STOCK EXCHANGE AGREEMENT
(as amended October 21, 1992)
THIS STOCK EXCHANGE AGREEMENT (this "Agreement") is entered into
as of this 20th day of August, 1992, by and among SJW CORP., a California
corporation ("SJW"), ROSCOE MOSS COMPANY, a California corporation ("RMC"),
ROSCOE MOSS, JR., GEORGE E. MOSS (Roscoe Moss, Jr. and George E. Moss being
referred to collectively as the "Principal Shareholders") and all of the other
shareholders of RMC, whose names are set forth on the signature pages of this
Agreement (together with the Principal Shareholders, being referred to
collectively as the "RMC Shareholders").
RECITALS
A. SJW, the RMC Shareholders and RMC have each determined to
engage in the transactions contemplated hereby, pursuant to which the RMC
Shareholders will cause RMC to distribute all of the capital stock of its
wholly-owned Roscoe Moss Manufacturing Company subsidiary, a California
corporation ("RMM"), to the existing shareholders of RMC (the "Spin-off") and,
after the occurrence of such Spin-off, the RMC Shareholders will exchange (the
"Exchange") all of their shares of RMC Common Stock, par value $100.00 per
share ("RMC Common Stock"), for shares of SJW's Common Stock, par value $3.125
per share ("SJW Common Stock"), upon the terms and subject to the conditions
set forth herein. Prior to the occurrence of the Exchange, each share of RMC
Preferred Stock, par value $100.00 per share ("RMC Preferred Stock"), will be
converted into RMC Common Stock in accordance with RMC's Articles of
Incorporation, as amended (the "Articles of Incorporation"). Shares of RMC
Common Stock and RMC Preferred Stock are sometimes collectively referred to
herein as "Shares."
B. It is the intention of the RMC Shareholders and RMC that prior to
the Exchange, Western Precision, Inc., a California corporation and a wholly
owned subsidiary of RMC ("Western Precision"), will be liquidated and become a
division of RMC.
C. The RMC Shareholders have unanimously approved the Spin-off,
the Exchange and this Agreement.
D. The Board of Directors of SJW has approved, and has resolved to
recommend that the shareholders of SJW approve, the Exchange and this Agreement.
E. The Principal Shareholders are the principal shareholders of
RMC and are hereby making certain representations, warranties, covenants and
agreements in support of the transactions contemplated by this Agreement.
F. The parties intend for the Spin-off to qualify as a tax free
distribution in accordance with the provisions of Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the Exchange to qualify
as a plan of reorganization in accordance with the provisions of Section 368 (a)
of the Code.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE EXCHANGE
Section 1.01 The Exchange. (a) Subject to the terms and conditions of this Agreement, on the
Closing Date (as defined in subsection (b) below), the RMC Shareholders agree to
exchange, assign, transfer and deliver all of their shares of RMC stock for
shares of SJW Common Stock and SJW agrees to exchange therefor and assign,
transfer and deliver that number of shares of SJW Common Stock as calculated in
accordance with the provisions of this Agreement. In furtherance of the
undertaking of each RMC Shareholder in the preceding sentence and subject to the
terms and conditions of this Agreement, each RMC Shareholder agrees to exchange
that number of shares of RMC Common Stock set forth opposite the name of such
RMC Shareholder on the signature pages hereof (which number of shares includes the
shares of RMC Common Stock issuable on conversion of RMC Preferred Stock in
accordance with Section 7.01 (j) hereof). The shares of RMC Common Stock and RMC
Preferred Stock owned beneficially or of record held by each RMC Shareholder
shall be delivered to the Principal Shareholders, as custodial agents and
attorneys-in-fact as provided in Section 1.05 hereof. Upon the satisfaction of
those terms and conditions of this Agreement required to permit the Exchange on
the Closing Date, the Principal Shareholders, or either of them shall be, and
they hereby are, authorized by the RMC Shareholders to release the shares of RMC
Common Stock from custody and exchange, assign, transfer and deliver such shares
to SJW.
(b) The closing of the Exchange (the "Closing") will take place as
soon as practicable after the parties hereto are in a position to satisfy or
waive the conditions set forth in Article VII. The Closing shall take place at a
date and time to be mutually agreed upon by the parties (but not earlier than
the dividend payment dates occurring during the fourth quarter of 1992 of both
the SJW Common Stock and the common stock of California Water Service Company, a
California corporation ("CW")) at the offices of Brobeck, Phleger & Harrison,
One Market Plaza, Spear Street Tower, San Francisco, California 94105, unless a
different place is agreed to in writing by the parties hereto. Each party shall
notify each other party when the party believes that the Closing could take
place as soon as fifteen (15) days later.
When the last party has given such notice, a tentative Closing date shall be
scheduled at least fifteen (15) days in advance (the "Tentative Closing Date"),
provided that the establishment of the Tentative Closing Date shall not modify
the requirements of this Section 1.01(b) or prevent the Closing from occurring
earlier than the Tentative Closing Date. The actual date of the occurrence of
the Closing in accordance with this Section 1.01(b) shall be referred to as the
"Closing Date."
(c) On the Closing Date, the Principal Shareholders, acting on behalf of
the RMC Shareholders, shall deliver to SJW the certificates representing all of
the outstanding shares of RMC Common Stock, and, if any, the outstanding shares
of RMC Preferred Stock, and SJW shall deliver to the Principal Shareholders for
exchange in accordance with this Section 1.01 certificates evidencing the
Initial Shares of SJW Common Stock in exchange for outstanding shares of RMC
Common Stock, less, in the case of the Principal Shareholders, an aggregate of
10% of the Initial Shares of SJW Common Stock constituting the Holdback Shares
corresponding to the Initial Shares, duly registered in the names of the RMC
Shareholders entitled thereto. Promptly after the occurrence of the Post-Closing
Audit, SJW shall deliver to the Principal Shareholders certificates evidencing
the Post-Audit Shares of SJW Common Stock, less, in the case of the Principal
Shareholders an aggregate of 10% of the total Post-Audit Shares of SJW Common
Stock, duly registered in the names of the RMC Shareholders entitled thereto.
In the event that the Post-Audit Shares equal a negative number, the former
holders of record of the shares of RMC Common Stock and the Holdback Escrow
Agent shall be obligated to promptly surrender to SJW an aggregate number of
Initial Shares equal to the negative number of Post-Audit Shares, such surrender
to be made in the same proportions as such shareholders were entitled to receive
Initial Shares and with the number of shares in the Holdback Escrow being
reduced to 10% of the remaining Initial Shares.(d) Notwithstanding any other provision of this Agreement, no fractional
shares of SJW Common Stock shall be issued in connection with the Exchange. In
lieu of any such fractional shares, each holder of shares of RMC Common Stock
who would otherwise have been entitled to receive a fraction of a share of SJW
Common Stock upon surrender of Certificates for exchange pursuant to this
Section 1.01 (either as Initial Shares or as Post-Audit Shares) shall be
entitled to receive from SJW a cash payment equal to such fraction multiplied by
the last reported sale price on the American Stock Exchange or, if different,
the principal exchange or market on which such shares are traded on the Closing Date.
(e) Notwithstanding any other provision of this Agreement to the
contrary, no more than 1,600,000 shares of SJW Common Stock shall be issued in
the Exchange to the RMC Shareholders subject to the effect of any shares of SJW
Common Stock having been changed into a different number of shares or a
different class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, exchange of shares or the like.
Section 1.02 Exchange Factors.
(a) On the Closing Date:(i) each share of RMC Common Stock outstanding immediately prior
to the Closing Date shall, except as otherwise provided in Section 1.01(d)
hereof, be exchanged for that number of shares of SJW Common Stock equal to the
Initial Exchange Factor (as defined in subsection (b) below) and the right to
receive that number of shares represented by the Post-Audit Exchange Factor (as
defined in subsection (b) below); and
(ii) each share of RMC Preferred Stock, if any, outstanding
immediately prior to the Closing Date shall, except as otherwise provided in
Section 1.01(d) hereof, be exchanged for that number of shares of SJW Common
Stock equal to the number of shares of SJW Common Stock which will be received
for each of the shares of RMC Common Stock into which such shares of RMC
Preferred Stock are convertible.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) The "Aggregate Number of SJW Initial Common Stock" shall be a
number of shares of SJW Common Stock equal to the sum of (A) the number of
shares of SJW Common Stock owned by RMC on the Closing Date, plus (B) 0.76 of a
share of SJW Common Stock for each share of Common Stock of CW owned by RMC on
the Closing Date.
(ii) The "Aggregate Number of SJW Post-Audit Common Stock" shall
be the number of shares of SJW Common Stock determined by dividing (A) the
amount of the net investment in Western Precision as recorded on the books of
RMC on the Closing Date (assets net of liabilities) minus all intangible assets
and good will of Western Precision on the Closing Date (the "Western Precision
Closing Date Tangible Book Value"), plus the amount of the investment in any
other assets of RMC on the Closing Date (other than those set forth in Section
(b) (i) above), minus the recorded amounts of any other good will and
intangibles of RMC on the Closing Date, and minus all other liabilities of RMC
on the Closing Date which are liabilities required to be stated in or reserved
on a balance sheet under GAAP ("GAAP", with respect to any entity or person,
means generally accepted accounting principles applied on a basis consistent
with the past practice of such person or entity except when there has been a
change in generally accepted accounting practices promulgated by the American
Institute of Certified Public Accountants or any successor or organization
thereto), the values in this Section 1.02(b) (ii) to be determined by the Post-
Closing Audit (as defined in Section 1.03), by (B) the net book value per share
of SJW Common Stock as of the fiscal quarter end immediately prior to the
Closing Date (without giving any effect to the Exchange).
(iii) The "Initial Exchange Factor" shall equal the quotient of (A)
the Aggregate Number of SJW Initial Common Stock, divided by (B) the number of
shares of RMC Common Stock outstanding immediately prior to the Closing Date,
assuming conversion of all RMC Preferred Stock.
(iv) The "Post-Audit Exchange Factor" shall equal the quotient of
(A) the Aggregate Number of SJW Post-Audit Common Stock, divided by (B) the
number of shares of RMC Common Stock outstanding immediately prior to the
Closing Date, assuming conversion of all RMC Preferred Stock.
(v) "Initial Shares" shall mean shares of SJW Common Stock issuable
in the Exchange in exchange for shares of RMC Common Stock or RMC Preferred
Stock based upon the Initial Exchange Factor.
(vi) "Post-Audit Shares" shall mean shares of SJW Common Stock
issuable in the Exchange in exchange for shares of RMC Common Stock or RMC
Preferred Stock based upon the Post-Audit Exchange Factor.
(c) If prior to the Closing Date the outstanding shares of RMC Common
Stock, CW Common Stock or SJW Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, exchange of shares or the like, the Initial Exchange Factor and the
Post-Audit Conversion Factor shall be correspondingly adjusted.
Section 1.03 Post-Closing Audit.
(a) Within 90 days after the Closing Date (but in any event on or prior
to the completion of the first annual audit of SJW that includes RMC), SJW shall
cause to be prepared and delivered, at its expense, to the Principal
Shareholders, for the benefit of all RMC Shareholders, a balance sheet of RMC as
of the Closing Date (the "RMC Audited Balance Sheet"), audited and certified by
KPMG Peat Marwick (the "Post-Closing Audit") as having been prepared in
accordance with GAAP. SJW agrees that the accounting principles and methods to
be employed in the Post-Closing Audit will be the accounting principles and
methods set forth in the RMC Disclosure Schedule and, with respect to those
items not expressly referred to in the RMC Disclosure Schedule, will be the
accounting principles and methods employed by RMC in connection with the audit
conducted of RMC's September 30, 1991 financial statements. At SJW's option and
expense, a physical inventory may be conducted as part of the Post-Closing Audit. (b) The RMC Shareholders shall have 10 days after receipt of the RMC
Audited Balance Sheet to object to such RMC Audited Balance Sheet in writing and
shall specify the basis of such objection. SJW and the RMC Shareholders shall
have 10 days upon receipt of such written objection by SJW to mutually resolve
the disputes with respect to the RMC Audited Balance Sheet. If no resolution is
reached within such period, SJW and the RMC Shareholders sI~a1l have five days
to mutually agree upon an active or retired independent certified public
accountant not affiliated or formerly affiliated with J. Arthur Greenfield & Co.
or KPMG Peat Marwick to resolve the dispute pursuant to arbitration. In the
event that SJW and the RMC Shareholders are unable to agree upon such an
accountant within the specified period, they will each appoint one such
accountant and such two accountants shall jointly select a third accountant
meeting the requirements set forth above. The parties shall have 30 days after
the selection of the third independent certified public accountant (the "CPA")
to present their cases to the CPA. The CPA's sole authority shall be to resolve
the disputes with respect to the RMC Audited Balance Sheet specified by the
parties. The CPA shall have no power or authority to award any amount for the
purposes of imposing a penalty upon any party. Presentation of evidence to the
CPA shall be in accordance with Section 1282.2 of the California Code of Civil
Procedure. With the exception of the presentation of witness lists and lists of
evidence, the parties shall not be entitled to conduct further discovery unless
the parties mutually agree or such discovery is necessary for the preservation
of evidence. The presentation of evidence to the CPA shall occur in San Jose,
California. The CPA shall render its decision within 30 days following the date
that the parties shall have presented their cases. The CPA shall render its
decision with respect to the disputes in writing and such decision shall be
final and binding upon the parties. The RMC Audited Balance Sheet shall be
revised based upon the CPA's determination and the RMC Audited Balance Sheet as
revised shall be used to calculate the Post-Audit Exchange Factor. SJW and the
RMC Shareholders shall bear their own expenses with respect to matters set forth
in this Section 1.03(b), including expenses of the accountants, if any, selected
by them in order to select the CPA; provided, that SJW and the RMC Shareholders
shall equally bear the expenses of the CPA.
Section 1.04 Holdback Shares; Claims Against the Holdback Escrow.
(a) Ten percent (10%) of the total number of the Initial Shares and of
the Post-Audit Shares Stock issuable in the Exchange pursuant to Section 1.02
(the "Holdback Shares") shall be deposited in escrow with the Bank of America
NT&SA, as Escrow Agent (the "Holdback Escrow Agent"), to be held and
administered in accordance with the terms and conditions of a Holdback Escrow
Agreement, in substantially the form attached hereto as Exhibit 1.04 (the
"Holdback Escrow Agreement"), which is to be entered into among SJW, RMC, the
Principal Shareholers and the Holdback Escrow Agent on or prior to the Closing
Date. One-half of the Holdback Shares shall be deducted from the Initial Shares
and the Post-Audit Shares of SJW Common Stock issuable in the Exchange to each
Principal Shareholder. The Holdback shares shall be registered in the name of
the Principal Shareholders and shall be accompanied by stock powers endorsed in
blank. SJW shall be entitled to recover from the Holdback Shares any Damages (as
defined below) in excess of $50,000 that may be suffered by SJW by reason of (i)
any misrepresentation or breach of warranty made by RMC or the Principal
Shareholders in Article II or (ii) any breach by RMC or the Principal
Shareholders of any covenant or agreement on their respective parts contained in
this Agreement. Such recovery shall be effected as follows: SJW shall give a
written instruction (an "Instruction") within one year from the Closing
Date to the Holdback Escrow Agent to deliver to SJW the number of Holdback
Shares, as shall be required to make up such Damages (SJW shall include in the
Instruction to the Holdback Escrow Agent any claim for Damages arising from
clauses (i) or (ii) above together with reasonable details with respect
thereto). The Escrow Agent shall promptly forward a copy of all Instructions
received to the Principal Shareholders. "Damages" means any provable loss,
liability, damage, cost and expense (including reasonable costs of
investigation, defense and prosecution of litigation and attorneys' fees)
incurred by SJW, net of any tax benefits and insurance recoveries received by
SJW with respect thereto, after reasonable efforts to mitigate such loss,
liability, damages, cost and expense. Notwithstanding the escrow of such
Holdback Shares, dividends on such Holdback Shares shall continue to be paid by
SJW to the Principal Shareholders. Any shares of SJW Common Stock received by
the Escrow Agent upon a stock split or a stock dividend made in respect of any
Holdback Shares held by the Escrow Agent in escrow shall be held by the Escrow
Agent as, and shall be included within the definition of, Holdback Shares. For
purposes of this Section 1.04, Holdback Shares shall be valued at their last
reported sale price on the American Stock Exchange, or if different, the
principal exchange last sale price on the American Stock Exchange or, if
different, the principal exchange or market on which such shares are traded on
the Closing Date or, if there was no trading on such date, on the
first date preceding such date on which trading occurred.(b) At the time of delivery of an Instruction to the Holdback Escrow
Agent by SJW, a duplicate copy of the Instruction shall be delivered to the
Principal Shareholders. For a period of 20 days after such delivery, the
Holdback Escrow Agent shall make no delivery of Holdback Shares unless the
Holdback Escrow Agent shall have received written authorization from the
Principal Shareholders to make such delivery. After the expiration of such 20-
day period, the Holdback Escrow Agent shall make delivery of the Holdback Shares
in accordance with this Section 1.04, provided that no such payment or delivery
may be made if the Principal Shareholders shall object in a written statement to
any claim made in the Instruction, and such statement shall have been delivered
to the Holdback Escrow Agent and to SJW prior to the expiration of such 20-day period.
(c) If the Principal Shareholders object in writing to any claim made in
an Instruction, the Principal Shareholders and SJW shall attempt in good faith
to agree upon the rights of the respective parties with respect to each of such
claims. If the Principal Shareholders and SJW should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Holdback Escrow Agent. The Holdback Escrow Agent shall
be entitled to rely on any such memorandum and distribute the Holdback Shares
held in escrow in accordance with the terms thereof.
(d) If the Principal Shareholders and SJW shall be unable to reach
agreement with respect to claims made in an Instruction within 30 days after the
date such Instruction shall have been delivered to the Principal Shareholders,
then the dispute as to the matter of the determination of Damages shall be
resolved by submitting such dispute for binding arbitration in San Jose,
California before a single arbitrator chosen and proceeding in accordance with
the rules of the Judicial Arbitration & Mediation Services, Inc., except as
specifically provided below ("Binding Arbitration"). All evidentiary and
discovery matters shall be conducted in accordance with and governed by the
applicable provisions of the law of the State of California as it relates to
arbitration proceedings including without limitation Section 1282.2 of the
California Code of Civil Procedure, and Section 1283.05 (Right of Discovery;
Procedure and Enforcement) of the California Code of Civil Procedure shall be
deemed incorporated herein. No later than 10 calendar days after the arbitrator
is appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be completed no
later than the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served, whichever occurs
earlier, unless upon a showing of good cause the arbitrator extends such period.
The hearing shall commence no later than 90 calendar days after the arbitrator
is appointed and shall continue until completed. The arbitrator shall issue his
or her award in writing no later than 20 calendar days after the conclusion of
the hearing. The parties to this Agreement agree that in rendering an award, the
arbitrator shall have no jurisdiction to consider evidence with respect to or
render any award of judgment for punitive, exemplary or consequential damages
or any other amount awarded for purposes of imposing a penalty. The
arbitrator's decision shall be binding and conclusive upon the parties. The
arbitrator shall not have the power to amend this Agreement in any respect. The
Holdback Escrow Agent shall be entitled to rely on such final determination or
final award and distribute the Holdback Shares from the escrow fund in
accordance with the terms thereof.(e) On the first anniversary of the Closing Date, Holdback Shares not
required to reimburse SJW for any claimed Damages for which an Instruction has
been delivered by SJW pursuant to Section 1.04(a) shall be returned by the
Holdback Escrow Agent to the Principal Shareholders.
Section 1.05 Custody of RMC Shares; Power of Attorney.
Each RMC Shareholder shall deposit a stock certificate or certificates
representing their shares of RMC Common Stock and Preferred Stock in custody
with the Principal Shareholders as custodial agents and attorneys-in-fact to be
held by them in accordance with the terms and conditions of this Agreement. To
facilitate the actions taken by the Principal Shareholders, or
either of them, as custodial agent, pursuant to Section 1.01 and the
consummation of the Exchange in accordance with the terms and conditions of
this Agreement, each RMC Shareholder irrevocably constitutes and appoints the
Principal Shareholders, or either of them, their true and lawful attorneys-in-
fact, to:
(a) hold the number of shares of RMC Common Stock set forth
opposite each such RMC Shareholder's name on the signature pages hereto in
custody, as custodial agent, pending the satisfaction of the terms and
conditions of this Agreement required to permit the Exchange on the Closing Date;
(b) release from custody and exchange, assign, transfer and
deliver to SJW stock certificates representing the number of shares of RMC
Common Stock set forth opposite each such RMC Shareholder's name on the
signature pages hereto upon the satisfaction of those terms and conditions of
this Agreement required to permit the Exchange on the Closing Date;
(c) incur any necessary or appropriate expense in connection with
the custody, exchange, assign. transfer and delivery of their RMC Common Stock;
(d) complete, execute and deliver all such stock certificates,
stock powers, orders, receipts and other writings and in general do all things
and take all actions which they, in their sole discretion consider necessary or
proper in connection with the consummation of the Exchange and the other terms
and conditions of this Agreement.
The power of attorney granted to the Principal Shareholders, as custodial
agent, in this Section 1.05 is an agency coupled with an interest and all
authority conferred hereby shall be irrevocable and shall not be terminated by
any act of any of the RMC Shareholders or by operation of law, whether by death
or incapacity of any of the RMC Shareholders or by the occurrence of any other
event or events (including without limitation, the termination of any trust or
estate for which any RMC Shareholder is acting as a fiduciary or the
dissolution of any corporation or partnership). Notwithstanding any of the
foregoing provisions of this Section 1.05, after the date of the termination of
this Agreement pursuant to Article VIII, any of the RMC Shareholders shall have
the power, upon written notice to the Principal Shareholders, as custodial
agent, to terminate the power of attorney granted in this Section 1.05 subject,
however, to all lawful actions done or performed pursuant to this Section 1.05
prior to the receipt by the Principal Shareholders of actual notice of such
termination of the power of attorney. The Principal Shareholders agree to
accept the terms and conditions of the power of attorney granted to them by the
RMC Shareholders in this Section 1.05.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RMC
AND THE RMC SHAREHOLDERS
Except as disclosed in a document delivered by RMC to SJW prior to the
execution of this Agreement and labelled as the RMC Disclosure Schedule, subject
to amendment pursuant to Section 9.04(d) of this Agreement (as so amended, the
"RMC Disclosure Schedule"), RMC and the RMC Shareholders, jointly and severally
represent and warrant to SJW as set forth below:
Section 2.01 Corporate Existence and Power. RMC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, and has all corporate powers required to carry on its business
as now conducted. RMC is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
RMC. For purposes of this Agreement, the term "Material Adverse Effect" means,
with respect to any person or entity, a material adverse effect on the condition
(financial or otherwise), business, properties, assets, liabilities (including
contingent liabilities), results of operations or prospects of such person or
entity and its subsidiaries (including, with respect to RMC, its Subsidiaries
(as defined in Section 2.06(a) below)), taken as a whole; and the term "Material
Adverse Change" means a change which would have a Material Adverse Effect. RMC
has delivered to SJW true and complete copies of RMC's Articles of
Incorporation and Bylaws as currently in effect.
Section 2.02 Corporate Authorization. The execution, delivery and
performance by RMC of this Agreement, the Asset and Liability Allocation
Agreement, the Affiliates Agreement and the Holdback Escrow Agreement, and the
consummation by RMC of the transactions contemplated hereby and thereby, are
within RMC's corporate powers and have been and, to the extent not executed as
of the date hereof, will be prior to execution, duly authorized by all necessary
corporate action, except for any required approval by RMC's shareholders in
connection with the consummation of the Spin-off and the Exchange. This
Agreement, the Asset and Liability Allocation Agreement, the Affiliates
Agreement and the Holdback Escrow Agreement constitute, or upon execution will
constitute, valid and binding agreements of RMC, enforceable against RMC in
accordance with their respective terms. The Holdback Escrow Agreement, the
Registration Rights Agreement and the Affiliates Agreements are collectively
referred to herein at time as the "RMC Ancillary Agreements." This Agreement and
the RMC Ancillary Agreements constitute, or upon execution will constitute,
valid and binding agreements of the Principal Shareholders, enforceable against
them in accordance with their respective terms. This Agreement constitutes, or
upon execution will constitute, a valid and binding agreement of the RMC
Shareholders, enforceable against them in accordance with itsterms. Section 2.03 Governmental Authorization. The execution, delivery and
performance by RMC of this Agreement, the Asset and Liability Allocation
Agreement and the Affiliates Agreements, the consummation of the transactions
contemplated hereby and thereby by RMC and the continued operation of the
businesses of RMC and its Subsidiaries after the Closing Date require no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than:
(a) compliance with any applicable requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act");
(b) compliance with any applicable requirements of the California
Public Utilities Commission and the rules and regulations promulgated by the
California Public Utilities Commission;
(c) compliance with any applicable requirements of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "Securities Act"); and
(d) compliance with any applicable state securities or "blue sky"
laws.
Section 2.04 Non-Contravention. The execution, delivery and performance by
RMC of this Agreement and the RMC Ancillary Agreements to which it is a party
and the consummation by RMC of the transactions contemplated hereby and thereby
do not and will not:
(a) contravene or conflict with the Articles of Incorporation or
Bylaws of RMC;
(b) assuming compliance with the matters referred to in Section
2.03, to the best of their knowledge, contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to RMC or any of its Subsidiaries;
(c) constitute a default under or give rise to a right of
termination, cancellation or acceleration or loss of any material benefit under
any agreement, contract or other instrument binding upon RMC or any of its
Subsidiaries or under any license, franchise, permit or other similar
authorization held by RMC or any such Subsidiary; or
(d) result in the creation or imposition of any Lien (as defined
below) on any material asset of RMC or any of its Subsidiaries.
For purposes of this Agreement, the term "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
Section 2.05 Capitalization. The authorized capital stock of RMC consists
of 5,000 Shares of RMC Common Stock and 15,000 shares of RMC Preferred Stock. As
of the date hereof there were outstanding:
(a) 1,723 shares of RMC Common Stock, and
(b) 7,410 shares of RMC Preferred Stock.
All outstanding shares of capital stoek of RMC have been duly authorized and
validly issued and are fully paid and nonassessable. After conversion of all
outstanding shares of RMC Preferred Stock into RMC Common Stock pursuant to
this Agreement, there will be a total of 2,217 shares of RMC Common Stock
outstanding that are owned by the RMC Shareholders (on a fully converted basis)
in the amounts set forth on the signature pages hereof. Except as set forth in
this Section 2.05, there are outstanding (i) no shares of capital stock or other
voting securities of RMC, (ii) no securities of RMC convertible into or
exchangeable for shares of capital stock or voting securities of RMC and (iii)
no options or other rights to acquire from RMC, and no obligation of RMC to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or other voting securities of RMC (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "RMC
Securities"). There are no outstanding obligations of RMC or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any RMC Securities.
Section 2.06 Subsidiaries. (a) Each of RMC's Subsidiaries is a corporation or other entity duly
incorporated or otherwise organized, validly existing and in good standing (or
local law equivalent) under the laws of its jurisdiction of organization, has
all corporate or other organizational powers required to carry on its business
as now conducted. Each such Subsidiary is duly qualified to do business
as a corporation or partnership and is in good standing (or local law
equivalent) in each jurisdiction where the character of the property owned or
leased by or the nature of its activities make such qualification necessary
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on such
Subsidiary. For purposes of this Agreement, the term "Subsidiary" means, with
respect to any entity, any corporation or other organization of which securities
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are
directly or indirectly owned by such entity or of which such entity is a
partner or is, directly or indirectly, the beneficial owner of 50% or more of
any class of equity securities or equivalent profit participation interest;
provided, however, that the term "Subsidiary" shall not include RMM. All
Subsidiaries of RMC and their respective jurisdictions of incorporation or
organization are identified in the RMC Disclosure Schedule. RMC has delivered to
SJW true and complete copies of the articles of incorporation, bylaws,
partnership agreement and other similar organizational documents as currently in
effect for each such Subsidiary.(b) All of the outstanding capital stock of, or other ownership
interests (the "RMC Subsidiary Securities") in, each Subsidiary held by RMC is
owned by RMC, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests) and no person or entity has any right to purchase or sell any of such
RMC Subsidiary Securities.
(c) RMC has delivered to SJW copies of all material agreements, contracts
and other documentation which set forth the terms and conditions of RMC's
ownership interest in its Subsidiaries and its ability to acquire additional
ownership interests in such Subsidiaries or which are otherwise relevant to such
ownership (the "Subsidiary Agreements"). Each Subsidiary Agreement is valid and
binding on RMC and its Subsidiaries, and is in full force and effect, and
neither RMC nor any of its Subsidiaries, nor to the knowledge of RMC any other
party thereto, has breached any provision of, or is in default under the terms
of, any such Subsidiary Agreement.
(d) RMC has delivered to SJW a summary of all existing arrangements
relating to its Subsidiaries pursuant to which any person or entity has any
right, whether presently in effect or inchoate, to acquire any equity in any
such Subsidiary. Included in such summary were copies of all "compensation
letters" delivered by RMC to any employee of or consultant to any of its
Subsidiaries which may have offered any equity participation rights to such
employees or consultants. With respect to all such rights to purchase equity in
any of the RMC Subsidiaries, RMC holds as of the date hereof the unencumbered,
vested right to repurchase such equity right at any time at a determinable price
and no holder of any such right has the power to cause RMC or any such
Subsidiary to repurchase such equity right from such holder.
Section 2.07 Financial Statements. RMC has delivered to SJW (i) an
unaudited consolidated balance sheet of RMC dated as of June 30, 1992, and the
related unaudited statement of income, shareholders equity and cash flows for
the nine month period then ended, (ii) the audited consolidated balance sheets
of RMC dated as of September 30, 1991 and September 30, 1990 and the related
audited statements of income, shareholders' equity and cash flows for the fiscal
years ended September 30, 1991, September 30, 1990 and September 30, 1989
together with the notes thereto and the reports of J. Arthur Greenfield & Co.
thereon and (iii) an unaudited consolidated balance sheet of RMC dated as of
June 30, 1992 (the "RMC Balance Sheet Date") prepared on a pro forma basis after
giving effect to the Spin-off, and the notes thereto ("RMC Balance Sheet").
Such consolidated financial statements of RMC present fairly, in conformity with
GAAP (except the business of RMM and certain administrative expenses shall be
shown as a discontinued operation and except as expressly stated in the notes
thereto), the consolidated financial position of RMC and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended.
Section 2.08 Inventory. The inventories (the "Inventories") of RMC and
its Subsidiaries shown on the RMC Balance Sheet were valued at cost determined
on a first-in first-out basis with proper allowance for obsolescence, in
accordance with GAAP. The Inventories consist of items which are of quality and
quantity readily usable or saleable in the normal course of business of RMC and
its Subsidiaries, except such amounts as are reserved in accordance with GAAP.
Section 2.09 Receivables. The receivables shown on the RMC Balance Sheet
arose in the ordinary course of business and have been collected or are, to the
best of their knowledge, collectible in the book amounts thereof, less an
amount not in excess of the allowance for doubtful accounts provided for in such
balance sheet. The receivables of RMC and its Subsidiaries arising after the
date of the RMC Balance Sheet and prior to the Closing Date arose or will arise
in the ordinary course of business and have been collected or, to the best of
their knowledge, are or will be collectible in the book amounts thereof,
consistent with the past practice of RMC and its Subsidiaries, less an
appropriate allowance for doubtful accounts.
Section 2.10 Compliance with Law. To the best of their knowledge, each of
RMC and its Subsidiaries is in compliance in all material respects with and has
conducted its business so as to comply in all material respects with all laws,
rules and regulations, judgments, decrees or orders of any court,
administrative agency, commission, regulatory authority or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Authority")
applicable to its operations and with respect to which compliance is a
condition of engaging in the business thereof. There are no judgments or
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration), including any such actions
relating to affirmative action claims or claims of discrimination, against RMC
or any Subsidiary of RMC or against any of their respective properties or
businesses, which are continuing in effect and could reasonably be expected to
have a Material Adverse Effect on RMC.
Section 2.11 No Defaults. Neither RMC nor any Subsidiary of RMC is, or
has received notice that it would be with the passage of time, (i) in violation
of any provision of its articles of incorporation or bylaws or other similar
organizational document or (ii) in default or violation of any term, condition
or provision of (A) any judgment, decree, order, injunction or stipulation
applicable to RMC or any Subsidiary of RMC or (B) any material agreement, note,
mortgage, indenture, contract, lease or instrument, permit, concession,
franchise or license to which RMC or any of its Subsidiaries is a party or by
which RMC or any of its Subsidiaries or their respective properties or assets
may be bound.
Section 2.12 Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of their knowledge, threatened, against
RMC or any of its Subsidiaries which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby or by any of the RMC Ancillary Agreements. The RMC Disclosure Schedule
sets forth with respect to each pending action, suit, proceeding, claim or
investigation to which RMC or any of its Subsidiaries is a party, the forum,
the parties thereto, a brief description of the subject matter thereof and the
amount of damages claimed. RMC has delivered to SJW correct and complete copies
of all audit response letters prepared by its counsel for RMC's independent
public accountants in connection with the last five completed audits of RMC's
financial statements, including the audit conducted in connection with the
RMC Balance Sheet, and any such correspondence since the RMC Balance Sheet Date.
Section 2.13 Absence of Certain Changes. Except as expressly allowed or
contemplated by this Agreement, since the RMC Balance Sheet Date, RMC and its
Subsidiaries have conducted their respective businesses in the ordinary course
and there has not occurred:
(a) Any Material Adverse Change with respect to RMC, except as may
have been caused by the incurrence of the RMC Expenses or by the Spin-off. "RMC
Expenses" means all reasonable costs, expenses and related liabilities incurred
by RMC in connection with preparations in connection with the Exchange or the
negotiation, execution and consummation of this Agreement;
(b) Any amendments or changes in the articles or certificate of
incorporation or bylaws or other similar organizational docdment of RMC or any
of its Subsidiaries;
(c) Any redemption, repurchase or other acquisition of shares of
capital stock of RMC or its Subsidiaries by RMC or its Subsidiaries, or any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of RMC
or its Subsidiaries other than the Spin-off;
(d) Any increase in or modification of the compensation or
benefits payable or to become payable by RMC or any of its Subsidiaries to any
of their respective directors, employees or consultants, excepc in the ordinary
course of business consistent with past practice, which past practice has been
previously disclosed to SJW;
(e) Any acquisition or sale of a material amount of property or
assets by or of RMC or any of its Subsidiaries except for the effect of the Spin-off;
(f) Any entry into, amendment of, relinquishment, termination or
non-renewal by RMC or any of its Subsidiaries of any material contract, lease
transaction, commitment or other right or obligation other than in the ordinary
course of business;
(g) Any labor dispute, other than routine individual grievances,
or, to the best of their knowledge, any activity or proceeding by a labor union
or representative thereof to organize any employees of RMC or any of its
Subsidiaries; or
(h) To the best of their knowledge, any agreement or arrangement
made by RMC or any of its Subsidiaries to take any action after the date hereof
which, if taken prior to the date hereof, would have made any representation or
warranty set forth in this Section 2.13 untrue or incorrect as of the date when made.
Section 2.14 Certain Agreements. Neither the execution and delivery of
this Agreement or the RMC Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of RMC
or its Subsidiaries from RMC or its Subsidiaries, under any RMC Employee Plan
(as defined in Section 2.15(a) below) or otherwise, (ii) materially increase any
benefits otherwise payable under any RMC Employee Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
Section 2.15 Employee Benefits.
(a) RMC has set forth in the RMC Disclosure Schedule a list which
identifies each "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and each
employment agreement, compensation agreement, bonus, commission or similar
arrangement, and fringe benefit arrangement which is maintained, administered
or contributed to by RMC or any affiliate thereof (as defined below) and covers
any employee or former employee of RMC or any affiliate or under which RMC or
any affiliate has any liability. Copies (or, if not in writing, detailed
summaries) of such plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof have been furnished to
SJW together with (to the extent existing) (x) the most recent annual report
(Form 5500 including, if applicable, Schedule B thereto) prepared in connection
with any such plan and (y) the most recent actuarial valuation report prepared
in connection with any such plan. Such plans are referred to collectively
herein as the "RMC Employee Plans." For purposes of this Section 2.15 only, an
"affiliate" of any person or entity means any other person or entity, which,
together with such person or entity, would be treated as a single employer under
Section 414 of the Code or Title IV of ERISA. The only RMC Employee Plans which
individually or collectively would constitute an "employee pension benefit
plan" as defined in Section 3(2) of ERISA are identified as such in the list
referred to above.(b) No RMC Employee Plan constitutes a "multiemployer plan" as defined
in Section 3(37) of ERISA (a "Multiemployer Plan"), no RMC Employee Plan is
maintained in connection with any trust described in Section 501(c) (9) of the
Code and no RMC Employee Plan is subject to Title IV of ERISA or Section 412 of
the Code. If RMC or an affiliate thereof ever maintained or was obligated to
contribute to a Multiemployer Plan or a plan subject to Title IV of ERISA, any
withdrawal or other liability under Title IV of ERISA with respect to such plan
has been fully satisfied. To RMC's knowledge, nothing done or omitted to be
done and no transaction or holding of any asset under or in connection with any
RMC Employee Plan has or will make RMC or any of its Subsidiaries, or any
officer or director thereof, subject to any liability under Title I of ERISA or
liable for any tax pursuant to Section 4975 of the Code.
(c) To the best knowledge of RMC and the RMC Shareholders, each RMC
Employee Plan which is intended to be qualified under Section 401(a) of the Code
is so qualified and has been so qualified during the period from its adoption
to date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501 (a) of the Code. RMC has furnished to SJW copies of the most recent
Internal Revenue Service determination letters, if any, with respect to each
such RMC Employee Plan. To the best of knowledge of RMC and the RMC
Shareholders, each RMC Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such RMC Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of RMC or any affiliate that would obligate RMC or
any affiliate to pay any additional compensation, including severance pay, as a
result of the consummation of the transactions contemplated by this Agreement
or that, individually or collectively, could give rise to the payment by RMC of
any amount that would not be deductible pursuant to the terms of Sections 162(a)
(1) or 280G of the Code.
(e) Neither RMC nor any of its affiliates maintain or administer any
"defined benefit plans" for the benefit of their employees. Neither RMC nor its
affiliates have any projected liability in respect of post-retirement health,
life and medical benefits for retired employees of RMC and its affiliates.
Other than provisions of applicable law, no condition exists that would prevent
RMC or any of its Subsidiaries from amending or terminating any RMC Employee Plan.(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by RMC or any of its affiliates relating
to, or change in employee participation or coverage under, any RMC Employee
Plan which would materially increase the expense of maintaining such RMC
Employee Plan above the level of the expense incurred in respect thereof for the
most recent fiscal year.
Section 2.16 Major Contracts. The RMC Disclosure Schedule sets forth a
list of the following agreements and covenants to which RMC or any of its
Subsidiaries is a party to or is subject to:
(a) Any union contract or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not terminable by it or its
Subsidiary on 30 days' notice or less without penalty or obligation to make
payments related to such termination, other than, in the case of employees other
than executive officers, such agreements as are not materially different from
standard arrangements offered to employees generally in the ordinary course of
business consistent with RMC's past practices, which past practice has been
previously disclosed to SJW;
(b) Any plan, contract or arrangement exceeding $10,000, written
or oral, providing for bonuses, pensions, deferred compensation, severance pay
or benefits, retirement payments, profit sharing, or the like;
(c) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits with
other persons;
(d) Any distribution agreement, sales agreement, volume purchase
agreement, or other similar agreement in which the annual amount involved in
1991 exceeded, or is expected to exceed in 1992, $100,000 in aggregate amount
or pursuant to which RMC has granted or received exclusive marketing rights
related to any product, group of products or territory;
(e) Any lease for personal property in which the amount of
payments which RMC or any of its Subsidiaries is required to make on an annual
basis exceeds $25,000;
(f) Any material agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment or
authorization which may be, by its terms, terminated or breached by reason of
the execution of this Agreement, the RMC Ancillary Agreements, the closing of
the Exchange, or the transactions contemplated hereby or thereby;
(g) Except for trade indebtedness incurred in the ordinary course
of business, any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise;
(h) Any material license agreement, either as licensor or
licensee;
(i) Any contract containing covenants purporting to limit RMC's
freedom or that of any of its Subsidiaries to compete in any line of business in
any geographic area; or
j) Any other agreement, contract or commitment which is material
to RMC and its Subsidiaries taken as a whole.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in the
RMC Disclosure Schedule pursuant to this Section 2.16 is valid and binding on
RMC or its Subsidiaries, as applicable, and is in full force and effect, and
neither RMC nor any of its Subsidiaries, nor to the best of their knowledge any
other party thereto, is in material breach of any provision of, or has committed
a material default under the terms of, any such agreement, contract, mortgage,
indenture, plan, lease, instrument, permit, concession, franchise, arrangement,
license orcommitment.
Section 2.17 Taxes.
(a) All Tax returns, statements, reports and forms (including estimated
Tax returns and reports and information returns and reports) required to be
filed with any Taxing Authority with respect to any Taxable period ending on or
before the Closing Date by or on behalf of RMC or any of its Subsidiaries
(collectively, the "RMC Tax Returns"), the non-filing of which would have a
Material Adverse Effect on RMC or would result in criminal penalties against RMC
or any officer or employee thereof, have been or will be filed when due
(including any extensions of such due date).
(b) RMC and its Subsidiaries have timely paid, withheld or made
provision on their books for all Taxes due and payable with respect to all
fiscal periods ending on or prior to the Closing Date and for the portion
ending on the Closing Date of any fiscal period beginning prior
to the Closing Date and ending after the Closing Date.
(c) All RMC Tax Returns relating to income or franchise Taxes filed
with respect to Taxable years of RMC and its Subsidiaries ending on or before
September 30, 1988 have been examined and closed or are RMC Tax Returns with
respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired.
(d) Neither RMC nor any of its Subsidiaries has granted any extension
or waiver of the limitation period applicable to any RMC Tax Returns.
(e) To the best of their knowledge, there is no claim, audit, action,
suit, proceeding, or investigation now pending or threatened in writing against
or with respect to RMC or any of its Subsidiaries in respect of any Tax or assessment.
(f) Other than with respect to the Spin-off and the proposed
reorganization as contemplated herein, there are no requests for rulings in
respect of any Tax pending between RMC or any of its Subsidiaries and any
Taxing Authority.
(g) None of the property owned or used by RMC or any of its
Subsidiaries is subject to a tax benefit transfer lease executed in accordance
with Section 168(f) (8) of the Internal Revenue Code of 1954, as amended by the
Economic Recovery Tax Act of 1981.(h) None of the property owned by RMC or any of its Subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(i) Neither RMC nor any of its Subsidiaries, nor any other person on
behalf of RMC or any such Subsidiary, has entered into nor will it enter into
any agreement or consent pursuant to Section 341 (f) of the Code.
j) There are no liens for Taxes upon the assets of RMC or any of its
Subsidiaries except liens for current Taxes not yet due.
(k) To the best of their knowledge, neither RMC nor any of its
Subsidiaries will be required to include any adjustment in Taxable income for
any Tax period (or portion thereof) ending after the Closing Date pursuant to
Section 481(c) of the Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for any Tax period
(or portion thereof) ending on or before the Closing Date or pursuant to the
provisions of any agreement entered into with any Taxing Authority with regard
to the Tax liability of RMC or any such Subsidiary for any Tax period (or
portion thereof) ending on or before the Closing Date.
(l) Neither RMC nor any of its Subsidiaries has been a member of an
affiliated group other than one of which RMC was the common parent, or filed or
been included in a combined, consolidated or unitary Tax return other than one
filed by RMC (or a return for a group consisting solely of its Subsidiaries or
predecessors), or participated in any other similar arrangement whereby any
income, revenues, receipts, gains, losses, deductions, credits or other Tax
items of RMC or any such Subsidiary was determined or taken into account for
Tax purposes with reference to or in conjunction with any such items of another
person other than RMC or any such Subsidiary or predecessor.
(m) Neither RMC nor any of its Subsidiaries is currently under any
contractual obligation to pay the income or franchise tax obligations of, or
with respect to transactions relating to, any other person or to indemnify any
other person with respect to any income or franchise tax.
(n) Neither RMC nor any of its Subsidiaries has signed any letter or
entered into any agreement or arrangement in writing consenting to the surrender
or sharing of any deductions, credits, or other Tax attributes with any other
person or transferred or assigned to any other person for Tax purposes any such item.
(o) Notwithstanding any of the foregoing, no representation or warranty
is made by RMC or the RMC Shareholders with respect to the Tax consequences that
may result from the transactions contemplated by this Agreement.
(p) For the purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means, for any entity, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid to or by such entity or any Subsidiary thereof, payroll,
employment, excise, severance, stamp, occupation, property, environmental or
windfall profit tax, or other tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign), (ii) liability of such entity or any Subsidiary thereof for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period and (iii) liability of such entity or any Subsidiary thereof for the
paymentÄof any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.Section 2.18 lnterests of Officers, Directors and Other Affiliates. The
RMC Disclosure Schedule sets forth a description of any interest held, directly
or indirectly, by any officer, director or other affiliate of RMC or its
Subsidiaries in any property, real or personal, tangible or intangible, used in
or pertaining to RMC's business or that of its Subsidiaries, including any
interest in the RMC Intellectual Property Rights.
Section 2.19 Intellectual Property.
(a) To the best of their knowledge, in the conduct of RMC's business
there is and has been no infringement by RMC or any of its Subsidiaries of the
patents, trademarks, trade names, service marks, trade secrets, copyrights or
other intellectual property rights of others.
(b) Set forth in the RMC Disclosure Schedule is a list of all licensing
arrangements which it or any of its Subsidiaries have with third parties and a
list of all inventions which are the subject of issued patent letters or an
application therefor, which are owned and used or held for use by RMC or any of
its Subsidiaries and which are material to the business of RMC and its
Subsidiaries taken as a whole (collectively, the "RMC Intellectual Property Rights").
(c) To the best of their knowledge, the RMC Intellectual Property
Rights on the RMC Disclosure Schedule are free of any unresolved ownership
disputes with respect to any third party, except as disclosed therein.
Section 2.20 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon RMC or any of its
Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of RMC or any of its
Subsidiaries, any acquisition of property by RMC or any of its Subsidiaries or
the conduct of business by RMC or any of its Subsidiaries as currently conducted
or as currently proposed to be conducted by RMC.
Section 2.21 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) The RMC Disclosure Schedule sets forth a true and complete list of
all real property leased by RMC or any of its Subsidiaries and the aggregate
annual rental or other fee payable under any such lease.
(b) RMC and its Subsidiaries have valid leasehold interests in, all of
their tangible properties and assets, real, personal and mixed, used in their
business, free and clear of any Liens, except for such imperfections of title
and encumbrances, if any, which are not substantial in character, amount or
extent, and which do not materially detract from the value, or interfere with
the present use, of the property subject thereto or affected thereby.
(c) The equipment owned or leased by RMC or its Subsidiaries is, taken
as a whole, (i) adequate for the conduct of the business of RMC and its
Subsidiaries consistent with their past practice, (ii) suitable for the uses to
which it is currently employed, (iii) in good operating condition, normal wear
and tear excepted, (iv) regularly and properly maintained, (v) not obsolete,
dangerous or in need of renewal or replacement, except for renewal or
replacement in the ordinary course of business, and (vi) free from any known
defects, except, with respect to clauses (ii) through (v) of this Section
2.21(c) as would not have a Material Adverse Effect
on RMC.Section 2.22 Governmental Authorizations and Licenses. To the best of
their knowledge, each of RMC and its Subsidiaries is the holder of all material
licenses, authorizations, consents, approvals, permits (including all necessary
environmental permits), concessions, certificates and other franchises of any
Governmental Entity required to operate its business (collectively, the
"Governmental Authorizations"). A list of such Governmental Authorizations is
set forth in the RMC Disclosure Schedule. The Governmental Authorizations are in
full force and effect. There is not now pending, nor, to the knowledge of RMC
and the RMC Shareholders, is there threatened, any action, suit, investigation
or proceeding against RMC or any of its Subsidiaries before any Governmental
Entity with respect to the Governmental Authorizations, nor is there
any issued or outstanding notice, order or complaint with respect to the
violation by RMC or any of its Subsidiaries of the terms of any Governmental
Authorizations or any rule or regulation applicable thereto.
Section 2.23 Environmental Matters.
(a) Except as set forth on the RMC Disclosure Schedule, to the best of
their knowledge, RMC has not within the five years preceding the date hereof
received any written notice, demand, citation, summons, complaint or order or
any notice of any penalty, Lien or assessment, and to the best of their
knowledge, no investigation or review is pending by any governmental entity,
with respect to any material (i) alleged violation by RMC or any of its
Subsidiaries of any Environmental Law (as defined in subsection (d) below),
