EXHIBIT 2.1
EXECUTION COPY
PURCHASE AGREEMENT
dated as of August 26, 1999
by and among
U.S. SILICA COMPANY
as Buyer,
and
JOSEPH H. SHEARER, R. SCOTT SHEARER,
CATS, INC., JHS PARTNERSHIP, RSS PARTNERSHIP and
THE DELL H. SHEARER GRANDCHILDREN'S TRUST
as Sellers.
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS................................................................. 1
ARTICLE II
SALE AND TRANSFER OF SHARES AND PARTNERSHIP INTERESTS; CLOSING
2.1 Acquisition.......................................................................................... 4
2.2 Payment of Purchase Price............................................................................ 5
2.3 Closing.............................................................................................. 6
2.4 Closing Obligations.................................................................................. 6
2.5 Letters of Credit.................................................................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Organization and Good Standing....................................................................... 8
3.2 Authority; No Conflict............................................................................... 8
3.3 Capitalization....................................................................................... 9
3.4 Financial Statements................................................................................. 9
3.5 Personal Property.................................................................................... 10
3.6 Real Property Interests.............................................................................. 10
3.7 Taxes................................................................................................ 12
3.8 Employee Benefits.................................................................................... 13
3.9 Compliance with Law.................................................................................. 15
3.10 Legal Proceedings; Orders............................................................................ 15
3.11 Absence of Certain Changes and Events................................................................ 16
3.12 Contracts............................................................................................ 17
3.13 Insurance............................................................................................ 18
3.14 Environmental Matters................................................................................ 18
3.15 Labor Relations...................................................................................... 20
3.16 Intellectual Property................................................................................ 21
3.17 Year 2000 Compliance................................................................................. 21
3.18 Absence of Undisclosed Liabilities................................................................... 21
3.19 Accounts Receivable.................................................................................. 22
3.20 Reserves............................................................................................. 22
3.21 Operating Permits.................................................................................... 22
3.22 Directors and Officers............................................................................... 22
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3.23 Customers and Suppliers.............................................................................. 22
3.24 Qualification of Product............................................................................. 23
3.25 Rich Hill Quarry..................................................................................... 23
3.26 Belle Vernon Quarry.................................................................................. 23
3.27 Silicosis............................................................................................ 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing....................................................................... 24
4.2 Authority; No Conflict............................................................................... 24
4.3 Investment Intent.................................................................................... 24
4.4 Certain Proceedings.................................................................................. 24
4.5 Financing............................................................................................ 24
ARTICLE V
COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 Access and Investigations............................................................................ 25
5.2 Operation of the Businesses of the Acquired Companies................................................ 25
5.3 Negative Covenants................................................................................... 26
5.4 Required Approvals................................................................................... 27
5.5 No Negotiation....................................................................................... 27
5.6 Reasonable Efforts................................................................................... 27
5.7 Bonuses.............................................................................................. 27
5.8 Guarantees........................................................................................... 27
ARTICLE VI
COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies..................................................................... 28
6.2 Request for Early Termination........................................................................ 28
6.3 Reasonable Efforts................................................................................... 28
6.4 Buyer Surveys........................................................................................ 28
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
7.1 Accuracy of Representations.......................................................................... 28
7.2 Sellers' Performance................................................................................. 29
7.3 Opinion of Counsel................................................................................... 29
7.4 No Proceedings....................................................................................... 29
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7.5 Payment of Indebtedness; Releases.................................................................... 29
7.6 HSR Act Approval..................................................................................... 29
7.7 Delivery of Documents................................................................................ 29
7.8 Agreement Regarding Three Rivers..................................................................... 30
7.9 Agreement Regarding Molly Slag Operations............................................................ 30
7.10 Financial Markets.................................................................................... 30
7.11 Audited Financial Statements......................................................................... 30
7.12 Real Estate Matters.................................................................................. 30
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
8.1 Accuracy of Representations.......................................................................... 31
8.2 Buyer's Performance.................................................................................. 31
8.3 Opinion of Counsel................................................................................... 31
8.4 No Injunction........................................................................................ 31
8.5 HSR Act Approval..................................................................................... 31
8.6 Agreement Regarding Three Rivers..................................................................... 31
8.7 Agreement Regarding Molly Slag Operations............................................................ 32
8.8 Delivery of Documents................................................................................ 32
ARTICLE IX
CERTAIN POST-CLOSING COVENANTS
9.1 Non-competition...................................................................................... 32
9.2 Confidentiality...................................................................................... 33
9.3 Termination of Commercial's S Corporation Status and Taxable Year.................................... 33
9.4 Certain Tax Assets and Liabilities................................................................... 33
ARTICLE X
TERMINATION
10.1 Termination Events................................................................................... 34
10.2 Effect of Termination................................................................................ 35
ARTICLE XI
INDEMNIFICATION; REMEDIES
11.1 Survival............................................................................................. 35
11.2 Indemnification and Payment of Damages by Sellers.................................................... 35
11.3 Indemnification and Payment of Damages by Buyer...................................................... 36
11.4 Time Limitations..................................................................................... 37
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11.5 Limitations on Indemnification....................................................................... 37
11.6 Investigation; Waiver................................................................................ 38
11.7 Procedures for Indemnification -- Third Party Claims................................................. 39
11.8 Procedure for Indemnification -- Other Claims........................................................ 39
11.9 Cooperation in Connection with Proceedings........................................................... 39
11.10 Closing Escrow Amount................................................................................ 40
ARTICLE XII
GENERAL PROVISIONS
12.1 Public Announcements................................................................................. 40
12.2 Confidentiality...................................................................................... 40
12.3 Notices.............................................................................................. 40
12.4 Jurisdiction; Service of Process..................................................................... 42
12.5 Further Assurances; Tax Returns...................................................................... 42
12.6 Waiver............................................................................................... 42
12.7 Entire Agreement and Modification.................................................................... 42
12.8 Assignments, Successors, and No Third-Party Rights................................................... 43
12.9 Severability......................................................................................... 43
12.10 Article and Section Headings; Construction........................................................... 43
12.11 Time of Essence...................................................................................... 43
12.12 Governing Law........................................................................................ 44
12.13 Counterparts......................................................................................... 44
12.14 Sellers' Knowledge................................................................................... 44
12.15 Retention of Records and Access to Information....................................................... 44
12.16 Transaction Fees and Expenses........................................................................ 44
EXHIBITS
2.1(a) Form of Closing Escrow Agreement
2.4(a)(iv) Form of Consultant Agreement
2.4(b)(i) Seller's Accounts
2.5 Form of Letter of Credit
4.5 Letter Regarding Financing
7.3 Opinion of Sellers' Counsel
7.8 Summary of River Transport Agreement
7.9 Summary of Molybdenum Slag Agreement
8.3 Opinion of Buyer's Counsel
10.1(e) Form Extension Deposit Escrow Agreement
SCHEDULES
2.1(f), Part I Distributed Assets
2.1(f), Part II Indebtedness
3.1 Organization and Good Standing
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3.3 Capitalization
3.5 Personal Property
3.6(a) Properties
3.6(c)(ii) Real Estate Permits
3.6(c)(iv) Conditions of Properties
3.6(d) Restrictions on Properties
3.7 Taxes
3.8 Employee Benefits
3.10 Legal Proceedings
3.11 Absence of Certain Changes
3.12 Contracts
3.13 Insurance
3.14 Environmental Matters
3.15 Labor Relations
3.16 Intellectual Property
3.18 Undisclosed Liabilities
3.20 Reserves
3.21 Operating Permits
3.22 Warranties
3.23 Directors and Officers
3.24 Customers and Suppliers
5.7 Bonuses
5.8 Guarantees
9.1 Counties
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made as of the 26/th/ day of
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August, 1999, by and among U.S. SILICA COMPANY, a Delaware corporation
("Buyer"), and JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the
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("Shareholders"), and CATS, INC., a Pennsylvania corporation, the JHS FAMILY
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PARTNERSHIP, a Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP,
a Pennsylvania limited partnership (collectively, the "Partnership Sellers") and
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THE DELL H. SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust
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Seller").
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The Shareholders, the Partnership Sellers and the Trust Seller are
hereinafter referred to collectively as the "Sellers."
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RECITALS
The Shareholders desire to sell, and Buyer desires to purchase, all of the
shares of the capital stock ("Capital Stock") of Commercial Stone Co., Inc., a
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Pennsylvania corporation ("Commercial"), for the consideration and on the terms
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set forth in this Agreement.
The Partnership Sellers desire to sell, and Buyer desires to purchase, all
of the partnership interests ("Partnership Interests") of Commercial Aggregates
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Transportation and Sales, L.P., a Pennsylvania limited partnership ("CATS"), for
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the consideration and on the terms set forth in this Agreement.
The Trust Seller desires to sell, and Buyer desires to purchase, all of the
Properties (as defined herein) and other interests (including without
limitation, all Real Estate Permits and Environmental Permits, if any, held by
the Trust Seller in relation to such Properties) that are owned by the Trust
Seller and used in the operation of the businesses of the Acquired Companies
(the "Trust Property").
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The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
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In addition to words and terms defined elsewhere in this Agreement, for
purposes of this Agreement, the following terms have the meanings specified or
referred to in this Article 1:
"Acquired Companies" -- Commercial Stone Co., Inc., a Pennsylvania
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corporation, and Commercial Aggregates Transportation and Sales, L.P., a
Pennsylvania limited partnership, collectively.
"Business Day" -- any day other than a Saturday, Sunday, or public holiday
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under the laws of the Commonwealth of Pennsylvania.
"Buyer" -- U.S. Silica Company.
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"Buyer's Advisors" -- as defined in Section 5.1.
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"Cap" -- as defined in Section 11.5(a).
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"Closing" -- as defined in Section 2.3.
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"Closing Date" -- the date and time as of which the Closing actually takes
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place.
"Code" -- the United States Internal Revenue Code of 1986, as amended.
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"Consent" -- any approval, consent, ratification, waiver, notice or other
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authorization.
"Contemplated Transactions" -- as defined in Section 2.1(e).
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"Damages" -- as defined in Section 11.2.
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"Encumbrance" -- any mortgage, easement, right of way, charge, claim,
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community property interest, condition, equitable interest, lien, option,
pledge, security interest, right of first refusal, or restriction or adverse
claim of any kind, including any restriction on use, voting, transfer, receipt
of income, or exercise of any other attribute of ownership, or any other
encumbrance or exception to title of any kind.
"Environmental Laws" -- shall mean, without limitation, the Comprehensive
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Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601
et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 46
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U.S.C. Sections 11001 et seq., the Resource Conservation and Recovery Act, 42
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U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
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Sections 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act,
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7 U.S.C. Sections 136 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et
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seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
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Sections 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Sections 300f et
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seq., the Occupational Safety and Health Act, 29 U.S.C. Sections 641 et seq.,
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the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., as
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any of the above statutes have been from time to time in effect, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
current foreign, federal, state or local law, statute, ordinance, rule or
regulation governing environmental matters, as the same have been from time to
time in effect, including any common law cause of action providing any right or
remedy relating to environmental matters, and all applicable judicial and
administrative decisions, orders, and decrees relating to environmental matters.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
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successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate" -- each business or entity which is a member of a
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"controlled group of corporations," under "common control" or an "affiliated
service group" with an Acquired Company within the meaning of Section 414(b),
(c) or (m) of the Code or required to be aggregated with an Acquired Company
under Section 414(o) of the Code, or is under "common control" with an Acquired
Company within the meaning of Section 4001(a)(14) of ERISA.
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"GAAP" -- generally accepted United States accounting principles, as in
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effect from time to time.
"Governmental Body" -- any:
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(a) nation, state, county, city, town, village, 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, or entity
and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
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amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Indebtedness" -- all indebtedness of the Acquired Companies other than
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ordinary course payables and wages and salaries.
"Indemnified Person" -- either a Buyer Indemnified Person or a Seller
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Indemnified Person.
"Intellectual Property Assets" -- as defined in Section 3.16.
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"IRS" -- the Internal Revenue Service.
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"Legal Requirement" -- any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, court order, consent, decree, regulation,
license, permit, statute, or treaty.
"Material Adverse Effect" -- an event, circumstance or condition which is
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reasonably likely to have an adverse effect on (a) the assets, business,
financial condition, results of operations or prospects of the Acquired
Companies taken as a whole, or (b) the ability of any Seller to perform any of
its material obligations under this Agreement or which threatens materially or
is reasonably likely to impede any Seller's ability to consummate the
Contemplated Transactions.
"Multiemployer Plan" -- a multiemployer plan within the meaning of Section
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4001(a)(3) of ERISA.
"Order" -- any award, decision, injunction, judgment, order, ruling,
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subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other governmental body or by any arbitrator.
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"Organizational Documents" -- (a) the articles or certificate of
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incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the certificate of organization and limited liability company
agreement of a limited liability company; (e) the trust agreement or similar
document of a trust; and (f) any amendment to any of the foregoing.
"PBGC" -- the Pension Benefit Guaranty Corporation.
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"Person" -- any individual, corporation (including any non-profit
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corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan" -- as defined in Section 3.8.
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"Representative" -- with respect to a particular Person, any director,
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officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants and financial advisors.
"Regulated Materials" -- any pollutants, contaminants, toxic or hazardous
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or extremely hazardous substances, materials, wastes, constituents, compounds,
chemicals, natural or man-made elements or forces (including, without
limitation, petroleum or any by-products or fractions thereof, any form of
natural gas, Bevill Amendment materials, lead, asbestos and asbestos-containing
materials, building construction materials and debris, polychlorinated biphenyls
("PCBs") and PCB-containing equipment, radon and other radioactive elements,
ionizing radiation, electromagnetic field radiation and other non-ionizing
radiation, sonic forces and other natural forces, infectious, carcinogenic,
mutagenic, or etiologic agents, pesticides, defoliants, explosives, flammables,
corrosives and urea formaldehyde foam insulation) that are regulated by any
Environmental Laws.
"S Corp Tax Deposit" -- means the amount of $1,792,432 deposited with the
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Internal Revenue Service in connection with the adoption by Commercial of a non-
standard fiscal year.
"Securities Act" -- the Securities Act of 1933 or any successor law, and
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regulations and rules issued pursuant to that Act or any successor law.
"Taxes" -- as defined in Section 3.7.
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"Year-End Balance Sheets" -- defined in Section 3.4.
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ARTICLE II
SALE AND TRANSFER OF SHARES AND PARTNERSHIP INTERESTS; CLOSING
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2.1 Acquisition.
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Subject to the terms and conditions of this Agreement, at the Closing:
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(a) The Buyer shall deliver to Sellers the aggregate amount of $138,700,000
(as adjusted pursuant to Section 2.2 below, the "Purchase Price"), less the
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amount of $8,000,000 (the "Closing Escrow Amount"), which shall be deposited by
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the Buyer with an escrow agent (the "Closing Escrow Agent") to be held in escrow
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by such agent pursuant to the terms of an escrow agreement, substantially in the
form of Exhibit 2.1(a) attached hereto (the "Closing Escrow Agreement"). The
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Closing Escrow Amount shall be used to satisfy claims for Damages to which any
Buyer Indemnified Person shall be entitled pursuant to Article XI of this
Agreement.
(b) The Shareholders shall issue, sell and deliver to Buyer, and Buyer
shall purchase and accept from the Shareholders, all of the shares of Capital
Stock (the "Acquired Shares"), free and clear of all Encumbrances.
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(c) The Partnership Sellers shall issue, sell and deliver to Buyer, and
Buyer shall purchase and accept from the Partnership Sellers, all of the
Partnership Interests (the "Acquired Interests"), free and clear of all
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Encumbrances. The Trust Seller shall sell and transfer to the Buyer the Trust
Property.
(d) Collectively, the sale and delivery of the Acquired Shares and Acquired
Interests are referred to as the "Acquisition."
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(e) The Acquisition and the other transactions contemplated hereby
(including, without limitation, the transfer of the Trust Property by the Trust
Seller) are collectively referred to herein as the "Contemplated Transactions."
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(f) Prior to the Closing Date, Sellers will cause the assets listed on Part
I of Schedule 2.1(f) to be distributed by Commercial to the Sellers. Sellers
shall be responsible for satisfying all Indebtedness of the Acquired Companies
outstanding at the time of Closing, other than the Indebtedness listed on Part
II of Schedule 2.1(f). If at any time Buyer ceases to use the name "Commercial
Stone" in connection with its business, it shall convey to Sellers, for the sum
of $10.00, the right to use such name as a corporate name solely so that Sellers
may continue to purchase Pennsylvania State University football tickets in such
name.
(g) The Sellers and the Buyer agree that, subject to adjustment under
Section 2.2(b) of this Agreement (which shall be ratable as between the Acquired
Shares and the Acquired Interests), the Aggregate Purchase Price shall be
allocated $121,200,000 to the Acquired Shares, $7,500,000 to the Acquired
Interests and $10,000,000 to the Trust Property being transferred hereunder by
the Trust Seller.
(h) Real estate transfer taxes payable in connection with the transfer of
the Trust Property by the Trust Seller will be split equally by the Trust Seller
and Buyer. Real estate transfer taxes, if any, with respect to the remaining
Properties will be split equally by the Shareholders and Buyer.
2.2 Payment of Purchase Price. (a) The Purchase Price, less the Closing
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Escrow Amount, will be payable at the Closing by wire transfer as specified in
Section 2.4(b). Prior to the Closing, the parties hereto shall provide all
necessary information as to the accounts to which such payments shall be made.
The Closing Escrow Amount shall be deposited with the Closing Escrow Agent
pursuant to the Closing Escrow Agreement.
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(b) Not later than 30 Business Days after the Closing Date, Buyer shall
deliver to the Sellers unaudited statements of Commercial's Closing Date Net
Working Capital (as herein defined) prepared by Buyer (which date of such
delivery is hereinafter referred to as the "Delivery Date"). The statement of
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Closing Date Net Working Capital shall be prepared from the books and records of
Commercial in accordance with GAAP applied on a basis consistent with the
Commercial Year-End Balance Sheets referred to in Section 3.4 hereof (except for
the omission of certain footnotes and other presentation items required by GAAP
with respect to annual financial statements or annual accounts and subject to
other normal year-end adjustments). The statement of Closing Date Net Working
Capital shall be subject to verification by Sellers not later than 20 Business
Days after the Delivery Date. In the event that the Closing Date Net Working
Capital is less than the Benchmark Net Working Capital (as hereinafter defined),
Sellers shall pay to Buyer in cash or other immediately available funds the
amount by which the Closing Date Net Working Capital is less than the Benchmark
Net Working Capital. In the event the Closing Date Net Working Capital is
greater than the Benchmark Net Working Capital, Buyer shall pay to Sellers in
cash or other immediately available funds the amount by which the Closing Date
Net Working Capital exceeds the Benchmark Net Working Capital. As used herein,
"Closing Date Net Working Capital" means the (i) sum of Commercial's current
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assets (excluding cash and cash equivalents) less (ii) the sum of Commercial's
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current liabilities (excluding short term debt and the current portion of long
term debt), each as determined as of the Closing Date in accordance with GAAP
applied on a basis consistent with the Commercial Year End Balance Sheets
referred to in Section 3.4 hereof. "Benchmark Net Working Capital" means
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$9,250,000. In the event that Buyer and Sellers cannot agree as to the amount
of the Closing Date Net Working Capital within 10 days following the
verification period, either party may refer the matter to the Pittsburgh office
of Ernst and Young L.L.P., and such firm shall be responsible for determining
the amounts of the Closing Date Net Working Capital for purposes of this Section
2.2; provided, however, that the amount not in dispute, if any, shall be paid in
cash or other immediately available funds as set forth above. The cost of such
determination by such independent certified public accountants shall be borne
one-half by Buyer and one-half by Sellers. Any adjustments to the Purchase
Price required by this Section 2.2(b) will be allocated to the Shareholders pro
rata in accordance with their respective ownership interests.
2.3 Closing. The consummation of the Contemplated Transactions (the
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"Closing") will take place at such location as the parties may agree. It is the
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intent of the parties to close the Contemplated Transactions as promptly as
possible; accordingly, the parties will use all commercially reasonable and
diligent best efforts to satisfy the conditions of this Agreement on or before
September 30, 1999. Consistent with the foregoing and subject to the provisions
of Section 10.1, the parties shall cause the Closing to occur on the earlier of
(i) the date that is three (3) business days following the satisfaction of all
of the conditions set forth in Articles VII and VIII, and (ii) September 30,
1999 (the "Deadline Date").
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2.4 Closing Obligations. At the Closing:
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(a) Sellers will deliver to Buyer:
(i) certificates representing the Acquired Shares, duly endorsed
(or accompanied by duly executed stock powers), for transfer to Buyer;
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(ii) certificates representing the Acquired Interests, duly
endorsed, for transfer to Buyer;
(iii) certificates executed by Sellers to the effect that that
each of the conditions precedent to the obligation of Buyer to close set
forth in Sections 7.1 and 7.2 hereof have been fulfilled;
(iv) consultant agreements with Commercial in the form of
Exhibit 2.4(a)(iv), executed by Joseph H. Shearer and R. Scott Shearer;
(v) a certificate from each landlord under a Real Property
Lease (as defined herein) who is unaffiliated with the Acquired Companies
and the Sellers, dated no earlier than September 1, 1999, certifying (i)
that the applicable lease with respect to each of the leased Properties is
in good standing and full force and effect in accordance with its terms and
has not been modified (except for modifications set forth therein), amended
or assigned, (ii) the date(s) to which rent and other charges thereunder
have been paid, (iii) that there is no default thereunder by either party
thereto, (iv) that all work required to be done under the applicable lease
on the part of the tenant has been completed to the satisfaction of the
landlord, and (v) such further matters as may be reasonably requested by
the Buyer; provided, however, that Sellers may elect, instead of furnishing
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such certificates at Closing, to indemnify Buyer for any Damages (subject
to the Cap) resulting from Sellers' failure to furnish such certificates,
such indemnity to continue until such certificates are provided ; and
(vi) all such documentation as is necessary to transfer
ownership of the Trust Property being transferred hereunder by the Trust
Seller, as the Buyer shall reasonably request.
(b) Buyer will deliver to Sellers:
(i) by wire transfer to an account specified by each Seller the
amounts listed on Exhibit 2.4(b)(i); and
(ii) a certificate executed by Buyer to the effect that each of
the conditions precedent to the obligation of Sellers to close set forth in
Sections 8.1 and 8.2 hereof have been fulfilled.
2.5 Letters of Credit. (a) Not later than 5:00 p.m., Pittsburgh time, on
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August 31, 1999, Buyer shall deliver to Sellers a letter of credit from Banque
Nationale de Paris, New York Branch, in the face amount of $7,000,000. The
letter of credit shall be substantially in the form attached hereto as Exhibit
2.5 and shall provide for payment of the full face amount thereof to Lion
Abstract Limited Partnership, as escrow agent, in the event that (i) Buyer does
not consummate the Acquisition due only to failure of the condition set forth in
Section 7.10 hereof, or (ii) the Acquisition does not occur due to a breach by
Buyer of its obligations under this Agreement. If Sellers elect to draw on the
letter of credit and receive the proceeds thereof pursuant to the foregoing
clause (ii), they covenant that they will not sue Buyer to recover damages for
such breach nor in connection with any other matter in relation to this
Agreement or the Contemplated Transactions. In the event of a dispute as to
whether Sellers are entitled to be
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paid the proceeds of the letter of credit, Buyer shall bear the burden of proof,
i.e., Buyer must establish by a preponderance of evidence that its failure to
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consummate the Acquisition was not due to an event described in clause (i) or
(ii) of the immediately preceding sentence.
(b) At the Closing, Buyer shall deliver to Sellers a letter of credit from
Banque Nationale De Paris, New York Branch, in the face amount of the S Corp Tax
Deposit. The letter of credit shall be in form and substance reasonably
satisfactory to Sellers and shall provide for payment to Lion Abstract Limited
Partnership, as escrow agent, in the event that Sellers certify that they have a
reasonable good faith belief that the S Corp Tax Deposit has been received by
Buyer or offset by the Internal Revenue Service to satisfy federal tax
liabilities of Commercial for periods commencing on or after the Closing Date,
and that in either case Buyer has not paid to Sellers the full amount of the S
Corp Tax Deposit.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
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Sellers severally (and not jointly) make the following representations and
warranties to Buyer, as of the date hereof and as of the Closing Date:
3.1 Organization and Good Standing. (a) Schedule 3.1 contains a complete
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and accurate list for each Acquired Company of its name, its jurisdiction of
incorporation or formation, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each stockholder or
partner and the number of shares or interests held by each). Each Acquired
Company is duly organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation or formation, with full power and authority
to conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use. Each Acquired Company is
in good standing in each foreign jurisdiction listed on Schedule 3.1 in which
such Acquired Company is authorized to do business as a foreign corporation and
such jurisdictions are the only jurisdictions where the nature of each such
Acquired Company's business and assets require such authorization.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of each Acquired Company and each Seller, as currently in effect.
3.2 Authority; No Conflict. (a) Each Seller has full capacity, right,
----------------------
power and authority to execute and deliver this Agreement and to consummate the
Contemplated Transactions. This Agreement constitutes the legal, valid, and
binding obligation of Sellers, enforceable against Sellers in accordance with
its terms.
(b) The execution, delivery and performance of this Agreement by
Sellers and the consummation of the Contemplated Transactions (i) have been
authorized by all necessary corporate, partnership and other action on the part
of Sellers, and (ii) will not (w) conflict with the terms, conditions or
provisions of the Organizational Documents of any Seller or any Acquired Company
(x) violate any provision of law or any Order to which any Seller or any
Acquired Company or any of their respective assets is subject or require the
consent of any Person, (y) result in a breach or violation of any of the terms
of, or constitute a default by any
8
Seller or Acquired Company under, any indenture, mortgage, loan agreement, lease
or other agreement or instrument to which any Seller or any Acquired Company is
a party or by which it or any of its assets is bound, or (z) result in the
creation or imposition of any Encumbrance upon the Acquired Shares or the
Acquired Interests or the assets of any Acquired Company or the Properties,
except to the extent such conflict, violation, breach or creation would not have
a Material Adverse Effect.
3.3 Capitalization. (a) The authorized equity securities of Commercial
--------------
consist of two classes of common stock. There are 1200 shares of Class A voting
stock, $5.00 par value, all of which are issued and outstanding. There are
22,800 shares of Class B non-voting stock, $5.00 par value, all of which are
issued and outstanding. All of the outstanding stock of Commercial is owned by
the Shareholders as set forth on Schedule 3.3, free and clear of all
Encumbrances, other than restrictions imposed by the buy/sell agreement between
the Shareholders. All such stock has been duly authorized and validly issued and
is fully paid and nonassessable. Neither Acquired Company owns, or has any
contract or other arrangement to acquire, any equity securities or other
securities of any Person (other than another Acquired Company) or any direct or
indirect equity or ownership interest in any other business.
(b) The entire partnership ownership of CATS consists of a 1% general
partner interest held by CATS, Inc., a Pennsylvania corporation, a 49.5% limited
partner interest held by the JHS Family Partnership, and a 49.5% limited partner
interest held by the RSS Family Partnership.
(c) There are no preemptive rights, whether at law or otherwise, to
purchase any of the securities of either Acquired Company and there are no
outstanding options, warrants, "phantom" stock plans, subscriptions, agreements,
plans or other commitments pursuant to which either Acquired Company is or may
become obligated to sell or issue any shares of its capital stock or partnership
interests (as the case may be) or any other debt or equity security, and there
are no outstanding securities convertible into shares of such capital stock or
partnership interests (as the case may be) or any other debt or equity security,
except rights of the Shareholders under their buy/sell agreement.
3.4 Financial Statements. Sellers have delivered to Buyer: (a) the audited
--------------------
balance sheets of Commercial as of March 31, 1999 and unaudited balance sheets
as of March 31, 1998 and 1997, (including the notes thereto, the "Commercial
----------
Year-End Balance Sheets"), together with the related statements of operations
- -----------------------
and retained earnings and statements of cash flows for the year then ended, and
(b) the unaudited balance sheet of CATS as of December 31, 1998, 1997 and 1996
(the "CATS Year-End Balance Sheets"), together with the related statements of
----------------------------
operations and statements of changes in partners' capital for the year then
ended, accompanied in the case of the March 31, 1999 financial statements of
Commercial, by the opinion of Schneider Downs, certified public accountants (the
Commercial Year-End Balance Sheets and the CATS Year-End Balance Sheets shall be
referred to collectively herein as the "Year-End Balance Sheets"). Sellers have
-----------------------
also delivered the balance sheets of the Acquired Companies as at June 30, 1999,
together with the related statements of operations and retained earnings for the
three months (in the case of Commercial), and six months (in the case of CATS)
then ended (the "Interim Financial Statements"). All of the financial statements
----------------------------
of the Acquired Companies referred to above (i) are in accordance with the books
and records of the Acquired Companies,
9
(ii) are true correct and complete, and (iii) fairly present in all material
respects the financial condition and the results of operations, changes in
stockholders' equity, partnership accounts and cash flow of the Acquired
Companies, as the case may be, as of the respective dates of and for the periods
referred to therein, all in conformity with GAAP (except in the case of the
Interim Financial Statements for the omission of certain footnotes and other
presentation items required by GAAP with respect to annual financial statements
or annual accounts and subject to other normal year-end adjustments). Such
financial statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements.
3.5 Personal Property. Except as set forth on Schedule 3.5 and except for
-----------------
liens for Taxes not yet due and payable, with respect to the material tangible
personal property used by the Acquired Companies in the operation of their
respective businesses (collectively, the "Personal Property"), the Acquired
-----------------
Companies, have good and valid title to all of their items of owned Personal
Property, and valid leasehold interests in all of their items of leased Personal
Property. The Personal Property is in the possession or control of the Acquired
Companies and no other Person has a right to possession or claims possession of
all or any part of such Personal Property, except for the rights of lessors of
leased assets under their respective contracts and leases.
3.6 Real Property Interests. (a) Schedule 3.6(a) contains a true and
-----------------------
complete list of each and every parcel of real property now owned ("Owned
-----
Property"), each and every parcel of real property, or interest therein, now
- --------
held under lease (including without limitation the Trust Property and all
mineral leases) ("Leased Property"), every parcel of real property used by or
---------------
necessary for the conduct of the business of the Acquired Companies, or held
under option or agreement to purchase, by any of the Acquired Companies
(individually, a "Property" and collectively, the "Properties"), the record
-------- ----------
title holder thereof and the legal description and location thereof. The
Acquired Companies neither own nor lease any real property or interest therein
other than the Properties. Sellers have furnished or made available to Buyer
true, correct and complete copies of all (i) title reports, (ii) surveys, (iii)
deeds, title holding or trust agreements under which any of the Properties have
been conveyed to the Acquired Companies or the Trust Seller, and (iv) all
leases, subleases or other agreements under which the Acquired Companies use or
occupy or have the right to use or occupy, any Properties, including all
amendments and assignments thereof (collectively, "Real Property Leases"), in
--------------------
the possession of Sellers or the Acquired Companies with respect to each of the
Properties. Except as set forth on Schedule 3.6(a), each of the Acquired
Companies or the Trust Seller, respectively, (a) owns and has good and
marketable fee simple title to the Owned Properties, together with all
buildings, improvements, appurtenant rights, privileges and easements located
thereon or appurtenant thereto, and (b) has good and valid title to, and is
lawfully seized and possessed of, the leasehold estates in all Leased
Properties, in each case free and clear of all Encumbrances which would
materially interfere with the present use of the Properties or which would have
a Material Adverse Effect, except general and special real estate taxes and
assessments which may be a lien but are not yet due and payable.
(b) Each Real Property Lease is valid and binding in all material respects
upon the Acquired Companies and the Trust Seller, and, to the knowledge of the
Sellers, each other party thereto, and is in full force and effect. All rent
and other sums and charges payable by the
10
Acquired Companies as tenant thereunder are current. The Acquired Companies and
the Trust Seller have complied in all material respects with the terms of each
Real Property Lease and no termination event or condition or uncured default
exists under any Real Property Lease. No event has occurred and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition.
(c) With respect to each of the Properties and the buildings, structures,
improvements and fixtures thereon:
(i) Sellers and the Acquired Companies are in compliance with all
zoning laws, deed restrictions and building codes applicable to the
Properties, non-compliance with which would materially interfere with the
present use of the Properties or which would have a Material Adverse
Effect;
(ii) Sellers have all permits, licenses and approvals with respect to
the ownership and the current use and occupancy of its respective
Properties the lack of which would materially interfere with the present
use of the Properties or which would have a Material Adverse Effect
(individually, "Real Estate Permit" and collectively, "Real Estate
------------------ -----------
Permits"). All Real Estate Permits are set forth on Schedule 3.6(c)(ii)
and are in full force and effect. The current use and occupancy of each of
the Properties do not Violate any of such Real Estate Permits, and no
proceeding is pending or, to the knowledge of Sellers, threatened, to
revoke, suspend, modify or limit any of the Real Estate Permits. No Permit
will be subject to revocation, suspension, modification or limitation as a
result of this Agreement or the consummation of the Contemplated
Transactions;
(iii) neither Sellers nor the Acquired Companies have received any
notice of any federal, state or local plans to restrict or change access
from any highway or road system in the vicinity of any of the Properties to
any of the Properties, or of any pending or threatened condemnation of any
of the Properties or any part thereof, or of any plans for improvements
which might result in a special assessment against any of the Properties;
(iv) Except as disclosed on Schedule 3.6(c)(iv,) there are no defects
with respect to any of the buildings, structures, improvements and fixtures
at any of the Properties which would impair the day-to-day use of any such
buildings, structures, improvements or fixtures or which would subject the
Acquired Companies or the Sellers to any material liability under
applicable law;
(v) Sellers and the Acquired Companies have good and valid rights of
ingress and egress to and from all Properties from and to the public street
systems for all usual street, road and utility purposes and other purposes
necessary or incidental to the business of the Acquired Companies; and
(vi) All facilities located on the Properties are supplied with
utilities and other services necessary for the operation of such facilities
as presently operated.
11
(d) Except as disclosed on Schedule 3.6(d), there are no restrictions
of any nature on the ability of Sellers or the Acquired Companies to assign and
transfer its interest in the Properties or Real Property Leases, as the case may
be, to the Buyer (or its nominee) either by the terms of each of such Real
Property Leases or by operation of law and there are no consents of third
parties necessary for such assignment or transfer.
(e) Each Seller is a "United States person" as that term is defined
--------------------
in Section 7701(a)(30) of the Code.
3.7 Taxes. (a) Except as set forth on Schedule 3.7(a), (i) the Acquired
-----
Companies and the Trust Seller have timely filed, in accordance with applicable
law, all material reports and returns relating to all taxes (including, without
limitation, all income, excise, property, sales and franchise taxes) and similar
assessments, customs, duties, charges and fees (including interest, penalties
and additions to such taxes, assessments, customs, duties, charges and fees and
any interest in respect of such penalties and additions) imposed by the United
States or any state, local or foreign government or taxing authority ("Taxes")
-----
required to be filed by them, which returns and reports are true, correct and
complete in all material respects, and have paid all Taxes that have become due,
whether or not shown as due on such returns and reports, (ii) all Taxes that
either of the Acquired Companies or the Trust Seller is required to withhold or
deduct and pay over to a government or taxing authority have been so withheld or
deducted and paid over to the extent due and payable, (iii) no notices
respecting asserted or assessed and unresolved material deficiencies for any Tax
have been received by any Acquired Company or the Trust Seller for any tax
periods, (iv) there is no investigation by any tax agency or authority presently
pending or, to the knowledge of Sellers, threatened with respect to an Acquired
Company or the Trust Seller or the Properties, and neither any Acquired Company
nor the Trust Seller is a party to any action or proceeding by any Governmental
Body for the assessment or collection of Taxes, nor has any such event been
asserted or threatened. Neither any Seller nor Commercial has filed any consent
of the type described under Section 341(f) of the Code. The federal income tax
returns of Commercial and CATS as required for the taxable years ending March
31, 1999, and December 31, 1998, respectively, have been timely filed and
Sellers have furnished or made available to Buyer a true and complete copy
thereof of each such return. The unpaid Taxes of each Acquired Company did not,
as of the dates of the Year-End Balance Sheets, exceed the respective accruals
and reserves (other than accruals and reserves for deferred Taxes) for such
Taxes set forth on the Year-End Balance Sheets. There are no liens in respect
of unpaid Taxes on any of the assets of either of the Acquired Companies or the
Properties except for Taxes not yet due.
(b) Except as set forth in Schedule 3.7(b), neither of the Acquired
Companies is currently pursuing an appeal of any Tax imposed against an Acquired
Company.
(c) Commercial is, and has been at all times since April 1987 an "S
-
corporation" within the meaning of Code Section 1361(a). A valid election under
- -----------
Code Section 1362 (and a comparable election under state or local law in each
jurisdiction in which Commercial is required to file Tax returns and reports
that provides for such an election) has been in effect with respect to
Commercial at all times since April 1987. Each Shareholder has filed in a
timely fashion with each of the IRS and any other applicable state taxing
authority a consent to such S corporation elections with respect to Commercial.
Commercial has not been, and will not be, subject to Tax
12
under Code Section 1374 or 1375 (or any comparable provision of state or local
law) for any period prior to Closing.
3.8 Employee Benefits. (a) Except as set forth in Schedule 3.8, no
-----------------
Acquired Company has with respect to its current or former employees sponsored,
maintained or contributed to any "employee benefit plan" within the meaning of
---------------------
Section 3(3) of ERISA, or any bonus, deferred compensation, incentive
compensation, severance or termination pay, change in control, stock purchase or
stock option plan, agreement or arrangement, or any other material employee
benefit or fringe benefit arrangement, whether formal or informal, and whether
legally binding or not, other than a Multiemployer Plan (collectively, "Plans"
-----
and individually, a "Plan").
----
(b) Except as otherwise set forth in Schedule 3.8, Sellers have
delivered to Buyer: (i) complete copies of all plan documents which set forth
the terms of each of the Plans and where applicable, complete copies of any
related trusts and insurance contracts; (ii) a general description of any of the
Plans with respect to which no formal plan document has been adopted; (iii)
where applicable, the most recent Form 5500, as filed with the IRS together with
all attachments thereto, relating to the Plans; and (iv) where applicable, the
most recent IRS determination letter with respect to each Plan.
(c) Each of the Plans which is intended to conform to the
requirements of the Code and ERISA has been administered in compliance in all
material respects with the applicable requirements of the Code and ERISA and
with the Plan terms. There is no accrued liability, contingent or otherwise,
relating to any Plan that would have a Material Adverse Effect, other than as
reflected in the most recent Year-End Balance Sheets, and there are no actions,
suits, arbitrations, or proceedings pending (or to the best knowledge of
Sellers, threatened) against any Plan, against the assets of any of the trusts
under any Plan or the plan sponsor or the plan administrator, or against any
fiduciary of any Plan with respect to the operation of such plans which would
have a Material Adverse Effect (other than routine benefit claims). Except as
set forth on Schedule 3.8, each Plan intended to qualify under the Code has,
since 1993, received at least one favorable determination letter as to its
qualification under the Code, and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification or result in
material costs to any Acquired Company under the IRS' Employee Plans Compliance
Resolution System. Neither Sellers, the Acquired Companies nor, to the best
knowledge of Sellers, any other party has, with respect to any Plan, engaged in
a non-exempt prohibited transaction within the meaning of Section 4975 of the
Code or Section 406 of ERISA. No event has occurred and no condition exists that
would subject any Acquired Company to any material fine under Section 502(c) of
ERISA.
(d) Except as set forth on Schedule 3.8, no Acquired Company
maintains or contributes to any plan which provides, or has any liability to
provide, life insurance, medical, severance or other employee welfare benefits
to any employee upon his retirement or termination of employment, except as may
be required by Section 4980B of the Code.
(e) Except as set forth in Schedule 3.8, the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) (i)
constitute an event under any plan or other employee benefit
13
arrangement or any employee agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee, or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of any Acquired
Company or the Buyer to amend or terminate any plan and receive the full amount
of any excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes, and no payment or benefit which will or may be made
by any Acquired Company, the Buyer or any of their respective affiliates with
respect to any employee will be characterized as an "excess parachute payment,"
------------------------
within the meaning of Section 280G(b)(1) of the Code.
(f) With respect to each Plan that is subject to Title IV of ERISA or to
the minimum funding requirements of Section 412 of the Code, the following is
true: (i) all contributions required to be made under Code Section 412 (whether
or not waived) have been made when due, and all premium payments to the PBGC
have been made when due; (ii) there is no event or condition existing (other
than the Contemplated Transactions) which could be deemed a "reportable event"
----------------
within the meaning of Section 4043 of ERISA with respect to which the notice
requirement has not been waived, and no condition exists which would subject the
Company or any Subsidiary to a fine under Section 4071 of ERISA; (iii) no
amendment has occurred which has required or could require any Acquired Company
to provide security to such Plan under Section 401(a)(29) of the Code; (iv) no
documentation or other information has been or is currently required to be
provided to the PBGC pursuant to Section 4010 of ERISA, and no participant
notices have been or are currently required pursuant to Section 4011 of ERISA;
(v) as of the most recent valuation date, the fair market value of The Plan's
assets exceeded the "projected benefit obligation" for such plan within the
----------------------------
meaning of Paragraph 17 of FASB 87; (vi) there are no contributing sponsors of
such Plan who are not ERISA Affiliates of an Acquired Company; and (vii) no
transaction has occurred and no condition exists with respect to such Plan that
has subjected or will likely subject any Acquired Company to liability under
Section 4069 of ERISA.
(g) Except as set forth in Schedule 3.8, no Acquired Company has ever been
a party to, or been required to contribute to, a Multiemployer Plan. With
respect to any Multiemployer Plan disclosed in Schedule 3.8, (i) all
contributions required by the terms of such Multiemployer Plan or any collective
bargaining agreement have been made when due; (ii) to the knowledge of Sellers,
no Acquired Company would be subject to any withdrawal liability under Part 1 of
Subtitle E of Title IV of ERISA if, as of the date hereof, the Acquired Company
were to engage in a "complete withdrawal" (as defined in ERISA Section 4203) or
-------------------
a "partial withdrawal" (as defined in ERISA Section 4205) from such
------------------
Multiemployer Plan, (iii) no Acquired Company has received notice that such
Multiemployer Plan is in reorganization (as defined in Section 4242 of ERISA) or
is insolvent (as defined in Section 4245 of ERISA), and (iv) no transaction has
occurred and no condition exists that has subjected or will likely subject any
Acquired Company to liability under Section 4212(c) of ERISA. Except as set
forth on Schedule 3.8, for each such Multiemployer Plan, Sellers have delivered
to Buyer (i) complete copies of the plan document and trust agreement, (ii) the
most recent Form 5500, as filed with the IRS, together with all attachments
thereto, and (iii) the most recent estimate of withdrawal liability that would
be incurred by any Acquired Company if it were to completely withdraw from the
Multiemployer Plan in 1998.
14
(h) Other than the Plans and Multiemployer Plans set forth in
Schedule 3.8, no ERISA Affiliate of an Acquired Company has ever sponsored,
maintained or contributed to a plan subject to Title IV of ERISA or to Section
412 of the Code.
3.9 Compliance with Law. Except as set forth on Schedule 3.9, for matters
-------------------
pertaining to employee benefits (which are provided for in Section 3.8) and for
environmental matters (which are provided for in Section 3.14), the operations
of each of the Acquired Companies are and have been conducted in accordance with
all applicable laws, regulations and other requirements of all U.S. and foreign
national Governmental Bodies, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over the
business of the Acquired Companies, except for deviations from such laws arising
from the operations of the Acquired Companies which, individually or in the
aggregate would not have a Material Adverse Effect.
3.10 Legal Proceedings; Orders. Except as set forth in Schedule 3.10
-------------------------
hereto, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of Sellers, threatened against any Seller, any
Acquired Company or with respect to the Contemplated Transactions or as to which
any such Person is a party or their properties are subject. To the knowledge of
the Sellers, there exist no set of facts or circumstances that could reasonably
give rise to any such claims, actions, suits, proceedings or investigations. No
Acquired Company is in violation of any term of any Order outstanding against
it, except where such violation would not have a Material Adverse Effect.
3.11 Absence of Certain Changes and Events. Except as set forth in
-------------------------------------
Schedule 3.11, since the dates of the respective most recent Year-End Balance
Sheets, the Acquired Companies have conducted their businesses only in the
ordinary course of business and there has not been any:
(a) change in Commercial's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock; issuance of any
security convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stack;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, partner, trustee, director, officer,
or manager or entry into any employment, severance, or similar contract or
agreement with any director, officer, or manager;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any officer or manager of
any Acquired Company;
(e) change in the accounting methods used by any Acquired Company;
(f) Material Adverse Effect;
15
(g) making of or changes to any material Tax election, or compromise of
any material liability for Taxes;
(h) sale, transfer, pledge or other disposition of any of the assets of
either Acquired Company having an aggregate value of $200,000 or more (except
sales of inventory in the ordinary course of business) and the assets listed on
Part I of Schedule 2.1(f);
(i) entering into, amendment, termination, waiver or cancellation of any
agreement requiring the expenditure of $250,000 or more per year, or any
termination, amendment, waiver or cancellation of any material right or claim of
any Acquired Company under any such agreement;
(j) material change in policies, operations or practices of either
Acquired Company with respect to selling methods, returns, discounts or other
non-price terms of sale;
(k) any commitment to purchase or pay for equipment after the date hereof,
(l) any capital appropriation or expenditure or commitment therefor on
behalf of either Acquired Company in excess of $1,500,000 individually or
$2,000,000 in the aggregate or any write-down or write-up of the value of any
inventory or equipment of either of the Acquired Companies;
(m) any purchase contracts or commitments which are in excess of the
requirements of the respective businesses of the Acquired Companies or at prices
higher than current market prices; or
(n) any commitment, whether legally binding or otherwise, to do any of the
foregoing.
3.12 Contracts. (a) Schedule 3.12 contains a complete and accurate list,
---------
and Sellers have delivered to Buyer true and complete copies, of:
(i) each contract or agreement that involves performance of
services or delivery of goods or materials by one or more Acquired Company
of an amount or value in excess of $250,000, or purchase orders with an
amount or value in excess of $250,000;
(ii) each contract or agreement that involves performance of
services or delivery of goods or materials to one or more Acquired Company
of an amount or value in excess of $250,000 with respect to fixed
obligations and $500,000 with respect to purchase orders;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other contract or agreement
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any Personal Property (except personal property
leases and installment and conditional sales agreements having a value per
item or aggregate payments of less than $50,000 per annum) or Properties;
16
(iv) each material licensing agreement or other contract or
agreement with respect to patents, trademarks, copyrights, or other
intellectual property;
(v) each joint venture, partnership, and other contract or
agreement (however named) involving a sharing of profits, losses, costs, or
liabilities by any Acquired Company with any other Person and each
agreement with respect to guarantees of the obligations of a third party
and agreements to indemnify third parties;
(vi) each agreement containing non-competition or other
limitations restricting the conduct of the business of any Acquired
Company;
(vii) each agreement between any Acquired Company and any of
their respective affiliates;
(viii) indentures, mortgages, deeds of trust, promissory notes,
loan agreements, capital leases, security agreements or other agreements or
commitments for the borrowing of money, or the deferred purchase price of
assets, or which otherwise evidence Indebtedness of either Acquired Company
or which create an Encumbrance on any of its assets or the Trust Property;
and
(ix) each other agreement not of the type referred to above
that is otherwise material to the Acquired Companies, other than contracts
with individual truckers (none of which represents more than ten percent
(10%) of the total truck units of CATS).
(b) Each Acquired Company has in all material respects performed all
of its obligations required to be performed by it to the date hereof, and is not
in default or alleged to be in default in any material respect, under any
agreement listed on Schedule 3.12, and there exists no event, condition or
occurrence which, after notice or lapse of time or both, would constitute such a
default. To the knowledge of the Sellers, no other party to any such agreement
is in default in any respect of any of its obligations thereunder. Each of the
agreements listed on Schedule 3.12 is valid and in full force and effect and
enforceable against the parties thereto in accordance with their respective
terms.
3.13 Insurance. Schedule 3.13 hereto sets forth a complete and accurate
---------
list and description, including but not limited to deductibles thereunder, of
all policies of fire, liability, product liability, workmen's compensation,
health and other forms of insurance in effect with respect to the Acquired
Companies. Sellers have furnished to Buyer true and correct copies of all such
policies. No Acquired Company has received notice of default under or
cancellation of any such policies and all such policies are valid and in full
force and effect. All premiums due thereon covering all periods up to and
including the Closing Date have been paid. Schedule 3.13 sets forth a list of
all claims in excess of $200,000 individually against either Acquired Company
(including, without limitation, products liability claims) and whether or not
covered by insurance that have been asserted in writing since January 1, 1994.
3.14 Environmental Matters. Except as set forth in Schedule 3.14:
---------------------
(a) Each Acquired Company and the Trust Seller has obtained, and has
made all appropriate filings for issuance or renewal of, all registrations,
permits, licenses and other
17
authorizations ("Environmental Permits") which: (i) are required to be obtained
---------------------
by any such Acquired Company or the Trust Seller under all Environmental Laws or
(ii) relate to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Regulated Materials, except for
those Environmental Permits, the absence of which will not have a Material
Adverse Effect.
(b) Except for such non-compliance which would not have a Material
Adverse Effect, and to the knowledge of Sellers, each Acquired Company and the
Trust Seller (and each property owned, leased or operated by any of the Acquired
Companies) at all times has been and is in compliance with: (i) all
Environmental Permits; (ii) all other, limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations contained in any of the
Environmental Laws as applicable to such Acquired Company or the Trust Seller
(or each property owned, leased or operated by any of the Acquired Companies);
and (iii) all plans, orders, decrees, judgments, injunctions, notices or demand
letters applicable to such Acquired Company or the Trust Seller (or each
property owned, leased or operated by any of the Acquired Companies) and issued,
entered, promulgated or approved under any of the Environmental Laws.
(c) No Acquired Company has, and the Trust Seller has not, received
any notice that any past or present conditions, circumstances, activities,
practices, incidents or actions of any Acquired Company or the Trust Seller
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Regulated Material or relating to any
emission, discharge, release or threatened release into the environment of any
Regulated Material: (i) may interfere with or prevent compliance or continued
compliance by any Acquired Company or any Seller with any of the Environmental
Laws or any regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder; (ii) may
give rise to any common law or legal liability; or (iii) may otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, unless the alleged violation or noncompliance with any
Environmental Laws which forms the basis of any notice described above in this
Section 3.14, if uncured or unsettled, would have a Material Adverse Effect.
(d) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or, to the knowledge of the Sellers,
threatened against any Acquired Company or any Seller relating in any way to the
disposal of any Regulated Material at any location or to any violation of any of
the Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
(e) To the knowledge of the Sellers, there has been no release,
spill, discharge, deposit, storage, burial or dumping (collectively "Release")
-------
of any Regulated Material in or on any properties currently or formerly owned,
leased or operated by any Acquired Company which would have a Material Adverse
Effect. All underground and above-ground storage tanks located on any property
now or formerly owned, leased or operated by each Acquired Company have been
used, maintained and, if applicable, removed, in material compliance with all
applicable Legal Requirements.
18
(f) To the knowledge of the Sellers, no property now or previously
owned, operated or leased by any Acquired Company is listed or is proposed for
listing on the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or the
Comprehensive Environmental Response, Compensation and Liability Information
System List or on any similar state or foreign list of sites requiring
investigation or cleanup; no clean-up of Regulated Material has occurred on any
such property which could result in the creation of any lien on such property,
and no lien has been filed against any Personal Property or any Properties under
any Environmental Law.
(g) Each Acquired Company and each Seller has heretofore delivered to
Buyer true and complete copies of all environmental studies made in the last
five years relating to any Acquired Company or the Properties or any other
property or facility previously owned, operated or leased by any Acquired
Company and all environmental studies in Sellers' possession with respect to
asphalt plants owned, operated or leased by any Acquired Company.
(h) No Acquired Company and no Seller has entered into any agreement
that may require it to pay to, reimburse, guarantee, pledge, defend, indemnify
or hold harmless any person for or against any environmental liability or costs.
(i) Neither the Property nor any other current or former real
property interest of any Acquired Company contains any: (a) underground storage
tanks; (b) asbestos; (c) equipment using PCBs; (d) underground injection wells;
or (e) septic tanks in which process wastewater or any Regulated Materials have
been disposed.
3.15 Labor Relations. (a) No Acquired Company has experienced any material
---------------
labor disputes, or any material work stoppage due to labor disagreements and, to
the knowledge of the Sellers, no material labor disputes or material work
stoppages are threatened. No Acquired Company has received a notice that there
is any unfair labor practice, charge or complaint against any Acquired Company
pending or threatened before the National Labor Relations Board or any
comparable state agency or authority. There is no labor strike, dispute,
slowdown or stoppage actually pending or, to Sellers' knowledge, threatened
against or affecting an Acquired Company. No question concerning representation
has been raised or, to Sellers' knowledge, is threatened respecting the
employees of the Acquired Companies. No material labor grievance is pending or,
to Sellers' knowledge, threatened against any Acquired Company.
(b) Except as otherwise set forth in Schedule 3.15, Sellers have
delivered to Buyer complete copies of all collective bargaining agreements or
similar agreements with any labor organization, or any work rules or practices
agreed to with any labor organization or employee association applicable to the
employees of the Acquired Companies. To the knowledge of the Sellers, there are
no current union organizing activities among the employees of the Acquired
Companies. The execution of this Agreement and the consummation of the
transaction contemplated hereby shall not result in a breach or other violation
of any collective bargaining agreement to which either Acquired Company is a
party.
(c) Sellers have provided to Buyer the names, titles and current
rates of compensation (whether in the form of salaries, bonuses, commissions or
other supplemental compensation now or hereafter payable) of the ten most
highly-compensated non-unionized
19
employees of the Acquired Companies, together with a list of any employment,
severance or other compensation contracts and agreements relating to any such
employees. Sellers have also provided to Buyer true, correct and complete copies
of all written personnel policies, rules or procedures applicable to employees
of the Acquired Companies. There are no material complaints, charges,
arbitrations, controversies, grievances, lawsuits or other proceedings pending
or, to the knowledge of Sellers, threatened in any forum against any Acquired
Company alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortuous, conduct in connection with the employment
relationship. Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), neither Acquired Company has
--------
effectuated (A) a "plant closing" (as defined in the WARN Act) affecting any
-------------
site of employment or one or more facilities or operating units within any site
of employment or facility of any Acquired Company, or (B) a "mass layoff" (as
-----------
defined in the WARN Act) affecting any site of employment or facility of any
Acquired Company; nor has either Acquired Company engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth on Schedule 3.15, none of the
employees of either Acquired Company have suffered an "Employment Loss" as
---------------
defined in the Warn Act since July 1, 1999.
3.16 Intellectual Property. Schedule 3.16 contains a complete and accurate
---------------------
list and summary description of all material patents, trademarks, tradenames,
service marks, copyrights, software, trade secrets, and know-how, owned, used or
licensed by any Acquired Company (the "Intellectual Property Assets"). Except as
----------------------------
set forth on Schedule 3.16, the Intellectual Property Assets are owned free and
clear of all material Encumbrances. No Acquired Company unlawfully or wrongfully
uses any Intellectual Property Asset, or infringes upon the rights of third
parties through its use of the Intellectual Property Assets. No Acquired Company
is in default under, or has received any notice of any claim of infringement or
any other claim or proceeding relating to any Intellectual Property Asset.
3.17 Year 2000 Compliance. All of the material computer systems of the
--------------------
Acquired Companies are in the final stages of the process to make such systems
Year 2000 Compliant and such systems are scheduled and will be Year 2000
Compliant by October 1999 in all material respects. Each of the Acquired
Companies has inquired of, or been advised by, its principal suppliers of their
Year 2000 compliant status. The Sellers have not received notice that any
customers or suppliers expect that their business with the Acquired Companies
will be materially adversely effected by the failure of such suppliers to be
Year 2000 Compliant on a timely basis.
The term "Year 2000 Compliant," with respect to a computer system or
-------------------
software program, means that such computer system or program: (i) is capable of
recognizing, processing, managing, representing, interpreting and manipulating
correctly date-related data for dates earlier and later than January 1, 2000;
(ii) has the ability to provide date recognition for any data element without
limitation; (iii) has the ability to function automatically into and beyond the
year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000; (iv) has the ability to interpret
data, dates and time correctly into and beyond the year 2000; (v) has the
ability not to produce noncompliance in existing data, nor otherwise corrupt
such data, into and beyond the year 2000; (vi) has the ability to process
20
correctly after January 1, 2000, data containing dates before that date; and
(vii) has the ability to recognize all "leap year" dates, including February 29,
2000.
3.18 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
----------------------------------
3.18, or elsewhere in this Agreement or any schedule hereto, to the knowledge of
the Sellers, neither Acquired Company has any liabilities or obligations of any
nature, known or unknown, fixed or contingent, matured or unmatured, other than
those (a) reflected in the Interim Financial Statements, or (b) incurred in the
ordinary course of business since the date of the Interim Financial Statements,
consistent (in amount and kind) with past practice or (c) liabilities which
would not individually or in the aggregate have a Material Adverse Effect.
3.19 Accounts Receivable. The Sellers have delivered to the Buyer a true
-------------------
and correct list and aging of all unpaid accounts receivable owing to each
Acquired Company as of June 30, 1999. All accounts receivable of the Acquired
Companies constitute legal, valid, binding and enforceable claims with respect
to which the rendition of services or the sale of goods has been completed in
bona fide transactions in the ordinary course of business. An adequate reserve
for doubtful accounts for the each Acquired Company has been established and
such reserve is consistent with both the operation of the Acquired Company in
the ordinary course of business and past practice.
3.20 Reserves. To the knowledge of the Sellers, the description of the
--------
aggregate reserves detailed in Schedule 3.20, including the location of the
reserves with respect to the Properties, is accurate in all material respects.
Schedule 3.20 also indicates for which reserves the Acquired Companies have
obtained the governmental licenses, permits, approvals and other authorizations
necessary for mining. The Sellers have no knowledge of any facts or
circumstances that would contradict or otherwise raise doubt as to the accuracy
of the information contained in Schedule 3.20 in any material respect.
3.21 Operating Permits. Set forth on Schedule 3.21 hereto is a list of all
-----------------
governmental licenses, permits, approvals, certificates of inspection and other
authorizations, filings and registrations that are necessary for the Acquired
Companies to own and operate their respective businesses as presently conducted
or presently proposed to be conducted (collectively, the "Operating Permits").
-----------------
Except as set forth on Schedule 3.21 hereto, all such Operating Permits have
been duly and lawfully secured or made by the Acquired Companies and are in full
force and effect. There is no proceeding pending, or, to the Sellers' knowledge,
threatened or probable of assertion, to revoke or limit any such Operating
Permit. None of the Contemplated Transactions will terminate, violate or limit
the effectiveness of any such Operating Permit. With respect to renewal of
Operating Permits, each Acquired Company has made, in a timely manner, all
filings, reports, notices and other communications with the appropriate
governmental body, and has otherwise taken, in a timely manner, all other
action, known or anticipated to be required to be taken by each such Acquired
Company, reasonably necessary to secure the renewal of the respective Operating
Permits prior to the date of their respective expirations. The Acquired
Companies are in compliance with the Operating Permits except where
noncompliance would not have a Material Adverse Effect.
3.22 Directors and Officers. Set forth on Schedule 3.22 is a true and
----------------------
correct list of the names and titles of each director and officer of each
Acquired Company.
21
3.23 Customers and Suppliers. Set forth on Schedule 3.23 hereto contains,
-----------------------
with respect to the calendar years ended December 31, 1998 and 1997, a true and
complete list of (i) the twenty (20) largest customers (in dollar volume) of
each Acquired Company, and (ii) the five (5) largest suppliers (in dollar
volume) to each Acquired Company. To the knowledge of the Sellers, no such
supplier, customer or creditor indicated on Schedule 3.23 hereto has or intends
or has threatened, or reasonably could be expected, to terminate or modify any
of its relationships with either Acquired Company.
3.24 Qualification of Product. To the Sellers' knowledge, the asphalt,
------------------------
stone and other products currently produced by Commercial meet the
specifications and qualifications established by the Strategic Highway Research
Program for use in "Superpave" in the regions where the Acquired Companies
currently operate. To the Sellers' knowledge, the aggregate mined and produced
by Commercial meets the specifications established by Penn DOT-Bulletin 14 as
"Class E Aggregate."
3.25 Rich Hill Quarry. To the Sellers' knowledge, the building of an
----------------
underground mine at the Rich Hill Quarry will not materially interrupt, or
otherwise have a material adverse effect on, the operations of the Rich Hill
Quarry, as such operations are currently being, and are currently contemplated
to be, conducted.
3.26 Belle Vernon Quarry. Sellers have provided to the Buyer a true and
-------------------
correct copy of the lease (the "Belle Lease") for the land upon which the Belle
-----------
Vernon Quarry (the "Belle Quarry") is located and a true and correct copy of the
------------
reclamation plan (the "Reclamation Plan") concerning the Belle Quarry (the Belle
----------------
Lease together with the Reclamation Plan to be hereinafter referred to as the
"Belle Quarry Documents"). The Sellers have performed in all material respects
----------------------
all of their obligations required to be performed by them to the date hereof
under the Belle Quarry Documents, and are not in default or alleged to be in
default in any material respect, under the Belle Quarry Documents, and there
exists no event, condition or occurrence which, after notice or lapse of time or
both, would constitute such a default. To the knowledge of the Sellers, no other
party to the Belle Quarry Documents is in default in any respect of any of its
obligations thereunder. There exist no liabilities or obligations of any nature
with respect to the Belle Lease, other than those disclosed and reflected in the
Interim Financial Statements and there exist no liabilities or obligations of
any nature with respect to the Reclamation Plan, which liabilities or
obligations are to be fulfilled or performed subsequent to the Closing Date. The
operations of the Acquired Companies that were and that are currently being
conducted at the Belle Quarry were and are currently being conducted in
accordance with all applicable Legal Requirements.
3.27 Silicosis. In the most recent chest x-rays performed on the employees
---------
of the Acquired Companies pursuant to the Acquired Companies' medical
surveillance program, no employee of the Acquired Companies (i) had a chest x-
ray read by a NIOSH certified "B" reader as a profusion of greater than or equal
to 1/0, or (ii) was diagnosed with silicosis.
22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers, as of the date hereof and as of
the Closing Date, as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly organized,
------------------------------
validly existing, and in good standing under the laws of the State of Delaware.
4.2 Authority; No Conflict. (a) The Buyer has full corporate power and
----------------------
authority to execute and deliver this Agreement and to consummate the
Contemplated Transactions. This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
(b) The execution, delivery and performance of this Agreement by
Buyer and the consummation of the Contemplated Transactions (i) have been
authorized by all necessary corporate action on the part of Buyer, and (ii) will
not (w) conflict with the terms, conditions or provisions of the Organizational
Documents of Buyer, (x) violate any provision of law or any Order to which Buyer
is subject, (y) result in a breach or violation of any of the terms of, or
constitute a default by Buyer under, any material indenture, mortgage, loan
agreement, lease or other agreement or instrument to which Buyer is a party or
by which it is bound. Except as set forth on Schedule 4.2, Buyer will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 Investment Intent. Buyer is acquiring the Acquired Shares for its own
-----------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.4 Certain Proceedings. There is no Proceeding pending that has been
-------------------
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's knowledge, no such proceeding has been
threatened.
4.5 Financing. Attached hereto as Exhibit 4.5 is a true and correct copy
---------
of the Buyer's commitment letter from The Chase Manhattan Bank and Chase
Securities Inc. with respect to the Buyer's financing in connection with the
Contemplated Transactions. As of the date hereof, such letter has not been
withdrawn.
ARTICLE V
COVENANTS OF SELLERS PRIOR TO CLOSING DATE
------------------------------------------
5.1 Access and Investigations. Between the date of this Agreement and the
-------------------------
Closing Date, Sellers will (a) afford Buyer and its Representatives
(collectively, "Buyer's Advisors") access, during normal business hours and with
----------------
reasonable prior notice, to each Acquired
23
Company's personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
5.2 Operation of the Businesses of the Acquired Companies. Between the
-----------------------------------------------------
date of this Agreement and the Closing Date, Sellers will cause each Acquired
Company to:
(a) conduct its business only in the ordinary course of business,
consistent with past practice;
(b) use reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and employees,
and maintain its relations and good will with its suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with it;
(c) maintain its corporate or partnership existence in good standing;
(d) comply in all respects with all applicable Legal Requirements;
(e) maintain its insurance coverages;
(f) pay all Taxes, charges and assessments when due, subject to any valid
objection or contest of such amounts asserted in good faith and adequately
reserved against;
(g) make all debt service payments when contractually due and payable;
(h) pay all accounts payable and other current liabilities when due;
(i) maintain the Plans;
(j) maintain its property, plant and equipment in good operating condition
in accordance with industry standards taking into account the age thereof;
(k) make capital expenditures in the ordinary course and consistent with
past practice; and
(l) maintain its books and records of account in the usual, regular and
ordinary manner.
5.3 Negative Covenants. Except as otherwise expressly permitted by this
------------------
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, without the prior consent of Buyer, permit any Acquired Company to:
(a) take any affirmative action, or fail to take any reasonable action
within their reasonable control, as a result of which any of the changes or
events listed in Section 3.11 is likely to occur;
24
(b) acquire, sell, lease or dispose of any assets (except necessary
equipment, raw materials and inventory in the ordinary course of business) which
are material to the Acquired Company or enter into any commitment to do any of
the foregoing or enter into any material commitment or transaction;
(c) except in the ordinary course of business consistent with past
practice (i) create, incur, assume or prepay any indebtedness for borrowed money
(including obligations in respect of capital leases) except for short-term debt
in the ordinary course of business consistent with past practice, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person or (iii) make
any loans, advances or capital contributions to, or investments in, or enter
into any "keep well" arrangements or other agreement to maintain the financial
condition of, any other Person;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof,
(e) institute, settle or compromise any claim, action, suit, or proceeding
pending or threatened by or against it involving amounts in excess of $200,000,
at law or in equity or before any Governmental Body;
(f) knowingly take any action that would knowingly render any
representation, warranty, covenant or agreement of any Acquired Company in this
Agreement inaccurate or breached as of the Closing Date;
(g) take any action, or permit any Acquired Company to take any action, to
encourage any of the personnel of either Acquired Company to leave their
positions with the Acquired Companies, other than Scott Turer and Rick Young if
such individuals are not offered satisfactory employment by Buyer;
(h) agree, whether in writing or otherwise, to do any of the foregoing; or
(i) effectuate either a "plant closing" or a "mass layoff" (each as
------------- -----------
defined in the WARN Act), or any similar action under applicable state or local
law requiring notice to employees in the event of a plant closing or layoff.
5.4 Required Approvals. As promptly as practicable after the date of this
------------------
Agreement, Sellers will make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions, including any
HSR filings. Between the date of this Agreement and the Closing Date, Sellers
will cooperate with Buyer with respect to all filings that Buyer elects to make
or is required by Legal Requirements to make in connection with the Contemplated
Transactions.
5.5 No Negotiation. Until such time, if any, as this Agreement is
--------------
terminated pursuant to Article X, Sellers will not directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to
25
any transaction involving the sale of the business or all or substantially all
the assets of any Acquired Company, any of the capital stock of Commercial, any
of the partnership interests of CATS, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company.
5.6 Reasonable Efforts. Between the date of this Agreement and the Closing
------------------
Date, Sellers will use all reasonable efforts to cause the conditions in Article
VII and Article VIII to be satisfied (including, without limitation, providing
such information and access to employees and properties as Buyer shall
reasonably request with respect to the consummation of the financing
contemplated by Section 4.5 hereof and the delivery of the financial statements
referred to in Section 7.13 hereof).
5.7 Bonuses. Buyer will pay or will cause Commercial to pay at Closing
-------
bonuses to employees of Commercial Stone in an aggregate amount of $1,320,000.
Schedule 5.7 identifies such employees and the amount to be paid to each. Buyer
may condition such bonuses on the employees' willingness to continue his or her
employment with Commercial Stone for up to six months after the Closing Date.
5.8 Guarantees. Buyer shall use its commercially reasonable efforts to
----------
effect the release of Sellers at Closing or as promptly thereafter as
practicable from all guarantees, indemnities, suretyships, and similar
arrangements issued or made by Sellers to third parties for the benefit of the
Acquired Companies or the Properties being conveyed by the Trust Sellers, a
partial listing of which is listed on Schedule 5.8 hereto (the "Guarantees"). To
----------
the knowledge of Sellers, no facts or circumstances exist under which any of the
Sellers is presently or, with the passage of time will be, obligated to perform
under any such Guarantees.
ARTICLE VI
COVENANTS OF BUYER PRIOR TO CLOSING DATE
----------------------------------------
6.1 Approvals of Governmental Bodies. As promptly as practicable after
--------------------------------
the date of this Agreement, Buyer will make all filings required by Legal
Requirements to be made by Buyer to consummate the transactions contemplated by
the Transaction Documents, including all filings under the HSR Act. All
applicable filing or transaction fees under such Legal Requirements, including
HSR filings shall be paid by Buyer. Between the date of this Agreement and the
Closing Date, Buyer will cooperate with Sellers with respect to all filings that
Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and cooperate with Sellers in obtaining all consents
that may be required in connection with the consummation of the Contemplated
Transactions.
6.2 Request for Early Termination. Upon the execution of definitive
-----------------------------
purchase agreement, the Buyer will promptly prepare and file a request for early
termination in accordance with the HSR Act.
6.3 Reasonable Efforts. Buyer will use all reasonable efforts to cause the
------------------
conditions in Articles VIII to be satisfied.
26
6.4 Buyer Surveys. Buyer shall use its commercial best efforts to obtain
-------------
a survey of each of the four sites commonly referred to as Rich Hill,
Springfield Pike, Dunningsville Asphalt and Adamsburg Asphalt, as deemed
reasonably necessary or advisable by the Buyer (collectively, "Buyer Surveys"),
-------------
certified to the Buyer, the Acquired Companies, Buyer's lender and Lawyer's
Title Insurance Corporation (the "Title Company").
-------------
The Sellers shall and shall cause the Trust Seller and the Acquired
Companies to assist Buyer as Buyer shall reasonably request in obtaining the
Buyer Surveys, including, without limitation, involving all documentation and
information reasonably requested and providing full access to the Properties to
Buyer and its agents for such purpose.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
---------------------------------------------------
Buyer's obligation to consummate the Contemplated Transactions is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations. All of Sellers' representations and
---------------------------
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been true
and correct in all material respects as of the date of this Agreement, and must
be true and correct in all material respects as of the Closing Date as if made
on the Closing Date.
7.2 Sellers' Performance. All of the covenants and obligations that
--------------------
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects.
7.3 Opinion of Counsel. There shall have been delivered to Buyer an
------------------
an opinion, dated the Closing Date, of Reed Smith Shaw & McClay, counsel to
Sellers, in the form of Exhibit 7.3 hereto.
7.4 No Proceedings. No suit, action, proceeding or investigation shall
--------------
have been commenced or threatened by any Governmental Body on any grounds to
restrain, enjoin or hinder the Contemplated Transactions, to obtain substantial
damages in respect thereof, or involving a claim that consummation thereof would
result in the violation of any law or Order, or which would otherwise have a
Material Adverse Effect if adversely decided. No suit or proceeding shall have
been commenced by any other Person, (a) that could reasonably be expected to
have the effect of preventing or materially diminishing the value to Buyer of
the Contemplated Transactions, (b) that would prevent or materially delay the
Contemplated Transactions, or (c) that could reasonably be expected to have the
effect, if adversely decided, of materially restricting or interfering with the
business or operations of either of the Acquired Companies after Closing or
would otherwise have a Material Adverse Effect.
27
7.5 Payment of Indebtedness; Releases. The Indebtedness of the Acquired
---------------------------------
Companies (other than the Indebtedness listed on Part 11 of Schedule 2.1(f))
shall have been repaid and the Buyer shall have received satisfactory evidence
thereof and there shall have been executed and delivered all required releases
of liens, termination statements and satisfaction pieces with respect to
Indebtedness of any Acquired Company being repaid on the Closing Date.
7.6 HSR Act Approval. The waiting periods applicable to the consummation
----------------
of the Contemplated Transactions under the HSR Act shall have expired or been
terminated.
7.7 Delivery of Documents. The Sellers shall have delivered to the Buyer
---------------------
Buyer the documents referenced in Section 2.4(a).
7.8 Agreement Regarding Three Rivers. Commercial shall have entered into
--------------------------------
an agreement with an affiliate of Seller regarding trucking services
substantially on the terms set forth on Exhibit 7.8 hereto.
7.9 Agreement Regarding Molly Slag Operations. Commercial shall have
-----------------------------------------
entered into an agreement with an affiliate of Seller regarding the disposal of
molybdenum slag substantially on the terms set forth on Exhibit 7.9 hereto.
7.10 Financial Markets. Buyer shall not have received from The Chase
-----------------
Manhattan Bank and Chase Securities, Inc. written notice to the effect that in
their reasonable judgment there has occurred and there was continuing a material
disruption of or a material adverse change in financial, banking or capital
market (including, without limitation, high-yield market) conditions such that
the funding contemplated by the commitment letter and term sheet attached hereto
as Exhibit 4.5 was not made available to the Buyer.
7.11 Audited Financial Statements. On or prior to September 10, 1999, Buyer
----------------------------
shall have received (a) audited balance sheets and related statements of income,
stockholders' equity and cash flows of each of the Acquired Companies for the
three fiscal years ended prior to the Closing Date and (b) unaudited balance
sheets and related statements of income, stockholders' equity and cash flows of
each of the Acquired Companies for the fiscal quarters ending after the most
recent fiscal year that precedes the Closing Date up to the latest fiscal
quarter ending at least 30 days prior to the Closing Date (and, to the extent
available, for each month preceding the Closing Date since the last such
quarter), which audited and unaudited financial statements shall be in form and
scope reasonably satisfactory to Buyer. Should the condition set forth in this
Section 7.11 not be satisfied on or before September 10, 1999 and Buyer shall
have failed to terminate this Agreement as provided in Section 10.1(c)(iii),
then such condition shall be deemed waived by Buyer.
7.12 Real Estate Matters. (a) Seller shall have executed and delivered to
-------------------
Buyer standard affidavits (and applicable supporting documentation) and/or
indemnification agreements, as the Title Company may reasonably require in order
to, with respect to each of the owner's and lender's title insurance policies on
each of the parcels of Owned Real Property and Leased Property that (a) omit all
exceptions with regard to (x) claims of mechanics, materialmen or laborers and
others entitled to claim a lien for work, services or materials furnished, (y)
rights of parties in possession, and (z) the nonpayment of corporate taxes, (b)
issue non-imputation
28
endorsements, and (c) confirm that the owner of record of each parcel of Owned
Property is Commercial.
(b) The Buyer Surveys shall not disclose any easements, discrepancies
or conflicts in boundary lines, shortages in area or encroachments that would
have a Material Adverse Effect.
(c) Notwithstanding anything in this Agreement to the contrary, Buyer
agrees as follows with respect to Sections 7.12(a) and (b) above: (i) Buyer will
use its best efforts to complete such matters prior to September 30, 1999 and
(ii) Buyer will not seek to impose any obligation on the part of Seller to pay
any money or enter into any guaranty or other noncustomary indemnification
obligation.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
----------------------------------------------------
Sellers' obligation to consummate the Contemplated Transactions is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Sellers, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's representations and
---------------------------
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been true
and correct in all material respects as of the date of this Agreement, and must
be true and correct in all material respects as of the Closing Date as if made
on the Closing Date.
8.2 Buyer's Performance. All of the covenants and obligations that Buyer
-------------------
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
8.3 Opinion of Counsel. There shall have been delivered to Sellers an
------------------
opinion, dated the Closing Date, of Winthrop, Stimson, Putnam & Roberts counsel
to Buyer, in the form of Exhibit 8.3 hereto.
8.4 No Injunction. There must not be in effect any Legal Requirement or
-------------
any injunction or other Order that (a) prohibits the sale of the Shares or
Partnership Interests by Sellers to Buyer, and (b) has been adopted or issued,
or has otherwise become effective, since the date of this Agreement.
8.5 HSR Act Approval. The waiting periods applicable to the consummation
----------------
of the Contemplated Transactions under the HSR Act shall have expired or been
terminated.
8.6 Agreement Regarding Three Rivers. Commercial shall have entered into
--------------------------------
an agreement with an affiliate of Seller regarding trucking services
substantially on the terms set forth on Exhibit 7.8 hereto.
29
8.7 Agreement Regarding Molly Slag Operations. Commercial shall have
-----------------------------------------
entered into an agreement with an affiliate of Seller regarding the disposal of
molybdenum slag substantially on the terms set forth on Exhibit 7.9 hereto.
8.8 Delivery of Documents. The Buyer shall have delivered to the Sellers
---------------------
the documents referenced in Section 2.4(b).
ARTICLE IX
CERTAIN POST-CLOSING COVENANTS
------------------------------
9.1 Non-competition. As an inducement for Buyer to enter into the Purchase
---------------
Agreement, Sellers agree that, for a period of four (4) years after the Closing:
(a) Sellers will not, nor shall they permit the Dell Shearer Marital
Trust to, directly or indirectly, engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management, operation, or
control of, be employed by or associated with any business whose products or
activities compete in whole or in part with the current products or activities
of the Acquired Companies, in any of the counties listed on Schedule 9.1 within
the states of Pennsylvania, Ohio, West Virginia, New York and Maryland;
provided, that Sellers may purchase or otherwise acquire up to (but not more
than) five percent of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities
are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934. Sellers
agree that this covenant is reasonable with respect to its duration,
geographical area, and scope.
(b) Sellers will not, directly or indirectly, either for themselves
or any other Person, (i) induce or attempt to induce any employee of an Acquired
Company to leave the employ of such Acquired Company, (ii) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any employee of an
Acquired Company, (iii) employ, or otherwise engage as an employee either of
Scott Turer or Rick Young for six months following the Closing or, if earlier,
until such time as the employment of Scott Turer or Rick Young, as the case may
be, has been terminated by the Acquired Companies, or (iv) induce or attempt to
induce any customer, supplier, licensee, or business relation of an Acquired
Company to cease doing business with such Acquired Company. This covenant shall
not prohibit Sellers from hiring any former employees of an Acquired Company
(except for Scott Turer and Rick Young) sixty (60) days following termination of
employment with such Acquired Company for any reason so long as Sellers did not
induce such employee to quit. A general solicitation of employment, such as a
newspaper advertisement, that is not directed towards employees of the Acquired
Companies will not be deemed to be a violation of this covenant.
(c) Sellers will not, directly or indirectly, either for themselves
or any other Person, solicit the business of any Person known to Sellers to be a
customer of an Acquired Company, whether or not Sellers had personal contact
with such Person, with respect to products or activities which compete with the
products or activities of an Acquired Company.
30
(d) The activities described in Exhibits 7.8 and 7.9 will not be
violative of Sellers' non-compete obligations.
9.2 Confidentiality. Each of Sellers agrees for itself and their
---------------
respective Representatives and affiliates (and all such parties' respective
successors, assigns and Representatives) that from and after the Closing Date,
all Confidential or Proprietary Business Information (as defined below) which is
known to such parties shall be kept confidential by such parties. Each Seller
further agrees for itself and their respective Representatives and affiliates
(and all such parties' respective successors, assigns and Representatives) that
no such party will use (whether or not for monetary gain) or disclose to any
other party such Confidential or Proprietary Business Information. As used
herein, "Confidential or Proprietary Business Information" means all information
related to the businesses of the Acquired Companies which is known by any
Seller, or any of their affiliates or Representatives, other than such
information which (A) is, or becomes, generally available to the public other
than as a result of a breach of this Section 9.2 by any Seller, or any of or
Representative thereof, (B) is hereafter available on a non-confidential basis
to the party to whom such information was disclosed from a source that was, to
the knowledge of the receiving party, entitled to disclose the same or (C) is
compelled by law or a court order or decree to be disclosed by the party to whom
such information was disclosed; provided that, in the case of clause (C) the
receiving party shall use their reasonable efforts (at the expense of the Buyer)
to obtain a protective order or other reliable assurance that confidential
treatment will be accorded any such Confidential or Proprietary Business
Information which is compelled to be disclosed.
9.3 Termination of Commercial's S Corporation Status and Taxable Year. The
-----------------------------------------------------------------
Contemplated Transactions will cause Commercial to terminate its status as an S
corporation. Pursuant to Code Section 1362(e)(1), Commercial shall have two
short taxable years for the year that includes the Closing Date: an "S short
year" beginning April 1 of such year and ending the day before the Closing Date
and a "C short year" beginning on the Closing Date and ending on the next
succeeding close of Buyer's consolidated return taxable year. Accordingly, Buyer
shall allocate Tax items to Commercial's S short year and C short year pursuant
to normal Tax accounting rules (the "closing of the books method") on a basis
consistent with past accounting practice.
9.4 Certain Tax Assets and Liabilities. Notwithstanding anything to the
----------------------------------
contrary contained or implied in this Agreement, the Buyer and the Sellers agree
that: (i) Buyer shall cause Commercial to promptly pay to Joseph H. Shearer and
R. Scott Shearer, on behalf of the Sellers, an amount equal to any refund
received after the Closing by Commercial as a refund of capital stock Taxes
previously paid by Commercial for the years ended March 31, 1993, 1994 and 1995
as a result of the petition filed by Commercial with the Pennsylvania
Commonwealth Court seeking review of a Board of Finance and Revenue Decision
denying Commercial's claim for such refund, net of any tax cost incurred by
Commercial as a result of the receipt thereof; (ii) Sellers shall promptly pay
in full when due, and shall indemnify and hold the Buyer Indemnified Parties
harmless from and against any and all Damages (determined as provided in Section
11.5(c)) incurred by the Buyer Indemnified Parties in connection with, all
capital stock Taxes determined by the Commonwealth of Pennsylvania to be owed by
Commercial for the years ended March 31, 1996, 1997, 1998 and 1999 (including,
without limitation, all interest thereon and penalties with respect thereto or
subsequently refunded for the years ended March 31, 1996,
31
1997, 1998 and 1999); and (iii) Buyer also shall cause Commercial to promptly
pay to Joseph H. Shearer and R. Scott Shearer, on behalf of the Shareholders, an
amount equal to any refund received after the Closing by Commercial of the real
estate taxes imposed upon certain of Commercial's properties located in Fayette
County, Pennsylvania (Tax Parcel 04-38-0001-368.18 acres in Bullskin Township;
Tax Parcel 04-36-0102-106.4 acres in Bullskin Township; and Tax Parcel 06-15-
0064-278.7 acres in Connellsville Township) as a result of appeals previously
filed by Commercial, net of any tax cost incurred by Commercial as a result of
the receipt thereof.
ARTICLE X
TERMINATION
-----------
10.1 Termination Events. This Agreement may, by notice given prior to or at
------------------
the Closing, be terminated:
(a) by Buyer if a material breach of any provision of this Agreement
has been committed by Sellers and such breach has not been waived by Buyer or
cured by Sellers;
(b) by Sellers if a material breach of any provision of this
Agreement has been committed by Buyer and such breach has not been waived by
Sellers or cured by Buyer;
(c) (i) by Buyer if any of the conditions in Article VII has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; (ii) by Sellers, if any of the conditions in Article
VIII has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date; or (iii) on September 10, 1999, by
Buyer if the condition set forth in Section 7.11 has not been satisfied (other
than through the failure of Buyer to comply with its obligations under this
Agreement);
(d) by mutual consent of Buyer and Sellers;
(e) by either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before the
Deadline Date. However, Buyer may, at its election, on or after September 25,
1999, extend the Deadline Date to not later than November 1, 1999 (the
"Extension") by delivering notice thereof at any time to the Sellers; provided,
however, that upon the later to occur of (i) September 30, 1999 and (ii) the
date upon which all of the conditions precedent to the Buyer's obligation to
close set forth in Article VII hereof (disregarding Section 7.10)
(collectively, the "Buyer's Conditions") have been fulfilled (or Sellers are
able and willing to fulfill them and have tendered performance on their part to
Buyer), the Extension shall terminate unless, within five (5) business days
thereafter, Buyer either deposits $7 million (the "Extension Deposit") into
escrow with an escrow agent reasonably satisfactory to Sellers and Buyer
pursuant to an escrow agreement in the form of Exhibit 10.1(e) attached hereto,
or
32
delivers a letter of credit (the "Extension LOC") to the Sellers in the face
amount of $7 million payable to the Sellers as provided in (f) below. The
Sellers may, at their option, cause the Extension of the Deadline Date by
delivering notice thereof at any time to the Buyer; or
(f) by either Buyer or Sellers if the Closing has not occurred by
November 15, 1999.
(g) If (i) the Extension Deposit has been paid or the Extension LOC
has been delivered by the Buyer, (ii) the Closing does not occur on or prior to
the last day of the Extension, and (iii) as of the last day of the Extension all
of the Buyer's Conditions remain fulfilled, then the Sellers shall be entitled
to payment of the Extension Deposit or payment under the Extension LOC and to
retain such amount. In all other events, the Buyer shall be entitled to payment
of and to retain the Extension Deposit or to cancel the Extension LOC.
10.2 Effect of Termination. Each party's right of termination under
---------------------
Section 10.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Article XI and Sections 12.1, 12.2 and 12.3 will
survive.
ARTICLE XI
INDEMNIFICATION; REMEDIES
-------------------------
11.1 Survival. Subject to Section 11.4, all representations, warranties,
--------
covenants, and obligations in this Agreement (including the Schedules hereto),
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing.
11.2 Indemnification and Payment of Damages by Sellers. Subject to Sections
-------------------------------------------------
11.4-11.10 hereof, Sellers, jointly and severally with respect to Damages to the
extent of the Closing Escrow Amount, and severally with respect to all other
Damages, will indemnify and hold harmless Buyer, and Buyer's Representatives,
stockholders, controlling Persons, and affiliates (including, without
limitation, the Acquired Companies) (collectively, the "Buyer Indemnified
Persons") for, and will pay to such Buyer Indemnified Persons the amount of, any
loss, liability, claim, damage or expense (including costs of investigation and
defense and reasonable attorneys' fees), whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by any Seller
in this Agreement or in any certificate or other document delivered by any such
Seller to Buyer pursuant to this Agreement;
(b) any breach by any Seller of any covenant or obligation of any
such Seller in this Agreement or in any certificate or other document delivered
by any such Seller to Buyer pursuant to this Agreement; and
33
(c) any and all Taxes measured or measurable, in whole or in part, by
income (net or gross), revenue, profit or other similar basis imposed on any
Seller or any affiliate of any Seller (including, without limitation, either of
the Acquired Companies ) for, or relating to, all periods ending on or before
the Closing Date, including, without limitation, any Taxes resulting from any
distribution by Commercial contemplated in Section 2.1(f) of this Agreement and
any liability to any third party under any Tax sharing or similar agreement or
arrangement, whether or not written; and
(d) the Release on or prior to the Closing Date of Regulated
Materials on, beneath or adjacent to the William/Walker Property and the
Wilson/Walker Property referred to on Schedule 3.14 hereto (together, the
"Walker Property"), including, without limitation, with respect to the
remediation thereof and the installation of pollution control equipment or other
equipment to bring such Property into compliance with Environmental Law;
provided that any such remediation or installation must be performed under the
direction and control of Sellers, subject to Buyer's approval which will not be
unreasonably withheld or delayed.
Notwithstanding anything in this Agreement to the contrary, the Trust
Seller shall be solely liable for Damages to the Buyer Indemnified Persons
resulting from any (i) breach of representation or warranty by the Trust Seller,
(ii) breach of any covenant or obligation by the Trust Seller, or (iii) any Tax
referred to in Section 11.2(c) relating to the Trust Seller. The Shareholders
and the Partnership Sellers hereby guaranty and act as sureties for any such
Damages. The Buyer Indemnified Persons shall not be required to exhaust their
remedies against the Trust Seller prior to collecting pursuant to such guaranty
and suretyship. The Trust Seller shall not be liable for (w) breach of
representation or warranty by the other Sellers, (x) breach of any covenant or
obligation by the other Sellers, (y) any Tax referred to in Section 11.2(c)
relating to the other Sellers, or (z) the matters referred to in Section
11.2(d).
For the avoidance of doubt, any obligations or liabilities of Sellers which
are several, rather than joint, pursuant to the terms of this Agreement shall be
apportioned among the Sellers pro rata in accordance with their respective
shares of the Purchase Price.
11.3 Indemnification and Payment of Damages by Buyer. Buyer will indemnify
-----------------------------------------------
and hold harmless Sellers and Sellers' Representatives (collectively, the
"Seller Indemnified Persons") and will pay to such Seller Indemnified Persons
the amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any breach of any representation or warranty made by Buyer in
this Agreement or in any certificate or other document delivered by Buyer to the
Sellers pursuant to this Agreement;
(b) any breach by Buyer of any covenant or obligation of Buyer in
this Agreement or in any certificate or other document delivered by Buyer to the
Sellers pursuant to this Agreement; and
(c) the Guarantees.
11.4 Time Limitations. (a) If the Closing occurs, Sellers will not have any
----------------
liability (for indemnification or otherwise) with respect to any representation
or warranty made by Sellers
34
hereunder, unless within 18 months of the Closing Date Buyer notifies Sellers of
a claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer; provided, however, that Sellers shall continue to
have liability (for indemnification and otherwise) indefinitely, with respect to
the representations and warranties of the Sellers contained in Sections 3.1, 3.2
and 3.3 of this Agreement.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty
made by Buyer hereunder, unless within 18 months of the Closing Date Sellers
notify Buyer of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Sellers.
(c) If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to the matters referenced in Section
11.2(d) unless within five years of the Closing Date Buyer notifies Sellers of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer.
11.5 Limitations on Indemnification. (a) Sellers will have no liability
------------------------------
(for indemnification or otherwise) with respect to matters described in Section
11.2(a) for the first $2,000,000 of Damages in the aggregate, which amount shall
constitute a deductible (the "General Deductible"). In addition, if a
representation or warranty is not breached due to the presence therein of the
phrase "Material Adverse Effect", such representation and warranty shall be
deemed to be breached, but Damages to the Buyer Indemnified Persons resulting
from such deemed breaches shall also be subject to an additional deductible of
$3,000,000 in the aggregate (the "MAE Deductible", and together with the General
Deductible, the "Deductibles"). Accordingly:
(i) Damages resulting from breaches of representations that are
not qualified by "Material Adverse Effect" or from breaches of
representations, which breaches have a Material Adverse Effect shall not be
recoverable by Buyer Indemnified Persons until, and then only to the extent
(subject to the Cap), the General Deductible is exceeded; and
(ii) Damages as to which the MAE Deductible applies shall count
first against the MAE Deductible and then against the General Deductible
(to the extent remaining), and shall then be recoverable to the extent in
excess of the combined amount of the General Deductible and the MAE
Deductible (i.e., a maximum of $5,000,000), subject to the Cap.
In no event shall Sellers collectively be liable hereunder for Damages
described in Section 11.2(a) in an aggregate amount more than $8,000,000 (the
"Cap") after giving effect to the Deductibles; provided, that, neither the
Deductibles nor the Cap shall apply with respect to claims made pursuant to
Section 11.2(a) that relate to breaches of Sections 3.1, 3.2, and 3.3.
(b) Sellers will have no liability (for indemnification or otherwise)
with respect to matters described in Section 11.2(d) for the first $250,000 of
Damages in the aggregate, which amount shall constitute a deductible with
respect to such matters. Sellers shall be responsible for the next $250,000 of
such Damages. Thereafter, Buyer shall have the option of retaining the
35
Walker Property and releasing Sellers from any further indemnification liability
with respect thereto. If Buyer does not elect such option, then Sellers can
elect to (i) purchase the Walker Property from Buyer for an amount equal to the
price for which it was originally purchased by Commercial, or (ii) continue to
control and be responsible for the environmental remediation of the Walker
Property at Sellers' expense.
(c) The amount of any payment or reimbursement of Damages by the
indemnifying party shall be: (i) net of the present value of any tax benefits to
the Indemnified Person by reason of the facts and circumstances giving rise to
the indemnifying party's liability (after taking into consideration the tax
effect of the receipt by the Indemnified Person of the indemnification payment);
and (ii) net of any insurance proceeds actually received by the Indemnified
Person in connection with the facts giving rise to the right of indemnification
(after giving effect to an increase in the Indemnified Person's cost of
insurance as a result thereof). The parties agree to use commercially
reasonable efforts to make claims on and pursue recovery with respect to all
insurance on account of such matters.
(d) No indemnifying party hereunder shall be liable for the payment
of special or consequential Damages or Damages for lost profits that have been
suffered directly by an Indemnified Person; however, if special or consequential
Damages or Damages for lost profits have been asserted by a third party against
an Indemnified Person, the indemnifying party shall otherwise be liable
therefore under the provisions of this Article XI.
(e) Buyer hereby waives any right it may have to file a claim for
reimbursement or indemnity against Sellers under the terms of this Agreement
concerning any matter to which it is ultimately determined that Buyer (i) had
actual knowledge prior to the Closing of facts which clearly and obviously
constitute a breach by Sellers of a representation or warranty made under this
Agreement, (ii) has an actual understanding prior to the Closing that such facts
constitute a breach of representation or warranty and (iii) fails to disclose
such knowledge to Sellers prior to Closing.
11.6 Investigation; Waiver. Buyer acknowledges that, except for the
---------------------
representations and warranties of Sellers contained in or made pursuant to
Article III hereof, or in any certificate or schedule delivered pursuant to this
Agreement, neither the Sellers nor their respective Representatives: (i) will be
deemed to have made any representations, warranties or assurances of any kind,
and (ii) will have any liability or obligation to Buyer in respect of any oral
or written statement or assurance made to Buyer in connection with the
Contemplated Transactions including, but not limited to, any information
provided in any offering material prepared by Sellers' Representatives.
11.7 Procedures for Indemnification -- Third Party Claims. (a) Promptly
----------------------------------------------------
after receipt by an Indemnified Person under Section 11.2 or 11.3 of notice of
the commencement of any claim, action or proceeding (including, without
limitation, any notice relating to a tax audit) against it, or the assertion of
any claim by a third Person which the Indemnified Person has reason to believe
may result in a claim for indemnification hereunder (collectively,
"Proceedings"), such Indemnified Person will give notice to the indemnifying
party of such Proceeding, but the failure to notify the indemnifying party will
not relieve the indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the
36
indemnifying party demonstrates that the defense of such action is prejudiced by
the Indemnified Person's failure to give such notice.
(b) Subject to the immediately succeeding sentence, the indemnifying
party will be entitled to control any Proceeding for which indemnification is
sought hereunder. If the indemnifying party, within a reasonable time after
notice of any claim (but in no event to exceed twenty days), fails to take
control of such Proceeding, the Indemnified Person will (upon further notice to
the indemnifying party) have the right to undertake the defense, compromise or
settlement in connection with such Proceeding on behalf of and for the account
and risk of the indemnifying party. The party who is not undertaking the defense
in connection with a Proceeding, may, at its sole expense, participate in (but
not control) such defense.
(c) Anything in this Section 11.7 to the contrary notwithstanding,
the party who is undertaking the defense in connection with a Proceeding shall
not, without the written consent of the other party, which consent shall not be
unreasonably withheld or delayed, settle or compromise any claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff of an unconditional release
from liability of the non-controlling party in respect of such claim.
11.8 Procedure for Indemnification -- 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.
11.9 Cooperation in Connection with Proceedings. The parties hereto agree
------------------------------------------
to cooperate with each other and to provide each other with all information and
documentation reasonably necessary to permit the defense in connection with any
and all Proceedings (including, without limitation tax audits) and to promptly
provide each other party with any and all notices that may be received by any of
them that could reasonably be expected to result in a claim for indemnification
under this Article XI.
11.10 Closing Escrow Amount. Buyer acknowledges and agrees that it shall be
---------------------
obligated to satisfy any Damages to which it is entitled under this Article XI
from the Closing Escrow Amount prior to proceeding against any other assets of
the Sellers; provided, however, that with respect to any Damages as to which the
Cap and the Deductibles do not apply, the Buyer shall not be obligated to first
satisfy such Damages from the Closing Escrow Amount and, with respect to such
Damages, in no way shall Buyer's recourse against the Sellers be limited by the
existence or amount of the Closing Escrow Amount.
ARTICLE XII
GENERAL PROVISIONS
------------------
12.1 Public Announcements. Any public announcement or similar publicity
--------------------
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer and Sellers mutually shall
determine, other than customary post-Closing "tombstone" and similar
announcements. Unless consented to by Buyer or Sellers, as the case may be, in
advance or required by Legal Requirements, prior to the Closing Sellers and
37
Buyer shall keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any third party. For the avoidance of doubt, the
parties acknowledge and agree that this Agreement and the Contemplated
Transactions shall be described and disclosed in a publicly available document
in connection with the offering of securities by the Buyer, provided that with
respect to any such offering prior to Closing, Buyer shall use reasonable
commercial efforts to keep information concerning Commercial, or CATS or the
Contemplated Transactions from being disseminated other than to a limited number
of "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act of 1933, as amended).
12.2 Confidentiality. Until such time as a closing shall have occurred
---------------
hereunder, Buyer and Sellers shall comply with all of the terms and conditions
of that certain Confidentiality Agreement dated May 11, 1999 by and among US
Bancorp Piper Jaffray and the Buyer. From and after the Closing Date, the
provisions of Section 9.2 shall govern the obligations of the parties hereto
with respect to confidentiality.
12.3 Notices. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered or certified mail, return receipt requested,-or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Sellers:
Commercial Stone Co. Inc.
Attn: Scott Turer
2200 Springfield Pike
Connellsville, PA 15425
Joseph H. Shearer
c/o Commercial Stone
2200 Springfield Pike
Connellsville, PA 15425
R. Scott Shearer
c/o Commercial Stone
2200 Springfield Pike
Connellsville, PA 15425
With a copy to:
Reed Smith Shaw & McClay LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David L. DeNinno
38
Buyer:
U.S. Silica Company
P.O. Box 187
Berkeley Springs, WV 25411
Attention: President
With a copy to:
D. George Harris & Associates, Inc.
399 Park Avenue, Thirty-second Floor
New York, New York 10022
Attention: Donald G. Kilpatrick
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Kenneth E. Adelsberg
12.4 Jurisdiction; Service of Process. Each party irrevocably submits to
--------------------------------
the exclusive jurisdiction of (a) the Court of Common Pleas of Westmoreland
County, Pennsylvania, and (b) the United States District Court for the Western
District of Pennsylvania, for the purposes of any suit, action or other
proceeding arising out of this Agreement, any Ancillary Agreement or any
transaction contemplated hereby or thereby. Each party agrees to commence any
such action, suit or proceeding either in the United States District Court for
the Western District of Pennsylvania or if such suit, action or other proceeding
may not be brought in such court for jurisdictional reasons, in the Court of
Common Pleas of Westmoreland County, Pennsylvania. Each party further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in Pennsylvania with respect to any
matters to which it has submitted to jurisdiction in this Section 12.4. Each
party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement, any
Ancillary Agreement or the Contemplated Transactions and thereby in (i) the
Court of Common Pleas of Westmoreland County, Pennsylvania, or (ii) the United
States District Court for the Western District of Pennsylvania, and hereby and
thereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
12.5 Further Assurances; Tax Returns. The parties agree (a) to furnish upon
-------------------------------
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement. The
parties further agree to cooperate with each other and to provide each other
with all information and documentation reasonably necessary (i) to permit the
preparation and
39
filing of all federal, state, local, and other Tax returns and Tax elections
with respect to the Acquired Companies and (ii) to facilitate the timely refund
of the S-Corp Tax Deposit.
12.6 Waiver. The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
12.7 Entire Agreement and Modification. This Agreement supersedes all
---------------------------------
prior agreements, understandings, negotiations and discussions, whether oral or
written, between the parties with respect to its subject matter and constitutes
(along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be modified except by a
written agreement executed by the party to be charged with the modification.
12.8 Assignments, Successors, and No Third-Party Rights. Neither party may
--------------------------------------------------
assign any of its rights or obligations under this Agreement without the prior
written consent of the other parties, except that Buyer may assign its rights
and obligations under this Agreement to one or more of its affiliates, for so
long as such entity remains an affiliate thereof, and Buyer or such affiliate(s)
may assign or grant a security interest in, all of its rights and/or obligations
under this Agreement (i) for collateral security purposes, to the Buyer's
lenders and/or investors as security for Buyer's or any such affiliate's
obligations to such lenders or investors (and such lenders or investors may
exercise remedies with respect to such assignment or security interest), and
(ii) at any time after the Closing, to a purchaser in connection with a sale of
the Acquired Companies or a sale of a substantial component of the Acquired
Companies. Notwithstanding the assignment of rights and obligations under this
Agreement pursuant to the provisions stated hereinabove, it is understood and
agreed that the assignor shall remain responsible for its obligations under this
Agreement and, in the case of a partial assignment, shall be the only party
entitled to enforce the rights and remedies which would otherwise be available
to an assignee of the Agreement. No such assignment shall in any way limit or
restrict the assignor's rights and remedies. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and permitted assigns.
12.9 Severability. If any provision of this Agreement is held invalid or
------------
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.10 Article and Section Headings; Construction. The headings of Sections
------------------------------------------
in this Agreement are provided for convenience only and will not affect its
construction or
40
interpretation. All references to "Article," "Articles,", "Section" or
"Sections" refer to the corresponding Article, Articles, Section or Sections of
this Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
12.11 Time of Essence. With regard to all dates and time periods set forth
---------------
or referred to in this Agreement, time is of the essence.
12.12 Governing Law. This Agreement will be governed by the laws of the
-------------
Commonwealth of Pennsylvania without regard to conflicts of laws principles.
12.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
12.14 Sellers' Knowledge. As used in this Agreement, the term, "knowledge
------------------
of Sellers" or words of similar import mean the actual knowledge by Joseph H.
Shearer, R. Scott Shearer or Scott Turer of a fact, or the knowledge that Joseph
H. Shearer or R. Scott Shearer could reasonably be expected to have based upon
reasonable investigation and inquiry.
12.15 Retention of Records and Access to Information. For a period of ten
----------------------------------------------
(10) years after the Closing Date, the Buyer shall retain and preserve all
business, accounting, tax and other records of the Acquired Companies. Prior to
the destruction of any such records, Buyer shall notify Sellers, in writing, of
Buyer's intention to destroy the records and deliver to Sellers, at Sellers'
expense, all such records requested by Sellers. From and after the Closing date,
Buyer shall afford to Sellers access to said records. Any such access shall be
(i) scheduled and provided on a reasonable basis taking into account the
business requirements of the Buyer; and (ii) for any legal purpose, including,
without limitation, obtaining information necessary in conjunction with the
preparation of tax returns, preparing for a tax audit or other government
investigation or defending against a claim, complaint or action by Buyer or a
third party against Sellers.
12.16 Transaction Fees and Expenses. Each of the parties to this Agreement
-----------------------------
shall bear the fees and expenses incurred by it in connection with the
Contemplated Transactions, including, without limitation, brokers and finders
fees and expenses.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer:
US SILICA COMPANY Sellers:
By:/s/ SHAREHOLDERS:
---------------------
/s/ Joseph H. Shearer
-----------------------------------------
Joseph H. Shearer
41
/s/ R. Scott Shearer
-----------------------------------------
R. Scott Shearer
COMMERCIAL AGGREGATES TRANSPORTATION
AND SALES, L.P.
By: CATS, Inc., General Partner:
By: /s/
---------------------------------------
Title: Pres.
-----------------------------------
By: JHS Family Partnership
By: /s/
--------------------------------------
General Partner
By: RSS Family Partnership
By: /s/
-------------------------------------
General Partner
By: The Dell H. Shearer Granchildren's Trust
By: /s/
-------------------------------------
Co-Trustee
By: /s/
-------------------------------------
Co-Trustee
42
Exhibit 2.1(a)
FORM OF CLOSING ESCROW AGREEMENT
--------------------------------
This ESCROW AGREEMENT (this "Agreement"), dated as of this ____ day of
---------
__________ 1999 is made and entered into by and among MELLON BANK, N.A. (the
"Escrow Agent"), U.S. SILICA COMPANY, a Delaware corporation ("Buyer"), and
-----
JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the "Shareholders"), and
------------
CATS, INC., a Pennsylvania corporation, the JHS FAMILY PARTNERSHIP, a
Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP, a Pennsylvania
limited partnership (collectively, the "Partnership Sellers") and THE DELL H.
-------------------
SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust Seller"; the
------------
Shareholders, the Partnership Sellers and the Trust Sellers being hereinafter
collectively referred to as the "Sellers" and each, individually, as a "Seller")
------- ------
pursuant to the terms of that certain Purchase Agreement dated as of the date
hereof (the "Purchase Agreement") by and among the Buyer and the Sellers.
------------------
In consideration of the mutual premises, obligations and agreements
contained herein, the parties, intending to be legally bound, do hereby agree as
follows:
1. The Escrow Agent acknowledges receipt of the sum of Eight Million
Dollars ($8,000,000.00) deposited by the Buyer (together with any interest
earned thereon and any interest earned on any reinvested funds, the "Closing
-------
Escrow Amount") and hereby accepts its appointment and agrees to act as Escrow
- -------------
Agent and to hold the Closing Escrow Amount and to disburse the Closing Escrow
Amount under the terms and conditions of this Agreement. The Escrow Agent
undertakes to perform only such duties as are expressly set forth herein.
2. (a) If, on the Release Date (as hereinafter defined), the Escrow
Agent shall not, have received a Buyer Demand (as hereinafter defined), the
Escrow Agent shall disburse to [NAME], as agent for the Sellers (the "Seller
------
Agent"), the Closing Escrow Amount on the Release Date. For purposes of this
- -----
Agreement, the term "Release Date" shall mean the [second business day following
------------
the eighteenth (18th) month from the date hereof].
(b) If, at any time after the date hereof up to and including the
Release Date, the Buyer shall file with the Escrow Agent a written and dated
demand (the "Buyer Demand") for the payment to the Buyer of all or a portion of
------------
the Closing Escrow Amount stating (i) that the Buyer is entitled to all or a
portion of such Closing Escrow Amount in satisfaction of a claim for
indemnification pursuant to Article 11 of the Purchase Agreement, which claim
shall be deemed to be against each of the Sellers, jointly and severally, unless
specifically stated otherwise, and (ii) that the Buyer has contemporaneously
delivered a copy of the Buyer Demand to the Seller Agent, the Escrow Agent shall
disburse to the Buyer the requested funds from the Closing Escrow Amount on the
fifteenth (15th) business day following the date of the Buyer Demand unless the
Seller Agent delivers an objection in writing (the "Seller Objection") to the
----------------
Escrow Agent (with a copy to the Buyer) prior to the close of business on the
tenth (10th) business day following the date of the Buyer Demand to the effect
that the Buyer is not so entitled, in which case no disbursement shall be made
by the Escrow Agent from the Closing Escrow Amount pursuant to the Buyer Demand
except in accordance with the terms and conditions hereof. The Escrow Agent
agrees to provide the Seller Agent with a copy of any Buyer Demand and to
provide the Buyer with a copy of any Seller Objection, in each case within two
business days after receipt by the Escrow Agent thereof.
(c) At any time after the date of the Closing, the Escrow Agent may be
advised in writing by the Buyer and the Seller Agent to pay all or a portion of
the Closing Escrow Amount pursuant to a joint written instruction (the "Joint
-----
Instruction"), in which case the Escrow Agent shall pay the Closing Escrow
- -----------
Amount, or portion thereof, in accordance with the terms and in the manner set
forth in such Joint Instruction.
(d) If the Buyer and the Seller Agent are unable to resolve any
disagreement with respect to their rights to the payment of all or a portion of
the Closing Escrow Amount pursuant to this Section 2 within twenty (20) business
days after the date of a Seller Objection, the dispute shall be settled as
provided in Section 4 hereof.
(e) The Escrow Agent shall hold the Closing Escrow Amount until it is
required to disburse it pursuant to this Section 2 or as provided in Sections
3(c) or 4 hereof. Upon delivery of the entire Closing Escrow Amount by the
Escrow Agent pursuant to this Section 2 or as provided in Sections 3(c) or 4
hereof, this Escrow Agreement shall terminate. The date upon which such
termination occurs shall be the "Termination Date."
----------------
(f) The Seller Agent and the Buyer each agree that they will give to
each other the copies of any Buyer Demand or Seller Objection, as the case may
be, concurrently with the delivery thereof to the Escrow Agent.
(g) If any of the Closing Escrow Amount is withheld pursuant to the
terms of paragraph (b) of this Section 2, the parties agree to provide the
Escrow Agent with a Joint Instruction upon the resolution of any claim which
caused the withholding of funds and upon receipt of such Joint Instruction, the
Escrow Agent shall release such funds in accordance with such Joint Instruction.
3. (a) Pending disbursement of funds held by it hereunder, the Escrow
Agent shall keep the Closing Escrow Amount invested in FDIC insured certificates
of deposit, obligations of the United States federal government (or any agency
thereof) or money market accounts of the Escrow Agent at market rates, maturing
in each case in ninety (90) days or less (each a "Permitted Investment"). The
--------------------
Seller Agent shall direct the Escrow Agent as to which Permitted Investment(s)
the Escrowed Amount shall be invested.
(b) Any interest earned on the originally deposited Closing Escrow
Amount, as well as any interest earned on any reinvested funds, shall be held by
the Escrow Agent as, and shall be deemed to be, part of the Closing Escrow
Amount and shall be disbursed pursuant to the terms of Sections 2, 3(c) and 4
hereof.
(c) Except as provided below in this subparagraph (c), the [Buyer]
shall be responsible for any federal, state or local taxes and any other
assessments which may be imposed and payable with respect to the earnings on the
Closing Escrow Amount (collectively, "Taxes"). To cover the payment by [Buyer]
-----
of such Taxes, the Escrow Agent shall, not later than 30 days after the end of
each calendar year during the term of this Agreement, disburse to the [Buyer] an
amount of cash equal to (i) the earnings on the Closing Escrow Amount for such
calendar year
2
multiplied by (ii) 45%. With respect to any earnings on the Closing Escrow
Amount as to which Taxes have not yet been paid as of the Termination Date, such
earnings shall be treated as taxable income to the party or parties to whom such
amounts are distributed and such party or parties shall be solely responsible
for any Taxes which may be imposed on such amounts. The Escrow Agent shall
deliver to the Buyer and each of the Sellers such forms as may be required by
law reporting such earnings as income of the Buyer or the Sellers, as the case
may be.
4. (a) Any controversy or claim arising out of or relating to this
Agreement or the rights of the Buyer or the Sellers to the payment of all or a
portion of the Closing Escrow Amount shall be settled in accordance with Section
12.4 of the Purchase Agreement. The Escrow Agent shall not be a party to any
such proceedings.
(b) Any portion of the Closing Escrow Amount being held pending
resolution of controversies or claims may also be disbursed in accordance with
the terms of a Joint Instruction.
5. (a) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(b) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct. The Sellers and the Buyer, jointly and
severally, shall indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
actually and reasonably incurred without gross negligence or bad faith on the
part of the Escrow Agent, arising out of and in connection with this Agreement.
Without limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from its own gross
negligence or willful misconduct) in the investment or reinvestment of the
Closing Escrow Amount, or any loss of interest incident to any such delays.
(c) The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument, arbitration award or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(d) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted in good faith in accordance with such advice.
3
(e) The Escrow Agent does not have any interest in the Closing Escrow
Amount but is serving as escrow holder only and having only possession thereof.
Any payments of income from the Closing Escrow Amount shall be subject to
applicable withholding regulations then in force with respect to United States
taxes. The Sellers and the Buyer will provide the Escrow Agent with appropriate
W-9 forms for tax identification number certification. This paragraph and
paragraph (b) of this Section 5 shall survive notwithstanding termination of
this Agreement or the resignation of the Escrow Agent.
(f) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in taking or refraining from taking any action with respect to any
amounts deposited hereunder.
(g) The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Closing Escrow Amount to any successor Escrow
Agent jointly designated by the Seller Agent and the Buyer in writing, or to any
court of competent jurisdiction, whereupon the Escrow Agent shall be discharged
of and from any and all further obligations arising in connection with this
Agreement. The resignation of the Escrow Agent will take effect on the earlier
of (i) the appointment of a successor (including by a court of competent
jurisdiction) or (ii) the day which is thirty (30) days after the date of
delivery of its written notice of resignation to the other parties hereto. If
at that time the Escrow Agent has not received a designation of a successor
Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to
safekeep the Closing Escrow Amount until receipt of a designation of successor
Escrow Agent pursuant to a Joint Instruction or a final order of a court of
competent jurisdiction.
(h) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely in good faith without any liability upon the contents
thereof.
(i) In the event of any disagreement between the Sellers and the
Buyer resulting in adverse claims or demands being made in connection with the
Closing Escrow Amount, or in the event that the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent shall be
entitled to retain the Closing Escrow Amount until the Escrow Agent shall have
received (i) a Joint Instruction directing delivery of the Closing Escrow
Amount; or (ii) a final non-appealable order of a court of competent
jurisdiction directing the delivery of the Closing Escrow Amount.
(j) [The Escrow Agent to be paid from interest in account.]
6. Each Seller hereby appoints [NAME] as the Seller Agent, and [NAME]
hereby accepts such appointment, to act as such Seller's exclusive agent and
attorney-in-fact to act on its behalf in connection with, and to facilitate the
consummation of, the transactions contemplated by this Agreement. The Seller
Agent shall take, and each Seller agrees that the Seller Agent is irrevocably
authorized and empowered in the name and on behalf of each Seller to take, any
and all actions which the Seller Agent deems necessary or appropriate under this
Agreement to be taken for and on behalf of each Seller, as fully as if such
party was acting on his own behalf, which shall include, without limitation, the
power and authority to (i) accept notices hereunder on behalf of the Sellers, to
issue or determine not to issue, as the case may be, Seller Objections
4
in response to Buyer Demands, (ii) agree to such amendments or modifications to
this Agreement as the Seller Agent, in his sole discretion, determines to be
desirable, (iii) execute and deliver such waivers and consents in connection
with this Agreement as the Seller Agent, in his sole discretion, may deem
necessary or desirable, (iii) collect and receive all moneys and other proceeds
and property payable to the Sellers pursuant to the terms of this Agreement;
(iv) enforce and protect the rights and interests of the Sellers or to refrain
from enforcing any right of the Seller, as the case may be, (v) settle or
compromise any claims asserted under this Agreement; and (vi) file and prosecute
appeals from any decision, judgment or award rendered in any such action,
proceeding or investigation as the Seller Agent, in his sole discretion, may
deem necessary or desirable.
7. Neither party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other parties, except as
provided in Section 5 with respect to a resignation by the Escrow Agent and
except that Buyer may assign its rights and obligations under this Agreement to
one or more of its affiliates, for so long as such entity remains an affiliate
thereof, and Buyer or such affiliate(s) may assign or grant a security interest
in, all of its rights and/or obligations under this Agreement (i) for collateral
security purposes, to the Buyer's lenders and/or investors as security for
Buyer's or any such affiliate's obligations to such lenders or investors (and
such lenders or investors may exercise remedies with respect to such assignment
or security interest), and (ii) to a purchaser in connection with a sale of the
Acquired Companies (as defined in the Purchase Agreement) or a sale of a
substantial component of the Acquired Companies. Notwithstanding the assignment
of rights and obligations under this Agreement pursuant to the provisions stated
hereinabove, it is understood and agreed that the assignor shall remain
responsible for its obligations under this Agreement and, in the case of a
partial assignment, shall be the only party entitled to enforce the rights and
remedies which would otherwise be available to an assignee of the Agreement. No
such assignment shall in any way limit or restrict the assignor's rights and
remedies. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and permitted assigns. This
Agreement will be governed by the laws of the Commonwealth of Pennsylvania
without regard to conflicts of laws principles.
8. This Agreement may not be modified except by a written agreement
executed by the party to be charged with the modification.
9. All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered or certified mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
5
To the Escrow Agent:
[To be provided]
To the Sellers or the Seller Agent:
[To be provided]
With a copy to:
Reed Smith Shaw & McClay LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David L. DeNinno
Telecopier No.: 412-288-3063
To the Buyer:
U.S. Silica Company
P.O. Box 187
Berkeley Springs WV 25411
Attention: President
Telecopier No.: 304-258-3500
With a copy to:
D. George Harris & Associates, Inc.
399 Park Avenue, Thirty-second Floor
New York, New York 10022
Attention: Donald G. Kilpatrick
Telecopier No.: 212-207-6470
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Kenneth E. Adelsberg
Telecopier No.: 212-858-1500
10. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
11. The term "business day" as used in this Agreement shall mean any day
other than a Saturday, Sunday, or public holiday under the laws of the
Commonwealth of Pennsylvania.
6
12. THE BUYER, THE SELLERS AND THE ESCROW AGENT SPECIFICALLY WAIVE THE
RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS
AGREEMENT. The Buyer and the Sellers agree that any legal action or proceeding
brought against the Escrow Agent, or to which the Escrow Agent is joined,
relating to this Agreement or the Escrow Agent's performance hereunder, shall be
brought exclusively in any state or federal court sitting in Pennsylvania, and
the Buyer and the Sellers each waive, to the fullest extent permitted by law,
(a) any objection that any of them may respectively, now or hereafter, have to
the laying of the venue of any such action or proceeding brought in any such
court, and (b) any claim that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
[THE ESCROW AGENT]
By:_____________________________________
Name:
Title:
U.S. SILICA COMPANY
By:_____________________________________
Name:
Title:
Sellers:
SHAREHOLDERS:
________________________________________
Joseph H. Shearer
________________________________________
R. Scott Shearer
7
COMMERCIAL AGGREGATES
TRANSPORTATION AND SALES, L.P.
By: CATS, Inc., General Partner:
By:_____________________________________
Title:
By: JHS Family Partnership
By:_____________________________________
General Partner
By: RSS Family Partnership
By:_____________________________________
General Partner
By: The Dell H. Shearer Granchildren's
Trust
By:_____________________________________
Co-Trustee
By:_____________________________________
Co-Trustee
SELLER AGENT:
________________________________________
[NAME]
8
Exhibit 2.4(a)(iv)
FORM OF CONSULTING AGREEMENT
THIS AGREEMENT is entered into as of ____________, 1999, between Commercial
Stone Co., Inc., a Pennsylvania corporation (the "Company"), and [Joseph H.
Shearer/R. Scott Shearer], a resident of the State of Pennsylvania ("Shearer").
WHEREAS, pursuant to a Purchase Agreement (the "Purchase Agreement") dated
as of ___________, 1999, U.S. Silica Company, a Delaware corporation ("U.S.
Silica"), has purchased all of the issued and outstanding shares of common stock
of the Company, including, without limitation, those owned by Shearer; and
WHEREAS, Shearer has extensive contacts, relationships and expertise in the
aggregates and asphalt businesses, which relationships and expertise are of
significant benefit to the Company in both the transition of the business to the
ownership of U.S. Silica and in the continued success of the aggregates and
asphalt businesses of the Company; and
WHEREAS, each of U.S. Silica and Shearer desires that Shearer continue his
involvement with the business of the Company and to contribute to its continued
success; and
WHEREAS, U.S. Silica and the Company desire that the Company engage Shearer
in a consulting role to advise the Company in his areas of expertise, and
Shearer desires to perform certain services as requested by the Company.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained, the parties, intending to be legally bound, agree as follows:
1. Consulting Services. Subject to the terms and conditions stated
-------------------
herein, the Company agrees to engage Shearer during the Term (as defined herein)
to perform, as a consultant of the Company, such services as may be reasonably
requested of Shearer from time to time by the Board of Directors (the "Board")
or the President of the Company (the "President"), as the Board's designee, and
Shearer accepts such engagement. Such consulting services will be primarily
related to facilitating the transition of the ownership of the business of the
Company to U.S. Silica, in maintaining and acquiring business relationships and
in assisting with the day-today operations of the Company. Shearer agrees to
perform his duties in a diligent, trustworthy and efficient manner. Shearer
shall provide consulting services to the Company on a full time basis during the
Term, consistent with past practice (including vacation practices).
2. Term. The term of Shearer's engagement by the Company hereunder shall
----
commence as of the date hereof and shall continue through the close of business
on May 1, 2000, unless his engagement is sooner terminated as provided herein
(the "Term").
3. Compensation. (a) During the Term, the Company shall compensate
------------
Shearer at the rate of [CURRENT ANNUAL SALARY] per year, payable monthly in
arrears commencing on _____________, 1999 and thereafter on the first day of
each month during the Term, for the
performance of consulting services hereunder (the "Consulting Fee"). The payment
of the Consulting Fee and the provision to Shearer the medical and life
insurance benefits as provided in paragraph 5 below shall be the only
compensation paid by the Company to Shearer for the performance of services
hereunder.
(b) If this Agreement is terminated by the Company without Cause (as
defined below) or by Shearer for Good Reason (as defined below), the Company
shall continue to pay Shearer, his legal representative, or his estate, for the
remainder of the Term, in accordance with subsection (a) above.
(c) If this Agreement is terminated by the Company for Cause, by
Shearer without Good Reason or as a result of the death or disability of
Shearer, the Company shall pay to Shearer and Shearer shall be entitled only to
that amount of the Consulting Fee that has been earned but not yet paid as of
the date of such termination as well as any unpaid business expenses owed to
Shearer pursuant to paragraph four (4) of this Agreement. For purposes hereof
"disability" shall mean any mental or physical disability of Shearer, which, in
the reasonable judgment of the Company, prevents Shearer from performing his
duties hereunder for an aggregate of two (2) months during the Term.
4. Business Expenses. The Company will reimburse Shearer for all
-----------------
reasonable out-of-pocket business expenses (including travel expenses incurred
travelling to and from Connellsville or other locations requested by the
Company, in each case, while on vacation) incurred by Shearer in performing his
duties hereunder during the Term; provided, that, Shearer shall promptly submit
such documentation therefor as may be requested by the Company, all in
accordance with the reimbursement policies of the Company then in effect.
5. Health and Life Insurance. During the Term hereof, the Company will
-------------------------
maintain, at the Company's expense, the existing health insurance coverage for
Shearer and Shearer's dependents and the existing life insurance coverage on
Shearer, all under the Company's existing plans.
6. Termination. (a) This Agreement may be terminated by either party,
-----------
with or without Cause, effective upon contemporaneous written or oral notice to
the other party.
(b) For purposes of this Agreement: "Cause" shall mean (i) any act of
personal dishonesty of Shearer at the expense of the Company; (ii) willful and
continued refusal to carry out a lawful and express directive from the Board or
the President after having had a reasonable time to do so; (iii) conviction of a
felony involving moral turpitude; (iv) failure by Shearer to perform specific
duties requested hereunder, which failure is not remedied in a reasonable period
of time after receipt of written notice from the Board or the President or (v)
material breach by Shearer of any provision of this Agreement; and "Good Reason"
shall mean a material breach by the Company of any provision of this Agreement.
7. Nondisclosure of Confidential Information. The provisions of Section
-----------------------------------------
9.2 of the Purchase Agreement are incorporated by reference herein as though
fully set forth herein and Shearer hereby agrees to comply with the obligations
of the Sellers as set forth therein.
2
8. Independent Contractor. (a) In the performance of the services to be
----------------------
provided hereunder, Shearer shall act solely as an independent contractor, and
nothing herein contained or implied will at any time be construed so as to
create the relationship of employer and employee, partnership, principal and
agent, or joint venturer as between the Company and/or any of its affiliates, on
the one hand, and Shearer, on the other. Shearer shall have no authority to
bind the Company and/or any of its affiliates in any way and shall not represent
to any person that he has such authority.
(b) All taxes applicable to any amounts paid by the Company to Shearer
under this Agreement shall be paid by Shearer, and the Company shall not
withhold or pay any amount for federal, state or municipal income tax, social
security, unemployment or worker's compensation. Upon request by the Company,
Shearer will provide documentation evidencing compliance with all applicable
federal, state and municipal income tax and/or self-employment tax laws in
regard to amounts received under this Agreement.
9. Severability, Invalidity or Unenforceability. If any provision of
--------------------------------------------
this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
10. Notices. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered or certified mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
If to Shearer:
[Joseph H./R. Scott] Shearer
____________________________
____________________________
____________________________
Telecopier No.:
If to the Company:
c/o U.S. Silica Company
P.O. Box 187
Berkeley Springs WV 25411
Attention: President
Telecopier No.: 304-258-3500
With a copy to:
3
D. George Harris & Associates, Inc.
399 Park Avenue, Thirty-second Floor
New York, New York 10022
Attention: Donald G. Kilpatrick
Telecopier No.: 212-207-6426
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Kenneth E. Adelsberg
Telecopier No.: 212-858-1500
11. Miscellaneous. (a) The rights and remedies of the parties to this
-------------
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
(b) The parties hereto agree that the obligations of Sections 7
through 11, inclusive, will survive the termination of this Agreement for any
reason.
(c) Buyer may assign its rights and obligations under this Agreement
to one or more of its affiliates, for so long as such entity remains an
affiliate thereof. Notwithstanding the assignment of rights and obligations
under this Agreement pursuant to the provisions stated hereinabove, it is
understood and agreed that the assignor shall remain responsible for its
obligations under this Agreement and, in the case of a partial assignment, shall
be the only party entitled to enforce the rights and remedies which would
otherwise be available to an assignee of the Agreement. No such assignment
shall in any way limit or restrict the assignor's rights and remedies and no
such assignment shall materially change the nature or scope of Shearer's duties
from those reasonably expected to be performed for the Company as it exists at
the time of this Agreement. The consulting services to be performed by Shearer
under this Agreement are personal in nature to the Company, and, therefore,
Shearer may not assign his rights under this Agreement. Any attempted
assignment by Shearer will be void and of no force or effect. Subject to the
preceding sentences, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and permitted assigns.
(d) This Agreement may not be modified except by a written agreement
executed by the party to be charged with the modification.
4
(e) This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
(f) This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter.
(g) This Agreement will be governed by the laws of the Commonwealth of
Pennsylvania without regard to conflicts of laws principles. Section 12.4 of
the Purchase Agreement with respect to jurisdiction and service of process is
incorporated herein by reference as though fully set forth in its entirety
herein. IN ANY ACTION OR PROCEEDING BROUGHT BEFORE ANY COURT RELATING TO THIS
AGREEMENT, THE COMPANY AND SHEARER SPECIFICALLY WAIVE ANY RIGHT TO A TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
COMMERCIAL STONE CO., INC.
By:____________________________
Name:
Title:
_______________________________
[JOSEPH H./R. SCOTT] SHEARER
5
Exhibit 2.4(b)(i)
AMOUNTS
See wire transfer instructions (to be provided).
Exhibit 3.20
AGGREGATE RESERVES
See Schedule 3.20.
Exhibit _____
August 11, 1999
U.S. Silica Company
Route 522 North
P.O. Box 187
Berkeley Springs, WV 25411
Attention of Richard E. Goodell
Gary E. Bockrath
Project Rock
$250,000,000 Senior Secured Credit Facilities
$150,000,000 Senior Subordinated Facility
Commitment Letter
-----------------------------------------------
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase"), Chase Securities Inc.
-----
("CSI"), Banque Nationale de Paris ("BNP") and BNP Capital Markets, LLC
--- ---
("BNPCM") that (a) pursuant to a Purchase Agreement to be entered into among (i)
-----
U.S. Silica Company, a Delaware corporation (the "Borrower"), in which Chase
--------
Capital Partners and D. George Harris & Associates Company, Inc. (together, the
"Sponsors") together own a majority indirect equity interest, and (ii) CATS,
--------
Inc., a Pennsylvania corporation, JHS Family Partnership, a Pennsylvania limited
partnership, RSS Family Partnership, a Pennsylvania limited Partnership, the
Dell H. Shearer Grandchildren's Trust, Joseph H. Shearer and R. Scott Shearer
(collectively, the "Sellers"), the Borrower will effect the Acquisitions (such
-------
term and each other capitalized term used but not defined herein having the
meanings assigned to them in the Term Sheets (as defined below)) and (b) the
Borrower will repay the Existing Indebtedness. You have further advised Chase,
CSI, BNPCM and BNP that, in connection with the Transactions, (a) the Borrower
will obtain the Senior Facilities (as defined in the Summary of Principal Terms
and Conditions attached hereto as Exhibit A (the "Senior Facilities Term
----------------------
Sheet")) and (b) the Borrower will either (i) issue not less than $150,000,000
- -----
in aggregate principal amount of its senior subordinated notes (the "Senior
------
Subordinated Notes") in a public offering or in a Rule 144A or other private
- ------------------
placement or (ii) if the Borrower is unable to issue the Senior Subordinated
Notes on or prior to the Closing Date, borrow not less than $150,000,000 in
senior subordinated loans from one or more lenders under the Senior Subordinated
Facility (as defined in the Summary of Principal Terms and Conditions attached
hereto as Exhibit B (the "Senior Subordinated Facility Term Sheet" and, together
---------------------------------------
with the Senior Facilities Term Sheet, the
"Term Sheets")). The Senior Facilities and the Senior Subordinated Facility are
-----------
collectively referred to herein as the "Facilities".
----------
In connection with the Transactions, (a) Chase is pleased to advise you of
(i) its commitment to provide $150,000,000 of the Senior Facilities, upon the
terms and subject to the conditions set forth or referred to in this Commitment
Letter and in the Senior Facilities Term Sheet, and (ii) its commitment to
provide $100,000,000 of the Senior Subordinated Facility, upon the terms and
subject to the conditions set forth or referred to in this Commitment Letter and
the Senior Subordinated Facility Term Sheet, and (b) BNP is pleased to advise
you of (i) its commitment to provide $100,000,000 of the Senior Facilities, upon
the terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Senior Facilities Term Sheet, and (ii) its
commitment to provide $50,000,000 of the Senior Subordinated Facility, upon the
terms and subject to the conditions set forth or referred to in this Commitment
Letter and in the Senior Subordinated Facility Term Sheet. You hereby appoint
CSI to act, and CSI hereby agrees to act, as sole and exclusive advisor, book
manager, lead arranger, syndication agent and documentation agent for the Senior
Facilities and the Senior Subordinated Facility, on the terms and subject to the
conditions set forth or referred to in this Commitment Letter and in the Term
Sheets.
It is understood and agreed that (a) BNP will act as sole and exclusive
administrative agent and collateral agent for the Facilities and after the
Closing Date will, in such capacities, perform the duties customarily associated
with such roles and (b) no additional agents, co-agents, book managers,
arrangers or co-arrangers will be appointed and no other titles awarded in
connection with the Facilities without the approval of Chase and CSI.
Chase and BNP reserve the right, prior to or after the execution of
definitive documentation for the Facilities, to syndicate all or a portion of
their commitments hereunder to one or more financial institutions, reasonably
acceptable to you and CSI, that will become parties to such definitive
documentation pursuant to syndication to be managed by CSI (the financial
institutions becoming parties to such definitive documentation being
collectively referred to as the "Lenders"). It is understood and agreed that
-------
pursuant to the syndication of the Senior Facilities, (a) until the amount of
Chase's commitment in respect of the Senior Facilities has been reduced to
$100,000,000 all commitments to the Senior Facilities received from other
Lenders will reduce Chase's commitment in respect of the Senior Facilities and
(b) after the amount of Chase's commitment in respect of the Senior Facilities
has been reduced to $100,000,000, all commitments to the Senior Facilities
received from other Lenders will reduce Chase's and BNP's commitments in respect
of the Senior Facilities in equal amounts. It is further understood and agreed
that pursuant to the syndication of the Senior Subordinated Facility, (a) until
the amount of Chase's commitment in respect of the Senior Subordinated Facility
has been reduced to $50,000,000, all commitments to the Senior Subordinated
Facility received from other Lenders will reduce Chase's commitment in respect
of the Senior Subordinated Facility and (b) after the amount of Chase's
commitment in respect of the Senior Subordinated Facility has been reduced to
$50,000,000, all commitments to the Senior Subordinated Facility received from
other Lenders will reduce Chase's and BNP's commitments in respect of the Senior
Subordinated Facility in equal amounts. It is also understood and agreed that,
until CSI notifies BNP that the syndications of the Facilities have been
completed, BNP will not assign any portion of its commitments or loans in
respect of the Facilities other than pursuant
2
to the syndications to be managed by CSI pursuant to this Commitment Letter. You
understand that CSI intends to commence syndication efforts promptly, and you
agree actively to assist CSI in completing timely and orderly syndications
satisfactory to CSI. Such assistance shall include (a) your using commercially
reasonable efforts to ensure that the syndication efforts benefit materially
from your existing lending relationships and the existing lending relationships
of the Sponsors, Holdings and the Targets, (b) direct contact during the
syndication between senior management, representatives and advisors of the
Sponsors, Holdings, the Targets and you, on the one hand, and the proposed
Lenders, on the other hand, (c) assistance (including the use of commercially
reasonable efforts to cause the Sponsors, Holdings, the Targets, the Sellers and
your and their respective affiliates and advisors to assist) in the preparation
of a Confidential Information Memorandum for each of the Facilities and other
marketing materials to be used in connection with the syndications and (d) the
hosting, with CSI, of one or more meetings of prospective Lenders.
Chase and CSI shall be entitled, after consultation with you, to change the
pricing, terms and structure of the Facilities if the syndications have not been
completed and if Chase and CSI determine that such changes are advisable in
order to ensure a successful syndication of any of the Facilities, provided that
--------
(a) the aggregate amount of the Facilities remains unchanged and (b) the
interest rate on each of the Facilities and the commitment fees will not
increase by more than 75 basis points per annum.
It is understood and agreed that CSI will, after consultation with you,
manage all aspects of the syndications, including selection of Lenders from a
list of Lenders reasonably acceptable to you, determination of when CSI will
approach potential Lenders and the time of acceptance of the Lenders, any naming
rights and the final allocations of the commitments among the Lenders. It is
also understood and agreed that the amount and distribution of fees among the
Lenders will be at CSI's discretion. To assist CSI in its syndication efforts,
you agree promptly to prepare and provide (and to use commercially reasonable
efforts to cause the Sellers and the Targets to provide) to CSI and Chase all
information with respect to Holdings and its subsidiaries, the Acquired
Businesses and their subsidiaries, the Transactions and the other transactions
contemplated hereby, including all financial information and projections (the
"Projections"), as CSI or Chase may reasonably request in connection with the
- ------------
arrangement and syndication of the Facilities. You hereby represent and
covenant that (a) all information other than the Projections (the "Information")
-----------
that has been or will be made available to Chase or CSI by or on behalf of you
or any of your authorized representatives, when taken as a whole, is or will be,
when furnished, complete and correct in all material respects and does not or
will not, when furnished, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (b) the Projections that have been or will be
made available to Chase or CSI by or on behalf of you or any of your authorized
representatives have been or will be prepared in good faith based upon
assumptions that are believed by you to be reasonable at the time made and at
the time the related Projections are made available to Chase or CSI, it being
understood the Projections do not constitute a guarantee of actual performance.
You agree that if, at any time from and including the date hereof until the
closing of the Facilities, any of the representations in the preceding sentence
would be incorrect if the Information and Projections were being furnished, and
such representations were being made, at such time, then you will promptly
supplement the Information and the Projections, to the extent
3
of information known to you, so that such representations will be correct under
those circumstances. In arranging the Facilities, including the syndication of
the Facilities, Chase and CSI will be entitled to use and rely primarily on the
Information and the Projections without responsibility for independent
verification thereof.
As consideration for Chase's and BNP's commitments hereunder and CSI's
agreement to structure, arrange and syndicate the Facilities and to provide
advisory services in connection therewith, you agree to pay to Chase and BNP,
the fees as set forth in the Terms Sheets and in the Fee Letter dated the date
hereof and delivered herewith with respect to the Facilities (the "Fee Letter").
----------
Once paid, such fees shall not be refundable under any circumstances.
Chase's and BNP's commitments hereunder are subject to (a) Chase's
completion of, and satisfaction in all respects with, its ongoing due diligence
investigation of the Acquired Businesses and their subsidiaries with respect to
legal matters (including but not limited to tax, environmental and employee
benefit matters), (b) Chase's not having discovered or otherwise becoming aware
of information not previously disclosed to Chase that is materially inconsistent
with information provided to Chase prior to the date hereof with respect to the
business, results of operations, assets, financial condition or prospects of
Holdings and its subsidiaries or the Acquired Businesses and their subsidiaries,
(c) there not having occurred any event, condition or circumstance that has had
or is reasonably likely to have a material adverse effect on the business,
results of operations, assets or financial condition of (i) Holdings and its
subsidiaries since December 31, 1998, or (ii) the Acquired Businesses and their
subsidiaries since March 31, 1999, in each case taken as a whole, (d) there not
having occurred and being continuing a material disruption of or material
adverse change in financial, banking or capital market (including, without
limitation, high-yield market) conditions that, in Chase's reasonable judgment,
could materially impair the syndication of any Facility or the issuance of the
Senior Subordinated Notes, (e) the negotiation, execution and delivery of
definitive documentation (similar to the Existing Credit Agreement and documents
related thereto (subject to such additions, deletions and other modifications as
are reasonably requested by Chase and CSI, including to reflect the Transactions
and the changes in the credit profile and capital structure of Holdings and its
subsidiaries after giving effect to the Transactions), and not inconsistent with
the terms set forth herein, including but not limited to the terms set forth in
the Term Sheets) with respect to the Facilities satisfactory to Chase and its
counsel and (f) the other conditions set forth in the Term Sheets. Those
matters that are not covered by or made clear under the provisions hereof and of
the Term Sheets are subject to the approval and agreement of Chase, CSI and you.
You agree that, in the event loans are made under the Senior Subordinated
Facility, you will cause to be deposited into escrow on the Closing Date the
Warrants referred to in the Warrant Letter of even date herewith among Chase,
BNP, BNPCM, CSI and you (the "Warrant Letter").
--------------
You agree to engage one or more investment banks (collectively, the
"Investment Bank") reasonably satisfactory to the Lenders to publicly sell or
- ----------------
privately place unsecured debt securities of the Borrower (the "Securities")
----------
that will provide gross proceeds in an amount equal to the proposed amount of
the Senior Subordinated Facility or, once the Senior Subordinated Facility has
been funded, in an amount sufficient to repay all or any portion of the
principal amount then
4
outstanding under the Senior Subordinated Facility. You further agree, subject
to the remainder of this paragraph, to take actions reasonably necessary or
desirable so that the Investment Bank can publicly sell or privately place the
Securities. Upon notice by the Investment Bank (a "Securities Demand") that in
-----------------
its opinion market conditions are such that the conditions specified in clauses
(i) and (iii) of the following proviso can be satisfied, at any time and from
time to time prior to the first anniversary of the Closing Date if all loans
under the Senior Subordinated Facility shall not have been made or repaid in
full, the Borrower will cause the issuance and sale of Securities upon such
terms and conditions as specified in the Securities Demand (it being understood
that there may be more than one Securities Demand), provided that (i) the
--------
interest rate (whether floating or fixed) shall be determined by the Investment
Bank in light of the then-prevailing market conditions but in no event shall the
effective yield (excluding any effective yield on the Warrants) on the
Securities exceed the greater of (x) 15.0% per annum and (y) the Treasury Rate
(as such term is defined in the Senior Subordinated Facility Term Sheet) plus
900 basis points; (ii) the Investment Bank and the Borrower shall determine
whether the Securities shall be issued through a public offering or a private
placement; (iii) the maturity of any Securities shall not be earlier than the
date that is ten years after the Closing Date; (iv) the Securities shall be
issued pursuant to an indenture or other governing document in the form
negotiated by the Borrower and the Investment Bank, which shall contain such
terms, conditions and covenants as are typical and customary for similar
financings and as are reasonably satisfactory in all respects to the Investment
Bank and its counsel and the Borrower and its counsel; and (v) all other
arrangements with respect to the Securities shall be reasonably satisfactory in
all respects to the Investment Bank and the Borrower in light of the then-
prevailing market conditions.
By executing this Commitment Letter, you agree (a) to indemnify and hold
harmless CSI, Chase, BNP, BNPCM and their respective officers, directors,
employees, affiliates, agents and controlling persons from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to
which any such persons may become subject arising out of or in connection with
any claim, litigation, investigation or proceeding relating to this Commitment
Letter, the Fee Letter, the Warrant Letter, the Term Sheets, the Transactions,
the Facilities or any related transaction, regardless of whether any of such
indemnified parties is a party thereto, and to reimburse each of such
indemnified parties upon demand for any reasonable legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified party,
- --------
apply to losses, claims, damages, liabilities or related expenses to the extent
they are found in a final judgment of a court to have resulted from the willful
misconduct or gross negligence of such indemnified party, and (b) to reimburse
CSI, Chase, BNPCM and BNP from time to time, upon presentation of a summary
statement, for all reasonable out-of-pocket expenses (including but not limited
to reasonable out-of-pocket expenses of Chase's due diligence investigation,
reasonable consultants' fees, syndication expenses, travel expenses and
reasonable fees, disbursements and other charges of counsel) incurred in
connection with the Facilities and the preparation of this Commitment Letter,
the Term Sheets, the Fee Letter, the Warrant Letter, the definitive
documentation for the Facilities and any security arrangements in connection
therewith. Notwithstanding any other provision of this Commitment Letter, no
indemnified party shall be liable for any damages arising from the use by others
of information or other materials obtained through electronic,
telecommunications or other information transmission systems (other than damages
to the extent they are found in a final judgment of a court to have resulted
from the
5
willful misconduct or gross negligence of such indemnified party) or for any
special, indirect, consequential or punitive damages in connection with its
activities related to the Facilities. Your indemnification and reimbursement
obligations under this paragraph with respect to any of the Facilities shall be
superseded by your indemnification and reimbursement obligations under the
definitive documentation for such Facility upon execution of such documentation.
You acknowledge that Chase, BNP, BNPCM and CSI may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
Chase, BNP, BNPCM nor CSI will use confidential information obtained from you by
virtue of the transactions contemplated by this Commitment Letter or its other
relationships with you in connection with the performance by Chase, BNP, BNPCM
or CSI of services for other companies, and neither Chase, BNP, BNPCM nor CSI
will furnish any such information to other companies. You also acknowledge that
neither Chase, BNP, BNPCM nor CSI has any obligation to use in connection with
the transactions contemplated by this Commitment Letter, or to furnish to you,
confidential information obtained by Chase, BNP, BNPCM or CSI from other
companies.
This Commitment Letter and Chase's and BNP's commitments hereunder shall
not be assignable by you without the prior written consent of Chase and BNP, and
any attempted assignment without such consent shall be void. This Commitment
Letter may not be amended or any provisions hereof waived or modified except by
an instrument in writing signed by Chase, BNP, BNPCM, CSI and you. This
Commitment Letter may be executed in any number of counterparts, each of which
shall be an original and all of which, when taken together, shall constitute one
agreement. Delivery of an executed counterpart of a signature page of this
Commitment Letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Commitment Letter. This Commitment Letter
is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto. This Commitment Letter shall be governed
by, and construed in accordance with, the laws of the State of New York.
You agree that you will not disclose this Commitment Letter, the Term
Sheets, the Fee Letter, the Warrant Letter, the contents of any of the foregoing
or the activities of Chase, BNP, BNPCM or CSI pursuant hereto or thereto to any
person without the prior written approval of Chase, except that you may disclose
(a) this Commitment Letter, the Term Sheets, the Fee Letter, the Warrant Letter
and the contents hereof and thereof (i) to the Sponsors and your and their
respective officers, employees, attorneys, accountants and advisors on a
confidential and need-to-know basis and (ii) as required by applicable law or
compulsory legal process and (b) this Commitment Letter, the Term Sheets, the
Warrant Letter and the contents hereof and thereof (but not the Fee Letter or
the contents thereof) to the Sellers, the Targets and their respective
attorneys, accountants and advisors, in each case in connection with the
Transactions and on a confidential and need-to-know basis.
Please indicate your acceptance of the terms hereof and of the Fee Letter,
the Advisory and Arrangement Letter dated the date hereof and delivered
herewith, the Warrant Letter, the Sponsor Letter dated the date hereof among the
Sponsors, CSI and Chase and the Engagement Letter dated the date hereof between
CSI, BNPCM and you (collectively, the "Financing
---------
6
Documents") by signing in the appropriate space below and in each other
- ---------
Financing Document and returning to Chase the enclosed duplicate originals (or
facsimiles) of each Financing Document not later than 2:00 p.m., New York City
time, on August 12, 1999. Chase's and BNP's commitments hereunder will expire at
such time in the event that Chase has not received such executed duplicate
originals (or facsimiles) in accordance with the immediately preceding sentence.
In the event that the initial borrowing in respect of the Senior Facilities does
not occur on or before October 31, 1999, then this Commitment Letter and Chase's
and BNP's commitments hereunder shall automatically terminate unless Chase, BNP,
BNPCM and CSI shall, in their reasonable discretion, agree to an extension. The
compensation, reimbursement, indemnification and confidentiality provisions
contained herein and in the Fee Letter shall remain in full force and effect
regardless of whether definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or
Chase's and BNP's commitments hereunder.
Chase, BNP, BNPCM and CSI are pleased to have been given the opportunity to
assist you in connection with the financing for the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK
By /s/ D. Davey
-----------------------
Name: D. Davey
Title: V.P.
CHASE SECURITIES INC.
By /s/ J. Blumin
-----------------------
Name: J. Blumin
Title: Vice President
BANQUE NATIONALE DE PARIS
By_______________________
Name:
Title:
By_______________________
Name:
Title:
7
BNP CAPITAL MARKETS, LLC
By_______________________
Name:
Title:
By_______________________
Name:
Title:
8
Chase, BNP, BNPCM and CSI are pleased to have been given the opportunity to
assist you in connection with the financing for the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK
By_______________________
Name:
Title:
CHASE SECURITIES INC.
By_______________________
Name:
Title:
BANQUE NATIONALE DE PARIS
By /s/ Richard Cushing
-----------------------
Name:
Title: Director
By /s/ Paul Barnes
-----------------------
Name: Paul Barnes
Title: AVP
BNP CAPITAL MARKETS, LLC
By /s/ Richard Cushing
-----------------------
Name:
Title: Director
By /s/ Paul Barnes
-----------------------
Name: Paul Barnes
Title: AVP
9
Accepted and agreed to as of
the date first above written.
U.S. SILICA COMPANY
By /s/
-------------------------
Name:
Title:
10
CONFIDENTIAL EXHIBIT A
August 11, 1999
Project Rock
$250,000,000 Senior Secured Credit Facilities
Summary of Principal Terms and Conditions
-----------------------------------------
Borrower: U.S. Silica Company, a Delaware corporation (the
- -------- "Borrower") that is a direct, wholly owned
--------
subsidiary of USS Intermediate Holdco, Inc., a
Delaware corporation ("Holdings"), in which Chase
--------
Capital Partners and D. George Harris & Associates
Company, Inc. (together, the "Sponsors") together
--------
own a majority indirect equity interest.
Acquisitions and Other Pursuant to a Purchase Agreement (the "Purchase
- ---------------------- --------
Transactions: Agreement") to be entered into among (a) CATS,
- ------------ ---------
Inc., a Pennsylvania corporation, JHS Family
Partnership, a Pennsylvania limited partnership,
RSS Family Partnership, a Pennsylvania limited
partnership, the Dell H. Shearer Grandchildren's
Trust, Joseph H. Shearer and R. Scott Shearer
(collectively, the "Sellers") and (b) the
-------
Borrower, the Borrower will acquire (the
"Acquisitions") from the Sellers (i) all the
------------
outstanding capital stock of Commercial Stone Co.
Inc., a Pennsylvania corporation ("CSC"), (ii) all
---
the outstanding partnership interests in
Commercial Aggregates Transportation and Sales,
L.P., a Pennsylvania limited partnership ("CATS"),
----
and (iii) certain real property (collectively with
CSC and CATS, the "Acquired Businesses") specified
-------------------
in the Purchase Agreement, for cash consideration
payable to the Sellers (the "Purchase Price") in
--------------
the aggregate amount of $140,000,000 (subject to
adjustment as provided in the Purchase Agreement).
In connection with the Acquisitions, (a) the
Borrower will obtain the senior secured credit
facilities (collectively, the "Senior Facilities")
-----------------
described below under the caption "Senior
------
Facilities", (b) the Borrower will either (i)
----------
issue not less than $150,000,000 in aggregate
principal amount of its senior subordinated notes
(the "Senior Subordinated Notes") in a public
-------------------------
offering or in a Rule 144A or other private
placement or (ii) if the Borrower is
unable to issue the Senior Subordinated Notes
prior to the date on which the Acquisitions are
consummated (the "Closing Date"), borrow not less
------------
than $150,000,000 in senior subordinated loans
from one or more lenders under a new senior
subordinated credit facility (the "Senior
------
Subordinated Facility" and, collectively with the
---------------------
Senior Facilities, the "Facilities"), (c) all
----------
existing indebtedness of the Borrower and its
subsidiaries (other than (i) certain indebtedness
of the Borrower incurred in connection with the
acquisition of certain assets of Nicks Silica
Company in an aggregate principal amount not to
exceed $1,600,000, (i) certain capital leases in
an aggregate principal amount not to exceed
$200,000 (together, the "Rolled Debt") and (iii)
-----------
certain other limited indebtedness to be agreed
upon) in an aggregate principal amount not to
exceed $167,200,000 (the "Existing Indebtedness")
---------------------
will be repaid in full and (d) fees and expenses
incurred in connection with the Transactions (as
defined below) in the aggregate amount not to
exceed $13,700,000 will be paid (the "Transaction
-----------
Costs"). The transactions described in this
-----
paragraph, together with the Acquisitions, are
collectively referred to herein as the
"Transactions."
------------
Book Manager, Syndication Chase Securities Inc. will act as sole and
- ------------------------- exclusive book manager, syndication agent, lead
Agent and Lead Arranger: documentation agent for the Senior Facilities (the
- ----------------------- "Arranger"), will perform the duties customarily
--------
associated with such roles and will manage the
syndication of the Senior Facilities to a
syndicate of financial institutions reasonably
satisfactory to the Arranger and the Borrower (the
"Lenders").
-------
Administrative Agent: Banque Nationale de Paris ("BNP") will act as sole
- -------------------- ---
and exclusive administrative agent and collateral
agent (collectively, the "Agent") for the Lender,
-----
and after the Closing Date will perform the duties
customarily associated with such roles.
Senior Facilities: (A) Three Senior Secured Term Loan Facilities in an
- ----------------- aggregate principal amount of up to $200,000,000
consisting of (a) a Tranche A Term Loan Facility
in an aggregate principal amount of up to
$50,000,000 (the "Tranche A Facility"), (b) a
------------------
Tranche B Term Loan Facility in an aggregate
principal amount of up
2
to $110,000,000 (the "Tranche B Facility") and (c)
------------------
a Delayed Draw Term Loan Acquisition Facility in
an aggregate principal amount of up to $40,000,000
(the "Acquisition Facility" and, collectively with
--------------------
the Tranche A Facility and the Tranche B Facility,
the "Term Facilities").
---------------
(B) A Senior Secured Revolving Credit Facility in an
aggregate principal amount of up to $50,000,000
(the "Revolving Facility"), of which an amount to
------------------
be agreed upon will be available in the form of
letters of credit.
In connection with the Revolving Facility, BNP
will make available to the Borrower a swingline
facility under which the Borrower may make short-
term borrowings of up to an amount to be agreed
upon. Any such swingline loans will reduce
availability under the Revolving Facility on a
dollar-for-dollar basis. Each Lender under the
Revolving Facility will, promptly upon request by
BNP, fund to BNP its pro rata share of any
swingline borrowings.
Purpose: (A) The proceeds of the Tranche A Facility and the
- ------- Tranche B Facility will be used, together with (a)
the net proceeds of the issuance of the Senior
Subordinated Notes or the borrowings under the
Senior Subordinated Facility, as applicable, and
(b) a portion of the Closing Date Loan (as defined
below) in an amount equal to approximately
$10,900,000, solely (I) to pay the Purchase Price
to the Sellers in accordance with the Purchase
Agreement, (ii) to repay the Existing Indebtedness
and (iii) to pay the Transactions Costs. The
estimated sources and uses of the funds necessary
to consummate the Transactions and the other
transactions contemplated hereby are set forth on
Annex II hereto.
(B) The proceeds of loans under the Acquisition
Facility will be used by the Borrower for
Permitted Acquisitions (to be defined).
(C) The proceeds of loans under the Revolving Facility
(other than a portion of the Closing Date Loan in
an amount equal to approximately $10,900,000) will
be used by the Borrower for general corporate
purposes, including, without limitation, working
capital and
3
capital expenditures, but excluding Permitted
Acquisitions.
(D) Letters of credit will be used by the Borrower
for general corporate purposes.
Availability: (A) The full amount of the Tranche A Facility and the
- ------------ Tranche B Facility must be drawn in a single
drawing on the Closing Date. Amounts borrowed
under the Tranche A Facility and the Tranche B
Facility that are repaid or prepaid may not be
reborrowed.
(B) Loans under the Acquisition Facility will be
available after the Closing Date and prior to the
date that is three years after the Closing Date
(the "Acquisition Facility Availability Period"),
----------------------------------------
the minimum principal amounts to be agreed upon,
subject to conditions to be agreed upon and
pursuant to procedures to be agreed upon,
provided that the Borrower will not be permitted
--------
to make more than three borrowings under the
Acquisition Facility after the Closing Date, and
provided further, that no borrowing under the
-------- -------
Acquisition Facility will be permitted if at the
time of such borrowing the Borrower's Leverage
Ratio (to be defined) calculated on a pro forma
basis to give effect to such borrowing and the
Permitted Acquisition for which such borrowing is
made would be greater than 5.25 to 1.0. Amounts
repaid under the Acquisition Facility may not be
reborrowed. No loans will be made under the
Acquisition Facility on the Closing Date.
(C) Loans under the Revolving Facility will be
available after the Closing Date and at any time
prior to the final maturity of the Revolving
Facility, in minimum principal amounts to be
agreed upon. Amounts repaid under the Revolving
Facility may be reborrowed. A loan of up to
$11,900,000 (the "Closing Date Loan") will be
-----------------
made under the Revolving Facility on the Closing
Date.
Interest Rates and Fees: As set forth on Annex I hereto.
- -----------------------
Default Rate: The applicable interest rate plus 2% per annum.
- ------------
Letters of Credit: Letters of credit under the Revolving Facility
- ----------------- will be issued by BNP or one of its affiliates
(the "Issuing
-------
4
Bank"). Each letter of credit shall expire not
----
later than the earlier of (a) 12 months after its
date of issuance and (b) the fifth business day
prior to the final maturity of the Revolving
Facility.
Drawings under any letter of credit shall be
reimbursed by the Borrower on the same business
day. To the extent that the Borrower does not
reimburse the Issuing Bank on the same business
day, the Lenders under the Revolving Facility
shall be irrevocably obliged to reimburse the
Issuing Bank pro rata based upon their respective
Revolving Facility commitments.
The issuance of all letters of credit shall be
subject to the customary procedures of the
Issuing Bank.
Final Maturity: (A) The Tranche A Facility will mature on the date
- -------------- that is six years after the Closing Date. Loans
under the Tranche A Facility will amortize in
quarterly installments under a schedule to be
agreed upon.
(B) The Tranche B Facility will mature on the date
that is eight years after the Closing Date. Loans
under the Tranche B Facility will amortize under
a schedule to be agreed upon providing for
nominal quarterly installments for the first six
years of the Tranche B Facility and quarterly
installments in amounts to be agreed upon during
the remaining term of the Tranche B Facility.
(C) The Acquisition Facility will mature on the date
that is six years after the Closing Date. Loans
under the Acquisition Facility will amortize in
quarterly installments under a schedule to be
agreed upon. The first such installment will be
payable on the last day of the first fiscal
quarter after the last day of the Acquisition
Facility Availability Period.
(D) The Revolving Facility will mature on the date
that is six years after the Closing Date.
Guarantees: All obligations of the Borrower under the Senior
- ---------- Facilities and under any interest protection or
other hedging arrangements entered into with a
Lender (or any affiliate thereof) will be
unconditionally guaranteed (the "Guarantees")
----------
by Holdings and each
5
existing and subsequently acquired or organized
domestic (and, to the extent no adverse tax
consequences to the Borrower would result
therefrom, foreign) subsidiary of the Borrower.
Any guarantees to be issued in respect of the
Senior Subordinated Notes or the Senior
Subordinated Facility shall be junior to the
obligations under the Guarantees.
Security: The Senior Facilities, the Guarantees and any
- -------- interest protection and other hedging
arrangements entered into with a Lender (or any
affiliate thereof) will be secured by all the
assets (subject to customary exceptions to be
agreed upon) of Holdings, the Borrower and each
existing and subsequently acquired or organized
domestic (and, to the extent no adverse tax
consequences to the Borrower would result
therefrom, foreign) subsidiary of the Borrower
(collectively, the "Collateral"), including but
----------
not limited to (a) a first-priority pledge of all
the capital stock of the Borrower, (b) a first-
priority pledge of all the capital stock,
membership interests and partnership interests
held by Holdings, the Borrower or any domestic
(or, subject to the foregoing limitation,
foreign) subsidiary of the Borrower of each
existing and subsequently acquired or organized
subsidiary of the Borrower (which pledge, in the
case of any foreign subsidiary, shall be limited
to 65% of the capital stock, membership interests
or partnership interests of such foreign
subsidiary to the extent the pledge of any
greater percentage would result in adverse tax
consequences to the Borrower) and (c) perfected
first-priority security interests in, and
mortgages on, substantially all tangible and
intangible assets of Holdings, the Borrower and
each existing or subsequently acquired or
organized domestic (or, subject to the foregoing
limitation, foreign) subsidiary of the Borrower
(including but not limited to accounts
receivable, inventory, trademarks, other
intellectual property, licensing agreements, real
property, leasehold mortgages (to be agreed
upon), cash and proceeds of the foregoing),
subject in each case to customary exceptions to
be agreed upon. On or prior to the Closing Date,
the Agent shall have received reasonably
satisfactory title insurance policies, current
certified surveys, evidence of zoning and other
legal compliance,
6
certificates of occupancy and other permits
(including such endorsements as the Agent may
require), legal opinions and other customary
documentation, in each case reasonably required
by the Agent with respect to all real property of
Holdings and its subsidiaries subject to
mortgages.
All the above-described pledges, security
interests and mortgages shall be created on
terms, and pursuant to documentation, reasonably
satisfactory to the Lenders, and none of the
Collateral shall be subject to any other pledges,
security interests or mortgages (subject to
limited exceptions to be agreed upon.)
Mandatory Prepayments: Loans under the Term Facilities shall be prepaid
- --------------------- with (a) 75% of Excess Cash Flow (to be defined),
provided that such percentage shall be reduced to
--------
50% upon satisfaction of certain financial
criteria to be agreed upon, (b) 100% of the net
cash proceeds of all asset sales or other
dispositions of property by Holdings and its
subsidiaries (including insurance and
condemnation proceeds in excess of an agreed-upon
amount), subject to limited exceptions to be
agreed upon, (c) 100% of the net cash proceeds of
issuances of debt obligations of Holdings and its
subsidiaries (other than (i) the proceeds of any
Senior Subordinated Notes issued after the
Closing Date to the extent that such proceeds are
applied to the payment of loans under the Senior
Subordinated Facility and (ii) the proceeds from
the issuance of any debt permitted to be incurred
under the covenant limiting the incurrence of
debt by Holdings or its subsidiaries) and (d)
100% of the net cash proceeds of issuances of
equity of Holdings and its subsidiaries, subject
to limited exceptions to be agreed upon
(including issuances in connection with capital
contributions applied to finance Permitted
Acquisitions or to repay the Senior Subordinated
Facility).
The above-described mandatory prepayments shall
be allocated among the Term Facilities pro rata
(based on the then-outstanding principal amount
of the loans under each Term Facility), subject
to the provisions set forth below under the
caption "Special Application Provisions". Within
------------------------------
each Term Facility,
7
mandatory prepayments shall be applied pro rata
to the remaining amortization payments under such
Term Facility.
Special Application Holders of loans under the Tranche B Facility
- ------------------- may, so long as loans are outstanding under the
Provisions: Tranche A Facility or the Acquisition Facility,
- ---------- decline to accept any mandatory prepayment
described above and, under such circumstances,
all amounts that would otherwise be used to
prepay loans under the Tranche B Facility shall
be used to prepay loans under the Tranche A
Facility and the Acquisition Facility. Such
mandatory prepayments shall be allocated between
the Tranche A Facility and the Acquisition
Facility pro rata (based on the then-outstanding
principal amount of the loans under each such
Term Facility) and applied with respect to each
such Term Facility in the manner described above
under the caption "Mandatory Prepayments".
---------------------
Voluntary Prepayments/ Voluntary prepayments of borrowings under the
- ---------------------- Senior Facilities, and voluntary reductions of
Reductions in Commitments: the unutilized portion of the Acquisition
- ------------------------- Facility and Revolving Facility commitments, will
be permitted at any time, in minimum principal
amounts to be agreed upon, without premium or
penalty, subject to reimbursement of the Lenders'
redeployment costs in the case of a prepayment of
Adjusted LIBOR borrowings other than on the last
day of the relevant interest period.
All voluntary prepayments of loans under the Term
Facilities shall be allocated pro rata among the
Term Facilities (based on the then-outstanding
principal amount of the loans under each Term
Facility). Within each Term Facility, voluntary
prepayments shall be applied pro rata to the
remaining amortization payments under such Term
Facility.
Representations and Usual for facilities and transactions of this
- ------------------- type (including customary exceptions and
Warranties: "materiality" thresholds) and similar to the
- ---------- representations and warranties contained in the
Credit Agreement dated as of July 21, 1998, among
the Borrower, George F. Pettinos (Canada)
Limited, the lenders party thereto and Banque
Nationale de Paris (as amended, the "Existing
--------
Credit Agreement", subject to such
----------------
8
additions, deletions and other modifications as
are reasonably requested by the Arranger,
including to reflect the Transactions and the
changes in the credit profile and capital
structure of Holdings and its subsidiaries after
giving effect to the Transactions, and others to
be reasonably specified by the Arranger,
including, without limitation, accuracy of
financial statements; no material adverse change,
absence of litigation, administrative proceedings
or governmental or judicial action; no violation
of agreements or instruments; compliance with
laws, rules and regulations (including ERISA,
margin regulations and environmental laws);
payment of taxes; ownership of properties;
inapplicability of the Investment Company Act;
solvency; effectiveness of regulatory and third-
party approvals; labor matters; environmental
matters; accuracy of information; "year 2000"
matters; and validity, priority and perfection of
security interests in the Collateral.
Conditions Precedent to Usual for facilities and transactions of this
- ----------------------- type and similar to the conditions precedent in
Initial Borrowing: the Existing Credit Agreement (subject to such
- ----------------- additions, deletions and other modifications as
are reasonably requested by the Arranger,
including to reflect the Transactions and the
changes in the credit profile and capital
structure of Holdings and its subsidiaries after
giving effect to the Transactions), including
delivery of satisfactory legal opinions; evidence
of authority; absence of any event, condition or
circumstance that has had or is reasonably likely
to have a material adverse effect on the
business, operations, properties, assets,
liabilities or financial condition of Holdings
and its subsidiaries since December 31, 1998, or
the Acquired Businesses and their subsidiaries
since March 31, 1999, in each case taken as a
whole; payment of fees and expenses; and
obtaining of reasonably satisfactory insurance.
The initial borrowing under the Senior Facilities
will also be subject to the applicable conditions
precedent set forth on Annex III hereto.
Affirmative Covenants: Usual for facilities and transactions of this
- --------------------- type (including customary exceptions and
"materiality" thresholds) and similar to the
affirmative covenants in the Existing Credit
Agreement (subject to such
9
additions, deletions and other modifications as are
reasonably requested by the Arranger, including to
reflect the Transactions and the changes in the
credit profile and capital structure of Holdings
and its subsidiaries after giving effect to the
Transactions) and others to be reasonably specified
by the Arranger (to be applicable to Holdings and
its subsidiaries), including, without limitation,
maintenance of corporate existence and rights;
performance of obligations, delivery of audited
annual consolidated financial statements for
Holdings and unaudited quarterly and monthly
consolidated financial statements for Holdings and
other financial information, delivery of notices of
default, litigation and material adverse change;
maintenance of properties in good working order;
maintenance of satisfactory insurance; compliance
with laws; inspection of books and properties;
further assurances; and payment of taxes.
The Borrower will also be required to maintain
appropriate interest protection hedging
arrangements with one or more Lenders (or
affiliates thereof) on terms reasonably
satisfactory to the Arranger.
Negative Covenants: Usual for facilities and transactions of this type
- ------------------ (including customary exceptions and "materiality"
thresholds) and similar to the negative covenants
in the Existing Credit Agreement (subject to such
additions, deletions and other modifications as are
reasonably requested by the Arranger, including to
reflect the Transactions and the changes in the
credit profile and capital structure of Holdings
and its subsidiaries after giving effect to the
Transactions) and others to be reasonably specified
by the Arranger (to be applicable to Holdings and
its subsidiaries), including, without limitation,
limitations on dividends and distributions;
limitations on redemptions and repurchases of
membership and partnership interests and capital
stock (subject to limited exceptions to be agreed
upon); prohibition of prepayments, redemptions and
repurchases of debt (other than loans under the
Senior Facilities and other than the prepayment of
loans under the Senior Subordinated Facility with
the proceeds of any Senior Subordinated Notes
issued after the Closing Date, which Senior
Subordinated Notes shall have terms
10
and conditions reasonably satisfactory to the
Lenders); limitations on liens and sale-leaseback
transactions; limitations on loans and investments;
limitations on debt, including limitations on
hedging arrangements; limitations on capital
expenditures; limitations on mergers, acquisitions
and asset sales; limitations on transactions with
affiliates; limitations on changes in business
conducted by Holdings and its subsidiaries; and
limitations on amendments of debt and certain other
material agreements to be agreed upon.
The Borrower and its subsidiaries will be permitted
to consummate Permitted Acquisitions. Each
Permitted Acquisition will satisfy criteria to be
agreed upon by the Arranger and the Borrower and
set forth in the definitive credit agreement with
respect to the Senior Facilities (the "Credit
------
Agreement").
---------
Selected Financial Usual for facilities and transactions of this type,
- ------------------ including, without limitation, (a) a minimum
Covenants: interest coverage ratio and (b) a maximum leverage
- --------- ratio, in each case with definitions and levels to
be agreed upon.
Events of Default: Usual for facilities and transactions of this type
- ----------------- (including customary grace periods and
"materiality" thresholds) and similar to the Events
of Default in the Existing Credit Agreement
(subject to such additions, deletions and other
modifications as are reasonably requested by the
Arranger, including to reflect the Transactions and
the changes in the credit profile and capital
structure of Holdings and its subsidiaries after
giving effect to the Transactions) and others to be
reasonably specified by the Arranger, including,
without limitation, nonpayment of principal or
interest, violation of covenants, incorrectness of
representations and warranties in any material
respect, cross default and cross acceleration,
bankruptcy, material judgments, ERISA, actual or
asserted invalidity of security documents and
Change in Control (to be defined).
Voting: Amendments and waivers of the Credit Agreement and
- ------ the other definitive credit documentation will
require the approval of Lenders holding more than
11
50% of the aggregate amount of the loans and
commitments under the Senior Facilities, except
that (a) the consent of each Lender adversely
affected thereby shall be required with respect to,
among other things, (i) increases in commitments,
(ii) reductions of principal, interest or fees,
(iii) extensions of final maturity and (iv)
releases of all or substantially all the Collateral
(other than in connection with any sale of
Collateral permitted by the Credit Agreement) and
(b) the consent of Lenders holding more than 50% of
the aggregate amount of the loans and commitments
of each adversely affected tranche of the Term
Facilities shall be required with respect to any
amendment that changes the effective allocation
among the Term Facilities of any voluntary or
mandatory prepayments of loans under the Term
Facilities (or the application of such prepayments
to the remaining amortization payments under the
Term Facilities).
Cost and Yield Protection: Usual for facilities and transactions of this type.
- --------------------------
Assignments and The Lenders will be permitted to assign loans and
- --------------- commitments to other Lenders (or their affiliates)
Participations: or to any Federal Reserve Bank without restriction,
- -------------- or to other financial institutions with the consent
of the Borrower and the Agent, in each case not to
be unreasonably withheld. Each assignment (except
to other Lenders or their affiliates) will be in an
amount not less than the lesser of (a) $5,000,000
and (b) the entire remaining principal amount of
loans or commitments, as applicable, of the
assigning Lender. The Agent will receive a
processing and recordation fee to be agreed upon,
payable by the assignor and/or the assignee, with
each assignment. Assignments will be by novation
and will not be required to be pro rata among the
Senior Facilities.
The Lenders will be permitted to participate in
loans and commitments without restriction to other
financial institutions. Voting rights of
participants shall be limited to matters in respect
of (a) increases in commitments, (b) reductions of
principal, interest or fees, (c) extensions of
final maturity and (d) releases of all or
substantially all the Collateral (other than in
connection with any sale of Collateral permitted by
the Credit Agreement).
12
Expenses and All reasonable out-of-pocket expenses (including,
- ------------ without limitation, reasonable expenses incurred in
Indemnification: connection with due diligence) of the Arranger and
- --------------- the Agent associated with the syndication of the
Senior Facilities and with the preparation,
execution and delivery, administration, waiver or
modification and enforcement of the Credit
Agreement and the other documentation contemplated
hereby and thereby (including the reasonable fees,
disbursements and other charges of counsel) are to
be paid by the Borrower. In addition, all
reasonable out-of-pocket expenses of the Lenders
for enforcement costs and documentary taxes
associated with the Senior Facilities are to be
paid by the Borrower.
The Borrower will indemnify the Arranger, the Agent
and the other Lenders and hold them harmless from
and against all costs, expenses (including
reasonable fees, disbursements and other charges of
counsel) and liabilities of the Arranger, the Agent
and the other Lenders arising out of or relating to
any claim or any litigation or other proceedings
(regardless of whether the Arranger, the Agent or
any other Lender is a party thereto) that relate to
the proposed transactions, including the financing
contemplated hereby, the Acquisitions and the other
Transactions, provided that none of the Arranger,
the Agent or any other Lender will be indemnified
for its gross negligence or willful misconduct. The
indemnities in this paragraph will be subject to
modifications to be agreed upon.
Governing Law and Forum: New York.
- -----------------------
Counsel to Arranger: Cravath, Swaine & Moore.
- -------------------
13
ANNEX I
Interest Rates: The interest rates under the Senior Facilities
- -------------- will be, at the option of the Borrower, as follows:
Tranche A Facility
------------------
Adjusted LIBOR plus 3.00% or ABR plus 2.00%, in
each case subject to one or more step-downs to be
agreed upon based on the Borrower's Consolidated
Leverage Ratio (to be defined).
Tranche B Facility
------------------
Adjust LIBOR plus 3.50% or ABR plus 2.50%.
Acquisition Facility
--------------------
Adjust LIBOR plus 3.00% or ABR plus 2.00%, in each
case subject to step-downs to be agreed upon based
on the Borrower's Consolidated Leverage Ratio.
Revolving Facility
------------------
Adjusted LIBOR plus 3.00% or ABR plus 2.00%, in
each case subject to step-downs to be agreed upon
based on the Borrower's Consolidated Leverage
Ratio.
All Senior Facilities
---------------------
The Borrower may elect interest periods of 1, 2, 3
or 6 months for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis of
accrual days elapsed in a year of 360 days (or 365
or 366 days, as the case may be, in the case of ABR
loans based on the Prime Rate) and interest shall
be payable at the end of each interest period and,
in any event, at least every 3 months or 90 days,
as the case may be.
ABR is the Alternate Base Rate, which is the
highest of The Chase Manhattan Bank's Prime Rate
and the Federal Funds Effective Rate plus 1/2 of
1%.
Adjusted LIBOR will at all times include statutory
reserves.
Letter of Credit Fee: A per annum fee equal to the spread over Adjusted
- -------------------- LIBOR under the Revolving Facility will accrue on
the aggregate face amount of outstanding letters of
credit under the
Revolving Facility, payable in arrears at the end
of each quarter and upon the termination of the
Revolving Facility, in each case for the actual
number of days elapsed over a 360-day year. Such
fees shall be distributed to the Lenders
participating in the Revolving Facility pro rata in
accordance with the amount of each such Lender's
Revolving Facility commitment. In addition, the
Borrower shall pay to the Issuing Bank, for its own
account, (a) a fronting fee of 1/4 of 1% per annum
on the aggregate face amount of outstanding letters
of credit, payable in arrears at the end of each
quarter and upon the termination of the Revolving
Facility, in each case for the actual number of
days elapsed over a 360-day year, and (b) customary
issuance and administration fees.
Acquisition Facility 3/4 of 1% per annum on the undrawn portion of the
- -------------------- commitments in respect of the Acquisition Facility
Commitment Fees: (a) commencing to accrue with respect to each
- --------------- Lender's commitment on the Closing Date, payable
quarterly in arrears after the Closing Date and (b)
subject to step-downs to be agreed upon based on
the Borrower's Consolidated Leverage Ratio.
Revolving Facility 1/2 of 1% per annum on the undrawn portion of the
- ------------------ commitments in respect of the Revolving Facility
Commitment Fees: (a) commencing to accrue with respect to each
- --------------- Lender's commitment on the Closing Date, payable
quarterly in arrears after the Closing Date, and
(b) subject to step-downs to be agreed upon based
on the Borrower's Consolidated Leverage Ratio.
Other: The annual interest rates in effect in respect of
- ----- each of the Senior Facilities will be permanently
reduced by 25 basis points if prior to the Closing
Date the Senior Facilities shall be rated Ba3 by
Moody's Investors Service, Inc. and BB- by Standard
and Poor's Ratings Group.
2
ANNEX II
Estimated Sources and Uses of Funds
(in millions of dollars)
For Consolidated Entity
Uses of Funds Sources of Funds
- ------------- ----------------
Purchase Price $140.0 Closing Date Loan $ 11.9*
Repay Existing Indebtedness 167.2 Tranche A Facility 50.0
Cash 1.0 Tranche B Facility 110.0
Acquisition Facility 0.0**
Rolled Debt 1.8 Rolled Debt 1.8
Transaction Costs 13.7 Senior Subordinated
------
Notes/Facility 150.0
-------
Total Uses $323.7 Total Sources $ 323.7
====== =======
______________________
* Represents drawn portion of $50,000,000 Revolving Facility.
** Represents drawn portion of $40,000,000 Acquisition Facility.
ANNEX III
Project Rock
$250,000,000 Senior Secured Credit Facilities and
$150,000,000 Senior Subordinated Credit Facility
Summary of Additional Conditions Precedent
------------------------------------------
Except as otherwise set forth below, the initial borrowing under each of
the Facilities shall be subject to the following conditions precedent:
1. The terms of the Purchase Agreements shall be satisfactory in all
material respects to the Arranger, and the Acquisitions and the other
Transactions shall be consummated simultaneously with the closing under the
Senior Facilities in accordance with applicable law, the Purchase Agreements
(including all Exhibits thereto) and all other related documentation (in each
case without giving effect to any amendment or waiver not approved by the
Arranger) and on terms substantially consistent with those set forth in this
Summary of Principal Terms and Conditions, and the Arranger shall be satisfied
that the Transaction Costs shall not exceed $13,700,000.
2. With respect to the Senior Facilities, the Borrower shall have
received not less than $150,000,000 in gross cash proceeds from either (a) the
issuance of the Senior Subordinated Notes in a public offering or in a Rule 144A
or other private placement to one or more holders satisfactory to the Arranger
or (b) the borrowings under the Senior Subordinated Facility. The terms and
conditions of the Senior Subordinated Notes or the Senior Subordinated Facility,
as applicable (in each case including but not limited to terms and conditions
relating to the interest rate, fees, amortization, maturity, subordination,
covenants, events of default and remedies) shall be satisfactory in all respects
to the Arranger (it being agreed that such terms of the Senior Subordinated
Facility to the extent described in Exhibit B to the Commitment Letter to which
this Annex III is attached (the "Commitment Letter") are satisfactory).
-----------------
3. After giving effect to the Transactions and the other transactions
contemplated hereby, Holdings and its subsidiaries shall have outstanding no
indebtedness or preferred membership or partnership interests or preferred stock
other than (a) the loans and other extensions of credit under the Senior
Facilities, (b) the Senior Subordinated Notes or loans under the Senior
Subordinated Facility, (c) the Rolled Debt (the terms of which shall be
reasonably satisfactory to the Arranger) and (d) other limited indebtedness to
be agreed upon.
4. The Lenders shall be reasonably satisfied as to the amount and nature
of any environmental and employee health and safety exposures to which the
Acquired Businesses may be subject after giving effect to the Transactions, and
with the plans of Holdings and its subsidiaries with respect thereto, and the
Lenders shall have received environmental assessments (including Phase I
reports) with respect to the properties of the Acquired Businesses satisfactory
to the Arranger from an environmental consulting firm satisfactory to the
Arranger.
5. The Lenders shall have received a certificate of a financial officer
of the Borrower with respect to the pro forma Consolidated EBITDA (to be
defined) of the Borrower (after
giving effect to the Acquisitions) for the twelve month period ending June 30,
1999, and such pro forma Consolidated EBITDA shall not be less than $60,300,000.
6. The Lenders shall have received a certificate of a financial officer
of the Borrower with respect to the ratio of Total Debt (to be defined) as of
June 30, 1999, to the pro forma Consolidated EBITDA (to be defined) of the
Borrower (after giving effect to the Acquisitions) for the twelve month period
ending on such date, and such ratio shall not exceed 5.5 to 1.0.
7. The Lenders shall have received (a) a consolidated pro forma balance
sheet and related statements of income, stockholders' equity and cash flows of
Holdings and its subsidiaries as of and for each fiscal quarter of Holdings
ending after December 31, 1998, and prior to the Closing Date for which internal
financial statements are available (and, to the extent available, for each month
preceding the Closing Date since the last such quarter), after giving effect to
the Transactions and (b) an analysis of the adjustments necessary to reconcile
the entries in such pro forma financial statements to those unaudited financial
statements delivered for Holdings and its subsidiaries for each such fiscal
quarter and month pursuant to paragraph 12 below.
8. CSI shall have received (a) audited consolidated and consolidating
balance sheets and related statements of income, stockholders' equity and cash
flows of each of the Borrower and its subsidiaries and the Acquired Businesses
and their subsidiaries for the three fiscal years ended prior to the Closing
Date and (b) unaudited consolidated and consolidating balance sheets and related
statements of income, stockholders' equity and cash flows of each of the
Borrower and its subsidiaries and the Acquired Businesses and their subsidiaries
for the fiscal quarters, if any, ending after the most recent fiscal year that
precedes the Closing Date (and, to the extent available, for each month
preceding the Closing Date since the last such quarter), which audited and
unaudited financial statements (i) shall be in form and scope satisfactory to
CSI and (ii) shall not be materially inconsistent with the financial statements
previously provided to CSI or the projections provided to CSI pursuant to
paragraph 9 below.
9. CSI shall have received management's consolidated and consolidating
financial projections for the Borrower and its subsidiaries for the period of
ten years following the Closing Date, detailed on a quarter-by-quarter basis for
fiscal years 1999 and 2000, which projections shall reflect the Transactions and
the other transactions contemplated hereby and include the written assumptions
upon which such projections are based, and such projections shall be reasonably
satisfactory in all respects to CSI. Such projections shall be substantially
similar in form to the projections received by CSI prior to the date of the
Commitment Letter.
10. With respect to the Senior Subordinated Facility, the Borrower shall
have received not less than $171,900,000 (excluding undrawn commitments) in
gross cash proceeds from borrowings under the Senior Facilities. The terms and
conditions of the Senior Facilities (including but not limited to terms and
conditions relating to interest rates, fees, amortization, maturity, covenants,
events of default and remedies) shall be reasonably satisfactory in all respects
to the agent under the Senior Subordinated Facility (it being agreed that such
terms of the Senior Facilities to the extent described in Exhibit A to the
Commitment Letter are satisfactory).
2
11. With respect to the Senior Subordinated Facility, CSI shall have
received, not later than 30 days prior to the Closing Date, a complete printed
preliminary prospectus or preliminary offering memorandum or preliminary private
placement memorandum that is suitable for use in a customary "high-yield road
show" relating to the Senior Subordinated Notes and contains all financial
statements and other data to be included therein (including all audited
financial statements, all unaudited financial statements (which shall have been
reviewed by the independent accountants for the Borrower as provided in
Statement on Auditing Standards No. 71) and all appropriate pro forma financial
statements prepared in accordance with, or reconciled to, generally accepted
accounting principles in the United States and prepared in accordance with
Regulation S-X under the Securities Act of 1933, as amended) and all other data
(including selected financial data) that the Securities and Exchange Commission
would require in a registered offering of the Senior Subordinated Notes or that
would be necessary for CSI to receive a customary "comfort" (including "negative
assurance" comfort) from independent accountants in connection with the offering
of the Senior Subordinated Notes.
12. With respect to the Senior Subordinated Facility, CSI shall have been
afforded a period of at least 30 days following receipt of the material
described in the immediately preceding paragraph to seek to place the Senior
Subordinated Notes with qualified purchasers thereof an CSI shall have marketed
the Senior Subordinated Notes in a manner customary for high-yield offerings of
this type (including completing a traditional "high-yield road show") for at
least 15 days (or such shorter period if acceptable to CSI) following September
6, 1999, and prior to the Closing Date.
3
CONFIDENTIAL EXHIBIT B
August 11, 1999
Project Rock
$150,000,000 Senior Subordinated Facility
Summary of Principal Terms and Conditions
-----------------------------------------
Initial Borrower Loans: The Lenders (as defined below) will make
- -----------------------
loans (the "Initial Borrower Loans") to
----------------------
the Borrower (as defined below) on the
Closing Date (as defined below) in an
aggregate principal amount not to exceed
$150,000,000. The Chase Manhattan Bank
("Chase"), Banque Nationale de Paris
-----
("BNP") and each assignee of any portion
---
of the Initial Borrower Loans or of
Chase's or BNP's commitments to make the
Initial Borrower Loans are collectively
referred to herein as the "Lenders".
-------
Borrower: U.S. Silica Company, a Delaware
- --------
corporation (the "Borrower") that is a
--------
direct, wholly owned subsidiary of USS
Intermediate Holdco, Inc., a Delaware
corporation ("Holdings"), in which Chase
--------
Capital Partners and D. George Harris &
Associates Company, Inc. (together, the
"Sponsors") together own a majority
--------
indirect equity interest.
Guarantees: The obligations of the Borrower in
- ----------
respect of the Initial Borrower Loans will
be unconditionally and irrevocably
guaranteed on a senior subordinated basis
by each guarantor, if any, of the Senior
Facilities (as defined below). Guarantees
will be released in a manner consistent
with the Senior Facilities.
Agents: Chase will act as sole and exclusive
- ------
syndication agent and documentation agent
(the "Syndication Agent"). BNP will act as
-----------------
sole and exclusive administrative agent
for the Lenders (the "Administrative
--------------
Agent" and, together with the Syndication
-----
Agent, the "Agents"), and after the
------
Closing Date (as defined below) will
perform the duties customarily associated
with such roles.
Arranger: Chase Securities Inc. ("CSI")
- -------- ---
Lenders: A syndicate of banking and financial
- -------
institutions arranged by CSI and
reasonably acceptable to the Borrower and
CSI.
Acquisition and Other Transactions: Pursuant to a Purchase Agreement (the
- ----------------------------------
"Purchase Agreement") to be entered into
------------------
among (a) CATS, Inc., a
Pennsylvania corporation, JHS Family
Partnership, a Pennsylvania limited
partnership, RSS Family Partnership, a
Pennsylvania limited partnership, the Dell
H. Shearer Grandchildren's Trust, Joseph
H. Shearer and R. Scott Shearer
(collectively, the "Sellers") and (b) the
-------
Borrower, the Borrower will acquire (the
"Acquisitions") from the Sellers (i) all
------------
the outstanding capital stock of
Commercial Stone Co. Inc., a Pennsylvania
corporation ("CSC"), (ii) all the
---
outstanding partnership interests in
Commercial Aggregates Transportation and
Sales, L.P., a property (collectively with
CSC and CATS, the "Acquired Businesses")
-------------------
specified in the Purchase Agreement, for
cash consideration payable to the Sellers
(the "Purchase Price") in the aggregate
--------------
amount of $140,000,000 (subject to
adjustment as provided in the Purchase
Agreement).
In connection with the Acquisitions, (a)
the Borrower will obtain the senior
secured credit facilities (collectively,
the "Senior Facilities") described below
-----------------
under the caption "Senior Facilities", (b)
the Borrower will either (i) issue of less
than $150,000,000 in aggregate principal
amount of its senior subordinated notes
(the "Senior Subordinated Notes") in a
-------------------------
public offering or in a Rule 144A or other
private placement or (ii) if the Borrower
is unable to issue the Senior Subordinated
Notes prior to the date on which the
Acquisitions are consummated (the "Closing
-------
Date"), borrow not less than $150,000,000
----
in senior subordinated loans from one or
more lenders under a new senior
subordinated credit facility (the "Senior
------
Subordinated Facility") and, collectively
---------------------
with the Senior Facilities, the
"Facilities"), (c) all existing
----------
indebtedness of the Borrower and its
subsidiaries (other than (i) certain
indebtedness of the Borrower incurred in
connection with the acquisition of certain
assets of Nicks Silica Company in an
aggregate amount not to exceed $1,600,000,
(ii) certain capital leases in an
aggregate principal amount not to exceed
$200,000 and (iii) certain other limited
indebtedness to be agreed upon) in an
aggregate principal amount not to exceed
$167,300,000 (the "Existing Indebtedness")
---------------------
will be repaid in full and (d) fees and
expenses incurred in connection with the
Transactions (as defined below) in an
aggregate amount not to exceed $13,700,000
will be paid (the "Transaction Costs").
-----------------
The transactions described in this
paragraph, together with the Acquisitions,
are collectively referred to herein as the
"Transactions".
------------
2
Use of Proceeds: The proceeds of the Initial Borrower
- ---------------
Loans will be used, together with the net
proceeds of the Tranche A Facility, the
Tranche B Facility (as each such term is
defined in Exhibit A to the Commitment
Letter to which this Exhibit B is
attached) and a portion of the Closing
Date Loan (as such term is defined in
Exhibit A to the Commitment Letter to
which this Exhibit B is attached) in an
amount equal to approximately $10,900,000,
solely (i) to pay the Purchase Price to
the Sellers in accordance with the
Purchase Agreement, (ii) to repay the
Existing Indebtedness and (iii) to pay the
Transaction Costs. The estimated sources
and uses of the funds necessary to
consummate the Transactions and the other
transactions contemplated hereby are set
forth in Annex II of Exhibit A to the
Commitment Letter to which this Exhibit B
is attached.
Funding: The Lenders will make the Initial
- -------
Borrower Loans simultaneously with (a) the
consummation of the Transactions and (b)
the initial funding under the Senior
Facilities.
Maturity/Exchange: All the Initial Borrower Loans will
- -----------------
mature on the date that is one year
following the Closing Date (the "Maturity
--------
Date"). If any Initial Borrower Loan has
----
not been previously repaid in full on or
prior to the Maturity Date, the Lender in
respect of such Initial Borrower Loan
thereafter will have the option at any
time or from time to time to receive
Borrower Exchange Notes (the "Borrower
--------
Exchange Notes") in exchange for such
--------------
Initial Borrower Loan having the terms set
forth in the term sheet attached hereto as
Annex I; provided, however, that a Lender
-------- -------
may not elect to exchange only a portion
of its outstanding Initial Borrower Loans
for Borrower Exchange Notes unless such
Lender intends at the time of such partial
exchange of Initial Borrower Loans
promptly to sell the Borrower Exchange
Notes received in such exchange. If any
Lender does not exchange its Initial
Borrower Loans for Borrower Exchange Notes
on the Maturity Date, such Lender shall be
required to extend the maturity of such
Initial Borrower Loans to another date
selected by such Lender. If, at such
extended maturity, such Lender does not
exchange its Initial Borrower Loans, such
Lender shall be required again to extend
the maturity of such Initial Borrower
Loans to another date selected by such
Lender (provided that such Lender shall
not be required to extend the maturity of
such Initial Borrower Loans beyond the
3
tenth anniversary of the Closing Date (the
"Final Maturity Date")), and this sentence
-------------------
shall apply to each extended maturity of
such Initial Borrower Loans prior to the
Final Maturity Date.
The Initial Borrower Loans and the
Borrower Exchange Notes shall be pari
----
passu for all purposes.
-----
Interest: Prior to the Maturity Date, the Initial
- --------
Borrower Loans will accrue interest at a
rate per annum equal to three-month
Adjusted LIBOR ("Adjusted LIBOR") plus a
--------------
spread (the "Spread"). The Spread will
------
initially be 600 basis points. If the
Initial Borrower Loans are not repaid in
whole within six months following the
Closing Date, the Spread will increase by
100 basis points at the end of such six-
month period and shall increase by an
additional 50 basis points at the end of
each three-month period thereafter until
the Maturity Date.
Notwithstanding the foregoing, (a) the
interest rate in effect at any time prior
to the Maturity Date shall not exceed
18.0% per annum, (b) the interest rate in
effect at any time prior to the Maturity
Date shall not be less than 11.0% per
annum and (c) to the extent the interest
payable prior to the Maturity Date on any
Initial Borrower Loan exceeds a rate of
15.0% per annum, the Borrower may, at its
option, cause such excess interest to be
paid by adding such excess interest to the
principal amount of such Initial Borrower
Loan. In no event shall the interest rate
on the Initial Borrower Loans exceed the
highest lawful rate permitted under
applicable law.
Following the Maturity Date, all
outstanding Initial Borrower Loans will
accrue interest at the rate provided for
the Borrower Exchange Notes in Annex I
hereto, subject to the absolute and cash
caps applicable to the Borrower Exchange
Notes.
Calculation of interest shall be on the
basis of actual days elapsed in a year of
360 days (or 365 days or 366 days, as the
case may be, in the case of Initial
Borrower Loans based on the Prime Rate (as
defined below)).
Adjusted LIBOR will at all times include
statutory reserves.
In the event that Adjusted LIBOR cannot be
determined, or any Lender is unable to
maintain a loan accruing interest at
4
Adjusted LIBOR, the affected Initial
Borrower Loans will accrue interest until
the Maturity Date, or until such earlier
time as Adjusted LIBOR can be determined,
at the "Alternate Base Rate", which will
-------------------
be the higher of (a) Chase's Prime Rate
(the "Prime Rate") and (b) the Federal
----------
Funds Effective Rate plus 1/2 of 1%, plus
in each case the Spread less 100 basis
points.
Interest will be payable in arrears (a)
for Initial Borrower Loans accruing
interest at a rate based on Adjusted
LIBOR, at the end of each Adjusted LIBOR
Period and on the Maturity Date, (b) for
Initial Borrower Loans accruing interest
at the Alternate Base Rate, at the end of
each fiscal quarter of the Borrower
following the Closing Date and on the
Maturity Date and (c) the Initial Borrower
Loans outstanding after the Maturity Date,
at the end of each fiscal quarter of the
Borrower following the Maturity Date.
Senior Facilities: The Borrower will obtain the $250,000,000
- -----------------
senior secured credit facilities (the
"Senior Facilities") as described in
-----------------
Exhibit A to the Commitment Letter to
which this Exhibit B is attached.
Subordination: The Initial Borrower Loans will be
- -------------
subordinated to the Senior Facilities and
other senior indebtedness of the Borrower
on terms customary for senior subordinated
facilities and transactions of this type.
Mandatory Redemption: The Borrower will be required to prepay
- --------------------
Initial Borrower Loans (and, if issued,
Borrower Exchange Notes, to the extend
required by the terms of such Borrower
Exchange Notes) on a pro rata basis
--- ----
subject, in certain circumstances, to the
call protection provisions of any Fixed
Rate Borrower Exchange Notes (as described
in Annex I hereto), at par plus accrued
and unpaid interest (or, in the case of
Fixed Rate Borrower Exchange Notes, at par
plus accrued and unpaid interest plus any
applicable premiums), from the net
proceeds (after deduction of, among other
things, amounts required to repay the
Senior Facilities) from the incurrence of
any debt or the issuance of any equity or
from certain asset sales, subject in each
case, to limited exceptions to be agreed
upon.
Optional Prepayment: The Initial Borrower Loans may be
- -------------------
prepaid, in whole or in part, at the
option of the Borrower, at any time upon
ten days' prior notice, at par plus
accrued and unpaid interest, subject to
reimbursement of the Lenders' actual
redeployment costs in the case of a
prepayment of Adjusted
5
LIBOR borrowings other than on the last
day of the relevant interest period.
Documentation: Usual for facilities and transactions of
- -------------
this type and satisfactory to CSI.
Representations and Warranties: Usual for facilities and transactions of
- ------------------------------
this type (including customary exceptions
and "materiality" thresholds) and others
to be reasonably specified by CSI,
including, without limitation, accuracy of
financial statements; no material adverse
change; absence of litigation; no
violation of agreements or instruments;
compliance with laws (including ERISA,
margin regulations and environmental
laws); payment of taxes; ownership of
properties; inapplicability of the
Investment Company Act; solvency;
effectiveness of regulatory approvals;
labor matters; environmental matters;
"year 2000" matters; and accuracy of
information.
Conditions Precedent: Usual for facilities and transactions of
- --------------------
this type, including delivery of
satisfactory legal opinions; evidence of
authority; absence of any event, condition
or circumstance that has had or is
reasonably likely to have a material
adverse effect on the business,
operations, properties, assets,
liabilities or financial condition of
Holdings and its subsidiaries since
December 31, 1998, or the Acquired
Businesses and their subsidiaries since
March 31, 1999, in each case taken as a
whole; payment of fees and expenses; and
obtaining of reasonably satisfactory
insurance.
Borrowings under the Senior Subordinated
Facility will also be subject to the
applicable conditions precedent set forth
on Annex III to Exhibit A to the
Commitment Letter to which this Exhibit B
is attached.
Notes: The Borrower will use commercially
- -----
reasonable efforts to refinance the
Initial Borrower Loans as promptly as
practicable after the Closing Date with an
issue of approximately $150,000,000
aggregate principal amount of senior
subordinated notes.
Covenants: Usual for facilities and transactions of
- ---------
its type (including customary exceptions
and "materiality" thresholds) and others
to be reasonably specified by CSI,
including (should CSI reasonably deem it
necessary) certain financial covenants,
including maintenance covenants, to be
mutually agreed upon by the Borrower and
CSI.
6
The affirmative covenants shall in any
vent include delivery of financial
projections of the Borrower and its
subsidiaries updated quarterly in a form
substantially similar to that described in
Annex III to Exhibit A to the Commitment
Letter to which this Exhibit B is
attached. Following the Maturity Date, all
covenants in respect of any outstanding
Initial Borrower Loans will be
substantially identical to the covenants
in respect of the Borrower Exchange Notes.
Events of Default: Usual for facilities and transactions of
- -----------------
this type (including customary grace
periods and "materiality" thresholds) and
others to be reasonably specified by CSI.
Following the Maturity Date, the events of
default relevant to the Initial Borrower
Loans will be substantially identical to
the events of default in respect of the
Borrower Exchange Notes.
Cost and Yield Usual for facilities and transactions of
- --------------
Protection: this type.
- -----------
Assignment and Participation: The Lender will have the absolute and
- ----------------------------
unconditional right to assign Initial
Borrower Loans and commitments without the
consent of the Borrower, after
consultation with the Borrower. Each
assignment (except to other Lenders or
their affiliates) will be in an amount
such that the gross proceeds to the
assigning lender shall not be less than
$250,000. The Administrative Agent will
receive a processing and recordation fee
to be agreed upon, payable by the assignor
and/or the assignee, with each assignment.
Assignments will be by novation which will
release the obligation of the assigning
Lender. BNP will act as Administrative
Agent for all assignees (if any) holding
the Initial Borrower Loans from time to
time.
Lenders will be permitted to participate
their Initial Borrower Loans, to other
financial institutions without
restriction, other than customary voting
limitations. Participations will have the
same benefits as the selling Lenders would
have (and will be limited to the amount of
such benefits) with regard to yield
protection and increased costs.
Voting: Amendments and waivers of the
- ------
documentation for the Initial Borrower
Loans and the other definitive credit
documentation related thereto will require
the approval of
7
Lenders holding more than 50% of the
outstanding Initial Borrower Loans, except
that the consent of each affected Lender
will be required for (a) reductions of
principal, interest rates or Spread, (b)
except as provided under the caption
"Maturity/Exchange", extensions of the
Maturity Date, (c) additional restrictions
on the right to exchange Initial Borrower
Loans for Borrower Exchange Notes or any
amendment of the rate of such exchange or
(d) any amendment to the Borrower Exchange
Notes that requires (or would, if any
Borrower Exchange Notes were outstanding,
require) the approval of all holders of
Borrower Exchange Notes.
Expenses and Indemnification: All reasonable out-of-pocket expenses
- ----------------------------
(including but not limited to reasonable
expenses incurred in connection with due
diligence) of the Agents and CSI
associated with the preparation, execution
and delivery, administration, waiver or
modification and enforcement of the Senior
Subordinated Facility and the other
documentation contemplated hereby and
thereby (including the reasonable fees,
disbursements and other charges of
counsel) are to be paid by the Borrower.
In addition, all reasonable out-of-pocket
expenses of the Lenders for enforcement
costs and documentary taxes associated
with the facility are to be paid by the
Borrower.
The Borrower will indemnify the Lenders
and CSI, and their respective officers,
directors, employees, affiliates, agents
and controlling persons, and hold them
harmless from and against all costs,
expenses (including but not limited to
reasonable fees and out-of-pocket charges
and disbursements of counsel) and
liabilities of any such Lender or CSI
arising out of or relating to any claim or
any litigation or other proceeding
(regardless of whether any such Lender or
CSI is a party thereto) that relate to the
proposed transactions, including but not
limited to the Transactions or any
transactions connected therewith;
provided, however, that no such person
will be indemnified for costs, expenses or
liabilities arising from such person's
gross negligence or wilful misconduct. The
indemnities in this paragraph will be
subject to modifications to be agreed
upon.
Governing Law and Forum: New York.
- -----------------------
Counsel for CSI and the Lenders: Cravath, Swaine & Moore.
- -------------------------------
8
Exhibit 7.4
Form of Opinion of Seller's Counsel
1. Each Acquired Company is validly existing, and in good standing under
the laws of its jurisdiction of incorporation or formation, with full power and
authority to conduct its business as it is now being conducted and to own or use
the properties and assets that it purports to own or use.
2. Each Seller has full capacity, right, power and authority to execute
and deliver the Purchase Agreement and to consummate the Contemplated
Transactions. The Purchase Agreement constitutes the legal, valid and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms
[INSERT BANKRUPTCY EXCEPTION].
3. The execution, delivery and performance of the Purchase Agreement by
Sellers and the consummation of the Contemplated Transactions (i) have been
authorized by all necessary corporate, partnership, trust and other action on
the part of Sellers and (ii) will not (w) conflict with the terms, conditions or
provisions of the Organizational Documents of any Seller or any Acquired Company
(x) violate any provision of law or any Order to which any Seller or any
Acquired Company or any of their respective assets is subject or require the
consent of any Person, (y) to our knowledge, result in a breach or violation of
any of the terms of, or constitute a default by any Seller or Acquired Company
under any indenture, mortgage, loan agreement, lease or other agreement or
instrument to which any Seller or any Acquired Company is a party or by which it
or any of its assets is bound, or (z) to our knowledge, result in the creation
or imposition of any Encumbrance upon the Acquired Shares or the Acquired
Interests or the assets of any Acquired Company or the Properties, except to the
extent such conflict, violation, breach or creation would not have a Material
Adverse Effect.
**Allow Buyer's lenders to rely on opinion.
Exhibit 7.9
1. Three Rivers Marine and Rail Terminals, L.P. ("Three Rivers") shall
------------
have the right to purchase from Commercial, for internal consumption or resale
of up to 3,000 tons per month (or such greater amount as the parties may agree)
crushed stone products (1B, 2B, 1A, 3's, 4's, 2A, 2RC Pocono and 3's Pocono and
4's Pocono) for a price of $[4.00] per ton [IS THIS THE CURRENT PRICE?] for the
first year after closing, increased by 3% in each year thereafter and actual
costs of hauling services for a period of four (4) years from the Closing Date.
The hauling charge contemplates delivery to the site of Three Rivers at
Gibsonton, Rostraver Township, Pennsylvania. The sales conducted by Three
Rivers, if any, shall not be construed to be in violation of any covenant not to
compete made in connection with the transaction contemplated by the Purchase
Agreement.
2. Three Rivers shall have the right to purchase from Commercial, for
internal consumption, asphalt products from any of the existing asphalt plants
(Adamsburg, Springfield Pike or Dunningsville), at a price that shall not exceed
the actual cost of the asphalt products (actual costs to include overhead) and
the actual costs of hauling services. The actual costs of asphalt products
shall be as set forth on the cost records of Commercial and the costs of hauling
services shall be the actual costs incurred by Commercial for hauling services.
Three Rivers shall attempt to order such asphalt products in non-peak time
periods. Commercial shall make reasonable efforts to accommodate Three Rivers
preferred delivery schedule. The right shall continue for a period of four (4)
years from the Closing Date.
3. Commercial shall continue to provide accounting, bookkeeping, payroll
and administrative services to Three Rivers in continuation of the services
presently provided and for the charges that are presently in effect; that is, a
charge of 2% of gross revenue up to a maximum charge of $[3,000.00] a month [IS
THIS THE CURRENT ARRANGEMENT?]. This obligation shall continue for a period of
two (2) years following the Closing Date.
4. Three Rivers shall provide CATS with the first call to provide
trucking services for the business of Three Rivers. The rates for such services
shall be the standard rates charged by CATS to its prime customers and the
obligation to make first call shall continue so long as CATS provides adequate
and complete service to Three Rivers. If service is not acceptable, Three
Rivers will provide written notice thereof to a designated executive in
Connellsville with a copy to the CEO of USS Holdings, Inc. If the problem is
not promptly remedied or if three such notices are delivered in any period of
three consecutive months, Three Rivers reserves the right to purchase and
operate its own trucks and trailers. The term of the Agreement shall be four
(4) years from the date of closing. CATS shall consent to Three Rivers
providing hauling services to Commercial under the Agreement contemplated herein
on terms substantially similar to those of independent truckers for Commercial
in the year before the date of closing (e.g., Mikel, Rathway Trucking,
Arsenberger Trucking).
5. In the event that Three Rivers exercises its right to purchase its own
trucks and trailers pursuant to Paragraph 4, Commercial shall use, on a first
call basis on each working day as its business requires, tri-axle dump trucks
and trailers supplied by Three Rivers or supplied on
behalf of Three Rivers. The dispatchers of trucks for Commercial shall exhaust
up to twenty (20) tri-axle dump trucks or trailers that may be available from
Three Rivers before securing the services of other truckers. However, Commercial
shall not be required to use Three Rivers' trucks and trailers in January and
February of each year. Three Rivers shall not be obligated to supply tri-axle
dump trucks or trailers if those tri-axle dump trucks or trailers are otherwise
obligated for the business of Three Rivers and shall promptly notify Commercial
if any trucks are not available to be scheduled for use on any given day. The
price to be paid for the services shall be the price charged for similar
services by CATS. This Agreement shall be in force and effect for a period of
four (4) years from the date of closing.
6. Commercial and Three Rivers shall agree to the designation of the
Gibsonton facility of Three Rivers, located at Gibsonton, Rostraver Township,
Pennsylvania, as the exclusive transloading facility for imported aggregates
(aggregates that are not produced at the quarries of Commercial) that are
transported by barge or rail for unloading and all other products for use at the
facilities of Commercial transported by barge or rail and Three Rivers shall
agree to provide the services necessary therefor. In the event that Commercial
produces products for shipment by barge, it shall ship such products exclusively
from the Gibsonton Facility of Three Rivers. The prices to be charged to
Commercial by Three Rivers shall be the lowest regularly established charges for
the applicable function as determined from time to time by Three Rivers. This
exclusive transloading facility designation shall be in effect for a period of
five (5) years from the date of closing.
7. The waiver with respect to any covenant not to compete shall be
effective regardless of whether same is referenced in the covenant not to
compete and the provisions of this Agreement shall prevail in the event of a
conflict with any covenant not to compete executed in connection with the
transaction contemplated by the Purchase Agreement.
8. The owners of Three Rivers shall give Commercial a right of first
refusal should they elect to sell Three Rivers or if Three Rivers decides to
sell its terminal property. The right of first refusal shall apply to the whole
business or a part thereof, whichever is being sold by Three Rivers. The right
of first refusal shall not apply to transfers by the existing owners to members
of their immediate families or to corporations or other entities controlled by
the existing owners or members of their immediate families or to trusts. This
agreement shall be in force and effect for a period of four (4) years from the
date of closing.
9. If Three Rivers expands its terminal or acquires one or more
additional terminals, the parties will negotiate in good faith to adjust the
foregoing provisions appropriately.
2
Exhibit 7.10
1. With respect to the slag produced as a result of the molybdenum
recovery process conducted by Gibsonton Industries, L.P. ("Gibsonton") at the
---------
Langeloth facility under existing contract with Langeloth, Commercial shall have
exclusive rights to market slag and to purchase the slag for its internal use or
resale. Commercial shall have no rights with respect to molybdenum recoverable
from the slag. Commercial shall pay the price provided in the prevailing
agreement with Gibsonton. Gibsonton shall have the right to sell the slag not
marketed by Commercial, it being understood that the owner requires the
depletion of the slag piles at the Langeloth site and that those sales shall not
be construed to be in violation of any covenant not to compete made in
connection with the transaction contemplated by the Purchase Agreement. For
those sales conducted by Commercial, the sales shall take into account and shall
incorporate the limitations of use for those products and shall inform any of
its customers by appropriate notice of those limitations. The rights shall
continue for a period equal to the shorter of four (4) years from the Closing
Date or the termination of Gibsonton's rights with Langeloth.
2. The waiver with respect to any covenant not to compete shall be
effective regardless of whether same is referenced in the covenant not to
compete and the provisions of this Agreement shall prevail in the event of a
conflict with any covenant not to compete executed in connection with the
transaction contemplated by the Purchase Agreement.
Exhibit 8.3
Form of Opinion of Buyer's Counsel
1. Buyer is a corporation validly existing and in good standing under the
laws of the State of Delaware.
2. The Buyer has full corporate power and authority to execute and
deliver the Purchase Agreement and to consummate the Contemplated Transactions.
The Purchase Agreement constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms [INSERT BANKRUPTCY
EXCEPTION].
3. The execution, delivery and performance of the Purchase Agreement by
Buyer and the consummation of the Contemplated Transactions (i) have been
authorized by all necessary corporate action on the part of Buyer and (ii) will
not (w) conflict with the terms, conditions or provisions of the Organizational
Documents of Buyer, (x) violate any provision of law or, to our knowledge, any
Order to which Buyer is subject, (y) to our knowledge, result in a breach or
violation of any of the terms of, or constitute a default by Buyer under, any
material indenture, mortgage, loan agreement, lease or other agreement or
instrument to which Buyer is a party or by which it is bound.
Exhibit 7.13
BARGAIN AND SALE DEED
Exhibit 10.1(e)
FORM OF EXTENSION ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement"), dated as of this _____ day of
---------
_____________, 1999 is made and entered into by and among MELLON BANK, N.A. (the
"Escrow Agent"), U.S. SILICA COMPANY, a Delaware corporation ("Buyer"), and
------------ -----
JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the "Shareholders"), and
------------
CATS, INC., a Pennsylvania corporation, the JHS FAMILY PARTNERSHIP, a
Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP, a Pennsylvania
limited partnership (collectively, the "Partnership Sellers") and THE DELL H.
-------------------
SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust Seller"; the
------------
Shareholders, the Partnership Sellers and the Trust Sellers being hereinafter
collectively referred to as the "Sellers" and each, individually, as a "Seller")
------- ------
pursuant to the terms of that certain Purchase Agreement dated as of
_____________, 1999 (the "Purchase Agreement") by and among the Buyer and the
------------------
Sellers.
In consideration of the mutual premises, obligations and agreements
contained herein, the parties, intending to be legally bound, do hereby agree as
follows:
1. The Escrow Agent acknowledges receipt of the sum of Seven Million
Dollars ($7,000,000.00) deposited by the Buyer (together with any interest
earned thereon and any interest earned on any reinvested funds, the "Extension
---------
Escrow Amount") and hereby accepts its appointment and agrees to act as Escrow
- -------------
Agent and to hold the Extension Escrow Amount and to disburse the Extension
Escrow Amount under the terms and conditions of this Agreement. The Escrow
Agent undertakes to perform only such duties as are expressly set forth herein.
2. (a) If, on or prior to the Release Date (as hereinafter defined), the
Escrow Agent shall not have received a Seller Demand (as hereinafter defined),
the Escrow Agent shall
disburse to the Buyer the Extension Escrow Amount five business days following
the Release Date. For purposes of this Agreement, the term "Release Date" shall
------------
mean the earlier of the date of the closing under the Purchase Agreement (of
which the Escrow Agent shall be notified in writing by the Buyer and the Seller
Agent as provided below), or [____________, 1999] [THREE DAYS AFTER THE LAST DAY
OF THE EXTENSION] (the "Extension Date"). The Buyer and the Seller Agent agree,
--------------
no later than the day immediately following the date of the closing under the
Purchase Agreement, to notify the Escrow Agent in writing of such closing date.
(b) If, after the Extension Date, the Seller Agent shall file with the
Escrow Agent a written and dated demand (the "Seller Demand") for the payment to
-------------
the Seller Agent of all or a portion of the Extension Escrow Amount stating (i)
that the Sellers are entitled to all or a portion of such Extension Escrow
Amount pursuant to Article X of the Purchase Agreement and (ii) that the Seller
Agent has contemporaneously delivered a copy of the Seller Demand to the Buyer,
the Escrow Agent shall disburse to the Seller Agent the requested funds from the
Extension Escrow Amount on the tenth (10th) business day following the date of
the Seller Demand unless the Buyer delivers an objection in writing (the "Buyer
-----
Objection") to the Escrow Agent (with a copy to the Seller Agent) prior to the
- ---------
close of business on the tenth (10th) business day following the date of the
Seller Demand to the effect that the Seller Agent is not so entitled, in which
case no disbursement shall be made by the Escrow Agent from the Extension Escrow
Amount pursuant to the Seller Demand except in accordance with the terms and
conditions hereof. The Escrow Agent agrees to provide the Buyer with a copy of
any Seller Demand and to provide the Seller Agent with a copy of any Buyer
Objection, in each case within two business days after receipt by the Escrow
Agent thereof.
2
(c) At any time after the date hereof, the Escrow Agent may be advised in
writing by the Buyer and the Seller Agent to pay all or a portion of the
Extension Escrow Amount pursuant to a joint written instruction (the "Joint
-----
Instruction"), in which case the Escrow Agent shall pay the Extension Escrow
- -----------
Amount, or portion thereof, in accordance with the terms and in the manner set
forth in such Joint Instruction.
(d) If the Buyer and the Seller Agent are unable to resolve any
disagreement with respect to their rights to the payment of all or a portion of
the Extension Escrow Amount pursuant to this Section 2 within twenty (20)
business days after the date of a Buyer Objection, the dispute shall be settled
as provided in Section 4 hereof.
(e) The Escrow Agent shall hold the Extension Escrow Amount until it is
required to disburse it pursuant to this Section 2 or as provided in Section
3(c) or 4 hereof. Upon delivery of the entire Extension Escrow Amount by the
Escrow Agent pursuant to this Section 2 or as provided in Section 3(c) or 4
hereof, this Escrow Agreement shall terminate. The date upon which such
termination occurs shall be the "Termination Date."
----------------
(f) The Seller Agent and the Buyer each agree that they will give to each
other the copies of any Seller Demand or Buyer Objection, as the case may be,
concurrently with the delivery thereof to the Escrow Agent.
(g) If any of the Extension Escrow Amount is withheld pursuant to the
terms of paragraph (b) of this Section 2, the parties agree to provide the
Escrow Agent with a Joint Instruction upon the resolution of any claim which
caused the withholding of funds and upon receipt of such Joint Instruction, the
Escrow Agent shall release such funds in accordance with such Joint Instruction.
3
3. (a) Pending disbursement of funds held by it hereunder, the Escrow
Agent shall keep the Extension Escrow Amount invested in FDIC insured
certificates of deposit, obligations of the United States federal government (or
any agency thereof) or money market accounts of the Escrow Agent at market
rates, maturing in each case in ninety (90) days or less (each a "Permitted
---------
Investment"). The Buyer shall direct the Escrow Agent as to which Permitted
- ----------
Investment(s) the Escrowed Amount shall be invested.
(b) Any interest earned on the originally deposited Extension Escrow
Amount, as well as any interest earned on any reinvested funds, shall be held by
the Escrow Agent as, and shall be deemed to be, part of the Extension Escrow
Amount and shall be disbursed pursuant to the terms of Sections 2, 3(c) and 4
hereof.
(c) Except as provided below in this subparagraph (c), the [Buyer]
shall be responsible for any federal, state or local taxes and any other
assessments which may be imposed and payable with respect to the earnings on the
Extension Escrow Amount (collectively, "Taxes"). To cover the payment by [Buyer]
-----
of such Taxes, the Escrow Agent shall, not later than 30 days after the end of
each calendar year during the term of this Agreement, if applicable, disburse to
the [Buyer] an amount of cash equal to (i) the earnings on the Extension Escrow
Amount for such calendar year multiplied by (ii) 45%. With respect to any
earnings on the Extension Escrow Amount as to which Taxes have not yet been paid
as of the Termination Date, such earnings shall be treated as taxable income to
the party or parties to whom such amounts are distributed and such party or
parties shall be solely responsible for any Taxes which may be imposed on such
amounts. The Escrow Agent shall deliver to the Buyer and each of the Sellers
such forms as may be required by law reporting such earnings as income of the
Buyer or the Sellers, as the case may be.
4
4. (a) Any controversy or claim arising out of or relating to this
Agreement or the rights of the Buyer or the Sellers to the payment of all or a
portion of the Extension Escrow Amount shall be settled in accordance with
Section 12.4 of the Purchase Agreement. The Escrow Agent shall not be a party
to any such proceedings.
(b) Any portion of the Extension Escrow Amount being held pending
resolution of controversies or claims may also be disbursed in accordance with
the terms of a Joint Instruction.
5. (a) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(b) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct. The Sellers and the Buyer, jointly and
severally, shall indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
actually and reasonably incurred without gross negligence or bad faith on the
part of the Escrow Agent, arising out of and in connection with this Agreement.
Without limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from its own gross
negligence or willful misconduct) in the investment or reinvestment of the
Extension Escrow Amount, or any loss of interest incident to any such delays.
5
(c) The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument, arbitration award or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(d) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted in good faith in accordance with such advice.
(e) The Escrow Agent does not have any interest in the Extension
Escrow Amount but is serving as escrow holder only and having only possession
thereof. Any payments of income from the Extension Escrow Amount shall be
subject to applicable withholding regulations then in force with respect to
United States taxes. The Sellers and the Buyer will provide the Escrow Agent
with appropriate W-9 forms for tax identification number certification. This
paragraph and paragraph (b) of this Section 5 shall survive notwithstanding
termination of this Agreement or the resignation of the Escrow Agent.
(f) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in taking or refraining from taking any action with respect to any
amounts deposited hereunder.
(g) The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Extension Escrow Amount to any successor Escrow
Agent jointly
6
designated by the Seller Agent and the Buyer in writing, or to any court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Agreement.
The resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including by a court of competent jurisdiction) or
(ii) the day which is thirty (30) days after the date of delivery of its written
notice of resignation to the other parties hereto. If at that time the Escrow
Agent has not received a designation of a successor Escrow Agent, the Escrow
Agent's sole responsibility after that time shall be to safekeep the Extension
Escrow Amount until receipt of a designation of successor Escrow Agent pursuant
to a Joint Instruction or a final order of a court of competent jurisdiction.
(h) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely in good faith without any liability upon the contents
thereof.
(i) In the event of any disagreement between the Sellers and the Buyer
resulting in adverse claims or demands being made in connection with the
Extension Escrow Amount, or in the event that the Escrow Agent in good faith is
in doubt as to what action it should take hereunder, the Escrow Agent shall be
entitled to retain the Extension Escrow Amount until the Escrow Agent shall have
received (i) a Joint Instruction directing delivery of the Extension Escrow
Amount; or (ii) a final non-appealable order of a court of competent
jurisdiction directing the delivery of the Extension Escrow Amount.
(j) [Escrow Agent to be paid from interest earned in account.]
6. Each Seller hereby appoints [NAME] as the Seller Agent, and [NAME]
hereby accepts such appointment, to act as such Seller's exclusive agent and
attorney-in-fact to act on its behalf in connection with, and to facilitate the
consummation of, the transactions contemplated
by this Agreement. The Seller Agent shall take, and each Seller agrees that the
Seller Agent is irrevocably authorized and empowered in the name and on behalf
of each Seller to take, any and all actions which the Seller Agent deems
necessary or appropriate under this Agreement to be taken for and on behalf of
each Seller, as fully as if such party was acting on his own behalf, which shall
include, without limitation, the power and authority to (i) accept notices
hereunder on behalf of the Sellers, to issue or determine not to issue, as the
case may be, Seller Demands, (ii) agree to such amendments or modifications to
this Agreement as the Seller Agent, in his sole discretion, determines to be
desirable, (iii) execute and deliver such waivers and consents in connection
with this Agreement as the Seller Agent, in his sole discretion, may deem
necessary or desirable, (iii) collect and receive all moneys and other proceeds
and property payable to the Sellers pursuant to the terms of this Agreement;
(iv) enforce and protect the rights and interests of the Sellers or to refrain
from enforcing any right of the Seller, as the case may be, (v) settle or
compromise any claims asserted under this Agreement; and (vi) file and prosecute
appeals from any decision, judgment or award rendered in any such action,
proceeding or investigation as the Seller Agent, in his sole discretion, may
deem necessary or desirable.
7. Neither party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other parties, except as
provided in Section 5 with respect to a resignation by the Escrow Agent and
except that Buyer may assign its rights and obligations under this Agreement to
one or more of its affiliates, for so long as such entity remains an affiliate
thereof, and Buyer or such affiliate(s) may assign or grant a security interest
in, all of its rights and/or obligations under this Agreement (i) for collateral
security purposes, to the Buyer's lenders and/or investors as security for
Buyer's or any such affiliate's obligations to such lenders or investors (and
such lenders or investors may exercise remedies with respect to
8
such assignment or security interest), and (ii) to a purchaser in connection
with a sale of the Acquired Companies (as defined in the Purchase Agreement) or
a sale of a substantial component of the Acquired Companies. Notwithstanding the
assignment of rights and obligations under this Agreement pursuant to the
provisions stated hereinabove, it is understood and agreed that the assignor
shall remain responsible for its obligations under this Agreement and, in the
case of a partial assignment, shall be the only party entitled to enforce the
rights and remedies which would otherwise be available to an assignee of the
Agreement. No such assignment shall in any way limit or restrict the assignor's
rights and remedies. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and permitted assigns. This
Agreement will be governed by the laws of the Commonwealth of Pennsylvania
without regard to conflicts of laws principles.
8. This Agreement may not be modified except by a written agreement
executed by the party to be charged with the modification.
9. All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
--------
registered or certified mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
9
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
To the Escrow Agent:
[To be provided]
To the Sellers or the Seller Agent:
[To be provided]
With a copy to:
Reed Smith Shaw & McClay LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David L. DeNinno
Telecopier No.: 412-288-3063
To the Buyer:
U.S. Silica Company
P.O. Box 187
Berkeley Springs VN 25411
Attention: President
Telecopier No.: 304-258-3500
With a copy to:
D. George Harris & Associates, Inc.
399 Park Avenue, Thirty-second Floor
New York, New York 10022
Attention: Donald G. Kilpatrick
Telecopier No.: 212-207-6470
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Kenneth E. Adelsberg
Telecopier No.: 212-858-1500
10
10. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
11. The term "business day" as used in this Agreement shall mean any day
------------
other than a Saturday, Sunday, or public holiday under the laws of the
Commonwealth of Pennsylvania.
12. THE BUYER, THE SELLERS AND THE ESCROW AGENT SPECIFICALLY WAIVE THE
RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS
AGREEMENT. The Buyer and the Sellers agree that any legal action or proceeding
brought against the Escrow Agent, or to which the Escrow Agent is joined,
relating to this Agreement or the Escrow Agent's performance hereunder, shall be
brought exclusively in any state or federal court sitting in Pennsylvania, and
the Buyer and the Sellers each waive, to the fullest extent permitted by law,
(a) any objection that any of them may respectively, now or hereafter, have to
the laying of the venue of any such action or proceeding brought in any such
court, and (b) any claim that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
[THE ESCROW AGENT]
By: _______________________________
Name:
Title:
U.S. SILICA COMPANY
By: _______________________________
Name:
Title:
11
Sellers:
SHAREHOLDERS:
_______________________________________
Joseph H. Shearer
_______________________________________
R. Scott Shearer
COMMERCIAL AGGREGATES
TRANSPORTATION AND SALES, L.P.
By: CATS, Inc., General Partner:
By: __________________________________
Title:
By: JHS Family Partnership
By: __________________________________
General Partner
By: RSS Family Partnership
By: __________________________________
General Partner
By: The Dell H. Shearer Granchildren's Trust
By: __________________________________
Co-Trustee
By: __________________________________
Co-Trustee
SELLER AGENT:
____________
[NAME]
12