INDEMNIFICATION AND WARRANT PURCHASE AGREEMENT
INDEMNIFICATION AND WARRANT PURCHASE AGREEMENT (the "Agreement"),
dated as of April 12, 1999, among Chart Industries, Inc., a Delaware
corporation ("Chart"), MVE Holdings, Inc., a Delaware corporation ("Holdings")
and each of the former members of MVE Investors, LLC listed on the signature
pages hereto (the "Members").
W I T N E S S E T H:
WHEREAS, Chart, Chart Acquisition Company, a Delaware corporation
("Sub"), and Holdings have entered into an Agreement and Plan of Merger, dated
February 16, 1999, whereby Sub will merge with and into Holdings (the "Merger
Agreement"; capitalized terms used herein but not defined shall have the
meanings ascribed to such terms in the Merger Agreement) (except that as used
herein the term "Holdings" shall include the "Surviving Corporation" of the
Merger);
WHEREAS, Chart has deposited certain amounts into escrow, which
amounts may be utilized as provided herein by the Members.
WHEREAS, Chart, Holdings and the Members desire to memorialize their
understanding that Damages arising out of Misallocation Claims and Powell Claims
(collectively, "Indemnifiable Claims") shall be satisfied first from insurance
proceeds, if any, second from the Holdback Amount and third, to the extent any
insurance proceeds and the Holdback Amount are not sufficient to satisfy all
Damages arising out of such claims (i) with respect to Misallocation Claims,
from the parties hereto according to the following percentages: (a) 90% by the
Members and (b) 10% by Chart and Holdings and (ii) with respect to Powell
Claims, 100% by the Members.
WHEREAS, Chart and Holdings, on the one hand, and the Members, on
the other hand, desire to indemnify each other for their proportionate share of
Damages, if any, arising out of Misallocation Claims and the Members desire to
indemnify Chart and Holdings for Damages arising out of Powell Claims; and
WHEREAS, Chart desires to grant to the Members the option to
purchase warrants to purchase up to 1,000,000 shares of common stock of Chart on
the terms and subject to the conditions set forth in this Agreement in
consideration of the Members' agreement to provide indemnification to Chart and
Holdings as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements herein contained, and for other good and lawful consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
INDEMNIFICATION AND RELATED MATTERS
I.01 Insurance Proceeds. Chart and Holdings agree to use
commercially reasonable efforts (including without limitation, complying with
the terms of the Merger Agreement) to cause any Damages for Indemnifiable Claims
which may be covered by third party insurance to be paid by any such third party
insurance carrier.
I.02 Holdback Amount. To the extent not paid in full with insurance
proceeds, all Damages for Indemnifiable Claims shall be paid out of the Holdback
Amount pursuant to the Merger Agreement and the Escrow Agreement, but only if
and to the extent the Members consent to the release of such funds in accordance
with the terms set forth in the Escrow Agreement.
I.03 Escrow Amount. Chart or the Company shall deposit in a separate
escrow account an amount in cash equal to (a) the accrued but unpaid dividends
on 576.76 shares of 10% Class B Cumulative Preferred Stock, par value $100.00
per share, of the Company, plus (b) any amounts recovered by the Company in
respect of certain rights assigned to it to collect indemnification payments
with respect to certain tax issues under that certain Agreement, dated August
27, 1996 among Robert E. Cieslukowski, Cieslukowski Family Limited Partnership,
C.J. Schoenbauer, H. Michael Lutgen, R. Edwin Powell, Powell Family Limited
Partnership, John J. Pint, Michael Tate, JMS Family Limited Partnership and
O'Halloran Family Limited Partnership, which collection rights have been
assigned to the Company pursuant to a letter agreement, dated February 11, 1999,
among MVE Inc. and Messrs. Clemence J. Schoenbauer and H. Michael Lutgen minus
(c) $296,035 (collectively, the "Escrow Amount"). The Members may, in their sole
and absolute discretion, at any time and from time to time, utilize all or any
portion of the Escrow Amount (a) to defend, settle or pay any Powell Claims, (b)
to satisfy their indemnification obligation arising under Section 1.06 hereof,
(c) to pay any or all of the purchase price of the Warrants (as defined in
Section 2.01), (d) to pay a bonus to any current or former officer of Holdings
or MVE, Inc., (e) to pay the fees and expenses of any Affiliate of the Members
including, without limitation, investment banking fees of
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ACI Capital Co., Inc., or its Affiliates or (f) in any other manner as the
Members, in their sole and absolute discretion, may from time to time determine;
provided, however, that the Members may only utilize the Escrow Amount for the
purposes described in clauses (a) and (b) above until such time as the Members'
indemnification obligations under Section 1.06 hereof terminate.
I.04 Liability of Chart, Holdings and the Members. To the extent any
Damages for Indemnifiable Claims are not paid out of insurance proceeds and to
the extent that such Damages are not paid out of the Holdback Amount or the
Escrow Amount, then such Damages in excess of any amounts actually paid by
Chart's or Holdings' insurance carriers and any amounts released from the
Holdback Amount or the Escrow Amount shall, pursuant to Sections 1.05 and 1.06
hereof, (a) with respect to Misallocation Claims be borne 90% by the Members and
10% by Chart and Holdings and (b) with respect to Powell Claims be borne 100% by
the Members.
I.05 Indemnification of the Members by Chart and Holdings. Chart and
Holdings shall, jointly and severally, indemnify, defend and hold the Members
and their respective directors, officers and Affiliates ("Member Indemnitees")
harmless from and against ten percent (10%) of any and all Damages, other than
Damages satisfied out of insurance proceeds pursuant to Section 1.01, Damages
satisfied out of the Holdback Amount pursuant to Section 1.02 or Damages
satisfied out of the Escrow Amount pursuant to Section 1.03, incurred or
suffered by any Member Indemnitee arising out of or in connection with any
Misallocation Claim.
I.06 Indemnification of Chart and Holdings by the Members. The
Members shall, jointly and severally (but if any Member deposits one-third of
its Class A Merger Consideration in an escrow account established for the
purpose of satisfying claims by any Chart Indemnitees (as hereinafter defined)
for Damages hereunder, the terms of which escrow are reasonably satisfactory to
Chart and Holdings, then to the extent such funds remain in escrow, such
Member's liability hereunder shall be several but not joint), indemnify, defend
and hold Chart and Holdings and their respective directors, officers and
Affiliates ("Chart Indemnitees") harmless from and against (a) ninety percent
(90%) of any and all Damages, other than Damages satisfied out of insurance
proceeds pursuant to Section 1.01, Damages satisfied out of the Holdback Amount
pursuant to Section 1.02, and Damages satisfied out of the Escrow Amount
pursuant to Section 1.03, incurred or suffered by a Chart Indemnitee arising out
of or in connection with any Misallocation Claim and (b) one hundred percent
(100%) of any and all Damages, other than Damages satisfied out of insurance
proceeds pursuant to Section 1.01, Damages satisfied out of the Holdback Amount
pursuant to Section 1.02 and Damages satisfied out of the Escrow Amount pursuant
to Section 1.03, incurred or
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suffered by any Chart Indemnitee arising out of or in connection with the Powell
Claims. The obligation of the Members to provide indemnification to Chart and
Holdings hereunder with respect to Misallocation Claims shall terminate (except
with respect to any claim for which a Claim Notice (as defined below) has been
provided) on the second anniversary of the Effective Time. The obligation of the
Members to provide indemnification to the Chart Indemnitees hereunder with
respect to Powell Claims shall terminate at the earliest time that (a) the
Powell Claims shall have been dismissed with prejudice pursuant to a settlement
agreement or otherwise, (b) the parties to the Powell Claims shall have reached
a settlement agreement reasonably satisfactory to Chart or (c) a court of
competent jurisdiction shall have issued a final judgment with respect to the
Powell Claims which is not subject to appeal, or if subject to appeal, the
applicable appeal period shall have lapsed, and such judgment shall have been
satisfied in full.
I.07 Limitations on Liability. Notwithstanding anything herein to
the contrary, the Members shall not be liable (a) for any Damages with respect
to Misallocation Claims and Powell Claims, in the aggregate, in excess of the
accrued but unpaid dividends on the 12 1/2% Class A Cumulative Convertible
Participating Preferred Stock, par value $100 per share, of the Company,
immediately prior to the Effective Time (the "Aggregate Cap") and (b) for any
Damages with respect to Powell Claims only, in excess of $5,000,000 (the "Powell
Cap"); provided, however, that (i) from and after the date which is six months
from the date hereof, if there are no Misallocation Claims outstanding, the
Aggregate Cap shall be reduced to $13,000,000 and (ii) on and after the first
anniversary of the date hereof, the Aggregate Cap shall be reduced at that time
and from time to time by an amount equal to $100 multiplied by the number of
shares of Common Stock held by former holders of Common Stock who have at any
time executed releases in the form of Exhibit A hereto; provided, further,
however, that as long as any Powell Claims remain outstanding, the Aggregate Cap
shall not be reduced below the Powell Cap.
I.08 Indemnification Claims. (a) If an indemnified party hereunder
(the "Claimant") wishes to assert an indemnification claim against another party
hereto, the Claimant shall deliver to the indemnifying party not later than the
second anniversary of the Effective Time a written notice (a "Claim Notice")
setting forth:
(i) a description of the facts and circumstances giving rise to the
right to receive indemnification hereunder; and
(ii) a description and a good faith estimate of the total amount of
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Damages actually incurred or expected to be incurred by the Claimant
(which estimate shall not operate as a limit on any indemnification
claim).
(b) Each of (i) the Members and (ii) Chart and Holdings agrees
to provide notice to the other of any information regarding threatened or
pending claims.
I.09 Defense of Indemnifiable Claims. Subject to the Members' prior
delivery to Chart and Holdings of a written acknowledgement that a claim
constitutes an Indemnifiable Claim for which the Members are responsible (in
whole or in part) pursuant to Section 1.06 of this Agreement, the Members shall
have the sole and exclusive right to assume the defense of any Indemnifiable
Claims. During any such defense:
(a) Chart and Holdings shall make available to the Members all
books, records and other documents and materials that are under the direct
or indirect control of Chart or Holdings or any of their representatives
and that the Members reasonably consider necessary or desirable for the
defense of any such Indemnifiable Claim;
(b) Chart and Holdings shall execute such documents and take such
other actions as the Members may reasonably request for the purpose of
facilitating the defense of, or any settlement, compromise or adjustment
relating to, any Indemnifiable Claim;
(c) Chart and Holdings shall otherwise fully cooperate as reasonably
requested by the Members in the defense of any Indemnifiable Claim; and
(d) The Members shall have the exclusive right to settle, adjust or
compromise any Indemnifiable Claim, on such terms as they, in their sole
and absolute discretion, deem appropriate, without the consent or approval
of Chart or Holdings; provided, however, that if Chart or Holdings are
parties to such settlement, adjustment or compromise, such settlement,
adjustment or compromise shall include a complete release of the Chart
Indemnitees on terms reasonably satisfactory to Chart; provided, further,
that such settlement, adjustment or compromise shall not require Chart or
Holdings to refrain from taking any action in the future or otherwise
provide for injunctive relief against Chart or Holdings.
1.10 Representation of the Members. The Members hereby jointly and
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severally represent and warrant to Chart and Holdings that (i) the Members
collectively owned all of the membership interests of MVE Investors during the
period of time from January 1, 1999 until immediately prior to the consummation
of the merger of MVE Investors with and into Sub, and (ii) the aggregate net
worth of the Members as of the date of this Agreement is not less than
$50,000,000.
1.11 Powell Offset. The amount payable in Section 1.06 hereof by the
Members in respect to Powell Claims shall be reduced by any amounts received by
the Chart Indemnitees in respect of potential claims against R. Edwin Powell,
the R. Edwin Powell Family Limited Partnership and the partners thereof, and
their representatives and professional service providers. In the event such
amounts recovered exceed the amount of the Powell Claims, such excess amount
shall be allocated and shall be distributed 90% to the Members and 10% to Chart
and Holdings
ARTICLE II.
OPTION TO PURCHASE WARRANTS
II.01 Option to Purchase Warrants. In consideration of the Members'
agreement to provide indemnification to Chart and Holdings hereunder, Chart
hereby grants to the Members the right to purchase from Chart, which right to
purchase is exercisable by the Members in whole or in part, in their sole and
absolute discretion, at any time after the date hereof and prior to the date
which is five years from the date hereof (the "Purchase Period"), warrants to
purchase an aggregate of 1,000,000 shares of common stock, par value $.01, of
Chart (the "Warrants"), pursuant to a Warrant Agreement in the form attached
hereto as Exhibit B, which option to purchase the Warrants shall be exercisable
for an aggregate purchase price determined in accordance with Section 2.02
hereof; provided, however, that in the event of the payment by Chart of the
Settlement Amount (as defined in Section 2.02 below), the Purchase Period shall
expire on the earlier to occur of (a) the fifth anniversary of the date hereof
or (b) the date which is one hundred and twenty (120) days following the date a
written notice is sent by Chart to the Members setting forth the amount of the
Settlement Amount and the general terms of the settlement or transaction giving
rise to the payment of the Settlement Amount.
II.02 Price of Warrants. If the Members determine, in their sole and
absolute discretion, to purchase the Warrants from Chart, the purchase price
therefor shall be an amount equal to seventy-five percent (75%) of the amount,if
any, paid by Chart, Holdings or any Affiliate thereof (the "Settlement Amount")
to Grumman Hill Investments LP ("Grumman Hill") in connection with (a) the
relinquishment or
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termination by Grumman Hill of all of its rights, or (b) any transaction or
series of transactions pursuant to which Grumman Hill sells to Chart, Holdings
or any Affiliate thereof (i) all of its right to the option (the "Option")
granted pursuant to that certain Caire Inc. Stock Option Agreement, dated
January 26, 1998, between Caire and Grumman Hill (the "Option Agreement"), (ii)
all of its rights to receive 10% Series AA Cumulative Preferred Stock (the
"Series AA Stock") of Caire Inc. ("Caire") or any other equity interest in Caire
pursuant to the exercise of the Option, or (iii) the actual Series AA Stock
issued to Grumman Hill upon the exercise of the Option or any other securities,
cash or property into which such Series AA Stock is converted or for which it is
exchanged; provided, however, that if the Members determine to purchase the
Warrant prior to the payment of the Settlement Amount or the original expiration
date of the Option (the "Expiration Date"), the purchase price of the Warrants
shall be an amount equal to seventy-five percent (75%) of (x) the aggregate
Liquidation Value (as defined in the Certificate of Designations, Preferences
and Rights of 10% Series AA Cumulative Preferred Stock of Caire Inc.) of the
shares of Series AA Stock issuable upon exercise of the Option as if such stock
was issued immediately prior to the fifth anniversary of the Grant Date (as
defined in the Option Agreement) (the "Maximum Purchase Price") minus (y) the
aggregate Exercise Price of the Option (as defined in the Option Agreement), as
if the Option were exercised immediately prior to the fifth anniversary of the
Grant Date. Notwithstanding the foregoing, if, during the Purchase Period,
Grumman Hill exercises the Option, the purchase price of the Warrant shall be an
amount equal to 75% of the amount paid to redeem, repurchase or otherwise
acquire the Series AA Stock issued upon exercise of the Option or if, on or
prior to the Expiration Date, Grumman Hill has failed to exercise the Option, or
no Settlement Amount has been paid by Chart, Holdings or any Affiliate thereof
to Grumman Hill, then the purchase price of the Warrant shall be $1.00. If the
Members pay the Maximum Purchase Price for the Warrant and subsequent to such
payment (x) Chart pays the Settlement Amount and seventy-five percent (75%) of
such Settlement Amount is less than the Maximum Purchase Price, then Chart shall
pay to the Members an amount equal to (i) the Maximum Purchase Price minus (ii)
seventy-five percent (75%) of the Settlement Amount or (y) Grumman Hill's right
to receive the Series AA Stock expires without payment of the Settlement Amount,
then Chart shall pay to the Members the Maximum Purchase Price minus $1.00.
ARTICLE III.
MISCELLANEOUS
III.01 Effective Time of Agreement. This Agreement shall not become
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effective unless the Merger is consummated, in which case this Agreement shall
be deemed to be effective as of the Effective Time of the Merger.
III.02 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to Chart or Holdings, to:
Chart Industries, Inc.
5885 Landerbrook Drive
Suite 150
Mayfield Heights, Ohio 44124
Attention: Arthur S. Holmes
Telecopy: (440) 753-1451
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attention: Thomas F. McKee, Esq.
Telecopy: (216) 241-0816
if to the Members, to:
ACI Capital I, LLC
707 Westchester Avenue
White Plains, New York 10604
Attention: Kevin Penn
Telecopy: (914) 681-9856
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq.
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Telecopy: (212) 310-8007
Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effective (i) if
personally delivered, at the time delivered by hand, (ii) if delivered by
facsimile transmission, upon confirmation of transmission, (iii) if by courier,
on the business day such courier guarantees delivery, and (iv) if delivered by
U.S. Mail, seven business days after deposit in the U.S. Mail, postage prepaid.
III.03 No Waivers. No failure or delay by either party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
III.04 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that neither party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto.
III.05 Counterparts; Effectiveness. This Agreement may be signed in
two counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. Subject to
Section 3.01, this Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto.
III.06 Entire Agreement; Assignment. (a) This Agreement, the Merger
Agreement, the Escrow Agreement and the Warrant Agreement constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the paries with respect to the
subject matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. Except as expressly stated herein, this
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
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(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including, but not
or otherwise; provided, however, that Chart may assign its rights and
obligations hereunder in connection with a sale or transfer of all or
substantially all of its assets or its rights hereunder to any of its creditors.
Any assignment in violation of the preceding sentence shall be void. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
III.07 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware, excluding its conflict of law
provisions.
III.08 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
III.09 Amendment. This Agreement may be amended, supplemented or
modified, and any provisions may be waived, only pursuant to a written
instrument signed by the parties hereto.
III.010 Severability. The invalidity or enforceability of any
provision of this Agreement shall not effect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
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IN WITNESS WHEREOF, the parties hereto here caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CHART INDUSTRIES, INC.
By: /s/ Arthur S. Holmes
------------------------------------
Name: Arthur S. Holmes
Title: Chairman and Chief Executive
Officer
MVE HOLDINGS, INC.
By: /s/ John M. Kucharik
------------------------------------
Name: John M. Kucharik
Title: President and CEO
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THE MEMBERS:
ACI CAPITAL I, LLC
By: /s/ Kevin S. Penn
----------------------------------
Name: Kevin S. Penn
Title: President
AMERICAN SECURITIES PARTNERS, L.P.
By: American Securities Associates, L.P.,
its general partner
By: American Securities Partners GP
(Management) Corp.
By: Authorized Representative
----------------------------------
Name:
Title:
MVE CRYOGENICS LLC
By: Authorized Representative
------------------------------------
Name:
Title:
CRM/MVE CAPITAL LLC
By: Cramer Rosenthal McGlynn, Inc.,
as Manager
By: /s/ Eugene Trainor
------------------------------------
Name: Eugene Trainor
Title: EVD, COO
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TANGENT LLC
By: /s/ Authorized Representative
-----------------------------------
Name:
Title:
FERTOSA LLC
By: /s/ Authorized Representative
------------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND II
By: William A.M. Burden & Co., L.P.,
its general partner
By: Burden Brothers, Inc.,
its sole general partner
By: /s/ Jeffrey A. Weber
--------------------------------------
Name: Jeffrey A. Weber
Title: President and CEO
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