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ASSET PURCHASE AGREEMENT
BY AND AMONG
AMETEK, INC.
AND
DYNAMIC MATERIALS CORPORATION
DATED AS OF JUNE 22, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................2
ARTICLE 2 BONDING ASSETS.............................................9
Section 2.1 Transfer of Assets.........................................9
(a) Machinery and Equipment........................9
(b) Real Property..................................9
(c) Business Systems...............................9
(d) Intellectual Property.........................10
(e) Contracts.....................................11
(f) Inventory.....................................11
(g) Claims........................................11
(h) Marketing Documents and Materials.............11
(i) Books and Records.............................11
(j) Licenses and Permits..........................11
(k) Telephone and Facsimile Numbers...............11
(l) Benefits Associated with Governmental Grants
and Incentives................................11
(m) Goodwill......................................12
Section 2.2 Excluded Assets...........................................12
Section 2.3 Sale of Excluded Colorado Assets..........................13
ARTICLE 3 ASSUMPTION OF LIABILITY...................................14
Section 3.1 Assumed Liabilities.......................................14
(a) Current Liabilities...........................14
(b) Liabilities Under Assigned Contracts..........14
Section 3.2 Retained Liabilities......................................14
(a) Obligations Under This Agreement..............14
(b) Pre-Closing Operations........................14
(c) Product Liability Obligations.................14
(d) Warranty Claims...............................14
(e) Mt. Braddock Completion Costs.................14
(f) Litigation....................................15
(g) Liability Related to Excluded Assets..........15
(h) Taxes.........................................15
(i) Environmental Liabilities.....................15
(j) Employee and Employee Plan Liability..........15
(k) Debts.........................................15
(l) Prior Breaches................................15
i
(m) Mechanics' Liens..............................15
ARTICLE 4 PURCHASE PRICE............................................16
Section 4.1 Purchase Price............................................16
Section 4.2 Purchase Price Adjustment.................................16
Section 4.3 Escrow Agreement..........................................18
Section 4.4 Allocation of Consideration...............................18
Section 4.5 Sales, Transfer and Use Taxes.............................18
ARTICLE 5 TRANSITION MATTERS........................................19
Section 5.1 Transition Cost Adjustment................................19
Section 5.2 Completion Costs..........................................20
Section 5.3 Equipment Relocation Costs................................22
Section 5.4 Transition Services.......................................22
ARTICLE 6 EMPLOYEES.................................................22
Section 6.1 Affected and Target Employees.............................22
Section 6.2 Vesting of Affected Employees.............................22
Section 6.3 Retained Responsibilities.................................22
Section 6.4 Payroll Tax...............................................23
Section 6.5 Termination Benefits......................................23
Section 6.6 Moving Expenses...........................................23
ARTICLE 7 CLOSING...................................................23
Section 7.1 Closing Date..............................................23
Section 7.2 Actions at Closing........................................23
(a) Performance by Purchaser......................24
(b) Performance by Seller.........................24
Section 7.3 Physical Inventory of Bonding Assets......................26
Section 7.4 Closing Deliveries........................................26
Section 7.5 Further Assurances........................................27
Section 7.6 Acknowledgment............................................27
ARTICLE 8 SELLER'S REPRESENTATIONS AND WARRANTIES...................27
Section 8.1 Organization and Standing.................................27
Section 8.2 Corporate Power; Authorization............................27
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Section 8.3 No Breach.................................................27
Section 8.4 Financial Statements......................................28
Section 8.5 Title to Properties; Liens; Condition of Properties.......28
Section 8.6 Real Property.............................................29
Section 8.7 Taxes.....................................................31
Section 8.8 Litigation................................................32
Section 8.9 Patents, Trade Names and Trademarks.......................32
Section 8.10 Compliance with Laws......................................33
Section 8.11 Environmental Matters.....................................34
Section 8.12 Licenses and Permits......................................35
Section 8.13 Insurance.................................................36
Section 8.14 Major Customers...........................................36
Section 8.15 Customers and Suppliers...................................36
Section 8.16 Existing Employment Contracts.............................36
Section 8.17 Employee Benefits.........................................36
Section 8.18 Absence of Certain Changes................................39
(a) Adverse Change................................39
(b) Inventory.....................................39
(c) Damage........................................39
(d) Labor Disputes................................39
(e) Commitments...................................39
(f) Disposition of Property.......................39
(g) Liens.........................................39
(h) Amendment of Contracts........................39
(i) Credit........................................39
(j) Accounts Receivable...........................40
(k) Loans.........................................40
Section 8.19 Contracts and Commitments.................................40
(a) Purchase Commitments..........................40
(b) Sales Commitments.............................40
(c) Contracts With Affiliates and Certain Others..40
(d) Powers of Attorney............................40
(e) Loan Agreements...............................40
(f) Use of IDB Proceeds and DCED Grants...........40
(g) Guarantees....................................40
(h) Contracts Subject to Renegotiation............41
(i) No Default....................................41
Section 8.20 Compliance with Laws......................................41
Section 8.21 Integrity of Dunbar Mine..................................41
Section 8.22 Inventory.................................................41
Section 8.23 Warranties................................................42
Section 8.24 Backlog...................................................42
Section 8.25 Disclosure................................................42
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ARTICLE 9 PURCHASER'S REPRESENTATIONS AND WARRANTIES................42
Section 9.1 Organization and Standing.................................42
Section 9.2 Corporate Power; Authorization............................42
Section 9.3 No Breach.................................................43
ARTICLE 10 SELLER'S COVENANTS........................................43
Section 10.1 Access to Information, Records and Third Parties..........43
Section 10.2 Conduct of Bonding Business Pending the Closing...........43
(a) No Changes....................................43
(b) No Material Contract..........................43
(c) Maintenance of Insurance......................44
(d) Maintenance of Property.......................44
(e) Discharge of Liens............................44
(f) Interim Financials............................44
(g) IDB...........................................44
(h) Government Grants.............................44
(i) Transfer of Inventory.........................44
Section 10.3 Consents and Novation.....................................44
Section 10.4 Intellectual Property.....................................45
Section 10.5 Non-Competition...........................................46
Section 10.6 Confidential Information..................................46
Section 10.7 Cooperation in Third-Party Litigation.....................46
Section 10.8 Cooperation with Telephone, E-Mail........................47
Section 10.9 Transfer of Neighborhood Assistance Tax Credit............47
Section 10.10 Revised Schedules.........................................47
Section 10.11 Covenant of Quiet Enjoyment...............................47
ARTICLE 11 ADDITIONAL COVENANTS......................................47
Section 11.1 Fees and Expenses.........................................47
Section 11.2 Termination Fee...........................................48
Section 11.3 Update of Disclosure Schedules............................48
Section 11.4 Public Announcements......................................49
Section 11.5 Product Warranty Obligations..............................49
Section 11.6 Product Claims and Replacement Product....................50
Section 11.7 Authorization; Mail.......................................50
Section 11.8 Collection of Accounts Receivable.........................50
Section 11.9 Provisions for Timet Titanium.............................50
Section 11.10 Insurance Claims..........................................51
Section 11.11 Employees.................................................51
Section 11.12 Pennsylvania Tax Matters..................................51
Section 11.13 Preparation of Tax Returns................................52
Section 11.14 HSR Fees..................................................52
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Section 11.15 Permits and Licenses......................................52
Section 11.16 Instructions to Escrow Agent..............................52
ARTICLE 12 CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATIONS...............................................52
Section 12.1 Representations and Warranties True on the Closing Date...52
Section 12.2 Compliance With Agreement.................................52
Section 12.3 Absence of Suit...........................................52
Section 12.4 Consents and Approvals....................................53
Section 12.5 Certificates..............................................53
(a) Good Standing Certificates..........................53
(b) Secretary's Certificate.............................53
(c) Incumbency Certificate..............................53
Section 12.6 Instruments of Conveyance, Transfer and Assumption........53
Section 12.7 Delivery of Seller Ancillary Documents....................54
Section 12.8 Environmental Reports.....................................54
Section 12.9 HSR Act...................................................54
Section 12.10 Extension of Mine Master Lease............................54
Section 12.11 Extension of Mine Sublease................................54
Section 12.12 Validity of Master/Sublease...............................54
Section 12.13 Operation of Mine Ventilation System......................54
Section 12.14 Satisfactory Results of Mine Integrity Study..............55
Section 12.15 Removal and Disposal of Contaminated Soils at
The Dunbar Facility.......................................55
Section 12.16 Preparation and Filing of Spill Prevention Plan...........55
Section 12.17 Satisfactory Results of Post-Signing Due
Diligence Investigation...................................55
Section 12.18 Mt. Braddock Facility.....................................55
Section 12.19 Certification of Mt. Braddock Facility....................56
Section 12.20 Purchaser's Review and Approval of Title and Survey.......56
ARTICLE 13 CONDITIONS PRECEDENT TO SELLER'S
OBLIGATIONS...............................................58
Section 13.1 Representations and Warranties True on the Closing Date...58
Section 13.2 Compliance With Agreement.................................58
Section 13.3 Absence of Suit...........................................58
Section 13.4 Delivery of Purchaser Ancillary Documents.................58
ARTICLE 14 POST-CLOSING MATTERS......................................58
Section 14.1 Sales Tax Matters.........................................58
Section 14.2 Finders Fees; Payments....................................58
Section 14.3 SEC Filings...............................................59
Section 14.4 Right of Access...........................................59
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ARTICLE 15 INDEMNIFICATION...........................................59
Section 15.1 Indemnification of Purchaser..............................59
Section 15.2 Indemnification of Seller.................................60
Section 15.3 Indemnification Procedures................................60
(a) Notice..............................................60
(b) Third Party Claims..................................60
(c) Other Claims........................................61
(d) Calculation of Losses...............................61
(e) Exclusivity of Indemnification Remedies.............61
(f) Limitation of Damages...............................62
Section 15.4 Survival of Representations and Warranties................62
ARTICLE 16 TERMINATION...............................................62
Section 16.1 Termination...............................................62
Section 16.2 Effect of Termination.....................................63
ARTICLE 17 MISCELLANEOUS.............................................64
Section 17.1 Entire Agreement and Amendments; Headings.................64
Section 17.2 Counterparts..............................................64
Section 17.3 Successors and Assigns....................................64
Section 17.4 Applicable Law............................................64
Section 17.5 Equitable Relief..........................................64
Section 17.6 Notices...................................................64
Section 17.7 Severability and Waiver...................................65
Section 17.8 Third Party Beneficiaries.................................65
Section 17.9 Pronouns..................................................65
Section 17.10 Attorneys' Fees...........................................65
Section 17.11 Time of Essence...........................................66
Schedule Listing
Exhibits
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the 22nd
day of June, 1999 (the "EFFECTIVE DATE") among DYNAMIC MATERIALS CORPORATION, a
Delaware corporation ("SELLER"), having a principal place of business at 551
Aspen Ridge Drive, Lafayette, Colorado 80026, and AMETEK, INC., a Delaware
corporation ("PURCHASER"), having a principal place of business at Station
Square, Paoli, PA 19301-1391.
RECITALS
WHEREAS, Seller owns and operates a business which produces clad metal
products and performs metal cladding and metal forming services including the
production of explosion bonded clad metal and the shock synthesis of synthetic
diamonds using its proprietary DYNACLAD(R) and DETACLAD(R) technologiEs and
other proprietary and licensed technologies (the "BONDING BUSINESS");
WHEREAS, the assets of the Bonding Business consist of certain assets and
properties, both real and personal, tangible and intangible, which are currently
located in the States of Colorado and Pennsylvania. The assets and properties of
the Bonding Business in Colorado are located at Seller's facility in Lafayette,
Colorado (the "COLORADO FACILITY"). The assets and properties of the Bonding
Business in Pennsylvania are located at Seller's facility situated at the mouth
of the Dunbar Mine, a portion of which is currently being leased by Seller (the
"DUNBAR MINE"), which is located on Dunbar-Ohiopyle Road in Dunbar, Pennsylvania
(collectively referred to herein as the "DUNBAR FACILITIES") and at Seller's
Facility in Mt. Braddock, Pennsylvania which is currently under construction
(referred to herein as the "MT. BRADDOCK FACILITY"). The Dunbar Facilities and
Mt. Braddock Facility are sometimes collectively referred to herein as the
"PENNSYLVANIA FACILITIES";
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser, substantially all of the assets, and certain of the
liabilities, of the Bonding Business upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
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ARTICLE 1
DEFINITIONS
1.1 "Adjustment Statement" shall have the meaning set forth in Article
4.2(c).
1.2 "Affected Employees" shall have the meaning set forth in Article
6.1.
1.3 "Affiliates" shall mean, with respect to any person or entity, any
other person or entity controlling, controlled by or under common
control with such person or entity, where "control" means the
possession, directly or indirectly, of the power to direct the
management and policies of a person or entity, whether through the
ownership of voting securities, contract or otherwise.
1.4 "Agreement" shall have the meaning set forth in the Preamble.
1.5 "ASC" shall have the meaning set forth in Article 11.9.
1.6 "Assignment and Assumption Agreement" shall have the meaning set
forth in Article 3.1.
1.7 "Assumed Liabilities" shall have the meaning set forth in
Article 3.1.
1.8 "Bond Proceeds Account" shall have the meaning set forth in Article
2.1(l).
1.9 "Bonding Assets" shall have the meaning set forth in Article 2.1.
1.10 "Bonding Business" shall have the meaning set forth in the Recitals.
1.11 "Bonding Operation Costs" shall have the meaning set forth in
Article 5.1(a).
1.12 "Books and Records" shall have the meaning set forth in Article
2.1(i).
1.13 "CERCLA" shall have the meaning set forth in Article 8.11(b).
1.14 "Closing" shall have the meaning set forth in Article 7.1.
1.15 "Closing Date" shall have the meaning set forth in Article 7.1.
1.16 "COBRA" shall have the meaning set forth in Article 8.17(b).
1.17 "Code" shall have the meaning set forth in Article 8.17(d).
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1.18 "Colorado Equipment" shall have the meaning set forth in Article
2.1(a)(ii).
1.19 "Colorado Facility" shall have the meaning set forth in the
Recitals.
1.20 "Competitive Business" shall have the meaning set forth in Article
10.5(a).
1.21 "Completion Cost Adjustment" shall have the meaning set forth in
Article 5.2(c).
1.22 "Completion Cost Reconciliation" shall have the meaning set forth in
Article 5.2(b).
1.23 "Construction Contracts and Plans" shall have the meaning set forth
in Article 5.1(a).
1.24 "Contracts" shall have the meaning set forth in Article 2.1(a).
1.25 "Corporate Law" shall have the meaning set forth in Article 8.1.
1.26 "Current Assets" shall mean the Bonding Assets which are reasonably
expected to be converted into cash or sold or consumed within one
year.
1.27 "Current Liabilities" shall mean all accounts payable and all
accrued liabilities (excluding current portions of long term debt
and all Retained Liabilities) which exist as of the Closing Date and
the liquidation of which is reasonably expected to occur within one
year, to the extent such payables and liabilities were incurred in
the ordinary course of business prior to the Closing Date.
1.28 "Damages" shall have the meaning set forth in Article 15.1.
1.29 "DCED" shall have the meaning set forth in Article 2.1(l).
1.30 "Designated Event" shall have the meaning set forth in Article
16.1(c).
1.31 "Deficiency" shall have the meaning set forth in Article 4.2.
1.32 "Disapproval Notice" shall have the meaning set forth in Article
12.20(a).
1.33 "Disclosure Schedule(s)" shall mean those schedules, lists, tables,
charts and documents relating to Seller, Purchaser, the Bonding
Business, the Bonding Assets and the transactions contemplated
hereby attached hereto and by reference incorporated herein.
3
1.34 "Dunbar Equipment" shall have the meaning set forth in Article
2.1(a)(i).
1.35 "Dunbar Facility(ies)" shall have the meaning set forth in the
Recitals.
1.36 "Dunbar Mine" shall have the meaning set forth in the Recitals.
1.37 "Dunbar Sublease" shall have the meaning set forth in Article
8.6(c).
1.38 "EBITDA" shall mean, with respect to any period, the operating
earnings of the Bonding Business before deduction of interest, tax,
depreciation and amortization charges for such period.
1.39 "Effective Date" shall have the meaning set forth in the Preamble.
1.40 "Employee Plan" shall have the meaning set forth in Article 8.17(a).
1.41 "Employees" shall have the meaning set forth in Article 8.17(a).
1.42 "Environmental Laws" shall have the meaning set forth in Article
8.11(b).
1.43 "Environmental Liabilities" shall have the meaning set forth in
Article 3.2(i).
1.44 "Environmental Reports" shall have the meaning set forth in Article
8.11(a).
1.45 "ERISA" shall have the meaning set forth in Article 8.18(a).
1.46 "Escrow Agent" shall have the meaning set forth in Article 4.3.
1.47 "Escrow Agreement" shall have the meaning set forth in Article 4.3.
1.48 "Escrow Amount" shall the meaning set forth in Article 4.3.
1.49 "Excess" shall have the meaning set forth in Article 4.2.
1.50 "Excluded Assets" shall have the meaning set forth in Article 2.2.
1.51 "Excluded Colorado Assets" shall have the meaning set forth in
Article 2.3.
1.52 "Expenses" shall have the meaning set forth in Article 11.2(a).
1.53 "Financial Statements" shall have the meaning set forth in Article
8.4.
4
1.54 "GAAP" shall mean generally accepted United States accounting
principles, applied on a basis consistent with the basis on which
the Financial Statements referred to in Article 8.4 were, or are to
be, prepared.
1.55 "Governmental Permits" shall have the meaning set forth in Article
8.12.
1.56 "Governmental Body" shall have the meaning set forth in Article
8.17(e).
1.57 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 as amended.
1.58 "IDB Loan Agreement" shall have the meaning set forth in
Article2.1(l).
1.59 "IDB" shall have the meaning set forth in Article2.1(l).
1.60 "Indemnified Damages" shall have the meaning set forth in Article
15.3(f).
1.61 "Indemnified Party" shall have the meaning set forth in Article
15.3(a).
1.62 "Indemnifying Party" shall have the meaning set forth in Article
15.3(a).
1.63 "Independent Accountants" shall have the meaning set forth in
Article 4.2(c).
1.64 "Inspection Period" shall have the meaning set forth in Article
12.20(c).
1.65 "Inspection Period Expiration Date" shall have the meaning set forth
in Article 12.20(c).
1.66 "Intellectual Property" shall have the meaning set forth in Article
2.1(d).
1.67 "Inventory" shall have the meaning set forth in Article 2.1(f).
1.68 "Knowledge" of a particular fact or other matter with respect to
Seller or Purchaser shall be limited to those employees of Seller or
Purchaser indicated herein, and will be deemed to exist if:
(i) such individual(s) is actually aware of such fact
or other matter; or
(ii) such individual(s) would have been aware of such fact or
other matter after a reasonable inquiry regarding the
existence of such fact or other matter.
5
When such terms are used in connection with the knowledge of
Purchaser, such knowledge shall mean the knowledge of William
Eginton, George Jucha, Jim Hunter, and Tom Montgomery. When such
terms are used in connection with the knowledge of Seller such
knowledge shall mean the knowledge of Joseph P. Allwein, Richard A.
Santa, Steven A.
Bennetts and Gary S. Burke.
1.69 "Legal Requirements" shall have the meaning set forth in Article
8.17(e).
1.70 "Licenses and Permits" shall have the meaning set forth in Article
8.12.
1.71 "Master Lease" shall have the meaning set forth in Article 12.10.
1.72 "Material Adverse Effect" shall mean a material adverse effect on
the properties, business, financial condition or results of
operations of the Bonding Business.
1.73 "Material Breach" shall have the meaning set forth in Article
16.1(b).
1.74 "Material Contracts" shall have the meaning set forth in Article
8.23.
1.75 "Mt. Braddock Completion Costs" shall have the meaning set forth in
Article 5.2(a).
1.76 "Mt. Braddock Equipment" shall have the meaning set forth in Article
2.1(a)(i).
1.77 "Mt. Braddock Facility" shall have the meaning set forth in the
Recitals.
1.78 "Neighborhood Assistance Tax Credit" shall have the meaning set
forth in Article 2.1(l).
1.79 "Net Book Value of Bonding Assets" shall mean net book value of the
Bonding Assets delivered to Purchaser at Closing.
1.80 "Net Current Assets" shall mean that amount calculated by
subtracting the Current Liabilities from the Current Assets.
1.81 "Notice of Claim" shall have the meaning set forth in Article
15.3(a).
1.82 "Owned Real Property" shall have the meaning set forth in Article
2.1(b)(i).
1.83 "PADEP" shall have the meaning set forth in Article 12.8.
6
1.84 "Pennsylvania Equipment" shall have the meaning set forth in Article
2.1(a)(i).
1.85 "Pennsylvania Property" shall have the meaning set forth in Article
3.2(m).
1.86 "Pennsylvania Facilities" shall have the meaning set forth in the
Recitals.
1.87 "Pension Plan" shall have the meaning set forth in Article 8.17(a).
1.88 "Permitted Encumbrances" shall mean (i) the Assumed Liabilities;
(ii) liens for taxes not yet due and payable; and (iii) the liens
and encumbrances set forth in SCHEDULE 1.79
1.89 "Pre-Closing Receivables" shall have the meaning set forth in
Article 11.8.
1.90 "Purchase Price" shall have the meaning set forth in Article 4.1.
1.91 "Purchaser" shall have the meaning set forth in the Preamble.
1.92 "Purchaser Ancillary Documents" shall have the meaning set forth in
Article 7.2(a)(ix).
1.93 "Regulated Substances" shall have the meaning set forth in Article
8.11(c).
1.94 "Repair Expenses" shall have the meaning set forth in Article
11.5(a).
1.95 "Required Consents and Approvals" shall have the meaning set forth
in Article 12.4.
1.96 "Retained Liabilities" shall have the meaning set forth in Article
3.2.
1.97 "Revised Schedules" shall have the meaning set forth in Article
11.3.
1.98 "Sales Materials" shall have the meaning set forth in Article
2.1(h).
1.99 "Schedule of Net Current Assets" shall have the meaning set forth in
Article 4.2(a).
1.100 "SEC" shall have the meaning set forth in Article 14.3.
1.101 "Seller" shall have the meaning set forth in the Preamble.
7
1.102 "Seller Ancillary Documents" shall have the meaning set forth in
Article 7.2(b)(xvi).
1.103 "Survey" shall have the meaning set forth in Article 12.20(b).
1.104 "Target Employees" shall have the meaning set forth in Article 6.1.
1.105 "Tax(es)" shall have the meaning set forth in Article 8.7.
1.106 "Tax Return" shall have the meaning set forth in Article 8.7.
1.107 "Termination Amount" shall have the meaning set forth in Article
11.2(c).
1.108 "Termination Fee" shall have the meaning set forth in Article
11.2(b).
1.109 "Third Party Claim" shall have the meaning set forth in Article
15.3(b).
1.110 "Timet Purchase Order" shall have the meaning as set forth in
Article 11.9.
1.111 "Timet Titanium" shall have the meaning as set forth in Article
11.9.
1.112 "Title Binder" shall have the meaning set forth in Article 12.20(a).
1.113 "Title Company" shall have the meaning set forth in Article
12.20(a).
1.114 "Title Cure Expiration Date" shall have the meaning set forth in
Article 12.20(a).
1.115 "Title Objections" shall have the meaning set forth in Article
12.20(a).
1.116 "Transition Cost Adjustment" shall have the meaning set forth in
Article 5.1(a).
1.117 "Transition Period" shall have the meaning set forth in Article
5.1(a).
1.118 "WARN" shall have the meaning set forth in Article 3.2(j).
1.119 "Warranty Claims" shall have the meaning set forth in Article 11.5.
1.120 "Welfare Plan" shall have the meaning set forth in Article 8.17(a).
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ARTICLE 2
BONDING ASSETS
2.1 TRANSFER OF ASSETS. Upon the terms and subject to the conditions of
this Agreement, at the Closing, the Seller will sell, convey, transfer, assign
and deliver to the Purchaser, and the Purchaser will purchase from the Seller,
for the Purchase Price free and clear of all mortgages, liens, charges, security
interests, claims or other encumbrances, except for Permitted Encumbrances, the
following assets of the Seller, to the extent such assets are primarily related
to (rather than generally to the Seller), used in or reasonably necessary for
the Bonding Business as presently conducted by the Seller, but excluding all
Excluded Assets (collectively, the "BONDING ASSETS"):
(a) MACHINERY AND EQUIPMENT.
(i) All buildings, supplies, furniture and furnishings,
machinery, equipment, tooling, dies, jigs, molds, patterns,
replacement parts and accessories, leasehold improvements that do
not constitute real property, trucks, vans, automobiles and other
titled vehicles, owned or leased by Seller that are reflected in the
current budget for, or located at, the Mt. Braddock Facility (the
"MT. BRADDOCK EQUIPMENT") or located at the Dunbar Facility (the
"DUNBAR EQUIPMENT" (which, together with Mt. Braddock Equipment is
referred to herein as the "PENNSYLVANIA EQUIPMENT") including the
items listed in SCHEDULE 2.1(a)(i); and
(ii) Certain machinery, equipment, supplies, furniture and
furnishings, machinery, tooling, dies, jigs, molds, patterns,
replacement parts and accessories, and leasehold improvements that
do not constitute real property, owned or leased by Seller, located
at the Colorado Facility, and being more fully described in SCHEDULE
2.1(a)(ii) attached hereto (the "COLORADO EQUIPMENT").
(b) REAL PROPERTY.
(i) Real property owned by Seller in Mt. Braddock, PA,
consisting of land, buildings and any leasehold improvements that
constitute real property, with an address of 1138 Industrial Park,
Mt. Braddock, Pennsylvania 15465, all as more particularly described
in SCHEDULE 2.1(b)(i) (the "OWNED REAL PROPERTY").
(ii) Seller's leasehold interest in the Dunbar Facilities
more particularly described in SCHEDULE 2.1(b)(ii) and all of
Seller's leasehold improvements that constitute real property and
which are located at the Dunbar Facilities.
(c) BUSINESS SYSTEMS. As set forth on SCHEDULE 2.1(c):
9
(i) Certain computer hardware, software and network servers
owned by the Seller together with all program processes relating to
such items;
(ii) All versions of the source and object code for the
items listed in (c)(i) above, together with all maintenance and
user documentation;
(iii) All testing data and all other documents related to the
items listed in (c)(i); and
(iv) All product configuration, order entry, purchasing,
manufacturing, invoicing and accounting software and systems and
related records and equipment.
(d) INTELLECTUAL PROPERTY. All of Seller's right, title and
interest in and to, the following assets as listed and described on
SCHEDULE 2.1(d) (collectively referred to hereafter as the "INTELLECTUAL
PROPERTY") including without limitation the right to sue for and collect
damages resulting from infringement of any of the Intellectual Property
before the Closing Date and the right to collect any royalties to be paid
after the Closing Date resulting from a license agreement of any of the
Intellectual Property signed on or before the Closing Date:
(i) the United States and foreign patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice);
(ii) all registered and unregistered statutory and
common law trademarks, service marks, logos, copyrights, trade
dress, trade names, including, without limitation, the registered
trademarks DETACLAD(R) and DETACOUPLE(R) and the common law
trademaRk DYNACLAD(TM);
(iii) all registrations, applications and reissues,
reexaminations and renewals for any of the foregoing;
(iv) all formulae, inventions, proprietary rights,
trade secrets, customer and supplier lists, sales data, know-how,
manuals, designs, blueprints, specifications, drawings,
engineering reports, test data and reports, processing and
performance standards, production methods, technical and computer
data, mask works and all records thereof;
(v) All other confidential information and
proprietary rights; and
(vi) All license agreements, sublicense agreements
assignment and confidentiality agreements to and from third parties
relating to any of the foregoing.
10
(e) CONTRACTS. Subject to Article 10.3, all of the rights and
benefits accruing to the Seller as of the Closing Date under all
contracts, agreements, commitments, indentures, leases, including the
Dunbar Sublease, purchase orders, instruments and other agreements of
Seller as set forth in SCHEDULE 2.1(e) (the "CONTRACTS").
(f) INVENTORY. All items of inventories and supplies, wherever
located, including, without limitation, raw material, stores, tools,
work-in-process, semi-finished product, finished product, supplies, spare
parts, samples, models, office supplies, production supplies, packaging
materials and other miscellaneous supplies owned by the Seller (the
"INVENTORY").
(g) CLAIMS. All claims against any employees or third parties that
are primarily related to the Bonding Business rather than generally to the
Seller, including, without limitation, unliquidated rights under any
manufacturers' and vendors' warranties or guarantees.
(h) MARKETING DOCUMENTS AND MATERIALS. All catalogues, brochures,
sales literature, advertising and promotional materials, customer and
supplier lists, confidential and other marketing information, price lists
and information, sales history and information, sales aids and other
selling material relating primarily to the products manufactured and
services provided by the Bonding Business rather than generally to the
Seller (the "SALES MATERIALS") subject to Seller's continuing right to
maintain copies of the supplier lists for use in connection with its other
businesses.
(i) BOOKS AND RECORDS. To the extent not required to be maintained
by Seller by law or by Seller's internal document retention policies,
originals or true copies of all operating data and records, whether
printed or electronic, customer lists, financial accounting and credit
reports, personnel files of Affected Employees, records pertaining to
suppliers and distributors, correspondence, budgets and all other files,
documents and records of or pertaining to the Bonding Business or the
Bonding Assets (the "BOOKS AND RECORDS") subject to Seller's continuing
right to reasonable access to such books and records if required for use
by Seller in the operation of its business;
(j) LICENSES AND PERMITS. All transferable Licenses and Permits
owned, possessed, granted to or used by the Seller in connection with the
Bonding Business;
(k) TELEPHONE AND FACSIMILE NUMBERS. Seller's rights to those
telephone and facsimile numbers set forth in SCHEDULE 2.1(k);
(l) BENEFITS ASSOCIATED WITH GOVERNMENTAL GRANTS AND INCENTIVES.
If assumed by Purchaser hereunder, all of Seller's right, title and
interest in any funds, grants, incentives and other benefits associated
with the Loan Agreement between the Seller and Fayette County Industrial
Development Authority, dated as of September 1, 1998 (the "IDB LOAN
AGREEMENT"), executed in connection with the Fayette County Industrial
Development Authority Multi-Mode Variable Rate Industrial Development
Revenue Bonds, Series 1998 (Dynamic Materials Corporation Project) (the
"IDB")
11
including, without limitation, Seller's segregated bond proceeds
account as provided for in the IDB Loan Agreement and all cash, securities
or other items credited thereto inclusive of any interest accrued thereon
through and including the Closing Date (the "BOND PROCEEDS ACCOUNT") and
any other governmental grant, tax credit or incentive (financial or
otherwise) or agreement as may be assumed by Purchaser hereunder,
including, without limitation, those funds granted from the Commonwealth
of Pennsylvania Department of Community and Economic Development (the
"DCED") for installation of a ventilation system in the Dunbar Mine
and for job training and the $250,000 tax credit approved under the
Neighborhood Assistance Program/Enterprise Zone Tax Credit Program
(the "NEIGHBORHOOD ASSISTANCE TAX CREDIT") to the extent that any of
the funds, credits, grants, incentives or other benefits referred to
in this Article 2.1(l) become due or available on or after the Closing
Date, and are assignable by Seller.
(m) GOODWILL. The goodwill and going concern value of the Bonding
Business.
2.2 EXCLUDED ASSETS. Notwithstanding anything expressed or implied to
the contrary in Article 2.1, the following properties, assets and rights used in
or related to Seller's operation of the Bonding Business, are excluded from the
Bonding Assets that are being conveyed to the Purchaser (collectively referred
to herein as the "EXCLUDED ASSETS").
(a) All Accounts Receivable of the Bonding Business;
(b) Cash on hand or in banks or other depositories, including
investments except for the Bond Proceeds Account;
(c) All refunds or other reimbursements relating to prepaid taxes,
expense and advances;
(d) Taxes withheld by Seller from its employees' salaries and
wages, and other taxes of Seller incurred by it as an employer or as a
vendor, which Seller is obligated to pay;
(e) Agreements, as follows:
(i) Subject to Article 10.3, those non-assignable contracts
set forth in SCHEDULE 2.2(e)(i) to the extent that Seller is unable
to obtain the required consent to the assignment thereof ; and
(ii) the assignable contracts set forth on SCHEDULE
2.2(e)(i) attached hereto;
(f) The Colorado Facility and all real property owned or leased by
Seller in Colorado;
12
(g) The vehicles, trucks, vans and other titled vehicles located
at the Colorado Facility;
(h) The office equipment, furniture and fixtures, office supplies,
and related equipment at the Colorado Facility;
(i) Insurance policies;
(j) Causes of action or claims of Seller against third parties,
whether known or unknown on the Closing Date, which may arise solely in
connection with the Excluded Assets;
(k) Except for those items identified in SCHEDULE 2.1(c), computer
hardware and software systems of Seller, including without limitation, any
network equipment and software, order entry, invoicing and similar
corporate information systems and related equipment;
(l) Except when the following terms are used by Purchaser to
indicate that certain products, processes, or services relating to the
Bonding Business were previously provided by Seller, rights to the
following trademarks and service marks:
(i) "Dynamic Materials Corporation"
(ii) "DMC";
(m) The computer hardware and software systems of Seller,
including without limitation, any network equipment and software not
listed or described in SCHEDULE 2.1(c).
(n) The machinery and equipment located at the Colorado Facility
as set forth on SCHEDULE 2.2(n).
2.3 SALE OF EXCLUDED COLORADO ASSETS. Seller and Purchaser acknowledge
that Purchaser may have interest in acquiring certain of the excluded assets set
forth in SCHEDULE 2.2(n) (collectively the "EXCLUDED COLORADO ASSETS"). Not less
than 10 days prior to Closing, Purchaser shall prepare and deliver to Seller
SCHEDULE 2.3 which shall set forth any Excluded Colorado Assets that Purchaser
desires to acquire from Seller. At Closing, Seller agrees to sell, convey
transfer, assign and deliver to the Purchaser those Excluded Colorado Assets
identified and requested by Purchaser in exchange for an adjustment to the
Purchase Price in the aggregate amount of the fair market value of such Excluded
Colorado Assets as provided in Article 4.2(b)(iii); provided however, that if
the parties can not agree as to the fair market value of such Excluded Colorado
Assets then such Excluded Colorado Assets shall be valued at their book value.
13
ARTICLE 3
ASSUMPTION OF LIABILITY
3.1 ASSUMED LIABILITIES. As partial consideration for the sale of the
Bonding Assets hereunder, the Purchaser and the Seller shall execute and deliver
at the Closing an assignment agreement (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT"), pursuant to which the Seller shall assign to the Purchaser, and the
Purchaser shall assume and agree to pay, perform and discharge when due the
following (collectively, the "Assumed Liabilities"):
(a) CURRENT LIABILITIES. The Current Liabilities of Seller
relating to the Bonding Assets and set forth on or reserved against the
Statement of Net Current Assets; and
(b) LIABILITIES UNDER ASSIGNED CONTRACTS. The obligations of
Seller under all Contracts to the extent such obligations (i) do not
result from any breach or default by Seller occurring prior to the Closing
and (ii) arise and are to be performed pursuant to the terms of such
contract after the Closing Date.
3.2 RETAINED LIABILITIES. Notwithstanding any other provision of this
Agreement to the contrary, the Seller shall retain, and the Purchaser shall not
assume or be liable for, any of the obligations or liabilities of the Seller not
set forth in Article 3.1 (collectively, the "RETAINED LIABILITIES"), which
Retained Liabilities shall include, without limitation:
(a) OBLIGATIONS UNDER THIS AGREEMENT. Any claims against,
liabilities or obligations of the Seller of any kind or nature, arising
under this Agreement;
(b) PRE-CLOSING OPERATIONS. Except as otherwise expressly provided
to the contrary in this Agreement, all of the Seller's liabilities,
obligations, damages, losses, expenses, demands, claims, judgments,
actions or causes of action of any kind, whenever made, whether absolute,
contingent, accrued or otherwise, relating to, arising out of or incurred
in connection with any matter (including, the ownership of the Bonding
Assets or the conduct of the Bonding Business by the Seller) on or prior
to the Closing Date;
(c) PRODUCT LIABILITY OBLIGATIONS. All claims, liabilities and
obligations of any kind or nature arising with respect to services
provided or products manufactured by the Seller prior to the Closing Date,
including, without limitation, claims, liabilities and obligations for
personal injury arising out of or related to services provided or products
manufactured by the Seller on or prior to the Closing Date;
(c) WARRANTY CLAIMS. Seller's obligations for Warranty Claims as
provided in Article 11.3.
(e) MT. BRADDOCK COMPLETION COSTS. Seller's obligation for Mt.
Braddock Completion Costs as provided in Article 5.2, including any
obligations under the Construction Contracts and Plans except to the that
Purchaser assumes the IBD and obtains control of the Bond proceeds
Account, in which event Seller shall only retain
14
liability for any cost overruns associated with the completion of the Mt.
Braddock Facility.
(f) LITIGATION. Any claims against, liabilities or obligations of
the Seller relating to, arising out of or incurred in connection with any
litigation, arbitration or other adversarial proceeding in which the
Seller is a party or otherwise involved on or prior to the Closing Date,
including, without limitation, the matters set forth in SCHEDULE 3.2(f);
(g) LIABILITY RELATED TO EXCLUDED ASSETS. Any claims, liabilities
or obligations of the Seller relating to, arising out of or incurred in
connection with the Excluded Assets;
(h) TAXES. Any amounts due in respect of any Taxes imposed with
respect to any taxable period of the Seller or the Bonding Business ending
on or prior to the Closing Date or relating to, arising out of or incurred
in connection with the operations of the Bonding Business or the ownership
of the Bonding Assets on or prior to the Closing Date, including any Taxes
asserted against the Seller, the Bonding Business or the Bonding Assets by
reason of its or their inclusion in any consolidated, combined or unitary
Tax Return, but excluding any Taxes accrued or reserved for on the
Statement of Net Current Assets;
(i) ENVIRONMENTAL LIABILITIES. Any liabilities arising out of
violations of any Environmental Laws occurring on or prior to the
Closing Date ("ENVIRONMENTAL LIABILITIES");
(j) EMPLOYEE AND EMPLOYEE PLAN LIABILITY. Any claims, liabilities
or obligations of the Seller under any Employee Plan, employment
contracts, statute, ordinance or regulation including, but not limited to,
any obligations or liability under the Worker Adjustment and Retraining
Notification Act (WARN) associated with Seller's closure of its Colorado
Facility, or any other claims, liabilities or obligations of any kind to
employees or former (whether by reason of retirement or other termination
of employment) employees of the Bonding Business that relate to periods of
employment through and including the Closing Date or arise in connection
with the sale of the Bonding Assets hereunder;
(k) DEBTS. All indebtedness of Seller for borrowed money except to
the extent provided otherwise herein;
(l) PRIOR BREACHES. All obligations of Seller to pay money
damages for any breaches of, or defaults under, contracts, agreements
or commitments prior to the Closing including contracts assigned to
Purchaser hereunder;
(m) MECHANICS' LIENS Mechanics' and materialmen's liens and claims
of any kind or type, as well as any other statutory liens or claims
permitted by applicable law, filed or maintained by any contractor,
subcontractor, vendor, supplier or any other person or party, including
anyone directly or indirectly employed by any of them or anyone for
15
whose acts they may be liable, against the Owned Real Property and Dunbar
Facilities ("collectively referred to herein as the "PENNSYLVANIA
PROPERTY").
ARTICLE 4
PURCHASE PRICE
4.1 PURCHASE PRICE. Subject to adjustment pursuant to Article 4.2, in
reliance on the representations and warranties of the Seller hereunder and in
consideration of the Seller's sale, conveyance, transfer, assignment and
delivery of the Bonding Assets to the Purchaser and the other undertakings of
Seller hereunder, the Purchaser agrees to pay to or for the account of Seller
(or to the Escrow Agent pursuant to Article 4.3) at the Closing aggregate
consideration in the amount of $17,000,000 less the amount of the liability
assumed by Purchaser under the IDB Loan Agreement, without interest or penalty
(the "PURCHASE PRICE").
4.2 PURCHASE PRICE ADJUSTMENT.
(a) No later than ten (10) days prior to the Closing, Seller shall
prepare a schedule, which shall be annexed hereto as SCHEDULE 4.2, that
sets forth an estimate of the Current Assets and Current Liabilities
together with a calculation of the estimated value of the Net Current
Assets as of the Closing Date (the "SCHEDULE OF NET CURRENT ASSETS").
Seller agrees that, to the extent possible, all components of the Schedule
of Net Current Assets shall be prepared in accordance with GAAP. If
Purchaser disputes the correctness or completeness of the Schedule of Net
Current Assets, Purchaser shall notify Seller in writing of its objections
and its basis therefore within ten (10) business days of its receipt of
the Schedule of Net Assets. If any disputes cannot be resolved within ten
(10) business days after notice of such objection being received by
Seller, Seller and Purchaser shall promptly submit the matter to the
Independent Accountants for resolution.
(b) At the Closing, the Purchase Price will be:
(i) decreased by the amount by which the unpaid and
anticipated post-closing Mt. Braddock Completion Costs indicated on
the Completion Cost Reconciliation (as defined in Article 5.2(a))
exceed the balance remaining in the Bond Proceeds Account and
transferred to Purchaser hereunder, or increased by the amount by
which the balance remaining in the Bond Proceeds Account exceeds the
amount of the unpaid and anticipated post-closing Mt. Braddock
Completion Costs indicated on the Completion Cost Reconciliation;
(ii) increased by the amount that the estimate of Net
Current Assets indicated on the Schedule of Net Current Assets is
more than $3,861,313 (such amount hereafter referred to as the
"EXCESS") or decreased by the amount that the estimate of Net
Current Assets indicated on the Schedule of Net Current Assets is
less than $3,861,313 (such amount hereafter referred to as the
"DEFICIENCY");
16
(iii) increased by an amount for any Excluded Colorado
Equipment as provided in and pursuant to Article 2.3 and the book
value of the Caterpiller Model 924F Front End Loader, SN #5NN00743,
acquired for the Dunbar Facility;
(iv) subject to Article 11.9, decreased by an amount equal
to the difference between the price of the Timet Titanium
reflected in the Timet Purchase Order and the estimated net
realizable value of the Timet Titanium to Purchaser as of the
Closing Date (it being agreed by the parties that in determining
such net realizable value no consideration will be given to the
possible sale of the Timet Titanium in anticipation of the ASC
order to either an existing or potential competitor of Seller or
Purchaser for the ASC order); and
(v) decreased by the amount of actual or estimated Damages
or dimunition in value to either Purchaser or the Bonding
Business (as agreed to by Seller and Purchaser), as a result of
each of the matters set forth in SCHEDULE 4.2(b)(v).
(c) Within 60 days after the Closing Date, Purchaser shall
recompute any Excess or Deficiency as of the Closing Date using the
Schedule of Net Current Assets. Should there be a difference between
the recomputed Excess or Deficiency and the amount of the adjustment
to the Purchase Price paid at Closing pursuant to Article 4.2(a),
Purchaser shall, within such 60 day period, provide notice to Seller
thereof in writing and set forth in such notice reasonable detail of
Purchaser's recomputed adjustment amount on a Statement of Adjustment
in a form agreeable to the parties (the "ADJUSTMENT STATEMENT").
Seller shall have thirty (30) days from its receipt of the Adjustment
Statement to submit its written objection to Purchaser's recomputed
adjustment calculation as indicated on the Adjustment Statement. If
Seller does not make any objection within that period, the Adjustment
Statement shall be deemed final and conclusive with respect to the
determination of any adjustment to be made to the Purchase Price
pursuant to Article 4.2(b) and shall be binding on both Purchaser and
Seller. If Seller submits its written objection to any calculation on
the Adjustment Statement, the parties shall immediately make available
to each other such books and records as are relevant to such
disagreement and are in the possession of each of them, and the
parties shall attempt in good faith to resolve such disagreement and
mutually determine the correct calculation. If the parties are unable
to resolve Seller's objection within fourteen (14) days following
Seller's submission of its objection to Purchaser, they shall refer
the dispute to a representative of a firm of independent public
accountants of recognized national standing designated by Seller and
Purchaser (the "INDEPENDENT ACCOUNTANTS").
(d) The Independent Accountants shall review the calculation to
which Seller objected, and shall resolve all objections as soon as
practicable, but no later than fourteen (14) days after the Independent
Accountants shall have received all information that the Independent
Accountants may have reasonably requested from Seller and Purchaser
regarding the objection. The Adjustment Statement, upon modification or
approval by the Independent Accountants, shall be deemed final and
conclusive with respect to the determination of any adjustment to be made
to the Purchase Price, and shall be binding
17
on the parties to this Agreement. Seller and Purchaser shall each pay
one-half of the Independent Accountants' fees and expenses in
resolving any such objection.
(e) The adjustment to the Purchase Price, if any, shall be based
on the final determination of any Excess or Deficiency as determined by
Seller and Purchaser or the Independent Accountants. In the case of an
Excess, if the final amount of the Excess is greater than the Excess
determined and paid by Purchaser at Closing, then Purchaser shall
immediately deliver to Seller, in cash by wire transfer or certified
funds, the additional amount of the Purchase Price due to Seller as
provided in Article 4.2(b)(ii) and any interest accrued thereon from the
Closing Date. In the case of a Deficiency, if the final amount of the
Deficiency is greater than the Deficiency determined and credited to
Purchaser at Closing, then Seller shall pay to Purchaser in cash by wire
transfer or certified funds, the amount of the Purchase Price due to
Purchaser as provided in Article 4.2(b)(ii) and any interest accrued
thereon from the Closing Date. Any adjustment required to be made under
this Article 4.2 to the amount of Purchase Price shall not accrue interest
for the first 75 days from the Closing, and thereafter interest shall
accrue at a rate of eight percent (8%) per annum.
4.3 ESCROW AGREEMENT. Pursuant to an Escrow Agreement to be entered into
among Purchaser, Seller and First Union National Bank (the "ESCROW AGENT") in
substantially the form attached hereto as Exhibit A (the "ESCROW AGREEMENT"),
the Purchaser shall deliver $1,500,000 of the Purchase Price to the Escrow Agent
at the Closing. Such monies, together with all interest accrued thereon, are
hereinafter referred to as the "ESCROW AMOUNT." Any accrued interest on the
Escrow Amount shall be disbursed to Seller or Purchaser pursuant to the terms of
the ESCROW AGREEMENT in the same proportion as the original escrow deposit is
disbursed to Seller and Purchaser. Seller and Purchaser agree that each will
execute and deliver such instruments and documents as are furnished by any other
party to enable such furnishing party to receive those portions of the Escrow
Amount to which the furnishing party is entitled under the provisions of the
Escrow Agreement and this Agreement. Seller and Purchaser shall each pay
one-half of the Escrow Agent's fees and expenses.
4.4 ALLOCATION OF CONSIDERATION. The allocation of consideration paid by
Purchaser for the Bonding Assets shall be preliminarily allocated as determined
by Purchaser as of Closing and approved by Seller, which approval shall not be
unreasonably withheld or delayed. A final allocation shall be made jointly by
Purchaser and Seller within 90 days after the Closing. Purchaser and Seller
hereby affirm that they shall each adhere to any such allocation for the
purposes of all tax returns filed by them subsequent to such date, including the
determination by Seller of taxable gain or loss on the sale of the Bonding
Assets and the determination by Purchaser of the tax basis of the Bonding
Assets, for the purposes of all financial statements and in all other
circumstances.
4.5 SALES, TRANSFER AND USE TAXES. The Purchaser and the Seller agree to
share equally any and all sales, transfer or use tax due with regard to, the
transfer of the Bonding Assets, the Owned Real Property and the Dunbar Sublease,
as contemplated hereunder.
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ARTICLE 5
TRANSITION MATTERS
5.1 TRANSITION COST ADJUSTMENT.
(a) Purchaser acknowledges that Seller is currently in the process
of completing the construction of the Mt. Braddock Facility. In that
regard, Seller has warranted to Purchaser that during the Transition
Period (as defined below) the profit margin of the Bonding Business
(defined as EBITDA percentages of sales) shall not be lower than the
historical EBITDA margin of the Bonding Business as determined and
reported in the historical internal financial information of the Bonding
Business which has been provided to Purchaser as part of its due diligence
review of the Bonding Assets. Seller and Purchaser agree that should the
Bonding Operation Costs during the Transition Period exceed a cost level
that would have enabled the Bonding Business to generate an EBITDA level
of 11.0% then, subject to the provisions of the Escrow Agreement,
Purchaser shall be entitled to payment of an amount from the Escrow Amount
representing the difference between the cost level for the Transition
Period and that cost level that would have enabled the Bonding Business to
achieve an EBITDA level of 11% (the "TRANSITION COST ADJUSTMENT");
provided, however, that in calculating whether the 11% EBITDA level has
been met, Purchaser shall be required to employ pricing practices during
the Transition Period that are consistent with the pricing practices of
the Bonding Business during the 12 months immediately prior to the
Effective Date. As used in this Agreement, "BONDING OPERATION COSTS" shall
mean with respect to the operation of the Bonding Assets, all costs
incurred in operating the Bonding Business, including, but not limited to
direct labor costs, subcontract services costs (including, without
limitation, corporate information technology expenses allocable to the
operation of the Bonding Assets) arising out of the operation of the
Bonding Assets. "TRANSITION PERIOD" shall mean the period of time from the
Closing Date through the date the Purchaser and Seller agree that (i)
construction of the Mt. Braddock Facility has been satisfactorily
completed in accordance with the applicable contracts and plans as set
forth in SCHEDULE 5.1(a) (to be delivered prior to Closing) (the
"CONSTRUCTION CONTRACTS AND PLANS"), and (ii) the Pennsylvania Equipment,
relocated Colorado Equipment and all other equipment, machinery and
systems necessary to fully operate the Bonding Business (with the
exception of the Colorado Press) have been installed, tested and are
operating satisfactorily. If Purchaser and Seller are unable to agree as
to whether the requirements of (i) and (ii) of the preceding sentence have
been satisfied, then Purchaser and Seller shall retain a mutually
agreeable independent third party to make such determination. Purchaser
and Seller shall each pay one-half the cost of any such third-party.
(b) As soon as practicable and in any event within 60 days after
the termination of the Transition Period, Purchaser shall deliver to
Seller its written
19
calculation (and applicable work papers) of the Bonding Operation
Costs for the Transition Period, which costs shall be calculated in a
manner consistent with the terms of Article 5.1(a) hereof and Seller's
historical practice for calculating such costs. Seller shall have 30
days to review such calculation and submit any suggested changes in
writing to Purchaser. If any such changes are timely submitted, and
the Purchaser and Seller are unable, within 30 days of Purchaser's
receipt of Seller's proposed changes, to resolve any differences they
may have with respect to Purchaser's calculation of the Bonding
Operation Costs for the Transition Period, the issue shall be
forthwith submitted to the Independent Accountants for resolution.
Purchaser and Seller shall each be entitled to submit to the
Independent Accountants a written statement which sets forth their
respective proposed calculation of the Bonding Operation Costs during
the Transition Period, which calculation shall conform to the terms of
this Agreement and the past accounting practices of Seller in this
regard. The Independent Accountants shall determine the amount of the
Bonding Operation Costs for the Transition Period, and their
calculation shall be binding on the parties. Purchaser and Seller
shall share equally the costs and expenses of the Independent
Accountants.
5.2 COMPLETION COSTS.
(a) Seller shall be solely responsible for completing the Mt.
Braddock Facility and the Mt. Braddock Completion Costs including, without
limitation, any cost overruns that exceed the current budget for the Mt.
Braddock Facility to the extent that such Mt. Braddock Completion Costs
exceed the amount in the Bond Proceeds Account as of the Closing Date plus
the amount of any adjustment pursuant to Article 4.2(b)(i). Attached
hereto as SCHEDULE 5.2(a) is the current budget for the completion of the
Mt. Braddock Facility. As used in this Article 5.2, "MT. BRADDOCK
COMPLETION COSTS" shall mean the actual costs, whether budgeted or not,
associated with construction, testing and certification of the Mt.
Braddock Facility including all costs associated with the refurbishment,
relocation, testing, certification and installation of the Colorado
Equipment and the Pennsylvania Equipment and any other costs incurred by
either Purchaser or Seller to complete the Mt. Braddock Facility to
Purchaser's reasonable satisfaction in accordance with the design and
specifications for the Mt. Braddock Facility from and after the Closing
Date, including the cost of services performed or equipment delivered in
connection therewith as of the Closing Date but for which no invoice has
been delivered to Seller as of the Closing Date. The Mt. Braddock
Completion Costs shall not include any costs or expenses that arise after
the Closing Date in connection with any change orders or modifications
submitted by Purchaser with respect to the completion of the Mt. Braddock
Facility that are not included in the specifications for the Mt. Braddock
Facility and that are not contemplated by the budget set forth in SCHEDULE
5.2(a).
(b) In conjunction with the Schedule of Net Current Assets to be
prepared jointly by Seller and Purchaser as provided in Article 4.2(b)(i),
but in no event less than 10 days prior to the Closing Date, Seller shall
prepare a status report of the construction of the Mt. Braddock Facility
which sets forth the year to date spending on construction of the Mt.
Braddock Facility together with an estimate of the post-closing completion
costs
20
of the Mt. Braddock Facility as of the Closing Date (the "COMPLETION
COST RECONCILIATION"). The Completion Cost Reconciliation shall include,
without limitation, the estimated amount of the unpaid and anticipated
costs and expenses associated with completion of the Mt. Braddock Facility
as of the Closing Date, the amount due for services and equipment that
have been performed or delivered but not yet billed to Seller as well as
the estimated amount for services and equipment expected to be performed
or delivered post-closing in the completion of the Mt. Braddock Facility.
Prior to the Closing Date, the parties agree that the Completion Cost
Reconciliation shall be attached hereto as SCHEDULE 5.2(b).
(c) Within 30 days following termination of the Transition Period,
Purchaser shall submit to Seller a revised estimate of post closing Mt.
Braddock Completion Costs. If Purchaser's revised estimate of post closing
Mt. Braddock Completion Costs exceeds the estimate of post closing Mt.
Braddock Completion Costs set forth in the Completion Cost Reconciliation,
Purchaser shall be entitled to recover such excess amount from the Escrow
Amount pursuant to the terms of the Escrow Agreement (the "COMPLETION COST
ADJUSTMENT"). If Seller provides Purchaser with its written notice of
dispute regarding Purchaser's calculation of the Post Closing Mt. Braddock
Completion Costs within 15 days after receipt by Seller of such
calculations, Purchaser and Seller shall forthwith meet in an effort to
resolve such differences. If the parties are unable to resolve such
determination of the appropriate amount of the Post Closing Mt. Braddock
Completion Costs, the parties shall submit such calculation to the
Independent Accounts who shall conclusively determine the amount of the
Post Closing Mt. Braddock Completion Costs and whether any adjustment from
the Escrow Amount is due Purchaser hereunder. Purchaser and Seller shall
share equally the costs of the Independent Accounts in this determination.
Notwithstanding anything to the contrary provided herein, Seller's
liability for the Mt. Braddock Completion Costs shall not be limited to
the Escrow Amount.
(d) Seller acknowledges having received a grant of funds from the
DCED that was to be applied towards the installation of a mine ventilation
system at the Dunbar Facility and that it has been awarded a separate job
training grant from the DCED for which it has yet to receive any funds.
Seller agrees to use its reasonable best efforts to transfer and deliver
to Purchaser at the Closing any unspent funds and unused tax credits
received from or through the DCED at no cost to Purchaser.
(e) Seller shall be responsible for assuring that at the time of
Closing the Mt. Braddock Facility complies with all applicable laws,
ordinances, rules and regulations, including, without limitation, all
applicable fire, building, plumbing, electrical, health and safety codes,
and for the cost of all work, construction and installations which may be
required by reason of any notice or communication issued prior to or
subsequent to Closing, citing any violation thereof, or any deficiency in
Seller's construction. If the closing occurs prior to the completion of
the Mt. Braddock Facility, Purchaser shall provide Seller and its
authorized agents reasonable access to the Mt. Braddock Facility as may be
required for Seller to satisfy its obligations hereunder. Notwithstanding
anything
21
to the contrary provided herein, the provisions of this Article 5.2(e)
shall expressly survive Closing.
5.3 EQUIPMENT RELOCATION COSTS. Seller shall coordinate and pay for the
costs of the dismantling, transporting, re-installation and refurbishment of the
Colorado Equipment including, but not limited to, refurbishment and
transportation of the Colorado Press, to the Mt. Braddock Facility. Seller shall
be responsible for all costs and bear all risk of loss for the Bonding Assets
through the Closing Date.
5.4 TRANSITION SERVICES. For a period of up to six months after the
Closing Date, Seller shall provide to Purchaser up to forty (40) hours per week
of information systems support services for the Visual Manufacturing and
Paragraphix systems, as well as wide area and local network support services as
described on SCHEDULE 5.4. Subject to the availability of qualified personnel
employed by Seller, Seller agrees to provide such services in a manner
consistent with the manner in which such services were provided by the Seller to
the Bonding Business prior to the sale. In consideration for such services, the
Purchaser shall pay to the Seller the amounts set forth on SCHEDULE 5.4.
ARTICLE 6
EMPLOYEES
6.1 AFFECTED AND TARGET EMPLOYEES. Not less than 15 days prior to
Closing, Purchaser shall identify in a schedule to be attached hereto as
SCHEDULE 6.1, those employees of Seller to whom Purchaser, subject to its
satisfactory completion of an employment interview, intends to offer employment
("Target Employees"). Seller agrees to inform the Target Employees of
Purchaser's interest in offering them employment and to grant permission to the
Target Employees to speak with Purchaser regarding possible employment.
"Affected Employees" shall mean employees of Seller, if any, who are employed by
Purchaser immediately after the Closing.
6.2 VESTING OF AFFECTED EMPLOYEES. Effective as of the Closing Date,
Seller shall cause all Affected Employees to be 100% vested in all of their
accounts under the Seller's 401(k) defined contribution plan. As soon as
practicable following the Closing Date, Seller shall provide the Affected
Employees with such forms and materials as are required to enable the Affected
Employees to roll over (by a direct rollover or otherwise) their account
balances (including, if applicable, the outstanding balances of any participant
loans) to Purchaser's 401(k) defined contribution plan. Seller shall cooperate,
and shall cause its plan trustee and plan administrator to cooperate, with
Purchaser in order to effect the foregoing.
6.3 RETAINED RESPONSIBILITIES. Seller agrees to satisfy, or cause its
insurance carriers to satisfy, all claims for benefits, whether insured or
otherwise (including, but not limited to, workers' compensation, life insurance,
medical and disability programs), under Seller's employee benefit programs
brought by, or in respect of, Affected Employees and other employees and former
employees of the Seller, which claims are caused by events occurring on or prior
to the Closing Date, in accordance with the terms and conditions of such
programs or
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applicable workers' compensation statutes without interruption as a result of
the employment by Purchaser of any such employees after the Closing Date.
6.4 PAYROLL TAX. Seller agrees to discontinue payroll tax reporting with
respect to the Affected Employees and to forward to the proper federal, state
and city governments those amounts respectively withheld or required to be
withheld for periods ending on or prior to the Closing Date. Seller also agrees
to issue, by the date prescribed by IRS Regulations, Forms W-2 for salaries,
wages and other compensation paid through the Closing Date. Except as set forth
in this Agreement, Purchaser shall be responsible for all payroll and payroll
tax obligations with respect to employment compensation accruing after the
Closing Date for Affected Employees.
6.5 TERMINATION BENEFITS. Purchaser shall be solely responsible for, and
shall pay or cause to be paid, the severance payments and other termination
benefits, if any, to Affected Employees who may become entitled to such benefits
after the Closing; provided, however, that Seller shall be solely responsible
for, and shall pay, or cause to be paid, severance payments and other
termination benefits (including any obligations regarding the vesting of
Seller's stock options) pursuant to an employment agreement to be executed
between Seller and John Knoll in a form agreeable to Seller and John Knoll. In
particular and without limiting the foregoing, Purchaser shall specifically
assume all obligations and duties under an employment agreement to be executed
between the Seller and Gary Burke (except with respect to any obligations
regarding the vesting of Seller's stock options) in a form agreeable to Seller,
Purchaser and Gary Burke.
6.6 MOVING EXPENSES. Seller shall be responsible for any and all moving
expenses of those Affected Employees identified by Seller on SCHEDULE 6.6
incurred with respect to such employees' relocation to the Mt. Braddock
Facility. Purchaser shall be responsible for any and all moving expenses of
those Affected Employees not identified by Seller on SCHEDULE 6.6.
ARTICLE 7
CLOSING
7.1 CLOSING DATE. The closing of the transactions provided for in
Article 2 (the "CLOSING") shall take place, at the offices of Davis, Graham &
Stubbs LLP, 4410 Arapahoe Avenue, Suite 200, Boulder, Colorado, on such date, as
agreed to by Seller and Purchaser, identified as occurring as soon as reasonably
possible following, but in no event more than fifteen (15) days after, Seller's
notification to Purchaser that all of the conditions provided in Article 12 have
been satisfied (the "CLOSING DATE"), or such other place, time and date as the
parties may agree. Notwithstanding the foregoing, the effective time of the
closing of the sale and purchase of the Bonding Assets pursuant to this
Agreement shall be deemed to have occurred at 11:59 p.m., Eastern Standard Time,
on the Closing Date.
7.2 ACTIONS AT CLOSING. At the Closing, in order to consummate the
transactions contemplated by this Agreement, each of the following actions shall
occur:
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(a) PERFORMANCE BY PURCHASER. At the Closing (unless delivered
previously), Purchaser shall duly execute (where applicable) and deliver,
or cause to be executed and delivered, to Seller the following:
(i) The Purchase Price by wire transfer of immediately
available funds to the accounts set forth in SCHEDULE 7.2(a)(i),
subject to adjustment in accordance with Articles 4 and 5;
(ii) An opinion of Donna F. Winquist, Corporate Counsel to
Purchaser, in a form agreeable to the parties;
(iii) Satisfactory evidence of any approval of any regulatory
authorities whose approvals to the transactions contemplated by this
Agreement are required by law;
(iv) A certified copy of resolutions of Purchaser's Board
approving the transactions contemplated by this Agreement as
required by applicable law, Purchaser's Certificate of Incorporation
and Bylaws, or any other applicable instrument;
(v) Such other evidence of the performance of all covenants
required of Purchaser by this Agreement at or before the Closing, as
Seller or its counsel may reasonably require;
(vi) The Assignment and Assumption Agreement;
(vii) Purchaser shall have delivered to Seller and Escrow
Agent the duly executed Escrow Agreement;
(viii) A certificate executed by an officer of Purchaser,
dated as of the Closing Date, in a form agreeable to the parties;
(ix) Each of the documents and instruments to be executed
and delivered by Purchaser pursuant to this Agreement (the
"PURCHASER ANCILLARY DOCUMENTS"); and
(x) All other previously undelivered documents, instruments
and certificates as the Seller or its counsel may reasonably
request.
(b) PERFORMANCE BY SELLER. At the Closing (unless delivered
previously), Seller shall duly execute and deliver, or cause to be
executed and delivered, to Purchaser the following:
(i) The Bill of Sale;
(ii) The Assignment and Assumption Agreement;
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(iii) The waivers, consents and approvals contemplated by
Article 12.4 that Seller has obtained as of the Closing;
(iv) An opinion of Davis, Graham & Stubbs LLP, counsel to
Seller, in a form agreeable to the parties;
(v) Satisfactory evidence of any approval of any regulatory
authorities whose approvals are required by law;
(vi) A certified copy of resolutions of Seller's Board,
Seller's Articles of Incorporation and Bylaws, or any other
applicable instrument;
(vii) Such other evidence of the performance of all covenants
required of Seller by this Agreement at or before the Closing as
Purchaser or its counsel may reasonably require;
(viii) Certificate of Good Standing of Seller;
(ix) Seller shall have delivered to Purchaser and Escrow
Agent the duly executed Escrow Agreement required by Article 4.3
hereof;
(x) A certificate executed by an officer of Seller dated as
of the Closing Date, in a form agreeable to the parties;
(xi) A special warranty deed for the Mt. Braddock Facility
conveying good and marketable title thereto to Purchaser or its
designee and all other real estate closing documents reasonably
required of Seller by Purchaser's title insurance company in order
to issue the policy of title insurance and endorsements thereto as
otherwise specified herein;
(xii) A FIRPTA Certificate;
(xiii) Estoppel letters, in form satisfactory to Purchaser,
from the Landlord under the Master Lease and the Sublandlord under
the Dunbar Sublease;
(xiv) A separate instrument of assignment of all registered
trademarks and trademark applications in a mutually agreeable form.
Purchaser shall be responsible for the recordation of such
assignment in the U.S. Patent and Trademark Office and corresponding
non - U.S. offices;
(xv) A separate instrument of assignment of all patents and
patent applications in a mutually agreeable form. Purchaser shall be
responsible for the recordation of such assignment in the U.S.
Patent and Trademark Office and corresponding non - U.S. offices;
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(xvi) Such other bills of sale, trademark and patent
assignments, executed counterparts of consents and approvals,
including without limitation all notifications from the U.S. Patent
and Trademark Office and corresponding non-U.S. offices indicating
that certain documents have been recorded which were necessary to
effect transfer of title of all Intellectual Property listed in
SCHEDULE 8.9 to Seller, authorizations, filings and registrations
required to be made under applicable law in connection with the
transactions contemplated by this Agreement and each of the
documents and instruments to be executed and delivered by it
pursuant to this Agreement and such other appropriate documentation
as may be reasonably requested by the Purchaser in order to
consummate the transactions contemplated by this Agreement (the
"Seller Ancillary Documents");
(xvii) Originals or true copies of all Books and Records to
the extent provided in Article 2.1(d)(i);
(xviii) All other previously undelivered documents,
instruments and certificates as the Purchaser or its counsel may
reasonably request;
(xix) Written consents from any Licensor of Seller of any
intellectual property relating to the Bonding Business, including
without limitation written consents from Pacific Coast
Technologies, Inc. (for U.S. Patent Nos. 5,041,019 and 5,109,594)
and Texas Instruments (for U.S. Patent Nos. 5,138,114 and
5,435,058);
(xx) All confidential information (including all tangible
forms thereof) which the Seller and its successors are obligated to
maintain in confidence, including without limitation all such
information received from Oil States Industries (UK) Ltd. under the
Confidentiality Agreement dated July 2, 1998; and
(xxi) Copies of all tax filings made by Seller with the
Commonwealth of Pennsylvania Department of Revenue during the six
(6) months prior to the Effective Date and the period between the
Effective Date and Closing and any other documents reasonably
requested by Purchaser that evidence that Seller has paid, withheld
and is current with all applicable taxes of the Commonwealth of
Pennsylvania.
7.3 PHYSICAL INVENTORY OF BONDING ASSETS. At Closing, Seller and
Purchaser shall take a physical inventory of the Bonding Assets for preparation
by Seller of the Adjustment Statement.
7.4 CLOSING DELIVERIES. All deliveries by one party to any other party
at Closing shall be deemed to have occurred simultaneously and none shall be
effective until and unless all have occurred in accordance with this Agreement
or been waived.
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7.5 FURTHER ASSURANCES. In addition to the actions, documents and
instruments specifically required to be taken or delivered hereby, prior to and
after the Closing and without further consideration, the Seller and the
Purchaser shall execute, acknowledge and deliver such other assignments,
transfers, consents and other documents and instruments and take such other
actions as any party, or their counsel, may reasonably request in order to
complete and perfect the transactions contemplated by this Agreement including
the transfer of title to the Bonding Assets and to protect the validity of any
Intellectual Property. This obligation shall survive Closing.
7.6 ACKNOWLEDGMENT. By closing the transactions contemplated by this
Agreement, each party acknowledges that all deliveries required in this Article
7 have been received other than any deliveries permitted after the Closing,
including, without limitation, any consents, waivers or other approvals
contemplated in Articles 4 and 5.
ARTICLE 8
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller makes the following representations and warranties to Purchaser.
8.1 ORGANIZATION AND STANDING. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Seller has all requisite power under Delaware General Corporate Law
(the "CORPORATE LAW"), its Certificate of Incorporation and Bylaws to own and
operate its properties and assets, to carry on its business as conducted. Seller
is qualified to do business in the Commonwealth of Pennsylvania, the state of
Colorado and in each other jurisdiction in which the nature of its business or
its assets requires it to be qualified and in which the failure to be so
qualified would have a Material Adverse Effect.
8.2 CORPORATE POWER; AUTHORIZATION. Seller has full power and authority
to enter into and perform this Agreement the Seller Ancillary Documents and to
consummate the transactions contemplated hereby and thereby. Seller has taken
all action as and in the manner required by law, its certificate of
incorporation, by-laws and organization documents, or otherwise to authorize the
execution, delivery and performance of this Agreement and the Seller Ancillary
Documents. This Agreement and the Exhibits, when executed and delivered by the
parties, and assuming the due authorization of Purchaser, shall constitute the
legal and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights and by rules of law governing specific
performance, injunctive relief or other equitable remedies.
8.3 NO BREACH. Except as set forth in SCHEDULE 8.3, neither the
execution and delivery of this Agreement and the Seller Ancillary Documents by
the Seller, the sale of the Bonding Assets nor the consummation of the
transactions contemplated by this Agreement or the Seller Ancillary Documents:
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(a) conflict with or result in any breach of any of the
provisions of;
(b) constitute a default under;
(c) result in a violation of;
(d) give any third party or governmental authority any interest or
rights, including without limitation the right to terminate, to cancel or
to accelerate any obligation under;
(e) result in the creation of any lien, security interest, charge or
other encumbrance upon the Assets under; or
(f) require the Seller to obtain any consent, approval, action,
order or authorization of or from, or make any registration, notification,
declaration or filing with or give any notice to, any individual,
partnership, corporation, firm or other entity or any foreign, federal,
state, local governmental, quasi-governmental, administrative, regulatory,
public, judicial or other authority under,
the provisions of the articles of incorporation or by-laws of the Seller or any
indenture, mortgage, lease, commitment, note, loan agreement, license, contract
or other agreement or instrument to which the Seller or the Bonding Assets are
bound or affected, including without limitation, the Assumed Liabilities, or any
Legal Requirement to which the Seller or the Bonding Assets are subject.
8.4 FINANCIAL STATEMENTS. Annexed hereto as SCHEDULE 8.4 is a true and
complete copy of (i) a pro forma statement of operations for the Bonding
Business for the year ended December 31, 1997 (ii) a statement of pro forma
assets of the Bonding Business as of December 31, 1998 and a related pro forma
statement of operations for the year then ended, and (iii) a pro forma statement
of assets of the Bonding Business as of April 30, 1999 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements have been derived from
Seller's audited financial statements as of and for years ended December 31,
1997 and 1998 and from the unaudited balance sheet of the Seller as of April 30,
1999 prepared in accordance with GAAP. All of the Financial Statements present
fairly in all material respects the pro forma assets and pro forma results of
operations of the Seller's Bonding Business for the periods covered thereby,
subject to the pro forma adjustments disclosed in these Financial Statements.
8.5 TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(a) Seller has good and marketable title to all of the Bonding
Assets. Except as set forth in SCHEDULE 8.5(a), none of the Bonding Assets
is subject to any mortgage, pledge, lien (statutory or otherwise), claims,
license, option, lease and purchase agreement, assessment, easement,
covenant, conditional sale agreement, security interest, encumbrance or
other charge other than the Permitted Encumbrances.
(b) Each item of Pennsylvania Equipment owned or leased by Seller
and included in the Bonding Assets is in good working order and repair,
subject to normal
28
wear and tear, and all such buildings, machinery, and equipment are sufficient
for the conduct of the Bonding Business in substantially the same manner as
conducted prior to the Closing.
(c) Each item of Colorado Equipment owned or leased by Seller and
included in the Bonding Assets is in good working order and repair,
subject to normal wear and tear;
(d) The Equipment conforms with all material applicable
ordinances, regulations and zoning or other laws and does not encroach
on the property of others.
(e) Except as expressly provided herein, Seller makes no
warranties or representations of any kind or nature whatsoever with
respect to any of the Equipment.
(f) To the best of Seller's knowledge, all of the Colorado
Equipment set forth on SCHEDULE 2.1(a)(ii) is located at the Colorado
Facility or the Pennsylvania Facility.
8.6 REAL PROPERTY.
(a) Except as set forth in SCHEDULE 8.6(a), Seller represents and
warrants the following:
(i) Seller possesses full legal and equitable, indefeasible
fee simple title to the Owned Real Property and full legal power to
convey the Owned Real Property to Purchaser in accordance with this
Agreement,
(ii) title to the Owned Real Property at Closing will be good,
indefeasible fee simple title, free and clear of all encroachments,
boundary disputes, covenants, restrictions, easements, rights of
way, mortgages, security interests, liens, encumbrances and title
objections of every type and nature, (excepting only Permitted
Encumbrances and such encumbrances or imperfections of title which
are not substantial in character, amount or extent and which do not
materially detract from the value of the Owned Real Property or
interfere with the conduct of the Bonding Business thereon),
(iii) at Closing, such title shall be insurable by
Commonwealth Land Title Insurance Corporation or by any other
reputable title insurance company selected by Purchaser, at such
company's regular rates and without additional premium, pursuant to
an owner's form of policy acceptable to Purchaser, free of all
exceptions (other than Permitted Encumbrances and title objections
of the type described in Article 8.6(a)(ii)), including, without
limitation, insurance against unfiled mechanics' and materialmen's
liens and free of exceptions for municipal liens and possible
unsettled taxes by the Commonwealth of Pennsylvania or any
governmental authority against Seller or any other party. If such
policy is not issued at Closing, then, without limitation of the
provisions of Article 16 below or any other provision hereof,
Purchaser shall have the right to terminate this Agreement.
29
(iv) Seller represents and warrants to Purchaser that (1)
there is no existing agreement, commitment, option or right with, in
or to any person to acquire the Owned Real Property or any interest
therein and (2) no default or breach exists under any easement,
covenant, agreement or restriction affecting the Owned Real
Property.
(v) Seller shall not sell, mortgage, grant any easement,
option, right or interest in, or otherwise encumber the Owned Real
Property, or do or permit any act which diminishes title to the
Owned Real Property, and shall take all commercially reasonable
action necessary to convey to Purchaser at Closing title to the
Owned Real Property of the quality required by this Agreement.
(b) The Master Lease is legally valid, enforceable and binding, in
full force and effect as to the party(ies) thereto and, except as provided
in SCHEDULE 8.6(b), has not been modified in any material respect.
(c) The existing lease agreement from which Seller derives its
right to occupy and use the Dunbar Mine and Dunbar Facility (the "DUNBAR
SUBLEASE") legally valid, enforceable and binding, in full force and
effect as to the party(ies) thereto, except as provided in SCHEDULE
8.6(c), has not been modified in any material respect.
(d) Neither the Seller nor, to Seller's Knowledge, any other party
to the Dunbar Sublease is in breach or default, and no event has occurred
which, with notice or the passage of time, would constitute such a breach
or default or permit termination, modification or acceleration under the
Dunbar Sublease.
(e) Except as set forth in SCHEDULE 8.6(e) and except for
Permitted Encumbrances, (i) there are no parties other than the Seller
in possession of the Owned Real Property or the Dunbar Facility or any
portion thereof and (ii) there are no leases, subleases, licenses,
concessions, written or oral, granting to any party or parties the
right of use or occupancy of the Owned Real Property or the Dunbar
Facility or any portion thereof. There are no outstanding options or
rights of first refusal to purchase or lease the Owned Real Property,
or any portion thereof or interest therein.
(f) Except for the Owned Real Property and the Dunbar Facility,
there is no real property leased or owned by the Seller relating to the
Bonding Business located in Pennsylvania.
(g) Except as set forth in SCHEDULE 8.6(g), during the two (2)
years immediately preceding the Closing Date, the Seller has not
received any written notice or writing referring to any requirements
or recommendations by any insurance company which has issued a policy
covering any part of the Owned Real Property or the Dunbar Facility,
requiring or recommending any repairs or work to be done on any part
of the Owned Real Property or the Dunbar Facility.
30
(h) The Seller has not received any written notice of any special
real estate tax assessments, and has no knowledge of any pending special
or new assessments, affecting the Owned Real Property or the Dunbar
Facility.
(i) Seller has heretofore secured all necessary licenses, permits,
approvals and authorizations required in connection with the development
and construction of the Mt. Braddock Facility and all ancillary site
improvements, and for the provision of all necessary utility services
thereto, including, without limitation, potable water and sanitary and
storm sewer service, for which connections and services all applicable
fees, assessments, imposts tapin charges and the like have been or shall
have been paid by Closing by Seller.
(j) To the knowledge of Seller, other than Permitted Encumbrances,
no variances, special exceptions, conditions or agreements pertaining to
the Mt. Braddock Real Property have been imposed or granted by, or entered
into with or be enforceable by any governmental authority, or any
neighborhood or civic group or similar body prior to Closing which might
reasonably be expected to limit or impair in any manner Seller's ability
to construct the Mt. Braddock Facility for its intended use.
8.7 TAXES. With respect to the Bonding Business, Seller has accurately
prepared and timely filed all income Tax Returns and has paid, or made provision
for the payment of, all Taxes shown as due pursuant to said Tax Returns or
pursuant to any notice of deficiency or any assessment which has been received
by it. No deficiency for unpaid property tax has been asserted against the
Seller by any tax authority which relates to the Assets. There are no liens for
any Taxes upon any of the Bonding Assets other than liens for Taxes not yet due
and payable. All Taxes that the Seller is required to withhold or collect with
respect to the Bonding Business or the Bonding Assets prior to the Closing Date,
have been or will be withheld or collected by the Seller and, to the extent
required by applicable law, have been or will be paid by the Seller to the
proper governmental authorities or properly deposited. Seller is not a party to
any pending action or proceeding, nor, to the best knowledge of Seller, is any
such action or proceeding threatened by any governmental authority for the
assessment or collection of Taxes, interest, penalties, assessments or
deficiencies, and no claim for assessment or collection of Taxes, interest,
penalties, assessments or deficiencies has been asserted against Seller with
respect to the Bonding Business or the Bonding Assets. As used in this Agreement
the term "TAX(ES)" shall mean any:
(i) federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding,
or other tax, of any kind whatsoever, including any interest, penalties or
additions to tax or additional amounts in respect of the foregoing;
31
(ii) liability of the Seller for the payment of any amounts of the
type described in clause (a) arising as a result of being (or ceasing to
be) a member of any affiliated group (or being included (or required to be
included) in any Tax Return relating thereto); and
(iii) liability of the Seller for the payment of any amounts of the
type described in clause (a) as a result of any express or implied
obligation (legal, contractual or otherwise) to indemnify or otherwise
assume or succeed to the liability of any other person.
As used in this Agreement "TAX RETURN(S)" shall mean returns, declarations,
reports, claims for refund, information returns or other documents (including
any related or supporting schedules or statements of information) filed or
required to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws, regulations
or administrative requirements relating to any Taxes.
8.8 LITIGATION. Except as set forth in SCHEDULE 8.8, with respect to the
Bonding Business or the Bonding Assets, no action, suit, proceeding or
governmental investigation of any nature, including any claims alleging
infringement of the intellectual property rights of others or use of the Bonding
Assets, is now pending, was pending at any time since January 1, 1994, or, to
Seller's knowledge, threatened against Seller. The foregoing includes, without
limitation, any action, suit, proceeding or investigation, pending or
threatened, which questions the validity of this Agreement or any of the
Exhibits or the right of Seller to enter into this Agreement, the Exhibits or
any of the transactions contemplated hereunder or to sell and transfer the
Bonding Assets to Purchaser. There is no judgment, decree, injunction, or order
of any Governmental Body or arbitrator or other similar ruling outstanding
against Seller materially affecting the results of operations or financial
condition of the Bonding Business. Except as set forth in SCHEDULE 8.8, (i)
since January 1, 1994, no actions, suits or arbitration, administrative or other
legal proceedings seeking damages for personal injury or property damage
resulting from a defective product manufactured by the Seller have been
instituted against the Seller relating to the Bonding Business and (ii) to the
knowledge of the Seller, since January 1, 1994, no actions, suits or
arbitration, administrative or other legal proceedings seeking damages for
personal injury or property damage resulting from a defective product
manufactured by the Seller have been instituted against the Seller relating to
the Bonding Business.
8.9 PATENTS, TRADE NAMES AND TRADEMARKS. Except as set forth in
SCHEDULE 8.9:
(a) the Seller exclusively owns and possesses all right, title and
interest in and to, or has a valid license to make, use, sell, offer for
sale or import, all of the Intellectual Property necessary for the
operation of the Bonding Business as presently conducted, free and clear
of any licenses, charges, attachments, liens, encumbrances, except
Permitted Encumbrances, or adverse claims;
(b) none of the processes employed or products manufactured or
sold by Seller relating to or in connection with the Bonding Business,
infringes upon the intellectual property, trade secrets or proprietary
rights of any other person; and
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(c) no product manufactured or sold by any other person and no
process used by any other person infringes upon any Intellectual Property
of the Seller, and Seller has not received any information as to any
infringement or misappropriation by any third party with respect to the
Seller's Intellectual Property, and no claim by any other person
contesting the validity, enforceability, use or ownership of any
Intellectual Property owned or used by the Bonding Business is currently
pending or threatened.
(d) all patents, registered trademarks and trademark applications
included in the Intellectual Property, including assignments thereof, have
been duly registered with, filed in or issued by the United States Patent
and Trademark Office, and all such registered copyrights, and assignments
thereof, have been duly registered in, recorded in, filed in or issued by
the United States Copyright Office, or, in each case, the corresponding
offices of other countries identified on SCHEDULE 8.9, and have been
properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations in the United States and
each such country.
(d) Seller's use of Intellectual Property does not require the
consent of any other person and the same are freely transferable (except
as otherwise provided by law).
(f) there are no royalties, fees or other payments payable by
Seller to any person by reason of the ownership, use, license, sale or
disposition of any instrument or agreement governing any of the
Intellectual Property.
(g) there are no obligations of secrecy pertaining to any of the
Intellectual Property or any processes employed or products manufactured
or sold by Seller relating to the Bonding Business";
(h) The assets identified in SCHEDULE 2.1(d) are a complete
listing of all intellectual property assets relating to the Bonding
Business and, after Closing, none of the products manufactured or
processes employed by Purchaser relating to the Bonding Business would
infringe any of the Excluded Assets or any other intellectual property
retained by Seller;
(i) Seller has fully complied with, and shall continue to comply
with, all applicable laws, statutes, regulations, and ordinances in
connection with its acquisition and protection of its Intellectual
Property, including paying any maintenance fees or annuities due on any
registration or issued patent and, to the extent Seller has not done so,
it has taken prompt action to revive any cancelled registration or lapsed
patent; and
(j) Seller has not abandoned and has properly used all of its
trademarks and service marks included in the Intellectual Property.
8.10 COMPLIANCE WITH LAWS. Seller is not in violation of any laws and
regulations which apply to the conduct of the Bonding Business that would have a
Material Adverse Effect including, without limitation, laws and regulations
relating to employment, occupational safety and environmental matters.
33
8.11 ENVIRONMENTAL MATTERS.
(a) SCHEDULE 8.11(a) lists each report, permit, approval,
registration, license or other authorization required by any governmental
authority pursuant to any Environmental Law applicable to the Pennsylvania
Facilities ("ENVIRONMENTAL REPORTS") that has been provided to Seller.
Seller possesses, is in material compliance with, and has provided to
Purchaser true and accurate copies of all Environmental Reports.
(b) Except as set forth in SCHEDULE 8.11(b), Seller is in material
compliance with all Environmental Laws and there is no pending or, to
Seller's knowledge, threatened civil or criminal litigation, written
notice of violation, formal administration proceeding, or investigation,
inquiry or information request by any Governmental Body, relating to any
Environmental Law to which Seller is a party or, to Seller's knowledge,
Seller is threatened to be made a party which relates to the Bonding
Business or the Bonding Assets. For purposes of this Agreement,
"ENVIRONMENTAL LAWS" shall mean all applicable written federal, state and
local statutes, regulations, ordinances, policies, guidance documents and
similar provisions, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or
protection of the environment, including, without limitation, all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or
cleanup of any regulated or hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and in
effect on the Closing Date. As used herein, the terms "release" and
"environment" shall have the meaning set forth in the federal
Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
(c) Except as set forth in SCHEDULE 8.11(c), to Seller's
knowledge, no Regulated Substances have been or, are being, used,
stored, treated, disposed of or released by or on the and will not be
placed or located on the Pennsylvania Property prior to Closing in
violation of any Environmental Laws, including any amounts which,
under Environmental Laws, either (i) require remediation or corrective
action as the result of the receipt by the Purchaser of a notice or
directive from any governmental regulatory authority, or (ii) could
reasonably be anticipated to require remediation or corrective action
by any governmental regulatory authority and no threatened damage to
the environment (including, without limitation, ambient air, surface
water, groundwater, land surface and subsurface) exists at the
Pennsylvania Property. For purposes of this Agreement, "REGULATED
SUBSTANCES" means any material, substance, product or waste that is
regulated by, or that may form the basis of liability under, any
Environmental Laws.
34
(d) To Seller's knowledge, there has not been manufactured, stored
or deposited by Seller, or to the best of Seller's knowledge, by any other
person or party, on the Pennsylvania Property any Regulated Substance.
Seller has no knowledge of, and has received no notice of, any proceeding
or inquiry by any governmental authority with respect to the possible
presence of any Regulated Substance on the Pennsylvania Property.
(e) Except as set forth in SCHEDULE 8.11(e), there are no
underground or above-ground storage tanks on the Pennsylvania Property,
and Seller has no knowledge that any such tanks were ever located on the
Pennsylvania Property.
(f) No discharge of any Regulated Substance has emanated from the
Pennsylvania Property into any pond, stream, bay or other body of water.
No dredge or fill activities have occurred or will occur prior to Closing
with respect to the Pennsylvania Property. No emission of air contaminants
or pollutants has emanated from the Pennsylvania Property.
(f) Set forth in SCHEDULE 8.11(g) is a list of all environmental
reports, investigations and audits in the possession of Seller with
respect to the operations of, or real property owned or leased by Seller
and located at the Pennsylvania Facilities (whether conducted by or on
behalf of Seller or a third party and whether done at the initiative of
Seller or directed by a governmental authority or other third party).
Complete and accurate copies of each such report, or the results of each
such investigation or audit, have previously been provided to Purchaser.
(h) Seller is not aware of any material Environmental Liability
arising out of the utilization by Seller of any solid and hazardous waste
transporter or treatment, storage and disposal facility located at the
Pennsylvania Property.
8.12 LICENSES AND PERMITS. SCHEDULE 8.12 sets forth a list of all of the
permits, licenses, certificates, approvals and authorizations, and
registrations, owned or possessed by Seller, under all federal, state, local and
foreign laws, authorities and agencies relating to the Bonding Business (the
"LICENSES AND PERMITS"). Each of the Licenses and Permits is in full force and
effect, the Seller is not in material violation of any of the Licenses and
Permits nor has there occurred any event which, with the passage of time or
giving of notice or both, would constitute a material violation of any of the
Licenses and Permits and no proceeding is pending or threatened seeking the
revocation, limitation or nonrenewal of any of the Licenses and Permits. No
event or circumstance has occurred or exists (other than those events or
circumstances that relate to the Purchaser) that would prohibit or prevent the
reissuance to the Purchaser of any of the Licenses and Permits necessary for or
material to the operation of the Bonding Business as presently conducted by the
Seller. Seller owns, holds or possesses all federal, state or local governmental
permits, certificates, licenses, franchises, privileges, immunities, approvals
and other authorizations which are necessary to entitle it to own or lease,
operate and use the Bonding Assets and to carry on and conduct the Bonding
Business (collectively, the "GOVERNMENTAL PERMITS"), except for such
Governmental Permits which the failure to so own, hold or possess would not have
a Material Adverse Effect.
35
8.13 INSURANCE. Set forth in SCHEDULE 8.13 is a complete and accurate
list and summary description of all policies of fire, casualty, general
liability, product liability, workers compensation and other forms of insurance
presently in effect with respect to the Bonding Business. True and correct
copies of such policies have previously been made available to or delivered to
Purchaser. SCHEDULE 8.13 includes, without limitation, the carrier, a
description of coverage, the limits of coverage, retention or deductible
amounts, amount of annual premiums, date of expiration and the date through
which premiums have been paid with respect to each such policy, and any pending
claims.
8.14 MAJOR CUSTOMERS. SCHEDULE 8.14 contains a list of the five largest
customers of the Bonding Business for the most recent fiscal year (determined on
the basis of the total dollar amount of net sales) showing the total dollar
amount of net sales to each such customer during each such year.
8.15 CUSTOMERS AND SUPPLIERS. Except as set forth in SCHEDULE 8.15, (i)
the Seller is not engaged in any material disputes with any of the customers or
suppliers of the Bonding Business; and (ii) no present customer or supplier of
the Bonding Business has informed the Seller that it intends to terminate,
discontinue or in any way materially alter its relationship with the Seller,
including, but not limited to the cancellation, reduction or modification of any
existing, anticipated or forecasted orders, except for such disputes,
terminations, reductions or alterations as will not, individually or in the
aggregate, have a Material Adverse Effect.
8.16 EXISTING EMPLOYMENT CONTRACTS. SCHEDULE 8.16 contains a list of all
employment contracts, consulting agreements and collective bargaining agreements
to which Seller is a party or by which Seller is bound relating to the Bonding
Business. All of the contracts and agreements set forth in SCHEDULE 8.16 are in
full force and effect in all material respects, and Seller is not in material
default under any of them. There have been no claims of defaults and, to
Seller's knowledge, there are no facts or conditions which if continued, or upon
notice, will result in a material default under any of the contracts or
arrangements set forth on SCHEDULE 8.16. There is no pending or, to Seller's
knowledge, threatened labor dispute, strike, or work stoppage affecting the
Bonding Business at the Pennsylvania Facilities.
8.17 EMPLOYEE BENEFITS.
(a) SCHEDULE 8.17(a) lists all Employee Plans covering persons
currently or formerly employed by Seller ("EMPLOYEES"). The term "EMPLOYEE
PLAN" includes any pension, retirement, savings, disability, medical,
dental, health, life (including, without limitation, any individual life
insurance policy under which any Employee is the named insured and as to
which Seller makes premium payments, whether or not Seller is the owner,
beneficiary or both of such policy), death benefit, group insurance,
profit-sharing, deferred compensation, stock option, bonus (including
without limitation, holiday, vacation, Christmas and other bonus practices
to which Seller is a party or is bound or which relate to the operation of
the Bonding Business with respect to Employees), incentive, vacation pay,
severance pay, or other employee benefit plan, trust arrangement,
agreement, policy or commitment (including, without limitation, any
employee pension
36
benefit plan as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("PENSION PLAN"),
and any employee welfare benefit plan as defined in Section 3(1) of
ERISA ("WELFARE PLAN")), whether or not any of the foregoing is funded
or insured and whether written or oral, which is intended to provide
or does in fact provide benefits to any Employee, and (i) to which
Seller is party or by which Seller (or any of the rights, properties
or assets of the Company) is bound, (ii) with respect to which Seller
has made any payments, contributions or commitments, or may otherwise
have any liability (whether or not Seller still maintains such plan,
trust, arrangement, contract, agreement, policy or commitment) or
(iii) under which any current Employee or agent of Seller is a
beneficiary as a result of his employment or affiliation with Seller.
Copies of all Employee Plans have been made available to Purchaser.
(b) With respect to any Employee, Seller has no obligation to
contribute to (or any other liability with respect to) any funded or
unfunded Welfare Plan, whether or not terminated, which provides medical,
health, life insurance or other welfare-type benefits for current or
future retirees or current or former Employees (including their dependents
and spouses) except for limited continued medical benefit coverage for
former Employees, their spouses and their other dependents as required to
be provided under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), and Seller is in compliance in all material
respects with the continued medical and other welfare benefit coverage
requirements of COBRA and all other applicable laws.
(c) Except as set forth on SCHEDULE 8.17(c),with respect to any
Employee, Seller does not maintain, contribute to or have any material
liability under (or with respect to) any Pension Plan which is a tax
qualified "defined benefit plan" (as defined in Section 3(35) of ERISA)
or, a tax-qualified "defined contribution plan" (as defined in Section
3(34) of ERISA), or a non-qualified deferred compensation plan for certain
highly compensated or management employees whether or not terminated. All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each Employee
Plan or are reflected as a liability on the books of Seller and all
contributions for any period ending on or before the Effective Date which
are not yet due have been paid to each such Employee Plan or accrued in
accordance with the past custom and practice of Seller. All premiums or
other payments for all periods ending on or before the Closing Date have
been paid with respect to each such Employee Plan which is a Welfare Plan.
(d) Seller has, with respect to all current and former Employee
Plans (and all related trusts, insurance contracts and funds), at all
times complied in all material respects with the applicable requirements
of ERISA, the Internal Revenue Code of 1986, as amended (the "CODE") and
all other applicable statutes, common law, regulations and regulatory
pronouncements. Seller has not engaged in nor is it bound to enter into,
any transaction with respect to any Employee Plan which would subject
Seller to any material liability due to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code. No actions, suits or
claims with respect to the assets of any Employee Plan (and all related
trusts, insurance contracts and funds), other than routine claims for
benefits, are pending
37
or to Seller's knowledge threatened; and, to the knowledge of Seller,
there exist no facts that could give rise to any such actions, suits
or claims. Except as otherwise provided in Article 6.2, consummation
of the transactions contemplated by this Agreement will not result in
an increase in the amount of compensation or benefits or accelerate
the vesting or timing of payment of any benefits or compensation
payable in respect of any Employee. With respect to any Employee,
Seller has no obligation to contribute to (or any other liability with
respect to) any "multi-employer plan," as defined in the
Multi-employer Pension Plan Amendments Act of 1980, and Seller has not
incurred any current or potential withdrawal or termination liability
as a result of a complete or partial withdrawal from any
multi-employer plan or the sale of the Assets. Each Employee Plan
intended to qualify under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under the
requirements of section 401(a) of the Code, the Internal Revenue
Service has issued a determination letter to that effect, and such
letter remains effective and has not been revoked. To Seller's
knowledge there is no event or condition which would cause such
Employee Plan to fail to be so qualified. No unfulfilled obligation to
contribute with respect to an Employee Plan exists with respect to any
Employee Plan year ending on or before December 31, 1997, except as
shown in the Statement of Net Current Assets. There is no agreement or
promise, written or oral, of Seller to the effect that any Employee
Plan may not be terminated at Seller's discretion at any time, subject
to applicable law. The Statement of Net Current Assets reflects all
accrued vacation and other benefits for Seller's employees as of the
date thereof.
(e) Seller has not been nor is it currently a party to any
collective bargaining or other labor contract relating to the Bonding
Business. 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 the or
affecting the Bonding Business relating to the alleged violation of any
Legal Requirements pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Relations Labor Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity,
or other labor or employment dispute against or affecting the Bonding
Business or the Colorado or Pennsylvania Facilities, 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 at the Colorado or Pennsylvania
Facilities. There is no lockout of any employees of the Bonding Business
by Seller, and no such action is contemplated by Seller. Seller, in
operating the Bonding Business, 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. Seller is 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. As used in this Agreement, the term "GOVERNMENTAL BODY"
shall mean any: (a) nation, state, county, city, town, district, or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign,
or other government, (c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department,
official,
38
or entity and any court or other tribunal); (d) multi-national
organization or body; or (e) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature. As used in
this Agreement, the term "LEGAL REQUIREMENTS" shall mean any federal,
state, local, municipal, foreign, international, multinational, or
other administrative order, constitution, law, ordinance, principle of
common law, regulation, statute, or treaty.
8.18 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth in
SCHEDULE 8.18, since December 31, 1998, through the date hereof, there has not
been and, where applicable, Seller has not committed to effect, with respect to
the Bonding Business or the Bonding Assets:
(a) ADVERSE CHANGE. Any undisclosed material adverse change in the
financial condition, assets, liabilities, business, results of operations,
customer relations, supplier relations or, except as contemplated by this
Agreement, employee relations of the Bonding Business;
(b) INVENTORY. Any undisclosed material adverse change in the
normal and ordinary manner in which the Bonding Business is conducted
including, without limitation, changes in the manner and timing of
inventory purchases and payable payments, changes in manufacturing
methods and changes in sales, marketing and collection practices and
policies;
(c) DAMAGE. Any material loss, damage or destruction, whether
covered by insurance or not to any of the Seller's property;
(d) LABOR DISPUTES. Any material labor dispute or disturbance;
(d) COMMITMENTS. Any material commitment or transaction by Seller
(including, without limitation, any borrowing or capital expenditure
relating to the Bonding Business which exceed $100,000 in the aggregate)
which have not been paid or accrued as a liability other than in the
ordinary course of business;
(f) DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any material properties, rights or assets of Seller, except
for the sale of inventory items in the ordinary course of business;
(g) LIENS. Any mortgage, pledge, lien or encumbrance made on any
of the Bonding Assets;
(h) AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by Seller of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(i) CREDIT. Any grant of credit to any customer on terms or in
amounts more favorable than those which have been extended to such
customer in the past, any other
39
change in the terms of any credit heretofore extended, or any other
change of Seller's policies or practices with respect to the granting
of credit;
(j) ACCOUNTS RECEIVABLE. Any write-off of Accounts Receivable
other than in the ordinary course of business;
(k) LOANS. No material loans have been made to any individuals,
firms, corporations or other entities other than (i) advances to employees
for business related expenses in the ordinary course of business and (ii)
credit terms extended to customers in the ordinary course of business; and
8.19 CONTRACTS AND COMMITMENTS.
(a) PURCHASE COMMITMENTS. Seller does not have any purchase
commitments for inventory items or supplies that, together with amounts on
hand, constitute in excess of three months normal usage or which are at an
excessive price.
(b) SALES COMMITMENTS. Except as provided in SCHEDULE 8.19(b),
Seller does not have any sales contracts with or commitments to any
customer which aggregate in excess of $20,000 to any one customer (or
group of affiliated customers).
(c) CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Seller does not
have any agreement, understanding, contract or commitment (written or
oral) with any affiliate or any other manager, director, officer,
employee, agent, or consultant that is not cancelable by Seller on notice
of not longer than 30 days without liability, penalty or premium of any
nature or kind whatsoever.
(d) POWERS OF ATTORNEY. Seller has not given a power of attorney,
which is currently in effect, to any person, firm or corporation for any
purpose whatsoever.
(e) LOAN AGREEMENTS. Except as provided on SCHEDULE 8.19(e),
Seller is not obligated under any loan agreement, promissory note,
letter of credit, or other evidence of indebtedness as a signatory,
guarantor or otherwise.
(f) USE OF IDB PROCEEDS AND DCED GRANTS. Seller has used all
funds, monies and proceeds derived from the IDB or granted by the DCED
lawfully and in accordance with all applicable terms and conditions
provided in the respective governing agreements or documents for same
or otherwise relating thereto.
(g) GUARANTEES. Seller has not guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently
or secondarily liable for the obligations of any person.
40
(h) CONTRACTS SUBJECT TO RENEGOTIATION. Seller is not a party to
any contract with any governmental body which is subject to renegotiation.
(i) NO DEFAULT. Seller is not in default in any material respects
under any lease, contract or commitment, nor has any event or omission
occurred which through the passage of time or the giving of notice, or
both, would constitute a default thereunder or cause the acceleration of
any of Seller's obligations or result in the creation of any lien on any
of the assets owned, used or occupied by Seller. Based on Seller's
knowledge, no third party is in default under any lease, contract or
commitment to which Seller is a party, nor has any event or omission
occurred which, through the passage of time or the giving of notice, or
both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof. SCHEDULE
8.19(i) sets forth a complete and correct list of each agreement, contract
or commitment of the Seller, whether written or oral, related to or
entered into in connection with the operation of the Bonding Business or
by which any of the Bonding Assets are bound and that provides for
aggregate payments by any party in excess of $50,000 or otherwise
materially restricts or limits any of the Bonding Assets or any means or
methods by which the Bonding Business is conducted (the "MATERIAL
CONTRACTS"). Except as set forth in SCHEDULE 8.19(i), each of the Material
Contracts is (i) in full force and effect and enforceable in accordance
with its terms and (ii) is assignable without consent of any person,
including without limitation any governmental agency or authority.
8.20 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 8.20 and
except for matters relating to Environmental Laws which are covered in Article
8.11(b), the operations of the Bonding Business are in material compliance with,
and each of the Bonding Assets is in material compliance with, all applicable
Legal Requirements promulgated by Governmental Bodies having jurisdiction over
the Bonding Assets except for such non-compliance which, either individually or
in the aggregate, would not have or result in a Material Adverse Effect. Except
as set forth in SCHEDULE 8.20, the Seller has not received any notification of
any asserted failure to comply with any such laws, statutes, orders, rules,
regulations or requirements, which failure has not been cured. Except as set
forth on SCHEDULE 8.20, there are no written and published orders, decrees,
injunctions, rulings, publications, decisions, directives, consents,
pronouncements or regulations of any court or governmental authority issued
against or binding upon the Seller relating to the Bonding Business which
materially affect, limit or control the Seller's operation of the Bonding
Business.
8.21 INTEGRITY OF DUNBAR MINE. To Seller's knowledge, the integrity of
the Dunbar Mine is sufficient to support continued operations at the expected
future rate of three detonation events per day. Loss of the current chamber will
not preclude the use of another area of the mine for continuing operations or
otherwise have a Material Adverse Effect.
8.22 INVENTORY. All Inventory was purchased or manufactured in the
ordinary course of business consistent with past practice. Inventory is valued
at the lower of cost or market, on a first-in, first-out basis, consistent with
Seller's internal accounting procedures that are in accordance with GAAP and in
the case of all such inventory that is rejected, damaged or
41
obsolete, has been written down to its net realizable value based on a physical
inventory at Closing. Seller and Purchaser agree that all Inventory that is
slow-moving (i.e., any item of inventory in excess of one year's supply based on
sales of inventory during the prior 12 month period or requirements based on
existing backlog, whichever is higher) will be retained by Seller unless written
notification is received from Purchaser that it intends to purchase such
Inventory. In such case, Seller agrees to sell the slow moving inventory to
Purchaser at Seller's Net Realizable Value. Inventory is located at either the
Pennsylvania Facilities, the Colorado Facility or the facilities of outside
third parties that provide various subcontract services to the Seller in
connection with the manufacture of clad plates.
8.23 WARRANTIES. SCHEDULE 8.23 sets forth a general description of all
warranties and other guarantees provided to any material customer of the Bonding
Business within the past two (2) years with respect to products sold or services
performed.
8.24 BACKLOG. SCHEDULE 8.24 sets forth a list of the total backlog of
orders with firm delivery dates of the Bonding Business as at May 3, 1999.
8.25 DISCLOSURE. Neither the representations and the warranties of the
Seller contained in this Agreement nor any of the attached schedules contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information made not misleading.
ARTICLE 9
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser makes the following representations and warranties to Seller:
9.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has all requisite corporate power to own and operate its
properties and assets, and to carry on its business as conducted and possesses
all licenses, franchises, rights and privileges necessary for the conduct of its
business. Purchaser is qualified to do business in all jurisdictions in which
such qualification is required.
9.2 CORPORATE POWER; AUTHORIZATION. Purchaser has all requisite legal
and corporate power and authority to enter into this Agreement and to carry out
and perform all of its obligations under the terms of this Agreement. All
corporate action on the part of Purchaser and all action on the part of its
shareholders, officers and directors necessary for the authorization, execution
and delivery of this Agreement and the Purchaser Ancillary Documents by
Purchaser and for the performance of Purchaser's obligations hereunder has been
taken, and this Agreement and the Exhibits, when duly executed and delivered,
shall constitute the legal and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and by rules of law governing specific performance, injunctive relief or other
equitable remedies.
42
9.3 NO BREACH. The execution and delivery of this Agreement by Purchaser
and all documents to be executed by Purchaser in connection with the
transactions contemplated hereby do not, and the performance and consummation by
Purchaser of the transactions contemplated by this Agreement and the Purchaser
Ancillary Documents will not, result in any conflict with, breach or violation
of or default, termination, forfeiture or lien under (or upon the failure to
give notice or the lapse of time, or both, result in any conflict with, breach
or violation of or default, termination, forfeiture or lien under) any terms or
provisions of Purchaser's Certificate of Incorporation or Bylaws or similar
charter documents, each as amended, or any statute, rule, regulation, judicial
or governmental decree, order or judgment, or any agreement, lease or other
instrument, to which Purchaser is a party or by which its assets are bound.
ARTICLE 10
SELLER'S COVENANTS
Seller covenants and agrees as follows:
10.1 ACCESS TO INFORMATION, RECORDS AND THIRD PARTIES. During the period
prior to the Closing, Seller shall give Purchaser, its counsel, accountants and
other representatives (i) reasonable access during normal business hours to all
of the properties, books, records, contracts and documents of Seller in
connection with the Bonding Business for the purpose of such inspection,
investigation and due diligence as Purchaser deems appropriate (and Seller shall
furnish or cause to be furnished to Purchaser and its representatives all
information with respect to the Bonding Business of Seller as Purchaser may
reasonably request); (ii) reasonable access to employees, agents and
representatives for the purposes of such meetings and communications as
Purchaser reasonably desires; and (iii) with the prior consent of Seller to the
nature of any questions to be asked by Purchaser, which consent shall not be
unreasonably withheld, in each instance, access to vendors, customers,
manufacturers of its machinery and equipment, and others having business
dealings with the Bonding Business of the Seller.
10.2 CONDUCT OF BONDING BUSINESS PENDING THE CLOSING. From the date
hereof until the Closing, except as otherwise approved by the Purchaser:
(a) NO CHANGES. Seller will carry on the Bonding Business in the
ordinary course and will not make or institute any changes in its methods
of purchase, sale, management, accounting or operation.
(b) NO MATERIAL CONTRACT. With respect to the Bonding Business, no
contract or commitment will be entered into, and no purchase of raw
materials or supplies and no sale of assets (real, personal, or mixed,
tangible or intangible) will be made, by or on behalf of Seller, except
contracts, commitments, purchases or sales which are for the purchase of,
and purchases of: (i) raw materials and supplies made in the ordinary
course of business and consistent with past practice, (ii) products or
inventory in the ordinary course of business and consistent with past
practice, or (iii) other goods in the ordinary
43
course of business and consistent with past practice, and which are
not material to the Seller and would not have been required to be
disclosed on any of the Disclosure Schedules referenced herein had
they been in existence on the Effective Date.
(c) MAINTENANCE OF INSURANCE. Seller shall maintain all of the
insurance coverages in effect as of the date hereof.
(d) MAINTENANCE OF PROPERTY. Seller shall use, operate, maintain
and repair all property of Seller in a normal business manner.
(e) DISCHARGE OF LIENS. If any lien for work in connection with
the Mt. Braddock Facility shall be filed, or if any other title
objection of any type or nature whatsoever shall become known to
Purchaser after the Effective Date, Seller shall, at Purchaser's
option, either discharge or otherwise hold the Purchaser harmless
against any such lien, prior to Closing.
(f) INTERIM FINANCIALS. Seller will provide Purchaser with interim
monthly financial statements and other management reports as and when they
are available.
(g) IDB. Seller shall cooperate with Purchaser and use its
reasonable best efforts to obtain all necessary consents to permit
assignment of all relevant documents relating to the IDB.
(h) GOVERNMENT GRANTS. To the extent assumed by Purchaser, Seller
shall use its reasonable best efforts to obtain all necessary consents to
permit the assignment to Purchaser of all of its rights, title and
interest in any funds, grants, incentives or other benefits in any
governmental grant or incentive program or agreement, including, but not
limited to those grants granted by the DCED.
(i) TRANSFER OF INVENTORY. Seller shall transfer all of the
Inventory from the Colorado Facilities to the Pennsylvania Facility at its
sole cost and expense.
10.3 CONSENTS AND NOVATION. Seller will use its reasonable best
efforts prior to Closing to obtain all consents necessary for the consummation
of the transactions contemplated hereby, including, without limitation, the
consent of each lessor of real or personal property leased by Seller under
leases being assumed by Purchaser herein to assignment of the lessee's interest
under the lease of such property to Purchaser. All such consents shall be in
writing and executed counterparts thereof shall be delivered to Purchaser
promptly after Seller's receipt thereof but in no event later than two business
days prior to the Closing. This Agreement shall not constitute an agreement to
assign any of Seller's interest in any instrument, contract, lease, permit or
other agreement or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom, if an assignment without the consent of a third party,
or without novation of the same, would constitute a breach or violation thereof
or affect adversely the rights of the Seller or the Purchaser thereunder. If
novation is required in order to transfer and assign any interest to the
Purchaser, or if the consent of a third party is required in order to assign any
such interest and such consent is not obtained prior to the Closing Date, or if
an attempted assignment
44
would be ineffective or would adversely affect the Seller's ability to convey
the benefit of such instrument, contract, lease, permit or other agreement or
arrangement to the Purchaser, then: (i) the Purchaser shall be entitled to the
benefits of each such assigned contract accruing after the Closing Date, (ii)
Purchaser shall be responsible for performing the Seller's obligations under
such contracts to the same extent as any contract assigned hereunder, (iii) the
Seller shall continue to deal with the other contracting party(ies) as the prime
contracting party, (iv) the Seller will cooperate with the Purchaser until such
consent or novation is obtained or effected in any lawful and economically
feasible arrangement so that the Purchaser shall receive the Seller's interest
in the benefits under any such instrument, contract, lease, permit or other
agreement or arrangement, including performance by the Seller or the Purchaser
as agent for the other, if economically feasible and (v) if Seller is unable to
obtain the required consent, Seller shall, if requested by Purchaser, assist
Purchaser in entering into substantially equivalent agreements. The Seller shall
promptly assign to the Purchaser each such assigned contract after receipt of
the appropriate consent or novation.
10.4 INTELLECTUAL PROPERTY.
(a) As part of the Intellectual Property, at Closing, the Seller
will assign to the Purchaser all of the Seller's right to all obligations
of confidentiality, secrecy, noncompetition, invention disclosure and
similar rights contained in any agreements or contracts with third parties
including employees of the Bonding Business.
(b) Prior to Closing, to the extent that Seller's ownership of
each item of same is not reflected in the records of the applicable
Governmental Body, Seller agrees to arrange, at its own cost and expense
for the transfer or assignment all of all rights to the Intellectual
Property to Seller in its current legal name.
(c) Prior to Closing, the Seller shall locate at least one copy or
tangible embodiment of all of the Intellectual Property, including
without limitation the "Invention Disclosures," if any, listed on
SCHEDULE 2.1(d) and, to the extent that no such copy or tangible
embodiment is uncovered, then Seller shall prepare a document
explaining the Intellectual Property asset for which no copy or
tangible embodiment can be located.
(d) Prior to Closing, Seller, to the extent that Seller's
ownership of any Intellectual Property (including without limitation
German Patent No. 69313828) is not reflected in the records of the
applicable Government Body, agrees to arrange at its own cost and
expense for the transfer or assignment, and the recordation of the
transfer or assignment with the applicable Government Body, of all
such Intellectual Property to Seller's current legal name.
(e) Prior to Closing, Seller, to the extent that any of the
Intellectual Property has expired for failure to pay a maintenance fee or
annuity, shall make its best efforts to revive any such expired
Intellectual Property.
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10.5 NON-COMPETITION.
(a) During the five (5) year period commencing on the Closing Date
and ending on the fifth anniversary thereof (the "Non-Compete Period"),
Seller agrees that neither it nor any of its Affiliates will, for any
reason whatsoever, directly or indirectly, either individually or as an
owner, partner, officer, director, manager, lender or otherwise, engage in
any business that: (i) is engaged in the design, development, manufacture
or sale of any products or services designed, developed, performed or sold
by the Bonding Business during the one year period prior to the Closing
Date or (ii) competes with the Bonding Business as conducted immediately
prior to the Closing Date in any geographical market worldwide
("COMPETITIVE BUSINESS")
(b) During the three (3) year period immediately following the
Closing Date, Seller shall not and shall not permit any of its Affiliates
to:
(i) hire any employee of the Purchaser;
(ii) attempt to hire any employee of Purchaser; or
(iii) induce or attempt to induce any employee of the
Purchaser to leave the employ of the Purchaser.
(c) Notwithstanding anything in this Article 10.5 to the contrary,
if at any time, in any judicial proceeding, any of the restrictions stated
in this Article 10.5 are found by a final order of a court of competent
jurisdiction to be unreasonable or otherwise unenforceable under
circumstances then existing, Seller and the Purchaser agree that the
period, scope or geographical area, as the case may be, shall be reduced
to the extent necessary to enable the court to enforce the restrictions to
the maximum extent such provisions are allowable under law, giving effect
to this Agreement and the intent of the parties that the restrictions
contained herein shall be effective to the fullest extent permissible.
10.6 CONFIDENTIAL INFORMATION. From and after the Closing Date, Seller
agrees that it will not, nor will it permit any of its respective Affiliates to,
make use of, divulge or disclose to any third party (other than the Purchaser or
any agent or employee of the Purchaser) any information of any proprietary,
secret or confidential nature related to the Bonding Business.
10.7 COOPERATION IN THIRD-PARTY LITIGATION. After the Closing Date,
Seller agrees to provide such cooperation as the Purchaser or its counsel may
reasonably request in connection with:
(a) any proceedings related to the Bonding Assets or the Bonding
Business which are hereafter pending or threatened and to which the
Bonding Business, the Purchaser and/or any Affiliate of the Purchaser
is a party; and
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(b) any proceedings for which Seller is entitled to indemnification from
the Purchaser under Article 15.2.
Such cooperation shall include, but not be limited to, making the Seller and its
respective officers, directors and employees available upon the reasonable
request and at the expense (out-of-pocket expenses only, excluding employee
compensation) of the Purchaser or its counsel to consult with and assist the
Purchaser and its counsel in connection with any such proceedings and to prepare
for and testify in any such proceedings, including depositions, trials and
arbitration proceedings. Seller acknowledges and agrees that due to the unique
nature of the rights protected by this Article, Purchaser could not be
reasonably or adequately compensated in damages in an action at law for Seller's
breach of any of the provisions of Articles 10.5, 10.6 or 10.7 and, therefore,
Seller agrees that Purchaser, in addition to and without limiting any other
remedy or right it may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction enjoining any such
breach. Seller further agrees that the Purchaser shall not be required to post a
bond or other security in connection with the issuance of any such injunction.
10.8 COOPERATION WITH TELEPHONE AND E-MAIL. After the Closing Date,
Seller agrees to forward or direct all telephone calls and inquiries concerning
the Bonding Business to a telephone number specified by Purchaser and to provide
such other cooperation as the Purchaser or its counsel may reasonably request in
connection with the transition of telephone, e-mail, Internet other marketing
and communication tools and services.
10.9 TRANSFER OF NEIGHBORHOOD ASSISTANCE TAX CREDIT. Seller agrees that
in the event that it is determined that the Neighborhood Assistance Tax Credit
is not assignable to Purchaser and (i) Purchaser is not eligible to apply for a
similar tax credit or (ii) if eligible, is denied approval for same, Seller
agrees that it will pay to Purchaser the equivalent value realized by Seller
from the Neighborhood Assistance Tax Credit. Notwithstanding the above, Seller
agrees to pay to Purchaser any value that Seller realizes from the Neighborhood
Assistance Tax Credit.
10.10 REVISED SCHEDULES. Seller shall provide Revised Schedules to
Purchaser as provided in Article 11.3.
10.11 COVENANT OF QUIET ENJOYMENT. For a period of eighteen months
following Closing, Seller shall ensure that Purchaser experiences peaceful and
quiet occupation and enjoyment of the Dunbar Facilities against any and all
parties, and in the event that the peaceful and quiet occupation and enjoyment
of Purchaser is disturbed during this period, Seller shall indemnify and hold
Purchaser safe and harmless from and against any claims, losses, expenses
(including reasonable attorneys fees) and damages incurred by Purchaser in
connection therewith.
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ARTICLE 11
ADDITIONAL COVENANTS
11.1 FEES AND EXPENSES. Except as otherwise provided herein, each party
to this Agreement shall pay its own expenses in connection with the preparation
of this Agreement and the consummation of the transactions contemplated
hereunder, including the fees of any attorneys, accountants or others engaged by
such party.
11.2 TERMINATION FEE.
(a) If this Agreement is terminated pursuant to any of Articles
16.1(c)(i)-(iv) of this Agreement, Seller shall, within 30 days after such
termination, pay to Purchaser in cash an amount equal to the aggregate
out-of-pocket costs and reasonable expenses incurred in connection with
this Agreement, the transactions contemplated hereby and Purchaser's due
diligence investigation of the Seller including, without limitation,
reasonable attorneys' fees (collectively, "EXPENSES").
(b) In addition to any required payment of Expenses, Seller shall
promptly pay to Purchaser a termination fee in cash (the "TERMINATION
FEE") in accordance with the following:
(i) upon termination of this Agreement pursuant to
Article16.1(c)(ii) or 16.1(c) (iii) of this Agreement the
Termination Fee shall be $500,000; or
(ii) upon termination of this Agreement pursuant to
Article 16.1(c)(i) or 16.1(c) (iv) of this Agreement and the closure
of a subsequent sale or acquisition of the Seller or the Bonding
Business to or by a third party purchaser within eighteen (18)
months of such termination, the Termination Fee shall be $250,000.
(c) The sum of the Expenses and the Termination Fee, if any, shall
be referred to herein as the "TERMINATION AMOUNT".
11.3 UPDATE OF DISCLOSURE SCHEDULES.
(a) From and after the Effective Date through the Closing, Seller shall
deliver to Purchaser every 30 days, beginning July 15, 1999, any revised
Disclosure Schedules to this Agreement that Seller deems appropriate in order to
insure that the representations or warranties of Seller made herein remain true
and accurate (the "REVISED SCHEDULE(S)"). Seller agrees that if Purchaser is not
reasonably satisfied that any matter disclosed on any Revised Schedule(s) does
not result in a Material Breach of any of Seller's representations or warranties
made or provided herein, Purchaser shall notify Seller of its objection to same
and Purchaser and Seller shall attempt to resolve the parties' concerns with
respect to such matters. If the parties are successful in resolving such matter
to the parties mutual satisfaction, Seller and Purchaser agree either (i) to
include such matter (together with the agreed upon amount of Damages or
dimunition in value) on SCHEDULE 4.2(b)(v) as a matter which has, or would
reasonably be expected to cause either the Purchaser or the Bonding Business to
incur Damages or suffer a dimunition in value, either prior to or following
Closing, or (ii) to take such steps as would otherwise resolve the matter to the
48
parties' mutual satisfaction, or both. If, within 30 days of Purchaser's notice
to Seller of its objection, the parties are unable to agree to the amount of the
Purchase Price reduction pursuant to Article 4.2(b)(v) or otherwise resolve the
dispute, either party may elect to terminate this Agreement, in which event the
parties shall not have any further liability or obligation to the other, subject
to the provisions of Article 16, if applicable.
(b) In addition to Seller's obligation to provide Revised Schedules to
Purchaser as provided in this Article, Seller agrees to notify Purchaser as soon
as reasonably practicable of any occurrences or events that may constitute a
Material Breach of any representation or warranty made or provided in this
Agreement.
11.4 PUBLIC ANNOUNCEMENTS. No party hereto shall make any press release
or public announcement, including announcements by any party hereto for general
reception by or dissemination to the employees, agents, customers or suppliers
of the Bonding Business, with respect to the transactions contemplated hereby
without the prior consent of the other party; provided, however, that (i) each
party may make any disclosure or announcement which such party, in the opinion
of its counsel, is obligated to make pursuant to applicable law, in which case,
(A) such party shall consult with the other party prior to making such
disclosure or announcements and (B) the other party shall be entitled to issue
its own press release without the prior consent of the other party; (ii) the
Purchaser may disclose any matters it deems appropriate to its financing sources
and financial, legal and other advisors involved with the transactions
contemplated hereby; and (iii) upon consummation of the Closing, the Purchaser
may make any disclosure or announcement it desires relating to the transactions
contemplated hereby except as to the Purchase Price and except as to any
proprietary or confidential information of Seller or its Affiliates or any of
their respective business policies, practices or procedures.
11.5 PRODUCT WARRANTY OBLIGATIONS. Seller agrees for a period of one year
from the Closing Date to indemnify and hold Purchaser harmless from any
liability, cost, charge or expense related to warranty claims made pursuant to
the Seller's standard warranty, attached hereto as SCHEDULE 11.5, against
products shipped or services performed prior to the Closing Date ("WARRANTY
CLAIMS"). The procedure for processing of Warranty Claims as between Purchaser
and Seller shall be as set forth below.
(a) As to Warranty Claims which are resolved through repair or
replacement of the affected product by Purchaser, Seller shall reimburse
Purchaser for Purchaser's actual costs of effecting the repair or
replacement ("REPAIR EXPENSES"). Purchaser shall be entitled to
reimbursement for the Repair Expenses monthly, by tendering to Seller on
or before the 10th day after each month a report itemizing Repair
Expenses, if any, incurred during the prior month. Seller shall have
fifteen business days within which to object in writing to the expenses
noted on the Repair Expense report. If no timely objection is received
from Seller, Purchaser shall be entitled to immediate reimbursement from
Seller in an amount equal to the Repair Expenses. If Seller objects to any
item on the Repair Expenses form, Purchaser and Seller shall endeavor in
good faith to resolve such dispute within ten days, after which either
party may tender the dispute to the Independent Accountants, whose costs
shall be shared equally by the Seller and Purchaser.
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(b) As to Warranty Claims based on product returns, Purchaser
shall be entitled to reimbursement equal to the difference between (A) the
purchase price refunded to the customer, minus (B) the inventory value, if
any, of the product returned.
11.6 PRODUCT CLAIMS AND REPLACEMENT PRODUCT. During the period of one (1)
year after the Closing Date, Purchaser shall cooperate with Seller's efforts to
resell any rejected or returned products which have been sold, shipped or set
aside for a customer of Seller prior to the Closing Date. At Seller's request,
Purchaser shall reprocess any such rejected or returned finished product at a
charge to Seller equal to Purchaser's costs for such services.
11.7 AUTHORIZATION; MAIL. The Seller authorizes and empowers the
Purchaser on and after the Closing Date to receive and open mail addressed to
Seller and to take any reasonable and prudent action required by the contents
thereof in any manner the Purchaser sees fit, provided such mail and the
contents thereof relate to the Bonding Assets or otherwise to the Bonding
Business or to any of the Assumed Liabilities. The Seller agrees to deliver to
the Purchaser promptly upon receipt and identification any mail, checks or other
documents received by it pertaining to the Bonding Assets or otherwise to the
Bonding Business or any of the Assumed Liabilities. The Purchaser agrees to
deliver to Seller any mail which it receives which does not pertain to the
Bonding Business or the Bonding Assets or any of the Assumed Liabilities and to
which Seller is entitled.
11.8 COLLECTION OF ACCOUNTS RECEIVABLE. After the Closing Date, Seller
and Purchaser agree that Purchaser shall collect all receivables of Seller
arising from Seller's operation of the Bonding Business in the ordinary course
prior to the Closing Date (the "PRE-CLOSING RECEIVABLES"), as agent of Seller,
and without any liability by reason of so acting. Purchaser shall promptly
transfer and deliver to the Seller all amounts collected on account of such
Pre-Closing Receivables. Nothing in this Article 11.8 shall require Purchaser to
undertake any special collection including without limitation, commencing any
actions on Seller's behalf. In its efforts to collect Pre-Closing Receivables,
Purchaser shall not, without the prior written consent of Seller, compromise the
amount due from any pre-closing account debtors with respect to the Pre-Closing
Receivables. Purchaser agrees that if any Pre-Closing Receivables are not
collected and paid over to Seller within 120 days after the Closing, then Seller
shall be entitled to take any appropriate actions to collect such outstanding
Pre-Closing Receivables. Seller and Purchaser shall cooperate in reconciling the
amounts collected by Purchaser with respect to the Pre-Closing Receivables.
11.9 PROVISION FOR TIMET TITANIUM Purchaser acknowledges that, in June
1998, Seller contracted for a quantity of highly specialized Grade-17 Titanium
from Timet Metals Corporation (the "TIMET TITANIUM") pursuant to Purchase Order
#98-294D, dated June 29, 1998 (the "TIMET PURCHASE ORDER") in anticipation of an
order with ASC-Engineering PTY, Limited ("ASC"). Seller has not, as yet, taken
delivery of the Timet Titanium nor has an order been received from ASC. Seller
acknowledges that, because of its unique application, an extremely limited
market exists for the Timet Titanium and that if no order is received from ASC,
the net realizable value of the Timet Titanium to Purchaser would be
substantially and materially diminished. Therefore, Seller and Purchaser agree
that between signing and Closing,
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Seller may, at its sole option, cancel the Timet Purchase Order in the normal
course of business and be responsible for any associated fees, charges or
expenses. Seller and Purchaser further agree that if Seller does not cancel the
Timet Purchase Order and no order is received from ASC on or prior to Closing,
Purchaser shall be entitled to a Purchase Price reduction, pursuant to Article
4.2(b)(iv), in the amount of the difference between the cost of the Timet
Titanium and the market price of a lower grade of metal that is suitable for
sales in the ordinary course of business. The parties further agree, however,
that if, within twelve (12) months of the Closing, ASC or any other party
requiring Grade-17 Titanium places an order with Purchaser, and the Timet
Titanium is used to satisfy that order, Purchaser will refund to Seller any
Purchase Price reduction received pursuant to 4.2(b)(iv).
11.10 INSURANCE CLAIMS. In the event that, after the Closing, Purchaser or
Seller shall suffer any loss arising out of a third party claim or otherwise and
such injured party in good faith notifies the others that such claim would be
covered under a policy of insurance maintained by any such other party for the
benefit of the Bonding Business or the Bonding Assets, such other insured party
(at such injured party's cost and expense) shall present and use commercially
reasonable efforts to prosecute a claim for payment under such policy in respect
of such loss, and pay to such injured party the proceeds of such claim under
such policy as reimbursement to such injured party in respect of the amount of
such loss.
11.11 EMPLOYEES.
(a) Effective as of the Closing Date, the Seller shall terminate
all of the Target Employees identified by Purchaser on SCHEDULE 6.1
and the Purchaser shall be entitled to make offers of employment to
the Target Employees upon such terms, conditions and policies as shall
be determined and established by the Purchaser.
(b) As part of the Intellectual Property, at Closing, the Seller
will assign to the Purchaser all of the Seller's rights under all
confidentiality, secrecy, nondisclosure or noncompetition agreements or
similar provisions in other agreements that Seller has or had with all
current and former employees of the Bonding Business, contractors,
consultants or other third parties performing or who have ever performed
work for or provided services to Seller in connection with the Bonding
Business,
11.12 PENNSYLVANIA TAX MATTERS. At least ten (10) days prior to the
Closing, Seller shall provide evidence satisfactory to Purchaser that it has
paid, withheld and is current with all applicable taxes of the Commonwealth of
Pennsylvania including, without limitation, sales and use tax, corporate taxes
and unemployment compensation taxes. Without limitation of the foregoing
requirements, Seller shall indemnify, defend and save and hold harmless
Purchaser from any loss, cost, liability or expense (including, without
limitation, reasonable counsel fees and court costs) incurred, paid or suffered
by Purchaser arising out of or by reason of any claim made by the Pennsylvania
Department of Revenue or by any other state taxing or employment authorities
asserting or indicating any claims or possible claims for unpaid taxes,
penalties, interest or court costs related thereto of Seller or any related
party, due the Commonwealth of Pennsylvania or its political subdivisions. The
provisions of this Article 11.12 shall specifically survive Closing hereunder.
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11.13 PREPARATION OF TAX RETURNS. The Purchaser and the Seller shall
cooperate in preparing and filing use, transfer and sales tax returns relating
to the transfer of the Bonding Assets.
11.14 HSR FEES. The Purchaser and the Seller agree to share equally any
and all filing fees due with regard to any pre-closing filing obligations under
the HSR Act.
11.15 PERMITS AND LICENSES. Purchaser will apply for and retain in full
force and effect all permits, certificates of occupancy and licenses required to
operate the Bonding Business.
11.16 INSTRUCTIONS TO ESCROW AGENT. Each of Seller and Purchaser agree to
promptly issue and dispatch all undisputed orders and instructions to the Escrow
Agent.
ARTICLE 12
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Each of the obligations of Purchaser under this Agreement that are
required to be performed on or before the Closing Date shall be subject to the
satisfaction or fulfillment on or before the Closing Date of each of the
following conditions, any one or more of which may be waived by the Purchaser in
a writing executed by a duly authorized officer of Purchaser:
12.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE.
(a) Each of the representations and warranties made by Seller in
this Agreement, and the Disclosure Schedules hereto and in the Seller
Ancillary Documents, shall be true, complete and correct in all
material respects when made and shall be true, complete and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the
Closing Date, except:
(i) where any inaccuracy or untruth in the representation
or warranty would not reasonably be expected to result
individually or in the aggregate in a Material Adverse Effect on
the Bonding Business; and
(ii) for any changes permitted by the terms of this
Agreement or consented to in writing by Purchaser
12.2 COMPLIANCE WITH AGREEMENT. Seller shall have in all material
respects performed and complied with all of its covenants, agreements and
obligations required by this Agreement and the Seller Ancillary Documents to be
performed or complied with by it prior to or on the Closing Date, including the
delivery of the closing documents specified in Article 7.2(b).
12.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall be instituted or pending and to the knowledge
of Seller, no investigation by any governmental or regulating authority shall be
instituted or pending, against Purchaser, Seller or any of the affiliates,
officers or directors of any of them, seeking to restrain,
52
modify, prevent or change the transactions contemplated by this Agreement, the
Seller Ancillary Documents or the Purchaser Ancillary Documents, or to seek
damages or a discovery order in connection with such transactions, or
questioning the validity or legality of any such transactions, or seeking
damages in connection with, or imposing any condition on, any such transactions
or that has or may have, in the reasonable opinion of the Purchaser, a Material
Adverse Effect.
12.4 CONSENTS AND APPROVALS. SCHEDULE 12.4 contains a list of all
approvals, consents and waivers that are required to be received under
applicable Legal Requirements to effect the transactions contemplated in this
Agreement and the Seller Ancillary Documents ("REQUIRED CONSENTS AND
APPROVALS"). Subject to the provisions of Article 10.3, all Required Consents
and Approvals shall have been received and shall be in full force and effect,
and executed counterparts thereof shall have been delivered to Purchaser, except
such consents, approvals or waivers the absence of which would not reasonably be
expected to cause a Material Adverse Effect.
12.5 CERTIFICATES. The Seller shall have furnished the Purchaser with the
following certificates:
(a) GOOD STANDING CERTIFICATES. A certificate, executed by
the applicable Secretary of State, as to
(i) the good standing of the Seller in the State of
Colorado;
(ii) the authority or qualification of the Seller to conduct
business as a foreign corporation in each jurisdiction where it is
so authorized or qualified.
(b) SECRETARY'S CERTIFICATE. A certificate from the Secretary of
the Seller attaching copies of resolutions authorizing the execution,
delivery and performance of this Agreement and the taking of all
action required hereunder or in connection herewith; and
(c) INCUMBENCY CERTIFICATE. A certificate of the Secretary of the
Seller certifying the incumbency of its officers and their genuine
signatures, with a cross certification of such Secretary's incumbency and
genuine signature.
12.6 INSTRUMENTS OF CONVEYANCE, TRANSFER AND ASSUMPTION. Seller shall
have delivered to Purchaser full possession of all of the Bonding Assets in the
Commonwealth of Pennsylvania, together with (i) the Bill of Sale; (ii) such
other instruments of conveyance and transfer as shall be effective to vest in
Purchaser all right, title and interest in and to the Bonding Assets free and
clear of all liens, charges, easements, mortgages, pledges, claims and other
encumbrances in favor of any third party other than Permitted Encumbrances; and
(iii) any and all tangible manifestations of the Bonding Assets including,
without limitation, all notes, records, files, prints, drawings, schematics
diagrams, specifications and tangible items of any sort in Seller's possession
or under Seller's control relating to the Bonding Assets, and including original
trademarks and related registrations, copyrights and related registrations, and
certificates
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of letters patent, and applications and disclosures therefor, if any. Such
delivery shall include all present versions of such materials and, to the extent
in Seller's possession or control, predecessor versions.
12.7 DELIVERY OF SELLER ANCILLARY DOCUMENTS. The Seller shall have
delivered to the Purchaser all of the Seller Ancillary Documents.
12.8 ENVIRONMENTAL REPORTS. Purchaser shall have received copies of all
Environmental Reports, including, but not limited to, all closure documents
required by the Pennsylvania Department of Environmental Protection ("PADEP")
for removal of underground storage tanks at the Dunbar Facility, and all
environmental permits relating to the Bonding Business or the Bonding Assets
shall be in full force and effect.
12.9 HSR ACT. The applicable waiting period under the HSR Act shall have
expired or been terminated and no conditions to the transactions contemplated by
this Agreement shall have been imposed or proposed by any Governmental Body.
12.10 EXTENSION OF MINE MASTER LEASE. Seller shall have caused the
existing Master Lease Agreement covering the Dunbar Facility between the heirs
of the Daniel Harper Estate (as owners) and Mypodiamond, Inc. (as Lessee and
assignee of E.I. duPont de Nemours and Company) from which Seller (as sublessee)
derives its use of the Dunbar Facility in connection with the Bonding Business
(the "MASTER LEASE") to be renegotiated and entered into on or before the
Closing Date such that it includes terms which are substantially similar to the
terms set forth in SCHEDULE 12.10.
12.11 EXTENSION OF MINE SUBLEASE. Seller shall have caused the Dunbar
Sublease to be renegotiated and entered into on or before the Closing Date such
that its terms are substantially similar to the terms set forth in SCHEDULE
12.11.
12.12 VALIDITY OF MASTER/SUBLEASE. Purchaser shall have determined, in its
sole and absolute discretion, based upon its own due diligence investigation,
that each of the Master Lease and the Dunbar Sublease is legally valid, binding
in full force and effect as to the parties thereto and is enforceable against
all such parties in accordance with its terms.
12.13 OPERATION OF MINE VENTILATION SYSTEM.
(a) Seller shall have caused the existing Mine Ventilation system
installed at the Dunbar Facility to be completed, fully operational and
operating properly and in compliance with all applicable Environmental
Laws such that it can support three controlled detonations in the Dunbar
Facility per day. The determination that three controlled detonations per
day can be accomplished shall be supported by the results of air quality
testing which establishes adequate time periods for ventilation between
each detonation to ensure worker safety. In connection with this
condition, Seller shall have received a formal determination from the
PADEP that the mine operations are exempt from Pennsylvania regulations
regarding fugitive emissions and visible emissions. In the alternative,
Seller may obtain all required permits.
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(b) In addition, Seller shall have caused the surface water runoff
from the associated dust suppression system to be analyzed for suspended
solids and other parameters which are regulated by the existing NPDES
permit for the Dunbar Facility and if required by applicable Legal
Requirements, shall have received an amended NPDES permit for the Dunbar
Facility.
12.14 SATISFACTORY RESULTS OF MINE INTEGRITY STUDY. Within thirty (30)
days of the Effective Date, Seller shall have contracted with a reputable mining
and geological consulting firm, acceptable to Purchaser, to perform such
geotechnical and other investigations of the Dunbar Mine as Purchaser shall, in
its sole and reasonable discretion deem necessary or desirable including, but
not limited to core sampling analysis to determine the size and strength of the
various rock layers of the Dunbar Mine. Purchaser shall, within ten (10) days
following the issuance of the consultant's reports but not later than ten (10)
days prior to the Closing, in its sole and reasonable discretion be satisfied
that the results of such investigation support the conclusion that the integrity
of the Dunbar Mine is sufficient to support the expected future rate of three
detonation events per day in the mine and that the loss of the current mine
chamber would not preclude the use of another area of the Dunbar Mine (covered
under the Dunbar Sublease) for explosion bonding and shock synthesis operations
in connection with the Bonding Business. Seller and Purchaser agree that the
cost of all such investigations described hereunder shall be shared equally by
them.
12.15 REMOVAL AND DISPOSAL OF CONTAMINATED SOILS AT THE DUNBAR FACILITY.
Seller shall have removed and disposed of all TPH contaminated soils in and
around the containment area for the drum storage area at the Dunbar Facility.
12.16 PREPARATION AND FILING OF SPILL PREVENTION PLAN. Seller shall have
prepared and filed a Spill Prevention Control and Countermeasures (SPCC) Plan as
required by federal law (40 CFR 112) and an Environmental Emergency Response
Plan as required under Pennsylvania law (25 Pa. Code Chapters 101 and 262 and
Act 32-1989).
12.17 SATISFACTORY RESULTS OF POST-SIGNING DUE DILIGENCE Investigation.
Within 30 days after the effective date, Purchaser shall have determined, in its
sole, reasonable and good faith judgment, that the results of its sales and
marketing review, based on its due diligence investigation, including customer
visits, and its analysis of that sales and marketing review, confirm its
understanding of the base business of the Bonding Business. If Purchaser fails
to notify Seller, in writing within 30 days after the Effective Date, that the
results of its post-signing due diligence are unsatisfactory, then this
condition shall be deemed satisfied.
12.18 MT. BRADDOCK FACILITY. The Mt. Braddock Real Property shall be free
of mechanics' and materialmen's liens and claims of any kind or type, as well as
any other statutory liens or claims permitted by applicable law, filed or
maintained by any contractor, subcontractor, vendor, supplier or any other
person or party, including anyone directly or indirectly employed by any of them
or anyone for whose acts they may be liable, against the Owned Real Property. In
addition, at or prior to Closing, Seller shall have either (i) furnished to
Purchaser a complete release and waiver in a form acceptable to Purchaser; (ii)
obtained title insurance coverage insuring against or (iii) obtained a bond
covering or indemnification against all liens and
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potential liens of any kind arising out of the construction and development of
the Mt. Braddock Facility. Without limitation of the foregoing condition, Seller
shall also indemnify and hold the Purchaser and its title company harmless for
liens which attach to the Owned Real Property by the Seller, its contractors or
subcontractors, or any other person or entity, including anyone directly or
indirectly employed by any of them or anyone for whose acts they may be liable,
other than Purchaser or anyone claiming by, through or under Purchaser.
12.19 CERTIFICATION OF MT. BRADDOCK FACILITY. Seller's architect or
engineer shall certify to Purchaser, in a form of certificate reasonably
satisfactory to Purchaser that the Mt. Braddock Facility, if built in accordance
with the Construction Contracts and Plans, will comply with all applicable
zoning, subdivision and land use laws.
12.20 PURCHASER'S REVIEW AND APPROVAL OF TITLE AND SURVEY.
(a) Seller has delivered to Purchaser, Seller's title insurance
policy or title commitment for the Owned Real Property (complete with
copies of all exceptions to title), and Purchaser shall forthwith make
application for a current title commitment (the "TITLE BINDER") from
Commonwealth Land Title Insurance Company, or another reputable title
insurance company selected by Purchaser (the "TITLE COMPANY"), and shall
have until the Inspection Period Expiration Date (as hereinafter defined)
to examine the condition of title, including the terms and provisions of
all items and documents referred to in the Title Binder (including,
without limitation, those items, if any, referenced in SCHEDULE 1.79
hereto, and in part defining Permitted Encumbrances under this Agreement),
and all information regarding title as disclosed on the Survey
(hereinafter defined), and to reasonably approve or disapprove the same.
If Purchaser shall disapprove the condition of title, such disapproval
shall be set forth in a notice given to Seller (the "DISAPPROVAL NOTICE")
which shall be delivered, if at all, prior to the Inspection Period
Expiration Date, identifying the condition of title to the Owned Real
Property or any of the terms, provisions or contents of said items,
documents or Survey which may reasonably be expected to impair the
marketability of title to the Owned Real Property or impair or limit the
use of the Owned Real Property by Purchaser in the manner and for the
purposes contemplated under this Agreement, and are therefore disapproved
by Purchaser (the "TITLE OBJECTIONS"). Subject to the provisions of the
succeeding portion of this Section , Seller shall have until the date
which is thirty (30) days after the date of the Disapproval Notice (the
"TITLE CURE EXPIRATION DATE") in which to cure or eliminate all items
which Purchaser disapproves in the Disapproval Notice, and to furnish
evidence satisfactory to Purchaser and the Title Company that all such
items either have been cured by Seller, eliminated by Seller, will be
cured by Seller at or prior to Closing or that arrangements have been made
with the Title Company and any parties in interest to cure or eliminate
the same at or prior to the Closing. If Seller fails to remove any Title
Objection in accordance with the provisions of the immediately preceding
sentence, Purchaser, nevertheless, may elect within ten (10) days next
following the Title Cure Expiration Date: (i) to consummate the
transaction provided for in this Agreement subject to any such Title
Objection(s) as may exist as of the Closing, with a credit against the
Purchase Price equal to the sum necessary to remove any Title Objection(s)
of a fixed or ascertainable amount, or (ii) to terminate this Agreement by
56
notice in writing to Seller, whereupon this Agreement shall be terminated,
and the parties shall thereupon be relieved of all further obligations and
liability under this Agreement, subject to the provisions of Article 16
hereof, if applicable.
(b) Seller has delivered to Purchaser the survey of the Owned Real
Property secured by Seller when Seller acquired the Owned Real Property,
and Purchaser may order an updated ALTA survey (the "Survey"), prepared by
a duly licensed land surveyor acceptable to Purchaser. Purchaser shall
have until the Inspection Period Expiration Date to approve or disapprove
the material contained thereon. If Purchaser shall disapprove such Survey,
such disapproval shall be set forth in a Disapproval Notice as provided
above in Article 12.20(a), and the provisions of Article 12.20(a) with
respect to Disapproval Notices shall apply.
(c) For a period (the "INSPECTION PERIOD") commencing on the date
Purchaser receives a copy of this Asset Purchase Agreement as executed by
Seller, and expiring August 16, 1999 (such date being herein referred to
as the "INSPECTION PERIOD EXPIRATION DATE"), without limitation of any
other right reserved to Purchaser under this Agreement, Purchaser shall
have the right to have performed physical and engineering inspections of
the Pennsylvania Facilities, and to perform such other physical
inspections, measurements and audits of each and all such properties as
Purchaser shall determine, and Seller shall reasonably cooperate with
Purchaser and shall furnish to Purchaser such information, materials and
documents as shall be within Seller's possession or control and Purchaser
may reasonably request in connection therewith. If Purchaser, in
Purchaser's reasonable discretion, shall find that any one or more of such
reviews, audits, surveys or inspection(s) shall reveal a condition which
may reasonably be expected to impair the marketability of the Owned Real
Property or the Dunbar Facilities or impair or limit the use of the Owned
Real Property or the Dunbar Facilities by Purchaser in the manner and for
the purposes contemplated under this Agreement, then Purchaser shall have
the right, at its option, to terminate this Agreement upon notice to
Seller in writing, (which notice shall include a description of the
unacceptable condition) delivered on or before the Inspection Period
Expiration Date, whereupon if not cured by Seller within 30 days of such
notice, this Agreement shall be terminated, and the parties shall
thereupon be relieved of all further obligations and liability under this
Agreement, subject to the provisions of Article 16 hereof, if applicable.
If Purchaser exercises its right to cause physical or engineering
inspections of the Owned Real Property or the Dunbar Facilities, then in the
event of any physical damage thereto resulting from the exercise by Purchaser of
such right, Purchaser agrees to restore such property to the extent feasible to
its condition prior to incurring such damage. Purchaser hereby agrees to
indemnify, defend and hold harmless Seller from and against all physical damage
to the Owned Real Property or the Dunbar Facilities and personal injury and/or
any other claims or liability which may occur as a result of the Purchaser's (or
the Purchaser's agents, employees, invitees or licensees) entry or activities
upon the Owned Real Property or the Dunbar Facilities.
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ARTICLE 13
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
conditions:
13.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
13.2 COMPLIANCE WITH AGREEMENT. Purchaser shall have in all material
respects performed and complied with all of Purchaser's agreements and
obligations under this Agreement which are to be performed or complied with by
Purchaser prior to or on the Closing Date.
13.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced, and to the knowledge of
Purchaser, no investigation by any governmental or regulating authority shall
have been commenced, against Purchaser, Seller or any of the affiliates,
officers or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
13.4 DELIVERY OF PURCHASER ANCILLARY DOCUMENTS. The Purchaser shall have
delivered to the Seller all of the Purchaser Ancillary Documents.
ARTICLE 14
POST-CLOSING MATTERS
14.1 SALES TAX MATTERS. As soon as reasonably practicable following the
Closing, Seller and Purchaser shall timely file with the appropriate
governmental authority all state and local transfer, sales and use tax returns
and shall make all other filings which may be required in connection with the
transactions contemplated hereby.
14.2 FINDERS FEES; PAYMENTS. Each party agrees to pay its own broker or
finders' fees in connection with any of the transactions contemplated by this
Agreement. Except for the brokerage firm of The Wallach Company which has been
retained by Seller in connection with the transactions contemplated by this
Agreement and for whom Seller is solely responsible, each party represents and
warrants to the other that neither it, nor any of its managers, officers,
directors, employees, shareholders, assignees or agents, have retained, employed
or used any broker or other finder in connection with the transactions
contemplated by this Agreement or in connection with the negotiation of this
Agreement. Seller and Purchaser further agree to indemnify, defend and hold
harmless the other from against any loss, liability, damage, cost
58
claim, or expense, including, without limitation, reasonable attorneys' fees,
incurred by reason of any brokerage, commission, or finder's fee alleged to be
payable because of any act, omission, or statement of the indemnifying party.
14.3 SEC FILINGS. Seller shall provide reasonable assistance to
Purchaser, at Purchaser's sole cost and expense, in furnishing reasonable
financial data relating to the Bonding Assets for inclusion in connection with a
filing by the Purchaser of Form 8K with the Securities and Exchange Commission
("SEC"), if required, during a period of 60 days following the Closing. Such
assistance shall include furnishing financial data to Purchaser's independent
auditors.
14.4 RIGHT OF ACCESS. For a period of five years after the Closing Date,
Seller shall have access to the financial records and statements of the Seller
related to the Bonding Business for the period prior to the Closing Date and
have the right to copy such documents as may be necessary to prepare any
required tax or regulatory filings, or respond to any audits or similar
inquiries. Seller will cooperate with and make available to the Purchaser,
during normal business hours, all books and records in its possession which are
related to the conduct of the Bonding Business prior to the Closing Date. In the
event that the Seller wishes to destroy or dispose of any books or records,
whether in accordance with its established documents destruction policy or
otherwise, it shall first notify Purchaser of its intention to do so and afford
Purchaser a reasonable opportunity, at Purchaser's expense, to take possession
or make copies of such books and records.
ARTICLE 15
INDEMNIFICATION
15.1 INDEMNIFICATION OF PURCHASER. Notwithstanding any investigation of
the business, financial condition, prospects or assets of Seller made by or on
behalf of Purchaser prior to the Closing, Seller shall indemnify, defend and
hold harmless Purchaser from and against any and all costs and expenses
including, but not limited to, reasonable attorneys' fees, damages and losses
actually incurred by the Purchaser, net of any tax adjustments, benefits,
savings or reductions to the extent realized and insurance proceeds received by
the Purchaser by virtue of such losses, whether or not involving a Third Party
Claim (the foregoing are referred to collectively as "DAMAGES") sustained,
incurred, paid or required to be paid by the Purchaser which arise out of,
relate to or result from:
(a) any breach by Seller of any representation, warranty or
covenant contained in or made pursuant to this Agreement;
(b) any of the Retained Liabilities;
(c) non-compliance with any bulk sales or similar law in
connection with the transfer of the Bonding Assets pursuant to this
Agreement, except to the extent any such Damages result from the
failure of the Purchaser to pay any Assumed Liability;
59
(d) the manufacture, use, sale, offer for sale, importation,
delivery, operation or breach of warranty of any products or services
manufactured, performed or sold on or before the Closing Date; or
(e) any claim and/or litigation involving personnel or former
personnel of the Seller based on transactions, events or occurrences prior
to the Closing Date.
Seller shall reimburse the Purchaser for any Damages to which this Article
15.1 relates only if a Notice of Claim is given within the period of survival of
the applicable representation, warranty or covenant as provided in Article 15.4,
except that the Seller shall reimburse the Purchaser for any Damages which
arises out of or is related to any of the Retained Liabilities without regard to
when a Notice of Claim is given.
15.2 INDEMNIFICATION OF SELLER. Purchaser shall indemnify, defend and
hold harmless Seller from and against all Damages (as applied to Seller)
relating to or arising out of or in connection with any breach of warranty or
covenant or any inaccurate representation of Purchaser contained in this
Agreement or in any schedule, exhibit, agreement, certificate, list or other
instrument delivered pursuant hereto.
15.3 INDEMNIFICATION PROCEDURES.
(a) NOTICE. In the event Purchaser or Seller (each individually the
"INDEMNIFIED PARTY") seeks indemnification or defense under Articles 15.1
or 15.2 above, the Indemnified Party shall give the party from whom
indemnification is requested (the "INDEMNIFYING PARTY") written notice (a
"NOTICE OF CLAIM") as promptly as practicable after the Indemnified Party
has received notice or obtains knowledge of the matter that has given or
could give rise to a right of indemnification or defense under this
Agreement. The Notice of Claim shall state the amount of losses, if any,
and the method of computation thereof, all with reasonable specificity and
shall contain a reference to the provisions of this Agreement with respect
to which such right of indemnification or defense is claimed.
(b) THIRD PARTY CLAIMS. With respect to any Damages to which the
indemnity or defense obligations of Articles 15.1 or 15.2 apply and which
arise from any third party claim (a "THIRD PARTY CLAIM"), the Indemnified
Party shall give the Indemnifying Party a Notice of Claim as promptly as
practicable after receiving notice of any Third Party Claim, but the
failure to provide a Notice of Claim to 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 materially prejudiced by
the Indemnifying Party's failure to give the Notice of Claim. The
Indemnifying Party shall be entitled, at its option, to assume and control
the defense of such Third Party Claim at its expense and through counsel
of its choice (subject to the consent of the Indemnified Party, not to be
unreasonably withheld or delayed) upon giving written notice of its
intention to do so to the Indemnified Party. In such case, the Indemnified
Party shall be permitted, at its option, to participate in the defense of
any such Third Party Claim with counsel of its
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own choosing and at its own expense; provided, however, that the
Indemnified Party shall have the right at the Indemnifying Party's
expense, to, at its option, have separate counsel if representation of
both the Indemnified Party and the Indemnifying Party by the
Indemnifying Party's counsel would be inappropriate due to an actual
or potential conflict of interest between such parties. The parties
agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought hereunder. If
the Indemnifying Party does not elect to assume and control the
defense of such Third Party Claim, then the Indemnified Party may, at
its option, elect to assume and control such defense at the reasonable
expense of the Indemnifying Party and through counsel of the
Indemnified Party's choice (subject to the consent of the Indemnifying
Party not to be unreasonably withheld or delayed). If the Indemnifying
Party exercises its right to undertake the defense of any such Third
Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party and make available to the Indemnifying
Party all pertinent records, materials and information in its
possession or under its control as is reasonably requested by the
Indemnifying Party. Similarly, if the Indemnified Party rightfully
undertakes the defense of any Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party and make available to
it all such records, materials and information in the Indemnifying
Party's possession or under its control relating thereto as is
reasonably requested by the Indemnified Party. No Third Party Claim
may be settled by the Indemnifying Party or the Indemnified Party
without the written consent, not to be unreasonably withheld or
delayed, of the other party; provided, however, that if such
settlement involves the payment of money only and, by the payment of
that money, the Indemnified Party is fully indemnified and the
Indemnified Party refuses to consent thereto, the Indemnifying Party
shall cease to be obligated with respect to such Third Party Claim.
(c) OTHER CLAIMS. A claim for indemnification for any matter not
involving a Third Party Claim may be asserted by notice to the party from
whom indemnification is sought.
(d) CALCULATION OF LOSSES. The parties shall make appropriate
adjustments for the proceeds of any insurance coverage of, or any other
form of cost recovery obtained by, the Indemnified Party in determining
the amount of Damages for purposes of this Article 15, provided that the
indemnifiable Damages shall then be increased by any additional expense or
liability associated with the obtaining of benefits under such coverage,
to the extent of and as a result of such Damages.
(e) EXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies in this Article 15 shall be deemed to be
exclusive. Accordingly, the exercise by any person of any of its rights
under this Article 15 shall be deemed to be an election of remedies and
shall be deemed to prejudice, and to constitute or operate as an
irrevocable waiver of, any other right or remedy that such person may be
entitled to exercise, whether under this Agreement, under any other
contract, under any statute, rule or other legal requirement, at common
law, in equity or otherwise. Notwithstanding the foregoing, nothing
contained in this Article 15.3(e) shall prevent any party hereto from
seeking and obtaining, as and to the extent permitted by applicable law,
specific
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performance by the other party hereto of any of its obligations under this
Agreement or injunctive relief against the other party's activities in
breach of this Agreement (including, without limitation, the obligations
provided for in Article 10.5).
(f) LIMITATION OF DAMAGES. No party shall have any obligation or
liability to any other party under this Article 15 until the aggregate
amount of all Damages for which the Indemnified Party seeks or claims
defense or indemnification pursuant to this Article 15 (the "INDEMNIFIED
DAMAGES") exceeds a threshold of $100,000. Once an Indemnified Party's
Indemnified Damages meet or exceed $100,000, such party may seek or claim
defense or indemnification for the amount of Indemnified Damages in excess
of $100,000; provided, however that neither party may make a claim for
Indemnified Damages in excess of $3,825,000.
15.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the parties in this Agreement, the Seller Ancillary Documents
and the Purchaser Ancillary Documents shall survive the Closing for a period of
eighteen (18) months, except as follows:
(a) the representations and warranties made by the Seller in
Articles 8.7 (Taxes) and 8.17 (Employee Benefits) shall survive the
Closing for the applicable statutory period of limitations with respect to
any liabilities covered thereby;
(b) the representations and warranties made by the Seller in
Article 8.2 (Corporate Power; Authorization) shall survive the Closing
without limitation;
(c) the representations made by the Seller in Article 7.5 (Further
Assurances) shall survive the Closing without limitation;
(d) the representations made by the Seller in Article 10.6
(Confidential Information) shall survive the Closing without limitation;
and
(e) the representations and warranties made by the Seller in
Article 8.11 (Environmental) shall survive the Closing for a period of
ten (10) years.
All covenants of the parties that are to be performed after Closing shall
continue in effect and expire in accordance with their respective terms.
ARTICLE 16
TERMINATION
16.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(a) by mutual consent of Seller and Purchaser;
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(b) by Purchaser, if there has been a Material Breach (as
hereinafter defined) on the part of Seller in the representations,
warranties or covenants of the Company set forth herein, or any Material
Breach on the part of Seller to comply with its obligations hereunder,
and, in the case of a Material Breach of covenant, such Material Breach of
covenant, if capable of being cured, is not cured within thirty days. As
used in this Agreement, "MATERIAL BREACH" of a representation or warranty
or a covenant, shall mean a breach of a representation or warranty or a
covenant which individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect on the Bonding Business;
(c) by Purchaser if:
(i) the Seller's stockholders do not approve this Agreement or
any of the transactions contemplated hereby if submitted to them by
Seller for approval;
(ii) the Seller's Board of Directors endorses a tender offer
for all or substantially all of the outstanding shares of Seller or
approves an agreement of merger or consolidation;
(iii) the Seller or Seller's Board of Directors for any reason
whatsoever, directly or indirectly, sells or agrees to sell all or a
material portion of the Bonding Assets to a third party; or
(iv) initiation of any legal or administrative action, suit or
proceeding by an officer, director or stockholder of the Seller
which either seeks or has the effect of prohibiting, defeating or
materially delaying any of the transactions contemplated by this
Agreement (each of which shall be considered a "DESIGNATED EVENT"
hereunder);
(d) by Purchaser if the conditions specified in Article 12, other
than those provided in Articles 12.10, 12.11 and 12.12, are not satisfied
by October 15, 1999;
(e) by Purchaser if the conditions specified in Articles 12.10,
12.11 and 12.12 are not satisfied by December 31, 1999; or
(f) by the Seller if (i) there has been a material breach on the
part of Purchaser in the representations, warranties or covenants of
Purchaser set forth herein, or any material failure on the part of
Purchaser to comply with its obligations hereunder, and, in the case of a
material breach of covenant or failure to comply, such material breach of
covenant or failure to comply, if capable of being cured, is not cured
within thirty days.
16.2 EFFECT OF TERMINATION. In the event of a termination of this
Agreement by either Seller or Purchaser as provided in Article 16.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part or Purchaser or Seller or their affiliates or respective
officers or directors, other than the provisions of Article 11.1; provided,
however, that any such termination shall not relieve any party from liability
for any breach of this Agreement.
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ARTICLE 17
MISCELLANEOUS
17.1 ENTIRE AGREEMENT AND AMENDMENTS; HEADINGS. This Agreement, including
the Exhibits and Disclosure Schedules which are referred to or incorporated
herein and made a part hereof, contains the final complete and exclusive
understanding of the parties hereto with respect to the subject matter contained
herein and may be amended or terminated only by a written instrument executed by
Seller and Purchaser or their respective successors or assigns. There are no
representations, promises, warranties, covenants or undertakings other than
those expressly set forth herein. Any representations, promises warranties,
covenants or undertakings prior to the Closing are hereby merged into this
Agreement. The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17.2 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
17.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto; provided, however, that neither
this Agreement nor any rights or obligations accruing hereunder may be assigned
or is assignable by Seller or Purchaser, or may be delegated or is delegable,
and any attempted assignment or delegation shall be null and void.
17.4 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
its choice-of or conflict-of-laws rules and venue for any action to enforce or
interpret this Agreement shall be in a court of competent jurisdiction located
in the Commonwealth of Pennsylvania and each of the parties consents to the
jurisdiction of such court in any such action or proceeding and waives any
objection to venue laid therein.
17.5 EQUITABLE RELIEF. Each party further acknowledges that any breach of
warranty or covenant or any other provision of this Agreement will cause the
other party irreparable injury which may not be adequately compensated by
damages. Accordingly, in addition to all other remedies that a party may have
hereunder, each party shall have the right to equitable and injunctive relief,
including the right to request specific performance of the other party's
obligations hereunder.
17.6 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be given in writing and shall be served either
personally, by facsimile or delivered by first class mail, registered or
certified, return receipt requested, postage prepaid and properly addressed as
follows:
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If to the Seller: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attn: Richard Santa, Chief Financial Officer
Fax: 303/604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 200
4410 Arapahoe Avenue
Boulder, Colorado 80303
Attn.: Jacqueline Studer
Fax: 303/544-5997
If to Purchaser: AMETEK, Inc.
Station Square
Paoli, PA 19301-1391
Attn.: William D. Eginton
Fax: (610)647-0211
With a copy to: AMETEK, Inc.
Station Square
Paoli, PA 19301-1391
Attn.: Donna F. Winquist, Esquire
Fax: (610)725-8485
Notice shall be deemed received upon the earliest of actual receipt, confirmed
facsimile or three business days following mailing pursuant to this Article.
17.7 SEVERABILITY AND WAIVER. In the event that any provision of this
Agreement is held to be invalid or unenforceable, the valid or enforceable
portion thereof and the remaining provisions of this Agreement will remain in
full force and effect. Any waiver (express or implied) by either party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach.
17.8 THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
construed to create any rights in any of Seller's or Purchaser's employees or in
any other person as a third party beneficiary or otherwise.
17.9 PRONOUNS. All pronouns used in this Agreement shall be deemed to
refer to the masculine, feminine or neuter gender, as the context requires.
17.10 ATTORNEYS' FEES. Should any litigation or arbitration occur between
the parties to this Agreement respecting or arising out of this Agreement, the
successful or prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs in connection therewith, including, without
limitation, any attorneys' fees incurred after a judgment has been rendered by a
court of competent jurisdiction.
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17.11 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this agreement, time is of the essence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
SELLER:
DYNAMIC MATERIALS CORPORATION
/s/ Joseph P. Allwein
-----------------------------------------
Joseph P. Allwein
President and Chief Executive Officer
PURCHASER:
AMETEK, Inc.
/s/ William D. Eginton
-----------------------------------------
William D. Eginton
Vice President
SCHEDULES
Schedule 1.79 Permitted Encumbrances
Schedule 2.1(a)(i) Machinery and Equipment
Schedule 2.1(a)(ii) Colorado Equipment
Schedule 2.1(b)(i) Owned Real Property
Schedule 2.1(c) Business Systems
Schedule 2.1(d) Intellectual Property
Schedule 2.1(e) Contracts
Schedule 2.1(k) Telephone and Facsimile Numbers
Schedule 2.2(e)(i) Excluded Contracts
Schedule 2.2(n) Excluded Colorado Machinery and Equipment
Schedule 2.3 Excluded Colorado Assets
Schedule 3.2(f) Retained Litigation
Schedule 4.2 Net Current Assets
Schedule 4.2(b)(v) Purchase Price Adjustment Matters
Schedule 5.1(a) Contracts and Plans
Schedule 5.2(a) Budget for Mt. Braddock Facility
Schedule 5.2(b) Completion Costs Reconciliation
Schedule 5.4 Transition Services
Schedule 6.1 Target Employees
Schedule 6.6 Affected Employees - Moving Expenses
Schedule 7.2(a)(i) Wire Instructions
Schedule 8.3 Seller's Representations
Schedule 8.4 Pro Forma Financial Statements
Schedule 8.5(a) Claims Against Bonding Assets
Schedule 8.6(a) Legal Descriptions of Owned Real Property
Schedule 8.6(b) Seller's Representations Concerning Master Lease
Schedule 8.6(c) Seller's Representations Concerning Dunbar
Sublease
Schedule 8.6(e) Seller's Representations Concerning Owned Real
Property
Schedule 8.6(g) Insurance Notices Concerning Owned Real Property
Schedule 8.8 Litigation Related To Bonding Business
Schedule 8.9 Seller's Representations Concerning
Intellectual Property; Country Registration
Schedule 8.11(a) Environmental Reports Provided To Purchaser
Schedule 8.11(b) Compliance With Environmental Laws
Schedule 8.11(c) Seller's Representations Concerning Regulated
Substances
Schedule 8.11(e) Storage Tanks
Schedule 8.11(g) Environmental Reports
Schedule 8.12 Licenses and Permits
Schedule 8.13 Insurance
Schedule 8.14 Major Customers
Schedule 8.15 Disputes with Customers and Suppliers
Schedule 8.16 Employment Contracts
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Schedule 8.17(a) Employee Plans
Schedule 8.17(c) Seller's Liabilities Under Pension Plans
Schedule 8.18 Absence of Certain Changes
Schedule 8.19(b) Sales Commitments
Schedule 8.19(e) Loan Agreements
Schedule 8.19(i) Material Contracts
Schedule 8.20 Non-compliance With Laws
Schedule 8.23 Warranties
Schedule 8.24 Backlog
Schedule 11.5 Seller's Standard Warranty
Schedule 12.4 Required Consents and Approvals
Schedule 12.10 Terms of Mine Master Lease Extension
Schedule 12.11 Terms of Mine Sublease Extension
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EXHIBITS
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Exhibit A Escrow Agreement