened Order, notice, or other communication from (A) any Governmental Body or private citizen acting in the public interest, or (B) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company has had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by the Company or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 2.23.2.2 There are no pending or, to the knowledge of the Sellers or the Company, threatened claims, encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Facilities or any other properties and assets (whether real, personal, or mixed) in which the Sellers or the Company has or had an interest. 2.23.2.3 Neither the Sellers nor the Company has knowledge of or any basis to expect, nor has any of them or any other Person for whose conduct they are or may be held responsible received any citation, directive, inquiry, notice, Order, summons, warning, or other communications that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other Assets in which the Company had an interest, or with respect to any Facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Sellers, the Company, or any other Person for whose conduct it or they are or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 2.23.2.4 Neither the Company nor any other Person for whose conduct it may be held responsible, has any Environmental, Health, and Safety Liabilities with respect to the Facilities or with respect to any other Assets (whether real, personal, or mixed) in which the Company (or any predecessor thereof), has or had an interest, or at any property geologically or hydrologically adjoining the Facilities or any such Assets. 2.23.3 There are no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facilities or such adjoining property, or incorporated into any structure therein or thereon. Neither the Company nor any other Person for whose conduct it may be held responsible, or any other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Sellers or the Company has or had an interest except in full compliance with all applicable Environmental Laws. 2.23.4 There has been no Release or, to the knowledge of the Sellers or of the Company, any threat of Release of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which the Company has or had an interest, or any geologically or hydrologically adjoining property. 2.23.5 The Sellers has delivered to Purchaser true and complete copies and results of any reports, studies, analyses, tests, and monitoring possessed or initiated by the Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning compliance by the Sellers, the Company or any other Person for whose conduct it or they are or may be held responsible, with Environmental Laws. 2.23.6 There are no Liens arising under or pursuant to any Environmental Law on any Owned Real Property or Leased Real Property and there are no facts, circumstances, or conditions that could reasonably be expected to restrict, encumber, or result in the imposition of special conditions that could reasonably be expected to restrict, encumber, or result in the imposition of special conditions under any Environmental Law with respect to the ownership, occupancy, development, use, or transferability of any Real Property. 2.23.7 There are no (i) underground storage tanks, active or abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing material, at any Real Property. 2.23.8 There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by, on behalf of, or which are in the possession of the Sellers or the Company with respect to any Asset of, or property that is adjacent to an Asset of the Company which have not been delivered to Purchaser prior to execution of this Agreement. 2.24 Substantial Customers and Suppliers. Section 2.24.1 of the Disclosure Schedule lists the ten (10) largest customers of the Company on the basis of revenues for goods sold or services provided for the twelve month period ending December 31, 1998. Section 2.24.2 of the Disclosure Schedule lists the ten (10) largest suppliers of the Company on the basis of cost of goods or services purchased during the twelve month period ending December 31, 1998. Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the knowledge of the Sellers and the Company, no such customer or supplier is insolvent or threatened with bankruptcy or insolvency. 2.25 Accounts Receivable. Except as set forth in Section 2.25 of the Disclosure Schedule, the accounts and notes receivable of the Company reflected on the balance sheets included in the Financial Statements for the period ended December 31, 1998, and all accounts and notes receivable arising subsequent to such date, (i) arose from bona fide sales transactions in the ordinary course of business consistent with past practice and are payable on ordinary trade terms, (ii) are legal, valid and binding obligations of the respective debtors enforceable in accordance with their respective terms, (iii) are not subject to any valid set-off or counterclaim, (iv) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangements, and (v) are not subject of any Actions or Proceedings brought by or on behalf of the Company. Section 2.25 of the Disclosure Schedule sets forth (x) a description of any security arrangements and collateral securing the repayment or other satisfaction of receivables of the Company and (y) all jurisdictions in which the records relating to accounts and notes receivable are located. 2.26 Other Negotiations; Brokers. Neither the Sellers, nor the Company, nor any of their respective Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers or the Company or any such Affiliate) has entered into any agreement or had any discussions with any third party regarding any transaction involving the Company which could result in the Company, Purchaser or its stockholders, or any officer, director, employee, agent or Affiliate of any of them, being subject to any claim for liability to said third party as a result of entering into this Agreement or consummating the transactions contemplated hereby or thereby. No agent, broker, finder, investment banker, financial advisor or other Person will be entitled to any fee, commission or other compensation in connection with the transactions contemplated by this Agreement on the basis of any act or statement made by the Sellers, the Company or any of their respective Affiliates, or any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers, the Company, or any such Affiliate. 2.27 Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Company Act of 1935, as amended. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.28 Bank and Brokerage Accounts. Section 2.28 of the Disclosure Schedule sets forth (a) a list of the names and locations of all banks, securities brokers and other financial institutions at which the Company has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; and (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of all persons having signatory power and respect thereto. 2.29 Exemption from Registration. The offer and sale of the Purchased Stock made pursuant to this Agreement are exempt from the registration requirements of the Securities Act. Neither any the Sellers, nor the Company nor any Person authorized to act on behalf of any of the foregoing has, in connection with the offering of the Purchased Stock, engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 501(c) under the Securities Act), (ii) any action involving a public offering within the meaning of section 4(2) of the Securities Act, or (iii) any action that would require the registration under the Securities Act of the offering and sale of the Purchased Stock pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. 2.30 Disclosure. The representations and warranties contained in this Agreement, and the statements contained in the Disclosure Schedule or in the certificates, lists and other writings furnished to Purchaser pursuant to any provision of this Agreement (including the Financial Statements), when taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein and therein, in the light of the circumstances under which they were made, not misleading. 2.31 Survival of Representations, Warranties, Covenants and Agreements. Even though the Purchaser may investigate the affairs of the Company and attempt to confirm the accuracy of the representations and warranties of the Sellers, the Purchaser, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Sellers contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE III 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser, to its best knowledge, represents and warrants to the Sellers as follows: 3.1 Organization and Qualification. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. Purchaser is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, could not be reasonably expected to have a material adverse effect on the validity or enforceability of this Agreement or on the ability of Purchaser to perform its obligations hereunder or thereunder. 3.2 Authority Relative to this Agreement. Purchaser has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly approved by its board of directors and no other corporate proceedings on the part of Purchaser or its stockholders are necessary to authorize the execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. 3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement does not, and the performance by Purchaser of its obligations under this Agreement and the consummation of the transactions contemplated hereby, do not and will not: 3.3.1 conflict or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or by-laws of Purchaser; 3.3.2 subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.4 of the Disclosure Schedule, if any, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or its Assets and Properties; or 3.3.3 except as disclosed in Section 3.3.3 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, or (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of any Contract or License to which Purchaser is a party, or by which it is bound. 3.4 Governmental Approvals and Filings. Except as disclosed in Section 3.4 of the Disclosure Schedule, other than filings with the Federal Trade Commission and the United States Department of Justice under HSR, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement to which it is a party or the consummation of the transactions contemplated herein. 3.5 Legal Proceedings. There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets which (i) could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, or (ii) could reasonably be expected, individually or in the aggregate with other such Actions or Proceedings, to have a material adverse effect on the business or condition of Purchaser. 3.6 Brokers. No agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement on the basis of any act or statement made by Purchaser. 3.7 Purchase for Investment. The Purchased Stock will be acquired by Purchaser for its own account for the purpose of investment and not with a view to the resale or distribution of all or any part of the Purchased Stock in violation of the Securities Act. 3.8 Survival of Representations, Warranties, Covenants and Agreements. Even though the Sellers may investigate the affairs of the Purchaser and confirm the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the Sellers, nonetheless, shall have the right to rely fully upon the representations, warranties, covenants and agreements of the Purchaser contained in this Agreement. All such representations, warranties, covenants and agreements will survive the Closing. ARTICLE IV 4 COVENANTS BY THE SELLERS 4.1 Noncompetition; Non Solicitation. 4.1.1 For a period of five (5) years from the Closing Date, each of the Sellers, alone or in conjunction with any other Person, or directly or indirectly through their present or future Affiliates, will not directly or indirectly own, manage, operate, join, have a financial interest in, control or participate in the ownership, management, operation or control of, or use or permit his name to be used in connection with, or be otherwise connected in any manner with any business or enterprise engaged in the design, development, manufacture, distribution or sale of any products, or the provision of any services, which the Company was designing, developing, manufacturing, distributing, selling or providing at any time prior to and up to and including the Closing Date anywhere in the State of Montana, provided that the foregoing restriction shall not be construed to prohibit the ownership, in the aggregate, of not more than two percent (2%) of any class of securities of any corporation which is engaged in any of the businesses or enterprises described above, having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, which securities are publicly owned and regularly traded on any national exchange or in the over-the-counter market. 4.1.2 For a period of five (5) years from the Closing Date, the Sellers shall not directly or indirectly, or through an Affiliate, (i) influence any individual who was an employee or consultant of the Company at any time, to terminate his or her employment or consulting relationship with the Company, (ii) interfere in any other way with the employment, or other relationship, of any employee or consultant of the Company or (iii) cause or attempt to cause or participate in any way in any discussion or negotiation concerning (x) any client, customer or supplier of the Company or (y) any prospective client, customer or supplier of the Company from engaging in business with the Company. 4.1.3 The Sellers agree that Purchaser's remedies at law for any breach or threat of breach by it of any of the provisions of this Section 4.1 will be inadequate, and that, in addition to any other remedy to which Purchaser may be entitled at law or in equity, Purchaser shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining orders or orders to prevent breaches of the provisions of this Section 4.1 and to enforce specifically the terms and provisions hereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting Purchaser from pursuing, in addition, any other remedies available to it for such breach or threatened breach. A waiver by the Purchaser of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provisions of this Agreement or of any subsequent breach thereof. 4.1.4 The parties hereto consider the restrictions contained in this Section 4.1 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, but if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in this Section 4.1 is an unenforceable restriction on the Sellers' activities, the provisions of this Section 4.1 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the court referred to above finds that any restriction contained in this Section 4.1 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. The provisions of this Section 4.1 shall in no respect limit or otherwise affect the Sellers's obligations under other agreements with the Company. 4.2 Regulatory and Other Approvals. The Sellers shall, and shall cause the Company to, (a) take all necessary or desirable steps and proceed diligently and in good faith and use its best efforts, as promptly as practicable, to obtain all consents, approvals or actions of, to make all filings with and to give all notices to, Governmental or Regulatory Authorities or any other Person required to consummate the transactions contemplated hereby and those described in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request and (c) cooperate with Purchaser as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to, Governmental or Regulatory Authorities or other Persons required of Purchaser to consummate the transactions contemplated hereby. the Sellers will provide prompt notification to Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 4.3 Investigation by Purchaser. 4.3.1 From the date of this Agreement until the date on which either Party provides the other Party with written notice that this Agreement is terminated (the "Termination Date"), or until the Closing, whichever is earlier, the Sellers will afford Purchaser's accountants, and their representatives access to certain contracts, books and records, and all other documents and data of the Company, other than formulas and manufacturing procedural instructions of the Company and certain other documents and data that the Sellers will not disclose until Closing, such as certain of the vendors of the Company or prices paid for certain products connected with certain formulas, manufacturing processes, bagging operations and acrylic stucco division processes and operations, as well as employee files and records. Sellers will advise Purchaser what is not being disclosed as Purchaser's investigation proceeds. 4.3.2 From the date of this Agreement until the Termination Date, or until the Closing, whichever is earlier, the Sellers will afford Purchaser, its employees, agents and representatives full and free access to certain books and records of the Company as provided in Section 4.3.1 hereof. To the extent that any such books and records are not furnished to Purchaser immediately, the same shall nevertheless be furnished to Purchaser at a mutually agreeable time, not later than one day prior to the Closing. Purchaser acknowledges that certain of the books and records are highly confidential and their disclosure will not be made except as provided herein due to the Sellers' confidentiality and proprietary concerns. Sellers will advise Purchaser what is not being disclosed as Purchaser's investigation proceeds. In any event, if any of this highly confidential information is disclosed to Purchaser prior to or at the Closing, Purchaser shall have the option to terminate this Agreement, at its sole discretion, if the highly confidential information discloses any matter which leads Purchaser to the conclusion that it should not close the transaction contemplated herein. ARTICLE V 5 CLOSING CONDITIONS 5.1 Condition to the Obligations of the Purchaser. The obligations of Purchaser hereunder to purchase the Purchased Stock are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by Purchaser in its sole discretion): 5.1.1 Representations and Warranties. Each of the representations and warranties made by the Sellers in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.1.2 Performance. The Sellers shall have performed and complied with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by them at or before the Closing. 5.1.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or which could reasonably be expected to otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to Purchaser. 5.1.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall be in form and substance reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any condition that has not been satisfied or waived, and (v) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation for the transactions contemplated by this Agreement shall have occurred. 5.1.5 Third Party Consents. Any consents (or waivers) identified in Section 2.5 of the Disclosure Schedule, and all other consents (or waivers) to the performance by the Purchaser of its obligations under this Agreement, or to the consummation for the transactions contemplated hereby as are required under any Contract or License to which the Purchaser is a party or by which any of its Assets are bound and where the failure to obtain any such consent (or in lieu thereof waiver) could reasonably be expected, individually or in the aggregate with other such failures, to materially adversely affect the Purchaser or the business or condition of the Company or otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall be in form and substance satisfactory to the Purchaser in its sole discretion, (iii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iv) shall be in full force and effect. 5.1.6 Purchaser's Investigation. Purchaser shall not have discovered, as a result of its investigation and review pursuant to Section 4.3 hereof, any condition (financial or otherwise) relating in any way to the Company, its Assets, business or prospects, that convinces Purchaser, in its sole discretion, that it is not advisable to complete the Closing. 5.1.7 Sellers' Certificates. The Sellers shall have delivered to Purchaser (i) certificates, dated the Closing Date and executed by an executive officer of the Company, substantially in the form and to the effect of Exhibit B hereto and (ii) certificates, dated the Closing Date and executed by the chief financial officer of the Company, substantially in the form of Exhibit C hereto. 5.1.8 Resignations of Officers and Directors. The Sellers shall have delivered to Purchaser the resignations of all current officers and directors of the Company, effective as of the Closing Date. 5.1.9 Opinion of Counsel. Purchaser shall have received the opinion of ________________ , Esquire, counsel to the Company in connection with this Agreement, dated the Closing Date, substantially in the form and to the effect of Exhibit D hereto, and to such further effect as Purchaser may reasonably request. 5.1.10 Disclosure Schedule. The Sellers shall have delivered to Purchaser a copy of the Disclosure Schedule, updated and current through the Closing Date. 5.1.11 Good Standing Certificates. The Sellers shall have delivered to Purchaser (i) copies of the certificate or articles of incorporation (or other comparable corporate charter documents), including all amendments thereto of the Company certified by the applicable Secretary of State or other appropriate governmental official, (ii) certificates from the applicable Secretary of State or other appropriate governmental official to the effect that the Company is in good standing in such jurisdiction, listing all charter documents of the Company on file and attesting to its payment of all franchise or similar Taxes, and (iii) certificates from the Secretary of State or other appropriate official in each jurisdiction in which the Company is qualified or admitted to do business to the effect that the Company is duly qualified or admitted in good standing in such jurisdiction. 5.1.12 Receipt of Purchased Stock. Certificates representing the Purchased Stock shall have been transferred to Purchaser in accordance with the terms of this Agreement. 5.1.13 Payment of Indebtedness. Purchaser must receive evidence satisfactory to Purchaser that upon payment of the Purchase Price, (i) all Shareholder Debt will be cancelled or otherwise paid in full, and be of no further force and effect, (ii) all other Indebtedness owing by the Company will be retired, released or repaid, and (iii) the Company has been conditionally released from all obligations it has in respect of (i) and (ii) above. 5.1.14 No Adverse Change. There shall have occurred no material adverse change in the business or condition of the Company between December 31, 1998 and the Closing Date. 5.1.15 Inventory. The silos and tanks at the Corette facility being filled with marketable fly ash to within 80% of capacity at the time of the Closing; and 5.1.16 Contract Extension. The Sellers shall obtain, prior to the Closing, an executed extension of the contracts between the Company and Montana Power & Light and the Company and Montana Dakota Utilities (collectively the "Contracts"). The Contracts must be extended for a period of at least an additional five (5) years, preferably ten (10), with substantially the same terms and conditions as those in existence as of the execution of this Agreement. The Montana Power & Light contract shall provide for a term of five (5) years from the date that the ash generated at the Colstrip facility becomes marketable. 5.2 Conditions to the Obligations of the Sellers. The obligations of the Sellers hereunder to sell the Purchased Stock to the Purchaser are subject to the fulfillment, at or prior to the Closing, of the following conditions precedent (any or all of which may be waived in whole or in part by the Sellers in theirs sole discretion): 5.2.1 Representations and Warranties. Each of the representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on and as of the Closing Date as though each such representation and warranty was made on and as of the Closing Date. 5.2.2 Performance. Purchaser shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing. 5.2.3 Orders and Laws. There shall not be pending, threatened or in effect on the Closing Date any Orders or Laws restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5.2.4 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (i) shall have been duly obtained, made or given, (ii) shall not be subject to the satisfaction or any condition that has not been satisfied or waived, and (iii) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have occurred. 5.2.5 Officers' Certificates. Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and executed by the president or vice-president or other officer of Purchaser, substantially in the form and to the effect of Exhibit E hereto. ARTICLE VI 6 TERMINATION 6.1 Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated: 6.1.1 by Purchaser or by the Sellers if a material breach of any provision of this Agreement has been committed by the other party and such breach has not been waived; 6.1.2 (i) by Purchaser if any of the conditions in Section 5.1 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Purchaser to comply with its obligations under this Agreement) and Purchaser has not waived such condition on or before the Closing Date, or (ii) by the Sellers, if any of the conditions in Section 5.2 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of the Sellers to comply with his obligations under this Agreement) and the Sellers has not waived such condition on or before the Closing Date; 6.1.3 by mutual consent of Purchaser and the Sellers; or 6.1.4 by Purchaser or by the Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before February 28, 1999, or such later date as the parties may agree upon. 6.2 Effect of Termination. Each party's right of termination under Section 6.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 6.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in this Section and in Sections 9.3, 9.4, 9.13 and Article X will survive; provided, however, that if this Agreement is terminated by a party because of a breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies (including specific performance) will survive such termination unimpaired. 6.2.1 If this Agreement is terminated, and the transaction contemplated herein is not consummated, Purchaser shall not employ any of the employees identified in Section 5.1.16 above, or any of the employees of the Company who are specifically identified to the Purchaser in writing by the Company within ten (10) days following cancellation or termination of this Agreement, for a period of five (5) years following cancellation or termination of this Agreement. The foregoing shall likewise apply to all subsidiary and related companies owned or controlled, directly or indirectly, by the Purchaser. ARTICLE VII 7 INDEMNIFICATION; TAX MATTERS 7.1 Indemnification. 7.1.1 The Sellers will indemnify the Company, the Purchaser and their respective stockholders and the officers, directors, employees, agents and Affiliates of each of them in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Sellers contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 7.1.2 Purchaser will indemnify the Sellers in respect of, and hold him harmless from and against, any and all Losses suffered, incurred or sustained by him or to which he becomes subject, resulting from, arising out of or relating to any misrepresentation or breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement (including, without limitation, any certificate delivered in connection herewith or therewith). 7.2 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 7.1 will be asserted and resolved as follows: 7.2.1 In order for an Indemnified Party to be entitled to any indemnification provided for under Section 7.1 in respect of, arising out of or involving a claim or demand made by any Person not a party to this Agreement against the Indemnified Party (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party promptly after receipt by such Indemnified Party of written notice of the Third Party Claim; _provided_, that failure to give such Claim Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. 7.2.2 If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnifying Party, which counsel must be reasonably satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, but shall continue to pay for any expenses of investigation or any Loss suffered. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party shall not assume the defense of a Third Party claim with counsel satisfactory to the Indemnified Party within five Business Days of any Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the Indemnifying Party that there are or may be legal defenses available to the Indemnifying Party or to other Indemnified Parties which are different from or additional to those available to the Indemnified Party, which, if the Indemnified Party and the Indemnifying Party were to be represented by the same counsel, would constitute a conflict of interest for such counsel or prejudice prosecution of the defenses available to such Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense of a Third Party Claim and fail to diligently prosecute such defense, then in each such case the Indemnified Party, by notice to the Indemnifying Party, may employ its own counsel and control the defense of the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees, charges and disbursements of counsel employed by the Indemnified Party, and the Indemnified Party shall be promptly reimbursed for any such fees, charges and disbursements, as and when incurred. Whether the Indemnifying Party or the Indemnified Party control the defense of any Third Party Claim, the parties hereto shall cooperate in the defense thereof. Such cooperation shall include the retention and provision to the counsel of the controlling party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation or any material provided hereunder. The Indemnifying Party shall have the right to settle, compromise or discharge a Third Party Claim (other than any such Third Party Claim in which criminal conduct is alleged) without the Indemnified Party's consent if such settlement, compromise or discharge (i) constitutes a complete and unconditional discharge and release of the Indemnified Party, and (ii) provides for no relief other than the payment of monetary damage and such monetary damages are paid in full by the Indemnifying Party. 7.2.3 In the event any Indemnified Party should have a claim under Section 7.1 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 7.1 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within thirty (30) days, such dispute shall be resolved as provided in Article X hereof. 7.3 Allocation of Tax Liability. 7.3.1 In the case of Taxes with respect to or payable by the Company with respect to a period that includes but does not end on the Closing Date, the allocation of such Taxes between the Pre-Closing Period and the Post-Closing Period shall be made on the basis of an interim closing of the books of the Company as of the close of business on the Closing Date. In the case of (i) franchise Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding and (ii) _ad valorem_ Taxes, in either situation attributable to any taxable period that includes but does not end on the Closing Date, the portion of such Taxes attributable to the Pre-Closing Period shall be the amount of such Taxes for the entire taxable period, multiplied by a fraction the numerator of which is the number of days in such taxable period ending on and including the Closing Date and the denominator of which is the entire number of days in such taxable period; _provided_, that if any Company Asset is sold or otherwise transferred prior to the Closing Date, then _ad valorem_ Taxes pertaining to such property, asset or other right shall be attributed entirely to the Pre-Closing Period. 7.3.2 Except to the extent a reserve for Taxes is reflected on the Financial Statements, the Sellers shall be responsible for and pay and shall indemnify and hold harmless Purchaser and the Company with respect to (i) any and all Taxes imposed on any of the Company, or for which the Company is liable with respect to any periods ending on or before the Closing Date; _provided_, that in the case of any adjustment to any item of loss or expense for any such years, which gives rise to corresponding and offsetting items of loss or expense in subsequent years the benefit of which is or will be actually realized by the Company (other than upon liquidation of the Company) including by reason of any increase in a net operating loss, the Sellers's obligations shall be limited to the amount of interest (computed at the appropriate statutory rates) and penalties actually paid to the appropriate taxing authorities by the Company as a result of such timing differences in the case of audit adjustments, or at a rate of eight percent (8%) per annum in the case of other adjustments, (ii) without duplication (subject to the same proviso), all Taxes arising out of a breach of the representations, warranties or covenants contained herein, (iii) any Tax liability resulting from any ongoing state audits that exceed, in the aggregate, any reserve therefore set forth on the Financial Statements, and (iv) any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified hereunder. 7.3.3 From and after the Closing Date, Purchaser shall cause the Company to prepare, or cause to be prepared, and shall file, or cause to be filed, all reports and returns of the Company required to be filed. Purchaser shall cause the Company to pay the appropriate taxing authorities the Taxes shown to be due and payable on all Tax Returns of the Company filed after the Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the Company for a period ending on or before the Closing Date shall be prepared on a basis consistent with the Tax Returns filed by the Company for previous taxable periods, subject to the requirements of applicable law. 7.4 Tax Contests. 7.4.1 If any Taxing Authority or other Person asserts a Tax Claim, then the party hereto first receiving notice of such Tax Claim shall promptly provide written notice thereof to the other parties hereto. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other Person. 7.4.2 If, within 30 calendar days after any the Sellers receives or delivers, as the case may be, notice of a Tax Claim, the Sellers provide to the Purchaser an Election Notice, then subject to the provisions of this Section 7.4, the Sellers shall defend or prosecute, at their sole cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall defended or prosecuted diligently by the Sellers to a Final Determination; provided, that the Sellers shall not, without the prior written consent of the Company, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to the Company. So long as the Sellers are defending or prosecuting a Tax Claim, with respect to the Company, the Company shall provide or cause to be provided to the Sellers any information reasonably requested by the Sellers relating to such Tax Claim, and shall otherwise cooperate with the Sellers and their representatives in good faith in order to contest effectively such Tax Claim. the Sellers shall inform the Company of all developments and events relating to such Tax Claim (including, without limitation, providing to the Company copies of all written materials relating to such Tax Claim) and the Company or its authorized representatives shall be entitled, at the expense of the Company, to attend, but not to participate in or control, all conferences, meetings and proceedings relating to such Tax Claim. 7.4.3 If, with respect to any Tax Claim, the Sellers fails to deliver an Election Notice to the Company within the period provided in Section 7.4.2 or, after delivery of such Election Notice to the Company, the Sellers fail diligently to defend or prosecute such Tax Claim to a Final Determination, then the Company shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at the sole cost, expense and risk of the Sellers, such Tax Claim. The Company shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by the Company, the Sellers shall cooperate in good faith with the Company and its authorized representatives in order to contest effectively such Tax Claim. the Sellers may attend, but not participate in or control, any defense, prosecution, settlement or compromise of any Tax Claim controlled by the Company pursuant to this Section 7.4.3, and shall bear their own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by the Company pursuant to this Section 7.4.3, the Company shall, from time to time, be entitled to receive current payments from the Sellers with respect to costs and expenses incurred by the Company in connection with such defense or prosecution (including, without limitation, reasonable attorneys', accountants' and experts' fees and disbursements, settlement costs, court costs and any other costs or expenses for investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as a result of receiving a payment from the Sellers pursuant to this Section 7.4) (collectively "Associated Costs"). 7.4.4 In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Sellers pursuant to this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitees, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim within five Business Days after such Final Determination. In the case of any Tax Claim that is defended or prosecuted to a Final Determination by the Company pursuant to the terms of this Section 7.4, the Sellers shall pay to the appropriate Tax Indemnitee, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim, together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, within five Business Days after such Final Determination. In the case of any Tax Claim not covered by the two preceding sentences, the Sellers shall pay to the Company, in immediately available funds, the full amount of any Tax arising or resulting from such Tax Claim (calculated after taking into account any actual reduction in the current liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting from such payment or such Tax Claim), together with any Associated Costs that have not theretofore been paid by the Sellers to the Company, at least five Business Days before the date payment of such Tax is due from any Tax Indemnitee. 7.4.5 Notwithstanding anything contained in this Article VII to the contrary, the rights of the Sellers under this Section 7.4 to defend or prosecute, or to control the defense or prosecution of, any Tax Claim shall be no greater than those rights that the Company would have to defend or prosecute, or to control the defense or prosecution of, such Tax Claim. 7.5 Cooperation Regarding Tax Matters. Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to the other parties hereto and the Company such cooperation and information as any of them reasonably may request related to the filing of any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules, workpapers and relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Article VII shall bear all costs of filing such Tax Returns. 7.6 Payment of Transfer Taxes and Fees. the Sellers shall pay all sales, use, transfer, stamp, documentary or similar Taxes imposed upon or arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless the Purchaser, the Company and their Affiliates with respect to such Taxes. the Sellers shall file all necessary documentation and Tax Returns with respect to such Taxes and provide to Purchaser copies of all such Tax Returns. 7.7 Other Tax Covenants. 7.7.1 Without the prior written consent of Purchaser, neither the Sellers nor any Affiliate of any the Sellers shall, to the extent it may affect or relate to the Company, make or change any tax election, change any annual tax accounting period, adopt or change any method of tax accounting, file any amended Tax Return, enter into any method of tax accounting, enter into any closing agreement, settle any Tax Claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of increasing any post-closing Tax Liability of the Purchaser, of the Company or any Affiliate of Purchaser. 7.7.2 Without the prior written consent of the Sellers, neither the Purchaser nor the Company shall, to the extent it may affect or relate to the Company, make or change any tax election, file any amended Tax Return, enter into any closing Agreement, settle any Tax claim, assessment or proposed assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would affect a Pre-Closing Tax Period, unless required by applicable law. 7.7.3 So long as any books, records and files retained by the Sellers or and his Affiliates relating to the business of the Company or the books, records and files delivered to the control of the Purchaser pursuant to this Agreement to the extent they relate to the operations of the Company prior to the Closing Date, remain in existence and are available, each party (at its own expense) shall have the right upon prior notice to inspect and to make copies of the same at any time during business hours for any proper purpose. The Purchaser and the Sellers and their respective Affiliates shall use reasonable efforts not to destroy or allow the destruction of any such books, records and files without first providing 60 days' written notice of intention to destroy to the other, and allowing such other party to take possession of such records. 7.8 Conflict. In the event of a conflict between the provisions of Sections 7.3 through 7.7 of this Article VII and any other provision of this Agreement, such provisions of this Article VII shall control. ARTICLE VIII 8 DEFINITIONS 8.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below: "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation or audit. "Affiliate" means, as applied to any Person, (a) any other Person directly or indirectly owning, owned by, controlling, controlled by or under common control with, that Person, (b) any director, partner, officer, agent, employee or relative of such Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agreement" means this Purchase Agreement, the Exhibits and the Disclosure Schedule and the certificates delivered in connection herewith, as the same may be amended from time to time in accordance with the terms hereof. "Assets" of any Person means all assets and properties of every kind, nature, character and description, including goodwill and other tangibles, operated, owned or leased by such Person, including cash and cash equivalents, investments, accounts and notes receivable, chattel paper, documents, instruments, real estate, equipment, inventory, goods and intellectual property. "Associated Costs" has the meaning ascribed to it in Section 7.4.3. "Benefit Plan" means any Plan, existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the Company or under which any employee, former employee or director of the Company or any beneficiary thereof is covered, is eligible for coverage or has benefit rights. "Books and Records" means all files, documents, instruments, papers, books and records relating to the Company, including financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans. "Claim Notice" means written notification pursuant to Section 7.2.1 of a Third Party Claim as to which indemnity under Section 7.1 is sought by an Indemnified Party. "Closing" and "Closing Date" have the meaning ascribed to them in Section 1.3. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Company" has the meaning ascribed to it in the first recital of this Agreement (and shall include all predecessors and subsidiaries of the Company). "Contract" means any agreement, lease, evidence of indebtedness, mortgage, indenture, security agreement or other contract (whether written or oral). "Disclosure Schedule" means the schedules delivered to Purchaser by or on behalf of the Company and the Sellers, and the schedules delivered by or on behalf of Purchaser, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein pursuant to this Agreement. "Dispute Period" means the period ending thirty (30) calendar days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "Election Notice" means a written notice provided by the Sellers in respect of a Tax Claim to the effect that (i) the Sellers acknowledge their indemnity obligation under this Agreement with respect to such Tax Claim and (ii) the Sellers elect to contest, and to control the defense or prosecution of, such Tax Claim at their sole risk and sole cost and expense. "Environment" means all air, surface water, groundwater, drinking water supply, stream sediments, or land, including soil, land surface or subsurface strata, all fish, wildlife, biota and all other environmental medium or natural resources. "Environmental, Health and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law and consisting of or relating to (i) any environmental, health or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (ii) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (iii) financial responsibility under Environmental Law or Occupational Safety and Health Law for clean-up costs or corrective action, including any investigation, clean-up, removal, containment, or other remediation or response actions required by Environmental Law or Occupational Safety and Health Law (whether or not such clean-up has been required or requested by any governmental body or any other Person) and for any natural resource damages; or (iv) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action" include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended (CERCLA). "Environmental Law" means all federal, state, local and foreign environmental, health and safety laws, common law orders, decrees, judgments, codes and ordinances and all rules and regulations promulgated thereunder, civil or criminal, including, without limitation, Laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the Environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid, toxic or hazardous substances or wastes. "Environmental Permit" means any federal, state, local, provincial, or foreign permits, licenses, approvals, consent or authorizations required by any Governmental or Regulatory Authority under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental or Regulatory Authority under any applicable Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures or equipment (including motor vehicles, tank cars and rolling stock) currently or formerly owned or operated by the Company. "Final Determination" means (i) a decision, judgment, decree or other Order by any court of competent jurisdiction, which decision, judgment, decree or other Order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired, (ii) a closing agreement entered into under Section 7121 of the Code or any other settlement agreement entered into in connection with an administrative or judicial proceeding, (iii) the expiration of the time for instituting suit with respect to a claimed deficiency or (iv) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto. "Financial Statements" has the meaning ascribed to it in Section 2.8. "GAAP" means generally accepted accounting principles of the United States, consistently applied. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Hazardous Activity" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company. "Hazardous Material" means (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (ii) any chemicals, materials, substances or wastes which are now or hereafter become defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import, under any Environmental Law; and (iii) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental or Regulatory Authority. "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases, (v) long term debt and (vi) in the nature of guarantees of the obligations described in clauses (i) through (v) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article VII. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article VII. "Indemnity Notice" means written notification pursuant to Section 7.2.3 of a claim for indemnity under Article VII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 2.15. "Liabilities" means all Indebtedness, obligations and other liabilities (or contingencies that have not yet become liabilities) of a Person (whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due). "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" means any and all damages, fines, fees, penalties, deficiencies, diminution in value of investment, losses and expenses, including without limitation, interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (such fees and expenses to include all fees and expenses, such as fees and expenses of attorneys, incurred in connection with (i) the investigation or defense of any Third Party Claims or (ii) asserting or disputing any rights under this Agreement against any party hereto or otherwise). "Occupational Safety and Health Law" means any Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions. "Option" with respect to any Person means any security, right, subscription, warrant, option, "phantom" stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of such Person, or (ii) receive any benefits or rights similar to those enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including without limitation, any rights to participate in the equity, income or election of directors or officers of such Person. "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 2.15. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Plan" means any bonus, compensation, pension, profit sharing, retirement, stock purchase or cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Post-Closing Period" means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. "Pre-Closing Period" means any taxable period or portion thereof that is not a Post-Closing Period. "Purchase Price" has the meaning ascribed to it in Section 1.2. "Purchased Stock" has the meaning ascribed to it on the first page of this Agreement. "Purchaser" has the meaning ascribed to it in the first paragraph of this Agreement. "Real Property" has the meaning ascribed to it in Section 2.15. "Real Property Leases" has the meaning ascribed to it in Section 2.15. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous Material into the Environment. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Seller" and the "Sellers" have the meaning ascribed to them on the first page of this Agreement. "Subsidiary" means any Person in which another Person, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least fifty percent (50%) of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof. Unless the context otherwise requires a different interpretation, references to a "Subsidiary" mean a Subsidiary of the Company. "Tax" or "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Tax Claim" means any written claim with respect to Taxes attributable to a Pre-Closing Period made by any Taxing Authority or any Person that, if pursued successfully, could serve as the basis for a claim for indemnification, under this Agreement, of Purchaser, the Company and other Indemnified Parties specified in Section 7.1 of this Agreement. "Tax Indemnitee" means the Company, the Purchaser and their respective stockholders, officers, directors, employees, agents and Affiliates of each of them (other than the Sellers). "Tax Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax. "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. "Third Party Claim" has the meaning ascribed to it in Section 7.2. 8.2 Interpretation of Agreement. 8.2.1 Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; (v) the word "including" does not imply any limitation to the item or matter mentioned; and (vi) the phrases "ordinary course of business" and "ordinary course of business consistent with past practice" refer to the business and practice of the Company. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. 8.2.2 When used herein, the phrase "to the knowledge of" any Person, "to the best knowledge of" any Person or any similar phrase, means (i) with respect to any Person who is an individual, the actual knowledge of such Person, (ii) with respect to any other Person, the actual knowledge of the directors, officers, managers, and other similar Persons in a similar position or having similar powers and duties, and (iii) in the case of each of (i) and (ii), the knowledge of facts that such individuals should have after reasonable inquiry. ARTICLE IX 9 MISCELLANEOUS 9.1 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or mailed by prepaid first class certified mail, return receipt requested, or sent by prepaid courier, to the parties at the following addresses: If to Purchaser, to: ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 Attn.: Sr. Vice President and General Counsel If to the Sellers, to: Mr. William ___. Leslie _________________ _________________ _________________ All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt and (iv) if delivered by courier to the address as provided for in this Section, be deemed given on the earlier of the second Business Day following the date sent by such courier or upon receipt. Any party from time to time may change its address or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 9.2 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof. 9.3 Expenses. Except as otherwise expressly provided in this Agreement (including without limitation as provided in Article VII), each party will pay its own costs and expenses incurred in connection with this Agreement, and the transactions contemplated hereby and thereby; _provided_, the Sellers will pay all expenses relating hereto of the Company incurred in respect of the period prior to the Closing. 9.4 Confidentiality. Purchaser and the Sellers will hold in strict confidence from any Person (other than its Affiliates or representatives) all documents and information concerning the other party hereto or any of its Affiliates furnished to it by or on behalf of the other party in connection with this Agreement or the transactions contemplated hereby, except to the extent the disclosing party can demonstrate that such documents or information was (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. Such covenant of confidentiality will remain in effect unless a party is compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law. 9.5 Set-Off. If from time to time and at any time any party shall be entitled (as either agreed upon by the parties or finally adjudicated in a court of competent jurisdiction) to be paid any amount under the provisions of Section 7.1, such party shall be entitled, if it so elects, to set off such amount against any amounts owing to the other party. 9.6 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the Sellers shall execute and deliver to Purchaser such other documents and instruments, provide such materials and information and take such other actions as Purchaser may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to cause each the Sellers to fulfill its obligations under this Agreement. The Sellers shall also, for a reasonable period of time (not to exceed ninety (90) days), cooperate with Purchaser by continuing to provide any welfare benefit plan, payroll services plan, operational service, or other service of any nature being provided to the Company by the Sellers or any business entity owned, managed or controlled, in any manner, by the Sellers. All of such services shall be provided at cost, plus ten percent (10%). 9.7 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 9.8 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of the parties hereto. 9.9 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person other than any Person entitled to indemnity under Article VII. 9.10 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by either party without the prior written consent of the other party(ies) and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 9.11 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 9.12 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 9.13 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Montana, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Montana. 9.14 Limited Recourse. Regardless of anything in this Agreement to the contrary, (i) obligations and liabilities of Purchaser hereunder shall be without recourse to any stockholder of Purchaser or any of such stockholder's Affiliates, directors, employees, officers or agents and shall be limited to the assets of such party and (ii) the stockholders of Purchaser have made no (and shall not be deemed to have made any) representations, warranties or covenants (express or implied) under or in connection with this Agreement or any other Operative Agreement. 9.15 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. ARTICLE X 10 MEDIATION In the event there is a dispute under this Agreement, the disagreeing parties shall meet with one another and diligently attempt to resolve their disagreements. If they are unable to do so, then upon request of either party to the dispute made within twenty (20) days of the failure of negotiations, they will mediate the dispute, utilizing an impartial mediator pursuant to the rules of the American Arbitration Association ("AAA") or any other reputable organization that sponsors mediation. If, after thirty (30) days the mediation is not successful, or if no mediation has been elected, then any party to the dispute may file a legal action in any court of competent jurisdiction to resolve the dispute. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth on the first page hereof. PURCHASER ISG RESOURCES, INC. _______________ By: ___________ Its: __________ SELLERS WILLIAM __. LESLIE ________________ William __. Leslie EXHIBIT B Officer's Certificate I, the undersigned, the President of Mineral Specialties, Inc. (the "Company"), a Montana corporation, do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section __ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie, an individual residing in the state of Montana. Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. Attached hereto as Exhibit __-1 is a correct and complete copy of the Certificate of Incorporation of the Company, as in effect on the date hereof. 3. Attached hereto as Exhibit __-2 is a correct and complete copy of the By-Laws of the Company, as in effect on the date hereof. 4. Attached hereto Exhibit __-3 is a correct and complete copy of the Certificates of Good Standing of the Company, as in effect on the date hereof. 5. Attached hereto Exhibit __-4 is a correct and complete list of the persons that have been duly elected (or appointed), qualified and acting as officers and directors of the Company (to and including the date hereof), each holding the respective offices set forth opposite their names; and the signatures set forth opposite their names on Exhibit -4 are the genuine signatures of such persons. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of the date hereof. ____________________ By:_________________ President, Mineral Specialties, Inc. EXHIBIT C Chief Financial Officer's Certificate I, the undersigned, the Chief Financial Officer of Mineral Specialties, Inc. (the "Company"), a Montana corporation, do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section __ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie, an individual residing in the state of Montana. Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. I am familiar with the Company's finances and capitalization. 3. The Company has provided the Purchaser with the Financial Statements as provided in the Agreement. 4. The Financial Statements accurately present the Company's financial condition and operations as of and through the respective dates and periods therein delineated, and the results of the Company's operations and changes in financial position for the periods then ended, and have been prepared in accordance with GAAP, applied on a consistent basis. 5. As of the Closing Date, no material adverse change in the financial condition or operations of the Company will have occurred from that shown on the Financial Statements. 6. The Company's authorized capital stock consists of ___ shares of common stock, all of which are outstanding and owned by the Seller. 7. There are no outstanding options, warrants, calls, subscriptions, commitments, agreements or other rights to purchase or dispose of Company common stock or other securities which are, or may at any time be, convertible into stock or other securities in the Company. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of the date hereof. _____________________ By:_____________________ CFO, Mineral Specialties, Inc. EXHIBIT D Opinion of Counsel On Counsel's Letterhead ISG Resources, Inc. 136 East South Temple, Suite 1300 Salt Lake City, Utah 84111 Dear Sirs: I have acted as counsel to _______________ (herein collectively the "Sellers") and Mineral Specialties, Inc., a Montana corporation (the "Company"), in connection with the Stock Purchase Agreement dated May , 1999 (the "Agreement") between ISG Resources, Inc., a Utah corporation ("Purchaser"), and the Sellers. This is the opinion contemplated by section ____ of the Agreement. All capitalized terms used in this opinion without definition have the respective meanings give to them in the Agreement or the Accord referred to below. This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, and this Opinion Letter should be read in conjunction therewith. The General qualifications, as defined in the Accord, apply to all of the opinions set forth in this Opinion Letter. Based on the foregoing, our opinion is as follows: 1. The Agreement is enforceable against the Sellers. 2. The authorized capital stock of the company consists of ___ shares of common stock, all of which are outstanding. Sellers own all of the outstanding stock of record free and clear of all adverse claims. As a result of the delivery of certificates to Purchaser and the payment to Sellers being made at the Closing, Purchaser is acquiring ownership of all of the outstanding stock of the company, free and clear of all adverse claims. 3. The Company is a corporation duly organized, validly existing and in good standing under the laws of Montana, with full corporate power and authority to own its properties and to engage in their business as presently conducted or contemplated. All of the outstanding shares of capital stock of the Company have been authorized and validly issued and are paid and nonassessable and were not issued in violation of the preemptive rights or any person. 4. Neither the execution and delivery of the Agreement nor the consummation of any or all of the transactions contemplated by the Agreement (a) breaches or constitutes a default (or an event that, with notice or lapse of time or both, would constitute a default) under any agreement or commitment to which the Sellers are parties or (b) violates any statute, law, regulation or rule, or any judgement, decree or order of any court applicable to the Sellers. 5. Neither the execution and delivery of the Agreement nor the consummation of any or all of the transactions contemplated by the agreement (a) violates any provision of the certificate of incorporation or bylaws of the company, (b) breaches or constitutes a default (or any event that, with notice or lapse of time or both, would constitute a default) under, or results in the termination of, or accelerates the performance required by, or excuses performance by any person of any of its obligations under, or causes the acceleration of the maturity of any debt or obligation pursuant to, or results in the creation or imposition of any encumbrance upon any property or assets of the Company under any agreement or commitment to which the Company is a party or by which any of the properties or assets of the Company are subject, or (c) violates any statute, law, regulation, or rule, or any judgement decree or order of any court applicable to the Company. 6. No consent, approval or authorization of, or declaration, filing or registration with, any governmental body is required in connection with the execution, delivery and performance of the Agreement or the consummation of any of the transactions contemplated by the Agreement. I hereby confirm to you that, with the exception of the insured claims reflected on the Disclosure Statement, if any, there are no proceedings or actions by or before any court or governmental body pending or overtly threatened against or involving the Company or that questions or challenges the validity of the Agreement or any action taken or to be taken by the Company pursuant to the Agreement or in connection with the transactions contemplated by the Agreement, and the Company is not subject to any judgement order or decree having prospective effect. Very truly yours, EXHIBIT E Purchaser's Officers' Certificate Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date and executed by the president or vice-president or other officer of Purchaser, substantially in the form and to the effect of Exhibit E hereto. I, the undersigned, the ________ of ISG Resources, Inc. (the "Company"), a Utah corporation, do hereby certify that: 1. This Certificate is being delivered at the Closing today pursuant to Section __ of the Stock Purchase Agreement (the "Agreement") dated May __, 1999, between ISG Resources, Inc., a Utah corporation ("Purchaser"), and William __. Leslie, an individual residing in the state of Montana. Unless otherwise indicated herein, capitalized terms used in this Certificate shall have the same meanings given to them in the Agreement. 2. Attached hereto as Exhibit __-1 is a true copy of the Board Resolution of the Company with respect to the Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of the date hereof. ___________________ By: _______________ ________, ISG Resources, Inc. EX-10.13 23 PARTNERSHIP REGULATIONS FOR DON'S BUILDING SUPPLY DON'S BUILDING SUPPLY L.L.P. (A Texas Limited Liability Partnership) PARTNERSHIP REGULATIONS TABLE OF CONTENTS Page ARTICLE I DEFINITIONS..................................................1 1.1 Definitions...........................................................1 ARTICLE II FORMATION OF THE COMPANY.....................................3 2.1 Name and Formation....................................................3 2.2 Principal Place of Business...........................................4 2.3 Principal Office......................................................4 2.4 Term..................................................................4 2.5 Purposes and Powers...................................................4 ARTICLE III MANAGEMENT.......................................................4 3.1 Management by Board of Directors......................................4 3.2 Board of Directors....................................................5 3.3 Officers..............................................................6 3.4 Committees of the Board of Directors..................................9 ARTICLE IV INDEMNIFICATION...................................................10 4.1 Liability of Director or Officer of the Company for Certain Acts.....10 4.2 Indemnification of Director, Officer and Partners of the Company.....10 ARTICLE V MEETINGS OF BOARD OF DIRECTORS..............................12 5.1 Meetings.............................................................12 5.2 Place of Meetings....................................................12 5.3 Notice of Meetings...................................................12 5.4 Meetings of All Directors............................................12 5.5 Quorum...............................................................12 5.6 Manner of Acting.....................................................12 5.7 Action by Directors Without a Meeting................................13 5.8 Waiver of Notice.....................................................13 5.9 Conduct of Meetings..................................................13 ARTICLE VI CONTRIBUTIONS TO CAPITAL AND CAPITAL ACCOUNTS....................13 6.1 Capital Contributions................................................13 6.2 Units................................................................13 6.3 Withdrawal or Reduction of Partners' Contributions to Capital........14 6.4 Liability of Partners................................................14 6.5 Deficit Capital Accounts.............................................14 ARTICLE VII ALLOCATIONS, DISTRIBUTIONS, ELECTIONS AND REPORTS.................................................14 7.1 Allocations of Profits and Losses....................................14 7.2 Distributions........................................................14 7.3 Tax Withholdings.....................................................16 7.4 Limitation Upon Distributions........................................16 7.5 Accounting Principles................................................16 7.6 Records and Reports..................................................17 7.7 Returns and Other Elections..........................................17 ARTICLE VIII TRANSFERABILITY.................................................17 8.1 Restrictions on Transfer of Interests in the Company.................17 8.2 Assignees............................................................18 8.3 Substituted and Additional Partners..................................18 8.4 Continuing Liability of Partners.....................................19 ARTICLE IX DISSOLUTION AND TERMINATION.....................................19 9.1 Dissolution..........................................................19 9.2 Distribution of Assets Upon Dissolution..............................20 ARTICLE X MEETINGS OF PARTNERS........................................20 10.1 Place and Manner of Meetings.........................................20 10.2 Special Meetings of Partners.........................................20 10.3 Notice of Meetings of Partners.......................................20 10.4 Quorum...............................................................20 10.5 Registered Partners..................................................21 10.6 Proxies..............................................................21 10.7 Conduct of Meetings..................................................21 10.8 Fixing Record Dates for Matters Other than Consents to Actions.......21 10.9 Fixed Record Dates for Consents to Action............................21 10.10Actions Without a Meeting............................................22 10.11Nature of Partnership Interest.......................................22 ARTICLE XI MISCELLANEOUS PROVISIONS........................................22 11.1 Notices..............................................................22 11.2 Waiver of Notice.....................................................22 11.3 Application of Texas Law.............................................23 11.4 No Action for Partition..............................................23 11.5 Headings and Sections................................................23 11.6 Amendment of Partnership Agreement and Partnership Regulations.......23 11.7 Registered Limited Liability Partnership.............................23 11.8 Resignation..........................................................23 11.9 Numbers and Gender...................................................23 11.10Binding Effect.......................................................24 11.11Counterparts.........................................................24 ATTACHMENT: SCHEDULE A - Names and Units Owned of the Partners PARTNERSHIP REGULATIONS OF DON'S BUILDING SUPPLY L.L.P. These Partnership Regulations are hereby adopted as the Partnership Regulations of DON'S BUILDING SUPPLY L.L.P., a Texas limited liability partnership (the "Company"), and are hereby confirmed and approved for good and valuable consideration. R E C I T A L S A. The Predecessor Entity, as hereinafter defined, was organized on November 9, 1981. B. The Company was created as general partnership by a conversion of the Predecessor Entity into the Company on December 31, 1998. C. The Partnership Agreement of the Company was executed on December 31, 1998. D. On December 31, 1998 the Company registered as a registered limited liability partnership. E. The Partnership Agreement contemplates the adoption of Partnership Regulations that would have the effect of amending the Partnership Agreement to provide detailed provisions as to the agreement of the Partners regarding the ownership and operation of the Company. R E G U L A T I O N S ARTICLE I DEFINITIONS I.1 Definitions. The following terms used in these Partnership Regulations shall have the following meanings (unless otherwise expressly provided herein): (a) "Act" shall mean the Texas Revised Partnership Act, as the same may be amended from time to time. (b) "Partnership Agreement" has the meaning given that term in Section 2.1 hereof. (c) "Board of Directors" means the committee designated pursuant to Article III. (d) "Capital Account" means, with respect to any Partner, the account maintained for such Partner in a manner consistent with the requirements of the Act, recognizing that distributions to the Partners are to be made without regard to Capital Accounts. (e) "Capital Contribution" means any contribution to the capital of the Company in cash or property by a Partner whenever made. (f) "Code" means the Internal Revenue Code of 1986, as amended. (g) "Company" means DON'S BUILDING SUPPLY L.L.P., a Texas limited liability partnership. (h) "Director" means a Manager designated pursuant to Section 3.1(b) hereto. (i) "Disposition" means any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation or other disposition, whether voluntary or involuntary and whether during a Partner's lifetime or upon or after his or her death, including without limitation, any partition of community property and any Disposition by operation of law, by court order, by judicial process or by foreclosure, levy or attachment. (j) "Fiscal Year" means the Company's fiscal year, which shall be the calendar year. (k) "Losses" means, for each Fiscal Year, the net losses of the Company determined in accordance with accounting principles consistently applied from year to year employed under the accrual method of accounting and as reported, separately or in the aggregate, as appropriate, on the Company's information tax return filed for federal income tax purposes. (l) "Majority" means, with respect to any referenced groups of members of the Board of Directors or any committee, a combination of any of such persons constituting more than fifty percent of the number of such persons of such referenced group who are then elected and qualified. (m) "Majority in Interest" means, with respect to the Partners, a combination of such Persons (one or more) holding more than fifty percent of the issued and outstanding Units. (n) "Partner" means each Person designated as a Partner on Schedule A, attached hereto and hereby made a part hereof, any successor or successors to all or any part of any such Person's interest in the Company, or any additional Partner admitted as a Partner of the Company in accordance with Article VIII, each in the capacity as a Partner of the Company, but does not include any who has ceased to be a Partner of the Company. "Partners" means all such Persons collectively in their capacity as Partners of the Company. (o) "Partnership Interest" means the percentage of partnership interest in the Company held by a Partner, which percentage shall be equal to the Unitholding Percentage of such Partner. (p) "Permitted Disposition" means any of the following kinds of Dispositions: (i) A Disposition of the community property or other interest in all or any part of the interests in the Company of a Partner's spouse, upon the death of such spouse, to the surviving Partner; (ii) A Disposition of the community property or other interest in all or any part of the interests in the Company of a Partner's spouse to such Partner in connection with the termination of the marital relationship of the Partner and the Partner's spouse; (iii) A Disposition made pursuant to and as permitted by the terms of these Partnership Regulations. (q) "Person" shall have the meaning given that term in Section 1.01(14) of the Act. (r) "Predecessor Entity" means Don's Building Supply, Inc., a Texas corporation that was converted into the Company (the "Conversion") effective on December 31, 1998. (s) "Profits" means, for each Fiscal Year, the net income and net gains of the Company determined in accordance with accounting principles consistently applied from year to year as reported, separately or in the aggregate, as appropriate, on the Company's information tax return filed for federal income tax purposes. (t) "Partnership Regulations" means these Partnership Regulations of the Company as originally adopted and as amended from time to time. (u) "Unitholding Percentage" of a Partner means the percentage that the Units held by such Partner bears to the aggregate number of issued and outstanding Units. (v) "Units" means the units of ownership in the Company, denominated as Units of Partnership Interest of the Company. ARTICLE II FORMATION OF THE COMPANY II.1 Name and Formation. The name of the Company is Don's Building Supply L.L.P. The Partnership Agreement of the Company (the "Partnership Agreement") was executed on December 31, 1998. II.2 Principal Place of Business. The principal place of business of the Company within the State of Texas shall be Dallas, Texas. The Company may locate its place(s) of business and registered office at any other place or places as the Board of Directors may from time to time deem necessary or advisable. II.3 Principal Office. The Company's initial principal office shall be at 2327 Langford, Dallas, Texas 75208. II.4 Term. The term of existence of the Company shall be perpetual, unless the Company is earlier dissolved in accordance with either the provisions of the Partnership Agreement, these Partnership Regulations or the Act. II.5 Purposes and Powers. (a) The purposes and character of the business of the Company shall be to accomplish any or all lawful business for which partnerships may be organized under the Act. (b) The Company shall have any and all powers which are necessary, proper, advisable, convenient, or desirable to carry out the purposes and business of the Company, to the extent the same may be legally exercised by partnerships under the Act. The Company shall carry out the foregoing activities pursuant to the arrangements set forth in the Partnership Agreement of the Company and these Partnership Regulations. ARTICLE III MANAGEMENT III.1 Management by Board of Directors. (a) General. The business and affairs of the Company shall be managed by a committee to be known as the Board of Directors. (b) Duties and Obligations. Subject to Section 4.1, each person serving on the Board of Directors (a "Director") and/or as officers of the Company shall exercise such person's business judgment in managing the business, operations and affairs of the Company. (c) No Authority of Partners or Directors to Bind Company. Unless authorized to do so by the Partnership Agreement, these Partnership Regulations or the Board of Directors, no Partner, Director, agent or employee of the Company shall have any power or authority to bind the Company in any way. (d) Voting by the Units. Actions to be taken by the Partners shall be approved by Partners holding a majority of the Units. III.2 Board of Directors. (a) Management. Any decisions to be made by the Partners under the Act, the Partnership Agreement or these Partnership Regulations shall be made by the Board of Directors unless specifically provided otherwise. (b) Decisions Reserved to Partners. Notwithstanding the provisions of Section 3.2(a) or any other provisions herein to the contrary, the Board of Directors may not cause the Company to do any of the following actions without the agreement of the Partners holding at least a majority of the Units: (i) the merger or consolidation of the Company with and into any corporation, limited liability company or other entity, or of any corporation, limited liability company or other entity with and into the Company, or the participation of the Company in any exchange of interests; (ii) the conversion of the Company into another form of entity; (iii) the liquidation or dissolution of the Company; and (iv) the delegation to an agent of the Company of the power to take any of the actions referred to in the foregoing clauses. (c) Designation and Election of Directors. The initial Board of Directors shall consist of those individuals designated as the directors in the Partnership Agreement. Thereafter, the Board of Directors shall be elected by majority vote of the Partners. Each of the members of the Board of Directors shall serve until his or her resignation or death or until his or her successor shall be elected as provided herein. Each Director elected shall have one vote. Except as provided in Section 3.2(b), the Directors shall in all respects relating to the Company represent and act on behalf of the Partners. (d) General. (i) Resignation. Any Director may resign at any time by giving notice to the other members of the Board of Directors. A Director's resignation shall take effect at the time specified in the notice and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. (ii) Vacancies. Any vacancy occurring in the Board of Directors shall be filled by majority vote of the Partners. (iii) Meetings. Meetings of the Board of Directors shall be held in accordance with Article V. (iv) Reimbursement. The Directors shall be entitled to receive such compensation as shall be determined by the Directors, and shall be entitled to reimbursement for reasonable "out-of-pocket" expenses incurred in connection with their services to the Company. (v) Indemnification. The Company shall indemnify the Directors to the extent set forth in Article IV. III.3 Officers. (a) Election of Officers. The members of the Board of Directors, at their first meeting, shall elect such officers as the Board shall choose to elect. No officers need be a Partner or a resident of Texas. The Directors may elect or appoint such other officers and agents as they shall deem necessary, who shall be appointed for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Any two or more offices may be held by the same Person. (i) Each officer of the Company shall hold office until his or her successor is chosen and is qualified in such officer's stead or until the death, resignation or removal from office of such officer. (ii) Any vacancy in any office because of death, resignation, removal or otherwise may be filled by such person as is elected or appointed by a majority vote of the Board of Directors. (iii) The compensation of all officers and agents shall be fixed by the Board of Directors or by a committee formed and appointed by the Board of Directors, as allowed pursuant to Section 3.4 of these Partnership Regulations. (b) Authority and Duties. The officers of the Company, if the Board chooses to elect one or more of such officers, shall have the authority and shall exercise the powers and perform the duties specified below and as may be additionally specified by the Board of Directors or these Partnership Regulations (and in all cases where the duties of any officer are not prescribed by these Partnership Regulations or the Board of Directors, such officer shall follow the orders and instructions of the President): (i) President. The President shall preside over the general and active management of the business of the Company, and shall direct, manage and control the business of the Company to the best of the President's ability. The President shall serve until resignation or dissolution and liquidation of the Company or removal by the Board of Directors. The President shall, subject to the provisions of Section 3.3(d), have full and complete authority, power and discretion to make any and all decisions and do any and all things that the President deems to be reasonably required in furtherance of the Company's business and objectives. Without limiting the generality of the foregoing, the President or such subordinate officer designated by the President, or any officer duly authorized by the Board of Directors shall have the power and authority on behalf of the Company: (1) to purchase liability and other insurance to protect the Company's property and business; (2) to invest any Company funds temporarily (by way of example but not limitation) in time deposits, short-term governmental obligations, commercial paper or other investments; (3) to employ accountants, legal counsel, managing agents or other experts, employees or agents to perform services for the Company and to compensate them from Company funds; (4) to negotiate with employees and any labor organization representing employees of the Company; and (5) to carry out all orders and resolutions of the Board of Directors. (ii) Vice-Presidents. The Vice Presidents, unless otherwise determined by the Board of Directors shall, in the absence or disability of the President, perform the duties and have the authority and exercise the powers of the President. The Vice-Presidents shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe or as the President may from time to time delegate. (iii) Secretary. The Secretary shall attend all meetings of the Board of Directors and Partners and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for any committee, if requested. The Secretary shall give, or cause to be given, notice of the meetings of the Board of Directors and Partners where such notices are required to be given by these Partnership Regulations. The Secretary shall be under the supervision of the President, and shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe or as the President may from time to time delegate. (iv) Treasurer. The Treasurer shall have the custody of the Company funds and shall keep full and accurate accounts of receipts and disbursements of the Company, and shall deposit all monies and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Company as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and Board of Directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all transactions as Treasurer and of the financial condition of the Company. If required by the Board of Directors, the Treasurer shall give the Company a bond in such form, in such sum, and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the Treasurer's office and for the restoration to the Company, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money or other property of whatever kind in the Treasurer's possession or under his or her control belonging to the Company. The Treasurer shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe or as the President may from time to time delegate. (c) Execution of Contracts. Each of the President or such subordinate officer or officers designated by the President or any officer designated by the Board of Directors shall have the authority to execute on behalf of the Company all agreements, instruments and documents, including, without limitation, checks, drafts, notes and other negotiable instruments, mortgages, deeds of trusts, security agreements, financing statements, documents providing for the acquisition, mortgage or disposition of the Company property, assignments, bills of sale, leases, partnership agreements and any other instruments or documents necessary to effectuate any actions which have been approved by the Partners or the Board of Directors (if such actions require, under the Act, the Partnership Agreement or these Partnership Regulations, the approval of the Partners or the Board of Directors) or by the President (if such actions do not require under the Act, the Partnership Agreement or these Partnership Regulations the approval of the Partners or the Board of Directors). (d) Actions Requiring Board of Directors Approval. Notwithstanding any other provision of the Partnership Agreement or these Partnership Regulations and in addition to any other actions requiring Partner or Board of Directors approval as provided herein or in the Act, the following actions on behalf of the Company shall require the approval of the Board of Directors: (i) the sale, lease, transfer or other disposition of all or a material part of the Company's assets or business; (ii) any increase or decrease in the capitalization of the Company; (iii) any acquisition by the Company of the stock, assets or business of another corporation or entity or any investment by the Company of corporate funds in another corporation or entity, including the creation of any subsidiary; (iv) the admission of any new Partner to the Company; (v) the lending of Company funds to any Partner or any affiliate of any Partner; (vi) any guarantee by the Company of any indebtedness or other obligation of any kind of any Partner or any affiliate of a Partner; (vii) the entry into, or any amendment or modification or cancellation of, a management, service, or other agreement or contract between the Company and a Partner or its affiliates; (viii) the making of a material tax election under the Code applicable to the Company unless specifically allowed pursuant to the terms of these Partnership Regulations; (ix) the confession of a judgment by the Company; (x) the filing of bankruptcy by the Company; (xi) the offering of any securities or Partnership Interests to third parties by the Company. (xii) the incurrence of any indebtedness, making of any contract (or any material amendment to any contract formerly approved in the Company's annual budget or by the Board of Directors), making of any capital expenditure or investment, the disposal or pledge of Company property or settlement of any claim or litigation in an amount in excess of $5,000; (xiii) the appointment or removal of any officer of the Company; (xiv) the acquisition, expansion or disposal of facilities of the Company; (xv) any other agreement which would substantially affect the operation of the Company. Notwithstanding the preceding provisions of this subparagraph (d) to the contrary, the approval of the Board of Directors shall not be required with respect to any of the actions listed above if such actions have been approved in writing by Partners holding a majority of the Units. (e) General. (i) Removal. Any officer may be removed at any time by a majority vote of the Board of Directors whenever in the Board of Directors's best judgment the best interests of the Company will be served thereby, but such removal will be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer shall not in itself create contract rights. (ii) Resignation. Any officer may resign at any time, subject to the rights or obligations under any existing contracts between the officer and the Company, by giving written notice to the President or the Board of Directors. An officer's resignation shall take effect at the time specified in the notice, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. (iii) Vacancies. A vacancy in any office, however occurring, may be filled by the Board of Directors as provided in Section 3.3(a)(ii) for the unexpired portion of the term. (iv) Indemnification. The Company shall indemnify the Directors, officers, and Partners to the extent set forth in Article IV. III.4 Committees of the Board of Directors. The Board of Directors may designate one or more committees, each of which shall be comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the Board of Directors, replace absent or disqualified members at any meeting of that committee. Any such committee, to the extent provided in the resolution establishing it, shall have and may exercise all of the authority that may be exercised by the Board of Directors. Regular and special meetings of any committee may be held on such dates, at such times and upon such notice (if any) as shall be provided in the resolution establishing such committee or, if not addressed in such resolution, as may be determined by the members of such committee. The Board of Directors may dissolve any committee at any time. ARTICLE IV INDEMNIFICATION IV.1 Liability of Director or Officer of the Company for Certain Acts. Each Director and officer of the Company shall exercise such person's business judgment in managing the business, operations and affairs of the Company. Absent fraud, deceit, gross negligence, willful misconduct or a wrongful taking, neither a Director nor an officer of the Company shall be liable or obligated to the Partners or to the Company for any mistake of fact or judgment, for the doing of any act, or for the failure to do any act in conducting the business, operations and affairs of the Company which may cause or result in any loss or damage to the Company or its Partners. No Director or officer of the Company guarantees the return of the Partners' capital contributions or a profit for the Partners from the operations of the Company. No Director or officer of the Company shall be responsible to any Partner because of a loss of such Partner's investment, unless the loss shall have been the result of the Director's or officer's fraud, deceit, gross negligence, willful misconduct or a wrongful taking. Neither the Directors nor officers of the Company shall be jointly and severally liable for fraud, deceit, gross negligence, willful misconduct or wrongful taking, but each such person shall only be liable for such person's own actions and omissions. IV.2 Indemnification of Director, Officer and Partners of the Company. (a) Right to Indemnification. The Company shall indemnify, to the fullest extent permitted by law (including without limitation in circumstances in which, in the absence of this Section 4.2(a), indemnification would be discretionary under the laws of Texas or limited or subject to particular standards of conduct under such laws) each Director, officer and Partner of the Company against all costs, expenses and liability, including reasonable attorneys' fees, incurred in connection with, relating to or as a result of any action, suit or proceeding to which a Director, officer or Partner of the Company may be involved or made a party by reason of being or having been a Director, officer or Partner of the Company, or while a Director, officer or Partner of the Company, is or was serving at the request of the Company as a manager, director, officer, partner, trustee, employee, fiduciary or agent of any other domestic or foreign limited liability partnership, corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise. (b) Advancement of Expenses. In the event of any action, suit or proceeding in which a Director, officer or Partner of the Company is involved or which may give rise to a right of indemnification under Section 4.2(a), following written request to the Company by the Director, officer or Partner of the Company, the Company shall pay to such Director, officer or Partner, to the fullest extent permitted by law (including without limitation in circumstances in which, in the absence of this Section 4.2(b), advancement of expenses would be discretionary under the laws of Texas or limited or subject to particular standards of conduct under such laws), amounts to cover expenses incurred by the Director, officer or Partner in, relating to or as a result of such action, suit or proceeding in advance of its final disposition. (c) Settlements. The Company shall not be liable under this Section 4.2 for any amounts paid in settlement of any action, suit or proceeding effected without the approval of the Board of Directors. The Company shall not settle any action, suit or proceeding in any manner that would impose any penalty or limitation on a Director, officer or Partner of the Company without the Director, officer or Partner's written consent. Consent to a proposed settlement of any action, suit or proceeding shall not be unreasonably withheld by the Board of Directors. (d) Liability Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a Director, officer or Partner of the Company or who is or was serving at the request of the Company as a manager, director, officer, partner, trustee, employee, fiduciary or agent of any other domestic or foreign limited partnership, limited liability partnership, corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise against any liability asserted against and incurred by a Director, officer or Partner of the Company in any such capacity or arising out of a Director, officer or Partner's status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Section. Any such insurance may be procured from any insurance company designated by the Board of Directors, whether such insurance company is formed under the laws of Texas or any other jurisdiction of the United States or elsewhere. (e) Other Rights and Remedies. The rights to indemnification and advancement of expenses provided in this Section shall be in addition to any other rights a Director, officer or Partner of the Company may have or hereafter acquire under any law, provision of the Partnership Agreement, any other or further provision of these Partnership Regulations, vote of the Board of Directors, agreement or otherwise. The Company shall have the right, but shall not be obligated, to indemnify or advance expenses to any employee or agent of the Company in accordance with and to the fullest extent permitted by law. (f) Applicability and Effect. The rights to indemnification and advancement of expenses provided in this Section shall be applicable to acts or omissions that occurred prior to the adoption of this Section, shall continue as to any Director, officer or Partner of the Company during the period such Director, officer or Partner serves in any one or more of the capacities covered by this Section, shall continue thereafter so long as the Director, officer or Partner may be subject to any possible action, suit or proceeding by reason of the fact that the Director, officer or Partner served in any one or more of the capacities covered by this Section, and shall inure to the benefit of the estate and personal Directors of each such person. Any repeal or modification of this Section or of any provision hereof shall not affect any rights or obligations then existing. All rights to indemnification under this Section shall be deemed to be provided by a contract between the Company and each Director, officer or Partner of the Company. (g) Limitation on Partners' Liability. The indemnification provided for in this Section shall in no event cause the Partners to incur any liability, nor shall it result in any liability of the Partners to any third party. ARTICLE V MEETINGS OF BOARD OF DIRECTORS V.1 Meetings. Meetings of the Board of Directors may be called for any purpose, unless otherwise prescribed by statute, by the President or any of the Directors. V.2 Place of Meetings. The Directors may designate any place, either within or outside the State of Texas, as the place of meeting for meetings. If no designation is made, the place of meeting shall be the principal office of the Company in the State of Texas. Directors may participate in such meetings by means of conference telephone and similar communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting as provided herein shall constitute presence in person at such meeting, except where a Person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. V.3 Notice of Meetings. The Chairman of the Board of Directors, the President or the Person(s) calling the meeting shall cause written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose for which the meeting is called to be delivered not less than two (2) days before the date of the meeting, either personally or by mail, to each Director entitled to vote at such meeting. If mailed, such notice shall be deemed to be given two business days following when it deposited in the United States mail, addressed to the Director at such Director's business address as set forth in the records of the Company, with postage prepaid. If a meeting is adjourned to another place or time, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. V.4 Meetings of All Directors. If all of the Directors shall meet at any time and place, either within or outside of the State of Texas, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and any action taken at such meeting shall be lawful. V.5 Quorum. A quorum shall consist of a majority of the Directors; provided that in the event of a quorum not being present, such meeting shall be adjourned to a date one (1) day after the date of such meeting but at the same time and location and any Directors then in attendance shall be deemed to be a quorum. V.6 Manner of Acting. If a quorum is present, the majority vote of the Directors entitled to vote on the subject matter shall be the act of the Partners. V.7 Action by Directors Without a Meeting. Action required or permitted to be taken at a meeting of the Board of Directors or the Board of Managers may be taken without a meeting if the action is evidenced by written consents signed by all Directors or Managers entitled to vote. V.8 Waiver of Notice. When any notice is required to be given to any Director, a waiver thereof in writing signed by the person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice. By attending a meeting, a Director: (a) waives objection to lack of notice or defective notice of such meeting unless the Director, at the beginning of the meeting, objects to the holding of the meeting or the transaction of business at the meeting, and (b) waives objection to consideration at such meeting of a particular matter not within the purpose or purposes described in the notice of such meeting unless the Director objects to considering the matter when it is presented. V.9 Conduct of Meetings. All meetings of the Board of Directors shall be presided over by the chairman of the meeting, who shall be a member of the Board of Directors. The chairman of any meeting of the Board of Directors shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem in order to him or her. ARTICLE VI CONTRIBUTIONS TO CAPITAL AND CAPITAL ACCOUNTS VI.1 Capital Contributions. (a) As a result of the Conversion, each Partner contributed to the capital of the Company his proportionate interest in the assets and business of the Predecessor Entity. As a result of the Conversion, each Partner received his or her Partnership interest and the Units described on Schedule A, attached hereto. (b) If the Board of Directors determines that additional capital contributions are needed to carry out the purposes of the Company, the Board of Directors may request that the Partners make additional cash or property Capital Contributions to the Company to purchase additional Units to be issued by the Company. No Partner shall be required to make any additional Capital Contribution without the written consent of all the Partners. (c) No Partner shall be paid interest on any Capital Contribution to the Company. VI.2 Units. (a) Each Partner's interest in the Company shall be represented by units of Partnership Interest denoted as Units. The Units owned by the Partners in the Company immediately after the Conversion are set forth on the attached Schedule A. Subject to the provisions of Section 8.3, additional Partners shall receive the number of Units determined by the Partners. The number of Units issued to an additional Partner, and the Capital Contribution required for the issuance of such Units, shall be within the sole discretion of the Partners. (b) The Board of Directors, in its discretion, shall be empowered to determine the form of any stock certificate that will evidence Units of the Company. VI.3 Withdrawal or Reduction of Partners' Contributions to Capital. (a) A Partner shall not receive out of the Company's property any part of his or her Capital Contributions until all liabilities of the Company, except the liabilities to Partners on account of their Capital Contributions, have been paid or there remains property of the Company sufficient to pay such liabilities. (b) No Partner shall have the right to withdraw all or any part of his or her Capital Contribution, except as may be otherwise specifically provided in these Partnership Regulations. Under circumstances involving a return of any Capital Contributions, no Partner shall have the right to receive property other than cash. (c) No Partner shall have priority over any other Partner, either as to the return of Capital Contributions or as to Profits, Losses or distributions; provided that this subsection shall not apply to loans (as distinguished from Capital Contributions) which a Partner has made to the Company. VI.4 Liability of Partners. No Partner shall be liable for the debts, liabilities or obligations of the Company. No Partner shall be required to contribute any funds to the capital of the Company, or to loan any funds to the Company. VI.5 Deficit Capital Accounts. No Partner will be required to pay to the Company, to any other Partner, or to any third party any deficit balance which may exist from time to time in the Partner's Capital Account. ARTICLE VII ALLOCATIONS, DISTRIBUTIONS, ELECTIONS AND REPORTS VII.1 Allocations of Profits and Losses. The Profits and Losses of the Company for each Fiscal Year shall be allocated among the Partners in accordance with the rules applicable to S corporations for federal income tax purposes. Any credit available for federal income tax purposes shall be allocated among the Partners in the same manner. VII.2 Distributions. All distributions of any nature whatsoever, including, without limitation, partial returns of capital, profit distributions, refinancing proceeds and liquidating distributions, shall be made solely to the Partners, in proportion to their respective Units and without regard to their Capital Account balances, so that, with respect to each such distribution, each Partner or other holder of Units will receive an equal dollar amount of distribution per Unit held as of the record date of such distribution. Anything in the Partnership Agreement or these Partnership Regulations to the contrary notwithstanding, each Unit shall confer upon the holder thereof identical rights to distribution and liquidation proceeds from the Company. Distributions shall be made if approved by the Board of Directors; provided, however, anything in these Partnership Regulations to the contrary notwithstanding, the Partnership shall make the Minimum Distributions, as hereinafter defined, to the Partners each year in order to provide the funds for the Partners to pay the federal, estate and local income taxes imposed on the income of the Partnership allocated to the Partners. (a) The "Minimum Distributions" for a year shall be such distributions to Partners or other holders of Units so that each Partner or other holder of Units will receive at least the amount of his or her Tax Distribution Amount, as hereinafter defined, for such year. (b) To carry out the obligation to distribute the Minimum Distributions, Net Operating Cash Flow, as hereinafter defined, shall be distributed to the Partners or other holders of Units in accordance with the provisions of this Section 7.2 at least a reasonable period before the respective Partners or other holders of Units are required to pay their estimated and final federal, state and local income taxes on the income of the Partnership allocated to the Partners or other holders of Units. The Board of Directors, in its discretion, may authorize the distribution of additional amounts of Net Operating Cash Flow to the Partners or other holders of Units. Notwithstanding the foregoing, no distribution of the Net Operating Cash Flow of the Partnership shall be made if and to the extent that, after the distribution is made, the liabilities of the Partnership shall exceed the fair market value of the assets of the Partnership. (c) For purposes of making the Minimum Distributions, Net Operating Cash Flow for each calendar year or other taxable period shall be distributed among the Partners or other holders of Units so that each Partner or other holder of Units receives an equal amount per Unit held until the Minimum Distributions have been made; i.e., each Partner or other holder of Units has received at least such party's Tax Distribution Amount. (i) The "Tax Distribution Amount" of a Partner or other holder of Units for a year shall be an amount equal to the greater of: (1) the combined federal and state income tax on the amount of such party's Total Taxable Income, as hereinafter defined, for such period, which combined federal and state income tax shall be calculated using the highest combined tax rates for individuals under federal and state law after taking into account any deductibility of such taxes on any other tax return; or (2) the combined federal alternative minimum tax (as imposed by Sections 55 through 59 of the Code or the subsequent equivalent of such provisions) on the amount of such party's federal alternative minimum taxable income and state income tax on the amount of state taxable income or state alternative minimum taxable income, as applicable to individuals, on the amount of such party's Total Taxable Income for such period, which combined federal alternative minimum tax and state income tax shall be calculated using the highest combined federal alternative minimum tax rate and either state alternative minimum tax rates or state income tax rates, as applicable to individuals, after taking into account any deductibility of such taxes on any other tax return. (ii) In the event Net Operating Cash Flow is insufficient to distribute the Minimum Distributions for a year, such deficiency shall be satisfied in the first subsequent calendar year that Net Operating Cash Flow is available. (iii) For purposes of this Agreement, "Total Taxable Income" means the net amount of taxable income of the Partnership allocated to a Partner or other holder of Units for such period, including without limitation the allocation to such party of all items of income, gains, deductions and losses required to be separately stated and allocated among the Partners or other holders of Units for income tax purposes. (iv) In the event that a self-employment tax or similar tax is imposed on a Partner or other holder of Units based in whole or in part on such party's allocable share of Partnership net income, such tax shall be deemed to constitute an income tax and the tax rate applicable to such self-employment or similar tax (taking into account the deductibility, if any, of such self-employment or similar tax) shall be added to, and treated as such constituent part of, the income tax rate (and, if applicable, the alternative minimum tax rate) of the applicable tax jurisdiction. (d) "Net Operating Cash Flow" shall be determined in the discretion of the Board of Directors, but generally shall mean the gross cash proceeds from Partnership operations less the portion thereof required to pay Partnership expenses less any reserves established by the Board of Directors for direct operating expenses, taxes, maintenance, insurance, capital expenditures, repairs and other items deemed reasonable and necessary for the Partnership's business operations. In addition, Net Operating Cash Flow shall include any net cash proceeds received from the sale, financing or refinancing of Partnership assets. VII.3 Tax Withholdings. To the extent the Company is required by federal, state or local law or any tax treaty to withhold or to make tax payments on behalf of or with respect to any Partner, the Company shall withhold such amounts and make such tax payments as so required. The amount of such payments shall constitute an advance by the Company to such Partner and shall be repaid to the Company by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Partner or, if such proceeds are insufficient, such Partner shall pay to the Company the amount of such insufficiency. VII.4 Limitation Upon Distributions. The Company may not make a distribution to its Partners to the extent that, immediately after giving effect to the distribution, all liabilities of the Company, other than liabilities to Partners with respect to their interests and liabilities for which the recourse of creditors is limited to specified property of the Company, exceed the fair value of the Company's assets, except that the fair value of the property that is subject to the liability for which recourse of creditors is limited shall be included in the Company assets only to the extent that the fair value of the property exceeds that liability. VII.5 Accounting Principles. The net income of the Company shall be determined in accordance with accounting principles applied on a consistent basis and adequate for the Company business as determined by the Board of Directors. VII.6 Records and Reports. At the expense of the Company, the Board of Directors shall maintain records and accounts of all operations and expenditures of the Company. At a minimum, the Company shall keep at its principal place of business the following records: (a) A current list that states: (i) The name and mailing address of each Partner; and (ii) The Units owned by each Partner; (b) Copies of the federal, state and local information or income tax returns for each of the Company's six most recent tax years; (c) A copy of the Partnership Agreement and these Partnership Regulations, all amendments or restatements, executed copies of any powers of attorney, and copies of any document that creates, in the manner provided by the Partnership Agreement or these Partnership Regulations, classes or groups of Partners; (d) Correct and complete books and records of account of the Company; and (e) Any other books, records or documents required by the Act or other applicable law. VII.7 Returns and Other Elections. The Board of Directors shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Partners within a reasonable time after the end of each Fiscal Year of the Company considering any extensions of time for filing that may be obtained by or on behalf of the Company. All elections permitted to be made by the Company under federal or state laws shall be made by an officer of the Company authorized to do so by the Board of Directors. ARTICLE VIII TRANSFERABILITY VIII.1 Restrictions on Transfer of Interests in the Company. (a) A Partner shall not attempt to transfer nor make or suffer any Disposition of all or any part of his Units, except in accordance with this Article VIII. (b) Notwithstanding anything to the contrary contained herein, unless all of the Partners shall consent in writing or unless such Disposition constitutes a Permitted Disposition under Section 1.1(p)(i) or (ii) hereof, no Partner shall make or suffer any Disposition of all or any portion of his or her Units to any person other than a Permitted Transferee, as hereinafter defined. A Partner shall be entitled to sell, transfer or assign all or any portion of his or her Units to one or more Permitted Transferees without obtaining the consent of any other Partner. For purposes of these Partnership Regulations, "Permitted Transferee" means and includes (i) an individual who is already a Partner, or (ii) an individual who is a child of a Partner. (c) The Partners agree that the holding and disposition of their respective Units shall be subject to and governed by all existing and effective agreements in effect immediately prior to the Conversion, with such agreements being applied to the Units with the same effect as such agreements were applicable to the outstanding shares of capital stock of the Predecessor Entity. VIII.2 Assignees. (a) The Company shall not recognize for any purpose any purported sale, assignment or transfer of all or any portion of a Partner's Units unless the assigning Partner complies with all of the provisions of Article VIII, all costs of such assignment have been paid by the assigning Partner and there is filed with the Company a written and dated notification of such sale, assignment or transfer, in satisfactory form, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such notification (i) contains the agreement by the purchaser, assignee or transferee to be bound by all the terms and provisions of these Partnership Regulations and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable securities laws, the Partnership Agreement and these Partnership Regulations (including suitability standards) and Section 8.1(b) hereof. Any sale, assignment or transfer shall be recognized by the Company as effective on the date of receipt of such notification by the Company. (b) Unless an assignee becomes a Partner in accordance with the provisions set forth below, such assignee shall not be entitled to any of the rights granted to a Partner hereunder, other than the right to receive allocations of income, gain, loss, deduction, credit and similar items and distributions to which the assignor would otherwise be entitled. (c) Any Partner who assigns all his or her interest in the Company shall cease to be a Partner, except that, unless and until a substituted Partner has been admitted into the Company, such assigning Partner shall retain the statutory rights of an assignor of a Partner's interest under the Act. (d) A person who is the assignee of all or any fraction of the interest of a Partner, but does not become a substituted Partner, and desires to make a further assignment of such interest, shall be subject to all the provisions of this Article and Article IX to the same extent and in the same manner as any Partner desiring to make an assignment of his or her interest. VIII.3 Substituted and Additional Partners. (a) With the written consent of all Partners, each Partner shall have the right to substitute in his or her place a purchaser, assignee, transferee, donee, heir, legatee or other recipient (a "Transferee") of all or any portion of the Units held by such Partner, provided that such substitution, and admittance to the Company as a substituted Partner, shall be effective at such time as the Transferee satisfies the conditions set forth in Section 8.2(a) hereof. (b) Any person may, subject to the terms and conditions of the Partnership Agreement and these Partnership Regulations, become an additional Partner in the Company by the issuance by the Company of new Units in the Company for such consideration and upon such terms as the Partners, by written consent of all of the Partners, shall determine. In order to become an additional Partner, a person shall be required to enter into a written agreement with the Company in which such person (i) agrees to be bound by all the terms and provisions of the Partnership Agreement and these Partnership Regulations, and (ii) agrees to the capital contribution(s) to be made to the Company by such person and such other terms and conditions as shall be determined by the Company. (c) No person shall become a substituted or additional Partner until such person has satisfied the requirements of this Article VIII; provided, however, that for the purpose of allocating Profits, Losses and distributions, a person shall be treated as having become, and as appearing in the records of the Company as, a Partner, as the case may be, on such date as the sale, assignment or transfer of Units to such person was recognized by the Company pursuant to Section 8.2. VIII.4 Continuing Liability of Partners. No assignment or transfer of an interest in the Company as provided herein, shall relieve the assigning or transferring Partner from any personal liability for outstanding indebtedness, liabilities, liens and obligations relating to the Company or the Company's assets which may exist and for which such Partner has any liability on the date of such assignment or transfer. ARTICLE IX DISSOLUTION AND TERMINATION IX.1 Dissolution. (a) The Company shall be dissolved upon the election to dissolve the Company by a Majority in Interest of the Partners. (b) Upon dissolution of the Company, the business and affairs of the Company shall terminate, and the assets of the Company shall be liquidated under this Article IX. (c) Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a winding up of the Company's business and affairs, and the assets of the Company have been distributed as provided in Section 9.2. (d) Upon dissolution of the Company, the Board of Directors may cause any part or all of the assets of the Company to be sold in such manner as the Board of Directors shall determine in an effort to obtain the best prices for such assets; provided, however, that the Board of Directors may distribute assets of the Company in kind to the Partners to the extent practicable. (e) The Company shall not dissolve upon the death, insanity, retirement, resignation, withdrawal, expulsion, bankruptcy, legal incapacity or dissolution of any Partner, or the occurrence of any other event which terminates the continued status of any Partner as a partner in the Partnership. IX.2 Distribution of Assets Upon Dissolution. In settling accounts after dissolution, the assets of the Company shall be paid in the following order: (a) First, to creditors, in the order of priority as provided by law, except those to Partners of the Company on account of their Capital Contributions; and (b) Second, to the Partners in respect of their interests in capital and accumulated earnings, by making distributions to the Partners or their assignees in proportion to the issued and outstanding Units. ARTICLE X MEETINGS OF PARTNERS X.1 Place and Manner of Meetings. All meetings of the Partners shall be held at the principal office of the Company or at such other place within or without the State of Texas as may be determined by a Majority in Interest of the Partners and set forth in the respective notice or waivers of notice of such meeting. Partners may participate in such meetings by means of conference telephone and similar communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting as provided herein shall constitute waiver of notice of the same and presence in person at such meeting, except where a Person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. X.2 Special Meetings of Partners. Special meetings of the Partners may be called by the holders of not less than twenty percent (20%) of all the Partnership Interests. Business transacted at all special meetings shall be confined to the purpose stated in the notice; provided however that the notice of special meetings may state that the meeting may consider the transaction of such other business as may properly come before the meeting. X.3 Notice of Meetings of Partners. Written or printed notice stating the place, day and hour of the meeting and, in the case of special meetings, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the discretion of the Person calling the meeting, to each Partner of record entitled to vote at such meeting. X.4 Quorum. A Majority in Interest of the Partners present at a meeting, in person or by proxy, shall constitute a quorum at all meetings of the Partners, except as otherwise provided by law or the Partnership Agreement. Once a quorum is present at the meeting of the Partners, the subsequent withdrawal from the meeting of any Partner prior to adjournment or the refusal of any Partner to vote shall not affect the presence of a quorum at the meeting. If, however, such quorum shall not be present at any meeting of the Partners, the Partners entitled to vote at such meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the holders of the requisite amount of Partnership Interests shall be present or represented. At any meeting of the Partners at which a quorum is present, the vote of the holders of a Majority in Interest of all the Partners present, in person or by proxy, shall be the act of the Partners, unless the vote of a greater number is required by law, the Partnership Agreement or these Partnership Regulations. Any vote may be taken viva voce or by show of hands unless someone entitled to vote objects, in which case written ballots shall be used. X.5 Registered Partners. The Company shall be entitled to treat the holder of record of any Partnership Interest as the holder of such Partnership Interest for all purposes, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such Partnership Interest on the part of any other Person, whether or not it shall have express or other notice of such claim or interest, except as expressly provided by the Partnership Agreement, these Partnership Regulations or the laws of Texas. X.6 Proxies. A Partner may vote either in person or by proxy executed in writing by the Partner. A telegram, telex, cablegram, or similar transmission by the Partner, or a photographic, photostatic, facsimile, or similar reproduction of a writing executed by the Partner shall be treated as having been executed in writing for purposes of this Section. X.7 Conduct of Meetings. All meetings of the Partners shall be presided over by the chairman of the meeting, who shall be a Partner designated by a Majority in Interest of the Partners. The chairman of any meeting of Partners shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem in order to him or her. X.8 Fixing Record Dates for Matters Other than Consents to Actions. The Partners may fix in advance a record date for the purpose of determining Partners entitled to notice of or to vote at a meeting of the Partners (other than determining Partners entitled to consent to action by Partners proposed to be taken without a meeting of Partners), the record date to be not less than ten (10) nor more than sixty (60) days prior to said meeting. In the absence of any action by the Partners, the date upon which the notice of the meeting is mailed shall be the record date. X.9 Fixed Record Dates for Consents to Action. Unless a record date shall have previously been fixed or determined pursuant to Section 5.9 hereof, whenever action by Partners is proposed to be taken by consent in writing without a meeting of Partners, if provided for by these Partnership Regulations, the Partners may fix a record date for purposes of determining Partners entitled to consent to that action, which record date shall not precede, and shall not be more than ten (10) days after, the date upon which the resolution fixing the record date as adopted by the Partners. If no record date has been fixed by the Partners and the prior action by the Partners is not required by the Act, the record date for determining Partners entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company by delivery to its registered office, its principal place of business, or a Partner of the Company having custody of the books in which proceedings of meetings of Partners are recorded. Delivery shall be by hand or by certified or registered mail, return receipt requested. Delivery to the Company's principal place of business shall be addressed to any Partner of the Company. If no record date has been fixed by the Partners and prior action of the Partners is required by statute, the record date for determining Partners entitled to consent to action in writing without a meeting shall be at the close of business on the date on which the Partners adopt a resolution taking such prior action. X.10 Actions Without a Meeting. Any action required by the Act to be taken at a meeting of the Partners, or any action which may be taken at a meeting of the Partners, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the actions setting forth the action so taken, shall be signed by the holder or holders of Partnership Interests having not less than the minimum percentage share of Partnership Interests that would be necessary to take such action at a meeting at which the holders of all of Partnership Interests entitled to vote on the action were present and voted. Every written consent pursuant to this Section shall be signed, dated, and delivered in the manner required by, and shall become effective at the time and remain effective for the period specified by, the Act. A telegram, telex, cablegram, or similar transmission by a Partner, or a photographic, photostatic, facsimile, or similar reproduction of a writing signed by a Partner shall be regarded as signed by the Partner for purposes of this Section. Prompt notice of the taking of any action by Partners without a meeting by less than unanimous written consent shall be given to those Partners who do not consent in writing to the action. X.11 Nature of Partnership Interest. A Partnership Interest is personal property. A Partner shall have no interest in specific property of the Company. ARTICLE XI MISCELLANEOUS PROVISIONS XI.1 Notices. Any notice, demand or communication required or permitted to be given by any provision of the Partnership Agreement or these Partnership Regulations shall be deemed to have been sufficiently given or served for all purposes if delivered personally to the party or to an officer of the party to whom the same is directed or, if sent by registered or certified mail, postage and charges prepaid, addressed to the Partner's and/or Company's address as it appears in the Company's records, as appropriate. Except as otherwise provided herein, any such notice shall be deemed to be given three business days after the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as aforesaid. XI.2 Waiver of Notice. Whenever, by statute, the Partnership Agreement or these Partnership Regulations, notice is required to be given to any Partner, a waiver thereof in writing signed by the Person or Persons entitled to such notice, whether before or after the time stated in such notice, shall be equivalent to the giving of such notice. Attendance of a Partner at a meeting shall constitute a waiver of notice of such meeting, except where a Partner attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. XI.3 Application of Texas Law. The Partnership Agreement and these Partnership Regulations and the application or interpretation hereof, shall be governed exclusively by the laws of the State of Texas, and specifically the Act, provided that the provisions of the Partnership Agreement and these Partnership Regulations shall override the provisions of the Act to the extent allowed by law. XI.4 No Action for Partition. No Partner shall have any right to maintain any action for partition with respect to the property of the Company. XI.5 Headings and Sections. The headings in these Partnership Regulations are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of these Partnership Regulations or any provision hereof. Unless the context requires otherwise, all references in these Partnership Regulations to Sections or Articles shall be deemed to mean and refer to Sections or Articles of these Partnership Regulations. XI.6 Amendment of Partnership Agreement and Partnership Regulations. These Partnership Regulations amend the Partnership Agreement. In case of any conflict between the provisions of the Partnership Agreement and the provisions of these Partnership Regulations, the provisions of these Partnership Regulations shall control. Except as otherwise expressly set forth in these Partnership Regulations, the Partnership Agreement of the Company and these Partnership Regulations may be amended, supplemented or restated only upon the written approval of a majority of the Partners, or in the alternative, upon written approval by a majority of the members of the Board of Directors. Notwithstanding the foregoing, any amendment to the Partnership Agreement or these Partnership Regulations which either (i) changes the allocation of Profits and Losses to an allocation that is not in proportion to Unitholding Percentages, or (ii) causes any Partner to be personally liable for the debts and/or obligations of the Partnership shall require the written consent of each affected Partner. XI.7 Registered Limited Liability Partnership. The Partnership has registered as a registered limited liability partnership pursuant to Section 3.08 of the Act. The officers and directors of the Partnership shall cause the Partnership to make such filings, pay such filing fees and otherwise take any other reasonable measures as necessary or appropriate to maintain and continue the status of the Partnership as a registered limited liability partnership. XI.8 Resignation. Any officer or agent of the Company may resign by giving written notice to any remaining Partner. The resignation shall take effect at the time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. XI.9 Numbers and Gender. Where the context so indicates, the masculine shall include feminine and neuter, and the neuter shall include the masculine and feminine, the singular shall include the plural. XI.10 Binding Effect. Except as herein otherwise provided to the contrary, these Partnership Regulations shall be binding upon and inure to the benefit of the Partners, their distributees, heirs, legal representatives, executors, administrators, successors and permitted assigns. XI.11 Counterparts. These Partnership Regulations may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of such counterparts shall constitute the same Partnership Regulations. These Partnership Regulations were duly adopted by written agreement of the Partners to be effective from and after December 31, 1998. _______________ ____________________ Victoria Smith Charlie A. Meador Date Signed: Date Signed: _______________ ____________________ Stephen Smith Charlie E. Meador Date Signed: Date Signed: _______________ ____________________ Deanna R. Smith Blake A. Meador Date Signed: Date Signed: Attachment to Partnership Regulations of Don's Building Supply LLP SCHEDULE A NAMES AND UNITS OWNED OF THE PARTNERS - - -------------------------------------- -------------------- ------------------ Name Units Owned - - -------------------------------------- -------------------- ------------------ Deanna R. Smith 2 - - -------------------------------------- -------------------- ------------------ Stephen and Victoria Smith 48 - - -------------------------------------- -------------------- ------------------ Charlie E. Meador 2 - - -------------------------------------- -------------------- ------------------ Blake A. Meador 2 - - -------------------------------------- -------------------- ------------------ Charlie A. Meador 66 - - -------------------------------------- -------------------- ------------------ TOTAL 120 - - -------------------------------------- -------------------- ------------------ - - -------------------------------------- -------------------- ------------------ EX-10.14 24 EMPLOYMENT AGREEMENT -- CLINTON PIKE EMPLOYMENT AGREEMENT This employment agreement (this "Agreement") is made and entered into on this the __ day of October, 1997 by and between JTM Industries, Inc. ("Employer"), a Texas corporation with its principal place of business located at 1000 Cobb Place Blvd., Bldg. 400, Kennesaw, Georgia 30144 and Clinton W. Pike, Sr. ("Employee"), an individual who resides at 725 Towne Green Boulevard, #1417, Kennesaw, Georgia 30144. WHEREAS, Employer desires to employ Employee and Employee desires to be employed by Employer on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth herein. 1. EMPLOYMENT Employer employs Employee and Employee accepts employment from Employer pursuant to the terms and conditions of this Agreement. 2. DUTIES. a. Subject to a change in title or responsibility at the discretion of Employer, that in no way materially decreases Employee's responsibilities, Employee is engaged by Employer as Executive Vice President in charge of Employer's currently existing: operations and sales west of the Mississippi River; non-traditional sales; and (iii) research and development. Employee shall perform such duties as are from time to time reasonably assigned to Employee by Employer consistent with Employee's position. b. Employee shall devote Employee's entire business time, attention and energies to the Employer's business and shall not at any time during the term of this Agreement be engaged in any other business activity which interferes or competes with Employer's business. 3. TERM, EXTENSION, TERMINATION. a. Except as hereinafter provided, the term of this Agreement shall commence on the date first above written and shall terminate on the fifth (5th) anniversary thereafter. b. The term of this Agreement shall be automatically extended for one year periods beginning on the fifth anniversary date of this Agreement and ending one year therefrom unless either party notifies the other of its desire to not renew the term of this Agreement by giving written notice of such desire to the other party in writing at any time within sixty (60) days prior to the expiration of the then current term. c. Either party may terminate this Agreement without cause upon thirty (30) days notice to other party. Provided however, that Employer's termination of this Agreement, other than as set forth below, shall not terminate Employer's obligation to make when due all compensation payments set forth in Paragraphs 4 through 6 of this Agreement for the balance of the original term for so long as Employee does not compete with the business of the Employer. d. Employer shall have the right to terminate this Agreement for cause at any time. If Employer terminates this Agreement for cause there shall be no obligation on the part of Employer to give prior notice to termination. For purposes of this Agreement, cause shall include: i. willful and/or unjustified or unexcused violations of express Employer policies, guidelines, rules or regulations, as set forth in Employer's Human Resources manual(s) as may be amended from time to time; ii. theft, misappropriation or embezzlement of property and/or funds of Employer and/or its subsidiaries as determined by an independent third party; iii. material breach of fiduciary duty owed to Employer for Employee's material personal benefit; iv. conviction of any felony; v. habitual intoxication or drug addiction at work or which affects work performance, provided, however, that habitual intoxication and/or drug addiction shall not constitute cause if Employee receives appropriate, in Employer's discretion, and successful treatment for either condition. e. Upon termination for cause, in accordance with this Agreement, and after the date of such termination, Employer shall have no further obligations or liability hereunder, or otherwise, to pay or provide salary, incentive compensation, and employee benefits. f. If the Employee's employment with Employer is terminated by Employee voluntarily, after the date of such termination Employer shall have no further obligation or liability to pay or provide salary, incentive, compensation, and other employee benefits, except as may be otherwise provided in Section 7, hereof. Provided however, that in such event, Employee shall abide by the terms of the Covenant Not To Compete set forth in Section 9, hereof, for so long as Employer continues to pay Employee the salary and insurance benefits paid, or provided to him, as of the date of the termination of this Agreement. g. If Employee is unable to perform his job for a period of six (6) consecutive months because of physical or mental disability, Employee's rights under this Agreement shall then terminate, and Employer shall have no further obligation or liability to pay or provide salary and employee benefits, except that Employee shall be entitled to such benefits as he may have as a participant in Employer's disability benefit plan, and except as may be otherwise provided in Section 7, hereof. h. In the event that Employee's employment by Employer is terminated because of Employee's death, after the date of death, Employer shall have no further obligation or liability to Employee or Employee's heirs for salary, incentive, compensation or benefits, except as may be otherwise provided in Section 7, hereof. 4. COMPENSATION. a. For the services to be rendered by Employee, and for Employee's covenant not to compete with Employer, as set forth herein, Employer shall pay Employee and Employee shall accept as full compensation for such services and agreement the compensation set forth herein. b. A base salary of $160,000.00 per year, payable in equal installments on the regular corporate payroll dates of Employer, subject to normal withholding and other applicable taxes and deductions. On each anniversary date of this Agreement, or such other time as the parties may agree, Employee shall receive a merit increase in accordance with existing written Employer policies and guidelines. c. An annual performance bonus up to 30% of Employee's current base salary consistent with Employer's policies. The performance bonus shall be paid in a lump sum within sixty (60) days of the end of the Employer's fiscal year or such other time as the parties may agree. The performance bonus will be based on objective performance (based on EBIT, defined as earnings before interest and taxes, within Employee's area of responsibility) and personal performance goals set annually by the Employer prior to each fiscal year. In the event Employer fails to set new performance goals prior to the sixtieth (60th) day following the start of a new fiscal year, then the previous fiscal year's performance goals shall control. d. Employee shall be entitled to an additional bonus if actual EBIT within Employee's area of responsibility ("actual EBIT") exceeds budgeted EBIT within Employee's area of responsibility ("budgeted EBIT"), as set forth below: i. If actual EBIT exceeds budgeted EBIT by 30% or more in any fiscal year, then Employee shall receive a bonus equal to 50% of base salary; ii. If actual EBIT exceeds budgeted EBIT by 50% or more in any fiscal year, then Employee shall receive a bonus equal to 100% of base salary; and iii. If actual EBIT exceeds budgeted EBIT by 75% or more in any fiscal year, then Employee shall receive a bonus equal to 200% of base salary. e. Employer shall pay Employee a signing bonus of $250,000.00 payable as follows: i. $100,000.00 within thirty (30) days of Employee's execution of this Agreement; ii. $100,000.00 on January 2, 1998; and iii. $50,000.00 on January 2, 1999. iv. If Employee voluntarily terminates his employment with Employer or is terminated for cause within one (1) year from the date of this Agreement, Employee shall repay to Employer the signing bonus paid by Employer. 5. ADDITIONAL BENEFITS. Employee shall be entitled to such other and further benefits as are made available to additional full-time employees of Employer in similar positions as Employee, subject to qualification periods, including, but not limited to: i. An automobile, automobile maintenance, medical and dental insurance, 401(k) or other retirement plan, life insurance, and company related expense reimbursement. All such benefits shall be in accordance with the applicable standards or policies in place for officers of Employer as of September 1, 1997; ii. Four (4) weeks annual paid vacation; iii. Twelve (12) days illness/disability leave in any continuous twelve (12) month period; iv. Payment by the Employer on behalf of the Employee of membership dues in such professional, civic or social organizations as the Employer and Employee may agree; and, v. Payment by the Employee of all costs incidental to the annual physical examination of Employee at a facility of Employee's choice. 6. NEW BUSINESS PROCUREMENT. In the event Employer enters into a contract with an entity after execution of this Agreement and the contract is a result of the efforts of Employee, then Employee shall be entitled to a bonus of one-half of one percent (.5%) of the value of the contract. For the purpose of this Agreement only, the value of the contract shall be determined as follows: The Employer shall determine the amount of the Employer's investment in the project within thirty (30) days of the contract execution and that amount shall be deemed the value of the contract. A bonus earned under this section shall be due and payable sixty (60) days after the date the contract is signed by Employer. 7. PHANTOM STOCK. a. Subject to the conditions and requirements set forth in this Agreement, Employer hereby grants to Employee a "phantom stock" right relating to one (1) share of common stock of the Employer which represents one percent (1%) of the outstanding shares of common stock of Employer as of the date of this Agreement, subject to adjustment as provided in (e), below. The Employee shall become vested in fifty percent (50%) of the phantom stock right on the date that is forty five (45) days after the execution of this Agreement, and shall become vested in the remaining fifty percent (50%) of the phantom stock right on the first anniversary of the execution of this Agreement, provided that Employee remains employed by Employer on each such date. The parties agree and acknowledge that the grant of the phantom stock right hereunder shall not confer upon the Employee the right to receive any actual equity of any kind in the Employer, and the Employee shall not be entitled to any privileges of ownership of a stockholder of the Employer in connection with the phantom stock right. Rather, such phantom stock right shall only represent the right of the Employee to receive a payment should either of the following events occur: i. the sale of all of the outstanding stock of the Employer, or its parent company, to a third party or entity not owning such stock as of the date of this Agreement. In such event, the Employee shall receive, within thirty (30) days of such sale, a lump sum cash payment equal to the fair market value (as determined in accordance with (f), below) of the shares of common stock to which this phantom stock right then relates, to the extent vested, determined as of the date of the sale; or ii. the completion of a public offering of the stock of the Employer, or its parent company. In such event, the Employee shall receive, within thirty (30 days of the completion of the public offering, a lump sum payment in cash or common stock of the Employer, as determined by the Employer, equal to the fair market value (as determined in accordance with (f), below) of the shares of common stock to which this phantom stock right then relates, to the extent vested, determined, as of the date of the public offering. b. If the Employee voluntarily terminates his employment with Employer, dies or becomes disabled (as set forth in paragraph 3. g.), his phantom stock right, to the extent vested, shall be valued as of the date that his employment is terminated, he dies or he becomes disabled. In any event, no lump sum distribution shall be made until the occurrence of the earlier of the events described in paragraph 7. a. i. or ii. c. The phantom stock right shall be immediately forfeited in the event that the Employee's employment with Employer is terminated for cause, as set forth in this Agreement, or if, following any termination of employment, the Employee violates any of the restrictive covenants contained in this Agreement. d. The Employee shall not have the power to sell, transfer, pledge, hypothecate, assign, mortgage, anticipate or otherwise encumber the phantom stock right. e. In the event of any reclassification, recapitalization, merger, consolidation, reorganization, stock dividend, stock split or reverse stock split, or any other similar change in corporate structure which, in the judgement of the Board of directors of the Employer (the "Board") affects the value of the shares of common stock of the Employer, the Board shall make equitable adjustments to the number and class of shares that relate to this phantom stock right. However, Employee acknowledges that his interest may be diluted through future issuances of shares of stock of the Employer. f. For purposes of this Section 7, fair market value of a share of common stock of the Employer shall be determined by the Board acting in good faith in its sole discretion; provided, however, that in the case of Section 7(a)(ii) where the public offering relates to the common stock of the Employer, the fair market value thereof shall be based on the public offering price. 8. RELOCATION ALLOTMENT. In the event Employer relocates Employee's work location from Marietta, Georgia to a location more than fifty (50) miles from Marietta, Georgia, then in such event Employer shall pay Employee $100,000.00 no later than thirty (30) days prior to the move, and upon such payment Employer shall have no further obligation to Employee for relocation expenses. 9. COVENANT NOT TO COMPETE. a. Employee agrees that during the term of this Agreement and for a period of one (1) year after the termination of this Agreement, he will not, either individually or in partnership or in conjunction with any person or persons, firm, association, syndicate, company, joint venture, corporation or other entity (of any kind whatsoever), and whether as principal, agent, shareholder, officer, employee, investor, or in any manner whatsoever, directly or indirectly carry on or be engaged in or be concerned with or interested in, or advise, lend money to, guarantee the debts or obligations of, or permit his name to be used or employed by any person or persons (including, without limitation, any corporation or other business enterprise) which at any time is or becomes engaged in or concerned with or interested in any business which is in any manner competitive with the business of Employer (the "Business") within North America. b. Without limiting the foregoing, Employee further agrees that Employee shall not directly or indirectly, for himself or any other individual or business entity: i. solicit Business for or from any person, company, or other entity which was a customer of Employer or which is now or hereafter becomes or could become a customer of the Employer or to which the Employer has submitted a bid, proposal or other offer to do business during the term of this Agreement and for the twelve (12) months period immediately preceding the effective date of this Agreement; or ii. use or release to any third party any trade secrets or other confidential information such as: customer lists, customer information, employee lists, employee information, intellectual property, and/or sensitive operational information that he was or may have been privileged to during his tenure with Employer, or its predecessors; or iii. induce or attempt to persuade any person now or hereafter employed by the Employer or any successor, affiliate or subsidiary thereof to terminate his employment relationship; or iv. advise any person or business entity not to do business with the Employer or any of their respective successors, affiliates, or subsidiaries; or v. make any disparaging, defamatory or negative comments, either orally or in writing, regarding or otherwise about the Employer, its officers, agents, employees or business operations. 10. INTELLECTUAL PROPERTY. Any intellectual property rights (i.e. patents, copyrights, trademarks, etc.), of whatsoever nature related in any manner to the business of Employer, arising during the term of this Agreement or which result from the efforts of Employer and/or Employee during the term of this Agreement shall be the sole property of Employer. 11. MISCELLANEOUS a. This Agreement may not be modified, changed, amended, or altered except in writing, signed by the Employee and Employer. b. All notice given or required to be given shall be in writing, sent by United States first-class certified or registered mail, postage prepaid, to Employee (or to Employee's spouse or estate upon Employee's death) at Employee's last known address, and to Employer at its principal offices. All such notices shall be effective when deposited in the mail in the manner specified in this paragraph. Either party by a notice in writing may change or designate the place for receipt of all such notices. c. No course of conduct between Employer and Employee and no delay or omission of Employer or Employee to exercise any right or power given under this Agreement shall: (i) impair the subsequent exercise of any right or power, or (ii) be construed to be a waiver of any default or any acquiescence in or consent to the curing of a default while any other default shall continue to exist, or be construed to be a waiver of such continuing default or of any other right or power that shall theretofore have arisen; and, every power and remedy granted by law and by this Agreement to any party hereto may be exercised from time to time, and as often as may be deemed expedient. All such rights and powers shall be cumulative to the fullest extent permitted by law. d. This Agreement shall be governed in all respects and be interpreted by and under the laws of the State of Georgia. e. Any waiver by any party of any provision or condition of this Agreement shall not be construed or deemed to be a waiver of any other provision or condition of this Agreement, nor a waiver of a subsequent breach of the same provision or condition, unless such waiver be expressed in writing by the party to be bound. f. Any notice to be given under this Agreement shall be in writing and addressed or delivered to the following: For Employee: For Employer: 725 Towne Green Boulevard, #1417 JTM Industries, Inc. Kennesaw, Georgia 30144 1000 Cobb Place Blvd., Bldg. 400 Kennesaw, GA 30144 Attn: President g. This Agreement constitutes the entire Agreement between Employee and Employer. All previous negotiations and representations not specifically incorporated herein are superseded and are rendered null and void upon execution of this Agreement. No modification of this Agreement shall be binding on Employee or Employer unless in writing and signed by all parties. h. Employee agrees that this Agreement is reasonable, that valid consideration has been received therefor and that each party affected by this Agreement has been responsible for drafting the same. Employee undertakes not to contest any action taken by Employer to enforce the same and this clause may be pleaded in complete estoppel of any defense; provided, however, that it is agreed between Employee and Employer that notwithstanding the foregoing, in the event that any court of competent jurisdiction should determine that any portion of the Covenant Not To Compete contained herein should require modification as being unreasonable, said Covenant Not To Compete shall be amended in accordance with the decision of such court of competent jurisdiction. It is acknowledged and agreed by Employee that the compensation and benefits (the "compensation") paid by Employer pursuant to this Agreement was based in part upon the entering into by Employee of the Covenant Not To Compete under the scope set out herein, and that should a court of competent jurisdiction reduce the scope of the Covenant Not To Compete contained herein as being unreasonable, it shall be open to such court to reduce the consideration paid and payable by Employer pursuant to this Agreement accordingly, and in such case the Employee shall forthwith pay to Employer the amount by which such consideration is reduced. i. In the event that Employee violates any of the provisions of this Agreement, Employer shall be entitled to maintain an action against Employee for damages, and since an action for damages could not adequately compensate Employer for any such violation, in addition to Employer's remedy at law, Employer shall also be entitled to injunctive relief. j. If any section, subsection, sentence or clause of this Agreement shall be adjudged illegal, invalid or unenforceable such illegality, invalidity, or unenforceability shall not affect the legality, validity or enforceability of the Agreement as a whole or of any section, subsection, sentence or clause hereof not so adjudged. IN WITNESS WHEREOF, intending to be legally bound hereby the parties hereto have duly executed this Agreement as of the day and year above written. JTM INDUSTRIES, INC. CLINTON W. PIKE, SR. _____________________ _________________________ By:_____________ Its:____________ EX-10.14(A) 25 AMENDMENT TO MR. PIKE'S EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment To Employment Agreement (this "Agreement") is made and entered into on this the 14th day of October, 1998 by and between ISG Resources, Inc., f/k/a JTM Industries, Inc. ("Employer"), a Texas corporation with its principal place of business located at 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111 and Clinton W. Pike, Sr. ("Employee"), an individual who resides at 10777 Richmond Avenue, Apartment 708, Houston, Texas 77042. WHEREAS, Employer and Employee entered into an Employment Agreement in October, 1997 (the "Employment Agreement"); WHEREAS Employer and Employee desire to amend the Employment Agreement as set forth herein, and to agree to certain other employment related issues. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth herein. 1. The parties agree that the date of the Employment Agreement is October 23, 1997. 2. The parties agree that the Employment Agreement is hereby amended as follows: a. Paragraph 2.a. of the Employment Agreement is amended to provide that: "a. Subject to a change in title or responsibility at the discretion of Employer, that in no way materially decreases Employee's responsibilities, Employee is engaged by Employer as Executive Vice President. Employee shall perform such duties as are from time to time reasonably assigned to Employee by Employer consistent with Employee's position." b. Paragraphs 4.c., 4.d. and 4.e., and all subparagraphs therein, of the Employment Agreement are amended by deleting them in their entirety and inserting the following in their place: "c. For the four month period ending December 31, 1998, Employee shall be paid a bonus of $15,000.00 which will be paid to Employee on January 2, 1999. d. For the 1999 fiscal year period, Employee shall be eligible for a performance bonus based on overall Employer performance and the performance of the Manufactured Goods Division, as set forth below: (1) If the Employer's actual corporate EBITDA (earnings before interest, taxes, depreciation and amortization) equals or exceeds ninety percent (90%) of its budgeted EBITDA, but is less than one hundred percent (100%) of its budgeted EBITDA, then Employee shall receive a bonus as follows: Actual Payout % EBITDA 90% 32% of 15% of his current salary 91% 36% of 15% of his current salary 92% 41% of 15% of his current salary 93% 46% of 15% of his current salary 94% 52% of 15% of his current salary 95% 58% of 15% of his current salary 96% 65% of 15% of his current salary 97% 73% of 15% of his current salary 98% 81% of 15% of his current salary 99% 90% of 15% of his current salary (2) If the Employer's actual corporate EBITDA equals or exceeds its budgeted EBITDA, then Employee shall receive a bonus as follows: (a) If actual corporate EBITDA equals or exceeds budgeted EBITDA, then Employee shall receive a bonus in the amount of 15% of his then current base salary; (b) If actual corporate EBITDA equals or exceeds budgeted EBITDA by 30%, but less than 50%, then Employee shall receive a bonus equal to 25% of his then current base salary; (c) If actual corporate EBITDA equals or exceeds budgeted EBITDA by 50% but less than 75%, then Employee shall receive a bonus equal to 50% of his then current base salary; or (d) If actual corporate EBITDA equals or exceeds budgeted EBITDA by 75% or more, then Employee shall receive a bonus equal to 100% of his then current base salary. (3) If the actual EBITDA of the Manufactured Goods Division equals or exceeds ninety percent (90%) of its budgeted EBITDA, but is less than one hundred percent (100%) of its budgeted EBITDA, then Employee shall receive a bonus as follows: Actual EBITDA Payout % 90% 32% of 15% of his current salary 91% 36% of 15% of his current salary 92% 41% of 15% of his current salary 93% 46% of 15% of his current salary 94% 52% of 15% of his current salary 95% 58% of 15% of his current salary 96% 65% of 15% of his current salary 97% 73% of 15% of his current salary 98% 81% of 15% of his current salary 99% 90% of 15% of his current salary (4) If the actual EBITDA of the Manufactured Goods Division equals or exceeds its budgeted EBITDA, then Employee shall receive a bonus as follows: (a) If actual EBITDA of the Manufactured Goods Division equals or exceeds budgeted EBITDA, then Employee shall receive a bonus in the amount of 15% of his then current his then current base salary; (b) If actual EBITDA of the Manufactured Goods Division equals or exceeds budgeted EBITDA by 30%, but less than 50%, then Employee shall receive a bonus equal to 25% of his then current base salary; (c) If actual EBITDA of the Manufactured Goods Division equals or exceeds budgeted EBITDA by 50% but less than 75%, then Employee shall receive a bonus equal to 50% of his then current base salary; or (d) If actual EBITDA of the Manufactured Goods Division equals or exceeds budgeted EBITDA by 75% or more, then Employee shall receive a bonus equal to 100% of his then current base salary." 3. For the consideration set forth herein, Paragraph 6 of the Employment Agreement is amended by deleting it in its entirety. 4. Employee's bonus for the period ending August 31, 1998 will be equal to 44% of his existing base salary of $160,000.00. 5. The parties agree that effective October 14, 1998, pursuant to Section 4.b. of the Employment Agreement, Employee's base annual salary shall be increased to $166,000.00. 6. Pursuant to the provisions of section 4.e.iii. of the Employment Agreement (as it existed prior to this Agreement), Employee shall be paid the sum of $50,000.00 on January 2, 1999. 7. Pursuant to the provisions of section 6 of the Employment Agreement (as it existed prior to this Agreement), Employee shall be paid the sum of $10,000.00 for his efforts in securing the award of the MidAmerica contract. 8. Employee shall be paid the relocation allotment of $100,000.00 pursuant to Section 8 of the Employment Agreement. Employee, who has relocated to Houston, Texas, has the option of remaining in Houston, Texas, or of relocating to Salt Lake City, Utah. If Employee chooses to relocate to Salt Lake City, Utah, he shall bear all expenses related to the relocation, and shall be entitled to no further compensation from Employer. 9. The remaining provisions of the Employment Agreement shall remain in full force and effect. Reference is craved to the Employment Agreement for specific terms and conditions thereof which are incorporated herein by reference, except as amended by this Agreement. IN WITNESS WHEREOF, intending to be legally bound hereby the parties hereto have duly executed this Agreement as of the day and year above written. ISG RESOURCES, INC. CLINTON W. PIKE, SR. ____________________ ____________________ By:_______________ Its:______________ EX-10.14(B) 26 SECOND AMENDMENT TO MR. PIKE'S EMPLOYMENT AGREEMEN SECOND AMENDMENT TO EMPLOYMENT AGREEMENT This Second Amendment To Employment Agreement (this "Agreement") is made and entered into on this the ___ day of August, 1999 by and between ISG Resources, Inc. ("Employer"), a Utah corporation with its principal place of business located at 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111 and Clinton W. Pike, Sr. ("Employee"), an individual who resides at 10777 Richmond Avenue, Apartment 708, Houston, Texas 77042. WHEREAS, Employer and Employee entered into an Employment Agreement in October, 1997 (the "Employment Agreement") and an Amendment To Employment Agreement on October 14, 1998 (the "First Amendment"); WHEREAS Employer and Employee desire to amend the Employment Agreement again as set forth herein. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth herein. 1. The parties agree that the Employment Agreement is hereby amended as follows: a. Section 7 of the Employment Agreement is amended by adding the following section: "g. If the Employee dies, his phantom stock right, to the extent vested and subject to the other provisions of the Employment Agreement (as amended by the First Amendment) and any other applicable laws, shall pass to his wife, Sandi S. Pike. 2. The remaining provisions of the Employment Agreement, as amended by the First Amendment, shall remain in full force and effect. Reference is craved to the Employment Agreement and the First Amendment for specific terms and conditions thereof which are incorporated herein by reference, except as amended by this Agreement. IN WITNESS WHEREOF, intending to be legally bound hereby the parties hereto have duly executed this Agreement as of the day and year above written. ISG RESOURCES, INC. CLINTON W. PIKE, SR. ___________________ _____________________ By:________________ Its________________ EX-10.15 27 EMPLOYMENT AGREEMENT -- R. STEVE CREAMER EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"), by and between JTM Industries, Inc. (the "Company") and R. Stephen Creamer (the "Executive"). WHEREAS, simultaneous with and effective upon the acquisition of the company by Industrial Quality Services, Inc., a Delaware corporation from Laidlaw, Inc., the Company desires to employ the Executive as Chief Executive Officer of the Company; and WHEREAS, the Executive desire to be retained in such capacity on the terms and conditions set forth herein, effective upon the consummation of such acquisition (the "Commencement Date"), it being understood and acknowledged that if the consummation of the acquisition shall not occur, this Agreement shall have no force or effect. NOW, THEREFORE, in consideration of the premises and the mutual agreements made herein, the Company and the Executive agree as follows: 1. No Conflict. The Executive represents to the Company that the execution, delivery and performance by the Executive of this Agreement do not and shall not conflict with or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) default under any contract, agreement or understanding, whether oral or written, to which the Executive is a party or of which the Executive is or should be aware. 2. Employment; Duties. The Company shall employ the Executive as Chief Executive Officer for the "Employment Period" as defined in Section 3. In addition, the Company shall use its best efforts to cause the Executive to be elected Chairman of the Board of Directors of the Company (the "Board") during the Employment Term. The Executive, in his capacity as Chief Executive Officer, shall have such duties, responsibilities and authority normally incident to such office. The precise duties, responsibilities and authority of the Executive may be expanded, limited or modified, at any time and from time to time, at the discretion of the Board. During the Employment Period, the Executive shall devote all necessary working time, attention, knowledge and experience and give his diligent effort, skill and abilities, to promote the business and interests of the Company. Subject to Section 8, the Executive may serve as an officer or director of make investments in, or otherwise participate in, other entities, provided that such service is disclosed in advance to the Board. 3. Employment Period. This Agreement shall have a term of three years, commencing as of the Commencement Date and ending on the third anniversary of the Commencement Date (the "Initial Period"), unless sooner terminated in accordance with the provisions of Section 9. On the expiration of the Initial Period and on each yearly anniversary thereof, this Agreement shall automatically renew for an additional one-year period, unless sooner terminated in accordance with the provisions of Section 9, unless the Company or the Executive notifies the other in writing of its intention not to renew this Agreement not less than sixty (60) days prior to such expiration date or anniversary, as the case may be. The term of this Agreement, as in effect from time to time, is referred to herein as the "Employment Period." 4. Compensation and Benefits. a. Base Compensation. The Executive shall be paid an aggregate base salary (the "Base Salary") at the rate of $150,000 per annum, less statutory deductions and withholdings. The Base Salary shall be payable in a manner consistent with the normal payroll practices of the Company as in effect from time to time. The Base Salary shall be reviewed annually by the Compensation Committee of the Board (the "Committee"). b. Annual Bonus. In addition to the Base Salary, the Executive may be entitled to receive a discretionary annual bonus for each year during the Employment Period based upon such factors as shall be established by the Committee, at the sole discretion of the Committee. c. Employee Benefits. The Executive shall be entitled to participate in each and every employee benefit and group insurance plan and program provided by the Company for its officers and employees generally, in accordance with the terms of the applicable plan documents as they may be amended form time to time, substantially consistent with the employee benefits being provided to the officers and/or employees of the Company as of the date immediately preceding the effectiveness of this Employment Agreement. d. Business Expense Reimbursement. The Company shall reimburse the Executive for all reasonable and necessary business and travel expenses that the Executive incurs in connection with the Executive's performance of services for the Company hereunder, in accordance with the reimbursement policies established by the Company from time to time (which, the parties hereto acknowledge, shall be consistent with the policies of the Company as they relate to business expense reimbursement as of thee date immediately preceding the effectiveness of this Employment Agreement), and shall reimburse the Executive for the reasonable expenses associated with the maintenance of an office in Utah, provided that such reimbursement shall be limited to $3,000 per month. 5. Confidentiality. The Executive recognizes that it is in the legitimate business interest of the Company to restrict his disclosure or use of Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates for any purpose other than in connection with his performance of his duties to the Company, and to limit any potential appropriation of such Trade Secrets and Confidential Information by the Executive. The Executive therefore agrees that both during and at all times after the Employment Period, shall be maintained as confidential all Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates heretofore or in the future obtained by the Executive. The terms "Trade Secrets" and/or "Confidential Information" means matters of a confidential technical or business nature that have been maintained as confidential or the disclosure of which could likely have an adverse effect upon the interests of the Company or its direct or indirect subsidiaries, parents or affiliates. 6. Return of Documents and Property. Upon the termination of the Executive's employment with the Company, or at any time upon the request of the Company, the Executive (or his heirs or personal representatives) shall deliver to the Company (a) all documents and materials (including, without limitation, computer files) containing Trade Secrets or other Confidential Information relating to the business and affairs of the Company and its direct and indirect subsidiaries, parents or affiliates, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to the Company or its direct or indirect subsidiaries, parents or affiliates, which in either case are in the possession or under the control of the Executive (or his heirs or personal representatives). 7. Discoveries and Works. All Discoveries and Works made or conceived by the Executive during his employment by the Company, whether during the Employment Period or at any time prior thereto, whether or not on the property or premises of the Company, jointly or with others, which relate to the activities of the Executive with the company or its direct or indirect subsidiaries, parents or affiliates shall be owned by the Company or its direct or indirect subsidiaries, parents or affiliates. The term "Discoveries and Works" includes, by way of example but without limitation, Trade Secrets and other Confidential information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service mark registrations and applications, trade names, copyrights and copyright registrations and applications. The Executive shall (a) promptly notify, make full disclosure to, and execute and deliver any documents requested by, the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company or its direct or indirect subsidiaries, parents or affiliates, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by the Company or its direct or indirect subsidiaries, parents or affiliates, (c) assist the Company or its direct or indirect subsidiaries, parents or affiliates in obtaining or maintaining for itself at its own expense United States and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with the Company or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for the Company or its direct or indirect subsidiaries, parents or affiliates and to protect the title of the Company or its direct or indirect subsidiaries, parents or affiliates thereto, including but not limited to assignments of such patents and other rights. The Executive acknowledges that all Discoveries and Works shall be deemed "works made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss. 101. 8. Noncompetition and Nonsolicitation. a. Restrictive Covenant. The Executive agrees that he shall, during the Restricted Period (as defined below), refrain from, either alone or in conjunction with any other Person, or directly or indirectly through his present or future affiliates or Associates (as defined below): (i) (except pursuant to his duties performed for the Company during the Employment Period) directly or indirectly, owning, managing, operating, joining, or having a financial interest, in controlling or participating in the ownership, management, operation or control of, or being employed as an employee, agent or the Executive, or in any other individual or representative capacity whatsoever, or using or permitting his name to be used in connection with, or lending assistance (financial or otherwise) to or being otherwise connected in any manner with any business or enterprise engaged in the Restricted Business (as defined below) within any portion of the United States whether or not such business is physically located within the United States); _provided_,_however_, that nothing contained herein shall be construed as preventing the Executive from engaging in the ownership, purchase and/or sale of landfills; and (ii) soliciting, inducing, or attempting to influence any individual who the Executive, after due inquiry, knows is an employee of the Company or any of its subsidiaries, parents or affiliates to terminate his or her employment relationship with the Company or such subsidiary or affiliates, or to become employed by the Executive or any affiliate or associate of the Executive or any person by which the Executive is employed, or interfering in any other way the employment, or other relationship, of the Company or such subsidiary, parent or affiliate and any employee thereof; provided, however, that this clause (ii) shall not apply as it may relate to Jean I. Everest. b. Definitions. As used herein: (i) "Associate" means with respect to any person, any corporation or other business organization of which such person is an officer, employee or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar capacity and any relative or spouse of such person, or any relative of such spouse; (ii) "Cause" shall mean (i) the willful and continued failure of the Executive to follow the lawful directions of the Board, (ii) any act of fraud or dishonesty, misappropriation or embezzlement, or willful misconduct in connection with the performance of the Executive's duties hereunder, (iii) a material breach by the Executive of any material provision hereof or of any material contractual or material legal duty to the company (including, but not limited to, the unauthorized disclosure of Trade Secrets or other Confidential Information), after written notice thereof from the Board and a 30-day opportunity to cure in the event that such breach is curable, (iv) the conviction of the Executive of a felony or other crime or offense involving moral turpitude (including pleading guilty or no contest to such a crime or offense or a lesser charge which results from plea bargaining), whether or not committed in connection with the business of the Company, (v) the Executive's alcohol or substance abuse or (vi) a material breach by the Executive of the provisions of any stockholders agreement or other agreement relating to the Executive's acquisition of an equity interest in the Company to which the Executive may become a party on or after the Commencement Date after written notice thereof from the Board and a 30-day opportunity to cure in the event that such breach is curable. (iii) "Good Reason" shall mean a material breach by the Company of any material provision hereof (after written notice thereof from the Executive and a 30-day opportunity to cure in the event that such breach is curable); a transfer of the Executive's customary place of employment to a location more than 40 milers from Salt Lake City, Utah; or a material change in the nature of the Executive's duties, title or responsibility without the consent of the Executive. (iv) "Restricted Business" means the provision of coal by-product ("CCB") management services, such as collection, removal, disposal and marketing of fly-ash and other CCBs. (v) "Restricted Period" means the Employment Period, and the period thereafter equal to (i) three years in the case of a termination of the Employment Period by the Company with Cause or by the Executive without Good Reason, or (ii) two years in the case of a termination of the Employment Period for any other reason (including by reason of expiration of the term of the Agreement). c. Reasonableness of Restrictions. The Executive acknowledges and agrees that the restrictions set forth in this Section 8, and, specifically, the period of time designated as the Restricted Period and geographical area specified hereunder, are reasonable in view of the nature of the business in which the Company is engaged, and the Executive's particular knowledge of the Company's and its subsidiaries, parents and affiliates' respective businesses, and the Executive hereby agrees not to challenge in any way, or to otherwise raise a defense to, the enforceability of any of the restrictions set forth in this Section 8 during the Restricted Period in any manner whatsoever, including but not limited to challenging the reasonableness of the restrictions set forth herein. d. Enforceability of Restrictive Covenant. It is the understanding of the Executive and the Company that the provisions of this Section 8 be enforced to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions of this Section shall not render unenforceable, or repair, the remainder of the provisions of this Section 8, or of this Agreement. 9. Termination. The Company or the Executive may terminate this Agreement, with or without cause, with or without prior notice. In the event the Company terminates this Agreement or the Executive resigns from employment, the Executive's rights and the obligations of the Company hereunder shall cease as of the effective date of the termination, including, without limitation, the right to receive the Base Salary, any Bonus Award and all other compensation or benefits provided for in this Agreement, and the Executive hereby acknowledges and agrees that no severance or similar or other damages or payments of any kind whatsoever shall be payable to the Executive due to, in connection with, or in the event of, the Executive's termination or resignation from employment for any reason. 10. Enforcement. a. Equitable Relief. The Executive agrees that the remedies at law for any breach or threat of breach by him of any of the provisions of Section 5, 6, 7 and 8 hereof will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches of the provisions of Sections 5, 6, 7, and 8 hereof and to enforce specifically the terms and provisions thereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing, in addition, any other remedies available to the Company for such breach or threatened breach. A waiver by the Company of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provision of this Agreement or of any subsequent breach by the Executive. b. Enforceability. It is expressly understood and agreed that although the Company and the Executive consider the restrictions contained in Sections 5, 6, 7 and 8 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in such Sections 5, 6, 7 and 8 is an unenforceable restriction on the Executive's activities, the provisions of such Sections 5, 6, 7 and 8 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the court referred to above finds that any restriction contained in Sections 5, 6, 7 and 8 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. The provisions of Sections 5, 6, 7 and 8 shall in no respect limit or otherwise affect the Executive's obligations under other agreements with the Company. 11. Assignment. The rights and obligations of the parties under this Agreement shall not be assignable by either the Company or the Executive, provided that this Agreement is assignable by the Company to any affiliate of the Company, to any successor in interest to any business of the Company, or to a purchaser of all or substantially all of the assets of any business of the Company. 12. Notices. Any notice required or permitted under this Agreement shall be deemed to have been effectively made or given if in writing and personally delivered, mailed properly addressed in a sealed envelope, postage prepaid by certified or registered mail, delivered by a reputable overnight delivery service or sent by facsimile. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to: R. Stephen Creamer ECDC Environmental 127 South 500 East Suite 675 Salt Lake City, Utah 84102 Fax: (801) 536-6111 with a copy to: Parsons Behle & Latimer One Utah Center 201 South Main Street Suite 1800 Salt Lake City, Utah 84111 Fax: (801) 536-6111 Attention: J. Gordon Hansen, Esq. and properly addressed to the Company if addressed to: JTM Industries, Inc. c/o Citicorp Venture Capital, Ltd. 399 Park Avenue New York, New York 10043 Attention: Joseph Silvestri Facsimile No.: (212) 888-2940 with a copy to: Morgan Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 Attention: Philip Werner, Esq. 13. Severability. Wherever there is any conflict between any provision of this Agreement and any statute, law, regulation or judicial precedent, the latter shall prevail, but in such event the provisions of this Agreement thus affected shall be curtailed and limited only to the extent necessary to bring them within the requirements of the law. In the event that any provision of this Agreement shall be held by a court of proper jurisdiction to be indefinite, invalid, void or voidable or otherwise unenforceable, the balance of the Agreement shall continue in full force and effect unless such construction would clearly be contrary to the intentions of the parties or would result in an unconscionable injustice. 14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 15. Effect of Termination. Notwithstanding anything to the contrary contained herein, this Agreement or the Executive's employment is terminated pursuant to Section 9 or otherwise expires, the provisions of Sections 5, 6, 7, 8, 9, 10, 12, 13, 15, 16, 17 and 18 shall continue in full force and effect. 16. Disputes. Except as necessary to obtain the relief specified in Section 10(a), any claim or controversy arising out of or relating to this Agreement, or any breach thereof, or otherwise arising out of or relating to the Executive's employment, compensation and benefits with the Company or the termination thereof, shall be settled by arbitration in Salt Lake City, Utah in accordance with the rules established by the American Arbitration Association, _provided,_however_, that the parties agree that (i) the arbitrator shall be prohibited from disregarding, adding to or modifying the terms of this Agreement; and (ii) the arbitrator shall be required to follow established principles of substantive law and the law governing burdens of proof. Any claim or controversy not submitted to arbitration in accordance with this Section 16 shall be considered waived and, thereafter, no arbitration panel or tribunal or court shall have the power to rule or make any award on any such claim or controversy. The award rendered in any arbitration proceeding held under this Section 16 shall be final and binding, and judgment upon the award may be entered in any court having jurisdiction thereof. 17. Miscellaneous; Choice of Law. This Agreement constitutes the entire agreement, and supersedes all prior agreements, of the parties hereto relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. 18. Indemnification. In the event the Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that the Executive is or was an officer or director of the Company or any subsidiary of the Company, the Executive shall be indemnified by the Company, and the Company shall pay the Executive's related expenses when and as incurred, all to the fullest extent permitted by law, provided, however, that no indemnification shall be made hereunder with respect to payments and expenses incurred in relation to (i) matters as to which the Executive shall not have acted in good faith and in the reasonable belief that his action was in the best interest of the Company, or (iii) matters as to which are otherwise prohibited by law. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. JTM INDUSTRIES, INC. /s/ J. I. Everest --------------------- By: J.I. Everest II Title: Treasurer & CFO EXECUTIVE /s/ R. Stephen Creamer ------------------------ R. Stephen Creamer EX-10.16 28 EMPLOYMENT AGREEMENT -- RAUL A. DEJU EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"), by and between JTM Industries, Inc. (the "Company") and Raul Deju (the "Executive"). WHEREAS, simultaneous with and effective upon the acquisition of the Company by Industrial Quality Services, Inc., a Delaware corporation from Laidlaw, Inc., the Company desires to employ the Executive as President and Chief Operating Officer of the Company; and WHEREAS, the Executive desires to be retained in such capacity on the terms and conditions set forth herein, effective upon the consummation of such acquisition (the "Commencement Date"), it being understood and acknowledged that if the consummation of the acquisition shall not occur, this Agreement shall have no force or effect. NOW, THEREFORE, in consideration of the premises and the mutual agreements made herein, the Company and the Executive agree as follows: 1. No Conflict. The Executive represents to the Company that the execution, delivery and performance by the Executive of this Agreement do not and shall not conflict with or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which the Executive is a party or of which the Executive is or should be aware. 2. Employment; Duties. The Company shall employ the Executive as President and Chief Operating Officer for the "Employment Period" as defined in Section 3. The Executive, in his capacity as President and Chief Operating Officer, shall have such duties, responsibilities and authority normally incident to such office. The precise duties, responsibilities and authority of the Executive may be expanded, limited or modified, at any time and from time to time, at the discretion of the Board of Directors of the Company (the "Board"). During the Employment Period, the Executive shall render his business services primarily in the performance of his duties hereunder, and the Executive agrees that during the term of his employment hereunder, he shall devote substantially all of his working time, attention, knowledge and experience and give his best effort, skill and abilities, to promote the business and interests of the Company. Other than as set forth on Schedule A hereto, the Executive may not serve as an officer or director of, make investments in, or otherwise participate in, any other entity without the prior written consent of the Board; provided, however, that the foregoing shall not prevent the Executive from acquiring, directly or indirectly, solely as an investment, not more than five percent (5%) of any class of securities of any entity that are registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, including the regulations issued thereunder. 3. Employment Period. This Agreement shall have a term of three years, commencing as of the Commencement Date and ending on the third anniversary of the Commencement Date (the "Initial Period"), unless sooner terminated in accordance with the provisions of Section 9. On the expiration of the Initial Period and on each yearly anniversary thereof, this Agreement shall automatically renew for an additional one-year period, unless sooner terminated in accordance with the provisions of Section 9, unless the Company of the Executive notifies the other in writing of its intention not to renew this Agreement not less than sixty (60) days prior to such expiration date or anniversary, as the case may be. The terms of this Agreement, as in effect from time to time, is referred to herein as the "Employment Period." 4. Compensation and Benefits. (a) Base Compensation. The Executive shall be paid a base salary (the "Base Salary") at the rate of $140,000 per annum, less statutory deductions and withholdings. The Base Salary shall be payable in a manner consistent with the normal payroll practices of the Company as in effect from time to time. The Base Salary shall be reviewed annually by the Compensation Committee of the Board (the "Committee"). (b) Annual Bonus. In addition to the Base Salary, the Executive may be entitled to receive a discretionary annual bonus for each year during the Employment Period based upon such factors as shall be established by the Committee, at the sole discretion of the Committee. (c) Employee Benefits. The Executive shall be entitled to participate in each and every employee benefit and group insurance plan and program provided by the Company for its officers and employees generally, in accordance with the terms of the applicable plan documents as they may be amended from time to time, substantially consistent with the employee benefits being provided to the officers and/or employees of the Company as of the date immediately preceding the effectiveness of this Employment Agreement. (d) Business Expense Reimbursement. The Company shall reimburse the Executive for all reasonable and necessary business and travel expenses that the Executive incurs in connection with the Executive's performance of services for the Company hereunder, in accordance with the reimbursement policies established by the Company from time to time (which, the parties hereto acknowledge, shall be consistent with the policies of the Company as they relate to business expense reimbursement as of the date immediately preceding the effectiveness of this Employment Agreement), and shall reimburse the Executive for the reasonable expenses associated with the maintenance of an office in California, provided that reimbursement for such office shall be limited to $3,000 per month. 5. Confidentiality. The Executive recognizes that it is in the legitimate business interest of the Company to restrict his disclosure or use of Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates for any purpose other than in connection with his performance of his duties to the Company, and to limit any potential appropriation of such Trade Secrets and Confidential Information by the Executive. The Executive therefore agrees that both during and at all times after the Employment Period, he shall maintain as confidential all Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates heretofore or in the future obtained by the Executive. The terms "Trade Secrets" and/or "Confidential Information" means matters protected by the Uniform Trade Secrets Act as stated in California Civil Code Sections 3426 through 3426.10 and as interpreted under California law. Confidential Information includes matters of a significant technical or business nature that have been maintained as confidential or the disclosure of which could likely have an adverse effect upon the interests of the Company or its direct or indirect subsidiaries, parents or affiliates. 6. Return of Documents and Property. Upon the termination of the Executive's employment with the Company, or at nay time upon the request of the Company, the Executive (or his heirs or personal representatives) shall deliver to the Company (a) all documents and materials (including, without limitation, computer files) containing Trade Secrets or other Confidential Information relating to the business and affairs of the Company and its direct and indirect subsidiaries, parents or affiliates, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to the Company or its direct or indirect subsidiaries, parents or affiliates, which in either case are in the possession or under the control of the Executive (or his heirs or personal representatives). 7. Discoveries and Works. All Discoveries and Works made or conceived by the Executive during his employment by the Company, whether during the Employment Period or at any time prior thereto, whether or not on the property or premises of the Company, jointly or with others, which relate to the activities of the Executive with the Company or its direct or indirect subsidiaries, parents or affiliates shall be owned by the Company or its direct or indirect subsidiaries, parents or affiliates. The term "Discoveries and Works" includes, by way of example but without limitation, Trade Secrets and other Confidential Information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service mark registrations and applications, trade names, copyrights and copyright registrations and applications. The Executive shall (a) promptly notify, make full disclosure to, and execute and deliver any documents requested by, the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company or its direct or indirect subsidiaries, parents or affiliates, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by the Company or its direct or indirect subsidiaries, parents or affiliates, (c) assist the Company or its direct or indirect subsidiaries, parents or affiliates in obtaining or maintaining for itself at its own expense United States and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with the Company or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for the Company or its direct or indirect subsidiaries, parents or affiliates thereto, including but not limited to assignments of such patents and other rights. The Executive acknowledges that all discoveries and Works shall be deemed "works made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss. 101. 8. Noncompetition and Nonsolicitation. (a) Restrictive Covenant. The Executive agrees that he shall, during the Restricted Period (as defined below), refrain from, either alone or in conjunction with any other Person, or directly or indirectly through his present or future affiliates or Associates (as defined below): (i) (except pursuant to his duties performed for the Company during the Employment Period) directly or indirectly, owning, managing, operating, joining, or having a financial interest in, controlling of, or being employed as an employee, agent or the Executive, or in any other individual or representative capacity whatsoever, or using or permitting his name to be used in connection with, or lending assistance (financial or otherwise) to or being otherwise connected in any manner with any business or enterprise engaged in the Restricted Business (as defined below) within any portion of the United States (whether or not such business is physically located within the United States); provided, however, that nothing contained herein shall be construed as preventing the Executive from engaging in the ownership, purchase and/or sale of landfills; and (ii) soliciting, inducing, entering into any agreement with, or attempting to influence any individual who the Executive, after due inquiry, knows is an employee of the Company or any of its subsidiaries, parents or affiliates during the Restricted Period to terminate his or her employment relationship with the Company or such subsidiary or affiliate, or to become employed by the Executive or any affiliate or associate of the Executive or any person by which the Executive is employed, or interfering in any other way with the employment, or other relationship, of the Company or such subsidiary, parent or affiliate and any employee thereof. (b) Definitions. As used herein: (i) "Associate" means with respect to any person, any corporation or other business organization of which such person is an officer, employee or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar capacity and any spouse of such person; (ii) "Cause" shall mean (i) the willful and continued failure of the Executive to follow the lawful directions of the Board, (ii) any act of fraud or dishonesty, misappropriation or embezzlement, or willful and material misconduct in connection with the performance of the Executive's duties hereunder, (iii) a material breach by the Executive of any material provision hereof or of any material contractual or material legal duty to the Company (including, but not limited to, the unauthorized disclosure of Trade Secrets or other Confidential Information), after written notice thereof from the Board and a 30-day opportunity to cure in the event that such breach is curable, (iv) the conviction of the Executive of a felony or other crime or offense involving dishonest (including pleading guilty or no contest to such a crime or offense or a lesser charge which results from plea bargaining), whether or not committed in connection with the business of the Company, (v) the Executive's alcohol or substance abuse or (vi) a material breach by the Executive of the provisions of any stockholders agreement or other agreement relating to the Executive's acquisition of an equity interest in the Company to which the Executive may become a party on or after the Commencement Date after written notice thereof from the Board and a 30-day opportunity to cure in the event that such breach is curable. (iii) "Good Reason" shall mean a material breach by the Company of any material provision hereof, after written notice thereof from the Executive and a 30-day opportunity to cure in the event that such breach is curable; a transfer of the Executive's customary place of employment to a location that could not be accommodated from a California office; or a material change in the nature of the Executive's duties, title or responsibility without the consent of the Executive. (iv) "Restricted Business" means the provision of coal by-product ("CCB") management services, such as collection, removal disposal and marketing of fly-ash and other CCBs. (v) "Restricted Period" means the Employment Period, and the period thereafter equal to (i) three years in the case of a termination of the Employment Period by the Company with Cause or by the Executive without Good Reason, or (ii) two years in the case of a termination of the Employment Period for any other reason (including by reason of expiration of the term of the Agreement). (b) Reasonableness of Restrictions. The Executive acknowledges and agrees that the restrictions set forth in this Section 8, and, specifically, the period of time designated as the Restricted Period and geographical area specified hereunder, are reasonable in view of the nature of the business in which the Company is engaged, and the Executive's particular knowledge of the Company's an its subsidiaries, parents and affiliates' respective businesses, and the Executive hereby agrees not to challenge in any way, or to otherwise raise a defense to, the enforceability of any of the restrictions set forth in this Section 8 during the Restricted Period in any manner whatsoever, including but not limited to challenging the reasonableness of the restrictions set forth herein. (c) Enforceability of Restrictive Covenant. It is the intention of the Executive and the Company that the provisions of this Section 8 be enforce to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions of this Section shall not render unenforceable, or impair, the remainder of the provisions of this Section 8, or of this Agreement. 9. Termination. (a) General. The Company or the Executive may terminate this Agreement, with or without cause, with or without prior notice. Except as provided in Section 9(b), in the event the Company terminates this Agreement or the Executive resigns from employment, the Executive's rights and the obligations of the Company hereunder shall cease as of the effective date of the termination, including, without limitation, the right to receive the Base Salary, any Bonus Award and all other compensation or benefits provided for in this Agreement, and the Executive hereby acknowledges and agrees that, except for salary, bonuses and employee benefits accrued and/or vested but unpaid as of the date of termination (the "Accrued Obligations"), no severance or similar or other damages or payments of any kind whatsoever shall be payable to the Executive due to, in connection with, or in the event of, the Executive's termination or resignation from employment for any reason. (b) Termination Without Cause; Resignation for Good Reason. In the event the Company terminates this Agreement without Cause, or the Executive resigns for Good Reason, the Executive shall be entitled to continue to receive payments of his Base Salary for the balance of the ten-existing Employment Period, payable at such times and in such amounts as if this Agreement were not terminated; provided, however, that the period during which the Executive shall be entitled to continue to receive payments of his Base Salary hereunder shall in no event exceed eighteen (18) months. Other than as set in the preceding sentence, the Executive's rights and the obligations of the Company hereunder shall cease as of the effective date of such termination, including, without limitation, the right to receive the Base Salary, any Bonus Award and all other compensation or benefits provided for in this Agreement, and the Executive hereby acknowledges and agrees that, except for the Accrued Obligations, no severance or similar or other damages or payments of any kind whatsoever shall be payable to the Executive due to, in connection with, or in the event of, such termination or resignation. Notwithstanding the foregoing, such continuation of Base Salary shall immediately cease upon any violation by the Executive of the restrictions contained in Sections 5, 6, 7 and 8 hereof, provided, that if such violation is curable, the Company shall have first given the Executive notice thereof and a period of 30 days in which to cure such violation. (c) Termination for Cause; Resignation without Good Reason. In the event the Company terminates this Agreement for Cause or in the event that the Executive resigns from his employment under this Agreement without Good Reason, the Executive's rights hereunder shall cease as of the effective date of the termination, including, without limitation, the right to receive the Base Salary, any Bonus Award and all other compensation or benefits provided for in this Agreement. In such event, the Executive hereby acknowledges and agrees that, except for the Accrued Obligations, no severance or similar or other damages or payments of any kind whatsoever shall be payable to the Executive due to, in connection with, or in the event of, such termination. (d) Disability; Death. If, prior to the expiration of the Employment Period or the termination of this Agreement, the Executive shall be unable to perform his duties by reason of mental or physical disability for at least one-hundred eighty (180) consecutive days or any one-hundred eighty (180) days (whether or not consecutive) in any three-hundred sixty (360) consecutive day period, the Company may terminate this Agreement and the remainder of the Employment Period by giving written notice to the Executive to that effect. Immediately upon the giving of such notice, the Employment Period shall terminate. Upon termination of this Agreement pursuant to this Section 9(d), the Executive shall be paid, in addition to the Accrued Obligations, his Base Salary for the month in which notice is given. In the event of a dispute as to whether the Executive is disabled within the meaning of Section 9(d), either party may from time to time request a medical examination of the Executive by a doctor appointed by the Chief of Staff of a hospital selected by mutual agreement of the parties, or as the parties may otherwise agree, and the written medical opinion of such doctor shall be conclusive and binding upon the parties as to whether the Executive has become disabled and the date when such disability arose. If, prior to the expiration of the Employment Period or the termination of this Agreement, the Executive shall die, the Executive's estate shall be paid, in addition to the Accrued Obligations, his Base Salary through the end of the month in which the Executive's death has occurred, at which time the Employment Period shall terminate without further notice and the Company shall have no further obligations hereunder. 10. Enforcement. (a) Equitable Relief. The Executive agrees that the remedies at law for any breach of threat of breach by him of any of the provisions of Sections 5, 6, 7, and 8 hereof, will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches of the provisions of Sections 5, 6, 7, and 8 hereof and to enforce specifically the terms and provisions thereof, in each case without the need to pose any security or bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing, in addition, any other remedies available to the Company for such breach or threatened breach. A waiver by the Company of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provision of this Agreement or of any subsequent breach by the Executive. (b) Enforceability. It is expressly understood and agreed that although the Company and the Executive consider the restrictions contained in Sections 5, 6, 7 and 8 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, if a final arbitratory or judicial determination is made by a court or arbitrator having jurisdiction that the time or territory or any other restriction contained in such Sections 5, 6, 7 and 8 is an unenforceable restriction on the Executive's activities, the provisions of such Sections 5, 6, 7 and 8 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such arbitrator or court may determine or indicate to be reasonable. Alternatively, if the arbitrator or court referred to above finds that any restriction contained in Sections 5, 6, 7 or 8 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. The provisions of Sections 5, 6, 7 and 8 shall in no respect limit or otherwise affect the Executive's obligations under other agreements with the Company, and the provisions of Sections 5, 6, 7 and 8 shall in no respect limit the rights of the Executive as set forth in this Agreement or any other agreement between the Executive and the Company. 11. Assignment. The rights and obligations of the parties under this Agreement shall not be assignable by either the Company or the Executive, provided that this Agreement is assignable by the Company to any affiliate of the Company, to any successor in interest to any business of the Company, or to a purchaser of all or substantially all of the assets of any business of the Company. 12. Notices. Any notice required or permitted under this Agreement shall be deemed to have been effectively made or given if in writing and personally delivered, mailed properly addressed in a sealed envelope, postage prepaid by certified or registered mail, delivered by a reputable overnight delivery service or sent by facsimile. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to: Raul Deju 5 Hastings Court Moraga, California 94556 Facsimile No.: (510) 299-7840 with a copy to: Otis & Hogan 180 Montgomery Street, Suite 1240 San Francisco, California 94104 Facsimile No." (415) 362-7332 Attention: J. Morrow Otis and properly addressed to the Company if addressed to: JTM Industries, Inc. 127 South 500 East, Suite 675 Salt Lake City, Utah 84102 Attention: Chief Executive Officer with a copy to" Citicorp Venture Capital, Ltd. 399 Park Avenue New York, New York 10043 Attention: Joseph Silvestri Facsimile No.: (212) 888-2940 13. Severability. Wherever there is any conflict between any provision of this Agreement and any statute, law, regulation or judicial precedent, the latter shall prevail. In the event that any provision of this Agreement shall be held by a court of proper jurisdiction to be indefinite, invalid, void or voidable or otherwise unenforceable, the balance of the Agreement shall continue in full force and effect unless such construction would clearly be contrary to the intentions of the parties or would result in an unconscionable injustice. 14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 15. Effect of Termination. Notwithstanding anything to the contrary contained herein, if this Agreement or the Executive's employment is terminated pursuant to Section 9 or otherwise expires, the provisions of Sections 5, 6, 7, 8, 9, 10, 12, 13, 15, 16, 17 and 18 shall continue in full force and effect. 16. Disputes. Except as necessary to obtain the relief specified in Section 10(a), any claim or controversy arising out of or relating to this Agreement, or any breach thereof, or otherwise arising out of or relating to the Executive's employment, compensation and benefits with the Company or the termination thereof hereafter, shall be settled by arbitration in San Francisco County, California, in accordance with the rules established by the American Arbitration Association, provided, however, that the parties agree that (i) a 30-day negotiation period between the Company and the Executive will be specified prior to any arbitration proceeding; (ii) the arbitrator shall be prohibited form disregarding, adding to or modifying the terms of this agreement; and (iii) the arbitrator shall be required to follow established principles of substantive law and the laws governing burdens of proof. Any claim or controversy not submitted to arbitration in accordance with this Section 16 shall be considered waived and, thereafter, no arbitration panel or tribunal or court shall have the power to rule or make any award on any such claim or controversy. The award rendered in any arbitration proceeding held under this Section 16 shall be final and binding, and judgment upon the award may be entered in any court having jurisdiction thereof. The prevailing party shall be entitled to recover all reasonable attorneys fees and related costs form the losing party. 17. Miscellaneous: Choice of Law. This Agreement constitutes the entire agreement, and supersedes all prior agreements, of the parties hereto relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein. This Agreement shall be governed by and construed in accordance with (i) with respect to Section 8 and all other provisions of this Agreement which affect the interpretation and/or the enforceability of the restrictive covenants therein contained, the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the s State of New York, and (ii) with respect to all other provisions of this Agreement, the domestic laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. 18. Indemnification. In the event that any claim is asserted against the Executive, including but not limited to any legal action or administrative proceeding, whether civil or criminal, by reason of the fact that the Executive is or was an officer or director of the Company or any subsidiary or affiliate of the Company, the Executive shall be indemnified by the Company, and the Company shall pay the Executive's attorney fees, accounting fees, expert witness fees and other customary expenses within 30 days after the Company receives notice of such fees, expenses and costs, all to the fullest extent permitted by law, provided, however, that no indemnification shall be made hereunder with respect to payments and expenses incurred in relation to (i) matters as to which the Executive shall not have acted in good faith and in the reasonable belief that his action was in the best interest of the Company, of (ii) matters as to which are otherwise prohibited by law. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. JTM INDUSTRIES, INC. /s/ J.I. Everest ------------------ By: J.I. Everest II Title:Treasurer & CFO EXECUTIVE /s/ Raul Deju --------------- Raul Deju EX-10.17 29 EMPLOYMENT AGREEMENT -- JEAN I. EVEREST, II EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of October 14, 1997 (this "Agreement"), by and between JTM Industries, Inc. (the "Company") and Jean I. ("Chip") Everest (the "Executive"). WHEREAS, simultaneous with and effective upon the acquisition of the Company by Industrial Quality Services, Inc., a Delaware corporation from Laidlaw, Inc., the Company desires to employ the Executive as Chief Financial Officer of the Company; and WHEREAS, the Executive desires to be retained in such capacity on the terms and conditions set forth herein, effective upon the consummation of such acquisition (the "Commencement Date"), it being understood and acknowledged that if the consummation of the acquisition shall not occur, this Agreement shall have no force or effect. NOW, THEREFORE, in consideration of the premises and the mutual agreements made herein, the Company and the Executive agree as follows: 1. No Conflict. The Executive represents to the Company that the execution, delivery and performance by the Executive of this Agreement do not and shall not conflict with or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which the Executive is a party or of which the Executive is or should be aware. 2. Employment; Duties. The Company shall employ the Executive as Chief Financial Officer for the "Employment Period" as defined in Section 3. The Executive, in his capacity as Chief financial Officer, shall have such duties, responsibilities and authority normally incident to such office. The precise duties, responsibilities and authority of the Executive may be expanded, limited or modified, at any time and from time to time, at the discretion of the Board of Directors of the Company (the "Board") or its Chief Executive Officer. During the Employment Period, the Executive shall devote all necessary working time, attention, knowledge and experience and give his diligent effort, skill and abilities, to promote the business and interests of the Company. Subject to Section 8, the Executive may serve as an officer or director of, make investments in, or otherwise participate in, other entities, provided that such service is disclosed in advance to the Board. 3. Employment Period. This Agreement shall have a term of three years, commencing as of the commencement Date and ending on the third anniversary of the commencement Date (the "Initial Period"), unless sooner terminated in accordance with the provisions of Section 9. On the expiration of the Initial Period and on each yearly anniversary thereof, this Agreement shall automatically renew for an additional one-year period, unless sooner terminated in accordance with the provisions of Section 9, unless the Company or the Executive notifies the other in writing of its intention not to renew this Agreement not less than sixty (60) days prior to such expiration date or anniversary, as the case may be. The term of this Agreement, as in effect from time to time, is referred to herein as the "Employment Period." 4. Compensation and Benefits. (a) Base Compensation. The Executive shall be paid an aggregate base salary (the "Base Salary") at the rate of $125,000 per annum, less statutory deductions and withholdings. The Base Salary shall be payable in a manner consistent with the normal payroll practices of the Company as in effect from time to time. The Base Salary shall be reviewed annually by the Compensation Committee of the Board (the "Committee"). (b) Annual Bonus. In addition to the Base Salary, the Executive may be entitled to receive a discretionary annual bonus for each year during the Employment Period based upon such factors as shall be established by the Committee, at the sole discretion of the Committee. (c) Employee Benefits. The Executive shall be entitled to participate in each and every employee benefit and group insurance plan and program provided by the Company for its officers and employees generally, in accordance with the terms of the applicable plan documents as they may be amended from time to time, substantially consistent with the employee benefits being provided to the officers and/or employees of the Company as of the date immediately preceding the effectiveness of this Employment Agreement. (d) Business Expense Reimbursement. The Company shall reimburse the Executive for all reasonable and necessary business and travel expenses that the Executive incurs in connection with the Executive's performance of services for the Company hereunder, in accordance with the reimbursement policies established by the Company from time to time (which, the parties hereto acknowledge, shall be consistent with the policies of the Company as they relate to business expense reimbursement as of the date immediately preceding the effectiveness of this Employment Agreement), and shall reimburse the Executive for the reasonable expenses associated with the maintenance of an office in Utah, provided that such reimbursement shall be limited to $3,000 per month. 5. Confidentiality. The Executive recognizes that it is in the legitimate business interest of the Company to restrict his disclosure or use of Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates for any purpose other than in connection with his performance of his duties to the Company, and to limit any potential appropriation of such Trade Secrets and Confidential Information by the Executive. The Executive therefore agrees that both during and at all times after the Employment Period, he shall maintain as confidential all Trade Secrets and Confidential Information relating to the Company and its direct or indirect subsidiaries, parents or affiliates heretofore or in the future obtained by the Executive. The terms "Trade Secrets" and/or "Confidential Information" means matters of a confidential technical or business nature that have been maintained as confidential or the disclosure of which could likely have an adverse effect upon the interests of the Company or its direct or indirect subsidiaries, parents or affiliates. 6. Return of Documents and Property. Upon the termination of the Executive's employment with the Company, or at any time upon the request of the Company, the Executive (or his heirs or personal representatives) shall deliver to the Company (a) all documents and materials (including, without limitation, computer files) containing Trade Secrets or other confidential Information relating to the business and affairs of the Company and its direct and indirect subsidiaries, parents or affiliates, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to the Company or its direct or indirect subsidiaries, parents or affiliates, which in either case are in the possession or under the control of the Executive (or his heirs or personal representatives). 7. Discoveries and Works. All Discoveries and Works made or conceived by the Executive during his employment by the Company, whether during the Employment Period or at any time period thereto, whether or not on the property or premises of the Company, jointly or with others, which relate to the activities of the Executive with the Company or its direct or indirect subsidiaries, parents or affiliates shall be owned by the Company or its direct or indirect subsidiaries, parents or affiliates. The term "Discoveries and Works" includes, by way of example but without limitation, Trade Secrets and other Confidential Information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service mark registrations and applications, trade names, copyrights and copyright registrations and applications. The Executive shall (a) promptly notify, make full disclosure to, and execute and delivery any documents requested by, the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company or its direct or indirect subsidiaries, parents or affiliates, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by the Company or its direct or indirect subsidiaries, parents or affiliates, (c) assist the Company or its direct or indirect subsidiaries, parents or affiliates in obtaining or maintaining for itself at its own expense United States and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with the Company or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for the Company or its direct or indirect subsidiaries, parents or affiliates and to protect the title of the Company or its direct or indirect subsidiaries, parents or affiliates thereto, including but not limited to assignments of such patents and other rights. The Executive acknowledges that all Discoveries and Works shall be deemed "works made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss. 101. 8. Noncompetition and Nonsolicitation. (a) Restrictive Covenant. The Executive agrees that he shall, during the Restricted Period (as defined below), refrain from, either alone or in conjunction with any other Person, or directly or indirectly through his present or future affiliates or Associates (as defined below): (i) (except pursuant to his duties performed for the Company during the Employment Period) directly or indirectly, owning, managing, operating, joining or having a financial interest in, controlling or participating in the ownership, management, operation or control of, or being employed as an employee, agent or the Executive, or in any other individual or representative capacity whatsoever, or using or permitting his name to be used in connection with, or lending assistance (financial or otherwise) to or being otherwise connected in any manner with any business or enterprise engaged in the Restricted Business (as defined below) within any portion of the United States (whether or not such business is physically located within the United States); provided, however, that nothing contained herein shall be construed as preventing the Executive from engaging in the ownership, purchase and/or sale of landfills; and (ii) soliciting, inducing, or attempting to influence any individual who the Executive, after due inquiry, knows is an employee of the Company or any of its subsidiaries, parents or affiliates to terminate his or her employment relationship with the Company or such subsidiary or affiliate, or to become employed by the Executive is employed, or interfering in any other way with the employment, or other relationship, of the Company or such subsidiary, parent or affiliate and any employee thereof; provided, however, that this clause (ii) shall not apply as it may relate to R. Stephen Creamer. (b) Definitions. As used herein: (i) "Associate" means with respect to any person, any corporation or other business organization of which such person is an officer, employee or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar capacity and any relative or spouse of such person, or any relative of such spouse; (ii) "Cause" shall mean (i) the willful and continued failure of the Executive to follow the lawful directions of the Board, (ii) any act of fraud or dishonesty, misappropriation or embezzlement, or willful misconduct in connection with the performance of the Executive's duties hereunder, (iii) a material breach by the Executive of any material provision hereof or any of any material contractual or material legal duty to the Company (including, but not limited to, the unauthorized disclosure of Trade Secrets or other Confidential Information), after written notice thereof from the Board and a 30-day opportunity to cure in the event that such breach is curable, (iv) the conviction of the Executive of a felony or other crime or offense involving moral turpitude (including pleading guilty or no contest to such a crime or offense or a lesser charge which results from plea bargaining), whether or not committed in connection with the business of the Company, (v) the Executive's alcohol or substance abuse or (vi) a material breach by the Executive of the provisions of any stockholders agreement or other agreement relating to the Executive's acquisition of any equity interest in the Company to which the Executive may become a party on or after the Commencement Date after written notice therefrom the Board and a 30-day opportunity to cure in the event that such breach is curable. (iii) "Good Reason" shall mean a material breach by the Company of any material provision hereof (after written notice thereof from the Executive and a 30-day opportunity to cure in the event that such breach is curable); a transfer of the Executive's customary place of employment to a location more than 40 miles from Salt Lake City, Utah; or a material change in the nature of the Executive's duties, title or responsibility without the consent of the Executive. (iv) "Restricted Business" means the provision of coal by-product ("CCB") management services, such as collection, removal, disposal and marketing of fly-ash and other CCBs. (v) "Restricted Period" means the Employment Period, and the period thereafter equal to (i) three years in the case of a termination of the Employment Period by the Company with Cause or by the Executive without Good Reason, or (ii) two years in the case of a termination of the Employment Period for any other reason (including by reason of expiration of the term of the Agreement). (c) Reasonableness of Restrictions. The Executive acknowledges and agrees that the restrictions set forth in this Section 8, and specifically, the period of time designated as the Restricted Period and geographical area specified hereunder, are reasonable in view of the nature of the business in which the Company is engaged, and the Executive's particular knowledge of the Company's and its subsidiaries, parents and affiliates' respective businesses, and the Executive hereby agrees not to challenge in any way, or other otherwise raise a defense to, the enforceability of any of the restrictions set forth in this Section 8 during the Restricted Period in any manner whatsoever, including but not limited to challenging the reasonableness of the restrictions set forth herein. (d) Enforceability of Restrictive Covenants. It is the understanding of the Executive and the Company that the provisions of this Section 8 be enforced to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions of this Section shall not render unenforceable, or impair, the remainder of the provisions of this Section 8, or of this Agreement. 9. Termination. The Company or the Executive may terminate this Agreement, with or without cause, with or without prior notice. In the vent the Company terminates this Agreement or the Executive resigns from employment, the Executive's rights and the obligations of the Company hereunder shall cease as of the effective date of the termination, including, without limitation, the right to receive the Base Salary, any Bonus Award and all other compensation or benefits provided for in this Agreement, and the Executive hereby acknowledges and agrees that no severance or similar or other damages or payments of any kind whatsoever shall be payable to the Executive due to, in connection with, or in the event of, the Executive's termination or resignation from employment for any reason. 10. Enforcement. (a) Equitable Relief. The Executive agrees that remedies at law for any breach of threat of breach by him of any of the provisions of Sections 5, 6, 7, and 8 hereof will be inadequate, and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches of the provisions of Sections 5, 6, 7 and 8 hereof and to enforce specifically the terms and provisions hereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing, in addition, any other remedies available to the Company for such breach or threatened breach. A waiver by the Company of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provision of this Agreement or of any subsequent breach by the Executive. (b) Enforceability. It is expressly understood and agreed that although the Company and the Executive consider the restrictions contained in Sections 5, 6, 7 and 8 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in such Sections 5, 6, 7 and 8 is an unenforceable restriction on the Executive's activities, the provisions of such Sections 5, 6, 7 and 8 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the court referred to above finds that any restriction contained in Sections 5, 6, 7 or 8 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the restrictions contained therein or the availability of any other remedy. The provisions of Sections 5, 6, 7 and 8 shall in no respect limit or otherwise affect the Executive's obligations under other agreements with the Company. 11. Assignment. The rights and obligations of the parties under this Agreement shall not be assignable by either the Company or the Executive, provided that this Agreement is assignable by the Company to any affiliate of the Company, to any successor in interest to any business of the Company, or to a purchaser of all or substantially all of the assets of any business of the Company. 12. Notices. Any notice required or permitted under this Agreement shall be deemed to have been effectively made or given if in writing and personally delivered, mailed properly addressed in a sealed envelope, postage prepaid by certified or registered mail, delivered by a reputable overnight delivery service or sent by facsimile. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to: Jean I. ("Chip") Everest ECDC Environmental 127 South 500 East Suite 675 Salt Lake City, Utah 84102 Fax: (801) 536-6111 with a copy to: Parsons Behle & Latimer One Utah Center 201 South Main Street Suite 1800 Salt Lake City, Utah 84111 Fax: (801) 536-6111 Attention: J. Gordon Hansen, Esq. and properly addressed to the Company if addressed to: JTM Industries, Inc. c/o Citicorp Venture Capital, Ltd. 399 Park Avenue New York, New York 10043 Attention: Joseph Silvestri Facsimile No: (212) 888-2940 with a copy to: Morgan Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Attention: Philip Werner, Esq. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. JTM INDUSTRIES, INC. /s/ unreadable ------------------------------- By: Title: EXECUTIVE /s/ J. I. Everest -------------------------------- Jean I. ("Chip") Everest EX-10.18 30 EMPLOYMENT AGREEMENT -- BRETT A. HICKMAN JTM An INDUSTRIALSERVICESGROUP Company February 6, 1998 Brett A. Hickman, Esquire 87 North Foxhill Road North Salt Lake, Utah 84054 Dear Brett: This letter is written to confirm the agreement (this "Agreement") which we have reached wherein you will be employed by JTM Industries, Inc. ("JTM" or the "Company"). We at JTM are happy to have you as a member of the senior management team and look forward to working with you. In consideration of your decision to leave your current position and join JTM, JTM agrees that your responsibilities, compensation and benefits will be as set forth herein. 1. The term of this Agreement shall begin on the date upon which you accept it and shall expire on October 13, 2000. 2. You will be employed in the position of Sr. Vice President, General Counsel and Secretary of JTM and its affiliated companies, including its parent company, Industrial Services Group, Inc. Your responsibilities will be to manage the legal affairs of the Company and to report directly to me. You will be provided with such clerical, paralegal and support staff and assistance as are necessary to perform your duties. 3. You will receive an initial annual salary of $120,000.00 (paid twice monthly in accordance with Company policy), less statutory deductions and withholding. Your salary will be subject to annual review in accordance with Company policy. 4. You will receive all of the benefits of all executive incentive, savings, retirement, vacation and stock option plans and programs currently maintained or hereinafter established by the Company for the benefit of its senior management and/or officers. 5. You and your family will receive all benefits under each welfare benefit plan of the Company currently maintained or hereinafter established by the Company for the benefit of its employees. Such welfare benefit plans will include, without limitation, medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. 6. Even though you are beginning your employment during the fiscal year, you will be paid a bonus for this fiscal year, if one is earned by other management employees of the Company, as if you were an employee of the Company for the entire fiscal year. 7. You will receive a monthly automobile allowance in the amount of $750.00. 8. If your employment relationship with JTM is terminated for any reason, including but not limited to your death or disability, other than just cause (defined as your conviction for a felony or your wilful refusal to perform your duties), at any time during the term of this Agreement, or any extension hereof, or by the expiration of this Agreement, then JTM will: (i) pay you (or in the event of your death, your beneficiary) a severance package equal to one year of your salary at the time of termination (in the form of a continuation of your salary for said one year period), along with an extension of all benefits (insurance, automobile allowance, etc.) for the same period of time and an amount equal to the bonus which would be paid to you during the year in which the employment relationship is terminated had the relationship not been terminated. 9. If, at any time during the period beginning upon the termination of your employment with JTM and until two years after such date (but in no event later than five years from the date of this Agreement), you (or in the event of your death, your family) desire to return to any State in the Southeastern United States, JTM will: (i) pay your (or in the event of your death, your beneficiary) all costs involved in relocating you and your family (which shall include, but not be limited to, the payment of all closing costs associated with the sale of your residence and the purchase of a new residence in the city to which you relocate and the payment of any discount points or costs necessary for you to obtain a 30 year fixed rate mortgage at 7.0% for the purchase of the new home) to a city of your choice in the Southeastern United States; and, (iii) will purchase your Salt Lake City home for market value or original purchase price, whichever is higher. 10. You will be allowed to continue your relationship as General Counsel, Western Division, or some similar position, for Laidlaw Environmental Services, Inc. ("Laidlaw") provided that you devote no more than one working day per week (you may also devote such additional after work and week-end time as you desire) toward these responsibilities to Laidlaw. You may also devote time to any other projects or matters which I request or direct you to manage. If this letter accurately sets forth our agreement, please sign this letter on the space indicated below, and return a copy to me. Sincerely, /s/ R Steve Creamer -------------------- R Steve Creamer Chairman of the Board and Chief Executive Officer RSC/bh /s/ Brett A. Hickman - - -------------------- Brett A. Hickman Accepted: February 10, 1998 EX-10.19 31 STOCK PURCHASE AGREEMENT -- WEBE ENTERPRISES, LTD. STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT is entered into as of October ___, 1999 ("Agreement"), by and between WEBE ENTERPRISES, LTD., a Michigan corporation, or its assigns ("Purchaser"), and ISG RESOURCES, INC. ("Seller"). W I T N E S S E TH: WHEREAS, the Seller is the owner and holder of all the outstanding shares of common stock of PNEUMATIC TRUCKING, INC. ("Pneumatic"), a Michigan corporation, which shares are hereinafter referred to as the "Purchased Shares"; and WHEREAS, the Seller desires to sell, and the Purchaser desires to purchase the Purchased Shares, all upon and subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained, the parties hereby covenant and agree as follows: ARTICLE I Purchase and Sale of Shares 1.1 Purchase and Sale. Subject to the terms, provisions and conditions of this Agreement, and on the basis of the representations and warranties herein contained, the Seller agrees to sell to Purchaser, and the Purchaser agrees to purchase from Seller, at the Closing (as hereinafter defined), all of the Purchased Shares consisting of 1,000 shares of the common stock of Pneumatic, which is all of its issued and outstanding shares and Seller represents that there are no stock options, warrants or preferred stock or common stock held by anyone or any entity other than the Seller whose entire interest in Pneumatic is being sold to Purchaser pursuant to this Agreement. Seller represents and warrants that the shares set forth above are owned by it free and clear of any and all claims of any nature or kind whatsoever which could or would affect the transfer or sale contemplated by this Agreement. Seller further represents and warrants that it has not pledged, encumbered or hypothecated the Purchased Shares. 1.2 Purchase Consideration. The consideration for the Purchased Shares ("Purchase Price") to be paid by Purchaser to Seller shall be SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($750,000.00). 1.3 Manner of Payment of Purchase Price. The SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($750,000.00) Purchase Price shall be paid by the Purchaser at Closing to Seller, by a cashier's check or checks or wire transfer. ARTICLE II Closing 2.1 Date of Closing. The transactions contemplated hereby shall close at a date and time mutually agreeable to Purchaser and Seller, but no later than October 31, 1999, which Closing shall be at the offices of Sullivan and Leavitt, P.C., 22375 Haggerty Road, Novi, Michigan, or at such other place or time as Purchaser and Seller shall mutually agree upon in writing ("Closing"). 2.2 Documents to be Delivered at Closing. (a) Documents to be Delivered by Seller. At closing, the Seller shall deliver to Purchaser: (i) Certificates representing the Purchased Shares duly endorsed in blank or accompanied by stock powers executed in blank. (ii) All minute books, stock records and stock books of Pneumatic. (iii) Resignation letters of all officers and directors of Pneumatic. (iv) Titles to all of the vehicles owned by Pneumatic as such vehicles are identified on Schedule A hereto entitled ISG Resources North Central Vehicle Listing As Of February 28, 1999. (v) Releases of any liens on the titles to the vehicles set forth on Schedule A (i.e., Certificate of Good Standing of Pneumatic Trucking, Inc. as a Michigan corporation). (vi) Letter of Indemnification by Seller indemnifying Purchaser against any Central States Southeast and Southwest Area Pension Fund Withdrawal Liability accrued as of the date of Closing. (vii) An opinion letter from Seller's counsel in a form satisfactory to Purchaser's counsel in accordance with Section 5.1(j) hereof in the form of Schedule B hereto. (viii) Such other documents as may reasonably be requested by the Purchaser or its counsel. (b) Documents to be Delivered by Purchaser. At the Closing, Purchaser will deliver, or cause to be delivered to the Seller, the following: (i) The Purchase Price represented by a cashier's check(s) of a national banking Institution or wire transfer to Seller of the Purchase Price. (ii) Certified resolutions of the Board of Directors of Purchaser, authorizing the transactions contemplated by this Agreement. (iii) Such other documents as may reasonably be requested by Seller or its counsel. ARTICLE III Representations and Warranties of Seller The Seller represents and warrants to Purchaser that: 3.1 Organization and Good Standing. Pneumatic is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan, and has full power and authority to own its properties and to carry on its business as now conducted. 3.2 Charter and Bylaws. Schedule B contains true, correct and complete copies of the Articles of Incorporation, as amended, certified as of a date within ten (10) days of the Closing by the Michigan Secretary of State, and of the Bylaws of Pneumatic, as amended through and including the date of this Agreement, certified as of the date hereof by the Secretary of Pneumatic. 3.3 Capitalization. The authorized capital stock of Pneumatic consists of 60,000 shares of common stock, $1.00 par value, of which 1,000 shares are validly issued and outstanding, and shall be validly issued and outstanding at Closing. The Purchases Shares shall consist of all of the Pneumatic shares which are validly issued, fully paid and nonassessible. There are no dividends owing or dividends which have been declared but not paid with respect to the Purchased Shares. Pneumatic does not have any subsidiaries and does not own any interest in any other person. 3.4 Title and Authority: Investment Representation. Seller is the absolute owner of the Purchased Shares, free, clear and discharged of and from any and all liens or other encumbrances, and Seller has full right, power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. Upon delivery of the Purchased Shares by Seller at the Closing, duly endorsed for transfer, Purchaser will be the absolute owner of all the Purchased Shares so delivered, free and clear of and from any and all liens and encumbrances. This Agreement is the legal, valid and binding obligation of Seller and is enforceable in accordance with its terms, except as the enforcement of this Agreement may be limited by laws of general application relating to bankruptcy, insolvency and relief of debtors. 3.5 No Commitment to Issue Capital Stock or Rights to Acquire Capital Stock. Seller has not entered into any contract or agreement or made any commitment to purchase, redeem, sell or otherwise transfer or issue any shares of Pneumatic's capital stock, nor are there any outstanding options, subscriptions, warrants, conversion rights or similar rights of any kind convertible into any shares of Pneumatic's capital stock. 3.6 Ability to Carry Out Agreement. The execution and delivery of this Agreement and the performance by the Seller of its obligations hereunder will not conflict with, violate or result in any breach of or constitute a default under any provisions of the Articles of Incorporation or Bylaws of Seller or Pneumatic, or of any mortgage, lease, contract, franchise agreement, license, permit, instrument, order, judgment, law, regulation or any other restriction to which either Seller or Pneumatic is a party or by which either Seller or Pneumatic is bound. Except for those already obtained, no consent of any governmental authority or other third-party is required to be obtained by either Seller or Pneumatic in connection with the Shareholders' execution, delivery or performance of this Agreement. 3.7 Financial Statements. (a) Pneumatic's balance sheet as of December 31, 1998, and related statements of income, retained earnings and cash flow for, the year ended December, 1998 (the "Financial Statement Date"), prepared by the chief financial officer of Seller are referred to herein as the "Pneumatic Financial Statements" and are attached hereto as Schedule C. The Pneumatic Financial Statements (I) present fairly, in all material respects, the financial position of Pneumatic at the Financial Statement Date; and (ii) were prepared in conformity with generally accepted accounting principles in a manner consistent with Pneumatic's historic accounting practice applied on a consistent basis, except as otherwise indicated. (b) Pneumatic's giving effect balance sheet as of October 31, 1999, and related statements of income, retained earnings and cash flow for the 10 months ended October 31, 1999, are attached as Schedule D and are referred to herein as the "Pneumatic Interim Financial Statements." The Pneumatic Interim Financial Statements (I) present fairly, in all material respects, the financial position of Pneumatic at October 31, 1999; and (ii) were prepared in conformity with generally accepted accounting principles in a manner consistent with Pneumatic's historic accounting practice applied on a consistent basis, subject to year-end closing adjustments. (c) Schedules C and D shall sometimes be referred to jointly as the "Financial Statements." 3.8 Taxes of Pneumatic. Pneumatic has paid any and all taxes, license fees, other charges levied, assessed, or imposed on the business and any of the property of Pneumatic, except those that are not due and payable. All taxes, franchises, contributions, and other charges required to be paid to governmental agencies by Pneumatic, with respect to its operations to the date of the closing will be paid as they become due. 3.9 Tax returns of Pneumatic. (a) Preparation. Pneumatic has duly prepared and filed any and all tax returns and reports required by federal, state, and local tax authorities. (b) Correctness. The returns filed are correct, true, and complete; (c) Payment. Any and all such taxes, including sales, corporate franchise, property, excise, and use taxes have been paid or are adequately provided for on the latest Pneumatic financial statement; and (d) No dispute. Pneumatic is not involved in any dispute with any tax authority about the amount of taxes due, nor has it received any notice of any deficiency, audit, or other indication of deficiency from any tax authority not disclosed to the parties to this Agreement. 3.10 Unreported and Contingent Liabilities. Except as set forth in the Financial Statements or on Schedule E attached hereto, Seller has no liabilities or obligations, whether accrued, absolute, fixed, known or unknown, contingent or otherwise, existing, arising out of or relating to any transactions entered into, or state of facts existing, on or prior to the date of this Agreement. 3.11 Licenses and Permits. Pneumatic possesses all material licenses or permits necessary to conduct its respective business as now operated, including the requisite operating authority issued by the Surface Transportation Road of the Federal Highway Administration and the Michigan Public Service Commission. Such licenses and permits are valid and in full force and effect. No action or claim is pending, or, to the knowledge of Seller, threatened, to revoke or terminate any such licenses or permits or declare any of them invalid in any respect. 3.12 Litigation. Except as set forth on Schedule F, there is not pending against Pneumatic, or, to the knowledge of Seller, threatened against it, any claim, action, suit, arbitration proceedings, governmental proceeding or investigation or other proceeding of any character. 3.13 Compliance With Laws Generally. Pneumatic has substantially complied with all laws, rules, regulations and ordinances materially affecting its business. Except for laws, rules, regulations or ordinances that are or are to be of general applicability, there are no existing or, to the knowledge of the Seller, proposed laws, rules, regulations or ordinances of such a nature as could be reasonably expected to materially adversely affect the continued conduct of Pneumatic's business in the manner presently conducted. 3.14 Trademark, etc. Attached hereto as Schedule G is a list of all copyrights, trade names and material trademarks and trade secrets as to which Pneumatic claims an ownership interest or as to which Pneumatic is a licensee or licensor (the "Pneumatic Intellectual Property"). Pneumatic has good and marketable title to or possesses adequate licenses or other valid rights to use the Pneumatic Intellectual Property, free and clear of all liens, charges, claims and other encumbrances. To the knowledge of the Seller, the use of the Pneumatic Intellectual Property does not misappropriate, infringe upon or conflict with any patent, copyright, trade name, trade secret or trademark of any third-party. No party has filed a claim (or, to the knowledge of Seller, threatened to file a claim) against Pneumatic alleging that it has violated, infringed on or otherwise improperly used the intellectual property rights of such party and Pneumatic has not violated or infringed any trademark, trade name, service mark, service name, copyright or trade secret held by others. 3.15 Equipment. It is agreed that the motor vehicle equipment set forth on Schedule A is conveyed by Seller and accepted by Purchaser "as is" and "with all faults" and that Seller is making no representations or warranties regarding any aspect thereof. It being understood that Purchaser has obtained or will obtain its own independent assurances as to all such matters to such extent as Purchaser, in its discretion, has deemed necessary or appropriate. Purchaser acknowledges that it is entering into this purchase on the basis of Purchaser's own investigation of the motor vehicle equipment and other assets of Pneumatic. Except as otherwise expressly set forth herein, Purchaser further acknowledges that Seller, Seller's agents and other persons acting on behalf of Seller, have made no representation or warranty of any kind in connection with any matter relating to the condition, value or fitness for use of the motor vehicle equipment and/or other assets of Pneumatic. Purchaser hereby waives, releases, remises, acquits and forever discharges Seller and Seller's agents or any other person acting on behalf of Seller, of and from any claims, actions, causes of action, demands, rights, damages, liabilities, costs, expenses or compensation whatsoever, direct or indirect, known or unknown, foreseen or unforeseen, which Purchaser now has or which may arise in the future on account of or in any way connected with the condition of the motor vehicle equipment and/or such other assets. 3.16 States Incorporated or Licensed to Do Business In. To the best of Seller's knowledge, Pneumatic is duly licensed to do business in those states where necessary to carry on the business of Pneumatic and all Federal, State, County and Municipal tax returns, including but not limited to fuel tax returns with the various states, currently due have been filed and the taxes paid. 3.17 Insurance Policies. To the best of Seller's knowledge, Pneumatic has in effect those insurance policies normally maintained by it in order to conduct its business. Schedule H attached hereto contains a copy of all such insurance policies and/or certificates. 3.18 Central States Southeast and Southwest Areas Pension Fund. Pneumatic contributes to the Central States Southeast and Southwest Areas Pension Fund on behalf of its driver employees and has or will obtain from such fund a written estimate of any withdrawal liability it would be subject to pursuant to ERISA (29 U.S.C.A. Section 1001 et seq.) which shall be attached hereto as Schedule I and shall be dated within 100 days of the Closing and Seller agrees to indemnify Purchaser in respect to any such liability which may have existed as of October 27, 1999. 3.19 Workers' Compensation Claims of Employees. Schedule J attached hereto contains, to the best of Seller's knowledge, a listing of all filed or threatened Workers' compensation claims. 3.20 Real Estate. Pneumatic owns no real estate and is not a party to any terminal or office lease. 3.21 Disclosure. No representations or warranties by Seller in this Agreement, and no document, certificate or other writing furnished by Seller to the Purchaser, to the best of the knowledge of the Seller, contains any untrue statements of material fact, or omits any material fact necessary to make the statements herein or therein not misleading. 3.22 Representations and Warranties as of the Closing Date. Each of the representations and warranties made by the Seller hereunder shall be deemed to have been made again on and as of the Closing Date. ARTICLE IV Representations and Warranties of Purchaser Purchaser represents and warrants to the Seller as follows: 4.1 Organization. Purchaser is a corporation formed under the laws of the State of Michigan and is duly organized, validly existing and in good standing pursuant to the laws of the State of Michigan. 4.2 Authority Relative to This Agreement. Purchaser or its assigns has or will have, prior to Closing, full legal power and authority to execute and deliver the Agreement and all agreements contemplated hereby. This Agreement shall be duly and validly executed by Purchaser, and shall constitute a valid and binding agreement of Purchaser enforceable against Purchaser in accordance with its terms. 4.3 Purchase for Investment. Purchaser is acquiring the Purchased Shares as a means of acquiring the business of Pneumatic in order to own and operate such business, and is not acquiring the Purchased Shares with a view towards their subsequent sale, transfer of distribution, although Purchaser shall have the right to freely seek, pledge or encumber the shares being acquired. Purchaser has 10 or fewer security holders or stockholders. Purchaser, either alone, or with the Purchaser's representatives, has sufficient knowledge and experience concerning investments generally and Pneumatic's in particular, such that it is able to evaluate the risks and merits of this investment. Purchaser has had full opportunity to make all inquiries it deems appropriate with respect to the business and affairs of Pneumatic and has had such inquiries answered to its full satisfaction. Purchaser represents that no commission is being paid now or owed in connection with this transaction to any party. 4.4 Collective Bargaining Agreements. After the execution, Pneumatic shall continue in full force and effect its collective bargaining agreements with Locals 406 and 486 affiliated with the International Brotherhood of Teamsters as extended or renegotiated pursuant to 5.1(b) hereof in accordance with their terms on a non-interrupted basis and shall also continue to make contributions to any applicable multi-employer pension plans in accordance with their terms on a non-interrupted basis. Seller shall take no action to interfere with such Agreements and represents that there are no written employment agreements between Pneumatic and any third-party. Schedule M attached hereto contains copies of the Collective Bargaining Agreements of Pneumatic, as well as signed participation agreements with employee benefit funds resulting therefrom. 4.5 Disclosure. No representations or warranties by Purchaser in this Agreement, and no document, certificate or other writing furnished by Purchaser to the Seller, to the best of the knowledge of the Purchaser, contains any untrue statements of material fact, or omits any material fact necessary to make the statements herein or therein not misleading. 4.6 Correct on Closing Date. The representations and warranties contained herein will be true and correct on and as of the Closing with the same effect as if were made on and as of Closing. ARTICLE V Conditions Precedent to the Performance by the Purchaser and the Seller of Their Obligations Under This Agreement 5.1 Purchaser's Conditions. The obligation of the Purchaser to complete the purchase of the Purchased Shares hereunder shall be subject to the satisfaction of, or compliance with, at or before the Closing, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Purchaser and may be waived by it in whole or in part): (a) Financing. The Purchaser, upon application for appropriate financing of the Purchase Consideration within forty-five (45) days of the execution of this Agreement, shall obtain financing from a banking institution upon terms and conditions which in Purchaser's sole discretion are acceptable to it. (b) Labor Agreements. The Purchaser shall obtain an extension of or shall have renegotiated the existing Collective Bargaining Agreements with Teamsters Locals 406 and 486 covering the drivers of Pneumatic, which extension or renegotiation shall be under terms and conditions satisfactory to Purchaser in its sole discretion. (c) ISG Hauling Agreement. The Seller shall enter into the Fly Ash Hauling Agreement with Purchaser in the form attached hereto as Schedule N. (d) Performance of Obligations. The Seller and Pneumatic shall have performed or complied with, in all respects, all of their obligations, covenants and agreements hereunder. (e) Receipt of Closing Documentation. All documentation relating to the due authorization and completion by the Seller of the sale and purchase hereunder of the Purchased Shares, and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Seller of its obligations pursuant to this Agreement, and the documentation provided to the Purchaser hereunder, shall be reasonably satisfactory to the Purchaser and its counsel, and the Purchaser shall have received copies of all such documentation or other evidence as it may reasonably request in order to establish the consummation by the Seller of the transactions contemplated hereby and the taking of all proceedings by the Seller in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance reasonably satisfactory to the Purchaser. (f) Subleases. Seller shall sought the consent of the respective landlords and have obtained permission from such landlords to enter into Subleases with Purchaser for a portion of its leased facilities which would permit the Purchaser to continue to park and/or store a similar quantity of motor vehicles and equipment as is presently being stored at Muskegon, Lansing and Erie, Michigan, which subleases shall be in the form of Schedules O, P and Q attached hereto. (g) Consents, Authorization and Registrations. All consents, approvals, orders and authorizations of any persons or governmental authorities, including courts (or registrations, declarations, filings or recordings with any such authorities) required in connection with the completion of any of the transactions contemplated by this Agreement, the execution of this Agreement, the Closing or the performance of any of the terms and conditions hereof, shall have been obtained on or before the Closing including, without limiting the generality of the foregoing, any and all consents or approvals to the sale of the Purchased Shares to the Purchaser required from any federal or state authority having jurisdiction over the issuance of operating authorities or licenses, unless such consents, orders or authorizations are waived by the Purchaser in writing. (h) Directors and Officers of Pneumatic. There shall have been delivered to the Purchaser, on or before the Closing, the resignations of Pneumatic's Officers and Directors from such positions, and duly executed comprehensive releases from such Officers and Directors as well as all non-union employees of Pneumatic of all claims against Pneumatic, other than those arising as a result of this Agreement, including claims relating to any existing Employment Agreements between Pneumatic and any such parties, which Employment Agreements shall be canceled as of the Closing. (i) Preservation of Business. Seller shall use its best efforts to preserve the business organization of Pneumatic intact, to keep available to Purchaser the services of the present employees, except those referenced hereinbefore, of Pneumatic and to preserve for Purchaser the present relationships between Pneumatic on the one hand and its suppliers, customers and others having business relations with it, on the other hand. (j) Opinion of Counsel. That at Closing, Seller's counsel shall give its legal opinion in a form satisfactory to Purchaser, in respect to the matters contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.10, 3.12 and 3.14. (k) Lien Search. Seller shall provide Purchaser with a tax lien and financing statement search, both certified to a date later than the date of this Agreement, in respect to public records of the states of Utah and Michigan for both Seller and Pneumatic. (l) Purchaser shall have been given access to and shall have conducted a due diligence review of the assets, business and legal status of Pneumatic satisfactory to it, in it's sole discretion. 5.2 Seller's Conditions. The obligations of the Seller to complete the sale of the Purchased Shares hereunder shall be subject to the satisfaction of, or compliance with, at or before the Closing, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Seller and may be waived by it in whole or in part): (a) Existing Labor Issues. The Seller shall have resolved to its satisfaction any pending grievances, threatened grievances or other claims, arising pursuant to the Collective Bargaining Agreements with Local Unions Number 406 and 486 as of the date of Closing which resolution shall be in the form of Schedule R hereto and executed by such local unions. (b) Assumption of Collective Bargaining Agreements. Purchaser shall have agreed in writing in the form of Schedule S hereto to assume all obligations pursuant to the Collective Bargaining Agreements set forth in Schedule M hereto or such agreements, successors as of the day after the Closing. (c) Performance of Obligations. The Purchaser shall have performed or complied with, in all respects, all its other obligations, covenants and agreements hereunder. (d) Receipt of Closing Documents. All documentation relating to the due authorization and completion by the Purchaser of the sale and purchase hereunder of the Purchased Shares, and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Purchaser of its obligations under this Agreement, shall be reasonably satisfactory to the Seller, and the Seller shall have received copies of all such documentation or other evidence as it may reasonably request in order to establish consummation by the Purchaser of the transaction contemplated hereby and the taking by it of all corporate proceedings in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance reasonably satisfactory to the Seller. ARTICLE VI Indemnification Indemnification. Seller shall defend, indemnify and hold harmless Purchaser, its directors, officers, shareholders, successors and assigns, from and against any and all costs, losses, claims, suits, actions, assessments, diminution in value, liabilities, fines, penalties, damages (compensatory, consequential and other), and expenses (including reasonable legal fees) to the extent resulting from: (a) any inaccuracy and any misrepresentation or breach of any warranty of the Seller contained in this Agreement; (b) Seller's failure to perform or observe in full, or to have performed in or observed in full, any covenant, agreement or condition to be performed or observed by the Seller under this Agreement or any documents related to this transaction; (c) Seller shall have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or obligation to be performed and complied with prior to the closing, unless within a period of two (2) years following the date of closing, Purchaser notifies Seller of a claim specifying the factual basis of that claim in reasonable detail. ARTICLE VII Access and Information 7.1 Due Diligence. During the period from the date of this Agreement to Closing, the parties agree: (a) Release of Information. Seller shall or cause Pneumatic to provide to Purchaser and to Purchaser's agents full access, during normal business hours, throughout the period before the Closing, to all of Pneumatic's assets, properties, books, contracts, commitments and records and shall furnish to Purchaser during that period all the information concerning Pneumatic's affairs that Purchaser may reasonably request. (b) Confidentiality. Purchaser acknowledges that, pursuant to the right to inspect Pneumatic's books, records, and other documents and material, Purchaser may become privy to confidential information of Pneumatic, and that communication of such confidential information to third parties (whether or not such communicated information is authorized by Purchaser) could injure Pneumatic's business in the event that this transaction is not completed. Purchaser agrees to take reasonable steps to ensure that such information about Pneumatic, obtained by Purchaser, shall remain confidential and shall not be disclosed or revealed to outside sources, and further agrees not to solicit any customers of Pneumatic disclosed from such confidential information. As used in this Agreement, confidential information includes information ordinarily known only to Pneumatic personnel, and information such as customer lists, supplier lists, trade secrets, channels of distribution, pricing policy and records, inventory records, and other information normally understood to be confidential or designated as such by Pneumatic. ARTICLE VIII Covenants of the Parties 8.1 Conduct of Business Prior to Closing. During the period from the date of this Agreement to Closing, the Seller will cause Pneumatic to: (a) Conduct Business in Ordinary Course. Except as otherwise contemplated or permitted by this Agreement, or as specifically authorized in writing by the Purchaser, to maintain and repair Pneumatic's vehicles as set forth on Schedule A, in accordance with past practice and to conduct its business in the ordinary and normal course thereof with no change from prior accounting practices and not, without the prior written consent of the Purchaser, to enter into any transaction which, if effected before the date of this Agreement, would materially affect the assets or liabilities of Pneumatic. (b) Insurance. To maintain in force policies of insurance similar to those types of policies set forth in Schedule H and in such amounts presently maintained by Pneumatic. (c) Perform Obligations. To comply with all laws affecting the operation of the business of Pneumatic. ARTICLE IX General 9.1 Expenses. All costs and expenses (including, without limitation, the fees and disbursements of legal counsel and any accountant's or consultants' fees) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring same. 9.2 Records. The Seller agrees at the Closing in turn over to Purchaser any and all records including but not limited to corporate minute books, stock record books and tax returns in its possession relating to Pneumatic, which records have been in the control of Seller. 9.3 Time. Time shall be of the essence hereof. 9.4 Notices. Any notice or other writing required or permitted to be given hereunder or for the purposes hereof (hereinafter called a "Notice") to any party shall be sufficiently given if delivered personally, by recognized courier service or if transmitted by facsimile or other form of recorded communication tested prior to transmission to such party with an acknowledgment of receipt from the recipient: In the case of a Notice to the Seller: ISG Resources, Inc. Attn: General Counsel 136 E. South Temple, Suite 1300 Salt Lake City, UT 84111 In the case of a Notice to Purchaser: Richard Notestine P.O. Box 7 Mongo, IN 46771 with a copy to: Bill D. Eberhand, Jr., Esq. 115 South Detroit Street LaGrange, IN 46761 and Richard Schwartz 212 South Main Street Brooklyn, MI 49230 with a copy to: Philip J. Curtis, Esq. 120 W. Michigan Ave., Ste. 1500 Jackson, MI 49204-0594 with an additional copy to: Martin J. Leavitt, Esq. 22375 Haggerty, PO Box 400 Northville, MI 48167 or at such other address as the Party to whom such writing is to be given shall have last notified the party giving the same in the manner provided in this Section. Any notice delivered personally or by courier service to the Party to whom it is addressed as hereinbefore provided shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a business day, then the notice shall be deemed to have been given and received on the next following business day. Any notice transmitted by facsimile or other form of recorded communication shall be deemed given and received on the first business day after its transmission and acknowledgment of receipt. 9.5 Assignment. The purchase of the stock, which is the subject of this Agreement, and any rights hereunder, are assignable by the Purchaser or by the Seller. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors (including any successor by reason of amalgamation of any party), heirs and assigns. 9.6 Further Assurances. The parties hereto shall, with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each party shall provide such further documents or instruments required by any other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions, whether before or after the Closing. 9.7 Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 9.8 Severability. In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable, such holding shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein. 9.9 Governing Law. This Agreement is executed in, and shall be construed in accordance with the laws of the State of Michigan. 9.10 Entire Agreement. This Agreement and any amendments and attachments hereto supersedes any other agreement, whether oral or written, between the parties hereto relating to the matters contemplated hereby, and constitutes the entire agreement between the parties hereto. IN WITNESS WHEREOF, this Agreement has been executed as of ________ 10, 1999. WITNESSED BY: SELLER: ________________________ ISG RESOURCES, INC. ________________________ By:_____________________________ Its:_____________________________ WITNESSED BY: PURCHASER: ________________________ WEBE ENTERPRISES, LTD. ________________________ By:_____________________________ Richard Schwartz, President SCHEDULES TO STOCK PURCHASE AGREEMENT (Pneumatic Trucking, Inc.) A. ISG Resources North Central Vehicle Listing as of February 28, 1999. B. Opinion of Seller's Counsel. C. Certified copy of Amended Articles of Incorporation as of October 19, 1999 and Bylaws of Pneumatic Tucking, Inc. D. Pneumatic Financial Statements as of December 31, 1998. E. Pneumatic Interim Financial Statements as of October 31, 1999. F. Unreported and Contingent Liabilities. G. Litigation Pending or Threatened. H. Pneumatic Intellectual Property. I. Pneumatic's Insurance Policies. J. Central States Estimate of Withdrawal Liability. K. Filed or Threatened Workers' Compensation Claims. L. Pneumatic Owned Real Estate. M. Pneumatic Leased Real Estate, Pneumatic Collective Bargaining Agreements and Benefit Funds. N. Participation Agreements. O. ISG Hauling Agreement. P. Sublease of Michigan Terminal Facility. Q. Sublease of Lansing Terminal Facility. R. Sublease of Erie Terminal Facility. S. Release of Seller of Claims or obligations arising from Collective Bargaining Agreements. T. Assumption by Purchaser of obligations arising from Collective Bargaining Agreements. EX-10.20 32 STOCK PURCHASE AGREEMENT -- KOCH CARBON, INC. STOCK PURCHASE AGREEMENT This Stock Purchase Agreement ("Agreement") is made and entered into as of June 2, 1999, by and between ISG Resources, a Utah corporation, having a business address at 136 East South Temple, Suite 1300, Salt Lake City, Utah 84111 ("Buyer"), and Koch Carbon, Inc., a Kansas corporation, having a business address at 4111 East 37th Street North, Wichita, Kansas 67220 ("Seller"); RECITALS: A. Seller is the sole shareholder of all the issued and outstanding shares of capital stock of Irvine Fly Ash, Inc., an Ohio corporation, having its principal business address at 2303 Gilbert Street, Cincinnati, Ohio 45206 (the "Company"); and B. Seller desire to sell, and Buyer desire to purchase, all of the issued and outstanding shares (the "Shares") of capital stock of the Company for the consideration and on the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. DEFINITIONS For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1: "Adjustment Amount" has the meaning as defined in Section 2.5. "Affiliated Group" shall mean an "affiliated group" as defined in Section 1504(a) of the IRC. "Applicable Contract" means any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company has or may become subject to any obligation or liability, or (c) by which the Company or any of the assets owned or used by it is or may become bound. "Best Efforts" means the efforts that a prudent person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible. "Breach" means a breach of a representation, warranty, covenant, obligation, or other provision of this agreement or any instrument delivered pursuant to the Agreement will be deemed to have occurred if there is or has been (a) any material inaccuracy in or breach of, or any material failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision except to the extent that any such representation, warranty, covenant, obligation or other provision may be limited or qualified by any other representation, warranty, covenant, obligation or other provision contained in the Agreement), or (b) any material claim (by and Person) or other occurrence or circumstance that is or was materially inconsistent with such representation, warranty, covenant, claim, occurrence, or circumstance, unless otherwise limited or qualified as set forth in the Disclosure Letter (as hereinafter defined). "Buyer" has the meaning as defined in the first paragraph of the Agreement. "Closing" has the meaning as defined in Section 2.3. "Closing Date" means the date and time as of which the Closing actually takes place. "Company" has the meaning as defined in the Recitals of the Agreement. "Consent," means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization). "Contemplated Transactions" means all of the transactions contemplated by this Agreement, including: (b) the sale of the Shares by Seller to Buyer; (c) the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; (d) Buyer's acquisition and ownership of the Shares and exercise of control over the Company; and (e) the Buyer and Seller entering into that certain Slag Sale and Purchase Agreement dated as of the Closing Date, which shall be duly executed and delivered between the parties in accordance with the form attached hereto as Exhibit 2.4(c) and made a part hereof by reference. "Contract" means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding. "Damages" has the meaning as defined in Section 10.2. "Disclosure Letter" means the disclosure letter delivered by Seller to Buyer concurrently with the execution and delivery of the Agreement. "Encumbrance" means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. "Environment" means soil, land surface or subsurface strata, surface water (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), ground-waters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource. "Environmental, Health, and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law and consisting of or relating to: (b) any environmental, health, or safety matters or conditions (including on-site contamination, occupational safety and health, and regulation of chemical substances or products); (c) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (d) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions ("Cleanup") required by applicable Environment Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resources damages; or (e) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended ("CERCLA"). "Environmental Law" means any Legal Requirement that requires or relates to: (b) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment; (c) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (d) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (e) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (f) protecting resources, species, or ecological amenities; (g) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (h) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such cleanup or prevention; or (i) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets. "ERISA" means the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to ERISA or any successor law. "Facilities" means any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, and rolling stock) currently or formerly owned or operated by the Company. "GAAP" means generally accepted United States accounting principles, applied on a basis consistent with the basis on which the Interim Balance Sheet and the other financial statements referred to in Section 3.4 were prepared. "Governmental Authorization" means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body of pursuant to any Legal Requirement. "Governmental Body" means any of the following: (b) federal, state, local, municipal, foreign, or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal). "Hazardous Activity" means the distribution, generation, handing, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use of Hazardous Material in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or posses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company, except the receipt, handling, transportation, disposal and sale of fly ash by the Company in the Ordinary Course of Business. "Hazardous Material" means any waste or other substance that is listed, defined, designated, or classified as hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing material, except the receipt, handling, transportation, disposal and sale of fly ash by the Company in the Ordinary Course of Business. "Independent Auditor" means KPMG Peat Marwick, LLP "Intellectual Property Assets" has the meaning as defined in Section 3.22. "Interim Balance Sheet" has the meaning as defined in Section 3.4. "IRC" means the Internal Revenue Code of 1986, as amended, or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. "IRS" means the United States Internal Revenue Service or any successor agency. "Knowledge" means that a Person will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) is actually aware of such fact or other matter. "Legal Requirement" means any federal, state, local municipal law, ordinance, principle of common law, regulation, or statue. "Occupational Safety and Health Law" means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards. "Order" means any award, decision, injunction, judgement, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. "Ordinary Course of Business" means an action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if: (b) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and (c) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by the parent company (if and) of such person. "Organizational Documents" means (a) the articles or certificate of incorporation and the bylaws of the Company, and (b) any amendments to any of the foregoing. "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. "Plan" has the meaning as defined in Section 3.13. "Proceeding" means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. "Related Person" means with respect to a specified Person other than an individual: (b) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified person; (c) any Person that holds a Material Interest in such specified Person; (d) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (e) any Person in which such specified Person holds a Material Interest; and (f) any Person with respect to which such specified Person serves as a general partner of a trustee (or in a similar capacity). For purposes of this definition, "Material Interest" means any direct or indirect beneficial ownership of voting securities or other voting interest in a Person or equity securities or other equity interests in a Person. "Release" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional. "Representative" means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. "Seller" has the meaning as defined in the first paragraph of this Agreement. "Seller' Releases" has the meaning as defined in Section 2.4. "Shares" has the meaning as defined in the Recitals of this Agreement. "Subsidiary" means, with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. "Taxes" shall mean all taxes, however denominated, including any interest or penalties that may become payable in respect thereof, imposed by any federal, state, local, or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income taxes (including the alternative minimum tax and the environmental tax as defined in Section 55 and 59A of the IRC), payroll and employee withholding taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer taxes, severance taxes, value added taxes, taxes measured by or imposed on capital, levies, imposts, duties, work's compensation, and other obligations of the same or similar nature, whether arising before or after the Closing Date. "Tax Return" means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. "Threat of Release" means a substantial likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release. "Threatened" means that a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 7. SALE AND TRASFER OF SHARES; CLOSING 7.1 SHARES Subject to the terms and conditions of the Agreement, at the Closing, Seller will sell, transfer and deliver the Shares to Buyer, and Buyer will purchase the Shares from Seller. 7.2 PURCHASE PRICE The purchase price for the Shares will be $6,000,000.00 (the "Purchase Price"), which shall be increased or decreased after the Closing Date by the Adjustment Amount determined in accordance with the provisions of Sections 2.5 and 2.6 hereof. 7.3 CLOSING The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Seller located at 4111 East 37th Street North, Wichita, Kansas 67220, at 10:00 a.m. (local time) on or before the 2nd day of June, 1999, or at such other time and place as the parties may agree in writing. Subject to the provisions of Section 9, failure to consummate the purchase and sale provided for in the Agreement on the date and time and at the place determined pursuant to this Section 2.3 will not result in the termination of the Agreement and will not relieve any party of any obligation under this Agreement. 7.4 CLOSING OBLIGATIONS At the Closing: (b) Seller will deliver to Buyer: (c) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers) for transfer to Buyer; (ii) (iii)a certificate executed by Seller representing and warranting to Buyer each of Seller's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any disclosures that were delivered by Seller to Buyer prior to the Closing Date in accordance with Section 5.5); (iv) (v) a certificate, dated as of the Closing Date and executed by the Controller of the Seller, substantially in the form and to the effect set forth in Exhibit 2.4(iii) hereof; (vi) (vii)the resignation of all current officers and directors of the Company, effective as of the Closing Date; and (viii) (ix) a copy of the Disclosure Letter, updated and current through the Closing Date. (x) (xi) Buyer will deliver to Seller: (xii) (xiii) the amount of the Purchase Price by wire transfer to the bank account specified by Seller; and (xiv)a certificate executed by Buyer to the effect that, except as otherwise stated in such certificate, each of buyer's representations and warranties in the Agreement was accurate in all respects as of the date of the Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date; and (o) Buyer and Koch Oil Marketing, S.A., and affiliate of Seller, shall enter into that certain Slag Sale and Purchase agreement dated as of the Closing Date, which shall be duly executed and delivered between the parties in accordance with the form attached hereto as Exhibit 2.4(c) and made a part hereof by reference 15.1 ADJUSTMENT AMOUNT The Adjustment Amount (which may be a positive or negative number) will be equal to (a) any changes in the net assets of the Company for the period between the Interim Balance Sheet (as defined in Section 3.4) and the Closing Financial Statements (as defined in Section 2.6), as determined in accordance with GAAP, plus (b) interest on any such changes in the net assets of the Company, which will be paid in accordance with the applicable provisions of Section 2.6(b). 15.2 ADJUSTMENT PROCEDURE (b) within a period of six days after the Closing Date, Seller will cause the Independent Auditor to prepare and deliver to Buyer an audited balance sheet and supporting footnotes (_Closing Financial Statement") of the Company as of May 31, 1999. If within thirty days following delivery of the Closing Financial Statements, Buyer has not given Seller notice of its objection to the Closing Financial Statements (such notice must contain a statement of the basis of Buyer's objection), then the net assets of the Company reflected in the Closing Financial Statements will be used in computing the Adjustment Amount. If Buyer gives such notice of objection, than the issues in dispute will be submitted to Ernst & Young, LLP, certified public accountants (the "Accountants"), for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such work papers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party (or its independent public accountants), and will be afforded the opportunity to present to the accountants any material relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the accountants, will be binding and conclusive on the parties, except for fraud or obvious errors; and (iii) Buyer and Seller will each bear 50% of the fees of the Accountants for such determination. (c) On the tenth business day following the final determination of the Adjustment Amount, if the Purchase price (as increased or decreased by the Adjustment Amount( is greater than the payment made pursuant to Section 2.4(b)(i), Buyer will pay the difference to Seller, and if the Purchase price is less than such payment, Seller will pay the difference to Buyer. All payments will be made together with interest at the annual rate of 8% compounded daily beginning on the Closing Date and ending on the date of payment. Payments must be made in immediately available funds. Payments to Seller must be made in the manner set forth in Section 2.4(b)(i). Payments to Buyer must be made by wire transfer to such bank account as Buyer will specify. 4. REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as follows: 4.1 ORGANIZATION AND GOOD STANDING (b) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio, with full corporate power and authority to conduct business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. Except as set forth in Part 3.1 of the Disclosure Letter, the Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction on which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. (c) Seller has delivered to Buyer copies of the Organizational Documents of the Company, as currently if effect. 3.1 AUTHORITY; NO CONFLICT (b) This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and to perform its obligations under this agreement. (b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Company, or (B) any resolution adopted by the board of directors or the stockholders of the Company; (ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy, or obtain any relief under, any Legal Requirement or any Order to which the Company or the Seller, or any of the assets owned or used by the Company, may be subject; (iii)contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the business of, or any of the assets owned or used by, the Company; (iv) contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or (v) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company. Except as set forth in Part 3.2 of the Disclosure Letter, neither the Seller nor the Company is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 3.3 CAPITALIZATION The authorized equity securities of the Company consist of 750 shares of common stock, without par value, of which 500 shares are issued and outstanding and constitute the Shares. Seller is and will be on the Closing Date the record and beneficial owner and holder of the Shares, free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of the Company. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of any Legal Requirement. The Company does not own, or have any Contract to acquire, any equity securities or other securities of any Person (other than Company) or any direct or indirect equity or ownership interest in any other business. 3.4 FINANCIAL STATEMENTS Seller has delivered to Buyer an unaudited balance sheet of the Company as at April 30, 1999 (the "Interim Balance Sheet") and the related unaudited statement of income for the six (6) months then ended. Such financial statements fairly present the financial condition and the results of operations of the Company at the respective date of and for the period referred to in such financial statements, all in accordance with GAAP, subject, in the case of interim financial statements, to normal recurring yearend adjustments (the effect of which will not, individually or in the aggregate, be materially adverse); the financial statements referred to in this Section 3.4 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in any notes to such financial statements. No financial statements of any Person other than the Company are required by GAAP to be included in the financial statements of the Company. 3.5 BOOKS AND RECORDS Since November 1, 1997, the books of account, minute books, stock record books, and other records of the Company, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. Since November 1, 1997, the minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholder and the Board of Directors, and no meeting of any such stockholder or Board of Directors has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company. 3.6 TITLE TO PROPERTIES; ENCUMBRANCES (a) Part 3.6 of the Disclosure Letter contains a complete and accurate list of all real property, leaseholds, or other interests therein owned by the Company. Seller has delivered or made available to Buyer copies of the deeds, leases and other instruments by which the Company acquired such real property and interests, and copies of all title insurance policies, opinions, abstracts, and surveys in the possession of Seller or the Company and relating to such property or interests. The Company owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that they purport to own in connection with the facilities and other assets owned or operated by the Company or reflected as owned in the books and records of the Company, including all of the properties and assets reflected in the Interim Balance Sheet (except for assets held under capitalized leases disclosed or not otherwise required to be disclosed in Part 3.6 of the Disclosure Letter and personal property sold since the date of the Interim Balance Sheet in the Ordinary Course of Business), and all of the properties and assets purchased or otherwise acquired by the Company since the date of the Interim Balance Sheet (except for personal property acquired and sold since the date of the Interim Balance Sheet in the Ordinary Course of Business) are listed in Part 3.6 of the Disclosure Letter. All material properties and assets reflected in the Interim Balance Sheet are free and clear of all Encumbrances except, with respect to all such properties and assets, (i) mortgages or security interests shown on the Interim Balance Sheet as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (ii) mortgages or security interests incurred in connection with the purchase of property or assets after the date of the Interim Balance Sheet (such mortgages and security interests being limited to the property or assets so acquired), with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (iii) liens for current taxes not yet due, and (iv) with respect to real property, minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Company, and zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. (b) The Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to any leased real property for the full term of the lease thereof. Each real property lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company and of each other Person that is a party thereto, and except as set forth in Part 3.6 of the Disclosure Letter, there is no, and neither the Seller nor the Company has knowledge of any, or has received any, notice of any default (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder. The Company has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in any real property lease. No penalties are accrued and unpaid under any real property lease. 3.7 CONDITION AND SUFFICIENCY OF ASSETS The equipment of the Company is in good operating condition and repair, and adequate for the uses to which it is being put, and none of the equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The equipment of the Company is sufficient for the continued conduct of the Company's business after the Closing in substantially the same manner as conducted prior to the Closing. 3.8 ACCOUNTS RECEIVABLE All accounts receivable of the Company that are reflected on the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the "Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves shown on the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the Accounts Receivable as of the Closing Date than the reserve reflected in the Interim Balance Sheet represented by the Accounts Receivable reflected therein and will not represent a material adverse change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any setoff, within ninety days after the day on which it first becomes due and payable. There is no contest, claim, or right of setoff, other than returns in the Ordinary Course of Business, under any Contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. 3.9 INVENTORY At the time of Closing, the business assets and other property of the Company shall not include any inventory of fly ash or any other dry bulk material. 3.10 NO UNDISCLOSED LIABILITIES To the Knowledge of Seller and the Company, except as otherwise provided in this Agreement or as set forth in Part 3.10 of the Disclosure Letter (or any other part of the Disclosure Letter) or as otherwise included as part of any Applicable Contract entered into by the Company in the Ordinary Course of Business, the Company has no undisclosed liabilities or obligations of any nature (whether absolute, accrued, contingent, or otherwise), except for (a) liabilities or obligations reflected or reserved against in the Interim Balance Sheet (including the related unaudited statement of income) or the Closing Financial Statements and (b) liabilities or obligations otherwise incurred by the Company in the Ordinary Course of Business. 3.11 TAXES (a) The Company has filed or caused to be filed all Tax Returns that are or were required to be filed pursuant to applicable Legal Requirements, except where the failure to file Tax Returns would not have a material adverse effect on the financial condition of the Company. The Company has paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by Seller or the Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter and are being contested in good faith and as to which adequate reserves have been provided in the Interim Balance Sheet. (b) The United States federal and state income Tax Returns of the Company have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through December 31, 1992. All deficiencies proposed as a result of any such audits have been paid, reserved against, settled, or are being contested in good faith by appropriate proceedings. Except as described in Part 3.11 of the Disclosure Letter, the Company has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of the Company or for which the Company may be liable. (c) The charges, accruals, and reserves with respect to Taxes on the respective books of the Company are adequate and are at least equal to the Company's liability for Taxes. There exists no proposed tax assessment against the Company except as disclosed in the Interim Balance Sheet or in Part 3.11 of the Disclosure Letter. All Taxes that the Company is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person. (d) To the Knowledge of Seller and the Company, all Tax Returns filed by (or that include on a consolidated basis) the Company are true, correct, and complete. Any tax sharing agreement between the Seller and the Company shall be terminated as of the Closing Date and any such agreement will have no further effect for any taxable year (whether the current year, a future year or any past year). (e) There are no liens for Taxes (other than current Taxes which are not yet due and payable) upon any of the assets or property of the Company. (f) The Contemplated Transactions described in this Agreement are not subject to the tax withholding provisions of Subchapter A of Chapter 3 or Section 3406 of the IRC or any other Legal Requirement. (g) All of the assets or other property with respect to which the Company claims any depreciation, amortization or similar expense for Tax purposes is owned by the Company. (h) Seller, with the cooperation of Buyer and the Company, shall be responsible for the timely filing (taking into account any extensions received from the relevant Tax Authorities) of all Returns required by law to be filed by the Company for periods ending on or prior to the Closing Date, which Returns shall be true, correct and complete in all material respects, and all Taxes indicated as due and payable on such Tax Returns shall be paid or will be paid by Seller as and when required by law, except to the extent such Taxes have been accrued on the Closing Financial Statements of the Company as of the Closing Date. (i) Any Tax refunds that are received by Buyer or the Company and any amounts credited against taxes to which Buyer or the Company become entitled, that relate to Tax periods or portions thereof ending on or before the Closing Date, shall be for the account of Seller, and Buyer shall pay to Seller any such refund or the amount of any such refund or the amount of any such credit within a period of fifteen (15) days after receipt or entitlement thereto. In addition, to the extent that a claim for refund or a proceeding results in a payment or credit against any Tax by a taxing authority to the Buyer or the Company of any amount accrued on the Closing Financial Statements, the Buyer shall pay such amount to Seller within fifteen (15) days after receipt or entitlement thereto. (j) At Seller's request, the Buyer will cause the Company to make and/or join with the Seller or Seller's affiliated group in making any election by Seller or Seller's affiliated group that does not have a material adverse impact on the Company or Buyer in any Tax period following the Closing Date. (k) In order to appropriately apportion any Taxes relating to a period that includes the Closing Date, the Seller and the Buyer will, to the extent permitted by applicable law, elect with the relevant taxing authority to treat for all purposes the Closing Date as the last day of a taxable period of the Company (a "short period"), and such period shall be treated as a Short Period and a period ending prior to or on the Closing Date for purposes of this Agreement. (l) In any case where applicable law does not permit the Company to treat the Closing date as the last day of a Short Period, then for purposes of this Agreement, the portion of each Tax that is attributable to the Company's operations which would have qualified as a Short Period if such election had been permitted by applicable law (an "Interim Period") shall be (A) in the case of a Tax that is not based on net or gross income, the total amount of such Tax for the period in question multiplied by a fraction, the numerator of which is the number of days in the Interim Period, and the denominator of which is the total number of days in such period, and (B) in the case of a Tax that is based on net or gross income, the Tax that would be due with respect to the Interim, Period if such Interim Period were a Short Period shall be determined based upon an interim closing of the books of the Company. (m) Seller, at its expense, shall have the exclusive authority to represent the Company before the IRS or any other governmental agency or authority or any court regarding any Tax Return and/or Taxes paid by the Company for periods ending on or before the Closing Date, including, but not limited to (A) the exclusive control of any response to any examination by the IRS of any federal tax returns of the Seller's affiliate group in respect of the operation of the Company for such Periods or any examinations of a unitary state return of Seller's affiliate group; and (B) the exclusive control over any contest of any issue to the extent included in any return of the Seller's affiliated group through final determination, including, but not limited to, whether and in what forum to conduct such contest, and whether and on what basis to settle such contest. (n) Buyer agrees to retain all of the Company's records regarding any of the Company's tax returns filed by law for all periods ending on or prior to the Closing Date. Buyer shall not destroy any of the Company's records covering periods prior to the Closing Date without the prior written consent in each instance of the Seller. (o) In general, Seller and Buyer agree to cooperate with each other and their respective representatives in a prompt and timely manner, in connection with the preparation and filing of, and any administrative or judicial proceeding involving, any Tax return or information filed or required to be filed by or for Seller or any member of Seller's affiliated group for any period ending on or before the Closing Date, or the Buyer's affiliated group or any member thereof for any period ending after the Closing Date, with respect to any item or issue affecting the property or operations of the Company. Such cooperation shall include, but not be limited to, the execution and delivery to Seller by Buyer or any of its affiliated group (including the Company) of any waiver of the statute of limitations or any power of attorney required to allow Seller and its counsel to represent the Company in any controversy which the Seller shall have the right to control pursuant to this Section 3.11, the prompt and timely filing of appropriate claims for any refund on IRS Form 1139 (or any successor thereto), and making available to the other parties, during normal business hours, all books, records (including, but not limited to, working papers and schedules) and information, officers and employees (without substantial interruption of employment) reasonably requested and necessary or useful in connection with any tax inquiry, audit, investigation, dispute, litigation or any other matter requiring such books, records, information, officers or employees for any reasonable business purpose. Notwithstanding the foregoing, neither party shall be required to furnish to the other the federal income tax returns or drafts thereof (except as otherwise expressly provided in this Agreement) of Seller's affiliated group or Buyer's affiliated group, as the case may be, for any period, except that each party shall furnish to the other the applicable portions of such returns reporting the operations of the Company and the applicable portions of all reports relating to the examination by the IRS or any other federal, state, local or foreign governmental agency relating to the examination of such returns. (p) In order to assist Seller in complying with its obligations pursuant to this Section 3.11, within 180 days following the Closing Date, Buyer shall furnish to Seller any information that may be necessary for Seller to prepare a draft federal income Tax return reporting the operations of the Company for the Short Period. Such draft return shall be prepared without regard to the items of income, gain, deduction, loss or credit of the other members of the Seller's affiliated group. All items of income, gain, deduction, loss and credit included in such draft return shall be reported therein on a basis consistent with the reporting of such items (or substantially similar items by the Company in prior federal income tax returns of Seller's affiliated group), except to the extent otherwise required by the IRC or as a result of a change in factual circumstances. 3.12 NO MATERIAL ADVERSE CHANGE Since the date of the Interim Balance Sheet, there has not been any material adverse change (or any event or development which, individually or together with other such events, could reasonably be expected to result in a material adverse change) in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change. 3.13 EMPLOYEE BENEFITS, ETC. (a) Subject to the provisions of Section 3.20, as of the Closing Date, the Company shall terminate its employment relationship with all of its employees and the Seller shall be responsible for (A) the payment of all wages, severance and other remuneration due to such employees with respect to their employment services for the Company prior to the Closing Date, including accrued vacation, (B) the provision of health plan continuation coverage for such employees in accordance with the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and Sections 601 through 609 of ERISA ("COBRA"), and (C) the handling of relationships with and any liabilities to such employees as a result of any claims, demands, suits, proceedings and the like arising prior to the Closing Date, or obligations triggered by, or resulting from, the Contemplated Transactions, except such liabilities as may arise from any employmentrelated decisions of Buyer with respect to such employees (b) As of the Closing Date, Buyer shall cause the Company to make available to the employees of the Company hired on or after the Closing Date such benefit plans and programs as shall be comparable to those offered to similarly situated employees of the Company prior to the Closing Date. Such employees shall be given credit for all years of service recognized by the Company under its current employee benefit plans and other benefit arrangements for the purposes of determining eligibility to become a participant, including their vested interest under any retirement plan, based upon their recognized original date of employment with the Company. For each such employee who was enrolled in any group medical and dental coverage offered by the Company on the Closing Date and who thereafter enrolls in any group medical and dental plan of the Buyer or the Company, the Buyer shall (A) waive or cause the Company to waive any preexisting condition limitation that might otherwise apply to such employee, and (B) agrees to recognize or cause the Company to recognize the dollar amount of all expenses incurred by such employee during the year in which the Closing Date occurs for purposes of satisfying the deductibles and copayment limitations in accordance with the terms of such group medical and dental plan of the Buyer or the Company. Seller will cause the Company to provide the Buyer with a true and complete listing of all amounts so expended and such other information as Buyer may reasonably require in order to properly administer any provisions of this Section 3.13(a). (c) All former Company employees hired by Buyer for employment by the Company on or after the Closing Date shall be subject to the vacation policy of the Buyer or any policy adopted by the Company thereafter, except that (A) such employees shall be given full vacation credit for prior years of service recognized by the Company prior to the Closing Date, and (B) the amount of annual vacation to which such employees are entitled on the Closing Date under the Company's vacation policy shall not be reduced and shall be carried forward on an annual basis until each such employee's annual vacation entitlements reach a parity with such entitlements under the vacation policy of the Buyer or any such policy thereafter adopted by the Company. Seller shall be responsible for payment to such employees based upon any accrued and earned but unused vacation entitlements prior to the Closing Date. (d) Buyer and Seller hereby acknowledge and agree that this Agreement shall not constitute a contract of employment or otherwise between either Buyer, Seller or the Company and any employee of the Company, nor shall any such employee be entitled to rely on this Agreement as a basis for any breach of contract claim against either Buyer, Seller or the Company. In no event shall Seller have any liability for the administration or payment of any benefits due under any employee benefit plans maintained by the Buyer or the Company after the Closing Date. (e) Pursuant to the Company terminating its employment relationship with all of its employees as contemplated under Section 3.13(a), Seller shall cause the Company to comply with all applicable federal, state and local laws, ordinances and regulations, including but not limited to the applicable provisions of the Worker Adjustment Retraining and Notification Act. 3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS (a) Except as set forth in Part 3.14 of the Disclosure Letter: (i) to the Knowledge of Seller and the Company since November 1, 1997, the Company has been in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; (ii) to the Knowledge of Seller and the Company since November 1, 1997, no event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation by the Company of, or a failure on the part of the Company to comply with, any Legal Requirement; and (iv) the Company has not received since November 1, 1997, any pending notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) Except as set forth in Part 3.14 of the Disclosure Letter: (i) to the Knowledge of Seller and the Company, the Company is, and at all times since November 1, 1997, has been in full compliance with all of the terms and requirements of each Governmental Authorization held by the Company; (ii) to the Knowledge of Seller and the Company, no event has occurred or circumstance exists since November 1, 1997, that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization held by the Company, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization held by the Company; (iii) the Company has not received at any time since November 1, 1997, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization held by the Company, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any such Governmental Authorization; and (iv) to the Knowledge of Seller and the Company, all applications required to have been filed for the renewal of any Governmental Authorizations held by the Company have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. The Governmental Authorizations held by the Company collectively constitute all of the Governmental Authorizations necessary to permit the Company to lawfully conduct and operate its business in the manner it currently conducts and operates such business and to permit the Company to own and use its assets in the manner in which it currently owns and uses such assets. 3.15 LEGAL PROCEEDINGS; ORDERS (a) To the Knowledge of Seller and the Company, except as set forth in Part 3.15 of the Disclosure Letter, there is no pending Proceeding: (i) that has been commenced by or against the Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To the Knowledge of Seller and the Company, (1) no Proceeding has been Threatened, and (2) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. Seller has delivered to Buyer copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not have a material adverse effect on the business, operations, assets, condition, or prospects of the Company. (b) Except as set forth in Part 3.15 of the Disclosure Letter: (i) there is no Order to which the Company, or any of the assets owned or used by the Company, is subject; (ii) the Seller is not subject to any Order that relates to the business of, or any of the assets owned or used by, the Company; and (iii)to the Knowledge of Seller and the Company, no officer, director, agent, or employee of the Company is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of the Company. (c) To the Knowledge of Seller and the Company, except as set forth in Part 3.15 of the Disclosure Letter: (i) the Company is, and at all times since November 1, 1997, has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject; (ii) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is subject; and (iii)the Company has not received, at any time since November 1, 1997, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is or has been subject. 3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the Interim Balance Sheet, the Company has conducted its businesses only in the Ordinary Course of Business and there has not been any: (a) change in the Company's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by the Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; (b) amendment to the Organizational Documents of the Company; (c) payment or increase by the Company of any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee, except as contemplated under the respective employment contracts with Messrs. James H. Irvine and Lee L. Irvine (the "Employment Contracts"); (d) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company, except as contemplated under the respective Employment Contracts; (e) damage to or destruction or loss of any asset or property of the Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Company, taken as a whole; (f) entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, except in the Ordinary Course of Business, or (ii) any Contract or transaction involving a total remaining commitment by or to the Company of at least $25,000, except in the Ordinary Course of Business; (g) sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, including the sale, lease, or other disposition of any of the Intellectual Property Assets; (h) cancellation or waiver of any claims or rights with a value to the Company in excess of $50,000; (i) material change in the accounting methods used by the Company; (j) agreement, whether oral or written, by the Company to do any of the foregoing, except as contemplated under the respective Employment Contracts; (k) transaction by the Company with any of its officers, directors, employees, stockholders or affiliates, other than pursuant to an Applicable Contract, the respective Employment Contracts between the Seller and Messrs. James H. Irvine and Lee L. Irvine, or arrangement in effect on the date of the Interim Balance Sheet and disclosed to Buyer; or (l) entry into of any agreement by the Company to do or engage in any of the foregoing, including, without limitation, any merger, sale of substantially all the assets or other business combination not otherwise restricted by any of the foregoing provisions. 3.17 CONTRACTS; NO DEFAULTS (a) To the Knowledge of Seller and the Company, Part 3.17(a) of the Disclosure Letter contains a complete and accurate list, and Seller has delivered to Buyer true and complete copies, of: (i) each Applicable Contract that involves performance of services or delivery of goods or materials by the Company; (ii) each Applicable Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of the Company; (iii)each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Applicable Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property; (iv) each licensing agreement or other Applicable Contract with respect to patents, trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation or the nondisclosure of any of the Intellectual Property Assets; (v) each collective bargaining agreement and other Applicable Contract to or with any labor union or other employee representative of a group of employees; (vi) each joint venture, partnership, and other Applicable Contract (however named) involving a sharing of profits, losses, costs, or liabilities by the Company with any other Person; (vii)each Applicable Contract containing covenants that in any way purport to restrict the business activity of the Company or limit the freedom of the Company to engage in any line of business or to compete with any Person; (viii) each Applicable Contract providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods; (ix) each power of attorney that is currently effective and outstanding; (x) each Applicable Contract for capital expenditures in excess of $25,000; (xi) each written warranty, guaranty, and or other similar undertaking with respect to contractual performance extended by the Company other than in the Ordinary Course of Business; and (xii)each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing. (b) Except as set forth in Part 3.17(b) of the Disclosure Letter, as of the Closing: (i) Seller (and no Related Person of Seller) neither has nor may acquire any rights under, and Seller neither has nor may become subject to any obligation or liability under, any Contract that relates to the business of, or any of the assets owned or used by, the Company; and (ii) No officer, director, agent, employee, consultant, or contractor of the Company is bound by any Contract that purports to limit the ability of such officer, director, agent, employee, consultant, or contractor to (A) engage in or continue any conduct, activity, or practice relating to the business of the Company, or (B) assign to the Company or to any other Person any rights to any invention, improvement, or discovery. (c) To the Knowledge of Seller and the Company, except as set forth in Part 3.17(c) of the Disclosure Letter, each Contract identified or required to be identified in Part 3.17(a) of the Disclosure Letter is in full force and effect and is valid and enforceable in accordance with its terms. (d) Except as set forth in Part 3.17(d) of the Disclosure Letter: (i) to the Knowledge of Seller and the Company, the Company is, and at all times since November 1, 1997, has been, in material compliance with all applicable terms and requirements of each Contract under which the Company has or had any obligation or liability or by which the Company or any of the assets owned or used by the Company is or was bound; (ii) to the Knowledge of Seller and the Company, each other Person that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and at all times since November 1, 1997, has been, in material compliance with all applicable terms and requirements of such Contract; (iii)to the Knowledge of Seller and the Company, no event has occurred or circumstance exists that (with or without notice or lapse of time) may materially contravene, conflict with, or result in a material violation or breach of, or give the Company or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; and (iv) to the Knowledge of Seller and the Company, the Company has not given to or received from any other Person, at any time since November 1, 1997, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. (e) to the Knowledge of Seller and the Company, there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation. (f) to the Knowledge of Seller and the Company, the Contracts relating to the sale, design, manufacture, or provision of products or services by the Company have been entered into in the Ordinary Course of Business and have been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement. 3.18 INSURANCE It is hereby acknowledged and agreed that the majority of the Company's property and liability exposures are insured under risk financing programs provided through the Seller, which utilize a combination of selfinsurance and large deductibles, as well as other riskfinancing techniques; therefore, effective as of the Closing, (a) Seller shall be entitled to cancel and terminate all property and liability insurance coverage applicable to the property and business operations of the Company, and (b) Buyer and/or the Company shall bear all risk of loss and liability accruing from and after the Closing with respect the property and business operations of the Company. 3.19 ENVIRONMENTAL MATTERS Except as set forth in part 3.19 of the disclosure letter: (a) To the Knowledge of Seller and the Company, the Company is, and at all times since November 1, 1997, has been in substantial compliance with, and since November 1, 1997, has not been and is not in material violation of, any applicable Environmental Law. Neither the Seller nor the Company has any basis to expect any actual or Threatened Order, notice, or other communication from (i) any Governmental Body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure by the Company to comply with any Environmental Law, or of any actual or Threatened obligation of the Company to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company has an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, transported, imported, used, or processed by the Company, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received by the Company. (b) There are no pending or, to the Knowledge of Seller and the Company, Threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Facilities or any other properties and assets (whether real, personal, or mixed) in which the Company has an interest. (c) Neither the Seller nor the Company has any basis to expect, nor has either of them received, any citation, directive, inquiry, notice, Order, summons, warning, or other communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which Seller or the Company has an interest, or with respect to any property or facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Company have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (d) To the Knowledge of Seller and the Company, neither the Seller nor the Company has any Environmental, Health, and Safety Liabilities with respect to the Facilities or with respect to any other properties and assets (whether real, personal, or mixed) in which the Company has an interest. (e) To the Knowledge of Seller and the Company, there are no Hazardous Materials present on the Facilities, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facilities. Neither the Company, nor to the Knowledge of Seller and the Company, any other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company has an interest except in full compliance with all applicable Environmental Laws. (f) To the Knowledge of Seller and the Company, since November 1, 1997, there has been no Release or, to the Knowledge of Seller and the Company, Threat of Release, of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which the Company has an interest, whether by Seller, the Company, or any other Person. (g) Seller has to its Knowledge delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by the Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning compliance by the Company with Environmental Laws. 3.20 EMPLOYEES (a) Part 3.20 of the Disclosure Letter contains a complete and accurate list of the following information for each employee (other than officers and directors) of the Company, including each employee on leave of absence or layoff status: name; job title; current compensation paid or payable and any change in compensation since November 1, 1997; vacation accrued; and service credited for purposes of vesting and eligibility to participate under the Company's pension, retirement, profit-sharing, thriftsavings, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership, severance pay, insurance, medical, welfare, or vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any other employee benefit plan. (b) Except as set forth in the respective Employment Contracts between the Seller and Messrs. James H. Irvine and Lee L. Irvine, or Part 3.20 of the Disclosure Letter, to the Knowledge of Seller and the Company, no employee of the Company is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, non-competition, or proprietary rights agreement, between such employee or director and any other Person that in any way adversely affects or will affect (i) the performance of his duties as an employee of the Company, or (ii) the ability of the Company to conduct its business in the Ordinary Course of Business. (c) Part 3.20 of the Disclosure Letter also contains a complete and accurate list of the following information for each retired employee or director of the Company, or their dependents, receiving benefits or scheduled to receive benefits in the future: name, pension benefit, pension option election, retiree medical insurance coverage, retiree life insurance coverage, and other benefits. (d) Buyer may interview and make offers of employment to each of the employees of the Company, effective as of the Closing Date. Any such offers of employment shall be made on substantially the same terms and conditions and at substantially the same levels of compensation as exist with each such employee prior to the Closing Date. On or before the Closing Date, Buyer shall provide Seller with a written list of all employees of the Company who have accepted offers from the Buyer for employment by the Company as of the Date of Closing. 3.21 LABOR RELATIONS; COMPLIANCE The Company is not a party to any collective bargaining or other labor Contract. There has not been, there is not presently pending or existing, and there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee grievance process, (b) any Proceeding against or affecting the Company relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable Governmental Body, organizational activity, or other labor or employment dispute against or affecting any the Company or its premises, or (c) any application for certification of a collective bargaining agent. No event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute. There is no lockout of any employees by the Company, and no such action is contemplated by the Company. To the Knowledge of Seller, the Company has complied in all respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing. To the Knowledge of Seller, the Company is not liable for the payment of any compensation, damages, taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. 3.22 INTELLECTUAL PROPERTY (a) Intellectual Property Assets. With respect to the Company, the term "Intellectual Property Assets" includes: (i) the name Irvine Fly Ash, Inc., all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, "Marks"); and (ii) all knowhow, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or licensed by the Company as licensee or licensor. (b) KnowHow Necessary for the Business. (i) The Intellectual Property Assets are all those necessary for the operation of the Company's business as currently conducted. The Company is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and has the right to use without payment to a third party all of the Intellectual Property Assets. (ii) To the Knowledge of Seller and the Company, no employee of the Company has entered into any Contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work to anyone other than the Company. (c) Trademarks. (i) To the Knowledge of Seller and the Company, the Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims. (ii) To the Knowledge of Seller and the Company, no Mark has been or is now involved in any opposition, invalidation, or cancellation and, to the Knowledge of Seller, no such action is Threatened with the respect to any of the Marks. (iii)To the Knowledge of Seller and the Company, there is no potentially interfering trademark or trademark application of any third party. (d) Trade Secrets. (i) To the Knowledge of Seller and the Company, with respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. (ii) Seller and the Company have taken all reasonable precautions in the Ordinary Course of Business to protect the secrecy, confidentiality, and value of their Trade Secrets. (iii)To the Knowledge of Seller and the Company, (A) the Company has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets, (B) the Trade Secrets are not part of the public knowledge or literature, and have not been used, divulged, or appropriated either for the benefit of any Person (other than the Company) or to the detriment of the Company, and (C) no Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. 3.23 CERTAIN PAYMENTS To the Knowledge of Seller and the Company, neither the Company nor any director, officer, agent, or employee of the Company, or any other Person associated with or acting for or on behalf of the Company, has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the Company, or (iv) in violation of any Legal Requirement; or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company. 3.24 DISCLOSURE (a) To the Knowledge of Seller and the Company, no representation or warranty of Seller in this Agreement and no statement in the Disclosure Letter omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. (b) No notice given pursuant to Section 5.5 will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading. (c) There is no fact known to Seller that has specific application to the Company (other than general economic or industry conditions) and that materially adversely affects or, as far as Seller can reasonably foresee, materially threatens, the assets, business, prospects, financial condition, or results of operations of the Company that has not been set forth in this Agreement or the Disclosure Letter. 3.25 RELATIONSHIPS WITH RELATED PERSONS As of the Closing, neither the Seller nor any Related Person of Seller or of the Company has any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Company's business, except that certain Commercial Lease Agreement dated as of November 1, 1997, by and between 2303 Gilbert Associates, as Lessor, and the Company, as lessee, covering certain office facilities located at 2303 Gilbert Avenue, Cincinnati, Ohio 45206 (the "Office Lease"). Neither the Seller nor any Related Person of Seller or, to the Knowledge of Seller, of the Company is the owner (of record or as a beneficial owner) of any equity interest, or any other financial or profit interest in, any Person that has (i) business dealings or a material financial interest in any transaction with the Company other than the Office Lease or business dealings or transactions conducted in the Ordinary Course of Business with the Company at substantially prevailing market prices and on substantially prevailing market terms, or (ii) engaged in competition with the Company with respect to the sale of fly ash or related services of the Company (a "Competing Business") in any market presently served by the Company, except for less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the overthecounter market. Except as set forth in Part 3.25 of the Disclosure Letter, neither the Seller nor any Related Person of Seller or of the Company is a party to any Contract with, or has any claim or right against, the Company. 3.26 BROKERS OR FINDERS Seller and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: 4.1 ORGANIZATION AND GOOD STANDING Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Utah. 4.2 AUTHORITY; NO CONFLICT (a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and the related closing documents and to perform its obligations under this Agreement and the related closing documents, respectively. (b) Except as set forth in Schedule 4.2, neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to: (i) any provision of Buyer's Organizational Documents; (ii) any resolution adopted by the board of directors or the stockholders of Buyer; (iii) any Legal Requirement or Order to which Buyer may be subject; or (iv) any Contract to which Buyer is a party or by which Buyer may be bound. Except as set forth in Schedule 4.2, Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 4.3 INVESTMENT INTENT Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. 4.4 CERTAIN PROCEEDINGS There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To the Knowledge of Buyer, no such Proceeding has been Threatened. 4.5 BROKERS OR FINDERS Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 5. COVENANTS OF SELLER 5.1 ACCESS AND INVESTIGATION Subject to the terms and conditions contained in that certain Confidentiality Agreement dated as of December 9, 1998, by and between Buyer and Seller, it is understood and agreed that between the date of this Agreement and the Closing Date, without unreasonable interference with the business operations of the Company, Seller will, and will cause the Company and its Representatives to, (a) afford Buyer and its Representatives (collectively, "Buyer's Advisors") full and free access to the Company's personnel, properties, contracts, books and records, and other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data pertaining to the Company as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with such additional financial, 'operating, and other data and information pertaining to the Company as Buyer may reasonably request. 5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES Between the date of this Agreement and the Closing Date, Seller will, and will cause the Company to: (a) conduct the business of the Company only in the Ordinary Course of Business; (b) use their Best Efforts to preserve intact the current business organization of the Company, keep available the services of the current officers, employees, and agents of the Company, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company; (c) confer with Buyer concerning operational matters of a material nature; and (d) otherwise report periodically to Buyer concerning the status of the business, operations, and finances of the Company. 5.3 NEGATIVE COVENANT Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, Seller will not, and will cause the Company not to, without the prior consent of Buyer, take any affirmative action, or fail to take any reasonable action within its control, as a result of which any of the changes or events listed in Section 3.16 is likely to occur. 5.4 REQUIRED APPROVALS As promptly as practicable after the date of this Agreement, Seller will, and will cause the Company to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Seller will, and will cause the Company to, (a) reasonably cooperate with Buyer with respect to all filings that Buyer elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions, and (b) reasonably cooperate with Buyer in obtaining all consents identified in Schedule 4.2. 5.5 NOTIFICATION Between the date of this Agreement and the Closing Date, the Seller will promptly notify Buyer in writing if the Seller or the Company becomes aware of any fact or condition that causes or constitutes a material Breach of any of Seller's representations and warranties as of the date of this Agreement, or if the Seller or the Company becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a material Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Disclosure Letter if the Disclosure Letter were dated the date of the occurrence or discovery of any such fact or condition, Seller will promptly deliver to Buyer a supplement to the Disclosure Letter specifying such change. During the same period, the Seller will promptly notify Buyer of the occurrence of any material Breach of any covenant of Seller in this Section 5 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 impossible or unlikely. 5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS Except as expressly provided in this Agreement, Seller will cause all indebtedness owed to the Company by either Seller or any Related Person of the Seller to be paid in full prior to Closing. 5.7 NO NEGOTIATION Until such time, if any, as this Agreement is terminated pursuant to Section 9, Seller will not, and will cause the Company and each of its Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the business or assets (other than in the Ordinary Course of Business) of the Company, or any of the capital stock of the Company, or any merger, consolidation, business combination, or similar transaction involving the Company. 5.8 BEST EFFORTS Between the date of this Agreement and the Closing Date, Seller will use its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 5.9 NONCOMPETITION From and after the Closing Date, Seller agrees that: (a) Except as otherwise contemplated under this Section 5.9, for a period of two (2) years from the Closing Date (the "Restricted Period"), the Seller, alone or in conjunction with any other Person, or directly or indirectly through a Related Person, will not directly or indirectly own, manage, operate, join, have a financial interest in, control or participate in the ownership, management, operation or control of, or use or permit its name to be used in connection with, or be otherwise connected in any manner with any business or enterprise engaged in providing services of any nature whatsoever related to the management, disposal, marketing, sale or other beneficial reuse of fly ash (the "Restricted Business") in the states of Ohio, Missouri, Indiana, Kentucky, Tennessee, West Virginia and/or Illinois (the "Territory"), provided that the Restricted Business shall not include (i) the transportation or terminating of fly ash or (ii) consulting services or the sale of flyash products (not to exceed 2,000 tons of fly ash per year) related to mixdesign by Seller or any Related Person within the Territory. (b) In the event that any petroleum coke customer of the Seller requests that the Seller, alone or in conjunction with any other Person, or directly or indirectly through a Related Person, perform or provide any services related to the Restricted Business within the Territory during the Restricted Period, the Buyer shall have a right of first refusal to perform or provide the requested services. Once Seller has secured a bona fide offer from a third party to provide such services, then Seller will promptly submit in writing the pertinent details of such offer to Buyer, provided that Buyer shall then have a period of ten (10) business days to notify Seller in writing of the exercise of its right of first refusal in accordance with the terms of the thirdparty offer. To the extent that Buyer fails to notify Seller in writing of the exercise of its right of first refusal hereunder, then Seller may accept the terms of the thirdparty offer without any further duty or obligation to Buyer as to the performance of such services in connection with the Restricted Business. The parties agree that the intent of this Section 5.9(b) is to allow the Seller to meet the needs of its petroleum coke customers while at the sale time honoring the provisions of this Agreement. As such, the benefits of any contract between the Seller and its coalfired power plant customer related to the Restricted Business shall be in the form of a passthrough relationship for the benefit of the Buyer, and shall not contain any markup or other financial consideration to the Seller. (c) During the Restricted Period, the Seller shall not directly or indirectly, or through a Related Person, (i) influence any individual who was an employee or consultant of the Company at any time, to terminate his or her employment or consulting relationship with the Company (except as provided in the respective Employment Contracts), (ii) interfere in any other way with the employment, or other relationship, of any employee or consultant of the Company or (iii) cause or attempt to cause or participate in any way in any discussion or negotiation which may cause (x) any client, customer or supplier of the Company or (y) any prospective client, customer or supplier of the Company, from engaging in business with the Company. (d) The Seller agrees that the Buyer's remedies at law for any breach or threat of breach by it of any of the provisions of this Section 5.9 will be inadequate, and that, in addition to any other remedy to which Buyer may be entitled at law or in equity, Buyer shall be entitled to a temporary or permanent injunction or injunctions or temporary restraining order or orders to prevent breaches of the provisions of this Section 5.9 and to enforce specifically the terms and provisions hereof, in each case without the need to post any security or bond. Nothing herein contained shall be construed as prohibiting Buyer from pursuing, in addition, any other remedies available to it for such breach or threatened breach. A waiver by the Buyer of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provisions of this Agreement or of any subsequent breach. (e) The parties hereto consider the restrictions contained in this Section 5.9 to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, but if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction on the Seller's activities, the provisions of this Section 5.9 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. Alternatively, if the court referred to above finds that any restriction contained in this Section 5.9 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy. 6. COVENANTS OF BUYER 6.1 APPROVALS OF GOVERNMENTAL BODIES As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its Related Persons to, make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Buyer will, and will cause each Related Person to, (i) reasonably cooperate with Seller with respect to all filings that Seller is required by Legal Requirements to make in connection with the Contemplated Transactions, and (ii) reasonably cooperate with Seller in obtaining all consents identified in Part 3.2 of the Disclosure Letter; provided that this Agreement will not require Buyer to dispose of or make any change in any portion of its business or to incur any other burden to obtain a Governmental Authorization. 6.2 BEST EFFORTS Except as set forth in the proviso to Section 6.1, between the date of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by Buyer, in whole or in part): 7.1 ACCURACY OF REPRESENTATIONS All of Seller' representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement, and must be accurate in all material respects as of the Closing Date as if made on the Closing Date, subject to the effect of any supplement to the Disclosure Letter. 7.2 SELLERS' PERFORMANCE (a) All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. (b) Each document required to be delivered pursuant to Section 2.4 must have been delivered, and each of the other covenants and obligations in Sections 5.4 and 5.8 must have been performed and complied with in all respects. 7.3 CONSENTS Each of the Consents identified in Part 3.2 of the Disclosure Letter must have been obtained and must be in full force and effect. 7.4 ADDITIONAL DOCUMENTS Each of the following documents must have been delivered to Buyer: (a) an opinion of Seller's legal counsel, dated the Closing Date, in the form of Exhibit 7.4(a); (b) such other documents as Buyer may reasonably request for the purpose of (i) enabling its counsel to provide the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Seller's representations and warranties, (iii) evidencing the performance by either Seller of, or the compliance by either Seller with, any covenant or obligation required to be performed or complied with by such Seller, (iv) evidencing the satisfaction of any condition referred to in this Section 7, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 7.5 NO PROCEEDINGS Since the date of this Agreement, there must not have been commenced or Threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions. 7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS There must not have been made or Threatened by any Person any claim asserting that such Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, the Company, or (b) is entitled to all or any portion of the Purchase Price payable for the Shares. 7.7 NO PROHIBITION Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Buyer or any Person. affiliated with Buyer to suffer any material adverse consequence under, (a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Governmental Body. 8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE Seller' obligation to sell the Shares and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by Seller, in whole or in part): 8.1 ACCURACY OF REPRESENTATIONS All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 8.2 BUYER'S PERFORMANCE (a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects. (b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.4 and must have paid the Purchase Price required to be made by Buyer pursuant to Section 2.4(b)(i). 8.3 CONSENTS Each of the Consents identified in Part 3.2 of the Disclosure Letter must have been obtained and must be in full force and effect. 8.4 ADDITIONAL DOCUMENTS Buyer must have caused the following documents to be delivered to Seller: (a) an opinion of Buyer's legal counsel, dated the Closing Date, in the form of Exhibit 8.4(a); and (b) such other documents as Seller may reasonably request for the purpose of (i) enabling their counsel to provide the opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iv) evidencing the satisfaction of any condition referred to in this Section 8, or (v) otherwise facilitating the consummation of any of the Contemplated Transactions. 8.5 NO INJUNCTION There must not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the sale of the Shares by Seller to Buyer, and (b) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 9. TERMINATION 9.1 TERMINATION EVENTS This Agreement may, by notice given prior to or at the Closing, be terminated: (a) by either Buyer or Seller if a material Breach of any provision of this Agreement has been committed by the other party and such Breach has not been waived; (b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition in writing on or before the Closing Date; or (ii) by Seller, if any of the conditions in Section 8 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Seller to comply with their obligations under this Agreement) and Seller have not waived such condition in writing on or before the Closing Date; (c) by mutual consent of Buyer and Seller; or (d) by either Buyer or Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before June 2, 1999, or such later date as the parties may agree upon. 9.2 EFFECT OF TERMINATION Each party's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 11. 1 and 11.3 will survive; provided, however, that if this Agreement is terminated by a party because of the Breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal and/or equitable remedies will survive such termination unimpaired. 10. INDEMNIFICATION; REMEDIES 10.1 SURVIVAL All representations, warranties, covenants, and obligations in this Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, and any other certificate or document delivered pursuant to this Agreement will survive the Closing, subject to the provisions of Sections 10.4 and 10.5. 10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS Subject to the provisions of Sections 10.4 and 10.5, Seller will indemnify and hold harmless Buyer, the Company, and their respective Representatives, stockholders, controlling persons, and affiliates (collectively, the "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, any loss, liability, claim, damage, expense (including reasonable attorneys' fees) (collectively, "Damages"), arising, directly or indirectly, from or in connection with: (a) any Breach of any representation or warranty made by Seller in this Agreement (after giving effect to any supplement to the Disclosure Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any other certificate or document delivered by Seller pursuant to this Agreement; (b) any Breach of any representation or warranty made by Seller in this Agreement as if such representation or warranty were made on and as of the Closing Date (after giving effect to any supplement to the Disclosure Letter), other than any such Breach that is expressly disclosed in a supplement to the Disclosure Letter; (c) any Breach by Seller of any covenant or obligation of such Seller in this Agreement; or (d) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with the Seller or the Company (or any Person acting on their behalf) in connection with any of the Contemplated Transactions. 10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER Buyer will indemnify and hold harmless Seller, and will pay to Seller the amount of any Damages arising, directly or indirectly, from or in connection with (a) any Breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in this Agreement, (c) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on its behalf) in connection with any of the Contemplated Transactions, (d) any Environmental, Health, and Safety Liabilities arising out of or relating to the ownership, operation, or condition occurring at any time after the Closing Date of the Facilities or any other properties and assets (whether real, personal, or mixed and whether tangible or intangible) in which the Company has an ownership interest, or (e) any bodily injury (including illness, disability, and death), personal injury, property damage (including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), or other damage of or to any Person, including any employee of former employee of the Company, in any way arising from any Hazardous Activity conducted by the Company after the Closing Date, or from Hazardous Material that was Released by the Company at any time after the Closing Date. 10.4 TIME LIMITATIONS If the Closing occurs, Seller will have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or obligation to be performed and complied with prior to the Closing Date, unless within a period of two (2) years following the Closing Date, Buyer notifies Seller of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer. 10.5 LIMITATIONS ON AMOUNT-SELLER The indemnifying party shall not have any liability or obligation (for indemnification or otherwise) to the indemnified party with respect to the matters described in Sections 10.2 and 10.3 until the total of all Damages incurred by the indemnified party with respect to such matters exceeds $75,000 or the limits of any applicable and recoverable insurance coverage available to the indemnified party, whichever is greater, and then only for the amount by which such Damages exceed $75,000 or the limits of any such applicable and recoverable insurance coverage, whichever is greater; provided, however, that in no event shall Seller or any of its affiliated entities have any liability or obligation under this Agreement, including but not limited to the provisions of Section 10.2 hereof, in excess of Six Million and No/100 Dollars ($6,000,000.00). 10.6 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS (b) (c) Promptly after receipt by an indemnified party under Sections 10.2 or 10.3 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnified party's failure to give such notice. (d) (e) If any Proceeding referred to in Section 10 is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party will, unless the claim involves Taxes, be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section 10 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent, which consent shall not be unreasonably withheld or delayed, unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnifying party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party. (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld or delayed). (d) Seller hereby consent to the nonexclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of any claim that an Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agrees that process may be served on Seller with respect to such a claim anywhere in the world. 10.7 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS A claim for indemnification for any matter not involving a thirdparty claim may be asserted by notice to the party from whom indemnification is sought. 11. GENERAL PROVISIONS 11.1 EXPENSES Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. Seller will cause the Company not to incur any material outofpocket expenses in connection with this Agreement, unless expressly approved in writing by Buyer. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a Breach of this Agreement by another party. 11.2 PUBLIC ANNOUNCEMENTS Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Seller determines. Unless consented to in writing by Seller in advance or required by Legal Requirements, prior to the Closing Buyer shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Seller and Buyer will consult with each other concerning the means by which the Company's employees, customers, and suppliers and others having dealings with the Company will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication. Buyer shall have the right to announce (publicly or otherwise) the acquisition of the Company following the Closing of the Contemplated Transactions. 11.3 CONFIDENTIALITY Without limitation of that certain Confidentiality Agreement dated as, of December 9, 1998, by and between Seller and Buyer, between the date of this Agreement and the Closing Date, Buyer and Seller will maintain in confidence, and will cause their respective directors, officers, employees, agents, and advisors to maintain in confidence, any written, oral, or other information obtained in confidence from another party or the Company in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by or necessary or appropriate in Connection with any legal proceedings. 11.4 NOTICES All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with written confirmation of receipt), (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Seller: Koch Carbon, Inc. 4111 East 37th Street North Wichita, Kansas 67220 Attention: President Facsimile No.: 316/8285046 with a copy to: Ronald D. Watson, Esq. Facsimile No.: 316/8285803 Buyer: ISG Resources, Inc. 136 East South Temple Suite 1300 Sale Lake City, Utah 84111 Attention: Brett A. Hickman, Esq. Facsimile No.: 801/2369730 11.5 JURISDICTION; SERVICE OF PROCESS Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Kansas, County of Sedgwick, or, if it has or can acquire jurisdiction, in the United States District Court for the Western District of Kansas, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 11.6 FURTHER ASSURANCES The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 11.7 WAIVER The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 11.8 ENTIRE AGREEMENT AND MODIFICATION This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 11.9 DISCLOSURE LETTER (a) The disclosures in the Disclosure Letter, and those in any Supplement thereto, must relate only to the representations and warranties in the Section of this Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. (b) In the event of any inconsistency between the statements in the body of this Agreement and those in the Disclosure Letter (other than an exception expressly set forth as such in the Disclosure Letter with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control. 11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRDPARTY RIGHTS Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 11.11 SEVERABILITY If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.12 SECTION HEADINGS, CONSTRUCTION The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 11.13 TIME OF ESSENCE With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 11.14 GOVERNING LAW This Agreement will be governed by the laws of the State of Kansas without regard to conflicts of laws principles. 11.15 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first written above. Seller: Buyer: Koch Carbon, Inc. ISG Resources, Inc. By: By: Name: Name: Title: Title: EX-12.1 33 STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO ISG Resources, Inc. Statement re Computation of Ratio of Earnings to Fixed Charges (In thousands, except ratios)
Year Year 2 1/2 Months 9 1/2 Months Ended Ended Ended Ended December 31, December 31, December 31, October 13, Year Ended December 31, ---------------------- 1999 1998 1997 1997 1996 1995 ---------------------------- ------------ ------------ --------- ------------ Fixed Charges: Interest on debt $ 12,690 $ 8,874 $ 628 $ 4,160 $ 4,853 $ 4,081 Amortization of debt issuance costs 702 464 - - - - Interest portion of rental expense 2,531 2,038 420 1,448 2,045 2,016 ---------------------------- ------------ ------------ --------- ------------ Total fixed charges $ 15,923 $ 11,376 $ 1,048 $ 5,608 $ 6,898 $ 6,097 ============================ ============ ============ ========= ============ Earnings: Pre-tax income (loss) from continuing operations $ 285 $ 4,808 $ 517 $ (2,478) $(2,232) $ (2,541) Add back fixed charges 15,923 11,376 1,048 5,608 6,898 6,097 ---------------------------- ------------ ------------ --------- ------------ Total earnings $ 16,208 $ 16,184 $ 1,565 $ 3,130 $ 4,666 $ 3,556 ============================ ============ ============ ========= ============ Ratio of Earnings to Fixed Charges 1.02 1.42 1.49 0.56 0.68 0.58 ============================ ============ ============ ========= ============ Deficit of Earnings to Fixed Charges $ - $ - $ - $ 2,478 $ 2,232 $ 2,541 ============================ ============ ============ ========= ============
EX-21.2 34 SUBSIDIARIES OF THE REGISTRANT AS OF 3/30/2000 Subsidiaries of the Registrant (As of March, 30, 2000) Best Masonry & Tool Supply, Inc. f/k/a J. Marvin Isaac Interests, Inc.(Texas domestic) Lewis W. Osborne, Inc. (California domestic) United Terrazzo Supply Co., Inc. (California domestic) Magna Wall, Inc. (Texas domestic) ISG Canada Limited (New Brunswick domestic - Canadian subsidiary) ISG Manufactured Products, Inc. (Utah domestic) Don's Building Supply, L.L.P. (Texas domestic)* Palestine Concrete Tile Company (Texas domestic) * This L.L.P is owned 90% by ISG Manufactured Products, Inc. and 10% by ISG Resources, Inc. EX-27 35 FDS --
5 (Replace this text with the legend) 0001063018 ISG Resources, Inc. 1 U.S. Dollars YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 1.000 0 0 21,496,616 329,000 4,055,425 27,046,921 41,477,562 7,893,374 220,462,511 18,075,120 133,500,000 0 0 0 27,161,804 220,462,511 120,319,575 156,205,272 83,442,725 142,883,926 0 0 13,391,944 285,177 647,589 (362,412) 0 0 0 (362,412) 0 0
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