EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Among
GT ACQUISITION COMPANY,
and
GREENVILLE TUBE, LLC
JULY 1, 2003
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS AND USAGE.................................................................................1
1.1 Definitions.....................................................................................1
1.2 Usage..........................................................................................16
2. SALE AND TRANSFER OF ASSETS; CLOSING.................................................................17
2.1 Assets to be Sold..............................................................................17
2.2 Excluded Assets................................................................................18
2.3 Consideration..................................................................................20
2.4 Liabilities....................................................................................20
2.5 Allocation.....................................................................................23
2.6 Closing........................................................................................23
2.7 Closing Obligations............................................................................23
2.8 Adjustment Amount and Payment..................................................................27
2.9 Adjustment Procedure...........................................................................27
2.10 Consents.......................................................................................28
2.11 Accounts Receivable............................................................................30
2.12 Contingent Note................................................................................30
2.13 Termination of Promissory Note.................................................................30
3. REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................32
3.1 Organization and Good Standing; Name...........................................................32
3.2 Enforceability; Authority; No Conflict.........................................................32
3.3 Capitalization.................................................................................33
3.4 Financial Statements...........................................................................33
3.5 Books and Records..............................................................................34
3.6 Sufficiency of Assets..........................................................................34
3.7 Description of Owned Real Property.............................................................34
3.8 Description of Leased Real Property............................................................34
3.9 Title to Assets; Encumbrances..................................................................35
3.10 Condition of Facilities........................................................................36
3.11 Accounts Receivable............................................................................36
3.12 Inventories....................................................................................36
3.13 No Undisclosed Liabilities.....................................................................37
3.14 Taxes..........................................................................................37
3.15 No Material Adverse Change.....................................................................38
3.16 Employee Benefits..............................................................................39
3.17 Compliance with Legal Requirements; Governmental Authorizations................................41
3.18 Legal Proceedings; Orders......................................................................43
3.19 Absence of Certain Changes and Events..........................................................44
3.20 Contracts; No Defaults.........................................................................45
3.21 Insurance......................................................................................48
3.22 Environmental Matters..........................................................................49
3.23 Employees......................................................................................51
3.24 Labor Disputes; Compliance.....................................................................52
3.25 Intellectual Property Assets...................................................................53
3.26 Parent Ownership of Assets.....................................................................56
3.27 Compliance with the Foreign Corrupt Practices Act and Export Control and Antiboycott Laws......56
3.28 Relationships With Related Persons.............................................................57
3.29 Brokers or Finders.............................................................................58
3.30 Securities Law Matters.........................................................................58
4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................59
4.1 Organization and Good Standing.................................................................59
4.2 Authority; No Conflict.........................................................................59
4.3 Certain Proceedings............................................................................60
4.4 Brokers or Finders.............................................................................60
4.5 Sufficient Funds...............................................................................60
[5. Intentionally Omitted]...............................................................................60
[6. Intentionally Omitted]...............................................................................60
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE..................................................60
7.1 Consents.......................................................................................60
7.2 Additional Documents...........................................................................60
7.3 Title Insurance................................................................................61
7.4 Governmental Authorizations....................................................................61
7.5 Employees......................................................................................61
7.6 Ancillary Agreements...........................................................................61
7.7 Financing......................................................................................61
7.8 Management Investment..........................................................................62
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.................................................62
8.1 Consents.......................................................................................62
9. NO TERMINATION.......................................................................................62
10. ADDITIONAL COVENANTS.................................................................................62
10.1 Employees and Employee Benefits................................................................62
10.2 Payment of All Taxes Resulting From Sale of Assets by Seller...................................65
10.3 Payment of Other Retained Liabilities..........................................................65
10.4 Financial Information..........................................................................66
10.5 Removing Excluded Assets.......................................................................66
10.6 Reports and Returns............................................................................66
10.7 Assistance in Proceedings......................................................................66
10.8 Noncompetition, Nonsolicitation and Nondisparagement...........................................66
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10.9 Customer and Other Business Relationships......................................................67
10.10 Retention of and Access to Records.............................................................68
10.11 Further Assurances.............................................................................68
10.12 TCE Sealant....................................................................................68
10.13 Master Lease Payments..........................................................................68
10.14 Effetive Date..................................................................................68
11. INDEMNIFICATION; REMEDIES............................................................................69
11.1 Survival.......................................................................................69
11.2 Indemnification and Reimbursement by Seller....................................................69
11.3 Indemnification and Reimbursement by Seller - Environmental Matters............................70
11.4 Indemnification and Reimbursement by Buyer.....................................................78
11.5 Limitations on Amount - Seller.................................................................80
11.6 Limitations on Amount - Buyer..................................................................80
11.7 Time Limitations...............................................................................80
11.8 Right of Setoff................................................................................81
11.9 Third-Party Claims.............................................................................82
11.10 Direct Claims..................................................................................83
11.11 Insurance Tax..................................................................................83
11.12 Limitation on Consequential Damages............................................................84
11.13 Payment of Claims..............................................................................84
11.14 Exclusive Means................................................................................84
11.15 Indemnification in Case of Strict Liability or Indemnitee Negligence...........................80
11.16 Facility Lease.................................................................................80
12. CONFIDENTIALITY......................................................................................85
12.1 Definition of Confidential Information.........................................................85
12.2 Restricted Use of Confidential Information.....................................................86
12.3 Exceptions.....................................................................................86
12.4 Legal Proceedings..............................................................................87
12.5 Return or Destruction of Confidential Information..............................................87
12.6 Attorney-Client Privilege......................................................................87
12.7 Tax Disclosure.................................................................................82
13. GENERAL PROVISIONS...................................................................................88
13.1 Expenses.......................................................................................88
13.2 Public Announcements...........................................................................88
13.3 Notices........................................................................................88
13.4 Jurisdiction; Service of Process...............................................................89
13.5 Enforcement of Agreement.......................................................................90
13.6 Waiver; Remedies Cumulative....................................................................90
13.7 Entire Agreement and Modification..............................................................90
13.8 Disclosure Letter..............................................................................90
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13.9 Assignments, Successors and No Third-Party Rights..............................................90
13.10 Severability...................................................................................91
13.11 Construction...................................................................................91
13.12 Time of Essence................................................................................91
13.13 Governing Law..................................................................................91
13.14 Execution of Agreement.........................................................................91
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated July 1, 2003,
between GT Acquisition Company, a Delaware corporation ("Buyer") and Greenville
Tube, LLC, a Delaware limited liability company ("Seller").
RECITALS
Chart, Inc., a Delaware corporation ("Member"), owns one hundred percent
(100%) of the issued and outstanding equity interest of Seller. Seller is, and
since February 24, 2002, has been, in the business of manufacturing and selling
steel and stainless steel tubing (the "Business"). From January 1, 2000, through
June 30, 2000, Member, through an incorporated subsidiary, Chart Holdings, Inc.,
a Delaware Corporation ("CHI"), operated the Business. From July 1, 2000 through
February 23, 2002, Member through an unincorporated division, operated the
Business. Before January 1, 2000, Member's wholly owned subsidiary, Greenville
Tube Corporation, an Arkansas corporation ("GTC," and, together with CHI and
Member, the "Prior Owner") operated the Business. Member is a wholly owned
subsidiary of Chart Industries, Inc., a Delaware corporation ("Parent"). Seller
desires to sell, and Buyer desires to purchase, the Assets of Seller for the
consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS AND USAGE.
1.1 Definitions. For purposes of this Agreement, the following terms
and variations thereof have the meanings specified or referred to in this
Section 1.1:
"Accounts Receivable" - (a) all trade accounts receivable and other
rights to payment from customers of Seller and the full benefit of all security
for such accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of goods shipped or products sold or
services rendered to customers of Seller, (b) all other accounts or notes
receivable of Seller and the full benefit of all security for such accounts or
notes, and (c) any claim, remedy or other right related to any of the foregoing.
"Active Employees" - as defined in Section 10.1(a).
"ADEQ Consent Order" - the Arkansas Department of Environmental Quality
Consent Administrative Order #LIS 99-152, issued June 30, 1999, and any
amendments thereto.
"Adjustment Amount" - as defined in Section 2.8.
"Affiliate" -- with respect to a Person (the "First Person"), any other
Person who controls, is under common control with, or is controlled by the First
Person.
"Appurtenances" - all privileges, rights, easements, hereditaments, and
appurtenances belonging to or for the benefit of the Land, including all
easements appurtenant to and for the benefit of any Land (a "Dominant Parcel")
for, and as the primary means of access between, the Dominant Parcel and a
public way, or for any other use upon which lawful use of the Dominant Parcel
for the purposes for which it is presently being used is dependent, and all
rights of Seller existing in and to any streets, alleys, passages and other
rights-of-way included thereon or adjacent thereto (before or after vacation
thereof) and vaults beneath any such streets.
"Assets" - as defined in Section 2.1.
"Assignment and Assumption Agreement" - as defined in Section
2.7(a)(ii).
"Assumed Contracts" - as defined in the definition of "Breach."
"Assumed Liabilities" - as defined in Section 2.4(a).
"Balance Sheet" - as defined in Section 3.4.
"Best Efforts" - the efforts that a reasonably prudent Person desirous
of achieving a result would use in similar circumstances to achieve that result
as expeditiously as possible, provided, however, that a Person required to use
Best Efforts under this Agreement will not be thereby required to take actions
that would, in the reasonable sole determination of such Person, result in a
material adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions or to dispose of or make any change to its business,
expend any funds in excess of Five Thousand Dollars ($5,000.00) or incur any
other material burden.
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"Bill of Sale" - as defined in Section 2.7(a)(i).
"Breach" - any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of this Agreement, or any agreement or instrument executed and
delivered by the parties hereto or their Affiliates in connection with the
transactions contemplated by this Agreement, or any contract which is being
assigned to or assumed by Buyer (the "Assumed Contracts") (which are listed on
Part 1.1(a) of the Disclosure Schedule), or any event that with the passing of
time or the giving of notice, or both, would constitute such a breach,
inaccuracy or failure.
"Bulk Sales Laws" - as defined in Section 5.10.
"Business" - as defined in the Recitals.
"Business Day" - any day other than (a) Saturday or Sunday or (b) any
other day on which banks in Delaware are permitted or required to be closed.
"Buyer" - as defined in the first paragraph of this Agreement.
"Buyer Change of Control"--shall mean any of the following: (a) a
liquidation, dissolution or winding up of the affairs Buyer (whether voluntary
or involuntary), (b) the merger or consolidation of Buyer with or into another
Person in a transaction pursuant to which the Investor Group, including its
Affiliates, fails, directly or indirectly, to retain record or beneficial
ownership or control in excess of 50% of the voting power of the surviving
Person, (c) a sale by the Investor Group of more than 50% of the voting power of
Buyer, excluding sales by members of the Investor Group to other members of the
Investor Group or their Affiliates, (d) a sale of all or substantially all of
the assets of Buyer, the consummation of which occurred when the Investor Group
owned in excess of 50% of the voting power of Buyer, and (e) any capital
reorganization or other transaction which creates a situation which is
substantially similar to the situation that would result from any transaction
described in the foregoing clauses (a) through (d).
"Buyer Indemnified Persons" - as defined in Section 11.2.
"Closing" - as defined in Section 2.6.
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"Closing Date" - the date on which the Closing actually takes place.
"Closing Financial Statements" - as defined in Section 2.9(b).
"Closing Working Capital" - as defined in Section 2.9(b).
"COBRA" - as defined in Section 3.16(f).
"Code" - the Internal Revenue Code of 1986.
"Confidential Information" - as defined in Section 12.1.
"Consequential Damages" - incidental, special, derivative or punitive
damages or any loss or liability arising from lost property, lost business
opportunities, diminution of value, damage to reputation or lost profits or
damages based upon a multiple of earnings, EBITDA, or cash flow.
"Consent" - any approval, consent, ratification, waiver or other
authorization.
"Contemplated Transactions" - all of the transactions contemplated by
this Agreement and the agreements executed and delivered hereunder.
"Contingent Note" - as defined in Section 2.12.
"Contract" - any legally binding agreement, contract, Lease, consensual
obligation, promise or undertaking (whether written or oral and whether express
or implied).
"Copyrights" - as defined in Section 3.25(a)(iii).
"Core Business" - the products and product lines produced, marketed or
sold by Seller on the Closing Date and during the six (6) month period
immediately preceding the Closing Date. Core Business shall not include other
businesses, products, or product lines that Buyer adds or acquires after the
Closing Date.
"Damages" - as defined in Section 11.2 and, except as otherwise provided
in this Agreement excludes Consequential Damages.
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"Disclosure Schedule" - the disclosure schedule delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
"Diversion Agreement" - as defined in Section 2.2(m).
"Earnout Agreement" - as defined in Section 2.7(a)(xii).
"EBITDA" - as defined in the Earnout Agreement.
"Effective Time" - the time of the closing of Seller's business on the
Closing Date.
"Employee Plans" - as defined in Section 3.16(a).
"Encumbrance" - any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.
"Environment" - soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments and ambient air (including indoor air).
"Environmental Claims" - any Third Party Claim relating to any
Environmental Liabilities or any demand by a Third Party in connection with a
proposed acquisition of the Assets from Buyer or a proposed loan to Buyer
relating to any Environmental Liabilities.
"Environmental Law" - any applicable Federal, state, or local law,
statute, ordinance, code, rule, regulation, authorization, permit, judgment,
decision, order, decree, or rule of common law which pertains to the Environment
or any Hazardous Material and shall include, without limitation, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001, et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the National Environmental Policy Act, 42 U.S.C. Section
4331, et seq., the Oil Pollution Act, 33 U.S.C. Section 2701, et seq., the
Rivers and Harbors Act of 1899, 33 U.S.C. Section 401, et seq., the Federal
5
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water
Act, 42 U.S.C. 300f, et seq., the Arkansas Water and Pollution Control Act, Sec.
8-4-101, Arkansas Code, et seq., the Arkansas Solid Waste Management Act, Sec.
8-6-201, Arkansas Code, et seq., the Solid Waste Management and Recycling Fund
Act, Sec. 8-6-601 Arkansas Code, et seq., the Hazardous Waste Management Act,
Sec. 8-7-201, Arkansas Code, et seq., Arkansas Resource Reclamation Act of 1979,
Sec. 8-7-301, Arkansas Code, et seq., the Emergency Response Fund Act, Sec.
8-7-401, Arkansas Code, et seq., the Remedial Action Trust Fund Act, Sec.
8-7-501, Arkansas Code, et seq.
"Environmental Liabilities" - any liabilities for personal injury,
property damage, fines, penalties, Remedial Action or other costs and expenses
incurred in connection with any Environmental Law or Occupational Health and
Safety Law, including those consisting of or relating to:
(a) any disposal, discharge, Release or presence in the
Environment of any Hazardous Material on, under or from
the Facility;
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand
or response, investigation, remedial or inspection cost
or expense arising under any Environmental Law or
Occupational Health and Safety Law;
(c) financial responsibility under any Environmental Law or
Occupational Health and Safety Law for cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment or other remediation or response
actions ("Cleanup") and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measure required under any Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA).
"ERISA" - Employee Retirement Income Security Act of 1974.
6
"Exchange Act" - the Securities Exchange Act of 1934.
"Excluded Assets" - as defined in Section 2.2
"Facility" or "Facilities" - the Real Property and the Tangible Personal
Property used or operated by Seller at the Real Property.
"Facility Lease" - as defined in Section 2.7(a)(iii).
"GAAP" - generally accepted accounting principles for financial
reporting in the United States, as in effect from time to time, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governing Documents" - with respect to any particular entity, (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization or certificate of formation and operating agreement;
(e) if another type of Person, any other charter or similar document adopted or
filed in connection with the creation, formation or organization of the Person;
(f) all equityholders' agreements, voting agreements, voting trust agreements,
joint venture agreements, registration rights agreements or other agreements or
documents relating to the organization, management or operation of any Person or
relating to the rights, duties and obligations of the equityholders of any
Person; and (g) any amendment or supplement to any of the foregoing.
"Governmental Authorization" - any Consent, license, registration or
permit issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" - any:
(a) nation, state, county, city, town, borough, village,
district or other jurisdiction;
(b) federal, state, local, municipal, or other government;
7
(c) governmental or quasi-governmental authority of any
nature (including any agency, branch, department, board,
commission, court, tribunal or other entity exercising
governmental or quasi-governmental powers);
(d) body exercising or legally entitled to exercise, any
administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; or
(e) official of any of the foregoing.
"Greenville Property" - the real property and improvements thereon
located at 451 4th Street, Greenville, Pennsylvania, formerly owned by GTC.
"GTC" - Greenville Tube Corporation, an Arkansas corporation and wholly
owned subsidiary of Member that until 1999 owned the Owned Real Property and
operated the business currently operated by Seller.
"GT Proceeding" - means the proceedings related to that certain
Diversion Agreement.
"Hazardous Material" - any substance, material or waste which is
regulated by any Environmental Law, including any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollution," "contaminant," "toxic waste" or "toxic substance" under any
provision of Environmental Law, and including petroleum, petroleum products,
asbestos, or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.
"Hired Active Employees" - as defined in Section 10.1(b)(i) and listed
on Exhibit 10.1(b)(i).
"Improvements" - all buildings, structures, fixtures and improvements
located on the Land.
"Indemnified Person" - as defined in Section 11.9.
"Indemnifying Person" - as defined in Section 11.9.
"Intellectual Property Assets" - as defined in Section 3.25(a).
8
"Interim Balance Sheet" - as defined in Section 3.4
"Inventories" - all inventories of Seller, wherever located, including
all finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Seller in the production of
finished goods.
"Investor Group"-- C.F.B. Venture Fund I, Inc., MidStates Capital L.P.,
Diamond State Ventures Limited Partnership, Hickory Venture Capital Corporation,
and Alpha Capital III SBIC, L.P., collectively.
"IRS" - the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"Knowledge" - a named individual acting within the scope of his or her
authority will be deemed to have Knowledge of a particular fact or other matter
if:
(a) the named individual is actually aware of that fact or
matter; or
(b) the named individual would discover such fact or matter
after conducting a reasonable investigation (consistent
with his or her duties) of the books and Records, and
making reasonable inquiry of employees, agents, and
representatives of Seller and the Prior Owner regarding
the accuracy of an applicable representation or warranty
contained in this Agreement.
For the purposes of this Agreement, the term "named individual" shall
mean Michael Biehl, Charles E. Downs, Richard L. Vareha, Harry R. Holstead, and
Larry B. McGaslin.
A Person (other than an individual) will be deemed to have Knowledge of
a particular fact or other matter if any named individual who is serving as a
director, officer, partner, or trustee of that Person (or in any similar
capacity) has Knowledge of that fact or other matter (as set forth in (a) and
(b) above), and any such individual will be deemed to have conducted a
reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by or about such Person.
"Land" - all parcels and tracts of land in which Seller has an ownership
or leasehold interest.
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"Lease" - any Real Property lease or any lease or rental agreement,
license, right to use or installment and conditional sale agreement to which
Seller is a party, other than the Facility Lease, and any other Seller Contract
pertaining to the leasing or use of any Tangible Personal Property.
"Lease Assignment" - as defined in Section 2.7(a)(iii).
"Leased Real Property" - the Land, Appurtenances located at 316 Hadley
Road, Greenville, Pennsylvania 16125-9700, and the subject of the Office Lease.
"Legal Requirement" - any federal, state, local, municipal, foreign or
other constitution, law, ordinance, principle of common law, code, regulation,
statute or treaty in existence prior to or as of the Closing Date.
"Liability" - with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"Marks" - as defined in Section 3.25(a)(i).
"Material Consents" - as defined in Section 7.1.
"Member" - Chart, Inc., a Delaware corporation that is a wholly owned
subsidiary of Parent.
"Occupational Safety and Health Law" - any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, including the Occupational Safety and Health Act.
"Office Lease" - that certain Lease entered into in 1978, between Seller
as lessee and Diane L. Frye as assignee of the original lessor, Gordon A. Frye,
relating to the Leased Real Property, as amended.
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"Office Lessor" - Diane L. Frye as assignee of the original lessor under
the Office Lease.
"Order" - any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if that
action:
(a) is consistent in all material respects in nature, scope
and magnitude with the past practices of such Person and
is taken in the ordinary course of the normal,
day-to-day operations of such Person; and
(b) does not require authorization by the board of
directors, board of managers, shareholders, partners, or
members of such Person (or by any Person or group of
Persons exercising similar authority).
"Owned Real Property" - the Land, Appurtenances, and Improvements
located at 501 South Montgomery Street, Clarksville, Arkansas.
"Parent" - Chart Industries, Inc.
"Patents" - as defined in Section 3.25(a)(ii).
"Permitted Encumbrances" - as defined in Section 3.9 and Part 3.9(a) of
the Disclosure Schedule.
"Petty Cash" - cash balances of Seller's accounts listed on Exhibit 2.3.
"Person" - an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity or a
Governmental Body.
"Prepaid Expenses" - all rights of Seller relating to deposits and
prepaid expenses, claims for refunds and rights to offset in respect thereof.
"Prior Owner" - as defined in the Recitals.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative whether public or private)
11
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator, including any agreement related to the
resolution of any of the foregoing.
"Promissory Note" as defined in Section 2.7(b)(ii)
"Purchase Price" - as defined in Section 2.3.
"Purchased Inventories" - as defined in Section 2.1(c).
"Purchased Receivables" - as defined in Section 2.1(d).
"Real Property" - the Owned Real Property and Leased Real Property,
collectively.
"Record" - information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in
perceivable form.
"Related Person" -
With respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
any one or more members of such individual's Family;
(c) any Person in which members of such individual's Family
hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which one or more members of
such individual's Family serves as a director, officer,
partner, executor or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by or is directly or
indirectly under common control with such specified
Person;
(b) any Person that holds a Material Interest in such
specified Person;
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(c) any person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a
similar capacity);
(d) any Person in which such specified Person holds a
Material Interest; and
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a
similar capacity).
For purposes of this definition, (a) "control" (including "controlling,"
"controlled by," and "under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and shall be construed as such term is used in the rules
promulgated under the Securities Act; (b) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree and (iv) any other natural person who resides with such individual; and
(c) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least twenty percent (20%) of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least twenty percent (20%) of the outstanding equity securities
or equity interests in a Person.
"Release" - any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or into the Environment or into or out of any property.
"Remedial Action" - all actions, including any capital expenditures,
undertaken (a) to clean up, remove or treat any Hazardous Material; (b) to
minimize the extent of a Release of any Hazardous Material so that it does not
migrate or endanger or threaten to endanger public health or welfare or the
Environment; (c) to perform studies and investigations of a Release of any
Hazardous Material or post-remedial monitoring and care after such a Release of
Hazardous Material has been cleaned up, removed, or treated; or (d) to correct
all violations or alleged violations of Environmental Law that occurred prior to
the Closing Date.
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"Representative" - with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, investment banker, or legal counsel of that Person.
"Retained Liabilities" - as defined in Section 2.4(b).
"Sale Transaction" - as defined in the Earnout Agreement.
"SEC" - the United States Securities and Exchange Commission.
"Securities Act" - as defined in Section 3.3.
"Seller" - as defined in the first paragraph of this Agreement.
"Seller Contract" - any Contract (a) under which Seller has or may
acquire any rights or benefits; (b) under which Seller has or may become subject
to any obligation or liability; or (c) by which Seller or any of the assets
owned or used by Seller is or may become bound.
"Software" - all computer software and subsequent versions thereof,
including source code, object, executable or binary code, objects, comments,
screens, user interfaces, report formats, templates, menus, buttons and icons
and all files, data, materials, manuals, design notes and other items and
documentation related thereto or associated therewith, other than
"off-the-shelf" software with a retail price of Two Hundred Dollars ($200.00) or
less.
"Subsidiary" - with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its Subsidiaries.
"Tangible Personal Property" - all machinery, equipment, tools,
furniture, office equipment, computer hardware and peripherals, production
equipment, supplies, materials, vehicles and other items of tangible personal
property (other than Inventories) of every kind owned or leased by Seller
(wherever located and whether or not carried on Seller's books),
14
together with any express or implied warranty by the manufacturer, seller, or
lessor of any item or component part thereof and all maintenance records and
other documents relating thereto.
"Tax" - any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.
"Tax Return" - any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"TCE Contamination" - any trichloroethylene ("TCE"),
1,1,1-trichloroethane or any chemical to which they break down in the
environment (such as 1,1-dichloroethane, 1,2-dichloroethene, and
1,1-dichloroethene) that was (i) present on or before the Closing Date on or at
the Facilities (or present on any other property, if such TCE Contamination
emanated from any Facility or the Greenville Property and was present on or
emanated from any Facility or the Greenville Property, on or prior to the
Closing Date) or (ii) Released by any Person on or at any Facilities, Assets, or
the Greenville Property at any time on or prior to the Closing Date.
"TCE Remedial Action" - any Remedial Action required pursuant to the
ADEQ Consent Order.
"Third Party" - a Person that is not a party to this Agreement.
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"Third-Party Claim" - any claim against any Indemnified Person by a
Third Party, including a claim made by a Governmental Body, whether or not
involving a Proceeding.
"Threat of Release" - a reasonable likelihood of a Release in violation
of Environmental Law that would reasonably be likely to require action in order
to prevent or mitigate damage to the Environment that may result from such
Release.
"Transaction Documents" - as defined in Section 2.2(j).
"WARN Act" - as defined in Section 3.23(d).
1.2 USAGE
(a) Interpretation. In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number
and vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only
if such successors and assigns are not
prohibited by this Agreement, reference to a
Person in a particular capacity excludes such
Person in any other capacity or individually,
and reference to a Person does not include the
Person's predecessors unless specifically
indicated to the contrary;
(iii) reference to any gender includes each other
gender;
(iv) reference to any agreement, document or
instrument means such agreement, document or
instrument as amended or modified and in effect
from time to time in accordance with the terms
thereof;
(v) reference to any Legal Requirement in any
representation or warranty means such Legal
Requirement as amended, modified, codified,
replaced or reenacted, in whole or in part, and
currently or previously in effect, including all
currently or previously effective rules and
regulations promulgated thereunder;
(vi) "hereunder," "hereof," "hereto," and words of
similar import shall be deemed references to
this Agreement as a whole and not to any
particular Article, Section or other provision
hereof;
(vii) "including" (and with correlative meaning
"include") means including without limiting the
generality of any description preceding such
term;
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(viii) "or" is used in the inclusive sense of "and/or";
(ix) with respect to the determination of any period
of time, "from" means "from and including" and
"to" means "to but excluding"; and
(x) references to documents, instruments or
agreements shall be deemed to refer as well to
all addenda, exhibits, schedules or amendments
thereto.
(b) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall
be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
(c) Legal Representation of the Parties. This Agreement was
negotiated by the parties with the benefit of legal
representation, and any rule of construction or
interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not
apply to any construction or interpretation hereof.
2. SALE AND TRANSFER OF ASSETS; CLOSING.
2.1 Assets to be Sold
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, but effective as of the Effective Time, Seller shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Seller, free and clear of any Encumbrances other than Permitted
Encumbrances, all of Seller's right, title and interest in and to all of
Seller's property and assets, tangible and intangible, of every kind and
description, wherever located, including the following (but excluding the
Excluded Assets):
(a) Petty Cash;
(b) all Tangible Personal Property, including those items
(including trade fixtures) described in Part 2.1(b) of
the Disclosure Schedule;
(c) all Inventories existing on the Closing Date, all of
which are listed on Part 2.1(c) of the Disclosure
Schedule (the "Purchased Inventory");
(d) all Accounts Receivable existing on the Closing Date
other than those excluded under Section 2.2(l), all of
which are listed on Part 2.1(d) of the Disclosure
Schedule (the "Purchased Receivables");
(e) except as provided in Section 2.2(e), all Seller
Contracts that are Assumed Contracts, all of which are
listed in Part 3.20(a) of the Disclosure Schedule
(including all outstanding offers or solicitations made
by or to Seller to
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enter into any Contract, all of which are also
separately listed on Part 3.20(a) of the Disclosure
Schedule);
(f) all Governmental Authorizations and all pending
applications therefor or renewals thereof, in each case
to the extent transferable to Buyer, including those
listed in Part 3.17(b) of the Disclosure Schedule;
(g) other than any Records related to the Diversion
Agreement or matters related to it, all data and Records
related to the operations of Seller, including client
and customer lists and Records, referral sources,
research and development reports and Records, production
reports and Records, service and warranty Records,
equipment logs, operating guides and manuals, financial
and accounting Records, creative materials, advertising
materials, promotional materials, studies, reports,
correspondence and other similar documents and Records
and, subject to Legal Requirements, copies of all
personnel Records and other Records described in Section
2.2(f); provided, however, that Seller may retain copies
of such Records;
(h) all of the intangible rights and property of Seller,
including Intellectual Property Assets and the names
"Greenville Tube, LLC," "Greenville Tube Corporation"
and "Greenville Tube," going concern value, goodwill,
telephone, telecopy and e-mail addresses and listings
and those items listed in Parts 3.25(d), (e), (f) and
(h) of the Disclosure Schedule;
(i) all claims of Seller against third parties relating to
the Assets, whether choate or inchoate, known or
unknown, contingent or noncontingent, including all such
claims listed in Part 2.1(i) of the Disclosure Schedule;
and
(j) all Prepaid Expenses, other than those listed in Parts
2.2(c) and 2.2(h) of the Disclosure Schedule.
All of the property and assets to be transferred to Buyer hereunder are herein
referred to collectively as the "Assets."
Notwithstanding the foregoing, the transfer of the Assets pursuant to
this Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).
2.2 Excluded Assets.
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following assets of Seller (collectively, the
"Excluded Assets") are not part of the sale and purchase contemplated hereunder,
are excluded from the Assets and shall remain the property of Seller after the
Closing:
(a) the Owned Real Property, subject to the rights of Buyer
under the Facility Lease;
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(b) all minute books, equity security Records, company
seals, and Records related to the Member's capital
contributions to the Seller;
(c) those rights relating to the deposits and prepaid
expenses and claims for refunds and rights to offset in
respect thereof listed in Part 2.2(c) of the Disclosure
Schedule;
(d) all insurance policies and rights thereunder;
(e) each of the Seller Contracts (including any and all
software licenses which are not assignable) that is not
an Assumed Contract, including, without limitation,
those listed in Part 2.2(e) of the Disclosure Schedule,
and any employment, severance, termination, salary
continuation, retention, stay-bonus, or similar
agreements with Seller's employees;
(f) all personnel Records and other Records that Seller is
required by law to retain in its possession;
(g) all Tax assets;
(h) all claims for refund of Taxes and other governmental
charges listed on Part 2.2(h) of the Disclosure
Schedule;
(i) all rights in connection with and assets of the Employee
Plans;
(j) all rights of Seller under this Agreement, the Earnout
Agreement, the Facility Lease, the Bill of Sale, the
Assignment and Assumption Agreement, the Lease
Assignment, Assignment of Intellectual Property,
Noncompetition Agreement, the Subordination Agreement,
the Buyer Subordination Agreement, the Promissory Note,
and the Contingent Note, (collectively, the "Transaction
Documents");
(k) except as otherwise agreed by Buyer and Seller, all
insurance benefits, insurance policies and all prepaid
insurance premiums of Seller;
(l) all accounts receivable from the Member or any Related
Person of Seller or the Member;
(m) that certain Agreement for Pre-Trial Diversion executed
by Seller on July 2, 2002 in connection with the GT
Proceeding and any other agreement, instrument, or
document associated therewith (collectively, the
"Diversion Agreement");
(n) the ADEQ Consent Order and all other agreements of
Seller and its Affiliates with the ADEQ;
(o) all of Seller's cash, cash equivalents, and short term
investments (except Petty Cash); and
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(p) any and all rights in or to the names "Chart," "Chart
Industries," or any derivative thereof.
2.3 Consideration.
The consideration for the Assets (the "Purchase Price") will be (a)
Fifteen Million Five Hundred Thousand Dollars ($15,500,000.00) plus the amount
of Petty Cash plus or minus the Adjustment Amount and (b) the assumption of the
Assumed Liabilities. In accordance with Section 2.7(b), at the Closing, the
Purchase Price, prior to adjustment on account of the Adjustment Amount, shall
be delivered by Buyer to Seller as follows: (a) Thirteen Million Four Hundred
Fifty Thousand Dollars ($13,450,000.00) by wire transfer; (b) One Million Nine
Hundred Fifty Thousand Dollars ($1,950,000.00) payable in the form of the
Promissory Note; (c) a check in the amount of the Petty Cash; and (d) the
balance of the Purchase Price by the execution and delivery of the Assignment
and Assumption Agreement. The Adjustment Amount shall be paid in accordance with
Section 2.8. As additional consideration for the Assets, Seller may receive
additional payments resulting from the adjustments to the Promissory Note that
may occur pursuant to the Earnout Agreement identified in Section 2.7(a)(xii).
Not included in the Purchase Price are amounts that may become payable under the
Earnout Agreement and Contingent Note.
2.4 Liabilities.
(a) Assumed Liabilities. On the Closing Date, but effective
as of the Effective Time, Buyer shall assume and agree
to discharge only the following Liabilities of Seller
(the "Assumed Liabilities"):
(i) any trade account payable listed on Part
2.4(a)(i) of the Disclosure Schedule (other than
a trade account payable to the Member, Parent or
a Related Person of Seller, Parent, or the
Member);
(ii) any unpaid accrued expenses of the kind
described on Part 2.4(a)(ii) of the Disclosure
Schedule;
(iii) any Liability to Seller's customers incurred by
Seller in the Ordinary Course of Business for
nondelinquent orders outstanding as of the
Effective Time reflected on Seller's books
(other than any Liability arising out of or
relating to a Breach that occurred prior to the
Effective Time);
(iv) any Liability to Seller's customers under
written warranty agreements in the forms
disclosed in Part 2.4(a)(iv) of the Disclosure
Schedule given by Seller to its customers in the
Ordinary Course of Business prior to the
Effective Time (other than a Liability arising
out of or relating to a Breach that occurred
before the Effective Time); and
(v) any Liability arising after the Effective Time
under the Assumed Contracts (other than any
Liability arising under the Seller
20
Contracts described on Part 2.4(a)(v) of the
Disclosure Schedule or arising out of or
relating to a Breach that occurred prior to the
Effective Time).
(b) Retained Liabilities. The Retained Liabilities shall
remain the sole responsibility of and shall be retained,
paid, performed and discharged solely by Seller.
"Retained Liabilities" shall mean every Liability of
Seller other than the Assumed Liabilities, including:
(i) any Liability arising out of or relating to
products of Seller to the extent manufactured or
sold prior to the Effective Time other than to
the extent assumed under Section 2.4(a)(iii),
(iv) or (v) and Buyer's obligations under
Section 11.2(d);
(ii) any Liability under any Assumed Contract that
arises after the Effective Time but that arises
out of or relates to any Breach that occurred
prior to the Effective Time;
(iii) any Liability for Taxes not specifically assumed
under Section 2.4(a), including (A) any Taxes
arising as a result of Seller's or the Prior
Owner's operation of its business or ownership
of the Assets before the Effective Time, (B) any
Taxes that will arise, as a result of the sale
of the Assets pursuant to this Agreement but
excluding Taxes relating to the transfer and
registration of any vehicles included in the
Assets listed on Part 2.4(b)(iii) of the
Disclosure Schedule that Buyer will assume and
pay, and (C) any deferred Taxes of any nature;
(iv) any Liability (including interest) under
any Seller Contract (other than the Assumed
Contracts), including any Liability arising out
of or relating to Seller's credit facilities or
any security interest related thereto or any
liability under any retention or salary
continuation agreement with employees of Seller;
(v) any Environmental Liabilities of Seller or any
of its Related Persons that relate to acts,
omissions or the condition of the Facilities or
any other property on or prior to the Closing
Date;
(vi) any Liability arising out of, or relating to
Seller's failure to comply with the ADEQ Consent
Order;
(vii) any Liability of Seller or any of its Related
Persons under the Employee Plans (including
liability for any underfunding and accrued
expenses for group insurance) or relating to
sick leave, workers' compensation, unemployment
benefits, pension benefits, employee equity
security option or profit-sharing plans, health
care plans or benefits or any other employee
plans or benefits of any kind (including payment
of all life insurance premiums and life
21
insurance death benefits relating to all life
insurance policies offered by Seller, whether
Seller is self-insured for the same or not,
including, without limitation, those set forth
on Part 3.32(b) of the Disclosure Schedule) for
Seller's employees or former employees or both;
(viii) any Liability of Seller or any of its Related
Persons under any employment, severance,
retention, stay bonus, salary continuation, or
termination agreement with any employee of
Seller or any of its Related Persons;
(ix) any Liability of Seller or any of its Related
Persons arising out of or relating to any
employee grievance with respect to any period
before the Effective Time;
(x) any Liability of Seller to the Member or Related
Person of Seller or the Member;
(xi) any Liability of Seller or any of its Related
Persons to indemnify, reimburse or advance
amounts to any officer, manager, employee or
agent of Seller;
(xii) any Liability of Seller to distribute to the
Member or otherwise apply all or any part of the
consideration received hereunder;
(xiii) any Liability of Seller or any of its Related
Persons arising out of any Proceeding pending as
of the Effective Time (including the GT
Proceeding or the Diversion Order);
(xiv) any Liability of Seller or any of its Related
Persons arising out of any Proceeding commenced
after the Effective Time and arising out of or
relating to any occurrence or event happening
before the Effective Time, with the exception of
any such Liability of Seller arising as a result
of Buyer's failure to perform or satisfy any
Assumed Liability;
(xv) any Liability of Seller or any of its Related
Persons arising out of or resulting from
Seller's compliance or noncompliance with any
Legal Requirement or Order of any Governmental
Body arising from, or related to, operation of
the Business by Seller or the Prior Owner during
the period prior to the Closing Date;
(xvi) any Liability of Seller or any of its Related
Persons under this Agreement or any other
document executed in connection with the
Contemplated Transactions;
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(xvii) any other Liability (other than an Assumed
Liability) arising out of the ownership or
operation of the Assets or the Facility before
the Effective Time;
(xviii) any Liability of Seller or any of its Related
Persons based upon Seller's or such Related
Person's acts or omissions occurring after the
Effective Time;
(xix) any Liability not specified in this Section
2.4(b) and excluded from assumption under
Sections 2.4(a)(i)-(v); and
(xx) accrued expenses payable to or on behalf of the
Member or a Related Person of the Seller or
Member.
2.5 Allocation.
The Purchase Price shall be allocated in accordance with Exhibit 2.5.
After the Closing, the parties shall make consistent use of the allocation, fair
market value and useful lives specified in Exhibit 2.5 for all Tax purposes and
in all filings, declarations and reports with the IRS and other taxing
authorities in respect thereof, including the reports required to be filed under
Section 1060 of the Code. Buyer shall prepare and deliver IRS Form 8594 to
Seller within sixty-five (65) days after the Closing Date for Seller's review
and agreement, which shall not be unreasonably denied, withheld, or delayed, and
the parties agree to each file a Form 8594 with the IRS following such form,
except to the extent that they mutually agree to any changes to such form.
Amounts payable under the Earnout Agreement or Contingent Note shall be
allocated to goodwill if they are treated as part of the Purchase Price. In any
Proceeding related to the determination of any Tax, neither Buyer nor Seller
shall contend or represent that such allocation is not a correct allocation.
2.6 Closing.
The purchase and sale provided for in this Agreement (the "Closing")
will take place at the offices of Husch & Eppenberger, LLC, 190 Carondelet
Plaza, Suite 600, St. Louis, Missouri 63105, commencing at 9:00 a.m. (local
time) on July 1, 2003, unless Buyer and Seller otherwise agree.
2.7 Closing Obligations.
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:
(a) Seller shall deliver to Buyer the following:
(i) a bill of sale for all of the Assets that are
Tangible Personal Property in the form of
Exhibit 2.7(a)(i) (the "Bill of Sale") executed
by Seller;
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(ii) an assignment of all of the Assets that are
intangible personal property other than
Intellectual Property Assets in the form of
Exhibit 2.7(a)(ii), which assignment shall also
contain Buyer's undertaking and assumption of
the Assumed Liabilities (the "Assignment and
Assumption Agreement") executed by Seller;
(iii) for each interest in Real Property identified on
Parts 3.7 and 3.8 of the Disclosure Schedule,
(x) a lease and memorandum of Lease in the form
of Exhibit 2.7(a)(iii)(x) (collectively, the
"Facility Lease") executed by Seller, (y) an
Assignment and Assumption of Lease in the form
of Exhibit 2.7(a)(iii)(y) (the "Lease
Assignment"), or (z) such other appropriate
document or instrument of transfer, as the case
may require, each in form and substance
satisfactory to Buyer and its counsel and
executed by Seller;
(iv) assignments of all Intellectual Property Assets
and separate assignments of all registered
Marks, Patents and Copyrights in the forms set
forth in Exhibit 2.7(a)(iv) executed by Seller;
(v) a Registrant Name Change Agreement, executed by
Seller, transferring the right to the website
www.greenvilletube.com to Buyer, in the form of
Exhibit 2.7(a)(v);
(vi) such other bills of sale, assignments,
certificates of title, documents and other
instruments of transfer and conveyance as may
reasonably be requested by Buyer, each in form
and substance satisfactory to Buyer and its
legal counsel and executed by Seller;
(vii) noncompetition agreement in the form of Exhibit
2.7(a)(vii), executed by Seller, Member, and
Parent (the "Noncompetition Agreement");
(viii) evidence satisfactory to Buyer of the
termination of the employment agreements and
salary continuation agreements listed on Exhibit
2.7(a)(viii), on terms and conditions
satisfactory to Seller;
(ix) a Guaranty in the form attached to this
Agreement, executed by Member and Parent;
(x) a certificate of the Secretary of Seller
certifying, as complete and accurate as of the
Closing, attached copies of the Governing
Documents of Seller, certifying and attaching
all requisite resolutions or actions of Seller's
sole manager and Member approving the execution
and delivery of this Agreement and the
consummation of the Contemplated Transactions
and the change of Seller's name to GTC of
Clarksville, LLC, and certifying to the
24
incumbency and signatures of the officers of
Seller executing this Agreement and any other
document relating to the Contemplated
Transactions and accompanied by the requisite
documents for amending the relevant Governing
Documents of Seller required to effect such
change of name in form sufficient for filing
with the appropriate Governmental Body;
(xi) a certificate of the Secretary of the Member
certifying as complete and accurate as of the
Closing attached copies of the Governing
Documents of the Member, certifying and
attaching requisite resolutions of the Member's
board of directors approving the execution and
delivery of this Agreement and the other
agreements and documents relating to the
Contemplated Transactions to be executed and
delivered by the Member, and certifying to the
incumbency and signatures of the officers of the
Member executing this Agreement and any other
agreements or documents relating to the
Contemplated Transactions;
(xii) an Earnout Agreement in the form of Exhibit
2.7(a)(xii) executed by Seller (the "Earnout
Agreement");
(xiii) the consent of the lessor to the Lease
Assignment of the Office Lease and the consent
of any other lessor to the Lease Assignment of
any other Leased Real Property;
(xiv) an owner's affidavit related to the Owned Real
Property in the form of Exhibit 2.7(a)(xiv)
executed by Seller;
(xv) such affidavits as the issuer(s) of the title
insurance policies specified in Section 7.3 may
require;
(xvi) Consents, where required, of the other
contracting Persons to the Assumed Contracts;
(xvii) A subordination agreement with the Buyer's
senior secured lender (or the agent thereof)
(the "Subordination Agreement") executed by
Seller;
(xviii) A subordination agreement with Buyer (the "Buyer
Subordination Agreement") executed by Seller;
(xix) Nineteen Thousand Eight Hundred Eighty One
Dollars Fifty-five Cents Dollars ($19,881.55),
representing an amount equal to fifty percent
(50%) of the fee payable by Buyer for the Phase
II assessment conducted by Buyer pursuant to an
Access Agreement between Seller and Capital for
Business, Inc., dated December 9, 2002, which
amount has been paid to Buyer through a
reduction in
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the amount to be wire transferred to Seller
under Section 2.7(b)(i); and
(xx) Such other agreements, documents, and
instruments as Buyer may reasonably request,
including, without limitation, certificates of
good standing of Seller, Member, and Parent in
their states of incorporation, Certificate of
Seller's good standing as a foreign corporation
in the States of Arkansas and Pennsylvania, and
Certificates of no tax due for Seller in the
States of Arkansas and Pennsylvania.
(b) Buyer shall deliver to Seller and Member, as the case
may be:
(i) Thirteen Million Four Hundred Fifty Thousand
Dollars ($13,450,000.00) by wire transfer to the
account set forth on Part 2.7(b)(i) of the
Disclosure Schedule;
(ii) A promissory note executed by Buyer and payable
to Seller in the principal amount of One Million
Nine Hundred Fifty Thousand Dollars
($1,950,000.00) in the form of Exhibit
2.7(b)(ii) (the "Promissory Note");
(iii) the Assignment and Assumption Agreement executed
by Buyer;
(iv) the Facility Lease executed by Buyer
(v) the Lease Assignment executed by Buyer;
(vi) the Noncompetition Agreement executed by Buyer;
(vii) the Buyer Subordination Agreement executed by
the Buyer;
(viii) a certificate of the Secretary of Buyer
certifying, as complete and accurate as of the
Closing, attached copies of the Governing
Documents of Buyer and certifying and attaching
all requisite resolutions or actions of Buyer's
board of directors approving the execution and
delivery of this Agreement and the consummation
of the Contemplated Transactions and certifying
to the incumbency and signatures of the officers
of Buyer executing this Agreement and any other
document relating to the Contemplated
Transactions;
(ix) an Earnout Agreement in the form of Exhibit
2.7(a)(xii) executed by Buyer;
(x) Buyer check in the amount of the Petty Cash; and
(xi) Copies of (i) certificate of good standing of
Buyer in Delware, (ii) certificate of good
standing of Buyer as a foreign corporation in
26
Arkansas, and (iii) such other state
certificates as Buyer simultaneously provides to
LaSalle Business Credit, LLC.
2.8 Adjustment Amount and Payment.
The "Adjustment Amount" (which may be a positive or negative number)
will be equal to the amount determined by subtracting the Closing Working
Capital from Seven Million Five Hundred Twenty-Seven Thousand Seven Hundred
Eighty Four Dollars ($7,527,784). If the Adjustment Amount is positive, the
Adjustment Amount shall be paid by Seller first by reduction of the principal
balance of the Promissory Note by such amount to fund payment of the Adjustment
Amount and second, by wire transfer to an account specified by Buyer in the
amount by which the Adjustment Amount exceeds the principal amount of the
Promissory Note. If the Adjustment Amount is negative, the difference between
the Closing Working Capital and Seven Million Five Hundred Twenty-Seven Thousand
Seven Hundred Eighty Four Dollars ($7,527,784) shall be paid by increasing the
principal balance of the Promissory Note by the amount of such Adjustment
Amount. Within three (3) business days after the calculation of the Closing
Working Capital becomes binding and conclusive on the parties pursuant to
Section 2.9, the applicable reduction or increase of the principal balance of
the Promissory Note, if any, shall automatically be effective and Seller shall
make any wire transfer payment provided for in this Section 2.8.
2.9 Adjustment Procedure.
(a) "Working Capital" as of a given date shall mean the
amount calculated by subtracting (i) the sum on such
date of Seller's (1) trade accounts payable and listed
on Part 2.4(a)(i) of the Disclosure Schedule, (2)
accrued expenses specified in Section 2.4(a)(ii) and set
for on Part 2.4(a)(ii) of the Disclosure Schedule, and
(3) advances to its customers arising in the Ordinary
Course of Business from (ii) the sum on such date of (1)
the Purchased Receivables, (2) Prepaid Expenses and (3)
the Purchased Inventory. Deferred Taxes shall not be
included in items 1 through 3 of clause (ii) above. All
amounts payable to or receivable from Related Persons of
the Seller shall be excluded from the calculation of
Working Capital on any date. Seller's cash, cash
equivalents, and short term investments shall not be
included in the computation of Working Capital. In
computing Working Capital, there shall be no accruals
for product warranty or product return claims, and the
parties shall include in accrued employee expenses only
accruals for the Hired Active Employees that Buyer
specifies on the Closing Date as employees it expects to
hire. Accrued employee expenses shall not include
accruals of retention bonuses or payments or amounts
payable to pension or other retirement plans to which
Seller contributes. Neither the Purchased Receivables
nor the Purchased Inventory shall be subject to any
reserves.
(b) Buyer shall prepare financial statements ("Closing
Financial Statements") of Seller as of the Effective
Time in accordance with the accounting principles,
policies and practices historically used by Seller and
set forth
27
on Exhibit 2.9. Buyer shall then determine the Working
Capital as of the Effective Time (the "Closing Working
Capital") based upon the Closing Financial Statements
and using the methodology specified in Section 2.9(a)
and Exhibit 2.9. Buyer shall deliver the Closing
Financial Statements and its determination of the
Closing Working Capital to Seller within sixty (60) days
following the Closing Date.
(c) If, within thirty (30) days following delivery of the
Closing Financial Statements and the Closing Working
Capital calculation, Seller has not given Buyer written
notice of its objection as to the Closing Working
Capital calculation (which notice shall state the basis
of Seller's objection in reasonable detail), then the
Closing Working Capital calculated by Buyer shall be
binding and conclusive on the parties and be used in
computing the Adjustment Amount.
(d) If Seller duly gives Buyer such notice of objection, and
if Seller and Buyer fail to resolve the issues
outstanding with respect to the Closing Financial
Statements and the calculation of the Closing Working
Capital within thirty (30) days of Buyer's receipt of
Seller's objection notice, Seller and Buyer shall submit
the issues remaining in dispute to Grant Thornton LLP in
Chicago, Illinois, (the "Independent Accountants") for
resolution applying the principles, policies and
practices referred to in Section 2.9(a) and Exhibit 2.9.
If issues are submitted to the Independent Accountants
for resolution, (i) Seller and Buyer shall furnish or
cause to be furnished to the Independent Accountants
such work papers and other documents and information
relating to the disputed issues as the Independent
Accountants may request and are available to that party
or its agents and shall be afforded the opportunity to
present to the Independent Accountants any material
relating to the disputed issues and to discuss the
issues with the Independent Accountants; (ii) the
determination by the Independent Accountants, as set
forth in a notice to be delivered to both Seller and
Buyer within sixty (60) days of the submission to the
Independent Accountants of the issues remaining in
dispute, shall be final, binding and conclusive on the
parties and shall be used in the calculation of the
Closing Working Capital; and (iii) Seller and Buyer will
each bear fifty percent (50%) of the fees and costs of
the Independent Accountants for such determination. Set
forth on Exhibit 2.9.1 is a calculation of the estimated
Working Capital of Seller as of June 30, 2003.
2.10 Consents.
(a) If there are any Material Consents that have not yet
been obtained (or otherwise are not in full force and
effect as of the Closing, in the case of each Seller
Contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect)
(the "Restricted Material Contracts"), Buyer may waive
the closing conditions as to any such Material Consent
and either:
28
(i) elect to have Seller continue its efforts to
obtain the Material Consents; or
(ii) elect to have Seller retain that Restricted
Material Contract and all Liabilities arising
therefrom or relating thereto.
If Buyer elects to have Seller continue its efforts to
obtain any Material Consents, notwithstanding Sections
2.1 and 2.4, neither this Agreement nor the Assignment
and Assumption Agreement nor any other document related
to the consummation of the Contemplated Transactions
shall constitute a sale, assignment, assumption,
transfer, conveyance or delivery or an attempted sale,
assignment, assumption, transfer, conveyance or delivery
of the Restricted Material Contracts, and following the
Closing, the parties shall use Best Efforts, and
cooperate with each other, to obtain the Material
Consent relating to each Restricted Material Contract as
quickly as practicable. Pending the obtaining of such
Material Consents relating to any Restricted Material
Contract, the parties shall cooperate with each other in
any reasonable and lawful arrangements designed to
provide to Buyer the benefits of use of the Restricted
Material Contract for its term (or any right or benefit
arising thereunder, including the enforcement for the
benefit of Buyer of any and all rights of Seller against
a third party thereunder). Once a Material Consent for
the sale, assignment, assumption, transfer, conveyance
and delivery of a Restricted Material Contract is
obtained, Seller shall promptly assign, transfer, convey
and deliver such Restricted Material Contract to Buyer,
and Buyer shall assume the obligations under such
Restricted Material Contract assigned to Buyer from and
after the date of assignment to Buyer pursuant to a
special-purpose assignment and assumption agreement
substantially similar in terms to those of the
Assignment and Assumption Agreement (which
special-purpose agreement the parties shall prepare,
execute and deliver in good faith at the time of such
transfer, all at no additional cost to Buyer).
(b) If there are any Consents not listed on Exhibit 7.1
necessary for the assignment and transfer of any Assumed
Contracts (the "Nonmaterial Consents") which have not
yet been obtained (or otherwise are not in full force
and effect) as of the Closing, Buyer shall elect at the
Closing, in the case of each of the Seller Contracts as
to which such Nonmaterial Consents were not obtained (or
otherwise are not in full force and effect) (the
"Restricted Nonmaterial Contracts"), whether to:
(i) Accept the assignment of such Restricted
Nonmaterial Contract, in which case, as between
Buyer and Seller, such Restricted Nonmaterial
Contract shall, to the maximum extent
practicable and notwithstanding the failure to
obtain the applicable Nonmaterial Consent, be
transferred at the Closing pursuant to the
Assignment
29
and Assumption Agreement as elsewhere provided
under this Agreement; or
(ii) Reject the assignment of such Restricted
Nonmaterial Contract, in which case,
notwithstanding Sections 2.1 and 2.4, (A)
neither this Agreement nor the Assignment and
Assumption Agreement nor any other document
related to the consummation of the Contemplated
Transactions shall constitute a sale,
assignment, assumption, conveyance or delivery
or an attempted sale, assignment, assumption,
transfer, conveyance or delivery of such
Restricted Nonmaterial Contract, and (B) Seller
shall retain such Restricted Nonmaterial
Contract and all Liabilities arising therefrom
or relating thereto.
2.11 Accounts Receivable.
Following the Closing, Buyer shall use its Best Efforts in the Ordinary Course
of Business to collect the Purchased Receivables, provided, that, Buyer shall
not be required to commence litigation to collect any of the Purchased
Receivables. If during the ninety (90) days following the Closing Seller
receives any payment on a Purchased Receivable, Seller shall give Buyer notice
of such receipt and promptly pay the amount received to an account specified by
Buyer. If Buyer receives a payment from an account debtor for which there is an
outstanding account receivable both before and after the Closing Date, such
payment shall be applied to the oldest outstanding invoice(s) not in dispute.
Buyer shall not encourage any account debtor to dispute any Purchased Receivable
or otherwise offer future discounts with respect to the nonpayment or dispute of
any Purchased Receivable. If after the close of business on the ninetieth (90th)
day (or if such day is not a Business Day, the close of business on the next
following Business Day) after the Closing (including the Closing Date) any of
the Purchased Receivable remain outstanding and uncollected in whole or in part,
Buyer may give Seller notice of those Purchased Receivables (the "Resale
Receivables") that Buyer will assign to Seller and Seller will purchase from
Buyer. Buyer will give such notice no later than the close of business on the
one hundredth (100th) day (or if such day is not a Business Day, the close of
business on the next following Business Day) after the Closing, with the notice
to identify the Resale Receivable by payor and the amount payable. Within three
(3) Business Days after the date of the notice, Buyer shall assign the Resale
Receivables to Seller, and Seller shall pay Buyer the outstanding amount payable
of the Resale Receivables, provided, that if Buyer collects any Resale
Receivables before such assignment, Buyer shall retain the amount collected and
shall not assign the collected Resale Receivables to Seller.
2.12 Contingent Note.
Seller shall be entitled to receive additional contingent payments (the
"Contingent Amount") up to a maximum of $500,000 ("Maximum Contingent Amount")
based on the EBITDA of the Core Business for the twelve-month period ending
December 31, 2003. (the "Contingent Measurement Period"). If the EBITDA of the
Core Business for the Contingent Measurement Period ending December 31, 2003
exceeds Three Million Two Hundred Thousand Dollars ($3,200,000) (the "2003
Target EBITDA"), Seller shall be entitled to receive seventy one percent
30
(71%) of such excess, if any (the "2003 Contingent Amount") up to an aggregate
amount of $500,000. For the months of calendar year 2003 that the Business is
owned by Seller prior to Closing, the EBITDA in those months will be adjusted by
amounts that are identified as excessive or nonessential allocations from Member
or Parent to Seller and agreed upon by Buyer and Seller, provided that Buyer and
Seller agree that the aggregate EBITDA for January through June 2003 was
$1,039,500.00. The 2003 Contingent Amount, if any, shall become a note in
substantially the form of Exhibit 2.12 (the "Contingent Note") hereto with the
principal amount due in equal amounts at the end of forty-eight (48) months from
Closing and sixty (60) months from Closing. The Contingent Note shall bear an
annual interest rate of six percent (6.0%) beginning January 1, 2004. The
interest on the Contingent Note will accrue during 2004, and will be paid in
cash annually the third (3rd), fourth (4th), and fifth (5th) years after the
Closing. If the Contingent Note is required, Buyer shall deliver it, executed by
Buyer, to Seller within thirty (30) days after the Buyer receives its audited
financial statements for the fiscal year ending December 31, 2003. In no event
shall the aggregate Contingent Amount payable to Seller hereunder exceed the
Maximum Contingent Amount. The Buyer's independent public accountants will
determine the EBITDA of the Core Business for the Contingent Measurement Period
in accordance with Exhibit 2.12 as consistently applied by Seller to the Core
Business. The computation of EBITDA shall be conducted in accordance with
Section 4.1 of the Earnout Agreement. Buyer will deliver a report setting out
the computation of EBITDA to Seller for review, and unless Seller notifies Buyer
within thirty (30) days after receipt of the report that it objects to the
computation, the report shall be binding and conclusive for the purposes of this
Agreement. If Seller gives Buyer notice of its objection to the computation of
EBITDA within the thirty (30) day period, the amount of EBITDA for the
Contingent Measurement Period shall be determined by negotiation between Seller
and Buyer. If Seller and Buyer are unable to reach agreement within thirty (30)
business days after such notification, the determination of the amount of EBITDA
for the Contingent Measurement Period shall be submitted to a mutually agreeable
third-party firm of independent certified public accountants for determination,
whose determination shall be binding and conclusive on the parties. All
transactions between or among the Core Business or Buyer or Buyer's Affiliates
shall be on term and conditions no less favorable to the Core Business than
those available through comparable transactions with third parties. Seller
represents and warrants to Buyer that all transactions between or among the Core
Business and Seller or Seller's Affiliates in 2003 before the Closing have been
no less favorable to the Core Business than those available through comparable
transactions with third parties.
2.13 Termination of Promissory Note If Parent, or any of its U.S. or
foreign subsidiaries, including Seller, is a debtor in any proceeding under
Title 11 of the United States Code (the "Bankruptcy Code") or any similar
reorganization or liquidation statute in any foreign jurisdiction ("Foreign
Insolvency Law") where any of the following occur: (a) the environmental
indemnity obligations set forth in (i) Section 11.3 of this Agreement or (ii)
Section 11.2 of this Agreement with respect to Section 3.22 of the Asset
Purchase Agreement, to the extent not addressed by Section 11.3(b) (collectively
the "Indemnity Obligations") are rejected under Section 365 of the Bankruptcy
Code or a similar provision under any Foreign Insolvency Law, or (b) any of the
debtors in such a proceeding propose a plan of reorganization that seeks to
impair or alter any of the Indemnity Obligations, the Buyer's obligation to make
any remaining payments under the Promissory Note and Contingent Note, if any,
shall terminate and the Buyer shall not thereafter be in default under the
Promissory Note or Contingent Note, if any.
31
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Buyer as follows:
3.1 Organization and Good Standing; Name.
(a) Part 3.1(a) of the Disclosure Schedule contains a
complete and accurate list of Seller's jurisdiction of
organization and any other jurisdictions in which Seller
is qualified to do business as a foreign entity. Seller
is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, with
full power and authority to conduct its business as it
is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform
all its obligations under the Seller Contracts. Seller
is duly qualified to do business as a foreign entity and
is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use
of the properties owned or used by it, or the nature of
the activities conducted by it, requires such
qualification, except for the failure to be so qualified
would not have a material adverse affect on Seller.
(b) Complete and accurate copies of the Governing Documents
of Seller as currently in effect, are attached to Part
3.1(b) of the Disclosure Schedule.
(c) Seller does not have any Subsidiaries and does not,
directly or indirectly, own any shares of capital stock
or other securities of any other Person.
(d) Since January 1, 1998, the Business has been operated
only under the names "Greenville Tube," "Greenville
Tube, LLC," and the "Greenville Tube division of Chart,
Inc."
3.2 Enforceability; Authority; No Conflict.
(a) This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in
accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Legal
Requirements affecting creditors' rights generally and
by general principles of equity or the fact that
specific performance or other equitable remedies are
within the discretion of any court. Upon the execution
and delivery by Seller, Parent, and Member of each
Transaction Document to which it is a party by Seller,
Parent, or the Member each Transaction Document will
constitute the legal, valid and binding obligation of
each of Seller, Parent, or the Member, as the case may
be, enforceable against each of them in accordance with
its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or
other similar Legal Requirements affecting creditors'
rights generally and by general principles of equity or
the fact that specific performance or other equitable
remedies are within the discretion of any court. Seller
has the absolute
32
and unrestricted right, power and authority to execute
and deliver this Agreement and the Transaction Documents
to which it is a party and to perform its obligations
under this Agreement and such Transaction Documents, and
such action has been duly authorized by all necessary
action by Member and Seller's board of managers.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, neither the execution and delivery of this
Agreement nor the consummation or performance of any of
the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) Breach (A) any provision of any of the Governing
Documents of Seller (B) any resolution adopted
by the board of managers or Seller;
(ii) Breach or give any Governmental Body or other
Person the right to challenge any of the
Contemplated Transactions or to exercise any
remedy or obtain any relief under any Legal
Requirement or any Order to which Seller or any
of the Assets may be subject;
(iii) contravene, conflict with or result in a
violation or breach of any of the terms or
requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental
Authorization that is held by Seller or any of
its Subsidiaries or that otherwise relates to
the Assets or to the business of Seller or any
of its Subsidiaries;
(iv) Breach any provision of, or give any Person the
right to declare a default or exercise any
remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel,
terminate or modify, any Assumed Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the
Assets, (other than Encumbrances to be imposed
in connection with Buyer's financing of the
Contemplated Transaction).
(c) Except as set forth in Part 3.2(c) of the Disclosure
Schedule, Seller is not required to give any notice to
or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated
Transactions.
3.3 Capitalization. All of the equity interests in Seller are owned
by Member, free and clear of all Encumbrances. There are no Contracts relating
to the issuance, sale or transfer of any equity interests in other securities of
Seller. Seller has no Subsidiaries.
3.4 Financial Statements. Seller has delivered to Buyer: (a) an
unaudited consolidated balance sheet of Seller as at December 31, 2002
(including the notes, if any,
33
thereto, the "Balance Sheet"), and the related consolidated unaudited statements
of income and cash flows for the fiscal year then ended; (b) unaudited
consolidated balance sheets of Seller as at December 31, in each of the fiscal
years 1999 through 2001, and the related unaudited consolidated statements of
income and cash flows for each of the fiscal years then ended; and (c) an
unaudited consolidated balance sheet of Seller as at May 31, 2003 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of income and
cash flows for the five (5) months then ended, certified by Seller's chief
financial officer. Such financial statements fairly present in all material
respects the financial condition and the results of operations, changes in
Member's equity and cash flows of Seller as at the respective dates of and for
the periods referred to in such financial statements, all in accordance with
GAAP, except (i) normal year-end adjustments that individually and in the
aggregate would not be material (ii) the omission of footnote disclosure
required by GAAP, and (iii) the practices disclosed in Part 3.4 of the
Disclosure Schedule. Except as set forth in Part 3.4 of the Disclosure Schedule,
the financial statements referred to in this Section 3.4 reflect and will
reflect the consistent application of such accounting principles throughout the
periods involved, except as disclosed in the notes to such financial statements.
The financial statements have been prepared from and are in accordance with the
accounting Records of Seller. Seller has also delivered to Buyer copies of the
portions of all letters related to Seller or its financial condition, results of
operations, financial statements, books of account, or internal controls from
Member's auditors to Member or its parent corporation or the audit committee of
its or its parent's board of directors during the thirty-six (36) months
preceding the execution of this Agreement, together with copies of all responses
thereto.
3.5 Books and Records. The books of account and other financial
Records of Seller and the Prior owner with respect to the Business all of which
have been made available to Buyer, are complete and correct and represent
actual, bona fide transactions and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal
controls. The minute books of Seller and the Prior Owner with respect to the
Business for the period commencing January 1, 2000, to the Closing Date, all of
which have been made available to Buyer, contain accurate and complete Records
of all meetings held of, and action taken by, the member and manager of Seller
and shareholders and boards of directors of the Prior Owner, and no meeting of
any such member or board of managers of the Seller or boards of directors or
shareholders of the Prior Owner has been held for which minutes have not been
prepared or are not contained in such minute books.
3.6 Sufficiency of Assets. Except as set forth in Part 3.6 of the
Disclosure Schedule, the Assets (a) constitute all of the assets, tangible and
intangible, of any nature whatsoever, necessary to operate Seller's business in
the manner presently operated by Seller, and (b) include all of the operating
assets of Seller.
3.7 Description of Owned Real Property. Part 3.7 of the Disclosure
Schedule contains a correct legal description, street address and tax parcel
identification numbers of the Owned Real Property.
3.8 The Leased Real Property. Part 3.8 of the Disclosure Schedule
contains the street address of the Leased Real Property and an accurate
description (by location, name of lessor, date of Lease and term expiry date) of
the Office Lease. Seller is the sole tenant under the Office
34
Lease, and, except as contemplated by this Agreement, Seller has not assigned,
transferred or hypothecated the Office Lease or any interest therein. Purchaser
has been furnished a true, correct and complete copy of the Office Lease. Seller
has not received any notice from Lessor modifying or changing the terms of the
Office Lease in any way, except that the term of the Office Lease has been
extended until December 31, 2003 and the current monthly rental is $1,100.00.
Seller has obtained all consents or other instruments from the Office Lessor
necessary to assign the Office Lease to Purchaser. Seller has paid all rent and
expenses through Closing, including, without limitation, real estate taxes and
utilities, payable by tenant under the terms of the Office Lease. Seller has
performed all of its obligations under the Office Lease and is not in default
under the Office Lease. To the best of Seller's Knowledge, no facts exist under
which Seller may be deemed in default under the Office Lease merely upon service
of notice or passage of time or both. To the best of Seller's Knowledge, (i) the
Office Lessor is not in default under the Office Lease and (ii) no facts exist
under which Lessor may be deemed in default under the Office Lease merely upon
the service of notice or passage of time or both. To the best of Seller's
Knowledge, Lessor has not assigned the Office Lease or otherwise transferred its
interest in the Office Lease or its premises.
3.9 Title to Assets; Encumbrances.
(a) Seller owns fee simple title to its respective estates
in the Owned Real Property free and clear of any
Encumbrances other than:
(i) liens for Taxes for the current year which are
not yet due and payable; and
(ii) those described in Part 3.9(a) of the Disclosure
Schedule ("Permitted Real Property
Encumbrances").
Seller has delivered true and complete copies of (A) all
deeds, existing title insurance policies and surveys of
or pertaining to the Owned Real Property and (B) all
instruments, agreements and other documents evidencing,
creating or constituting any Permitted Real Property
Encumbrances to Buyer. Seller warrants to Buyer that the
Leased Real Property is free and clear of all
Encumbrances other than Permitted Real Property
Encumbrances.
(b) Seller owns good and transferable title to all Assets
other than Real Property free and clear of any
Encumbrances other than those described in Part 3.9(b)
of the Disclosure Schedule ("Permitted Non-Real Property
Encumbrances" and together with Permitted Real Property
Encumbrances, "Permitted Encumbrances").
(c) The Owned Real Property and Leased Real Property are the
only real property owned, leased, or used by Seller.
35
3.10 Condition of Facilities.
(a) To the Knowledge of Seller use of the Owned Real
Property for the various purposes for which it is
presently being used is permitted as of right under all
applicable zoning legal requirements and is not subject
to "permitted nonconforming" use or structure
classifications. All Improvements on the Owned Real
Property are in compliance with all applicable Legal
Requirements, including those pertaining to zoning,
building and the disabled, are in good repair and in
good condition, ordinary wear and tear excepted, and are
free from latent and patent defects. The Land included
in the Owned Real Property abuts on and has direct
vehicular access to a public road or has access to a
public road via a permanent, irrevocable, appurtenant
easement benefiting such Land is supplied with public or
quasi-public utilities and other services appropriate
for the operation of the Owned Real Property (as
conducted or operated by Seller) located thereon. To the
Knowledge of Seller, there is no existing or proposed
plan to modify or realign any street or highway or any
existing or proposed eminent domain proceeding that
would result in the taking of all or any part of any
Facility or that would prevent or hinder the continued
use of any Facility as heretofore used in the conduct of
the business of Seller. There are no leases or other
rights of occupancy (other than Seller's right of
occupancy) of the Owned Real Property.
(b) Each item of Tangible Personal Property is in good
repair and good operating condition, ordinary wear and
tear excepted, is suitable for immediate use in the
Ordinary Course of Business and is free from latent and
patent defects. No item of Tangible Personal Property is
in need of repair or replacement other than as part of
routine maintenance in the Ordinary Course of Business.
Except as disclosed in Part 3.10(b) of the Disclosure
Schedule, all Tangible Personal Property used in
Seller's business is in the possession of Seller.
3.11 Accounts Receivable. The Purchased Receivables represent valid
obligations arising from sales actually made or services actually performed by
Seller in the Ordinary Course of Business. There is no contest, claim, defense,
or right of setoff, other than returns in the Ordinary Course of Business of
Seller, under any Assumed Contract with any account debtor of a Purchased
Receivable relating to the amount or validity of such Purchased Receivable. Part
3.11 of the Disclosure Schedule contains a complete and accurate list of the
Purchased Receivables as of the date of this Agreement, which list sets forth
the aging of each such Purchased Receivable.
3.12 Inventories. All items included in the Purchased Inventory
consist of a quality and quantity usable and, with respect to finished goods,
saleable, in the Ordinary Course of Business of Seller except for obsolete items
and items of below-standard quality slow moving or excessive items, all of which
(with the exception of the items set forth in Part 3.12 of the Disclosure
Schedule (the "Special Inventory")) have been written off or written down to net
realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting Records
36
of Seller as of the Closing Date, as the case may be. Seller is not in
possession of any inventory not owned by Seller, including goods already sold.
All of the Purchased Inventory has been valued at the lower of cost or market
value on a first in, first out basis. Inventories now on hand that were
purchased after the date of the Balance Sheet or the Interim Balance Sheet were
purchased in the Ordinary Course of Business of Seller at a cost not exceeding
market prices prevailing at the time of purchase. With the exception of the
Special Inventory, the quantities of each item of Purchased Inventory (whether
raw materials, work-in-process, or finished goods) are not excessive but are
reasonable in the present circumstances of Seller. Work-in-process Inventories
are valued according to GAAP, consistently applied.
3.13 No Undisclosed Liabilities. Except as set forth in Part 3.13 of
the Disclosure Schedule, Seller has no Liability required to be disclosed by
GAAP except for Liabilities reflected or reserved against in the Balance Sheet
or the Interim Balance Sheet or reflected in the notes (including off-balance
sheet liabilities) thereto and current liabilities incurred in the Ordinary
Course of Business of Seller since May 31, 2003.
3.14 Taxes.
(a) Tax Returns Filed and Taxes Paid. Since January 1, 1997,
Seller and the Prior Owner (solely in their capacities
as the prior owners and operators of the Business) have
each filed or caused to be filed on a timely basis all
Tax Returns, reports, or requests for extensions with
respect to Taxes relating to the Business that are or
were required to be filed pursuant to applicable Legal
Requirements. All of such Tax Returns relating to the
Business filed by Seller and the Prior Owner (solely in
their capacities as the prior owners and operators of
the Business) are true, correct and complete in all
material respects. Seller and the Prior Owner (solely in
their capacities as the prior owners and operators of
the Business) as the case may be, have paid, or made
provision for the payment of, all Taxes relating to the
Business that have or may have become due for all
periods covered by the Tax Returns or otherwise
(including amounts payable as a result of any Tax Audit
or similar inquiry), except such Taxes, if any, as are
listed in Part 3.14(a) of the Disclosure Schedule and
are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim
Balance Sheet. Except as provided in Part 3.14(a) of the
Disclosure Schedule, neither Seller nor Prior Owner is
currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has been
made by any Governmental Body in a jurisdiction where
Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in
connection with any failure (or alleged failure) to pay
any Tax.
(b) Delivery of Tax Returns and Information Regarding Audits
and Potential Audits. Seller has made available to Buyer
copies of, and Part 3.14(b) of the Disclosure Schedule
contains a complete and accurate list of, all Tax
37
Returns described in the first sentence of Section
3.14(a). Part 3.14(b) of the Disclosure Schedule
contains a complete and accurate list of all Tax Returns
of Seller and the Prior Owner (solely in their
capacities as the prior owners and operators of the
Business) relating to the Business currently under audit
and accurately describe any deficiencies or other
amounts that were paid or are currently being contested.
All deficiencies proposed as a result of such audits
have been paid, reserved against, settled or are being
contested in good faith by appropriate proceedings as
described in Part 3.14(b) of the ---------------------
Disclosure Schedule. Seller and Prior Owner have made
available to Buyer, copies of any examination reports,
statements or deficiencies or similar items with respect
to such audits. Except as described in Part 3.14(b) of
the Disclosure Schedule, neither Seller nor the Prior
Owner (solely in their capacities as the prior owners
and operators of the Business) have given or been
requested to give waivers or extensions (or is or would
be subject to a waiver or extension given by any other
Person) of any statute of limitations relating to the
payment of Taxes concerning the Business for which
Seller or the Prior Owners (solely in such capacities)
may be liable.
(c) Specific Potential Tax Liabilities and Tax Situations.
(i) Withholding. All Taxes that Seller is or was
required by Legal Requirement to withhold,
deduct or collect have been duly withheld,
deducted and collected and, to the extent
required, have been paid to the proper
Governmental Body or other Person.
(ii) Tax Sharing or Similar Agreements. There is no
tax sharing agreement, tax allocation agreement,
tax indemnity obligation or similar written or
unwritten agreement, arrangement, understanding
or practice with respect to Taxes (including any
advance pricing agreement, closing agreement or
other arrangement relating to Taxes) that will
require any payment by Seller.
(iii) Consolidated Group. Seller (A) has been a member
of an affiliated group within the meaning of
Code Section 1504(a) (or any similar group
defined under a similar provision of state,
local or foreign law) and (B) has no liability
for Taxes of any person (other than itself)
under Teas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign
law), as a transferee or successor by contract
or otherwise.
3.15 No Material Adverse Change. Since May 31, 2003, except as
specifically set forth in Part 3.15 of the Disclosure Schedule there has not
been any material adverse change in the business, operations, assets,
liabilities or results of operations of Seller.
38
3.16 Employee Benefits.
(a) Set forth in Part 3.16(a) of the Disclosure Schedule is
a complete and correct list of all "employee benefit
plans" as defined by Section 3(3) of ERISA, all
specified fringe benefit plans as defined in Section
6039D of the Code, and all other bonus,
incentive-compensation, deferred-compensation,
profit-sharing, security-option,
security-appreciation-right, security-bonus,
security-purchase, employee-security-ownership, savings,
severance, change-in-control, supplemental-unemployment,
layoff, salary-continuation, retirement, pension,
health, life-insurance, disability, accident,
group-insurance, vacation, holiday, sick-leave,
fringe-benefit or welfare plan, and any other employee
compensation or benefit plan, agreement, policy,
practice, commitment, contract or understanding (whether
qualified or non-qualified, currently effective or
terminated, written or unwritten) and any trust, escrow
or other agreement related thereto that (i) is currently
maintained or contributed to by Seller or with respect
to which Seller has liability, and (ii) provides
benefits, or describes policies or procedures applicable
to any current or former manager, officer, employee or
service provider of Seller or the dependents of any
thereof, regardless of how (or whether) liabilities for
the provision of benefits are accrued or assets are
acquired or dedicated with respect to the funding
thereof (collectively the "Employee Plans"). Part
3.16(a) of the Disclosure Schedule identifies as such
any Employee Plan that is (w) a "Defined Benefit Plan"
(as defined in Section 414(1) of the Code), (x) a plan
intended to meet the requirements of Section 401(a) of
the Code, (y) a "Multiemployer Plan" (as defined in
Section 3(37) of ERISA) or (z) a plan subject to Title
IV of ERISA, other than a Multiemployer Plan.
(b) Seller has delivered to Buyer true, accurate and
complete copies of (i) the documents comprising each
Employee Plan (or, with respect to any Employee Plan
which is unwritten, a detailed written description of
eligibility, participation, benefits, funding
arrangements, and assets), (ii) all trust agreements,
insurance contracts or any other funding instruments
related to the Employee Plans, (iii) all rulings,
determination letters, no-action letters or advisory
opinions from the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation (PBGC) or any other
Governmental Body that pertain to each Employee Plan and
any open requests therefor, (iv) all collective
bargaining agreements pursuant to which contributions to
any Employee Plan(s) have been made or obligations
incurred by Seller and all collective bargaining
agreements pursuant to which contributions are being
made or obligations are owed by such entities, and (v)
all summary plan descriptions, summaries of material
modifications and memoranda, employee handbooks and
other written communications regarding the Employee
Plans.
(c) [Intentionally Omitted]
39
(d) [Intentionally Omitted]
(e) [Intentionally Omitted]
(f) Seller has, at all times, complied, and currently
complies, in all material respects with the applicable
continuation requirements for its welfare benefit plans,
including (1) Section 4980B of the Code (as well as its
predecessor provision, Section 162(i) of the Code) and
Sections 601 through 608, inclusive, of ERISA, which
provisions are hereinafter referred to collectively as
"COBRA" and (2) any applicable state statutes mandating
health insurance continuation coverage for employees.
(g) The form of all Employee Plans is in material compliance
with the applicable terms of ERISA, the Code, and any
other applicable laws, including the Americans with
Disabilities Act of 1990, the Family Medical Leave Act
of 1993 and the Health Insurance Portability and
Accountability Act of 1996, and such plans have been
operated in material compliance with such laws and the
written Employee Plan documents. Neither Seller nor any
fiduciary of an Employee Plan has violated the
requirements of Section 404 of ERISA. All required
reports and descriptions of the Employee Plans
(including Internal Revenue Service Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan
Descriptions and Summaries of Material Modifications)
have been (when required) timely filed with the IRS, the
U.S. Department of Labor or other Governmental Body and
distributed as required, and all notices required by
ERISA or the Code or any other Legal Requirement with
respect to the Employee Plans have been appropriately
given.
(h) Each Employee Plan that is intended to be qualified
under Section 401(a) of the Code has received a
favorable determination letter from the IRS. Each trust
created under any Employee Plan has been determined to
be exempt from taxation under Section 501(a) of the
Code. Each Employee Welfare Benefit Plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle
described in Section 501(c)(9) of the Code or is subject
to the provisions of Section 505 of the Code qualifies
for tax-exempt status under Section 501(c)(9) of the
Code or complies with Section 505 of the Code.
(i) [Intentionally Omitted]
(j) Seller has maintained workers' compensation coverage as
required by applicable state law.
(k) [Intentionally Omitted]
(l) Except for the continuation coverage requirements of
COBRA, Seller has no obligations or potential liability
for benefits to employees, former employees or their
respective dependents following termination of
40
employment or retirement under any of the Employee Plans
that are Employee Welfare Benefit Plans.
(m) Except as provided in Section 10.1(d) and except for
Seller's intention to freeze its pension plan, none of
the Contemplated Transactions will result in an
amendment, modification or termination of any of the
Employee Plans. No written or oral representations have
been made to any employee or former employee of Seller
promising or guaranteeing any employee payment or
funding for the continuation of medical, dental, life or
disability coverage for any period of time beyond the
end of the current plan year (except to the extent of
coverage required under COBRA). Seller has made no
written or oral representations to its current employee
or former employees concerning the employee benefits of
Buyer.
(n) Seller has no obligation to contribute to any Employee
Plan that is a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA ("Multiemployer Plan").
3.17 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.17(a) of the Disclosure
Schedule:
(i) Seller is, in all material respects, in
compliance with each Legal Requirement that is
applicable to the conduct or operation of the
Business or the ownership or use of any of its
assets, except where the failure to be in
compliance would not have a material adverse
effect on Seller;
(ii) Since January 1, 2000, each of Seller and the
Prior Owner (solely in their capacities as the
prior owners and operators of the Business) has
been, in all material respects, in compliance
with each Legal Requirement that was applicable
to it or to the conduct or operation of the
Business or the ownership or use of any of its
assets, except where the failure to be in
compliance would not have a material adverse
effect on Seller or the Prior Owner as
applicable;
(iii) To Seller's Knowledge, since January 1, 2000, no
event has occurred or fact exists that (with or
without notice or lapse of time or both) (A) may
be reasonably likely to constitute or result in
a material violation by Seller of, or a failure
on the part of Seller to comply with, any Legal
Requirement or (B) may be reasonably likely to
give rise to any obligation on the part of
Seller to undertake, or to bear all or any
portion of the cost of, any remedial action of
any nature; and
(iv) Neither Seller nor the Prior Owner (solely in
their capacities as the prior owners and
operators of the Business) has received, at any
41
time since January 1, 2000, any written,
electronic, or to Seller's Knowledge, oral
notice from any Governmental Body or any other
Person regarding (A) any actual, alleged,
possible or potential violation of, or failure
to comply with, any Legal Requirement, which, if
true, may be reasonably likely to have a
material adverse effect on Seller or the
Business or (B) any actual, alleged, possible or
potential obligation on the part of Seller to
undertake, or to bear all or any portion of the
cost of, any remedial action of any nature,
which may be reasonably likely to have a
material adverse effect on Seller or the
Business.
This Section 3.17(a) shall not apply to matters
addressed by the representations and warranties
contained in Sections 3.14 (Taxes), 3.16 (Employee
Benefits), 3.22 (Environmental Matters), 3.23
(Employees) or 3.24 (Labor Disputes).
(b) Part 3.17(b) of the Disclosure Schedule contains a
complete and accurate list of each Governmental
Authorization that is held by Seller or that otherwise
relates to the Business or the Assets. Each Governmental
Authorization required to be listed in Part 3.17(b) of
the Disclosure Schedule is valid and in full force and
effect. Except as set forth in Part 3.17(b) of the
Disclosure Schedule:
(i) Seller is and since January 1, 2000, Seller and
Prior Owner (solely in their capacities as the
prior owners and operators of the Business) have
been in full compliance with all of the terms
and requirements of each Governmental
Authorization identified or required to be
identified in Part 3.17(b) of the Disclosure
Schedule except where such failure to be in
compliance would not have a material adverse
effect on the Seller or the Business.
(ii) To Seller's Knowledge, no event has occurred or
facts arisen since January 1, 2000, that is
likely to (with or without notice or lapse of
time or both) (A) constitute or result directly
or indirectly in a violation of or a failure to
comply with any term or requirement of any
Governmental Authorization required to be listed
in Part 3.17(b) of the Disclosure Schedule that
is likely to have a material adverse effect on
Seller or the Business or (B) result directly or
indirectly in the revocation, withdrawal,
suspension, cancellation or termination of, or
any modification to, any Governmental
Authorization required to be listed in Part
3.17(b) of the Disclosure Schedule;
(iii) Since January 1, 2000, neither Seller nor Prior
Owner (solely in their capacities as the prior
owners and operators of the Business) has
received any written or electronic, or to the
Knowledge of Seller, oral notice from any
Governmental Body or any other
42
Person regarding (A) any actual, alleged,
possible or potential violation of or failure to
comply with any term or requirement of any
Governmental Authorization or (B) any actual,
proposed, possible or potential revocation,
withdrawal, suspension, cancellation,
termination of or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed
since January 1, 2000, for the renewal of the
Governmental Authorizations listed or required
to be listed in Part 3.17(b) of the Disclosure
Schedule have been duly filed on a timely basis
with the appropriate Governmental Bodies, and,
to the knowledge of Seller, all other filings
required to have been made with respect to such
Governmental Authorizations have been duly made
on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.17(b) of the Disclosure
Schedule collectively constitute all of the Governmental Authorizations
necessary to permit Seller to lawfully conduct and operate its business
in the manner in which it currently conducts and operates such business
and to permit Seller to own and use its assets in the manner in which it
currently owns and uses such assets.
3.18 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.18(a) of the Disclosure
Schedule, there is no pending or, to Seller's Knowledge,
threatened Proceeding:
(i) by or against Seller or that otherwise relates
to or may affect the Business or any of the
assets owned or used by Seller; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or
otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller, no event has occurred or facts exist
that are reasonably likely to give rise to or serve as a basis
for the commencement of any such Proceeding. Seller has
delivered to Buyer copies of all pleadings, correspondence and
other documents relating to each Proceeding listed in Part
3.18(a) of the Disclosure Schedule (other than pleadings,
correspondence and other documents relating to the Diversion
Agreement which Seller has fully and accurately described to
Buyer). Except as set forth on Part 3.18(a) of the Disclosure
Schedule, there are no Proceedings listed or required to be
listed in Part 3.18(a) of the Disclosure Schedule that would, if
adversely determined, have
43
a material adverse effect on the Business as conducted by Seller
or the operations or financial condition of Seller or upon the
Assets.
(b) Except as set forth in Part 3.18(b) of the Disclosure
Schedule:
(i) there is no Order to which Seller, its business
or any of the Assets is subject; and
(ii) to the Knowledge of Seller, no officer, manager,
agent or employee of Seller is subject to any
Order that prohibits such officer, manager,
agent or employee from engaging in or continuing
any conduct, activity or practice relating to
the business of Seller.
(c) Except as set forth in Part 3.18(c) of the Disclosure
Schedule:
(i) Each of Seller and the Prior Owners (solely in
their capacities as the prior owners and
operators of the Business) is, and, at all times
since January 1, 2000, has been in compliance in
all material respects, with all of the terms and
requirements of each Order to which it or any of
the Assets is or has been subject;
(ii) To Seller's Knowledge, no event has occurred or
facts exist that are likely to constitute or
result in (with or without notice or lapse of
time) a violation of or failure to comply with
any term or requirement of any Order to which
Seller or any of the Assets is subject; and
(iii) Each of Seller and the Prior Owners (solely in
their capacities as the prior owners and
operators of the Business), has not received, at
any time since January 1, 2000, any notice or
other communication (whether written or, to the
Knowledge of Seller, oral) from any Governmental
Body or any other Person regarding any actual,
alleged, possible or potential violation of, or
failure to comply with, any term or requirement
of any Order to which Seller or the Prior Owners
(solely in their capacities as the prior owners
and operators of the Business) or any of the
Assets is or has been subject.
3.19 Absence of Certain Changes and Events. Except as set forth in
Part 3.19 of the Disclosure Schedule, since May 31, 2003, Seller has conducted
its business only in the Ordinary Course of Business and there has not been any:
(a) amendment to the Governing Documents of Seller;
(b) payment or increase (except in the Ordinary Course of
Business) by Seller of any bonuses, salaries or other
compensation to the Member, or any
44
manager, officer or employee or entry into any
employment, severance or similar Contract with any
manager, officer or employee;
(c) adoption of, amendment to or increase in the payments to
or benefits under, any Employee Plan;
(d) damage to or destruction or loss of any asset of Seller
having a value in excess of One Thousand Dollars
($1,000), whether or not covered by insurance;
(e) entry into, termination of or receipt of notice of
termination of (i) any license, distributorship, dealer,
sales representative, joint venture, credit or similar
Contract to which Seller is a party, or (ii) any
Contract or transaction involving a total remaining
commitment by Seller of at least Twenty Thousand Dollars
($20,000.00);
(f) sale (other than sales of Inventories in the Ordinary
Course of Business), lease or other disposition of any
one or more of the Assets or properties of Seller
(including the Intellectual Property Assets) having a
value in excess of Twenty-Five Thousand Dollars
($25,000) individually or in the aggregate or the
creation of any Encumbrance on any Asset;
(g) cancellation or waiver of any claims or rights with a
value to Seller in excess of Fifteen Thousand Dollars
($15,000.00);
(h) indication by any customer or supplier having purchases
from or sales to Seller of Ten Thousand Dollars
($10,000.00) or more in the twelve months ended December
31, 2002, of an intention to discontinue or change the
terms of its relationship with Seller;
(i) material change in the accounting methods used by
Seller; or
(j) contract by Seller or the Member to do any of the
foregoing.
3.20 Contracts; No Defaults.
(a) Part 3.20(a) of the Disclosure Schedule contains an
accurate and complete list, and Seller has delivered to
Buyer accurate and complete copies, of:
(i) each Seller Contract that involves performance
of services or delivery of goods or materials by
Seller of an amount or value in excess of Twenty
Thousand Dollars ($20,000.00);
(ii) each Seller Contract (including outstanding
purchase orders) that involves performance of
services or delivery of goods or materials to
Seller of an amount or value in excess of Twenty
Thousand Dollars ($20,000.00);
45
(iii) each Seller Contract that was not entered into
in the Ordinary Course of Business and that
involves expenditures or receipts of Seller in
excess of Twenty Thousand Dollars ($20,000.00);
(iv) each Seller Contract affecting the ownership of,
leasing of, title to, use of or any leasehold or
other interest in any real or personal property
(except personal property leases and installment
and conditional sales agreements for personal
property having a value per item or aggregate
annual payments of less than Ten Thousand
Dollars ($10,000.00) and with a term of less
than one year;
(v) each Seller Contract with any labor union or
other employee representative of a group of
employees relating to wages, hours and other
conditions of employment;
(vi) each Seller Contract (however named) involving a
sharing of Seller's profits, losses, costs or
liabilities by Seller with any other Person;
(vii) each Seller Contract containing covenants that
in any way purport to restrict Seller's business
activity or limit the freedom of Seller to
engage in any line of business or to compete
with any Person;
(viii) each Seller Contract providing for payments to
or by any Person based on sales, purchases or
profits, other than direct payments for goods;
(ix) each power of attorney of Seller that is
currently effective and outstanding;
(x) each Seller Contract entered into other than in
the Ordinary Course of Business that contains or
provides for an express undertaking by Seller to
be responsible for consequential damages;
(xi) each Seller Contract for capital expenditures in
excess of Twenty Thousand Dollars ($20,000.00);
(xii) each Seller Contract not denominated in U.S.
dollars;
(xiii) each written warranty, guaranty and/or other
similar undertaking with respect to contractual
performance extended by Seller other than in the
Ordinary Course of Business; and
(xiv) each amendment, supplement and modification
(whether oral or written) in respect of any of
the foregoing.
46
Part 3.20(a) of the Disclosure Schedule sets forth, the amount
of the remaining commitment of Seller under the Seller Contracts
and the location of Seller's or Member's office where details
relating to the Seller Contracts are located.
(b) Except as set forth in Part 3.20(b) of the Disclosure
Schedule, the Member has not and will not acquire any
rights under, and the Member has not and will not become
subject to any obligation or liability under, any Seller
Contract that relates to the business of Seller or any
of the Assets.
(c) Except as set forth in Part 3.20(c) of the Disclosure
Schedule:
(i) each Assumed Contract is in full force and
effect and is valid and enforceable in
accordance with its terms except as such
enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar legal
requirements affecting creditors' rights
generally;
(ii) each Assumed Contract is assignable by Seller to
Buyer without the consent of any other Person;
and
(iii) to the Knowledge of Seller, no Assumed Contract
would, upon completion or performance thereof,
have a material adverse affect on the business,
assets or condition of Seller.
(d) Except as set forth in Part 3.20(d) of the Disclosure
Schedule:
(i) each of Seller, Member (in its capacity as Prior
Owner), and GTC is, and at all times since
January 1, 2000, has been, in compliance in all
material respects with all applicable terms and
requirements of each Assumed Contract;
(ii) to the Knowledge of Seller, each other Person
that has or had any obligation or liability
under any Assumed Contract is currently in
material compliance with all applicable terms
and requirements of such Assumed Contract;
(iii) no event has occurred or, to the Knowledge of
Seller, circumstance exists that (with or
without notice or lapse of time or both) is
likely to contravene, conflict with or result in
a Breach of, or give Seller or other Person the
right to declare a default or exercise any
remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel,
terminate or modify, any Assumed Contract;
(iv) to the Knowledge of Seller, no event has
occurred or facts exist under or by virtue of
any Assumed Contract that (with or without
notice or lapse of time) would cause the
creation of any Encumbrance affecting any of the
Assets; and
47
(v) each of Seller and Prior Owner have not given to
or received from any other Person, at any time
since January 1, 2000, any notice or other
communication (whether written or, to Seller's
Knowledge, oral) regarding any actual, alleged,
possible or potential violation or Breach of, or
default under, any Assumed Contract.
(e) There are no renegotiations of, attempts to renegotiate
or outstanding rights to renegotiate any material
amounts paid or payable to Seller under current or
completed Seller Contracts with any Person having the
contractual or statutory right to demand or require such
renegotiation and no such Person has made written demand
for such renegotiation.
(f) Each Seller Contract relating to the sale, design,
manufacture or provision of products or services by
Seller (including executory Contracts originally entered
into by the Prior Owner) has been entered into in the
Ordinary Course of Business of the Seller or Prior Owner
and has been entered into without the commission of any
act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or
would be in violation of any Legal Requirement.
(g) All contracts between the Seller and Member or any of
its Related Persons have been provided to Buyer and
Buyer has notified Seller of those that it will assume
and those that it will not assume.
3.21 Insurance.
(a) Part 3.21(a) of the Disclosure Schedule provides a
summary of the kinds of insurance currently maintained
by Seller, Member, or Parent insuring the Business,
including the kind of coverage, the amount insured and
the insurer. Seller, Member, and Parent do not self
insure the Business.
(b) Part 3.21(b) of the Disclosure Schedule describes all
current (i) obligations of Seller to provide insurance
coverage to Third Parties (for example, under Leases or
service agreements) and identifies the policy under
which such coverage is provided, and (ii) Contracts or
arrangements, other than a policy of insurance, for the
transfer or sharing of any risk to which Seller is a
party or that involves the Business.
(c) Part 3.21(c) of the Disclosure Schedule sets forth for
the current policy year and each of the three (3)
preceding policy years:
(i) a summary of the loss experience under each
policy of insurance maintained by Seller,
Member, or Parent with respect to the Business;
(ii) a statement describing each claim under any such
policy of insurance for an amount in excess of
Five Thousand Dollars
48
($5,000.00) (Five Thousand Dollars ($5,000.00)
in the case of workers' compensation insurance),
which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer,
type of insurance and period of
coverage; and
(C) the amount and a brief description of
the claim.
(d) Except as set forth in Part 3.21(d) of the Disclosure
Schedule:
(i) all policies of insurance to which Seller,
Member, or Parent is a party that provide
coverage of Seller or the Business:
(A) taken together, provide adequate
insurance coverage for the Assets,
Seller, and Business for all risks
normally insured against by a Person
carrying on the same business or
businesses as Seller in the same
location; and
(B) to Seller's knowledge are sufficient for
compliance with all Legal Requirements
and Seller Contracts;
(ii) Since January 1, 2000, neither Seller, Prior
Owner, or Parent has received with respect to
coverage of affecting the Business (A) any
refusal of coverage (except for a notice that a
defense will be afforded with reservation of
rights) or (B) any notice of cancellation or any
other indication that any policy of insurance is
no longer in full force or effect or that the
issuer of any policy of insurance is not willing
or able to perform its obligations thereunder;
(iii) Seller, Member, and Parent have paid all
premiums due, and have otherwise performed all
of their respective obligations, under each
current policy of insurance to which it is a
party or that provides coverage to Seller or the
Business, provided that an insurer may assert a
reservation of rights without regard to the
payment of premiums; and
(iv) Seller, Member or Parent have given notice to
the insurer of all claims with respect to Seller
that in Seller's, Member's, or Parent's
reasonable judgment may be insured thereby.
3.22 Environmental Matters. Except as disclosed in Part 3.22 of the
Disclosure Schedule or in that certain Phase II Environmental Assessment dated
December 20, 2002 and prepared by The Forrester Group and all correspondence,
documents and reports related thereto (collectively, the "Phase II Report"):
49
(a) Since January 1, 1997, Seller has been in material
compliance with, and has not been and is not in material
violation of, any Environmental Law. Seller has not
received any written order, notice, warning, request for
information, from (i) any Governmental Body or private
citizen acting in the public interest or (ii) the
current or prior owner or operator of any Facilities, of
any actual or alleged violation or failure to comply
with any Environmental Law or Occupational Safety or
Health Law, or of any actual or threatened obligation to
undertake or bear the cost of any Environmental
Liabilities with respect to any Facility or, to the
Knowledge of Seller, other property or asset (whether
real, personal or mixed) in which Seller has or had an
interest, or any property to which Hazardous Materials
generated, manufactured, imported, used or processed by
Seller have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(b) There are no pending or, to the Knowledge of Seller,
threatened claims, Encumbrances, or other restrictions
of any nature resulting from any Environmental
Liabilities or Occupational Safety and Health
Liabilities with respect to or affecting any Facility
or, to the Knowledge of Seller, any other property or
asset (whether real, personal or mixed) in which Seller
has or had an interest.
(c) Seller has not received any written citation, directive,
inquiry, notice, Order, summons, or warning that relates
to Hazardous Materials, or any alleged or actual
violation or material failure to comply with any
Environmental Law, or of any alleged or actual
obligation to undertake or bear the cost of any
Environmental Liabilities or Occupational Safety and
Health Liabilities with respect to any Facility or with
respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred,
imported, used or processed by Seller have been
transported, treated, stored, handled, transferred,
disposed, recycled or received.
(d) [Intentionally Omitted]
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or, to the Knowledge of
Seller, at any geologically or hydrologically adjoining
property, (except for such Hazardous Materials in such
amounts necessary for the Ordinary Course of Business
and which are in compliance with Environmental Laws).
(f) There has been no Release or, to the Knowledge of
Seller, Threat of Release, of any Hazardous Materials at
or from any Facility or to the Knowledge of Seller, at
any other location where any Hazardous Materials were
generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by any Facility, or
from any other property or asset in which Seller has or,
to the Knowledge of Seller, had an interest.
50
(g) Seller has delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Seller, Member, or
any of their Related Persons within the past ten (10)
years pertaining to Hazardous Materials in, on, or under
the Facilities, or concerning compliance, by Seller,
Member, with Environmental Laws in respect of the
Facilities, except for the results of analyses, tests or
monitoring performed in the Ordinary Course of Business
pursuant to any Governmental Authorization issued under
Environmental Law, which documents have been provided
for the past three (3) years.
3.23 Employees.
(a) Part 3.23(a) of the Disclosure Schedule contains a
complete and accurate list of the following information
for each employee, manager, independent contractor,
consultant and agent of Seller, including each employee
on leave of absence or layoff status: name; job title;
date of commencement of employment or engagement;
current compensation paid or payable; sick and vacation
leave that is accrued but unused; service credited for
purposes of vesting and eligibility to participate under
any Employee Plan and, with respect to employees
compensated on a salaried rather than hourly basis, any
change in compensation paid by Seller or Prior Owner
since January 1, 2002;
(b) Part 3.23(b) of the Disclosure Schedule contains a
complete and accurate list of the following information
for each retired employee or manager of Seller or Prior
Owner (solely in their capacities as the prior owners
and operators of the Business) or their dependents,
receiving benefits or scheduled to receive benefits in
the future: name; pension benefits; pension option
election; and other benefits. Seller and Prior Owner
(solely in their capacities as the prior owners and
operators of the Business) not obligated and do not
provide any retiree medical or retiree life insurance
coverage to any of their former employees.
(c) Part 3.23(c) of the Disclosure Schedule states the
number of employees terminated by Seller since December
1, 2002, and contains a complete and accurate list of
the following information for each employee of Seller
who has been terminated or laid off, or whose hours of
work have been reduced by more than fifty percent (50%)
by Seller, same December 1, 2002: (i) the date of such
termination, layoff or reduction in hours; (ii) the
reason for such termination, layoff or reduction in
hours; and (iii) the location to which the employee was
assigned.
(d) Seller has not violated the Worker Adjustment and
Retraining Notification Act (the "WARN Act") or any
similar state or local Legal Requirement. Since April 1,
2003, Seller has not terminated any employees.
51
(e) To the Knowledge of Seller, no officer, manager, agent,
employee, consultant, or contractor of Seller is bound
by any Contract that purports to limit the ability of
such officer, manager, agent, employee, consultant, or
contractor (i) to engage in or continue or perform any
conduct, activity, duties or practice relating to the
business of Seller or (ii) to assign to Seller or to any
other Person any rights to any invention, improvement,
or discovery.
3.24 Labor Disputes; Compliance.
(a) Since June 1, 2000, Seller and Prior Owner (solely in
their capacities as the prior owners and operators of
the Business), have complied in all material respects
with all (and are not, and have not been, liable for
fines peanalties or other amounts for violations of any)
(i) Legal Requirements relating to employment practices,
terms and conditions of employment, equal employment
opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of
social security and similar Taxes, and the employment of
individuals who are not Citizens of the United States
and (ii) Occupational Safety and Health Laws.
(b) Except as disclosed in Part 3.24(b) of the Disclosure
Schedule: (i) neither Seller nor Prior Owner (solely in
their capacities as the prior owners and operators of
the Business) has been, and is not now, a party to any
collective bargaining agreement or other labor contract;
(ii) since January 1, 2000, there has not been, there is
not presently pending or existing, and to Seller's
Knowledge there is not threatened, any strike, slowdown,
picketing, work stoppage or employee grievance process
involving Seller or Prior Owner (solely in their
capacities as the prior owners and operators of the
Business); (iii) to Seller's Knowledge, no event has
occurred or fact exists, that could provide the basis
for any work stoppage or other labor dispute; (iv) there
is not pending or, to Seller's Knowledge, threatened
against or affecting Seller, any Proceeding relating to
the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters,
including any charge or complaint filed with the
National Labor Relations Board or any comparable
Governmental Body, and to Knowledge of Seller, there is
no organizational activity or other labor dispute
against or affecting Seller or the Facilities; (v) no
application or petition for an election of or for
certification of a collective bargaining agent is
pending; (vi) no grievance or arbitration Proceeding
exists that might have an adverse effect upon Seller or
the conduct of its business; (vii) there is no lockout
of any employees by Seller, and no such action is
contemplated by Seller; and (viii) to Seller's
Knowledge, there has been no charge of discrimination
filed against or threatened against Seller with the
Equal Employment Opportunity Commission or similar
Governmental Body.
52
3.25 Intellectual Property Assets.
(a) The term "Intellectual Property Assets" means all
intellectual property owned or licensed (as licensor or
licensee) by Seller in which Seller has a proprietary
interest, including:
(i) Seller's name, all assumed fictional business
names, trade names, registered and unregistered
trademarks, service marks and applications
(collectively, "Marks");
(ii) all patents, patent applications and inventions
and discoveries that may be patentable
(collectively, "Patents");
(iii) all registered and unregistered copyrights in
both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works;
(v) all know-how, trade secrets, confidential or
proprietary information, customer lists,
Software, technical information, data, process
technology, plans, drawings and blue prints
(collectively, "Trade Secrets"); and
(vi) all rights in internet web sites and internet
domain names presently used by Seller
(collectively "Net Names").
(b) Part 3.25(b) of the Disclosure Schedule contains a
complete and accurate list and summary description,
including any royalties paid or received by Seller, and
Seller has delivered to Buyer accurate and complete
copies, of all Seller Contracts relating to the
Intellectual Property Assets, except for any license
implied by the sale of a product and perpetual, paid-up
licenses for commonly available Software programs with a
value of less than Two Hundred Dollars ($200.00) under
which Seller is the licensee. There are no outstanding
and, to Seller's Knowledge, no threatened disputes or
disagreements with respect to any such Contract.
(c)
(i) Except as set forth in Part 3.25(c) of the
Disclosure Schedule, the Intellectual Property
Assets are all those necessary for the operation
of Seller's business as it is currently
conducted. Seller is the owner or licensee of
all right, title and interest in and to each of
the Intellectual Property Assets, free and clear
of all Encumbrances, and has the right to use
without payment to a Third Party all of the
Intellectual Property Assets, other than in
respect of licenses listed in Part 3.25(c) of
the Disclosure Schedule.
53
(ii) Except as set forth in Part 3.25(c) of the
Disclosure Schedule, all former and current
employees of Seller have executed written
Contracts with Seller that assign to Seller all
rights to any inventions, improvements,
discoveries or information relating to the
business of Seller.
(d)
(i) Part 3.25(d) of the Disclosure Schedule contains
a complete and accurate list and summary
description of all Patents.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements
(including payment of filing, examination and
maintenance fees and proofs of working or use),
are valid and enforceable, and are not subject
to any maintenance fees or taxes or actions
falling due within ninety (90) days after the
Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or
opposition Proceeding. To Seller's Knowledge,
there is no potentially interfering patent or
patent application of any Third Party.
(iv) Except as set forth in Part 3.25(d) of the
Disclosure Schedule, (A) no Patent is infringed
or, to Seller's Knowledge, has been challenged
or threatened in any way and (B) none of the
products manufactured or sold, nor any process
or know-how used, by Seller infringes or is
alleged to infringe any patent or other
proprietary right of any other Person.
(v) All products made, used or sold under the
Patents have been marked with the proper patent
notice.
(e)
(i) Part 3.25(e) of the Disclosure Schedule contains
a complete and accurate list and summary
description of all Marks.
(ii) All Marks filed or registered with the United
States Patent and Trademark Office, are
currently in compliance with all formal Legal
Requirements (including the timely
post-registration filing of affidavits of use
and incontestability and renewal applications),
are not subject to any maintenance fees or taxes
or actions falling due within ninety (90) days
after the Closing Date, and, to Sellers
Knowledge, are valid and enforceable.
(iii) No Mark has been or is now involved in any
opposition, invalidation or cancellation
Proceeding and, to Seller's
54
Knowledge, no such action is threatened with
respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially
interfering trademark or trademark application
of any other Person.
(v) No Mark is infringed or, to Seller's Knowledge,
has been challenged or threatened in any way.
None of the Marks used by Seller infringes or is
alleged to infringe any trade name, trademark or
service mark of any other Person.
(f)
(i) Part 3.25(f) of the Disclosure Schedule contains
a complete and accurate list and summary
description of all Copyrights.
(ii) All of the registered Copyrights are, to
Seller's Knowledge, valid and enforceable, and
are not subject to any maintenance fees or taxes
or actions falling due within ninety (90) days
after the date of Closing.
(iii) No Copyright is infringed or, to Seller's
Knowledge, has been challenged or threatened in
any way. None of the subject matter of any of
the Copyrights infringes or is alleged to
infringe any copyright of any Third Party or is
a derivative work based upon the work of any
other Person.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(g)
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is
current, accurate and sufficient in detail and
content to identify and explain it and to allow
its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) Seller has taken all reasonable precautions to
protect the secrecy, confidentiality and value
of all Trade Secrets (including the enforcement
by Seller of a policy requiring each employee or
contractor to execute proprietary information
and confidentiality agreements substantially in
Seller's standard form, and all current and
former employees and contractors of Seller have
executed such an agreement).
(iii) Seller has good title to and an absolute right
to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or
55
literature and, to Seller's Knowledge, have not
been used, divulged or appropriated either for
the benefit of any Person (other than Seller) or
to the detriment of Seller. No Trade Secret is
subject to any adverse claim or has been
challenged or threatened in any way or infringes
any intellectual property right of any other
Person.
(h)
(i) Part 3.25(h) of the Disclosure Schedule contains
a complete and accurate list and summary
description of all Net Names.
(ii) All Net Names have been registered in the name
of Seller and are in compliance with all formal
Legal Requirements.
(iii) No Net Name has been or is now involved in any
dispute, opposition, invalidation or
cancellation Proceeding and, to Seller's
Knowledge, no such action is threatened with
respect to any Net Name.
(iv) To Seller's Knowledge, there is no domain name
application pending of any other person which
would or would potentially interfere with or
infringe any Net Name.
(v) No Net Name is infringed or, to Seller's
Knowledge, has been challenged, interfered with
or threatened in any way. No Net Name infringes,
interferes with or is alleged to interfere with
or infringe the trademark, copyright or domain
name of any other Person.
3.26 Parent Ownership of Assets. At no time has Parent owned any of
the Assets.
3.27 Compliance with the Foreign Corrupt Practices Act and Export
Control and Antiboycott Laws.
(a) Since January 1, 2000, Seller and the Prior Owners
(solely in their capacities as the prior owners and
operators of the Business) have not, to obtain or retain
business, directly or indirectly, offered, paid or
promised to pay, or authorized the payment of, any money
or other thing of value (including any fee, gift,
sample, travel expense or entertainment with a value in
excess of One Hundred Dollars ($100.00) in the aggregate
to any one individual in any year) or any commission
payment to:
(i) any person who is an official, officer, agent,
employee or representative of any Governmental
Body or of any existing or prospective customer
(whether government owned or nongovernment
owned);
(ii) any political party or official thereof;
56
(iii) any candidate for political or political party
office; or
(iv) any other individual or entity;
while knowing that all or any portion of such money or
thing of value would be offered, given, or promised
directly or indirectly to any such official, officer,
agent, employee, representative, political party,
political party official, candidate, individual, or any
entity affiliated with such customer, political party or
official or political office.
(b) Except as set forth in Part 3.27(b) of the Disclosure
Schedule, since January 1, 2002, Seller and Member
(solely in its capacity as a prior owner and operator of
the Business) have made all payments to Third Parties by
check mailed to such Third Parties' principal place of
business or by wire transfer to a bank located in the
same jurisdiction as such party's principal place of
business.
(c) Seller maintains no off-the-books accounts.
(d) Since January 1, 2000, Seller and the Prior Owner
(solely in their capacities as the prior owners and
operators of the Business), have at all times been in
material compliance with all Legal Requirements relating
to export control and trade embargoes. No product sold
or service provided by Seller or the Prior Owners
(solely in their capacities as the prior owners and
operators of the Business) during such period has been
directly sold to or performed by Seller or the Prior
Owners (solely in their capacities as the prior owners
and operators of the Business), on behalf of Cuba, Iraq,
Iran, Libya or North Korea.
(e) Except as set forth in Part 3.27(e) of the Disclosure
Schedule, Seller and Prior Owner (in their capacities as
the prior owners and operators of the Business) have not
violated of any of the antiboycott prohibitions
contained in 50 U.S.C. Section 2401 et seq. or taken any
action that can be penalized under Section 999 of the
Code. Except as set forth in Part 3.27(e) of the
Disclosure Schedule, during the last five (5) years
Seller and Prior Owner (in their capacities as the prior
owners and operators of the Business) are not a party
to, are not a beneficiary under and have not performed
any service or sold any product under any Seller
Contract or other Contract under which a product has
been sold to customers in Bahrain, Iraq, Jordan, Kuwait,
Lebanon, Libya, Oman, Quatar, Saudi Arabia, Sudan,
Syria, United Arab Emirates or the Republic of Yemen.
3.28 Relationships With Related Persons. Except as disclosed in Part
3.28 of the Disclosure Schedule, neither Seller nor the Member nor any Related
Person of either of them has, or since January 1, 2000, has had, any interest in
any property (whether real, personal or mixed and whether tangible or
intangible) used in or pertaining to Seller's business. Neither Seller nor the
Member nor any Related Person of any of them owns, or since January 1, 2000,
57
has owned, of record or as a beneficial owner, an equity interest or any other
financial or profit interest in any Person that has (a) had business dealings or
a material financial interest in any transaction with Seller other than business
dealings or transactions disclosed in Part 3.28 of the Disclosure Schedule, each
of which has been conducted in the Ordinary Course of Business with Seller at
substantially their prevailing market prices and on substantially their
prevailing market terms or (b) to the Knowledge of Seller, engaged in
competition with Seller with respect to any line of the products or services of
Seller (a "Competing Business") in any market presently served by Seller, except
for ownership of less than one percent (1%) of the outstanding capital stock of
any Competing Business that is publicly traded on any recognized exchange or in
the over-the-counter market. Except as set forth in Part 3.28 of the Disclosure
Schedule, neither Seller nor the Member nor any Related Person of any of them is
a party to any Contract with, or has any claim or right against, Seller.
3.29 Brokers or Finders. Except for McDonald Investments, Inc.,
neither Seller nor any of its Representatives have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payments in connection with the sale of Seller's
business or the Assets or the Contemplated Transactions.
3.30 Securities Law Matters.
(a) Seller is acquiring the Promissory Note, its interest in
the Earnout Agreement and, if issued, the Contingent
Note for its own account and not with a view to its
distribution within the meaning of Section 2(11) of the
Securities Act.
(b) Seller confirms that Buyer has made available to Seller
and its Representatives the opportunity to ask questions
of the officers and management employees of Buyer and to
acquire such additional information about the business
and financial condition of Buyer as Seller has
requested, and all such information has been received.
EXCEPT AS SET FORTH IN THIS ARTICLE 3, AS SUPPLEMENTED OR MODIFIED BY
THE DISCLOSURE SCHEDULE, THE CERTIFICATES DELIVERED PURSUANT TO SECTION 2.7(a),
AND THE OTHER AGREEMENTS AND INSTRUMENTS EXECUTED AND DELIVERED BY SELLER IN
CONNECTION WITH THE CONTEMPLATED TRANSACTIONS, SELLER MAKES NO REPRESENTATIONS
OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR
WARRANTY OF MARKETABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
BUYER ACKNOWLEDGES AND AGREES THAT SELLER MAKE NO REPRESENTATIONS OR WARRANTY
WITH RESPECT TO ANY FORECASTS, PROJECTIONS, ESTIMATES OR BUDGETS DELIVERED OR
MADE AVAILABLE TO BUYER OF
58
FUTURE REVENUES, FUTURE CASH FLOWS, ETC. THE FOREGOING REPRESENTATIONS AND
WARRANTIES ARE EXPRESSLY LIMITED TO THE BUSINESS AND ITS ASSETS, PROPERTIES, AND
LIABILITIES. ANY REFERENCE TO MEMBER, PARENT, THE PRIOR OWNER OR THEIR
RESPECTIVE RELATED PERSONS OR AFFILIATES IS LIMITED TO MATTERS CONCERNING THE
BUSINESS AND ITS ASSETS, PROPERTIES, AND LIABILITIES.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and
authority to conduct its business as it is now conducted.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in
accordance with its terms. Upon the execution and
delivery by Buyer of the Transaction Documents to which
it is a party, each of which will constitute the legal,
valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its respective terms.
Buyer has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and the
Transaction Documents to which it is a party and to
perform its obligations under this Agreement and
thereunder, and such action has been duly authorized by
all necessary corporate action.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person
the right to prevent, delay or otherwise interfere with
any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Governing Documents;
(ii) any resolution adopted by the board of directors
or the shareholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
59
Buyer is not and will not be required to obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
4.4 Brokers or Finders. Neither Buyer nor any of its Representatives
have incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with the Contemplated Transactions.
4.5 Sufficient Funds. Buyer has sufficient funds to satisfy and
discharge its obligations or promises (monetary or otherwise) under the
Transaction Documents to which it is a party.
5. [Intentionally Omitted]
6. [Intentionally Omitted]
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE Buyer's obligation
to purchase the Assets and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at the
Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
7.1 Consents. Each of the Consents identified in Exhibit 7.1 (the
"Material Consents") shall have been obtained and shall be in full force and
effect.
7.2 Additional Documents. Seller shall have caused the documents and
instruments required by Section 2.7(a) and the following documents to be
delivered (or tendered subject only to Closing) to Buyer:
(a) The Certificate of Formation and all amendments thereto
of Seller, duly certified as of a recent date by the
Secretary of State of Delaware;
(b) If requested by Buyer, any Consents or other instruments
that may be required to permit Buyer's qualification in
each jurisdiction in which Seller is licensed or
qualified to do business as a foreign entity under the
name "Greenville Tube" or any derivative thereof;
(c) Releases of all Encumbrances on the Assets, other than
Permitted Encumbrances;
(d) Certificates dated as of a date not earlier than the
third (3rd) business day prior to the Closing as to the
good standing of Seller, executed by the appropriate
officials of the State of Delaware and each jurisdiction
in
60
which Seller is licensed or qualified to do business as
a foreign corporation as specified in Part 3.1(a) of the
Disclosure Schedule;
(e) Certificates dated as of a date not earlier than the
tenth (10th) business day before the Closing as to the
payment of all applicable state Taxes executed by the
appropriate officials in Pennsylvania and Arkansas; and
(f) Such other documents as Buyer may reasonably request for
the purpose of facilitating the consummation or
performance of any of the Contemplated Transactions.
7.3 Title Insurance. Buyer shall have received unconditional and
binding commitments to issue policies of title insurance, dated the Closing
Date, in an aggregate amount equal to $2,000,000, deleting all requirements
listed in ALTA Schedule B-1, amending the effective date to the date and time of
recordation of the memorandum of the Facility Lease with no exception for the
gap between Closing and recordation, deleting or insuring over Buyer's or its
lenders' title objections attaching all endorsements required by Buyer in order
to ensure provision of coverage required by Buyer or its lenders and otherwise
in form satisfactory to Buyer insuring Buyer's leasehold interest in each parcel
of Owned Real Property or interest therein. Such title insurance commitments
must be acceptable to Buyer in its sole discretion. Buyer shall pay the fee for
such commitments.
7.4 Governmental Authorizations. Buyer shall have received such
Governmental Authorizations as are necessary or desirable to allow Buyer to
operate the Assets from and after the Closing.
7.5 Employees.
(a) Buyer shall have entered into employment agreements with
those employees of Seller identified in Exhibit --------
7.5.
(b) Those key employees of Seller identified on Exhibit 7.5,
or substitutes therefor who shall be acceptable to
Buyer, in its sole discretion, shall have accepted
employment with Buyer on terms mutually agreeable to the
Buyer and each such respective employee, with such
employment to commence on and as of the Closing Date.
(c) Substantially all other employees of Seller shall be
available for hiring by Buyer, in its sole discretion,
on and as of the Closing Date.
7.6 Ancillary Agreements. The relevant Persons shall have entered
into ancillary agreements in form and substance as set forth in Exhibit 7.6
hereto.
7.7 Financing. Buyer shall have received proceeds under its credit
and subscription agreements with the providers of Buyer's debt and equity
financing sufficient for Buyer to fund the consummation of the Contemplated
Transactions and satisfy its working capital requirements after the Closing.
61
7.8 Management Investment. The employees listed on Exhibit 7.8 shall
have purchased at least Two Hundred Ninety Thousand Dollars ($290,000) of the
Buyer's common stock.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE Seller's obligation
to sell the Assets and to take the other actions required to be taken by
Seller at the Closing is subject to the satisfaction, at the Closing, of
each of the following conditions (any of which may be waived by Seller
in whole or in part):
8.1 Consents. Each of the Consents identified in Exhibit 8.1 shall
have been obtained and shall be in full force and effect.
9. NO TERMINATION.
Buyer and Seller acknowledge and agree that the execution and delivery
of this Agreement and the closing of the transactions contemplated hereby are
occurring simultaneously. Accordingly, this Agreement shall not be deemed to be
executed and delivered unless and until all of the conditions to Closing have
been satisfied or waived, and all deliveries at Closing required hereunder have
been made, and once the conditions to Closing have been satisfied or waived and
all deliveries required hereunder have been made, no party hereto will have any
right to terminate this Agreement.
10. ADDITIONAL COVENANTS
10.1 Employees and Employee Benefits.
(a) Information on Active Employees. For the purpose of this
Agreement, the term "Active Employees" shall mean all
employees employed on the Closing Date by Seller in the
operation of the business acquired by Buyer hereunder,
including employees on temporary leave of absence,
including family medical leave, military leave,
temporary disability or sick leave, but excluding
employees on long-term disability leave. A list of
Seller's employees as of the Closing Date is attached
hereto as Exhibit 10.1(a).
(b) Employment of Active Employees by Buyer.
(i) Attached hereto as Exhibit 10.1(b)(i) is a list
of Active Employees to whom Buyer has made an
offer of employment that has been accepted to be
effective on the Closing Date (the "Hired Active
Employees"). Effective immediately before the
Closing, Seller will terminate the employment of
all of its Hired Active Employees.
(ii) Neither Seller nor its Related Persons shall
solicit the continued employment of any Active
Employee (unless and until Buyer has informed
Seller in writing that the particular Active
Employee will not receive any employment offer
from Buyer) or the employment of any Hired
Active Employee after the Closing. Set forth on
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Exhibit 10.1(b)(ii) is a list of those Active
Employees to whom Buyer will not make employment
offers (the "Non-Hired Active Employees").
(iii) It is understood and agreed that (A) Buyer's
expressed intention to extend offers of
employment as set forth in this Section shall
not constitute any commitment, Contract or
understanding (expressed or implied) of any
obligation on the part of Buyer to a
post-Closing employment relationship of any
fixed term or duration or upon any terms or
conditions other than those that Buyer may
establish pursuant to individual offers of
employment, and (B) employment offered by Buyer
is "at will" and may be terminated by Buyer or
by an employee at any time for any reason
(subject to any written commitments to the
contrary made by Buyer or an employee and Legal
Requirements). Nothing in this Agreement shall
be deemed to prevent or restrict in any way the
right of Buyer to terminate, reassign, promote
or demote any of the Hired Active Employees
after the Closing or to change adversely or
favorably the title, powers, duties,
responsibilities, functions, locations,
salaries, other compensation or terms or
conditions of employment of such employees.
(iv) As of the Closing Date, each Hired Active
Employee shall, without duplication of benefits,
be given credit for all service with Seller
before the Effective Time under all employee
benefit plans (including credit for service as
applicable to pre-existing conditions under
Buyer's health insurance plans), programs, and
arrangements maintained by or contributed to by
Buyer in which the Hired Active Employee becomes
a participant for the purposes of eligibility to
participate, vesting, and determination of level
of benefits (excluding however benefit accrual
under any defined benefit plans, if any).
(v) Seller shall be responsible for providing
continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, for all Non-Hired Active
Employees, all of Seller's former employees, and
all Hired Active Employees who elect not to
participate or are unable to participate in
Buyer's health plans and, in each case, elects
such continuation coverage, provided that Buyer
will not advise Hired Active Employees who are
eligible for coverage by Buyer's health plans to
elect to receive such continuation coverage.
(vi) Effective as of the Closing Date, Hired Active
Employees who are participants in Seller's
401(k) plan shall become fully vested in their
account balances in such plan (the "Seller
Savings Plan") and distributions of such account
balance shall be made available to
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such Hired Active Employees as soon as
reasonably practicable following the Closing
Date, in accordance with the provisions of the
Seller Savings Plan and Legal Requirements. As
soon as reasonably practicable after the Closing
Date, Buyer will establish a 401(k) plan that
will accept rollover contributions from the
Seller Savings Plan.
(vii) Buyer and Seller will cooperate as necessary to
effect the requirements of this Section 10.1.
(c) Salaries and Benefits.
(i) Seller shall be responsible for (A) the payment
of any termination or severance payments
(excluding all retention and salary continuation
bonuses or payments) and the provision of health
plan continuation coverage in accordance with
the requirements of COBRA and Sections 601
through 608 of ERISA, (B) any and all payments
to employees required under the WARN Act, and
(D) payment of all retention payments or salary
continuation payments to which Seller is
contractually obligated.
(ii) Seller shall be liable for any claims made or
incurred by Active Employees and their
beneficiaries through the Closing Date under the
Employee Plans. For purposes of the immediately
preceding sentence, a charge will be deemed
incurred, in the case of hospital, medical or
dental benefits, when the services that are the
subject of the charge are performed and, in the
case of other benefits (such as disability or
life insurance), when an event has occurred or
when a condition has been diagnosed that
entitles the employee to the benefit.
(d) Seller's Retirement and Savings Plans. All Hired Active
Employees who are participants in Seller's or Member's
retirement plans shall retain their accrued benefits
under such retirement plans as of the Closing Date, and
Seller or Member (or Seller's or Member's retirement
plans) shall retain sole liability for the payment of
such benefits as and when such Hired Active Employees
become eligible therefor under such plans. All Hired
Active Employees shall become fully vested in their
accrued benefits under Seller's or Member's retirement
plans as of the Closing Date, and Seller or Member will
so amend such plans if necessary to achieve this result.
(e) No Transfer of Assets. Neither Seller nor Member nor
their respective Related Persons will make any transfer
of pension or other employee benefit plan assets to
Buyer.
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(f) General Employee Provisions.
(i) Seller and Buyer shall give any notices required
by Legal Requirements and take whatever other
actions with respect to the plans, programs and
policies described in this Section 10.1 as may
be necessary to carry out the arrangements
described in this Section 10.1.
(ii) Seller and Buyer shall provide each other with
such plan documents and summary plan
descriptions, employee data or other information
as may be reasonably required to carry out the
arrangements described in this Section 10.1.
(iii) If any of the arrangements described in this
Section 10.1 are determined by the IRS or other
Governmental Body to be prohibited by law,
Seller and Buyer shall modify such arrangements
to as closely as possible reflect their
expressed intent and retain the allocation of
economic benefits and burdens to the parties
contemplated herein in a manner that is not
prohibited by law.
(iv) On the Closing Date, Seller shall provide Buyer
with completed I-9 forms and attachments with
respect to all Hired Active Employees, except
for such employees as Seller certifies in
writing to Buyer are exempt from such
requirement.
(v) Buyer shall not have any responsibility,
liability or obligation, whether to Active
Employees, former employees, their beneficiaries
or to any other Person, with respect to any
employee benefit plans, practices, programs or
arrangements (including the establishment,
operation or termination thereof and the
notification and provision of COBRA coverage
extension) maintained by Seller.
10.2 Payment of Certain Taxes. Buyer shall pay all personal property
taxes due on the Assets for 2003. Seller shall pay all personal property taxes
that are due on the Assets for 2002.
10.3 Payment of Other Retained Liabilities. In addition to payment of
Taxes pursuant to Section 10.2, Seller shall pay, or make adequate provision for
the payment, in full all of the Retained Liabilities and other Liabilities of
Seller under this Agreement, except to the extent being reasonably contested in
good faith by Seller. If any such Liabilities are not so paid or provided for,
and are not being reasonably contested in good faith by Seller, or if Buyer
reasonably determines that failure to make any payments will impair Buyer's use
or enjoyment of the Assets or conduct of the Business, Buyer may, at any time
after the Closing Date, elect to make all such payments directly (but shall have
no obligation to do so) and pursuant to Section 11.8 set off and deduct the
amount of all such payments then remaining from the first one or more maturing
installments of the unpaid principal balance of the Promissory Note, each
65
effective as of the date such payments are actually made by Buyer. Buyer shall
receive full credit under the Promissory Note and this Agreement for all
payments so made.
10.4 Financial Information. For as long as Buyer has any monetary
obligations to Seller under any of the Transaction Documents, Buyer shall
furnish Seller with its unaudited quarterly and audited annual financial
statements at the time and in the format it delivers such financial statements
to its senior secured lender.
10.5 Removing Excluded Assets. Not later than thirty (30) days after
the Closing Date, Seller shall remove all Excluded Assets from the Real
Property. Buyer shall provide Seller and its Representatives with reasonable
access during normal business hours and upon reasonable advance notice to the
Real Property to effect the removal of any Excluded Assets. Such removal shall
be done in such manner as to avoid any damage to the Facilities and other
properties to be occupied by Buyer and any disruption of the business operations
to be conducted by Buyer after the Closing. Seller shall promptly reimburse
Buyer for any damage to the Assets or to the Real Property resulting from such
removal. Should Seller fail to remove the Excluded Assets as required by this
Section, Buyer shall have the right, but not the obligation, (a) to remove the
Excluded Assets at Seller's sole cost and expense, (b) to treat the Excluded
Assets as unclaimed and to proceed to dispose of the same under the laws
governing unclaimed property or (c) to exercise any other right or remedy
conferred by this Agreement or otherwise available at law or in equity. Seller
shall promptly reimburse Buyer for all costs and expenses incurred by Buyer in
connection with any Excluded Assets not removed by Seller as provided in this
Section 10.5.
10.6 Reports and Returns. Seller shall reasonably promptly after the
Closing prepare and file all reports and returns required by Legal Requirements
relating to the Business as conducted by Seller using the Assets, to and
including the Effective Time, and when required after the Closing Seller, and
Buyer shall prepare and file all reports and returns required by Legal
Requirements with respect to the Contemplated Transactions.
10.7 Assistance in Proceedings. The parties hereto will cooperate
with other parties and their counsel in the contest or defense of, and make
available its personnel and provide any testimony and access to its books and
Records in connection with, any Proceeding involving or relating to (a) any
Contemplated Transaction or (b) any action, activity, circumstance, condition,
conduct, event, fact, failure to act, incident, occurrence, plan, practice,
situation, status or transaction on or before the Closing Date involving Seller
or its business, Member, or Buyer.
10.8 Noncompetition, Nonsolicitation and Nondisparagement.
(i) Noncompetition. For a period of five (5) years
after the Closing Date, neither Seller nor its
Related Persons shall, anywhere in the United
States, directly or indirectly invest in, own,
manage, operate, finance, control, advise,
render services to or guarantee the obligations
of any Person engaged in or planning to become
engaged in the business of manufacturing steel
and stainless steel tubing ("Competing
Business"), provided, however, that Seller or
its Related Persons may purchase or otherwise
acquire up to (but
66
not more than) one percent (1%) of any class of
the securities of any Person (but may not
otherwise participate in the activities of such
Person) if such securities are listed on any
national or regional securities exchange or have
been registered under Section 12(g) of the
Exchange Act.
(b) Nonsolicitation. For a period of five (5) years after
the Closing Date, neither Seller nor its Related Persons
shall, directly or indirectly:
(i) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor,
franchisee, employee, consultant or other
business relation of Buyer to cease doing
business with Buyer, to deal with any competitor
of Buyer or in any way interfere with its
relationship with Buyer;
(ii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor,
franchisee, employee, consultant or other
business relation of Seller on the Closing Date
or within the year preceding the Closing Date to
cease doing business with Buyer, to deal with
any competitor of Buyer or in any way interfere
with its relationship with Buyer; or
(iii) hire, retain or attempt to hire or retain any
employee or independent contractor of Buyer or
in any way interfere with the relationship
between Buyer and any of its employees or
independent contractors.
(c) Nondisparagement. After the Closing Date, none of the
parties hereto will disparage either of the other
parties' shareholders, members, managers, directors,
officers, employees, agents or Representatives.
(d) Modification of Covenant. If a final judgment of a court
or tribunal of competent jurisdiction determines that
any term or provision contained in Section 10.8(a)
through (c) is invalid or unenforceable, then the
parties agree that the court or tribunal will have the
power to reduce the scope, duration or geographic area
of the term or provision, to delete specific words or
phrases or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or
provision. This Section 10.8 will be enforceable as so
modified after the expiration of the time within which
the judgment may be appealed. This Section 10.8 is
reasonable and necessary to protect and preserve Buyer's
legitimate business interests and the value of the
Assets and to prevent any unfair advantage conferred on
Seller.
10.9 Customer and Other Business Relationships. After the Closing,
Seller at no additional cost or expense to Seller, will cooperate with Buyer in
its efforts to continue and
67
maintain for the benefit of Buyer those business relationships of Seller
existing prior to the Closing and relating to the business to be operated by
Buyer after the Closing, including relationships with lessors, employees,
regulatory authorities, licensors, customers, suppliers and others. Seller will
refer to Buyer all inquiries relating to the Business. Neither Seller nor its
officers or Related Persons shall, and Seller shall instruct its managers,
employees, and agents not to, intentionally or recklessly take any action that
would diminish the value of the Assets after the Closing or that would interfere
with the business of Buyer to be engaged in after the Closing, including
disparaging the name or business of Buyer. Notwithstanding the foregoing, Seller
will not be in breach of this Section 10.9 if its Member has a dispute with a
supplier or customer who is or was a customer or supplier of Seller or Buyer if
the dispute is not related to Seller or the business that Seller or Buyer have
conducted or is conducting with the Acquired Assets and Assumed Liabilities.
10.10 Retention of and Access to Records. After the Closing Date,
Buyer shall retain for a period of not less than six (6) years those Records of
Seller delivered to Buyer. Buyer also shall provide Seller and its
Representatives reasonable access thereto, during normal business hours and on
at least three (3) days' prior written notice, to enable them to prepare
financial statements or tax returns or deal with tax audits. After the Closing
Date, Seller shall provide Buyer and its Representatives reasonable access to
Records that are Excluded Assets, during normal business hours and on at least
three days' prior written notice, for any reasonable business purpose specified
by Buyer in such notice.
10.11 Further Assurances. The parties shall cooperate reasonably with
each other and with their respective Representatives in connection with any
steps required to be taken as part of their respective obligations under this
Agreement, and shall (a) furnish upon request to each other such further
information, (b) execute and deliver to each other such other documents and (c)
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 Contemplated
Transactions.
10.12 TCE Sealant. While it is the lessee under the Facility Lease,
Buyer shall be responsible for applying and maintaining, in accordance with the
sealant manufacturer's specifications, at least the current sealant on the TCE
degreaser sump and the area in which degreasing operation occur, and Buyer shall
reseal such area from time to time as its environmental consultant shall
recommend.
10.13 Master Lease Payments. Seller and its Affiliates lease vehicles
and equipment under that certain Master Lease Agreement dated on or about August
1, 2001, among Amembal Capital Corporation, as lessor, and Chart Leasing, Inc.
("CLI"), and Parent, as lessees (the "Master Lease"). Following the Closing,
Buyer will possess, and will operate certain equipment that is subject to the
Master Lease (the "Leased Equipment"). Seller shall provide Buyer with detail of
the portion of the monthly lease payments under the Master Lease that are
allocable to the Leased Equipment thereunder and Notice of the date upon which
the lessees under the Master Lease must make lease payments at least ten (10)
days prior to such payment date, and Buyer shall pay to Seller the amount of the
Buyer's portion of the payment not later than five (5) days before the date
lessee's payment is due. Seller agrees that it shall promptly pay over the
amount it receives from Buyer to CLI and Parent. If at the end of the term of
the Master Lease, the Buyer desires to exercise the purchase option for any of
the leased equipment, Buyer shall
68
give Seller notice of such exercise at least six (6) months before the end of
such lease term, and Buyer shall pay to Seller the amount of any applicable
option exercise price.
10.14 Effective Date. The effective date of this Agreement shall be
July 1, 2003. If the Closing does not occur on July 1, 2003, Buyer shall
reimburse Seller, Parent, or Member (as applicable) for all self-insured medical
insurance costs it incurs with respect to the Hired Active Employees during the
period commencing July 1, 2003, and ending on the Closing Date. Seller shall
provide Buyer with evidence of all such costs and its payment thereof. Buyer
shall reimburse Seller for all payroll expenses it incurs with respect to Hired
Active Employees during the period commencing July 1, 2003, and ending on the
Closing Date. Seller shall provide Buyer with evidence of such payroll expenses.
11. INDEMNIFICATION; REMEDIES.
11.1 Survival. All representations, warranties, covenants and
obligations in this Agreement, the Disclosure Schedule, and the Transaction
Documents shall survive the Closing and the consummation of the Contemplated
Transactions, subject to Section 11.7. The right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations shall not be affected by any investigation (including
any environmental investigation or assessment or any due diligence review or
investigation) conducted with respect to, or any Knowledge acquired (or capable
of being acquired) at any time before the execution and delivery of this
Agreement on the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with any such representation, warranty, covenant or obligation.
11.2 Indemnification and Reimbursement by Seller. Subject to the
limitations described herein, Seller will indemnify and hold harmless Buyer, and
its shareholders, subsidiaries, officers, directors and employees (collectively,
the "Buyer Indemnified Persons"), and will reimburse the Buyer Indemnified
Persons for any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees and expenses) or
diminution of value, whether or not involving a Third-Party Claim (collectively,
"Damages"), arising from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in (i) this Agreement, or (ii) the Transaction
Documents (excluding the Facility Lease);
(b) any Breach of any covenant or obligation of Seller in
this Agreement or the Transaction Documents (excluding
the Facility Lease);
(c) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made,
or alleged to have been made, by any Person with Seller
or the Member (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions;
(d) any product or component thereof manufactured by or
shipped, or any services provided by, Seller, in whole
or in part, prior to the Closing Date, provided that
Buyer shall be responsible for the first Ten Thousand
69
Dollars ($10,000) of product warranty claims arising in
the eighteen (18) months immediately following the
Closing and product warranty claims specifically assumed
under Section 2.4(a)(iv);
(e) any matter disclosed in Part 11.2(e) of the Disclosure
Schedule;
(f) any noncompliance with any Bulk Sales Laws or fraudulent
transfer law in respect of the Contemplated
Transactions;
(g) any liability under the WARN Act or any similar state or
local Legal Requirement that may result from an
"Employment Loss", as defined by 29 U.S.C. Section
2101(a)(6), caused by any action of Seller prior to the
Closing;
(h) any Employee Plan established or maintained by Seller;
or
(i) any Retained Liabilities.
Notwithstanding any provision in this Agreement to the contrary, Buyer
agrees that it shall be prohibited from asserting any claims for
indemnification for expenses it incurs (i) for replacing any "shrink
wrap" software programs that Seller is unable to assign to Buyer because
Seller cannot obtain the consent of the software licensor to the
assignment, or (ii) for Damages with respect to the Special Inventory.
11.3 Indemnification and Reimbursement by Seller - Environmental
Matters.
(a) TCE Matters.
(i) Subject to the material compliance by Buyer with
its obligations in Section 11.3(f) herein,
Seller will indemnify and hold harmless Buyer
and the other Buyer Indemnified Persons, and
will reimburse Buyer and the other Buyer
Indemnified Persons, for any Damages (including
costs of any other Remedial Action) arising from
or in connection with:
(A) the TCE Contamination, provided,
however, that as between Buyer and
Seller, and without limiting the Buyer's
right to indemnification with respect to
the matters described in Section
11.3(a)(i)(B) through 11.3(a)(i)(D)
herein, upon a determination by the
Arkansas Department of Environmental
Quality ("ADEQ") that Seller has
complied with the ADEQ Consent Order to
the full extent required by ADEQ, the
TCE Contamination, referenced in this
Section 11.3(a)(i)(A), will be
considered a Non-TCE Environmental
Condition, as provided in Section
11.3(b);
70
(B) any Environmental Claim related to the
TCE Contamination;
(C) the failure of the Seller to comply with
the ADEQ Consent Order; and
(D) any bodily injury (including illness,
disability and death, regardless of when
any such bodily injury manifested
itself), personal injury, property
damage (including trespass, nuisance,
diminution in property value, wrongful
eviction and deprivation of the use of
real property) or other damage of or to
any Person, property (real or personal),
or any Assets from the TCE
Contamination.
(ii) For purposes of Section 11.3(a), there shall be
a rebuttable presumption, subject to Section
11.3(a)(iii), that any TCE Contamination that
was present in the Environment at, on or
emanating from the Facilities or present in
Facility building components (e.g., concrete
flooring) was present at or prior to the Closing
Date provided that, so long as Buyer uses TCE,
Buyer complies with the following requirements
set forth in this Section 11.3(a)(ii):
(A) maintain the trichloroethylene-resistant
sealant currently on the Facility floor
pursuant to the sealant manufacturer's
instructions;
(B) provide written notification to Seller
of any Release of fifty (50) pounds of
TCE to soil and/or groundwater at, on or
from the Greenville Property;
(C) provide a certification to Seller within
one (1) year of the Closing Date and
annually thereafter as to whether there
have been any Releases of greater than
fifty (50) pounds of TCE to soil and/or
groundwater at, on or from the
Greenville Property during the preceding
year and, if applicable, a description
of any such Releases, including, without
limitation, the date, location and
circumstances of the Release, the
estimated amount of TCE Released, a
description of remedial measures taken
to address such TCE Release(s) and a
statement as to whether such TCE Release
was reported to any Governmental Body
and the date of such report, if
applicable; and
(D) provide to Seller written notice at
least ten (10) days prior to the
performance of regularly scheduled
preventative maintenance on the TCE
degreaser involving transfer of
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TCE from the degreaser to and from an
in-line aboveground storage tank or any
similar container; and provide Parent,
Member, Seller or their respective
Representatives an opportunity to
observe any activities related thereto.
(iii) Subject to the provisions contained in this
Section 11.3(a)(iii), Buyer may assign its
rights under Section 11.3(a) without Seller's
consent, provided, that Buyer, its successors
and assigns, shall provide written notice to
Seller within five (5) days of any such
assignment. A Buyer Change of Control shall
affect assignment of the rebuttable presumption
as follows:
(A) Following the consummation of a Buyer
Change of Control, the rebuttable
presumption that the TCE Contamination
pre-dated the Closing Date shall
terminate and not apply and Buyer shall
not be entitled to rely upon the same;
provided, that, (x) members of the
Investor Group, in their capacities as
Buyer Indemnified Parties, and (y)
Buyer, in the event the Buyer Change of
Control was a sale of assets and the
Investor Group, or any combination of
the members of the Investor Group or
their Affiliates continues to own in
excess of 50% of the voting power of
Buyer, shall, subject to Section
11.3(a)(ii), continue to be entitled to
the benefit of the rebuttable
presumption.
(B) Other than as provided in the
immediately preceding Section
11.3(a)(iii)(A), the right of the Buyer
Indemnified Parties to indemnification
and reimbursement, and Seller's
obligation to provide the same, under
Section 11.3(a), including, without
limitation, indemnification for any
Third-Party Claim shall continue and the
rebuttable presumption discussed above,
shall not be impaired.
(b) Non-TCE Matters.
(i) Subject to the material compliance by Buyer with
its obligations in Sections 11.3(c), (d), (e)
and (f) herein, Seller will indemnify and hold
harmless Buyer and the other Buyer Indemnified
Persons, and will reimburse Buyer and the other
Buyer Indemnified Persons, for any Damages
(including costs of any other Remedial Action)
arising from or in connection with any
Environmental Claims arising out of or relating
to:
(A) any Breach of any representation or
warranty made by Seller in Section 3.22
of this Agreement, provided that such
Breach is not a result of fraud;
72
(B) ownership or operation at any time on or
prior to the Closing Date of any of the
Facilities, Assets, the Business or the
Greenville Property;
(C) any Hazardous Materials that are present
on, under, or emanating from the
Facilities, Assets, or the Greenville
Property or that were disposed or
transferred from the Facilities, Assets
or the Greenville Property at any time
by Seller on or prior to the Closing
Date,
(D) any bodily injury (including illness,
disability and death, regardless of when
any such bodily injury manifested
itself), personal injury, property
damage (including trespass, nuisance,
diminution in property value, wrongful
eviction and deprivation of the use of
real property) or other damage of or to
any Person, property (real or personal),
or any Assets prior to the Closing Date
or from any Hazardous Material that was
(i) present or reasonably suspected to
be present on or before the Closing Date
on or at the Facilities (or present or
reasonably suspected to be present on
any other property, if such Hazardous
Material emanated from any Facility or
the Greenville Property and was present
or reasonably suspected to be present on
any Facility or the Greenville Property,
on or prior to the Closing Date), or
(ii) Released by any Person on or at any
Facilities, Assets, or the Greenville
Property at any time on or prior to the
Closing Date, and
(E) any Remedial Actions taken by Seller at
the Facilities.
(ii) The circumstances and conditions described in
Sections 11.3(b)(i)(A) through 11.3(b)(i)(E) are
collectively referred to herein as "Non-TCE
Environmental Conditions." The parties
acknowledge and agree that Section 11.3(b) shall
not include obligations with respect to TCE
Contamination, except as provided in Section
11.3(a)(i)(A). In the event of a Buyer Change of
Control, the right of the Buyer Indemnified
Parties to indemnification and reimbursement
under Section 11.3(b) shall terminate
automatically and be void and of no force and
effect; Notwithstanding the foregoing sentence,
(x) the Buyer Indemnified Parties (excluding
Charles E. Downs, Richard L. Vareha, Harry R.
Holstead, and Larry B. McGaslin), and (y) Buyer,
in the event the Buyer Change of Control was a
sale of assets and the Investor Group, or any
combination of its members, continues to own in
excess of 50% of the voting power of Buyer,
shall be permitted to assert a claim against
Seller under Section 11.3(b); provided that in
the event that such claim is made against the
Buyer Indemnified
73
Parties by a successor owner of Buyer or its
assets, the right to indemnification or
reimbursement is limited to claims substantially
similar to those in Section 11.3(b)(i).
(c) In the event of an Environmental Claim related to
Non-TCE Environmental Conditions initiated by any Third
Party related to any Environmental Liabilities in
connection with a proposed acquisition of assets from
Buyer or a proposed loan to Buyer (the "Acquisition
Environmental Claim"), Seller shall have no obligation
of indemnification or reimbursement under Section
11.3(b) herein if the concentrations of constituents
identified by such Third Party are at or below the
screening levels for industrial land use developed by
U.S. EPA-Region 6 pursuant to its Corrective Action
Strategy ("SLs"), any similar standards applicable in
Arkansas subsequently adopted in the event U.S.
EPA-Region 6 withdraws or revokes the SLs. In the event
that the concentrations of constituents exceed such
levels or no applicable limit exists for a particular
constituent, Seller will perform a risk assessment for
that constituent, in compliance with any applicable
protocols or guidance acceptable to the Arkansas
Department of Environmental Quality and U.S. EPA, Region
6 at the time of the risk assessment at Seller's sole
cost, and will perform such Remedial Action, if any,
reasonably necessary to meet the risk level acceptable
to the Arkansas Department of Environmental Quality and
the U.S. EPA Region 6 for an industrial facility at the
time of the risk assessment. Input parameters into the
risk assessment must be consistent with the then current
use of the Facilities, as long as such use is
industrial.
(d) In the event of an Environmental Claim related to
Non-TCE Environmental Conditions initiated by any
Governmental Body or for which a Governmental Body
requires a response, Seller will be responsible for any
Remedial Action required by such Governmental Body under
Environmental Law with respect to such Non-TCE
Environmental Conditions. Upon completion of Remedial
Action to the satisfaction of any Governmental Body
having jurisdiction over any Non-TCE Environmental
Condition, Seller shall have no further indemnity or
reimbursement obligation with respect to any such
Environmental Claim.
(e) Buyer shall not be entitled to indemnification or
reimbursement under Section 11.3(b) with respect to any
Non-TCE Environmental Condition in the absence of an
Environmental Claim.
(f) The procedure described in Section 11.9 will apply to
any claim (whether for monetary damages or injunctive
relief) relating to a matter covered by Section 11.3 and
as provided in Section 11.4(g), subject to the
following: Seller shall be entitled to control any
Proceeding with respect to which indemnity may be sought
under this Section 11.3. Buyer shall be prohibited from
undertaking any TCE Remedial Action or any other
74
Remedial Action arising out of an Environmental Claim
related to any Non-TCE Environmental Condition without
the prior written consent of Seller; provided, however,
if Seller refuses or neglects to perform a Remedial
Action after notice from Buyer, as provided in Section
11.9, and Buyer has a reasonable, good faith belief that
it will be subject to damages, penalties, fines or
action taken by a Governmental Body in response to
Seller's failure to undertake the TCE Remedial Action or
any other Remedial Action, Buyer may control the
Proceeding. Buyer hereby grants to Seller, its
employees, managers, agents, consultants, contractors
and subcontractors, access to such portions of the Real
Property as may be reasonably required so as to permit
Seller to perform the TCE Remedial Action or any other
Remedial Action. In the course of any Remedial Action
performed by Seller at the Facilities pursuant to this
Agreement or in relation to the TCE Remedial Action, the
following conditions shall apply:
(i) Seller shall provide Buyer with copies of any
and all analysis results, workplans, reports and
any correspondence with a Governmental Body
associated with such Remedial Action;
(ii) Seller shall not unreasonably or unnecessarily
interfere in any way with Buyer's operation of
the Facilities;
(iii) Seller follow all reasonable safety rules
communicated to Seller in writing by Buyer, but
in no event shall Buyer be responsible for the
safety of Seller, its employees, contractors or
invitees;
(iv) Seller shall inform Buyer in writing at least
five (5) days in advance of any activity that is
to take place at the Facilities;
(v) Seller shall perform all such Remedial Actions
during normal business hours, except with the
written permission of Buyer (such permission not
to be unreasonably withheld, delayed, denied or
conditioned);
(vi) Seller shall not communicate to any Governmental
Body, a neighboring property owner, or any other
Person that Buyer is responsible for the TCE
Remedial Action or the TCE Contamination,
provided Buyer maintains the
trichloroethylene-resistant sealant on the
Facility floor;
(vii) Seller shall provide copies to Buyer of any such
Remedial Action workplan at least ten (10) days
in advance of the submittal of any such workplan
to any Governmental Body and revise such
Remedial Action workplan to incorporate any
reasonable comments made by Buyer;
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(viii) all of Seller's contractors or subcontractors
operating at the Facilities shall have in force
during any such Remedial Action performed by
that contractor or subcontractor on the
Facilities insurance coverage of the following
types, in at least the following amounts:
(A) Workers'compensation in accordance with
all applicable statutory requirements;
(B) Comprehensive general liability
insurance with a combined single limit
of not less than $1,000,000 per
occurrence for bodily injury and
property damage;
(C) Comprehensive automobile liability,
including coverage for all owned and
non-owned vehicles used in connection
with any Remedial Action, with a
combined single limit of not less than
$1,000,000 per occurrence for bodily
injury and property damage;
(D) Employers' liability insurance with
limits of not less than $1,000,000 per
occurrence;
(E) Environmental impairment liability
insurance with limits of not less than
$1,000,000 per occurrence and $1,000,000
aggregate, or higher if required by
state or federal Law; and
(F) Any such insurance policy shall name
Buyer as an additional insured and shall
contain an agreement or endorsement that
it will not be canceled or materially
modified by the insurer without at least
thirty (30) days prior written notice to
Buyer.
(ix) the TCE Remedial Action or any such Remedial
Action at the Facilities shall be performed in
conformance with all applicable Environmental
Laws;
(x) Seller shall be responsible for the handling,
storage and disposal of any Hazardous Materials
created, collected or otherwise generated in
connection with the TCE Remedial Action or any
such Remedial Action performed pursuant to this
Agreement;
(xi) Seller shall take all precautions necessary to
prevent damage to the Facilities and shall
promptly repair or replace any and all damage to
the Facilities caused by any Remedial Action. At
the conclusion of the Remedial Action, Seller
shall restore the Facilities substantially the
same condition it was in prior to the
commencement of the Remedial Action;
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(xii) if required by any Governmental Body having
jurisdiction over the TCE Remedial Action or if
required in conformance with Occupational Safety
and Health Laws, Seller shall perform such
Remedial Actions as are necessary to reduce
exposures by workers at the Facilities to the
levels required pursuant to Occupational Health
and Safety Law;
(xiii) Seller shall provide Buyer in advance with the
name of any contractor to perform any such
Remedial Action or activity in relation to the
TCE Remedial Action, provided, however, that
Buyer shall be deemed to have approved those
contractors identified on Exhibit 11.3(f)(xiii).
Buyer may reasonably reject a contractor not
identified on Exhibit 11.3(f)(xiii), provided,
however, that in the event that Buyer fails to
notify Seller of such rejection in writing
within ten (10) days of receipt of notice from
Seller of the name of any contractor, Buyer will
be deemed to have approved such contractor;
(xiv) Seller shall provide Buyer, at Buyer's sole cost
and expense, with split samples of any
environmental media sampled, if requested by
Buyer. In no event shall Buyer be deemed the
generator or the arranger for disposal of any
wastes or materials generated by or during any
such Remedial Action;
(xv) Buyer shall cooperate with Seller in the conduct
of any such Remedial Action, including, without
limitation, providing reasonable access to any
necessary services, such as water, sewer and
electricity, provided that Seller reimburses
Buyer promptly for the additional out-of-pocket
costs of such services;
(xvi) Buyer shall not initiate any communication with
any Governmental Body with respect to any
Remedial Action performed under this Agreement
without Seller's prior written consent, except
in the event that Buyer:
(A) notifies Seller, in writing, at least
seven (7) days prior to such
communication, which notification shall
include a description of the agenda or
topics for discussion; and
(B) provides Seller the opportunity to
participate in such communication.
In such case, Seller may, by written notice to Buyer prior to the date of the
proposed communication, postpone the communication for up to fourteen (14) days.
If, following the expiration of the period of twenty-one (21) days from the date
of Buyer's notice to Seller, Seller has not agreed to the proposed
communication, with or without Seller's participation (in Seller's
77
sole discretion), Buyer may proceed to contact the Governmental Body pursuant to
its original notice to Seller.
(xvii) Buyer may initiate any communication with any
Governmental Body with respect to any
Environmental Liability performed under this
Agreement other than a Remedial Action without
Seller's prior written consent, provided that,
in the event that Buyer has a reasonable belief
that Seller is obligated to indemnify it with
respect to such Environmental Liability, Seller
must notify Buyer and afford Buyer an
opportunity to participate in any such
communication pursuant to Section 11.3(f)(xvi)
of this Agreement.
(xviii) In the case of any Remedial Action performed
under this Agreement other than the TCE Remedial
Action, the clean-up standards selected shall
reflect the least stringent remediation
standards acceptable under Environmental Law,
assuming such Remedial Action is conducted using
the most cost-effective commercially reasonable
methods for investigation, remediation and/or
containment, including, without limitation, the
use of "institutional" or "engineering" controls
or deed restrictions limiting the use of the
relevant Facility to industrial purposes,
provided that such controls or restrictions: (A)
are consistent with applicable Environmental
Law; and (B) do not materially preclude Buyer
from using such Facility in the manner it was
used in as of the Closing Date.
(g) Without limiting the generality of the foregoing, absent
fraud, the provisions of this Section 11.3 shall
exclusively govern the rights and obligations of the
parties and shall be the only remedies available to the
parties hereto in respect of any matter arising
hereunder with respect to the matters expressed herein,
provided, however, that this Section 11.3(g) shall have
no force and effect for Non-TCE Environmental Conditions
on the first day following the expiration of the
"Non-TCE Survival Period" (as defined in Section 11.7
herein). Following the expiration of the Non-TCE
Survival Period, the Buyer Indemnified Parties may,
subject to Section 11.3(b)(ii), pursue all other
remedies for Non-TCE Environmental Conditions, whether
statutory, regulatory, common law or otherwise.
11.4 Indemnification and Reimbursement by Buyer. Buyer will indemnify
and hold harmless Seller and its shareholders, directors, officers and employees
(the "Seller Indemnified Persons") and will reimburse Seller and Seller
Indemnified Persons, for any Damages arising from or in connection with:
(a) any Breach of any representation or warranty made by
Buyer in this Agreement or the Transaction Documents
(excluding the Facility Lease);
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(b) any Breach of any covenant or obligation of Buyer in
this Agreement or the Transaction Documents (excluding
the Facility Lease);
(c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any
agreement or understanding alleged to have been made by
such Person with Buyer (or any Person acting on Buyer's
behalf) in connection with any of the Contemplated
Transactions;
(d) any Assumed Liabilities;
(e) any liability resulting or arising from Buyer's
ownership and operation of the Assets or business after
the Closing that is not a Liability for which Seller
otherwise indemnifies Buyer under Sections 11.2 or 11.3
hereof; or
(f) any liability under WARN Act caused by Buyer's decision
not to hire the requisite number of Active Employees so
as to avoid liability under the WARN Act;
(g) any Environmental Claims arising out of or relating to:
(i) operation by Buyer at any time subsequent to the
Closing Date of any of the Facilities, Assets,
the Business or the Greenville Property;
(ii) any Hazardous Materials that Buyer causes to be
present on, under, or emanating from the
Facilities, Assets, or the Greenville Property
or that Buyer disposes or transfers from the
Facilities, Assets or the Greenville Property at
any time subsequent to the Closing Date, and
(iii) any bodily injury (including illness, disability
and death, regardless of when any such bodily
injury manifested itself), personal injury,
property damage (including trespass, nuisance,
diminution in property value, wrongful eviction
and deprivation of the use of real property) or
other damage of or to any Person, property (real
or personal), or any Assets subsequent to the
Closing Date or from any Hazardous Material that
Buyer causes to be (i) present or reasonably
suspected to be present subsequent to the
Closing Date on or at the Facilities (or present
or reasonably suspected to be present on any
other property, if such Hazardous Material
emanated from any Facility or the Greenville
Property and Buyer caused the Hazardous Material
to be present on the Facility or the Greenville
Property, subsequent to the Closing Date), or
(ii) Released on or at any Facilities, Assets,
or the Greenville Property at any time
subsequent to the Closing Date any liability
arising under Environmental Law, including,
without limitation, any Environmental
Liabilities, resulting or arising from the acts
or omissions of Buyer or the ownership or
operation of the Facilities,
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Assets, the Business or the Greenville Property
after the Closing Date; and
(h) any damage or destruction to the Leased Equipment,
normal wear and tear excepted and further excepting any
existing wear, tear, and damage existing on the Closing
Date.
The circumstances and conditions described in Sections 11.4(g)(i)-(iii) are
collectively referred to herein as "Seller Environmental Claims." Seller shall
not be entitled to indemnification or reimbursement under this Section 11.4 (g)
with respect to any Seller Environmental Claim in the absence of an
Environmental Claim. In the event of an Environmental Claim related to Seller
Environmental Claims, the provisions of Section 11.3 (d) and (f) (except Section
11.3 (f)(vi)) shall apply, with the term "Seller Environmental Claims"
substituted for "Non-TCE Environmental Claims," the term "Buyer" substituted for
"Seller," "Seller" substituted for "Buyer" and Section 11.4(g) substituted for
Section 11.3.
11.5 Limitations on Amount - Seller. Seller shall have no liability
(for indemnification or otherwise) with respect to claims under Section 11.2(a),
11.2(f), 11.2(g), 11.2(i), and 11.3(b) until the total of all Damages with
respect to such matters exceeds $150,000.00 (the "Threshold") and then only for
the amount by which such Damages exceed the Threshold. However, the ---------
Threshold will not apply to claims under Sections 11.2(b), 11.2(c), 11.2(d),
11.2(e) and 11.2(h) or to matters arising in respect of Sections 3.9, 3.14,
3.22, 3.29, 3.30, 11.3(a) or fraud. Subject to the immediately preceding
sentence:
(a) Seller's aggregate liability for Damages under Section
11.2(a) 11.2(f), 11.2(g) and 11.2(i) shall not exceed
$2,000,000 provided that this Section 11.5(a) shall not
apply to Sections 2.4(b)(iii), (v), (vi), (vii) (ix),
(xii) and (xv); and
(b) Seller's aggregate liability for Damages for Non-TCE
Contamination under Section 11.3(b) shall not exceed
$13,500,000 provided, however, that the limitation under
this Section 11.5(b) shall not apply to Damages for
Non-TCE Contamination under Section 11.3(b)(i)(D).
11.6 Limitations on Amount - Buyer. Buyer will have no liability (for
indemnification or otherwise) with respect to claims under Section 11.4(a) until
the total of all Damages with respect to such matters exceeds $150,000.00 and
then only for the amount by which such Damages exceed $150,000.00. However, this
Section 11.6 will not apply to claims under Section 11.4(b) through Section
11.4(h) or matters arising in respect of Sections 4.4 or 4.5, fraud, or to any
Breach of any of Buyer's representations and warranties of which Buyer had
Knowledge at any time before the date on which such representation and warranty
is made or any intentional Breach by Buyer of any covenant or obligation, and
Buyer will be liable for all Damages with respect to such Breaches.
11.7 Time Limitations.
Seller will have liability (for indemnification or otherwise) with
respect to any Breach of (i) a covenant or obligation to be performed or
complied with (other than those in Sections 2.1
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and 2.4(b), (v)(except as provided in Section 11.3(b)), (ix), (xi), (xii), and
(xv), and Articles 10, 12, and 13, as to which a claim may be made at any time
and those in Sections 2.4(b)(iii), (vi), and (vii) as to which a claim may be
made during the period before the applicable statute of limitations, including
extensions thereof, becomes effective to bar claims), or (ii) a representation
or warranty (other than those in Sections 3.9, and 3.22 (except for
nonfraudulent Breaches as provided in Section 11.3(b)), as to which a claim may
be made at any time and Section 3.14, and 3.16, as to which a claim may be made
during the period before the applicable statute of limitations, including
extensions thereof, becomes effective to bar claims), only if on or before
January 1, 2005, Buyer notifies Seller in writing of a claim specifying the
factual basis of the claim in reasonable detail to the extent then known by
Buyer. Nothing in the preceding sentences shall constitute or be construed as an
assumption of any of Seller's Retained Liabilities by Buyer.
Seller's obligation to indemnify the Buyer Indemnified Parties for
Non-TCE Environmental Conditions in Section 11.3(b) shall expire on the
twenty-fifth (25) anniversary of the Closing Date (the "Non-TCE Survival
Period"). Thereafter, the Buyer Indemnified Parties may, subject to Section
11.3(b)(ii), pursue all other remedies for Non-TCE Environmental Conditions,
whether statutory, regulatory, common law or otherwise.
Buyer will have liability (for indemnification or otherwise) with
respect to any Breach of (i) a covenant or obligation to be performed or
complied with (other than those in Articles 10, 12, and 13 as to which a claim
may be made at any time) or (ii) a representation or warranty (other than that
set forth in Section 4.4, as to which a claim may be made at any time), only if
on or before January 1, 2005, Seller notifies Buyer in writing of a claim
specifying the factual basis of the claim in reasonable detail to the extent
then known by Seller.
11.8 Right of Setoff. Upon notice to Seller specifying in reasonable
detail the basis therefor, Buyer shall set off any amount to which it may be
entitled under this Article 11 against amounts otherwise remaining payable under
the Promissory Note. If the Buyer's Damages exceed amounts available for setoff,
Buyer may recover the excess from Seller directly. The exercise of such right of
setoff by Buyer in good faith, whether or not ultimately determined to be
justified, will not constitute an event of default under the Promissory Note or
any instrument securing the Promissory Note. Neither the exercise of nor the
failure to exercise such right of setoff will constitute an election of remedies
or limit Buyer in any manner in the enforcement of any other remedies that may
be available to it. If Seller disputes an exercise of Buyer's right of set off
against the Promissory Note, Seller shall give Buyer written notice of such
dispute and its basis in fact and law, and Buyer and Seller shall have thirty
(30) days after Buyer's receipt of Seller's notice to negotiate a resolution of
such dispute, which shall be evidenced in a written agreement signed by Buyer
and Seller. If Buyer and Seller are unable to settle such dispute within such
period, either Buyer or Seller will have the right, exercisable during the next
thirty (30) day period, to refer the dispute to arbitration pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. If no such
referral is made within the thirty (30) day period, the dispute shall be deemed
to have been conclusively resolved in favor of the Buyer. If the dispute is
referred to arbitration, each of (i) Buyer and (ii) Seller shall within thirty
(30) days after the date of the referral, designate one arbitrator, and the two
arbitrators shall select a third arbitrator, and the decision of a majority of
the arbitrators shall be final and binding upon the parties to the arbitration
and such decision may be enforced by a court of competent jurisdiction.
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The decision of the arbitrators shall be in writing and shall be delivered
within thirty days after the parties to the arbitration have been afforded an
opportunity to present evidence and examine and cross-examine witnesses before
the arbitrators. Buyer and Seller shall each pay one half of the arbitrators'
fees and expenses.
11.9 Third-Party Claims.
Promptly after receipt by a Person entitled to indemnity under Section
11.2, 11.3, or 11.4 (an "Indemnified Person") of notice of the assertion of a
Third-Party Claim against it, such Indemnified Person shall give notice to the
Person obligated to indemnify under such Section (an "Indemnifying Person") of
the assertion of such Third-Party Claim, provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party Claim is
prejudiced by the Indemnified Person's failure to give such notice.
If an Indemnified Person gives notice to the Indemnifying Person
pursuant to Section 11.9 of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes (unless (i) the Indemnifying
Person is also a Person against whom the Third-Party Claim is made and the
Indemnified Person determines in good faith that joint representation would be
in appropriate or (ii) the Indemnifying Person fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to defend such
Third-Party Claim and provide indemnification with respect to such Third-Party
Claim), to assume the defense of such Third-Party Claim with counsel reasonably
satisfactory to the Indemnified Person. After notice from the Indemnifying
Person to the Indemnified Person of its election to assume the defense of such
Third-Party Claim, the Indemnifying Person shall not, so long as it diligently
conducts such defense, be liable to the Indemnified Person under this Article 11
for any fees of other counsel or any other expenses with respect to the defense
of such Third-Party Claim, in each case subsequently incurred by the Indemnified
Person in connection with the defense of such Third-Party Claim. If the
Indemnifying Person assumes the defense of a Third-Party Claim, (i) such
assumption will conclusively establish for purposes of this Agreement that the
claims made in that Third-Party Claim are within the scope of and subject to
indemnification, provided, however, that the right of the Indemnifying Person to
contest the right of the Indemnified Person to indemnification with respect to
Third-Party Claims arising under Section 11.3 or 11.4(g) of the Agreement shall
not be extinguished until thirty (30) days after the assumption, and (ii) no
compromise or settlement of such Third-Party Claims may be effected by the
Indemnifying Person without the Indemnified Person's Consent unless (A) there is
no finding or admission of any violation of Legal Requirement or any violation
of the rights of any Person, (B) the sole relief provided is monetary damages
that are paid in full by the Indemnifying Person, and (C) the Indemnified Person
shall have no liability with respect to any compromise or settlement of such
Third-Party Claims effected without its Consent. If notice is given to an
Indemnifying Person of the assertion of any Third-Party Claim and the
Indemnifying Person does not, within ten (10) days after the Indemnified
Person's notice is given, give notice to the Indemnified Person of its election
to assume the defense of such Third-Party Claim, the Indemnifying Person will be
bound by any determination made in such Third-Party Claim or any compromise or
settlement effected by the Indemnified Person.
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Notwithstanding the foregoing, if an Indemnified Person determines in
good faith that there is a reasonable probability that a Third-Party Claim may
adversely affect it or its Related Persons other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the Indemnified Person may, by notice to the Indemnifying Person, assume the
exclusive right to defend, compromise or settle such Third-Party Claim, but the
Indemnifying Person will not be bound by any determination of any Third-Party
Claim so defended for the purposes of this Agreement or any compromise or
settlement effected without its Consent (which may not be unreasonably withheld,
delayed or conditioned).
Notwithstanding the provisions of Section 13.4, each of Buyer and Seller
hereby consents to the nonexclusive jurisdiction of any court in which a
Proceeding in respect of a Third-Party Claim is brought against any Indemnified
Person for purposes of any claim that a Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein and
agree that process may be served on such party with respect to such a claim
anywhere in the world.
With respect to any Third-Party Claim subject to indemnification under
this Article 11: (i) both the Indemnified Person and the Indemnifying Person, as
the case may be, shall keep the other Person fully informed of the status of
such Third-Party Claim and any related Proceedings at all stages thereof where
such Person is not represented by its own counsel, and (ii) the parties agree
(each at its own expense) to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other
in order to ensure the proper and adequate defense of any Third-Party Claim.
With respect to any Third-Party Claim subject to indemnification under
this Article 11, the parties agree to cooperate in such a manner as to preserve
in full (to the extent possible) the confidentiality of all Confidential
Information and the attorney-client and work-product privileges. In connection
therewith, each party agrees that: (i) it will use its Best Efforts, in respect
of any Third-Party Claim in which it has assumed or participated in the defense,
to avoid production of Confidential Information (consistent with applicable law
and rules of procedure), and (ii) all communications between any party hereto
and counsel responsible for or participating in the defense of any Third-Party
Claim shall, to the extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.
11.10 Direct Claims. If an Indemnified Person may have a claim under
Section 11.2 or 11.4 other than a Third Party Claim (a "Direct Claim"), the
Indemnified Person shall provide written notice to the Indemnifying Person of
such Direct Claim promptly after such Direct Claim becomes known to the
Indemnified Person. A delay in giving such notice shall relieve the Indemnifying
Person of liability for the Direct Claim only to the extent Indemnifying Person
suffers actual prejudice because of delay. Upon receipt of notice of the Direct
Claim, the Indemnified Party and Indemnifying Person shall in good faith
promptly seek to resolve such Direct Claim. If the Parties cannot resolve the
Direct Claim within sixty (60) days following receipt of the notice of Direct
Claim, the Indemnified Person or Indemnified Person may elect to enforce their
rights under this Agreement
11.11 Insurance; Tax. Any indemnification shall be (i) net of any
reasonably anticipated federal or state income tax benefit specifically arising
from the facts or circumstances
83
giving rise to the Damages, realizable by the Indemnified Person by a reduction
in Taxes payable, or by the receipt of a refund of Taxes, by the Indemnified
Person (or such Affiliate); and (ii) net of any amounts recovered or recoverable
from any surety, insurance carrier or third party obligor, including any
customer (and shall not include the cost of maintaining any surety or insurance
policies). The Indemnified Party shall submit in a timely manner to any
applicable surety, insurance carrier or third party obligor, including any
customer, all claims for indemnifiable Damages for which it is reasonably likely
that such entity would have a payment obligation to any such indemnified party
(or its predecessors) and the indemnifying party shall be subrogated to the
rights of such Indemnified Person to claim against such surety, insurance
carrier or third party; provided, however, that any failure to collect any such
amounts shall not constitute a defense to an obligation to indemnify for any
such Damages. Any Tax benefit shall be determined in good faith by the
independent public accountants of the indemnified party and shall apply to the
earliest year reasonably permissible.
11.12 Limitation on Consequential Damages. Neither Buyer nor Seller
shall be entitled to indemnification under this Article 11 for Consequential
Damages related to Direct Claims. If a Third Party Claim includes claims by the
third party for Consequential Damages, the Indemnifying Person shall indemnify
and hold Indemnified Person harmless against the claims for Consequential
Damages but only to the extent actually paid to the third party by the
Indemnified Person pursuant to a non-appealable final Order
11.13 Payment of Claims. After (i) any Order of a Governmental
Authority that is non-appealable (or for which the time for appeal has passed)
shall have been entered with respect to a Direct Claim or Third Party Claim, or
(ii) the Indemnified Person and Indemnifying Person shall have agreed to a
mutually binding settlement with respect to a Direct Claim or Third Party Claim,
the Indemnified Person shall give the Indemnifying Person notice of any amount
payable by the Indemnifying Person to the Indemnified Person pursuant to this
Agreement, and the Indemnifying Person shall pay such amount by wire transfer to
the Indemnified Person within five Business Days after receipt of such notice.
11.14 Exclusive Means. Except for claims alleging fraud, this Section
11 provides the exclusive means by which Seller or Buyer may assert claims for
indemnification.
11.15 Indemnification in Case of Strict Liability or Indemnitee
Negligence. THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE 11 SHALL BE
ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR
FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE
BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY
AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND
REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION
IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE
NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT
STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
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11.16 Facility Lease. The various temporal and monetary limitations
disclosed in Sections 11.4, 11.5, 11.6 and 11.7 shall not apply to any claim
(whether or not for Damages) asserted by Buyer (as tenant) or Seller (as
landlord) in connection with any breach or alleged breach of any representation,
warranty, covenant, or promises contained in the Facility Lease.
12. CONFIDENTIALITY.
12.1 Definition of Confidential Information.
As used in this Article 12, the term "Confidential Information" includes
any and all of the following information of Seller or Buyer that has been or
hereafter may be disclosed in any form, whether in writing, orally,
electronically or otherwise, or otherwise made available by observation,
inspection or otherwise by either party (Buyer on the one hand or Seller on the
other hand) or its Representatives (collectively, a "Disclosing Party") to the
other party or its Representatives (collectively, a "Receiving Party"):
(i) all information that is a trade secret under
applicable trade secret or other law;
(ii) all information concerning product
specifications, data, know-how, formulae,
compositions, processes, designs, sketches,
photographs, graphs, drawings, samples,
inventions and ideas, past, current and planned
research and development, current and planned
manufacturing or distribution methods and
processes, customer lists, current and
anticipated customer requirements, price lists,
market studies, business plans, computer
hardware, Software and computer software and
database technologies, systems, structures and
architectures;
(iii) all information concerning the business and
affairs of the Disclosing Party (which includes
historical and current financial statements,
financial projections and budgets, tax returns
and accountants' materials, historical, current
and projected sales, capital spending budgets
and plans, business plans, strategic plans,
marketing and advertising plans, publications,
client and customer lists and files, contracts,
the names and backgrounds of key personnel and
personnel training techniques and materials,
however documented), and all information
obtained from review of the Disclosing Party's
documents or property or discussions with the
Disclosing Party regardless of the form of the
communication; and
(iv) all notes, analyses, compilations, studies,
summaries and other material prepared by the
Receiving Party to the extent containing or
based, in whole or in part, upon any information
included in the foregoing.
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Any trade secrets of a Disclosing Party shall also be entitled to all of
the protections and benefits under applicable trade secret law and any other
applicable law. If any information that a Disclosing Party deems to be a trade
secret is found by a court of competent jurisdiction not to be a trade secret
for purposes of this Article 12, such information shall still be considered
Confidential Information of that Disclosing Party for purposes of this Article
12 to the extent included within the definition. In the case of trade secrets,
each of Buyer and Seller hereby waives any requirement that the other party
submit proof of the economic value of any trade secret or post a bond or other
security.
12.2 Restricted Use of Confidential Information.
Each Receiving Party acknowledges the confidential and proprietary
nature of the Confidential Information of the Disclosing Party and agrees that
such Confidential Information (i) shall be kept confidential by the Receiving
Party, (ii) shall not be used for any reason or purpose other than to evaluate
and consummate the Contemplated Transactions and (iii) without limiting the
foregoing, shall not be disclosed by the Receiving Party to any Person, except
in each case as otherwise expressly permitted by the terms of this Agreement or
with the prior written consent of an authorized representative of Seller with
respect to Confidential Information of Seller (each, a "Seller Contact") or an
authorized representative of Buyer with respect to Confidential Information of
Buyer (each, a "Buyer Contact"). Each of Buyer and Seller shall disclose the
Confidential Information of the other party only to its Representatives who
require such material for the purpose of evaluating the Contemplated
Transactions and are informed by Buyer or Seller, as the case may be, of the
obligations of this Article 12 with respect to such information. Each of Buyer
and Seller shall use their Best Efforts to enforce the terms of this Article 12
as to its respective Representatives.
Seller shall maintain as confidential any Confidential Information
(including for this purpose any information of Seller of the type referred to in
Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) of the
Seller relating to any of the Assets or the Assumed Liabilities. Notwithstanding
the preceding sentence, Seller may use any Confidential Information of Seller
before the Closing in the Ordinary Course of Business in connection with the
transactions permitted by Section 5.2.
From and after the Closing, the provisions of Section 12.2(a) above
shall not apply to or restrict in any manner Buyer's use of any Confidential
Information of the Seller relating to any of the Assets or the Assumed
Liabilities.
12.3 Exceptions. Sections 12.2(a) and (b) do not apply to that part
of the Confidential Information of a Disclosing Party that a Receiving Party
demonstrates (a) was, is or becomes generally available to the public other than
as a result of a breach of this Article 12 or the Confidentiality Agreement by
the Receiving Party or its Representatives, (b) was or is developed by the
Receiving Party independently of and without reference to any Confidential
Information of the Disclosing Party or (c) was, is or becomes available to the
Receiving Party on a nonconfidential basis from a Third Party not bound by a
confidentiality agreement or any legal, fiduciary or other obligation
restricting disclosure. Seller shall not disclose any Confidential Information
of Seller relating to any of the Assets or the Assumed Liabilities in reliance
on the exceptions in clauses (b) or (c) above.
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12.4 Legal Proceedings. If a Receiving Party becomes compelled in any
Proceeding or is requested by a Governmental Body having regulatory jurisdiction
over the Contemplated Transactions to make any disclosure that is prohibited or
otherwise constrained by this Article 12, that Receiving Party shall provide the
Disclosing Party with prompt notice of such compulsion or request so that it may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions of this Article 12. In the absence of a
protective order or other remedy, the Receiving Party may disclose that portion
(and only that portion) of the Confidential Information of the Disclosing Party
that, based upon advice of the Receiving Party's counsel, the Receiving Party is
legally compelled to disclose or that has been requested by such Governmental
Body, provided, however, that the Receiving Party shall use reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded by any
Person to whom any Confidential Information is so disclosed. The provisions of
this Section 12.4 do not apply to any Proceedings between the parties to this
Agreement.
12.5 Return or Destruction of Confidential Information. If this
Agreement is terminated, each Receiving Party shall (a) destroy all Confidential
Information of the Disclosing Party prepared or generated by the Receiving Party
without retaining a copy of any such material, (b) promptly deliver to the
Disclosing Party all other Confidential Information of the Disclosing Party,
together with all copies thereof, in the possession, custody or control of the
Receiving Party with all copies thereof, in the possession, custody or control
of the Receiving Party or, alternatively, with the written consent of a Seller
Contact or a Buyer Contact (whichever represents the Disclosing Party) destroy
all such Confidential Information and (c) certify all such destruction in
writing to the Disclosing Party, provided, however, that the Receiving Party may
retain a list that contains general descriptions of the information it has
returned or destroyed to facilitate the resolution of any controversies after
the Disclosing Party's Confidential Information is returned.
12.6 Attorney-Client Privilege. The Disclosing Party is not waiving,
and will not be deemed to have waived or diminished, any of its attorney work
product protections, attorney-client privileges or similar protections and
privileges as a result of disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party, regardless of whether the Disclosing Party has asserted, or is
or may be entitled to assert, such privileges and protections. The parties (a)
share a common legal and commercial interest in all of the Disclosing Party's
Confidential Information that is subject to such privileges and protections, (b)
are or may become joint defendants in Proceedings to which the Disclosing
Party's Confidential Information covered by such protections and privileges
relates, (c) intend that such privileges and protections remain intact should
either party become subject to any actual or threatened Proceeding to which the
Disclosing Party's Confidential Information covered by such protections and
privileges relates and (d) intend that after the Closing the Receiving Party
shall have the right to assert such protections and privileges. No Receiving
Party shall admit, claim or contend, in Proceedings involving either party or
otherwise, that any Disclosing Party waived any of its attorney work-product
protections, attorney-client privileges or similar protections and privileges
with respect to any information, documents or other material not disclosed to a
Receiving Party due to the Disclosing Party disclosing its Confidential
Information (including Confidential Information related to pending or threatened
litigation) to the Receiving Party.
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12.7 Tax Disclosure. Notwithstanding anything in this Section 12 to
the contrary, each party to the transactions contemplated herein (and each
Affiliate and person acting on behalf of any such party) agree that each party
(and each employee, representative, and other agent of such party) may disclose
to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transactions contemplated herein and all materials of any
kind (including opinions or other tax analyses) that are provided to such party
or such person relating to such tax treatment and tax structure, except to the
extent necessary to comply with any applicable federal or state securities laws.
This authorization is not intended to permit disclosure of any other information
including (without limitation) (i) any portion of any materials to the extent
not related to the tax treatment or tax structure of the transaction, (ii) the
identities of participants or potential participants in the transaction, (iii)
the existence or status of any negotiations, (iv) any pricing or financial
information (except to the 3extent such pricing or financial information is
related to the tax treatment or tax structure of the transaction), or (v) any
other term or detail not relevant to the tax treatment or the tax structure of
the transactions contemplated herein.
13. GENERAL PROVISIONS.
13.1 Expenses. Except as otherwise provided in this Agreement, each
party to this Agreement will bear its respective fees and expenses incurred in
connection with the preparation, negotiation, execution and performance of this
Agreement and the Contemplated Transactions, including all fees and expense of
its Representatives.
13.2 Public Announcements. Except as required by Legal Requirement or
Governmental Body due to Parent's status as a publicly-traded company, any
public announcement, press release 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 determines. Except with the prior consent of
Buyer or as permitted by this Agreement, neither Seller nor any of its
Representatives shall disclose to any Person (a) the fact that any Confidential
Information of Seller has been disclosed to Buyer or its Representatives, that
Buyer or its Representatives have inspected any portion of the Confidential
Information of Seller, that any Confidential Information of Buyer has been
disclosed to Seller or its Representatives or that Seller or its Representatives
have inspected any portion of the Confidential Information of Buyer or (b) any
information about the Contemplated Transactions, including the status of such
discussions or negotiations, the execution of any documents (including this
Agreement) or any of the terms of the Contemplated Transactions or the related
documents (including this Agreement). Seller and Buyer will consult with each
other concerning the means by which Seller's employees, customers, suppliers and
others having dealings with Seller will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
13.3 Notices. All notices, Consents, waivers and other communications
required or permitted by this Agreement shall be in writing and shall be deemed
given to a party when (a) delivered to the appropriate address by hand or by
nationally recognized overnight courier service (costs prepaid), (b) sent by
facsimile or e-mail with confirmation of transmission by the transmitting
equipment or (c) received or rejected by the addressee, if sent by certified
mail, return receipt requested, in each case to the following addresses,
facsimile numbers or e-mail addresses and marked to the attention of the person
(by name or title) designated below (or to
88
such other address, facsimile number, e-mail address or person as a party may
designate by notice to the other parties):
Seller: Greenville Tube, LLC
c/o Chart Industries, Inc.
5885 Landerbrook Drive
Cleveland, OH 44124
Attention: Chief Financial Officer
Fax no.: 440-753-1491
E-mail address: michael.biehl@Chart-ind.com
With a mandatory copy to: Calfee, Halter & Griswold, LLP
800 Superior Avenue
Cleveland, OH 44114
Attention Thomas F. McKee, Esq.
Fax no.: 216-241-0816
E-mail address: tmckee@calfee.com
Buyer: GT Acquisition Company
c/o CFB Venture Fund III, L.P.
Eleven South Meramec, Suite 1430
St. Louis, Missouri 63105
Attention: Stephen B. Broun
Fax no.: 314-746-8739
E-mail address: steve.broun@capitalforbusiness.com
With a mandatory copy to: Husch & Eppenberger, LLC
190 Carondelet Plaza, Suite 600
St. Louis, Missouri 63105
Attention: James V. Stepleton, Esq.
Fax no.: 314-480-1505
E-mail address: james.stepleton@husch.com
13.4 Jurisdiction; Service of Process. Any Proceeding arising out of
or relating to this Agreement or any Contemplated Transaction may be brought in
the courts of the State of Delaware, County of New Castle or, if it has or can
acquire jurisdiction, in the United States District Court for the District of
Delaware, and each of the parties irrevocably submits to the exclusive
jurisdiction of each such court in any such Proceeding, waives any objection it
may now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the Proceeding shall be heard and determined only in any
such court and agrees not to bring any Proceeding arising out of or relating to
this Agreement or any Contemplated Transaction in any other court. The parties
agree that either or both of them may file a copy of this paragraph with any
court as written evidence of the knowing, voluntary and bargained agreement
between the parties irrevocably to waive any objections to venue or to
convenience of forum. Process in any Proceeding referred to in the first
sentence of this section may be served on any party anywhere in the world.
89
13.5 Enforcement of Agreement. The parties acknowledge and agree that
the other parties would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that any
Breach of this Agreement by such other parties could not be adequately
compensated in all cases by monetary damages alone. Accordingly, in addition to
any other right or remedy to which a party may be entitled, at law or in equity,
it shall be entitled to enforce any provision of this Agreement by a decree of
specific performance and to temporary, preliminary and permanent injunctive
relief to prevent Breaches or threatened Breaches of any of the provisions of
this Agreement, without posting any bond or other undertaking.
13.6 Waiver; Remedies Cumulative. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. Neither any
failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or any of 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 or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or any of the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of that party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
13.7 Entire Agreement and Modification. This Agreement supersedes all
prior agreements, whether written or oral, between the parties with respect to
its subject matter (including any letter of intent and any confidentiality
agreement between Buyer and Seller) and constitutes (along with the Disclosure
Schedule, Exhibits and other documents delivered pursuant to this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended,
supplemented, or otherwise modified except by a written agreement executed by
the party to be charged with the amendment.
13.8 Disclosure Schedule. The information in the Disclosure Schedule
constitutes (i) exceptions to particular representations, warranties, covenants
and obligations of Seller as set forth in this Agreement or (ii) descriptions or
lists of assets and liabilities and other items referred to in this Agreement.
If there is any inconsistency between the statements in this Agreement and those
in the Disclosure Schedule(other than an exception expressly set forth as such
in the Disclosure Schedule with respect to a specifically identified
representation or warranty), the statements in this Agreement will control. The
statements in the Disclosure Schedule relate only to the provisions in the
Section of this Agreement to which they expressly relate and not to any other
provision in this Agreement, provided that Seller may use cross references to
one section containing the original disclosure of a matter without repeating the
disclosure.
13.9 Assignments, Successors and No Third-Party Rights. Except as
otherwise provided in this Agreement no party may assign any of its rights or
delegate any of its
90
obligations under this Agreement without the prior written consent of the other
parties, except that either Buyer or Seller may assign any of its rights and
delegate any of its obligations under this Agreement to any of its Subsidiaries
and may collaterally assign its rights hereunder to any of its respective
financial institutions (and, without limiting the foregoing, Seller may
collaterally assign its rights hereunder to JPMorgan Chase Bank (including any
successors thereto), in its capacity as Administrative Agent under that certain
Credit Agreement dated as of April 12, 1999 between Chart Industries, Inc., the
Subsidiary Borrowers party thereto, the lenders party thereto and such
Administrative Agent for such lenders, as amended, restated, supplemented or
otherwise modified from time to time, or any refinancing thereof), provided that
no such permitted assignment shall release the assignor from its obligations and
liabilities hereunder. 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, except such rights
as shall inure to a successor or permitted assignee pursuant to this Section
13.9.
13.10 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.
13.11 Construction. The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Articles," "Sections," and "Parts" refer
to the corresponding Articles, Sections and Parts of this Agreement and the
Disclosure Letter.
13.12 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
13.13 Governing Law. This Agreement will be governed by and construed
under the laws of the State of Delaware without regard to conflicts-of-laws
principles that would require the application of any other law.
13.14 Execution of Agreement. 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. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.
[Remainder of this Page Intentionally Left Blank. Next Page is Signature Page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GT ACQUISITION COMPANY
By: /s/ Stephen B. Broun
-------------------------------
Name: Stephen B. Broun
Title: President
GREENVILLE TUBE, LLC
By: /s/ Michael F. Biehl
-------------------------------
Name: Michael F. Biehl
-----------------------------
Title: Assistant Secretary
----------------------------
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GUARANTY
1. Chart Industries, Inc. and Chart, Inc. (collectively, the
"Guarantor") hereby jointly and severally, unconditionally and irrevocably
guarantee to GT Acquisition Company ("GTAC") the punctual payment and
performance when due of the indebtedness and other obligations of Greenville
Tube, LLC ("GTLLC") to GTAC pursuant to the Asset Purchase Agreement between
GTAC and GTLLC to which this Guaranty is attached ("APA") and the Lease between
GTAC as lessee and GTLLC as lessor of real estate located in Clarksville,
Arkansas, dated the date of the APA (the "Lease" with such indebtedness and
obligations under the APA and Lease hereinafter referred to as "Obligations").
This Guaranty is a present and continuing guaranty of payment and not of
collectibility, and GTAC shall not be required to prosecute collection,
enforcement or other remedies against GTLLC before calling on Guarantor for
payment. If for any reason GTLLC shall fail or be unable to pay or perform,
punctually and fully, any of the Obligations it is required to satisfy in
accordance with the APA or Lease, Guarantor shall, jointly and severally with
GTLLC, be obligated to pay such obligations to GTAC in full immediately upon
demand. One or more successive actions may be brought against Guarantor, as
often as GTAC deems advisable, until all of the Obligations are paid and
performed in full. The Obligations, together with all other payment and
performance obligations of Guarantor hereunder are referred to herein as
"Guarantor's Obligations".
2. Guarantor agrees that performance of Guarantor's obligations
hereunder by Guarantor shall be a primary obligation, shall not be subject to
any counterclaim, set-off, abatement, deferment or defense based upon any claim
that any Guarantor may have against GTAC or any other person or entity, and
shall remain in full force and effect without regard to, and shall not be
released, discharged or affected in any way by, any circumstance or condition
(whether or not any Guarantor shall have any knowledge thereof), including
without limitation:
a. any lack of validity or enforceability of the APA or
Lease;
b. any termination, amendment, modification or other change
in the APA or Lease;
c. any failure, omission or delay on the part of GTLLC, any
Guarantor, or GTAC to conform or comply with any term of the APA or
Lease or any failure of GTAC to give notice of any event of default or
breach under the APA or Lease;
d. any waiver, compromise, release, settlement or extension
of time of payment or performance or observance of any of the
obligations or agreements contained in the APA or Lease;
e. any action or inaction by GTAC under or in respect of
the APA or Lease, any failure, lack of diligence, omission or delay on
the part of GTAC to enforce, assert or exercise any right, power or
remedy conferred on it in the APA or Lease, or any other action or
inaction on the part of GTAC;
f. any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition,
receivership, liquidation, marshalling of assets and liabilities or
similar events or proceedings with respect to GTLLC or Guarantor or any
of their respective property or creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding;
g. any merger or consolidation of GTLLC into or with any
entity, or any sale, lease or transfer of any of the assets of GTLLC or
Guarantor to any other person or entity;
h. any change in the ownership of GTLLC or any change in
the relationship between GTLLC or Guarantor or any termination of any
such relationship;
i. any release or discharge by operation of law of GTLLC or
Guarantor from any obligation or agreement contained in the APA or
Lease; or
j. any other occurrence, circumstance, happening or event,
whether similar or dissimilar to the foregoing and whether foreseen or
unforeseen, which otherwise might constitute a legal or equitable
defense or discharge of the liabilities of a guarantor or surety or
which otherwise might limit recourse against GTLLC or Guarantor to the
fullest extent permitted by law.
3. To the extent permitted by applicable law, Guarantor expressly
and unconditionally waives (i) notice of any of the matters referred to in
Section 2 above, (ii) all notices which may be required by statute, rule of law
or otherwise, now or hereafter in effect, to preserve intact any rights against
Guarantor, including, without limitation, any demand, presentment and protest,
proof of notice of non-performance or non-payment under the APA or Lease and
notice of any event of default or breach under or any failure on the part of
GTLLC or Guarantor to perform or comply with any covenant, agreement, term or
condition of the APA or Lease, (iii) any right to the enforcement, assertion or
exercise against GTLLC or Guarantor of any right or remedy conferred under the
APA or Lease, (iv) any requirement of diligence on the part of any person or
entity, (v) to the fullest extent permitted by law and except as otherwise
expressly provided in this Guaranty, the APA or Lease, any claims based on
allegations that GTAC has failed to act in a commercially reasonable manner or
failed to exercise GTAC's so-called obligation of good faith and fair dealing,
and (vi) any requirement to exhaust any remedies or to mitigate the damages
resulting from any default under the APA or Lease.
4. Until Guarantor's Obligations are paid in full and all periods
under applicable bankruptcy law for the contest of any payment by Guarantor or
GTLLC as a preferential or fraudulent payment have expired, each Guarantor
knowingly, and with advice of counsel, waives, relinquishes, releases and
abandons all rights and claims to indemnification, contribution, reimbursement,
subrogation and payment which any Guarantor may now or hereafter have by and
from GTLLC and the successors and assigns of GTLLC, for any payments made by
Guarantor to GTAC, including, without limitation, any rights which might allow
GTLLC, GTLLC's successors, a creditor of GTLLC, or a trustee in bankruptcy of
GTLLC to claim in bankruptcy or any other similar proceedings that any payment
made by GTLLC or GTLLC's successors and assigns to GTAC was on behalf of or for
the benefit of Guarantor and that such payment is recoverable by GTLLC, a
creditor or trustee in bankruptcy of GTLLC as a
preferential payment, fraudulent conveyance, payment of an insider or any other
classification of payment which may otherwise be recoverable from GTAC.
5. The obligations of Guarantor pursuant to this Guaranty shall
continue to be effective or automatically be reinstated, as the case may be, if
at any time payment of any of Guarantor's Obligations under this Guaranty is
rescinded or otherwise must be restored or returned by GTAC upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Guarantor or GTLLC
or otherwise, all as though such payment had not been made.
Dated: July 1, 2003. CHART INDUSTRIES, INC.
By: /s/ Michael F. Biehl
-----------------------------------
Name: Michael F. Biehl
Title: Chief Financial Officer and
Treasurer
CHART, INC.
By: /s/ Michael F. Biehl
-----------------------------------
Name: Michael F. Biehl
Title: Chief Financial Officer and
Treasurer