EXHIBIT 10.67
STOCK PURCHASE AGREEMENT
BY AND AMONG
PINNACLE WEST CAPITAL CORPORATION,
EL DORADO INVESTMENT COMPANY
AND
USEC INC.
DATED AS OF
JULY 29, 2004
TABLE OF CONTENTS
PAGE
Article 1 DEFINITIONS..................................................................1
1.1 Definitions..................................................................1
Article 2 SALE AND PURCHASE OF COMPANY SHARES.........................................11
2.1 Sale and Purchase of Company Shares.........................................11
2.2 Purchase Price..............................................................11
2.3 Preliminary Merger..........................................................11
2.4 Closing.....................................................................11
2.5 Closing Deliveries by the Seller Parties....................................11
2.6 Closing Deliveries by Purchaser.............................................13
2.7 Net Working Capital Determination...........................................14
Article 3 REPRESENTATIONS AND WARRANTIES REGARDING THE
SELLER PARTIES..............................................................15
3.1 Organization and Authority of the Seller Parties............................15
3.2 Authorization; Enforceability...............................................15
3.3 No Conflicts................................................................16
3.4 Brokers, Finders, etc.......................................................16
3.5 Solvency....................................................................16
3.6 Proceedings.................................................................16
Article 4 REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY AND THE SUBSIDIARY..................................................17
4.1 Organization and Authority of Company.......................................17
4.2 No Conflicts................................................................17
4.3 Notices and Consents........................................................18
4.4 Capitalization of the Company; Title to the Company Shares..................18
4.5 Capitalization of the Subsidiary; Title to the Subsidiary Shares............19
4.6 Financial Statements........................................................20
4.7 No Guarantees, Sureties, Indemnities........................................20
4.8 Books and Records...........................................................21
4.9 Taxes.......................................................................21
4.10 Absence of Changes; Absence of Undisclosed Liabilities......................23
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.11 Proceedings.................................................................24
4.12 Material Contracts..........................................................25
4.13 Insurance...................................................................27
4.14 Title to Assets.............................................................28
4.15 Sufficiency of Assets.......................................................28
4.16 Condition of Facilities and Equipment.......................................28
4.17 Accounts Receivables........................................................28
4.18 Accounts Payable............................................................29
4.19 Intellectual Property.......................................................29
4.20 Permits.....................................................................30
4.21 Environmental Matters.......................................................31
4.22 Compliance with Applicable Laws.............................................31
4.23 Employees...................................................................32
4.24 Benefit Plans...............................................................33
4.25 Customers and Suppliers.....................................................36
4.26 Affiliate Contracts.........................................................36
4.27 Bank Accounts...............................................................36
4.28 NRC Matters.................................................................37
4.29 New Technology..............................................................37
Article 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................37
5.1 Organization and Authority of Purchaser.....................................37
5.2 Authorization; Enforceability...............................................38
5.3 No Conflicts................................................................38
5.4 Notices and Consents........................................................38
5.5 Proceedings.................................................................38
5.6 Accredited Investor; Investment Intent......................................39
5.7 Non-Foreign Status..........................................................39
5.8 Brokers, Finders, etc.......................................................39
Article 6 COVENANTS OF THE PARTIES....................................................39
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.1 Conduct of Business.........................................................39
6.2 Further Assurances..........................................................41
6.3 Confidentiality; Announcements..............................................42
6.4 Tax Matters.................................................................43
6.5 Employment Matters..........................................................49
6.6 Payment of Company and Subsidiary Debt Obligations..........................49
6.7 No Solicitation.............................................................50
6.8 Non-Competition; No Solicitation of Employees...............................50
6.9 Termination of Affiliate Contracts..........................................51
6.10 Change of Control Arrangements..............................................51
6.11 Access to Company and Subsidiary Information................................51
6.12 Use of Company and Subsidiary Name After the Closing........................52
6.13 Parent Support Obligations..................................................52
Article 7 CONDITIONS FOR CLOSING......................................................53
7.1 Conditions to Obligations of the Seller Parties.............................53
7.2 Conditions to Obligations of Purchaser......................................53
Article 8 TERMINATION.................................................................55
8.1 Termination.................................................................55
8.2 Effect of Termination.......................................................56
Article 9 SURVIVAL AND INDEMNIFICATION................................................56
9.1 Survival....................................................................56
9.2 Indemnification By the Seller Parties.......................................56
9.3 Indemnification by Purchaser................................................57
9.4 Limitations on Indemnification Claims.......................................58
9.5 Timing of Indemnification Claims............................................59
9.6 Third-Party Claim Procedures................................................60
9.7 Reserve Indemnity...........................................................62
9.8 Exclusive Remedy............................................................62
Article 10 MISCELLANEOUS...............................................................62
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.1 Expenses....................................................................62
10.2 Specific Performance........................................................63
10.3 Severability................................................................63
10.4 Notices.....................................................................63
10.5 Dispute Resolution..........................................................64
10.6 Headings; Interpretation....................................................65
10.7 Entire Agreement............................................................65
10.8 Governing Law, etc..........................................................66
10.9 Binding Effect; Assignment..................................................66
10.10 No Third Party Beneficiaries................................................66
10.11 Amendment; Waivers, etc.....................................................66
10.12 Dates and Times.............................................................66
10.13 Joint Preparation...........................................................67
10.14 Limitation of Liability.....................................................67
10.15 Counterparts................................................................67
LIST OF EXHIBITS
Exhibit A Form of General Release
Exhibit B Form of Right-to-Use Opinion
Exhibit C Form of Indemnification Agreement
Exhibit D Form of Retention/Confidentiality/Non-compete Agreement
iv
STOCK PURCHASE AGREEMENT
This
Stock Purchase Agreement (this "Agreement"), dated as of July 29,
2004, is made by and among PINNACLE WEST CAPITAL CORPORATION, an Arizona
corporation ("Parent"), EL DORADO INVESTMENT COMPANY, an Arizona corporation
("El Dorado" and, together with Parent, the "Seller Parties"), and
USEC INC., a
Delaware corporation ("Purchaser"). The Seller Parties and Purchaser are
sometimes referred to herein collectively as the "Parties" and each individually
as a "Party".
RECITALS
A. Parent is the legal and beneficial owner of one hundred
percent (100%) of the issued and outstanding shares of capital stock of El
Dorado. El Dorado is the legal and beneficial owner of 1,051,439,075 shares of
Class A Common Stock of NAC Holding Inc., a
Delaware corporation (including any
successor thereto, the "Company"), which shares constitute ninety-nine point
seventy-six percent (99.76%) of the issued and outstanding shares of capital
stock of the Company. The Company is the legal and beneficial owner of 1,100,100
shares of common stock, par value $0.01 per share (the "Subsidiary Shares"), of
NAC International Inc., a
Delaware corporation (the "Subsidiary"), which shares
constitute all of the issued and outstanding shares of capital stock of the
Subsidiary.
B. The Seller Parties wish to cause El Dorado to sell, and
Purchaser wishes to purchase from El Dorado, all of the issued and outstanding
shares of capital stock of the Company for the consideration and on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, and warranties herein contained, and on the terms and subject
to the conditions herein set forth, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Except as otherwise expressly provided in this
Agreement, or unless the context otherwise requires, whenever used in this
Agreement (including in the Schedules), the following terms will have the
respective meanings indicated below.
"Additional Reserves" has the meaning set forth in Section
9.7.
"Adjustment Notice" has the meaning set forth in Section
2.7(b).
"Affiliate" of a Person means a Person that, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, the first Person. For purposes of
this definition, "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Affiliated Group" means any affiliated group within Code
Section 1504(a) or any similar group defined under a similar provision
of any other Applicable Law which includes Parent or any of its
Affiliates (other than the Company and the Subsidiary).
"Agreement" means this Agreement, including the Schedules and
Exhibits hereto, as may be amended from time to time in accordance with
the provisions hereof.
"Applicable Law" means, with respect to any Person, any
constitution, treaty, statute, law (including common law), rule,
regulation, ordinance, code, Governmental Approval, or any order,
decision, injunction, judgment, award or decree of any Governmental
Authority, in any such case to the extent applicable to such Person or
any of its Affiliates or any of their respective assets and/or
businesses.
"APS" means Arizona Public Service Company.
"APS Agreement" has the meaning set forth in Section 6.13(b).
"Benefit Plan" means each Employee Plan (expressly including
the Employment Contracts) sponsored, maintained or contributed to or
required to be contributed to by the Company or the Subsidiary or any
ERISA Affiliate for the benefit of any Employee or any former employee
of the Company or the Subsidiary.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in Phoenix, Arizona or New York, New York are
permitted or required by Applicable Law to close.
"Claim Threshold" has the meaning set forth in Section 9.4.
"Claims Period" has the meaning set forth in Section 9.5.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in Recital A to this
Agreement.
"Company Required Consents" has the meaning set forth in
Section 4.3.
"Company Shares" has the meaning set forth in Section 2.3.
"Consent" means any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption,
certificate, declaration or order of, or any registration or filing
with, any Person, including any Governmental Authority.
"Customary License Arrangements" means a non-exclusive royalty
free license (or sublicense) appearing as an incidental feature in a
contract for the sale of goods or the performance of consulting or
development services in the ordinary course of the
2
licensor's business, permitting the use of the licensed Intellectual
Property for: (i) using or maintaining the goods and services which are
the subject of the contract and delivered by the licensor under such
contract, (ii) exercising rights of ownership in work product produced
by the licensor under such contract, and/or (iii) enabling a
Governmental Authority to reproduce, prepare derivative works, perform
and/or display publicly copyrighted data or Software first produced by
the licensor in the performance of a contract with the Governmental
Authority. In no event will any contract that includes the transfer of
ownership or the exclusive license of any Intellectual Property rights
be considered a "Customary License Arrangement."
"Determination Date" has the meaning set forth in Section
2.7(d).
"DOE" means the United States Department of Energy.
"Effective Time" means 11:59 p.m. (New York, New York time) on
the date immediately preceding the Closing Date.
"El Dorado" has the meaning set forth in the introductory
paragraph on page 1 of this Agreement.
"Employee" has the meaning set forth in Section 4.23(a).
"Employee Plan" means each employee benefit plan (within the
meaning of Section 3(3) of ERISA) and each other employment, fringe
benefit, or other retirement, bonus, deferred or incentive compensation
plan, program, arrangement or agreement sponsored, maintained or
contributed to or required to be contributed to by the Company or the
Subsidiary or any ERISA Affiliate for the benefit of any current or
former employee or director of the Company or the Subsidiary or any
ERISA Affiliate.
"Employment Contracts" has the meaning set forth in Section
4.23(c).
"Environmental Laws" mean all Applicable Laws, regulations,
standards, requirements, ordinances, policies, guidelines, orders,
approvals, notices, Permits or directives, or parts thereof, pertaining
to environmental or occupational health and safety matters, in effect
as at the date hereof, including laws and regulations relating to
Releases or threatened Releases of Hazardous Substances, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances or
containers or casks containing Hazardous Substances or otherwise
subject to any such laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, that together with the Company or the Subsidiary is or
ever was deemed a "single employer" within the meaning of Section
4001(b)(1) of ERISA or Section 414 of the Code.
3
"Estimated Working Capital Adjustment" has the meaning set
forth in Section 2.7(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements" has the meaning set forth in Section
4.6(a).
"GAAP" means generally accepted accounting principles as in
effect in the United States of America as determined by the Financial
Accounting Standards Board from time to time applied on a consistent
basis as of the date of any application thereof.
"Governmental Approval" means any Consent of, with, or from
any Governmental Authority.
"Governmental Authority" means any nation or government,
including any foreign nation or government, any state, province,
county, municipality or other political subdivision thereof, any entity
(including but not limited to the International Atomic Energy Agency
and the European Union and its institutions and communities) exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any registrar of
Intellectual Property (whether technically governmental or not) and
including any government authority, agency, department, board,
commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, any court, tribunal
or arbitrator(s) of competent jurisdiction, any self-regulatory
organization (including the New York Stock Exchange) or any Indian
tribal authority.
"Government Contract" has the meaning set forth in Section
4.12(c).
"Hazardous Substance" means any substance that: (i) is or
contains asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum or petroleum-derived substances or wastes, radon
gas or related materials, (ii) requires investigation, removal or
remediation or for which there are restrictions pursuant to any
Environmental Law regarding its use or disposal, under any
Environmental Law, or is defined, listed or identified as a "hazardous
waste," "toxic substance," "toxic material," "pollutant," "hazardous
substance" or the like, or (iii) is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority or
Environmental Law.
"Indemnification Agreement" has the meaning set forth in
Section 6.13(a).
"Indemnitee" has the meaning set forth in Section 9.6(a).
"Indemnitor" has the meaning set forth in Section 9.6(a).
"Indemnity Payment" has the meaning set forth in Section
6.13(a).
"Independent Accountants" has the meaning set forth in Section
2.7(c).
4
"Independent Firm" has the meaning set forth in Section
6.4(m).
"Initial Termination Date" has the meaning set forth in
Section 8.1(b).
"Intellectual Property" means trademarks, service marks, trade
names, Internet domain names, designs, logos, slogans, and general
intangibles of like nature, together with all goodwill associated with,
and all registrations and applications for, any of the foregoing;
patents and industrial designs (including any continuations,
divisionals, continuations-in-part, renewals, reissues, and
applications for any of the foregoing); copyrights (including
copyrights in Software and databases and any registrations and
applications for any of the foregoing); mask works (as defined under 17
U.S.C. Section 901) and any registrations and applications for mask
works; trade secrets, know-how, proprietary processes, formulae,
algorithms, models, and methodologies (collectively, trade secrets);
and rights of publicity relating to the use of the names, likenesses,
voices, signatures and biographical information of real persons.
"IRS" means the Internal Revenue Service.
"Knowledge" means:
(a) when used to qualify a representation, warranty or
other statement of the Seller Parties contained herein, the actual,
direct and personal knowledge, after reasonable inquiry by them of
Persons whom they believe, in good faith, to be the Persons generally
responsible for the subject matters to which the knowledge is pertinent
as of the date of inquiry, of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Chief Executive Officer
of the Company), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Chief Financial Officer of the
Company), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Vice President, Business Operations of the
Subsidiary), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (General Counsel and Corporate
Secretary of the Company), ▇▇▇▇ ▇▇▇▇ (Vice President of Projects and
Site Transportation Services of the Subsidiary), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
(Vice President, Marketing and Business Development of the Subsidiary),
▇▇▇▇▇▇ ▇▇▇▇▇▇ (Vice President, Engineering of the Subsidiary), ▇▇▇
▇▇▇▇▇▇▇ (Vice President, Consulting of the Subsidiary) and/or ▇▇▇▇ ▇.
▇▇▇▇ (Venture Investments Manager of El Dorado), whom the Seller
Parties reasonably believe in good faith to be the individuals
generally responsible for the matters in respect of which the Seller
Parties' or the Company's "Knowledge" is referenced herein;
(b) when used to qualify a representation, warranty or
other statement of Purchaser, the actual, direct and personal
knowledge, after reasonable inquiry by them of Persons whom they
believe, in good faith, to be the Persons generally responsible for the
subject matters to which the knowledge is pertinent as of the date of
inquiry, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (President and Chief Executive Officer
of Purchaser) and/or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Senior Vice President, General
Counsel and Secretary of Purchaser), whom Purchaser reasonably believes
in good faith to be the individuals generally responsible for the
matters in respect of which Purchaser's "Knowledge" is referenced
herein; and
(c) all references to the Knowledge of the Seller Parties
shall include the Knowledge of the Company and the Knowledge of the
Subsidiary.
5
"Liability" means, 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.
"Lien" means any mortgage, deed of trust, pledge, lien,
charge, hypothecation, security interest, encumbrance, adverse right,
interest or claim, lease, sublease, license, easement, right of way,
covenant, encroachment, title defect, option, right of first refusal,
proxy, voting trust or agreement or other restriction or limitation of
any nature whatsoever.
"Loss" and "Losses" have the meanings set forth in Section
9.2.
"Maine Yankee Guarantee" has the meaning set forth in Section
6.13(b).
"Material Adverse Effect" means a material adverse effect on
the assets, business, properties, condition (financial and otherwise),
prospects or the results of operations of the Company and the
Subsidiary, taken as a whole, or on the ability of the Seller Parties
to consummate the transactions contemplated by this Agreement;
provided, however, that the following will not be considered when
determining whether a Material Adverse Effect has occurred: (i) any
general social, political or economic condition or event, the effects
of which are not specific or unique to the Company or the Subsidiary or
the industry in which either operates, including stock market
fluctuations, acts of war or terrorism, or the consequences of any of
the foregoing; (ii) any change in the general conditions of the
industry in which the Company or the Subsidiary operates that is not
disproportionately adverse to the Company and the Subsidiary; (iii) any
change in currency exchange rates or interest rates; or (iv) any change
in Applicable Law that is not disproportionately adverse to the Company
and the Subsidiary.
"Material Contracts" has the meaning set forth in Section
4.12.
"Minority Shareholders" has the meaning set forth in Section
2.3.
"Net Working Capital" means the amount, as of the Effective
Time, by which (i) the sum of (A) cash and cash equivalents of the
Company and/or the Subsidiary (whether on-hand, in bank or other
financial institution accounts of the Company, the Subsidiary, or any
Affiliate thereof, or held as deposits by Third Parties) (which are
generally categorized as "Cash" on the Company's and/or the
Subsidiary's internal financial statements) (excluding any amounts paid
or payable in respect of the Seller Parties' obligations pursuant to
Section 6.6), (B) any and all accounts receivable of the Company and/or
the Subsidiary from current or former customers and other amounts
receivable of the Company and/or the Subsidiary (which are generally
categorized as "A/R-Trade" and "A/R-Other" on the Company's and/or the
Subsidiary's internal financial statements), (C) unbilled amounts that
will be payable by customers of the Company and/or the Subsidiary for
goods or services provided or performed by the Company and/or the
6
Subsidiary before the Effective Time upon issuance of invoice therefor
(which are generally categorized as "A/R-Rev in Excess of ▇▇▇▇▇▇▇▇" on
the Company's and/or the Subsidiary's internal financial statements),
and (D) prepaid expenses of the Company and/or the Subsidiary (which
are generally categorized as "Prepaid Expenses" on the Company's and/or
the Subsidiary's internal financial statements), exceed (ii) the sum of
(W) the trade and vendor accounts payable of the Company and/or the
Subsidiary (which are generally categorized as "Accounts Payable" on
the Company's and/or the Subsidiary's internal financial statements),
excluding any amounts owed to Seller Parties or any of their Affiliates
(other than APS), (X) all deposits, credits and other prepayments
received by the Company and/or the Subsidiary before the Effective Time
for goods to be provided or services to be performed by the Company
and/or the Subsidiary after the Effective Time (which are generally
categorized as "Deferred Revenue" on the Company's and/or the
Subsidiary's internal financial statements), (Y) the current portion of
amounts related to capital leases (which are generally categorized as
"Capital Leases" on the Company's and/or the Subsidiary's internal
financial statements), and (Z) accrued expenses and other current
liabilities relating to the ongoing operation of the Company's and/or
the Subsidiary's business (which are generally categorized as "Accrued
Expenses & Other Liab" on the Company's and/or the Subsidiary's
internal financial statements), excluding from this clause (ii) any
amounts related to capital leases or long term indebtedness other than
as provided in (Y) above, excluding any amounts paid or payable in
respect of the Seller Parties' obligations pursuant to Section 6.6 and
further excluding any amounts owed to the Seller Parties or any of
their Affiliates (other than APS). Based on the foregoing formula, the
Net Working Capital may be a negative amount.
"New Cask Technology" has the meaning set forth in Section
4.29.
"NMMSS" has the meaning set forth in Section 7.2(i).
"NRC" means the U.S. Nuclear Regulatory Commission.
"Parent" has the meaning set forth in the introductory
paragraph on page 1 of this Agreement.
"Parent Group" means the Affiliated Group of which Parent is
the common parent as of the Closing Date.
"Parent Support Obligations" has the meaning set forth in
Section 6.13(a).
"Party" and "Parties" have the meanings set forth in the
introductory paragraph on page 1 of this Agreement.
"Permit" means, with respect to any Person, any license,
permit, registration, Consent, certificate (including any Certificate
of Compliance from the NRC), order, approval, security clearance or
other authorization required by any Governmental Authority for such
Person to lawfully (i) own, lease or use a particular asset, (ii)
occupy, access or use particular real property, or (iii) conduct its
business as presently conducted.
7
"Permitted Lien" means (i) any statutory Lien for Taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings and for which an appropriate reserve has been established
in accordance with GAAP and which is set forth on Schedule 4.14, (ii)
any Lien incurred or deposit made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security or to secure public or statutory obligations
that does not interfere with the present use of the relevant assets or
property, (iii) any mechanics', carriers', warehousemen's, workers',
repairers' and similar liens, arising in the ordinary course of
business by operation of Applicable Law with respect to a Liability
that is not yet due or delinquent or which is being contested in good
faith by appropriate proceedings and for which an appropriate reserve
has been established in accordance with GAAP and which is set forth on
Schedule 4.14, (iv) any imperfection or irregularity of title or other
Lien that, individually or in the aggregate, does not, or would not
reasonably be expected to, have a Material Adverse Effect or interfere
with the present use of the relevant assets or property, (v) zoning,
planning or other land use and environmental regulations by any
Governmental Authority, (vi) rights of setoff and banker's Liens with
respect to funds on deposit in a financial institution in the ordinary
course of business that do not interfere with the present use of such
funds, (vii) any other matter identified as a Permitted Lien on
Schedule 4.14, or (viii) any Lien to be released before or in
connection with the Closing and identified on Schedule 4.14.
"Person" means any natural person, firm, partnership,
association, corporation, company, limited liability company,
partnership, trust, business trust, Governmental Authority, or other
unincorporated entity or organization.
"Post-Closing Net Working Capital Determination" has the
meaning set forth in Section 2.7(b).
"Post-Closing Tax Period" means, collectively, (i) all taxable
periods beginning after the Closing Date, and (ii) the portion of any
Straddle Period after the Closing Date.
"Pre-Closing Tax Period" means, collectively, (i) all taxable
periods ending on or before the Closing Date, and (ii) the portion of
any Straddle Period through the end of the Closing Date.
"Preliminary Merger" has the meaning set forth in Section 2.3.
"Proceeding" means any action, arbitration, mediation, audit,
hearing, investigation, litigation or lawsuit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal,
and whether public or private) commenced, brought, conducted or heard
by or before, or otherwise involving, any Governmental Authority,
mediator or arbitrator.
"Proposed Acquisition Transaction" has the meaning set forth
in Section 6.7(a).
"Purchase Order" has the meaning set forth in Section 4.7.
"Purchase Price" has the meaning set forth in Section 2.2.
8
"Purchaser" has the meaning set forth in the introductory
paragraph on page 1 of this Agreement.
"Purchaser Indemnitees" has the meaning set forth in Section
9.2.
"Purchaser Required Consents" has the meaning set forth in
Section 5.4.
"Rejection Notice" has the meaning set forth in Section
2.7(b).
"Release" means any release, spill, emission, emptying,
leaking, injection, deposit, disposal, discharge, dispersal, leaching,
pumping, pouring or migration into the atmosphere, soil, surface water,
groundwater or otherwise onto, above or underneath any real property.
"Representatives" has the meaning set forth in Section 6.11.
"Reserve Amount" has the meaning set forth in Section 4.12(c).
"Reserve Excess" has the meaning set forth in Section 9.7.
"Reserve Shortfall" has the meaning set forth in Section 9.7.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Indemnitees" has the meaning set forth in Section 9.3.
"Seller Parties" has the meaning set forth in the introductory
paragraph on page 1 of this Agreement.
"Software" means (i) computer programs, including
implementation of algorithms, models, and methodologies, whether in
source code or object code form, (ii) electronic databases and
compilations of data, and (iii) documentation, including user manuals
and training materials, relating to any of the foregoing.
"Straddle Period" means any taxable period that includes, but
does not end on, the Closing Date.
"Subsidiary" has the meaning set forth in Recital A to this
Agreement.
"Subsidiary Shares" has the meaning set forth in Recital A to
this Agreement.
"Tax" means any federal, state, provincial, county, local,
municipal, foreign or other income, alternative, minimum, accumulated
earnings, personal holding company, franchise, capital stock, net
worth, capital, profits, windfall profits, gross receipts, value added,
privilege, sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental (including taxes under
Section 59A of the Code), real property, personal
9
property, transfer, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care, registration,
withholding, estimated recapture or other tax, duty, fee, levy, custom,
tariff, impost, obligation or other governmental charge or assessment
of any kind whatsoever or deficiencies thereof (including all interest
and penalties thereon and additions thereto whether disputed or not).
"Tax Claim" shall mean any claim with respect to Taxes made by
any Taxing Authority that, if pursued successfully, would reasonably be
expected to serve as the basis for a claim for indemnification under
Section 6.4(c).
"Tax Proceeding" has the meaning specified in Section
6.4(d)(ii).
"Tax Provisions" shall mean Section 4.9 and Section 6.4.
"Tax Return" means any return, report, declaration, election,
disclosure, estimate, form, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment, supplement or revocation thereof
permitted or required by a Taxing Authority relating to Taxes.
"Tax Sharing Agreements" has the meaning specified in Section
4.9(a)(v).
"Taxing Authority" shall mean any Governmental Authority
having or purporting to exercise jurisdiction with respect to any Tax.
"Third Party" means a Person that is not a Party or an
Affiliate of a Party, and is not acting in the capacity as agent for a
Party or any of its Affiliates.
"Third Party Claim" means any claim against any Indemnitee by
a Third Party, whether or not involving a Proceeding.
"Transfer Taxes" means any and all transfer, documentary,
sales, use, excise, stock, filing, permit, license, stamp,
registration, value added, recording, escrow and other similar Taxes
and fees (including any out-of-pocket filing expenses, penalties and
interest).
"Treasury Regulations" means the Treasury Regulations
promulgated under the Code, and the term "Treasury Regulation" followed
by a particular Section number reference means that particular section
or subsection of the Treasury Regulations.
"US Fire Indemnity Agreement" has the meaning set forth in
Section 6.13(b).
"WARN Act" has the meaning set forth in Section 4.23(e).
"Working Capital Adjustment" has the meaning set forth in
Section 2.7.
10
ARTICLE 2
SALE AND PURCHASE OF COMPANY SHARES
2.1 Sale and Purchase of Company Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller Parties
will cause El Dorado to sell, assign and transfer to Purchaser, and Purchaser
will purchase and acquire from El Dorado, all legal and beneficial right, title
and interest in and to the Company Shares, free and clear of any and all Liens.
2.2 Purchase Price. The purchase price for the Company Shares will
be cash in the amount of Sixteen Million and no/100 Dollars ($16,000,000.00),
subject to adjustment as determined pursuant to the provisions of Section 2.7
(as adjusted, the "Purchase Price"), payable by Purchaser to El Dorado upon the
terms and subject to the conditions of this Agreement.
2.3 Preliminary Merger. As promptly as practicable following the
execution of this Agreement, El Dorado will reorganize the ownership structure
of the Company pursuant to a short-form merger under
Delaware law (the
"Preliminary Merger") pursuant to which the Company will be merged with a
wholly-owned subsidiary of El Dorado organized for the sole purpose of
effectuating the Preliminary Merger, with the Company being the surviving
entity. Prior to executing and filing any documents necessary or advisable to
effect the Preliminary Merger, the Seller Parties shall provide Purchaser
reasonable opportunity to comment thereon. In connection with the Preliminary
Merger, each record holder of outstanding shares of capital stock of the
Company, other than El Dorado (collectively, the "Minority Shareholders"), will
have his, her or its shares of such stock converted into a right to receive a
specified cash payment from El Dorado. Immediately after giving effect to the
Preliminary Merger, El Dorado will be the legal and beneficial owner of all of
the issued and outstanding shares of capital stock of the post-merger Company
(the "Company Shares"). The Seller Parties will cause to be cancelled all
outstanding warrants issued by the Company and held by the Seller Parties for
the purchase of shares of capital stock of the Company. The Seller Parties agree
that the Minority Shareholders shall be entitled to appraisal rights pursuant to
Section 262 of the
Delaware General Corporation Law, and the Seller Parties
agree that they shall be solely liable for any payments required in connection
therewith, as well as all other costs and Liabilities in connection with the
Preliminary Merger.
2.4 Closing. Upon the terms and subject to the conditions hereof,
the closing of the sale and purchase of the Company Shares as provided herein
(the "Closing") will take place at 10:00 a.m. local time on the second (2nd)
Business Day following the satisfaction or waiver (subject to Applicable Law) of
the conditions precedent specified in Article 7 (other than those conditions
that by their nature are to be fulfilled only at the Closing, but subject to the
fulfillment or waiver (subject to Applicable Law) of such conditions) (the
"Closing Date"), at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., One Arizona Center,
400 ▇. ▇▇▇ ▇▇▇▇▇, Phoenix, Arizona, or at such other time and place as the
Parties may agree in writing.
2.5 Closing Deliveries by the Seller Parties. At the Closing, the
Seller Parties will deliver or cause to be delivered to Purchaser the following:
11
(a) a Certificate of Good Standing of the Company
(post-Preliminary Merger) issued by the
Delaware Secretary of State
dated not more than ten (10) days before the Closing Date;
(b) a Certificate of Good Standing of the Subsidiary
issued by the
Delaware Secretary of State and a Certificate of Good
Standing of the Subsidiary issued by the applicable corporate
regulatory authority for the State of Georgia, each dated not more than
ten (10) days before the Closing Date;
(c) certificates from public officials as to the good
standing or similar qualification of the Company and the Subsidiary to
do business as a foreign corporation in each and every state where the
Company or the Subsidiary is so qualified;
(d) a copy, certified by an executive officer of El
Dorado, of resolutions of the directors of El Dorado authorizing and
approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(e) separate certificates of each Seller Party, each in
form and substance satisfactory to Purchaser (acting reasonably) duly
executed by an executive officer of such Seller Party, on behalf of
such Seller Party and not in such officer's personal capacity,
certifying that (i) the conditions for Closing set forth in Section
7.2(a) and Section 7.2(b) have been fulfilled and (ii) each of such
Seller Party's conditions for Closing as set forth in Section 7.1 has
been satisfied or waived;
(f) copies of all written Company Required Consents;
(g) evidence of the discharge of Liens on the Company
Shares, the Subsidiary Shares and the assets of the Company and the
Subsidiary, other than Permitted Liens;
(h) the stock certificates representing the Company
Shares, together with one or more stock powers duly executed in blank
sufficient to vest in Purchaser good title to the Company Shares;
(i) the stock certificates representing the Subsidiary
Shares duly registered to the Company;
(j) written resignations of the Company's and the
Subsidiary's directors and, to the extent specified by Purchaser in
writing, written resignations of (or, if any such officer fails to
resign, evidence of the termination of) the Company's and the
Subsidiary's officers, in each case dated as of the Closing Date;
(k) the minute books, stock books, stock ledgers and
other corporate and business records of the Company and the Subsidiary
(provided, however, that the Seller Parties may retain copies of those
corporate and business records of the Company and the Subsidiary that
the Seller Parties deem necessary or appropriate for their own legal
compliance and record-keeping purposes) and the Company and Subsidiary
corporate seals (if any);
12
(l) a general release in favor of the Company and the
Subsidiary in the form of Exhibit A hereto, duly executed by the Seller
Parties, and dated as of the Closing Date;
(m) a statement duly executed by El Dorado pursuant to
Treasury Regulation Section 1.1445-2(b), certifying as to El Dorado's
non-foreign status;
(n) the Indemnification Agreement, duly executed by
Parent;
(o) a right-to-use opinion of outside patent counsel of
the Company or the Subsidiary substantially in the form of Exhibit B
hereto, the costs of which opinion shall be shared equally by the
Seller Parties and Purchaser; and
(p) such other documents and instruments required to be
delivered by the Seller Parties at or prior to the Closing Date
pursuant to this Agreement or as Purchaser may reasonably require to
further and give effect to the transactions contemplated in this
Agreement to take place at the Closing.
2.6 Closing Deliveries by Purchaser. At the Closing, Purchaser
will deliver or cause to be delivered to the Seller Parties the following:
(a) a Certificate of Good Standing of Purchaser issued
by the
Delaware Secretary of State dated not more than ten (10) days
before the Closing Date;
(b) a copy, certified by an officer of Purchaser, of
resolutions of the directors of Purchaser authorizing and approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(c) a certificate, in form and substance satisfactory to
the Seller Parties (acting reasonably) duly executed by an executive
officer of Purchaser, on behalf of Purchaser and not in such officer's
personal capacity, certifying that (i) the conditions for Closing set
forth in Section 7.1(a) and Section 7.1(b) have been fulfilled and (ii)
each of Purchaser's conditions for Closing as set forth in Section 7.2
has been satisfied or waived;
(d) payment by wire transfer of immediately available
U.S. funds to the bank account designated by the Seller Parties in
writing no later than five (5) Business Days prior to the Closing in
the amount of Sixteen Million and no/100 Dollars ($16,000,000.00), plus
or minus, as applicable, the Estimated Working Capital Adjustment;
(e) the Indemnification Agreement, duly executed by
Purchaser; and
(f) such other documents and instruments required to be
delivered by Purchaser at or prior to the Closing Date pursuant to this
Agreement or as the Seller Parties may reasonably require to further
and give effect to the transactions contemplated in this Agreement to
take place at the Closing.
13
2.7 Net Working Capital Determination. The Seller Parties and
Purchaser will determine (i) the amount, if any, by which the Net Working
Capital is a positive amount, and (ii) the amount, if any, by which the Net
Working Capital amount is a negative amount (the amount described in clause (i)
or (ii), the "Working Capital Adjustment"), the determination and payment
thereof to be made as follows:
(a) At least five (5) Business Days before the Closing
Date, the Seller Parties and Purchaser, acting in good faith, will
agree upon a mutually acceptable estimate of the Net Working Capital
based on the most currently available month-end financial records of
the Company and the Subsidiary and other appropriate information (the
"Estimated Working Capital Adjustment"). If the Estimated Working
Capital Adjustment is a positive amount, the Purchase Price payable at
the Closing will be increased by such amount, and, if the Estimated
Working Capital Adjustment is a negative amount, the Purchase Price
payable at the Closing will be decreased by such amount, in each case
pursuant to Section 2.6(d).
(b) Within forty-five (45) days after the Closing Date,
Purchaser will deliver to the Seller Parties written notice (the
"Adjustment Notice") of Purchaser's post-closing determination of the
Net Working Capital (the "Post-Closing Net Working Capital
Determination"), as derived from Purchaser's review of the financial
and other books and records of the Company and the Subsidiary as of the
Effective Time and prepared in a manner consistent with GAAP and the
formula and methodology used for purposes of determining the Estimated
Working Capital Adjustment. The Adjustment Notice will contain
reasonable detail as to how the Post-Closing Net Working Capital
Determination was determined by Purchaser along with copies of any and
all materials used in preparing the Post-Closing Net Working Capital
Determination. Within thirty (30) days after the Seller Parties'
receipt of the Adjustment Notice, the Seller Parties will notify
Purchaser in writing of the Seller Parties' acceptance or rejection of
the Post-Closing Net Working Capital Determination as set forth in the
Adjustment Notice. Any notice of rejection ("Rejection Notice") by the
Seller Parties must include reasonable detail as to the reasons for
such rejection and, if appropriate, the Seller Parties' proposed
calculation of the Post-Closing Net Working Capital Determination. If
(i) by written notice to Purchaser, the Seller Parties accept the
Post-Closing Net Working Capital Determination as set forth in the
Adjustment Notice, or (ii) the Seller Parties fail to deliver any
notice of acceptance or rejection of the Post-Closing Net Working
Capital Determination within the prescribed thirty (30)-day period
(which failure will result in the Seller Parties being deemed to have
irrevocably accepted and agreed with the Post-Closing Net Working
Capital Determination), the Post-Closing Net Working Capital
Determination as set forth in the Adjustment Notice will be final and
binding on the Parties.
(c) If the Seller Parties deliver a Rejection Notice to
Purchaser under Section 2.7(b), the Seller Parties and Purchaser and
their respective representatives will promptly (and in any event within
ten (10) Business Days) attempt in good faith to resolve the
differences between the Seller Parties and Purchaser as set forth in
the Rejection Notice. If the Seller Parties and Purchaser are unable to
resolve such matter within thirty (30) days after the date of delivery
of the Seller Parties' Rejection Notice to Purchaser, the Seller
Parties and Purchaser will refer the dispute to a mutually acceptable
firm of
14
independent certified public accountants (the "Independent
Accountants") for review and final determination of the Post-Closing
Net Working Capital Determination. The Independent Accountants may
request of the Seller Parties or Purchaser such documents and
information as may be necessary or appropriate for proper determination
of the matter, and the Seller Parties and Purchaser will cooperate to
promptly satisfy any such request. Any such documents provided to the
Independent Accountants shall be provided on a confidential basis and
shall be concurrently provided to the other Parties. The determination
by the Independent Accountants of the Post-Closing Net Working Capital
Determination will be final and binding on the Seller Parties and
Purchaser, and such determination shall be deemed the Post-Closing Net
Working Capital Determination for purposes of Section 2.7(d). The costs
of the Independent Accountants in undertaking such review and
determination will be shared equally by the Seller Parties and
Purchaser.
(d) Within ten (10) Business Days after the date of the
final agreement of the Seller Parties and Purchaser, the final
determination by the Independent Accountants or the deemed acceptance
by the Seller Parties (as the case may be) of the Post-Closing Net
Working Capital Determination (such date, the "Determination Date"),
either:
(i) Purchaser will pay to El Dorado by wire
transfer of immediately available U.S. funds the amount (if
any) by which the Post-Closing Net Working Capital
Determination exceeds the Estimated Working Capital
Adjustment; or
(ii) The Seller Parties will pay to Purchaser by
wire transfer of immediately available U.S. funds the amount
(if any) by which the Estimated Working Capital Adjustment
exceeds the Post-Closing Net Working Capital Determination.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
REGARDING THE SELLER PARTIES
In order to induce Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Parent, as to itself and El
Dorado only, and El Dorado, as to itself only, hereby represent and warrant to
Purchaser as follows:
3.1 Organization and Authority of the Seller Parties. Each of
Parent and El Dorado is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arizona. Each of the Seller Parties
has all requisite corporate power and corporate authority to own its assets, to
carry on its business as presently conducted by it and to enter into this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto and to consummate the transactions contemplated hereunder
and thereunder.
3.2 Authorization; Enforceability. Each of the Seller Parties (as
applicable) has taken all necessary and appropriate corporate action to
authorize its execution and delivery of this Agreement and each other agreement
and instrument to be executed and delivered by it pursuant hereto and the
consummation of the transactions contemplated hereunder and thereunder. This
Agreement and each other agreement and instrument to be executed by the Seller
Parties (as
15
applicable) and delivered by the Seller Parties pursuant hereto are, or at the
time they are executed by the applicable Seller Parties and each other party
thereto will be, legally binding upon and enforceable against the Seller Parties
(as applicable) in accordance with their respective terms, except as limited by
(i) Applicable Laws of general application regarding bankruptcy, insolvency,
reorganization, moratorium and other Applicable Laws of general application
affecting enforcement of creditors' rights generally, and (ii) Applicable Laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
3.3 No Conflicts. The execution, delivery, and performance by the
Seller Parties of this Agreement and each other agreement and instrument to be
executed and delivered by it pursuant hereto and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) breach or
violate any provision of the Articles of Incorporation and Bylaws of any of the
Seller Parties, or any resolution adopted by the respective boards of directors
or shareholders of any of the Seller Parties, (ii) give any Person the right to
exercise any remedy or obtain any relief under any Applicable Law to which any
of the Seller Parties is subject, or (iii) result in the imposition or creation
of any Lien upon the Company Shares or the Subsidiary Shares.
3.4 Brokers, Finders, etc. The Seller Parties and the Company have
engaged ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital as investment banker and broker in
connection with the sale of the Company Shares and the Subsidiary Shares, and
all fees and expenses of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital will be paid
solely by the Seller Parties. None of the Seller Parties, the Company, or the
Subsidiary nor any other Person acting on their behalf, has engaged, contracted
or dealt with any other Person that is or would be entitled to a broker's
commission, finder's fee, investment banker's fee, expense reimbursement or
similar payment from Purchaser or the Company or the Subsidiary for brokering or
otherwise arranging the transaction contemplated hereby or introducing the
Parties to each other. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital will execute a
waiver letter, dated as of the Closing Date, releasing the Company and the
Subsidiary from any payment obligation whatsoever.
3.5 Solvency. Each of the Seller Parties is, and immediately after
giving effect to the transactions contemplated by this Agreement will be,
solvent, and there are no bankruptcy, insolvency, receivership or other similar
proceedings pending against any of the Seller Parties or being contemplated by
any of the Seller Parties or, to the Knowledge of the Seller Parties, threatened
against any of them.
3.6 Proceedings. Except as may be indicated on Schedule 4.11,
except as contemplated in Section 262 of the
Delaware General Corporation Law in
connection with the Preliminary Merger, and except for other Proceedings brought
by or on behalf of any Minority Shareholder after the date hereof, which shall
be governed exclusively by Section 7.2(j) and Section 9.2(c) hereof, there is no
Proceeding pending or threatened against any of the Seller Parties, or any
Affiliate of the Seller Parties (other than the Company and the Subsidiary),
relating to the Company or the Subsidiary or the transactions contemplated by
this Agreement.
16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND THE
SUBSIDIARY
In order to induce Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Parent, as to itself and El
Dorado only, and El Dorado, as to itself, the Company and the Subsidiary only,
hereby represent and warrant to Purchaser as follows:
4.1 Organization and Authority of Company. Each of the Company and
the Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of
Delaware. Each of the Company and the
Subsidiary has all requisite corporate power and corporate authority to own its
assets, to carry on its business as presently conducted by it and to enter into
and perform the contracts and agreements to which it is a party. Each of the
Company and the Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the assets owned or used by
it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified in any such
jurisdiction would not have a Material Adverse Effect. The states or other
jurisdictions in which the Company and/or the Subsidiary are so qualified as of
the date hereof are listed on Schedule 4.1. The Company has no subsidiaries,
other than the Subsidiary, and does not own, directly or indirectly, any equity,
partnership or other ownership interest in any other Person. The Company is a
holding company and does not conduct, and has not conducted, any operations
other than those incidental to its ownership interest in the Subsidiary. The
Subsidiary has no subsidiaries and does not own, directly or indirectly, any
equity, partnership or other ownership interest in any other Person.
4.2 No Conflicts. Assuming the Seller Parties give or cause to be
given the required notices and obtain or cause to be obtained the required
Consents referred to in Section 4.3 and subject to the qualifications
specifically identified on Schedule 4.3, the execution, delivery, and
performance by the Seller Parties of this Agreement and the consummation of the
transactions contemplated hereby do not and will not:
(a) breach or violate (i) any provision of the
Certificate of Incorporation and Bylaws of the Company or the
Subsidiary, or (ii) any resolution adopted by the board of directors or
shareholders of the Company or the Subsidiary;
(b) contravene, conflict with or violate any Applicable
Laws or give any Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any
relief under any Applicable Law to which the Company or the Subsidiary
or any of their assets, may be subject;
(c) contravene, conflict with or result in a violation or
breach of any of the terms or requirements of, or give any Governmental
Authority the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Permit or Governmental Approval that is held by, or has
been granted to, the Company or the Subsidiary or any applicable
pending application for such a Permit or Governmental Approval or for
any amendment to, or extension of, any such existing Permit or
Governmental Approval;
17
(d) except with respect to payments under Employment
Contracts relating to a Change of Control (as such term is defined
therein), breach any provision of, or give any Person the right to
declare a default (with or without notice or lapse of time or both) or
exercise any remedy under, or to accelerate the maturity or performance
of, or payment under, or to cancel, terminate or modify, any Material
Contract; or
(e) result in the imposition or creation of any Lien upon
the Company Shares or the Subsidiary Shares or upon or with respect to
any of the assets of the Company or the Subsidiary except as
contemplated in this Agreement.
4.3 Notices and Consents. Except for those Consents set forth on
Schedule 4.3 (the "Company Required Consents"), none of the Seller Parties, the
Company or the Subsidiary is required to give any notice to, or obtain any
Consent from, any Third Party or Governmental Authority or other Person in
connection with the execution and delivery by the Seller Parties of this
Agreement or the consummation of the transactions contemplated hereby.
4.4 Capitalization of the Company; Title to the Company Shares.
(a) At the date of execution and delivery of this
Agreement, the authorized capital of the Company consists of
1,054,450,000 shares of voting Class A Common Stock, par value $0.01
per share, of which 1,053,714,701 shares are issued and outstanding,
and 550,000 shares of non-voting Class B Common Stock, par value $0.01
per share, of which 300,833 shares are issued and outstanding. At the
date of execution and delivery of this Agreement, El Dorado is the
record and beneficial owner of 1,051,439,075 shares of Class A Common
Stock of the Company, free and clear of any and all Liens, and El
Dorado does not own any shares of Class B Common Stock of the Company.
At the date of execution and delivery of this Agreement, the Persons
identified in Schedule 4.4(a) own the number of shares of Class A
Common Stock and Class B Common Stock of the Company as is set forth by
their respective names. There are no options, warrants, calls, rights,
commitments or agreements of any character to which Parent or El Dorado
is a party or by which it is bound obligating Parent or El Dorado to
issue, deliver or sell, pledge, grant a security interest on or
encumber or cause to be issued, delivered or sold, pledged or
encumbered or a security interest to be granted on, any shares of
capital stock of the Company or obligating Parent or El Dorado to
grant, extend or enter into, or cause to be granted, extended or
entered into, any such option, warrant, call, right, commitment or
agreement. All issued and outstanding shares of capital stock of the
Company have been duly authorized and are validly issued, fully paid
and non-assessable, and have not been issued in violation of any
pre-emptive rights of any Person.
(b) Except for (i) outstanding warrants to purchase
367,500,000 shares of Class A Common Stock of the Company and certain
outstanding debt of the Company which is convertible into shares of
Class A Common Stock of the Company, all of which warrants and
convertible debt are held by El Dorado free and clear of any and all
Liens, and (ii) outstanding options to purchase an aggregate of 142,000
shares of Class B Common Stock of the Company, which are held by
certain current and former employees of the Company, and which at the
Closing Date will be exercisable solely into the
18
consideration payable solely by El Dorado pursuant to the
Preliminary Merger, there are no other outstanding securities
convertible into or exchangeable for shares of capital stock of the
Company, nor any outstanding subscriptions, options, rights, warrants,
calls, rights of first refusal or offer, or other agreements or
commitments (contingent or otherwise) obligating the Company to issue
or transfer from treasury any shares of its capital stock or to issue,
grant or sell other securities convertible into or exchangeable for
shares of its capital stock; and there are no subscriptions, options,
warrants, calls, rights, commitments or agreements of any character to
which the Company is a party or by which it is bound obligating the
Company to issue, deliver or sell, pledge, grant a security interest on
or encumber or cause to be issued, delivered or sold, pledged or
encumbered or a security interest to be granted on, any shares of
capital stock of the Company or obligating the Company to grant, extend
or enter into any such subscription, option, warrant, call, right,
commitment or agreement.
(c) Following the Preliminary Merger, and as of the
Closing, El Dorado will be the sole record and beneficial owner of all
of the issued and outstanding shares of capital stock of the Company,
free and clear of any and all Liens.
(d) At the time of Closing, immediately after giving
effect to the sale and purchase of the Company Shares as contemplated
herein, Purchaser will be the sole record and beneficial owner of the
Company Shares, free and clear of any and all Liens.
4.5 Capitalization of the Subsidiary; Title to the Subsidiary
Shares.
(a) The authorized capital of the Subsidiary consists of
2,000,000 shares of Common Stock, par value $0.01 per share, of which
only the Subsidiary Shares are issued and outstanding, all of which
shares are owned beneficially and of record by the Company, free and
clear of any and all Liens, except Liens granted under document numbers
11 and 14 of Schedule 4.26, all of which Liens shall be released in
full prior to the Closing. All issued and outstanding shares of capital
stock of the Subsidiary have been duly authorized and are validly
issued, fully paid and non-assessable, and have not been issued in
violation of any pre-emptive rights of any Person.
(b) There are no outstanding securities convertible into
or exchangeable for shares of capital stock of the Subsidiary, nor any
outstanding subscriptions, options, rights, warrants, calls, rights of
first refusal or offer or other agreements or commitments (contingent
or otherwise) obligating the Subsidiary to issue or transfer from
treasury any shares of its capital stock or to issue, grant or sell
other securities convertible into or exchangeable for shares of its
capital stock. There are no subscriptions, options, warrants, calls,
rights, commitments or agreements of any character to which the Company
is a party or by which it is bound obligating the Company to issue,
deliver or sell, pledge, grant a security interest on or encumber or
cause to be issued, delivered or sold, pledged or encumbered or a
security interest to be granted on, any shares of capital stock of the
Subsidiary or obligating the Company to grant, extend or enter into any
such subscription, option, warrant, call, right, commitment or
agreement.
19
4.6 Financial Statements.
(a) The Company has provided to Purchaser copies of the
audited consolidated financial statements of the Company and its
consolidated subsidiaries as at and for the period ended December 31,
2003, together with the report thereon of Deloitte & Touche LLP,
independent auditors, and of the audited consolidated financial
statements of the Company and its consolidated subsidiaries as at and
for the periods ended December 31, 2002 and 2001, together with the
report thereon of Ernst & Young LLP, independent auditors, including in
each case a balance sheet, a statement of income and retained earnings,
a statement of cash flows and any applicable notes thereto
(collectively, the "Financial Statements"). The Financial Statements
fairly present the financial condition and results of operations of the
Company and the Subsidiary in all material respects as of their
respective dates. The Financial Statements have been prepared in
accordance with GAAP, consistently applied, except as disclosed
therein.
(b) Executive officers of the Company have signed, and
the Company has furnished to Parent, a certification with respect to
the consolidated audited financial statements of the Company as at and
for the period ended December 31, 2003 in form substantially similar to
that required by Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, a copy
of which certification has been provided to Purchaser.
(c) As of the Effective Time, the Company and/or the
Subsidiary will have cash and cash equivalents in an amount not less
than $1 million.
4.7 No Guarantees, Sureties, Indemnities. Neither the Company nor
the Subsidiary has granted or given any guaranty, surety bond, material
indemnity or similar contingent obligation in respect of the obligations or
Liabilities of any other Person where such guaranty, surety bond, indemnity or
similar contingent obligation is presently in effect, except (i) as otherwise
disclosed on Schedule 4.7; (ii) for any such obligations or Liabilities
involving less than Fifty Thousand Dollars ($50,000); (iii) for indemnities
given in contracts or agreements under which the Company or the Subsidiary, as
applicable, completed full performance on or after July 1, 2002 and before
January 1, 2003, in connection with which the Seller Parties hereby represent
and warrant that there are no facts or circumstances that would lead to a claim
thereunder; (iv) for indemnities given in contracts or agreements which were
fully performed by the Company or the Subsidiary, as applicable, prior to July
1, 2002, in connection with which, to the Knowledge of the Seller Parties, there
are no facts or circumstances which would lead the Seller Parties to reasonably
conclude that a claim thereunder may be forthcoming; (v) for indemnities given
in any purchase order or other agreement under which the Company or the
Subsidiary procures goods or services (each, a "Purchase Order") and pursuant to
which the Company or the Subsidiary, as applicable, agreed to indemnify the
seller, supplier, or vendor under the Purchase Order against Liabilities (A) for
infringement of patent laws resulting from the seller's, supplier's, or vendor's
use of the Company's or the Subsidiary's designs, drawings, or specifications in
the performance of the Purchase Order, or (B) for third party bodily injury or
property damage to the extent caused by the intentional or negligent acts of the
Company or the Subsidiary, other than third party bodily injury or property
damage resulting from a nuclear incident; and (vi) for indemnities given by the
Company or the Subsidiary in contracts or agreements for the sale or licensing
of goods or services and pursuant to which the Company or
20
the Subsidiary, as applicable, agreed to indemnify the purchaser or licensee
thereunder against Liabilities resulting from the Company's or the Subsidiary's
infringement of patent laws in connection with the goods or services covered by
such contract or agreement; provided, however, that the foregoing clauses (v)
and (vi) in no way limit the Seller Parties' representations in clauses (iii)
and (iv).
4.8 Books and Records. The minute books and other corporate books
and records of the Company and the Subsidiary are complete and correct in all
material respects. The Company maintains accurate books and records reflecting
its consolidated assets and liabilities and maintains proper and adequate
internal accounting controls which provide reasonable assurance that, among
other things, (i) transactions are executed with management's authorization;
(ii) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of the Company and the Subsidiary; and (iii)
accounts, notes and other receivables and inventory are recorded accurately and
proper and adequate procedures are implemented to effect the collection thereof
on a current and timely basis.
4.9 Taxes.
(a) Except as set forth on Schedule 4.9(a):
(i) except for Tax Returns the due date of
which are after the date hereof, the Company and the
Subsidiary (or Parent on the behalf of each) have each timely
filed with the appropriate Taxing Authorities all Tax Returns
that either the Company or the Subsidiary was required to file
through the date hereof, and all such Tax Returns were true,
correct and complete in all material respects;
(ii) all Taxes owed by or attributable to the
Company or the Subsidiary with respect to Tax Returns the due
date of which (as extended, if applicable) is on or before the
date hereof have been timely paid, and all other Taxes due and
payable by or attributable to the Company or the Subsidiary
with respect to any part of the Pre-Closing Tax Period
(whether or not a Tax Return is due by the Closing Date) have
been paid or are accrued on the applicable Financial
Statements, or will be paid or accrued on the books and
records of the Company or the Subsidiary (as applicable) as of
the Closing Date;
(iii) the Company and the Subsidiary have each
withheld and paid all Taxes required under Applicable Law to
have been withheld and paid in connection with any amounts
paid or owing to any employee, independent contractor,
creditor, stockholder or other Person;
(iv) there are no audits, actions, suits,
investigations, claims or Proceedings relating to Taxes or any
Tax Return of the Company or the Subsidiary now pending, or to
the Knowledge of the Seller Parties, threatened or proposed,
and neither the Company nor the Subsidiary has received any
notice of any proposed audits, actions, suits, investigations,
claims or Proceedings relating to Taxes or any Tax Returns;
21
(v) neither the Company nor the Subsidiary is a
party to, bound by or obligated under, any Tax sharing
agreement, Tax indemnification agreement, Tax allocation
agreement or similar agreement, arrangement or understanding,
whether written or unwritten (collectively, "Tax Sharing
Agreements") nor does the Company or the Subsidiary have any
potential liability or obligation to any person as a result
of, or pursuant to, any such Tax Sharing Agreement;
(vi) since January 1, 1995, neither the Company
nor the Subsidiary is, nor ever has been, nor is successor to
any entity that has been, a member of any consolidated,
affiliated, combined, unitary or similar group for U.S.
federal, state, local or foreign Tax purposes, other than a
group the parent of which is Parent or the Company;
(vii) to the Knowledge of the Seller Parties, no
jurisdiction where either the Company or the Subsidiary does
not file a Tax Return has made a claim that either the Company
or the Subsidiary is required to file a Tax Return for such
jurisdiction;
(viii) neither the Company nor the Subsidiary has
received a written ruling from any Taxing Authority, and no
closing agreement pursuant to Code Section 7121 (or similar
provision of state, local or foreign law) has been entered
into by or with respect to either the Company or the
Subsidiary; and
(ix) within the two (2) years prior to the date
hereof, neither the Company nor the Subsidiary has constituted
either a "distributing corporation" or a "controlled
corporation" within the meaning of Code Section 355 in a
distribution of stock qualifying or intended to qualify for
tax-free treatment under Code Section 355.
(b) Except as set forth on Schedule 4.9(b), with respect
to each taxable period for the Company and the Subsidiary ending on or
before the date hereof, (i) no deficiency or proposed adjustment which
has not been paid in full and either settled or otherwise resolved for
any amount of Taxes has been asserted or assessed by any Taxing
Authority against the Company or the Subsidiary, (ii) none of the
Company, the Subsidiary, or any Affiliate of either of them, has
consented to extend the time in which any Taxes payable by or
attributable to any Tax Return item of the Company or the Subsidiary
may be assessed or collected by any Taxing Authority, and (iii) none of
the Company, the Subsidiary, or any Affiliate of either of them, has
requested or been granted an extension of the time for filing any Tax
Return with respect to Taxes payable by or attributable to the Company
or the Subsidiary.
(c) The Parent Group has filed all income Tax Returns
that the Parent Group was required to file for each taxable period
during which the Company or the Subsidiary was a member of the Parent
Group, other than Tax Returns the due date for filing of which falls
after the date hereof (including as a result of any filing extension
granted to the Parent Group). All such income Tax Returns filed by the
Parent Group are true, correct and complete in all material respects.
All material income Taxes owed by the
22
Parent Group have been paid for each taxable period during which the
Company or the Subsidiary was a member of the Parent Group.
4.10 Absence of Changes; Absence of Undisclosed Liabilities.
(a) Except as set forth on Schedule 4.10 or as consented
to by Purchaser pursuant to Section 6.1, since December 31, 2003, there
has not been, and no fact or condition exists which would have, or
insofar as reasonably can be foreseen could have, a Material Adverse
Effect and the Company and the Subsidiary have conducted their
businesses in the ordinary course consistent with prior practice, and,
since such date, neither the Company nor the Subsidiary has:
(i) except for sales of goods or services in the
ordinary course of business consistent with prior practice,
sold, transferred, leased or licensed to others or otherwise
disposed of any material asset, except in the ordinary course
of business consistent with prior practice in an amount not
exceeding Fifty Thousand Dollars ($50,000);
(ii) suffered any damage, destruction, or loss
(whether or not covered by insurance) in excess of Fifty
Thousand Dollars ($50,000);
(iii) received any notice of termination of any
Material Contract (other than by virtue of expiration of the
term thereof) or materially amended, terminated, or agreed to
materially amend or terminate, any Material Contract;
(iv) instituted, settled, or agreed to settle any
Proceeding;
(v) suffered any material loss of customers
(except by virtue of the expiration of the term of a Material
Contract as contemplated by the parenthetical in clause (iii)
above) or received any notice of any pending material loss of
customers;
(vi) made any material change in the rate of
compensation, commission, bonus, retirement, welfare, fringe,
or severance benefit or vacation pay or other direct or
indirect compensation to or in respect of any director,
officer or employee;
(vii) had any claims made under any performance or
payment bond or guaranty or other form of credit enhancement
provided to a Company or Subsidiary customer by the Company or
the Subsidiary or on the Company's or the Subsidiary's behalf;
(viii) received notice of any claim for breach of
warranty by the Company or the Subsidiary under any Material
Contract or for breach by the Company or the Subsidiary of any
license or Certificate of Compliance issued to the Company or
the Subsidiary by the NRC;
23
(ix) (A) changed any financial or Tax accounting
methods, policies or practices of the Company or the
Subsidiary or with respect to the assets or liabilities of the
Company or the Subsidiary, except as required by a change in
GAAP or SEC rules, regulations or guidelines or Applicable
Law, (B) made, revoked, or amended any Tax election of the
Company or the Subsidiary or with respect to the assets of the
Company or the Subsidiary, (C) filed any amended Tax Return or
claim for refund of the Company or the Subsidiary or with
respect to the assets of the Company or the Subsidiary, (D)
consented to extend the period of limitations for the payment
or assessment of any Tax of the Company or the Subsidiary or
with respect to the assets of the Company or the Subsidiary,
(E) entered into any closing agreement affecting any Tax
liability or refund of the Company or the Subsidiary or with
respect to the assets of the Company or the Subsidiary, or (F)
settled or compromised any Tax liability or refund of the
Company or the Subsidiary or with respect to the assets of the
Company or the Subsidiary;
(x) suffered any material adverse change in its
financial condition, results of operation, assets,
Liabilities, reserves, business, operations or prospects; or
(xi) incurred any Liability (other than pursuant
to agreements entered into in the ordinary course of business
consistent with past practice) except immaterial items
incurred in the ordinary course of business and consistent
with past practice, none of which exceeds Fifty Thousand
Dollars ($50,000), or increased, or experienced any change in
any assumptions underlying or methods of calculating, any bad
debt, contingency or other reserves.
(b) Except for immaterial Liabilities incurred in the
ordinary course of business and consistent with past practice, since
December 31, 2003, neither the Company nor the Subsidiary has incurred
any Liability that has, or would be reasonably likely to have, a
Material Adverse Effect. The reserves reflected in the Financial
Statements are appropriate and reasonable and, to the Knowledge of the
Seller Parties, there are no facts or circumstances which would lead
the Seller Parties to reasonably conclude that such reserves are not
adequate.
4.11 Proceedings. Except as set forth on Schedule 4.11, except as
contemplated in Section 262 of the Delaware General Corporation Law in
connection with the Preliminary Merger, and except for other Proceedings brought
by or on behalf of any Minority Shareholder after the date hereof, which shall
be governed exclusively by Section 7.2(j) and Section 9.2(c) hereof:
(a) there is no Proceeding pending or, to the Knowledge
of the Seller Parties, threatened relating to or affecting the Company
or the Subsidiary or the transactions contemplated by this Agreement;
and
(b) neither the Company nor the Subsidiary nor any Seller
Party nor APS is party to or bound by any decree, order, injunction,
settlement agreement, arbitration
24
decision, award or any agreement entered into in any Proceeding with
respect to or affecting the properties, assets, personnel or business
activities of the Company or the Subsidiary.
4.12 Material Contracts.
(a) Schedule 4.12(a) contains an accurate list as of the
date hereof of each agreement, contract, commitment or other written
instrument of any type described below to which the Company or the
Subsidiary is a party or by which the Company or the Subsidiary is
bound (collectively, the "Material Contracts"):
(i) any lease of real property (whether the
Company or the Subsidiary is in the capacity of lessor, lessee
or sublessee) or other agreement providing for the recurring
use of or access to real property by the Company or the
Subsidiary;
(ii) any loan agreement, indenture, credit
facility, mortgage, security agreement, pledge agreement, deed
of trust, bond, note, guaranty, surety, indemnity and/or other
agreement or instrument relating to the borrowing of money or
obtaining of extensions of credit, except to the extent that
any such agreement or instrument will cease to be in effect as
of or prior to the Closing Date;
(iii) any agreement containing a license to
Intellectual Property, whether the Company or the Subsidiary
is the licensee or licensor thereunder, other than (A)
agreements for the sale of goods or services, in which the
total consideration paid to the licensor is less than Fifty
Thousand Dollars ($50,000) and pursuant to which the license
granted contains only Customary License Arrangements; (B)
agreements for the sale of goods or services, in which the
total consideration paid to the licensor is equal to or more
than Fifty Thousand Dollars ($50,000) and in which the
delivery of goods or performance of services was fully
completed prior to January 1, 2003 and pursuant to which the
license granted contains only Customary License Arrangements;
and (C) licenses of commercially-available mass-produced'
shrink-wrap" Software products (e.g., Microsoft Office, Adobe
Acrobat) acquired for less than Fifty Thousand Dollars
($50,000);
(iv) any hedging arrangements, forward sales
contracts and derivative arrangements in excess of a notional
amount of Fifty Thousand Dollars ($50,000) and with a term of
over one year;
(v) any open purchase order for capital
expenditures or contract for capital expenditures by the
Company or the Subsidiary in excess of Fifty Thousand Dollars
($50,000);
(vi) any performance bond, completion bond, bid
bond, suretyship agreement or similar instrument;
25
(vii) any contract or agreement that subjects the
Company or the Subsidiary to restrictions on the competitive
conduct of its business or that prohibits the Company or the
Subsidiary from soliciting customers, vendors or employees of
Third Parties;
(viii) any settlement agreement, covenant not to
▇▇▇, consent to use (other than as may be contained in a
Customary License Arrangement) or other agreement with a Third
Party that restricts the Company's or the Subsidiary's use of
its Intellectual Property or restricts the Company's or the
Subsidiary's business to accommodate a Third Party's
Intellectual Property (other than as may be contained in the
agreements covered in subsection (iii) above);
(ix) any agreement for the provision by the
Company or the Subsidiary to any Person of goods or services
for which the Company or the Subsidiary is expected to derive
revenues of more than Fifty Thousand Dollars ($50,000) in any
twelve (12)-month period following the date of this Agreement;
(x) any joint venture, partnership, royalty or
similar agreement involving the sharing of profits and/or
expenses;
(xi) any agreement (other than any agreement
entered into in the ordinary course of business consistent
with past practice) for the acquisition, divestiture, lease or
license of material assets or Liabilities of the Company or
the Subsidiary which, as of the date of this Agreement, has
not yet been performed or which has continuing material
indemnity or other performance obligations on the part of the
Company or the Subsidiary;
(xii) any agreement providing for the leasing to or
by the Company or the Subsidiary of equipment having a fair
market value of more than Fifty Thousand Dollars ($50,000);
(xiii) any Employment Contract, collective
bargaining or similar labor agreement, director compensation
or indemnity agreement or consulting agreement;
(xiv) any material warranty given by the Company or
the Subsidiary, other than (A) any warranty involving less
than Fifty Thousand Dollars ($50,000), (B) for warranties
given in contracts or agreements under which the Company or
the Subsidiary, as applicable, completed full performance on
or after July 1, 2002 and before January 1, 2003, in
connection with which the Seller Parties hereby represent and
warrant that there are no facts or circumstances that would
lead to a claim thereunder, and (C) for warranties given in
contracts or agreements which were fully performed by the
Company or the Subsidiary, as applicable, prior to July 1,
2002, in connection with which, to the Knowledge of the Seller
Parties, there are no facts or circumstances which would lead
the Seller Parties to reasonably conclude that a claim
thereunder may be forthcoming; and
26
(xv) any other contract, agreement or commitment
(A) with respect to which the aggregate amount that could
reasonably be expected to be paid by the Company or the
Subsidiary thereunder would exceed Fifty Thousand Dollars
($50,000) in any twelve (12)-month period following the date
of this Agreement, or (B) that is otherwise material to the
Company or the Subsidiary.
(b) All Material Contracts are in full force and effect
and are enforceable against the Company and/or the Subsidiary and, to
the Knowledge of the Seller Parties, each other party thereto;
provided, however, that, for those Material Contracts that have been
terminated or expired, the foregoing representation shall apply only
with respect to those provisions that survived such termination or
expiration. Except as disclosed on Schedule 4.12(b), (i) the Company
and/or the Subsidiary and, to the Knowledge of the Seller Parties, each
other party thereto are in material compliance with their respective
covenants and obligations under the Material Contracts, and (ii)
neither the Company nor the Subsidiary has received any notice of, and
the Seller Parties have no Knowledge of, any plan or intention of any
Third Party to any Material Contract to exercise any right to cancel or
terminate, or reduce the benefits to the Company and/or the Subsidiary
under, any such Material Contract.
(c) With respect to those Material Contracts which are
prime contracts or subcontracts between the Company or the Subsidiary
and either the United States Government or any prime contractor of the
United States Government (other than the contract listed as Item 19 on
Schedule 4.12(a)(ix)) (each, a "Government Contract"), all of which are
set forth on Schedule 4.12(c), (i) all certifications and
representations made therein by the Company or the Subsidiary were
complete and accurate in all material respects at the time they were
made; (ii) all cost and pricing data submitted by the Company or the
Subsidiary in connection therewith was current, accurate and complete
in all material respects at the time of submission, and has been
updated in all material respects as and when required by Applicable Law
or the terms of the applicable Government Contract in question; and
(iii) the Company or the Subsidiary, as applicable, has established
reserves on its financial statements in the amount of $160,000 for
possible overcharges or potentially disputed or unallowable costs with
respect to work performed or costs incurred thereunder as of the date
hereof (the "Reserve Amount"). Schedule 4.12(c) also contains an
accurate list as of the date hereof of any pending bids made by the
Company or the Subsidiary for any Government Contracts.
4.13 Insurance.
(a) Each of the Company and the Subsidiary is insured
and has been continuously insured since January 1, 2000 with
financially responsible and nationally recognized insurers in such
amounts and against such types of risks as is customary and appropriate
in its industry. The Company has provided to Purchaser accurate and
complete copies of all policies of insurance (including riders and
amendments thereto) obtained by the Company, the Subsidiary or any of
their Affiliates to which the Company or the Subsidiary is a party or
under which the Company or the Subsidiary is covered as of the date
hereof, each of which is identified on Schedule 4.13(a). All such
policies are in full force and effect, all premiums due thereon have
been paid, the Company and the
27
Subsidiary are otherwise in compliance in all material respects with
the terms and provisions of such policies, and adequate reserves have
been taken in accordance with GAAP for potential losses for which the
Company or the Subsidiary would be financially responsible under the
terms and provisions of such policies.
(b) Schedule 4.13(b) contains a complete summary
description dating back to January 1, 2000 of (i) the loss experience
under each such policy of insurance, including a statement describing
each claim having a value in excess of Fifty Thousand Dollars ($50,000)
(which statement includes the name of the claimant, the policy of
insurance being claimed under and the status of such claim), and (ii)
the loss experience for all claims during such period that were
self-insured by the Company or the Subsidiary, including the number and
aggregate cost of such claims. None of the Seller Parties, the Company
nor the Subsidiary has received any written notice of cancellation or
termination with respect to any insurance policy of the Company or the
Subsidiary or under which the Company or the Subsidiary is covered, and
none of the Seller Parties, the Company nor the Subsidiary has received
notice from any of the Company's or the Subsidiary's insurance carriers
that any insurance premiums will be increased in the future or that any
insurance coverage presently provided for will not be available to the
Company or the Subsidiary in the future on substantially the same terms
as now in effect.
(c) The maximum level of insurance coverage maintained
by the Company and the Subsidiary is as set forth in Schedule 4.13(c),
and such coverage is adequate to cover, and each of the Company and the
Subsidiary is otherwise in compliance with, all material insurance
requirements imposed thereon under contracts or other agreements to
which the Company or the Subsidiary is a party.
4.14 Title to Assets. Except as set forth on Schedule 4.14, the
Company and the Subsidiary have good, clear, record, and marketable or insurable
title to their assets and properties, free and clear of any and all Liens, other
than Permitted Liens.
4.15 Sufficiency of Assets. The real and personal property of the
Company and the Subsidiary constitute all of the assets (tangible and
intangible) necessary for the continued conduct of the Company's and the
Subsidiary's businesses after the Closing in substantially the same manner as
presently being conducted.
4.16 Condition of Facilities and Equipment. The facilities, plants,
machinery and equipment of the Company and the Subsidiary are in good working
order and condition, ordinary wear and tear excepted, and are being operated and
maintained in all material respects in accordance with prescribed operating
instructions (if any) necessary to ensure the effectiveness of equipment
warranties and/or service plans.
4.17 Accounts Receivable. (i) All accounts receivable of the
Company and the Subsidiary reflected in the Financial Statements have arisen
only from bona fide transactions in the ordinary course of business, and (ii) to
the Knowledge of the Seller Parties, there are no facts or circumstances (other
than general social and economic conditions) which would result in any material
increase in the uncollectibility of such receivables in excess of the reserves
of $139,945 therefor reflected in the Financial Statements.
28
4.18 Accounts Payable. Since December 31, 2003, the Company and the
Subsidiary have satisfied, paid and/or discharged their accounts payable and
other current Liabilities in accordance with their respective terms, except for
(i) accounts payable that are not yet due and payable as of the date hereof,
(ii) accounts payable or other current Liabilities that are the subject of a
bona fide dispute and identified on Schedule 4.18, or (iii) accounts payable to
any of the Seller Parties or any Affiliate thereof other than to APS (all of
which, other than as between the Company, on the one hand, and the Subsidiary,
on the other hand, will be settled or discharged on or before the Closing Date).
4.19 Intellectual Property.
(a) Schedule 4.19(a) contains a complete and accurate
list of all patents (including applications therefor), trade marks and
service marks (including registrations and applications therefor and
material unregistered trademarks and service marks), trade names,
Internet domain names, copyrights (including registrations and
applications therefore), and Software (excluding commercially
mass-produced Software products (e.g. Microsoft Office, Adobe Acrobat)
licensed pursuant to "shrink-wrap" agreements for less than Fifty
Thousand Dollars ($50,000)), that are, in each case owned by or
licensed to the Company or the Subsidiary as of the date hereof,
including, in the case of patents, registered trademarks, service
marks, copyrights and pending applications therefor, details of
registration and/or application filings with the United States Patent
and Trademark Office, United States Copyright Office or similar
Governmental Authorities in other jurisdictions.
(b) Except as disclosed on Schedule 4.19(b):
(i) the Company and/or the Subsidiary are the
sole and exclusive beneficial and record owners of the
Intellectual Property items listed in Schedule 4.19(a) and own
or have the right to use all Intellectual Property used in the
business as currently conducted, except where the failure to
possess such right would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect;
(ii) except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, all of the items of Intellectual Property set forth on
Schedule 4.19(a) are in compliance with formal legal
requirements (including, to the extent applicable, payment of
filing, examination and maintenance fees, proofs of working or
use, timely post-registration filing of affidavits of use and
incontestability and renewal applications), and are subsisting
and, to the Knowledge of the Seller Parties, are valid and
enforceable;
(iii) to the Knowledge of the Seller Parties, no
item of Intellectual Property owned by or licensed to the
Company or the Subsidiary is currently being infringed,
diluted, misappropriated, or otherwise violated, or challenged
or threatened in any way;
29
(iv) to the Knowledge of the Seller Parties, none
of the products or services sold, or processes or know-how
used, or business conducted by the Company or the Subsidiary
infringes, dilutes, misappropriates, or otherwise violates any
Intellectual Property right of any other Person, or has been
alleged to do so;
(v) there are no Proceedings pending or, to the
Knowledge of the Seller Parties, threatened against the
Company or the Subsidiary or any of the Seller Parties before
any Governmental Authority involving any of the Intellectual
Property owned or used by the Company or the Subsidiary;
(vi) the Company and the Subsidiary take
reasonable measures to protect the confidentiality of material
trade secrets owned or used by the Company or the Subsidiary;
(vii) no Affiliate of the Company or the
Subsidiary, or any current or former partner, director,
stockholder, officer, or employee of the Company or the
Subsidiary or any of the Seller Parties (or any of their
respective predecessors in interest) will, after giving effect
to the transactions contemplated hereby, own or retain any
rights to own or use any of the Intellectual Property on
Schedule 4.19(a) or otherwise owned by or licensed to the
Company or the Subsidiary;
(viii) the consummation of the transactions
contemplated hereby will not result in the loss or impairment
of the Company's or the Subsidiary's rights to own or use any
Intellectual Property; and
(ix) except as may be contained in the agreements
set forth in Schedule 4.12(a), there are no settlements,
covenants not to use, consents to use (other than as may be
contained in a Customary License Arrangement), or any
judgments, orders or similar obligations that restrict the
Company's or the Subsidiary's right to own or use any
Intellectual Property listed in Schedule 4.19(a), or restrict
the Company's or the Subsidiary's right to conduct its
business in order to accommodate any Third Party's
Intellectual Property rights or any Intellectual Property
rights of the Seller Parties.
4.20 Permits. Each of the Company and the Subsidiary possesses all
material Permits which are required in order for it to lawfully own its
properties and assets and to conduct its business as presently conducted and to
meet its contractual obligations to its customers and other Persons, including
its Affiliates, and all such Permits as of the date hereof are listed under Part
1 of Schedule 4.20. Each such Permit is in full force and effect in accordance
with its terms. There is no outstanding written notice of revocation and there
are no Proceedings pending or, to the Knowledge of the Seller Parties,
threatened that seek the revocation or suspension of any Permit. Each of the
Company and the Subsidiary is in compliance in all material respects with the
provisions of each such Permit that it holds. Any notice, other filing or other
registration required to be made by the Company or the Subsidiary with any
Governmental Authority in connection with Purchaser's acquisition of the Company
Shares in order to protect and maintain the effectiveness of any Permit is
described under Part 2 of Schedule 4.20.
30
4.21 Environmental Matters. Except as disclosed on Schedule 4.21,
(i) the Company has complied in all material respects, and is presently in
compliance in all material respects, with all applicable Environmental Laws
pertaining to the ownership and operation of its assets and properties and the
conduct of its business, (ii) neither the Company nor the Subsidiary has
received any written communication alleging that it, or any of its contractors
or subcontractors, currently is not in material compliance with or is liable
under any applicable Environmental Law, (iii) each of the Company and the
Subsidiary has all material Permits required for its operation pursuant to
applicable Environmental Laws, all such Permits are in full force and effect,
and each of the Company and the Subsidiary has been and is in material
compliance with respect to such Permits, (iv) to the extent relevant, each of
the Company and the Subsidiary has applied in a timely fashion for a renewal of
all Permits required for its operations pursuant to applicable Environmental
Laws, (v) to the Knowledge of the Seller Parties, any contractors or
subcontractors retained by the Company or the Subsidiary with respect to the
Company's or the Subsidiary's operations, including the fabrication or transport
of casks, are and have been in material compliance with all applicable
Environmental Laws in connection with the performance of any task related to the
business of the Company or the Subsidiary, including holding all required
Permits under applicable Environmental Laws, and have not caused or been
responsible for a Release of Hazardous Substances in connection with their
performance of any task related to the business of the Company or the
Subsidiary, (vi) neither the Company nor the Subsidiary has received any written
requests for information relating to its, or its subcontractors, compliance with
or potential liability under any applicable Environmental Laws, (vii) neither
the Company nor the Subsidiary is subject to any judicial or administrative
orders or decrees relating in any way to Environmental Laws or Hazardous
Substances, (viii) to the Knowledge of the Seller Parties, there have been no
Releases of Hazardous Substances (A) on any real property currently owned,
leased or operated by the Company or the Subsidiary or (B) resulting from
operations in connection with the business of the Company or the Subsidiary
conducted by a contractor or subcontractor of the Company or the Subsidiary on
any real property owned, leased or operated by the contractor or subcontractor,
and (ix) neither the Company nor the Subsidiary has taken, or failed to take,
any action that could reasonably be expected to result in any material Liability
relating to (A) the environmental conditions on, under, or about any real
property that is presently owned, leased or operated by the Company or the
Subsidiary, (B) the environmental conditions on, under, or about any real
property formerly owned, leased or operated by the Company or the Subsidiary,
(C) the use, management, handling, transport, treatment, generation, storage,
disposal or release of any Hazardous Substance, or (D) any applicable
Environmental Law. The Company has provided to Purchaser true, complete and
accurate copies of all environmental reports, assessments, audits or other
studies related to the Company or the Subsidiary, that are in the possession,
custody or control of the Seller Parties, the Company or the Subsidiary. Set
forth, on Part II of Schedule 4.21 is an accurate list of all the Company's and
the Subsidiary's Permits issued or obtained pursuant to applicable Environmental
Laws as of the date hereof.
4.22 Compliance with Applicable Laws. Except for laws covered under
Section 4.9, Section 4.19, Section 4.20, Section 4.21, Section 4.23, Section
4.24 and Section 4.28, each of the Company and the Subsidiary is, and since
January 1, 2003, has been, in material compliance with all Applicable Laws
governing, affecting or relating to it, its properties and assets, its personnel
and the conduct of its businesses, and, to the Knowledge of the Seller Parties,
neither
31
the Company nor the Subsidiary is under investigation with respect to any
violation of, and has not been given notice of or been charged with any
violation of, Applicable Laws.
4.23 Employees.
(a) Set forth on Schedule 4.23(a) is an accurate list of
employees of each of the Company and the Subsidiary as of the date
hereof, listed separately (the "Employees") and at least the following
details for each Employee: (i) name, (ii) part-time or full-time
status, (iii) title and/or job description, (iv) employment
commencement date, (v) salary or wage, and (vi) bonus or other
contingent compensation.
(b) With respect to the Employees, except as described on
Schedule 4.23(b), there has not been since January 1, 2000, there does
not presently exist, and there is not overtly threatened (i) any
strike, slowdown, picketing, work stoppage, lockout or mass employee
grievance process, (ii) any material charge, grievance proceeding,
arbitration, controversy or other employee claim against or affecting
the Company or the Subsidiary (or any director, officer or employee
thereof), (iii) any union or other employee association organizational
activity or other labor or employment dispute against or affecting the
Company or the Subsidiary, or (iv) any application for recognition or
certification of a collective bargaining agent.
(c) Schedule 4.23(c) contains a complete list of each
employment or change of control contract for any Employee or for any
former employee of the Company or the Subsidiary under which the
Company or the Subsidiary has continuing Liabilities as of the date
hereof (collectively, the "Employment Contracts"), and copies of all
such Employment Contracts have been provided to Purchaser. Except as
otherwise expressly provided under the Employment Contracts, the
employment of each Employee can be terminated upon not more than thirty
(30) days' notice without severance, penalty or premium, other than
payment of accrued salaries, wages, vacation pay and other benefits.
(d) Except as described on Schedule 4.23(d), none of the
Seller Parties, the Company or the Subsidiary is a party to, nor bound
by, any labor or collective bargaining agreement or any other agreement
with a labor union with respect to employees of the Company or the
Subsidiary and there are no labor or collective bargaining agreements
that pertain to any of the employees of the Company or the Subsidiary,
nor are any such employees represented by any labor organization with
respect to such employment.
(e) Except as described on Schedule 4.23(e), the Company
and the Subsidiary are in material compliance with all Applicable Laws
respecting employment and employment practices, terms and conditions of
employment, health and safety, and wages and hours with respect to the
employees of the Company and the Subsidiary, including the Worker
Adjustment and Retraining Notification Act and any similar applicable
state, local or foreign law requiring notice to employees in the event
of a plant closing or layoff (the "WARN Act"), the Immigration Reform
and Control Act, all laws and executive orders respecting employment
discrimination, disability rights or benefits, equal opportunity, plant
closure issues, affirmative action, workers' compensation, employee
benefits, severance payments, labor relations, employee leave issues,
wage and hour
32
standards, occupational safety and health requirements, unemployment
insurance and related matters, and the collection and payment of
withholding or social security taxes and any similar tax, and none of
the Seller Parties, the Company or the Subsidiary is engaged in any
unfair labor practice with respect to the employees of the Company or
the Subsidiary except for any noncompliance or practices that could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; and none of the Seller Parties, the Company or
the Subsidiary is delinquent in payments to any employees of the
Company or the Subsidiary for any services or amounts required to be
reimbursed or otherwise paid to such employees.
(f) Except as described on Schedule 4.23(f), none of the
Seller Parties, the Company or the Subsidiary, nor any of their
respective employees, agents or representatives, has committed a
material unfair labor practice as defined in the National Labor
Relations Act with respect to the current or former employees of the
Company or the Subsidiary and there is no material unfair labor
practice complaint or other allegation of labor law violation against
any of the Seller Parties, the Company or the Subsidiary with respect
to the current or former employees of the Company or the Subsidiary
pending before the National Labor Relations Board or any other
Governmental Authority.
(g) Except as described on Schedule 4.23(g), and except
for such matters as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, none of the
Seller Parties, the Company or the Subsidiary has received notice of
any actual or threatened investigation, charge or complaint against any
of the Seller Parties, the Company or the Subsidiary with respect to
the current or former employees of the Company or the Subsidiary
pending before the Equal Employment Opportunity Commission or any other
Governmental Authority regarding an unlawful employment practice.
4.24 Benefit Plans.
(a) Schedule 4.24(a) sets forth a list of each Benefit
Plan as of the date hereof. With respect to each Benefit Plan, the
Seller Parties have made available to Buyer:
(i) a copy of each Benefit Plan (including all
amendments thereto);
(ii) a copy of the annual report and actuarial
report, if required under ERISA or the Code, with respect to
each Benefit Plan for the last two (2) plan years ending prior
to the date hereof;
(iii) if the Benefit Plan is funded through a trust
or any Third Party funding vehicle, a copy of the trust or
other funding agreement (including all amendments thereto) and
the latest financial statements with respect to the last
reporting period ended immediately prior to the date thereof;
(iv) a copy of the most recent Summary Plan
Description, together with each Summary of Material
Modifications, if required under ERISA, with respect to each
Benefit Plan; and
33
(v) the most recent determination letter
received from the IRS with respect to each Benefit Plan that
is intended to be qualified under Section 401(a) of the Code.
(b) No Liability under Title IV of ERISA has been
incurred by the Company, the Subsidiary or any ERISA Affiliate since
the effective date of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or the
Subsidiary of incurring any Liability under Title IV of ERISA, other
than Liability for premiums due to the Pension Benefit Guaranty
Corporation. To the extent that the representation in this subsection
(b) applies to Section 4064, 4069 or 4204 of ERISA, it is made not only
with respect to the Employee Plans but also with respect to any
employee benefit plan, program, agreement or arrangement subject to
Title IV of ERISA to which the Company, the Subsidiary or any ERISA
Affiliate made, or was required to make, contributions during the
five-year period ending on the Closing Date.
(c) The Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any Employee Plan and no condition
exists that presents a material risk that such proceedings will be
instituted. Any contribution or premium required to be paid to or in
respect of an Employee Plan under the terms of the Employee Plan,
Section 302 of ERISA or Section 412 of the Code, have, to the extent
due, been paid in full or properly recorded on the financial statements
or records of the Company, the Subsidiary or an ERISA Affiliate, and no
Employee Plan or any trust established thereunder currently has any
"accumulated funding deficiency" (as defined in Section 302 of ERISA or
Section 412 of the Code), whether or not waived. The present value of
the projected benefit obligations under each Benefit Plan subject to
Title IV of ERISA, determined upon the basis of the actuarial
assumptions used for funding purposes in the most recent actuarial
report prepared with respect to such Benefit Plan, did not, as of its
most recent valuation date, exceed the then current value of the assets
of such Benefit Plan allocable to such projected benefit obligations.
(d) No Benefit Plan is a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA).
(e) Each Benefit Plan has been operated and administered
in all material respects in accordance with its terms and Applicable
Laws, including ERISA and the Code. There are no pending (or, to the
Seller Parties' Knowledge, threatened) claims involving the Benefit
Plans (other than routine claims for benefits). A favorable opinion
letter from the IRS regarding qualification of the form of a Benefit
Plan under all currently effective provisions of Section 401(a) of the
Code (except for requirements for which the remedial amendment period
has not passed) has been received by the prototype plan sponsor for
each Benefit Plan that is intended to be "qualified" within the meaning
of Section 401(a) of the Code, and, to the Knowledge of the Seller
Parties, no facts exist that would reasonably be expected to result in
the revocation of any such opinion letter.
(f) Except as may be provided in any Employment Contract
or as set forth on Schedule 4.24(f), the consummation of the
transactions contemplated by this Agreement will not, either alone or
in combination with any other event, (i) result in any payment
34
becoming due, or increase the amount of compensation due, to any
Employee or former employee or current or former director of the
Company or the Subsidiary, (ii) increase any benefits payable under any
Benefit Plan, or (iii) accelerate the time of payment or vesting, or
increase the amount of, or otherwise enhance, any benefit due to any
Employee or former employee or current or former director of the
Company or the Subsidiary.
(g) No Benefit Plan provides benefits, including death or
medical benefits (whether or not insured), with respect to current or
former employees after retirement or other termination of service
(other than (i) coverage mandated by Sections 601-608 of ERISA and
Section 4980F(g) of the Code, (ii) death benefits or retirement
benefits under any employee pension benefit plan (within the meaning of
Section 3(2) of ERISA), (iii) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary), (iv)
deferred compensation benefits accrued as Liabilities on the books of
the Company, the Subsidiary or an ERISA Affiliate, or (v) severance
benefits under Employment Contracts).
(h) To the Knowledge of the Seller Parties, no
representations or communications, oral or written, with respect to the
participation, eligibility for benefits, vesting, benefit accrual or
coverage under any Employee Plan have been made to any Employee or any
former employee or current or former director of the Company or the
Subsidiary (or any of their respective representatives or
beneficiaries) which are not in accordance with the terms and
conditions of the Employee Plans.
(i) Except as disclosed on Schedule 4.24(i), no leased
employee (within the meaning of Section 414(n) of the Code) performs
(or during the preceding three (3) years performed) services for the
Company or the Subsidiary; each of the Company and the Subsidiary has
at all times been in material compliance with Applicable Laws regarding
the classification of employees and independent contractors; and no
person engaged by the Company or the Subsidiary as an independent
contractor, third party contract laborer, temporary employee, or
"leased employee" has ever been improperly excluded from participation
in a Benefit Plan, nor has the Company or the Subsidiary used the
services of such individuals to an extent that would reasonably be
expected to result in the disqualification of any of the Employee Plans
or the imposition of material penalties or excise taxes with respect to
the Employee Plans by the IRS, the Department of Labor, the Pension
Benefit Guaranty Corporation, or any other Governmental Authority.
(j) Except as required by Applicable Law or as described
on Schedule 4.24(j), since January 1, 2004, there has been no amendment
to, written interpretation or announcement (whether or not written) by
the Company, the Subsidiary or any ERISA Affiliate relating to, or
change in employee participation or coverage under, any Benefit Plan
that would increase the expense of maintaining such Benefit Plan above
the level of the expense incurred in respect thereof for the preceding
twelve (12) months.
(k) With respect to each of the Benefit Plans, the
provisions of Section 4980B(f) of the Code and Sections 601-609 of
ERISA and the provisions of the Health
35
Insurance Portability and Accountability Act of 1996 have been complied
with in all material respects.
4.25 Customers and Suppliers. Except as set forth on Schedule 4.25,
since January 1, 2003, there has not been any material adverse change in the
business relationship of the Company or the Subsidiary with any customer who
accounted for more than five percent (5%) of the Company's or the Subsidiary's
sales during the period from January 1, 2002 to December 31, 2002 or from
January 1, 2003 to December 31, 2003, or any supplier or contractor from whom
the Company or the Subsidiary purchased more than five percent (5%) of the goods
or services which it purchased during the same periods. Since December 31, 2003,
no material licensor or licensee of the Company or the Subsidiary has cancelled
or otherwise adversely modified its license with the Company or the Subsidiary
and, to the Knowledge of the Seller Parties, (i) no such Person has declared any
intention to do so, and (ii) subject to the qualifications specifically
identified on Schedule 4.3, the consummation of the transactions contemplated by
this Agreement will not adversely affect any of such relationships.
4.26 Affiliate Contracts. Schedule 4.26 contains a true and
complete list of each agreement, contract, arrangement or understanding as of
the date hereof between (a) the Company or the Subsidiary, on the one hand, and
(b) any Affiliate of the Company or the Subsidiary, on the other.
4.27 Bank Accounts. Schedule 4.27 sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company or the Subsidiary maintains safe
deposit boxes, checking accounts or other accounts of any nature and the names
of all Persons authorized to draw thereon, make withdrawals therefrom or have
access thereto. As of the Closing Date, only then-current Employees shall be
authorized to draw thereon, make withdrawals therefrom or have access thereto.
4.28 NRC Matters.
(a) Each of the Company and the Subsidiary is in material
compliance with all applicable regulations under the Atomic Energy Act,
including the regulations of the NRC, affecting or relating to it, its
properties and assets, its personnel and the conduct of its businesses,
including the requirements of 10 C.F.R. Part 71 and 10 C.F.R. Part 72,
and each of the Company and the Subsidiary is in material compliance
with all requirements, provisions, terms and conditions of every
license and Certificate of Compliance issued to the Company or the
Subsidiary by the NRC, or any other agency, under all applicable
regulations under the Atomic Energy Act.
(b) Except as set forth on Schedule 4.28, neither the
Company nor the Subsidiary has been given written notice or, to the
Knowledge of the Seller Parties, any other notice of or been charged
with actual or potential violation of any applicable regulations under
the Atomic Energy Act, including those of the NRC, or the terms and
conditions of any license or Certificate of Compliance granted to the
Company or the Subsidiary by the NRC, and neither the Company nor the
Subsidiary is the subject of any pending or ongoing proceeding, or, to
the Knowledge of the Seller Parties, any investigation or inquiry, or
any enforcement action, special inspection, diagnostic
36
evaluation, or other action (including rules of general application
proposed by the NRC and published in the Federal Register that, to the
Knowledge of the Seller Parties, would be likely to materially
adversely affect the conduct of the Company's or the Subsidiary's
business) by or before the NRC, or any other agency, under any
applicable regulations under the Atomic Energy Act.
(c) Every spent fuel transportation cask and every spent
fuel storage cask owned by the Company or the Subsidiary is operated
and maintained in material compliance with all applicable regulations
under the Atomic Energy Act, including those of the NRC, and the
applicable Certificates of Compliance for each cask.
(d) Each spent fuel transportation cask and each spent
fuel storage cask maintained by the Company or the Subsidiary on behalf
of its customers is maintained in material compliance with all
applicable regulations under the Atomic Energy Act, including those of
the NRC, and the applicable Certificates of Compliance for each cask.
(e) All Certificates of Compliance for each spent fuel
transportation or storage cask owned by the Company or the Subsidiary
are in material compliance with NRC regulations and the conditions of
the Certificates of Compliance, and any pending amendments to such
Certificates of Compliance filed by or on behalf of the Company or the
Subsidiary are in material compliance with NRC regulations. To the
Seller Parties' Knowledge, there are no facts or circumstances
reasonably likely to result in the Company or the Subsidiary failing to
receive NRC approval of any such amendments.
4.29 New Technology. The Seller Parties have disclosed to
Purchaser all facts Known to them material to the Subsidiary's proposed "new
generation technology" relating to the Subsidiary's cask systems (the "New Cask
Technology"), including all facts Known to them that are material to the design
of, the applications of, the Company's or the Subsidiary's Intellectual Property
rights with respect to, any prospective NRC licensing of, the competitiveness in
the market for dry storage and transportation casks in the United States of, and
the expected date of commercial operation of, the New Cask Technology. To the
Knowledge of the Seller Parties, the New Cask Technology does not and will not
infringe, dilute, misappropriate or otherwise violate any Intellectual Property
right of any other Person, and it has not been alleged to do so. The Seller
Parties do not have any Knowledge of facts or circumstances that would likely
result in the New Cask Technology failing to operate in the manner described to
Purchaser or to receive an NRC Certificate of Compliance by March 31, 2006 or to
receive a patent pursuant to the patent application filed in the United States
Patent and Trademark Office on March 8, 2004.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce the Seller Parties to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser hereby represents and
warrants to the Seller Parties as follows:
5.1 Organization and Authority of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
37
Purchaser has all requisite corporate power and authority to own its assets, to
carry on its business as presently conducted by it and to enter into this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto and consummate the transactions contemplated hereunder and
thereunder.
5.2 Authorization; Enforceability. Purchaser has taken all
necessary and appropriate corporate action to authorize its execution and
delivery of this Agreement and each other agreement and instrument to be
executed and delivered by Purchaser pursuant hereto and its consummation of the
transactions contemplated hereunder and thereunder. This Agreement and each
other agreement and instrument to be executed and delivered by Purchaser
pursuant hereto are, or at the time they are executed by Purchaser and each
other party thereto will be, legally binding upon and enforceable against
Purchaser in accordance with their respective terms, except as limited by (i)
Applicable Laws of general application regarding bankruptcy, insolvency,
reorganization, moratorium and other Applicable Laws of general application
affecting enforcement of creditors' rights generally, and (ii) Applicable Laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
5.3 No Conflicts. Assuming that Purchaser gives the required
notices and obtains the required Consents referred to in Section 5.4, the
execution, delivery, and performance by Purchaser of this Agreement and each
other agreement and instrument to be executed and delivered by it pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
do not and will not:
(a) breach or violate (i) any provision of the
Certificate of Incorporation or Bylaws of Purchaser, or (ii) any
resolution adopted by the board of directors or shareholder(s) of
Purchaser; or
(b) contravene, conflict with or violate any Applicable
Laws or give any Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any
relief under any Applicable Law to which Purchaser may be subject.
5.4 Notices and Consents. Except for those Consents set forth on
Schedule 5.4 (the "Purchaser Required Consents"), Purchaser is not required to
give any notice to or obtain any Consent from any Third Party or Governmental
Authority or other Person in connection with the execution and delivery of this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto or the consummation of the transactions contemplated
hereby or thereby.
5.5 Proceedings. There is no Proceeding underway, pending, or to
the Knowledge of Purchaser, threatened, by or against or affecting Purchaser or
any of its Affiliates in connection with Purchaser's entering into this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto or the intended consummation by Purchaser of the
transactions contemplated hereby or thereby, nor to the Knowledge of Purchaser
has any event occurred or does any circumstance exist that is reasonably likely
to give rise to, or serve as a basis for, the commencement of any such
Proceeding.
38
5.6 Accredited Investor; Investment Intent. Purchaser is an
"Accredited Investor", as that term is defined under Rule 501(a) of Regulation D
promulgated under the Securities Act. Purchaser has had reasonable opportunity
to ask questions of, and has received answers from the Seller Parties concerning
the Company and the Company Shares, and has received such other information
which Purchaser considers reasonably necessary or appropriate to evaluate the
risks and merits of its investment in the Company Shares. Purchaser intends to
purchase the Company Shares for investment purposes only and not with a view to
the resale or other distribution thereof.
5.7 Non-Foreign Status. Purchaser is in compliance with Article XI
of its Certificate of Incorporation (relating to limitations on foreign
ownership).
5.8 Brokers, Finders, etc. Neither Purchaser nor any Affiliate or
other Person acting on its behalf has engaged, contracted or dealt with any
Person that is or would be entitled to a broker's commission, finder's fee,
investment banker's fee, expense reimbursement or similar payment from the
Seller Parties or any of its Affiliates for brokering or otherwise arranging the
transactions contemplated hereby or introducing the Parties to each other.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business. From the date hereof until the Closing
Date or the earlier termination of this Agreement, except as set forth on
Schedule 6.1 or as otherwise expressly permitted or required by this Agreement
or as otherwise consented to by Purchaser in writing, the Seller Parties will,
or will cause each of the Company and the Subsidiary (as applicable) to:
(a) carry on the Company's and the Subsidiary's business
in the ordinary course, in substantially the same manner as heretofore
conducted, and use commercially reasonable efforts to preserve intact
its present business organization, maintain its properties in good
operating condition and repair, keep available the services of its
present officers and its employees, and preserve its relationships with
its customers, suppliers and others having business dealings with it,
including regulatory authorities, with the goal and intent that its
goodwill and ongoing business will be on the Closing Date substantially
the same as it is on the date hereof;
(b) pay all accounts payable and other obligations of the
Company and the Subsidiary when they become due and payable in the
ordinary course of business consistent with prior practice, except for
(i) accounts payable or other obligations that are the subject of a
bona fide dispute, or (ii) accounts payable to any of the Seller
Parties or any Affiliate thereof other than APS (all of which, other
than as between the Company, on the one hand, and the Subsidiary, on
the other hand, will be settled or discharged on or before the Closing
Date);
(c) except as necessary to effect the Preliminary Merger,
not (i) amend the Certificate of Incorporation or Bylaws of the Company
or the Subsidiary other than amendments which are ministerial in nature
or otherwise immaterial; (ii) split, combine or reclassify the
outstanding shares of Company or Subsidiary capital stock; (iii)
declare,
39
set aside or pay any dividend payable in cash, stock or property in
respect of any Company or Subsidiary capital stock; or (iv) repurchase,
redeem or otherwise acquire any shares of Company or Subsidiary capital
stock or any securities convertible into or exchangeable or exercisable
for any shares of Company or Subsidiary capital stock;
(d) not issue, sell or dispose of any shares of, or
securities convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to acquire,
any shares of, Company or Subsidiary capital stock of any class;
(e) not (i) incur or assume any long-term Company or
Subsidiary indebtedness or, except in the ordinary course of business
consistent with prior practice, incur or assume any Company or
Subsidiary short-term indebtedness exceeding Fifty Thousand Dollars
($50,000) in the aggregate; (ii) make any loans, advances or capital
contributions to any other Person; (iii) enter into any material
commitment or transaction; (iv) write down the value of any inventory
or write off as uncollectible any notes or accounts receivable except
as required by GAAP or SEC rules, regulations or guidelines; (v)
license, dispose of or permit to lapse any rights to any Intellectual
Property; or (vi) change any of the banking or safe deposit
arrangements identified on Schedule 4.27;
(f) deploy maintenance capital in respect of the
Company's and the Subsidiary's assets and properties in the ordinary
course of business consistent with prior practice;
(g) not organize any subsidiary of the Company or the
Subsidiary or make any Company or Subsidiary acquisition of, or
investment in, assets or stock of, or otherwise make a capital
contribution to, any other Person or entity, other than acquisitions of
assets in connection with the ordinary course performance of its
obligations under the Material Contracts and acquisitions of assets in
the ordinary course of business consistent with prior practice and not
to exceed singularly or in the aggregate Fifty Thousand Dollars
($50,000);
(h) maintain insurance of the Company and the Subsidiary
with financially responsible and nationally recognized insurers in such
amounts and against such risks and losses as are consistent with the
insurance maintained by the Company and the Subsidiary in the ordinary
course of business consistent with prior practice;
(i) use commercially reasonable efforts to maintain in
effect or renew all existing governmental franchises or Permits
required for the ongoing operations of the Company and the Subsidiary;
(j) perform in all material respects all of the Company's
and the Subsidiary's obligations under all Material Contracts (except
as described in Section 6.1(b) regarding bona fide payment disputes)
and not modify, amend or terminate any Material Contracts or waive,
release or assign any material rights or claims or offer any discounts
or credits, except in the ordinary course of business consistent with
prior practice;
(k) comply in all material respects with all Applicable
Laws;
40
(l) (i) not change any financial or Tax accounting
methods, policies or practices of the Company or the Subsidiary or with
respect to the assets of the Company or the Subsidiary, except as
required by a change in GAAP or SEC rules, regulations or guidelines or
Applicable Law, (ii) not make, revoke, or amend any Tax election of the
Company or the Subsidiary or with respect to the assets of the Company
or the Subsidiary, (iii) not file any amended Tax Return or claim for
refund of the Company or the Subsidiary or with respect to the assets
of the Company or the Subsidiary, (iv) not consent to extend the period
of limitations for the payment or assessment of any Tax of the Company
or the Subsidiary or with respect to the assets of the Company or the
Subsidiary, (v) not enter into any closing agreement affecting any Tax
liability or refund of the Company or the Subsidiary or with respect to
the assets of the Company or the Subsidiary, and (vi) not settle or
compromise any Tax liability or refund of the Company or the Subsidiary
or with respect to the assets of the Company or the Subsidiary;
(m) not (i) enter into any new employment contract or,
except as required by Section 6.10(a) hereof, amend any Employment
Contract, (ii) increase the compensation or wages of or pay bonuses to
Employees, except for such increases or payments in the ordinary course
of business consistent with past practice for Employees who are not
officers of the Company or the Subsidiary, or (iii) except as may be
required by Applicable Law, amend or terminate any Benefit Plan or
establish any new employee benefit plan, program, arrangement or
agreement;
(n) not sell, transfer, lease, license, encumber or
otherwise dispose of any property or asset of the Company or the
Subsidiary, other than dispositions of property or assets in connection
with the ordinary course performance of its obligations under the
Material Contracts or dispositions of property or assets made in the
ordinary course of business consistent with prior practice for which
the proceeds of such disposition are retained by the Company and in an
amount not to exceed singularly or in the aggregate Fifty Thousand
Dollars ($50,000); and
(o) not take any action or knowingly omit to take any
action, which action or omission would or is reasonably likely to
result in any of the conditions to the Closing not being satisfied or
any representations or warranty of the Seller Parties or the Company
made under this Agreement to be untrue or inaccurate at, or as of any
time prior to, the Closing Date;
provided, however, that nothing herein will restrict the Company or the
Subsidiary from using its working capital to repay indebtedness of the Company
or the Subsidiary, including indebtedness to the Seller Parties, subject to the
provisions of Section 2.7 hereof.
6.2 Further Assurances. Each Party will undertake commercially
reasonable efforts and do all reasonable acts and things necessary, proper or
advisable to consummate the transactions contemplated hereby, and will cooperate
reasonably with the other Parties, both before and after the Closing, in
connection with any steps required to be taken as part of its obligations under
this Agreement. Without limiting the generality of the foregoing:
41
(a) Each of the Seller Parties will (i) as promptly as
practicable, file or supply, or cause to be filed or supplied with all
relevant Governmental Authorities and other Persons, all applications,
notifications and information required to be filed or supplied by it
pursuant to Applicable Law or any contract or agreement in connection
with this Agreement and the consummation of the transactions
contemplated hereby, (ii) promptly provide Purchaser with copies of all
such filings and inform Purchaser of any written communications
received from any Governmental Authority or other Person in connection
with the Company Required Consents, (iii) as promptly as practicable,
use reasonable efforts to obtain, or cause to be obtained, all Company
Required Consents, (iv) coordinate and cooperate with Purchaser in
obtaining the consent described in Section 7.2(i), (v) coordinate and
cooperate with Purchaser in exchanging such information and supplying
such assistance as may be reasonably requested by Purchaser in
connection with any notices, filings or other actions required to be
made or taken by Purchaser in connection with this Agreement, and (vi)
promptly notify Purchaser in writing, at any time before the Closing
Date, of any fact, condition, event, or occurrence of which it has
Knowledge that will or could reasonably result in the failure of any of
the conditions contained in Section 7.1 or Section 7.2 to be satisfied;
and
(b) Purchaser will (i) as promptly as practicable, file
or supply, or cause to be filed or supplied with all relevant
Governmental Authorities and other Persons, all applications,
notifications and information required to be filed or supplied by it
pursuant to Applicable Law or any contract or agreement in connection
with this Agreement and the consummation of the transactions
contemplated hereby, (ii) promptly provide the Seller Parties with
copies of all such filings and inform the Seller Parties of any
communications received from any Governmental Authority or other Person
in connection with the Purchaser Required Consents, (iii) as promptly
as practicable, use reasonable efforts to obtain, or cause to be
obtained, all Purchaser Required Consents, (iv) coordinate and
cooperate with the Seller Parties in obtaining the consent described in
Section 7.2(i), (v) coordinate and cooperate with the Seller Parties in
exchanging such information and supplying such assistance as may be
reasonably requested by the Seller Parties in connection with any
notices, filings or other actions required to be made or taken by the
Seller Parties in connection with this Agreement, and (vi) promptly
notify the Seller Parties in writing, at any time before the Closing
Date, of any fact, condition, event, or occurrence of which Purchaser
becomes aware that will or could reasonably result in the failure of
any of the conditions contained in Section 7.1 or Section 7.2 to be
satisfied.
6.3 Confidentiality; Announcements.
(a) Subject to Section 6.3(b), for a period of three (3)
years following the date of this Agreement, the Parties will keep the
terms and conditions of this Agreement and of the transactions
contemplated hereby confidential, and the Seller Parties and their
Affiliates shall keep confidential all information related to the
Company or the Subsidiary and their business and no Party will, nor
will it permit any Affiliate to, make any public announcement in
respect of this Agreement or the transactions contemplated hereby
without the prior written consent of the other Parties; provided,
however, that trade secrets included in the Intellectual Property of
the Company or the Subsidiary shall be
42
kept confidential indefinitely; provided further that the foregoing
confidentiality and non-disclosure obligations will not apply to any
Party to the extent that (i) disclosure of such information is
reasonably necessary to consummate the transactions contemplated
hereby, (ii) disclosure of such information is required pursuant to
Applicable Law (including the Exchange Act and the rules and policies
of the New York Stock Exchange), or an order of any Governmental
Authority, (iii) disclosure of such information is reasonably necessary
for such Party to enforce its rights under this Agreement or any other
agreement or instrument delivered by or to such Party pursuant to this
Agreement, or (iv) such information is already in the public domain
other than as a result of a breach of this Section 6.3(a) or any other
confidentiality or non-disclosure obligation owed to any Party by any
Person (including any other Party); provided further that to the extent
feasible, prior to disclosing any such information to a Third Party
pursuant to clause (i) or (iii) above, a Party shall notify the other
Parties of the proposed disclosure and use its commercially reasonable
efforts to obtain from the Third Party reliable assurance that such
information will be accorded confidential treatment.
(b) With respect to any initial public announcement of
the consummation of the transactions contemplated hereby, the Parties
will use their reasonable best efforts to reach agreement on the
contents and timing thereof and, with respect to any subsequent
announcement, through the six-month anniversary of the Closing Date, or
any announcement relating to any litigation brought by Minority
Shareholders, at any time, each Party will (i) consult with the other
Parties with respect to the contents of such announcement, (ii) provide
the other Parties reasonable opportunity to comment thereon, and (iii)
use reasonable efforts to incorporate any such comments. However, such
requirements for cooperation will not serve to delay any Party from
making any such required public announcement within any specific time
period mandated by Applicable Law or otherwise on a timely basis.
6.4 Tax Matters.
(a) Filing of Tax Returns for Periods Through Closing
Date.
(i) The Seller Parties will accurately complete
and file or cause to be completed and filed on a timely basis
all (A) affiliated, combined, consolidated or unitary Tax
Returns that include the Seller Parties or any of their
Affiliates, and (B) Tax Returns of the Company or the
Subsidiary, for any taxable period that ends on or before the
Closing Date. For all periods that end on or before the
Closing Date, Parent will include the Company and the
Subsidiary in Parent's consolidated federal income Tax
Return(s). Parent will include the income of the Company and
the Subsidiary (including any deferred items triggered into
income under Treasury Regulation Section 1.1502-13 and any
excess loss account taken into income under Treasury
Regulation Section 1.1502-19) on Parent's consolidated federal
income Tax Returns for all periods falling within the
Pre-Closing Tax Period. All income Tax Returns to be filed by
the Seller Parties pursuant to this Section 6.4(a)(i) will be
prepared and filed in a manner consistent with the Seller
Parties' prior practice, except for accounting method changes
that do not relate to any Company or Subsidiary Tax Return
item and except as required by any change in
43
Applicable Law. The Seller Parties shall use reasonable
efforts to consult Purchaser if the Seller Parties propose to
file a Tax Return pursuant to this Section that includes a tax
position not previously taken if such action could have a
material adverse impact on Purchaser, any Affiliate of
Purchaser, the Company or the Subsidiary.
(ii) Purchaser will, except to the extent that
such Tax Returns are the responsibility of the Seller Parties
pursuant to Section 6.4(a)(i), prepare or cause to be
prepared, and timely file or cause to be timely filed, all Tax
Returns of the Company or the Subsidiary with respect to
Straddle Periods. At least ten (10) days prior to the due date
for the payment of a Tax with respect to a Straddle Period,
Purchaser shall deliver to the Seller Parties a written
calculation of the Seller Parties' share of such Tax (in
accordance with Section 6.4(b)) and the Tax Return relating to
such Tax, and at least five (5) days prior to the due date for
payment of such Tax, the Seller Parties will pay Purchaser the
amount of Taxes shown on such Tax Returns that relate to the
portion of the Straddle Period through the end of the Closing
Date (as determined in accordance with Section 6.4(b));
provided, however, that the failure of Purchaser to make such
timely delivery shall not relieve the Seller Parties of any of
their obligations with respect to Taxes and indemnity
obligations therefor under the Tax Provisions, except to the
extent that the Seller Parties are actually prejudiced
thereby. Purchaser's calculation of the Seller Parties' share
of such a Tax for a Straddle Period shall be subject to
approval of the Seller Parties.
(iii) Purchaser will cause the Company and the
Subsidiary to file income Tax Returns or will include the
Company and the Subsidiary in Purchaser's affiliated,
combined, unitary or consolidated income Tax Returns, for all
periods other than periods ending on or before the Closing
Date.
(b) Straddle Period. With respect to any Straddle
Period, the amount of any Taxes payable by or attributable to the
Company and the Subsidiary based on or measured in whole or in part by
income or receipts of the Company and the Subsidiary for the
Pre-Closing Tax Period will be determined based on an interim closing
of the books as of the close of business on the Closing Date (and for
such purpose, the taxable period of any partnership or other
pass-through entity in which the Company or the Subsidiary holds a
beneficial interest will be deemed to terminate at such time). The
amount of other Taxes attributable to or payable by the Company or the
Subsidiary for a Straddle Period which relates to the Pre-Closing Tax
Period will be deemed to be the amount of such Tax for such Straddle
Period multiplied by a fraction, the numerator of which is the number
of days in the taxable period ending on (and including) the Closing
Date and the denominator of which is the number of days in such
Straddle Period.
(c) Tax Indemnification.
(i) The Seller Parties shall pay or cause to be
paid, shall be jointly and severally liable for, and shall
indemnify, defend and hold Purchaser and its Affiliates
(including the Company and the Subsidiary after the Closing
Date)
44
harmless from and against any and all (A) Taxes of the Company
and the Subsidiary for any Pre-Closing Tax Period, (B) Taxes
of the Seller Parties imposed on the Company or the Subsidiary
under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Tax law) by reason of the
Company or the Subsidiary having been a member of any
affiliated, consolidated, combined, or unitary group on or
before the Closing Date, (C) any liability for Taxes as a
result of transferee or successor liability or under any Tax
Sharing Agreement, (D) any liability for Taxes as a result of
any breach of any representation or warranty made by the
Seller Parties in Section 4.9, and (E) Transfer Taxes
resulting from the transactions contemplated by this Agreement
pursuant to Section 6.4(j).
(ii) Payment in full of any amount due from the
Seller Parties under this Section 6.4(c) shall be made to
Purchaser in immediately available funds at least two (2)
Business Days before the date payment of the Taxes to which
such payment relates is due, or, if no Tax is payable, within
fifteen (15) days after written demand is made for such
payment.
(d) Tax Contests.
(i) If any Taxing Authority asserts a Tax Claim,
then the Party hereto first receiving notice of such Tax Claim
shall promptly provide written notice thereof to the other
Party or Parties hereto; provided, however, that the failure
of such Party to give such prompt notice shall not relieve the
other Party of any of its obligations with respect to Taxes
and indemnity obligations therefor under the Tax Provisions,
except to the extent that the other Party is actually
prejudiced thereby. Such notice shall specify in reasonable
detail, to the extent known, the basis for such Tax Claim and
shall include a copy of the relevant portion of any
correspondence received from the Taxing Authority.
(ii) The Seller Parties shall have the right and
obligation to control, at their own expense, any audit,
examination, contest, litigation or other proceeding by or
against any Taxing Authority (a "Tax Proceeding") in respect
of the Company or the Subsidiary for any taxable period that
ends on or before the Closing Date; provided, however, that,
in the event of any Tax Claim in excess of One Thousand
Dollars ($1,000), (A) the Seller Parties shall provide
Purchaser with a timely and reasonably detailed account of
each stage of such Tax Proceeding, (B) the Seller Parties
shall use reasonable efforts to consult with Purchaser before
taking any significant action in connection with such Tax
Proceeding, (C) the Seller Parties shall use reasonable
efforts to consult with Purchaser and offer Purchaser an
opportunity to comment before submitting any written materials
prepared or furnished in connection with such Tax Proceeding,
(D) the Seller Parties shall defend such Tax Proceeding
diligently and in good faith as if they were the only party in
interest in connection with such Tax Proceeding, (E) Purchaser
shall be entitled to participate, at its own expense, in such
Tax Proceeding and receive copies of any written materials
relating to such Tax Proceeding received from the relevant
Taxing Authority, and (F) the Seller
45
Parties shall not settle, compromise or abandon any issues
relating to such Tax Proceeding, if such action could have a
materially adverse impact on Purchaser or any Affiliate of
Purchaser (including the Company and the Subsidiary after the
Closing Date), without obtaining the prior written consent of
Purchaser.
(iii) In the case of a Tax Proceeding for a
Straddle Period of the Company and the Subsidiary, Purchaser
shall have the right to control, at its own expense, such Tax
Proceeding; provided, however, that (A) Purchaser shall
provide the Seller Parties with a timely and reasonably
detailed account of each stage of such Tax Proceeding, (B)
Purchaser shall use reasonable efforts to consult with the
Seller Parties before taking any significant action in
connection with such Tax Proceeding, (C) Purchaser shall use
reasonable efforts to consult with the Seller Parties and
offer the Seller Parties an opportunity to comment before
submitting any written materials prepared or furnished in
connection with such Tax Proceeding, (D) Purchaser shall
defend such Tax Proceeding diligently and in good faith as if
it were the only party in interest in connection with such Tax
Proceeding, (E) the Seller Parties shall be entitled to
participate, at their own expense, in such Tax Proceeding and
receive copies of any written materials relating to such Tax
Proceeding received from the relevant Taxing Authority, and
(F) Purchaser shall not settle, compromise or abandon any such
Tax Proceeding, if such action could have a materially adverse
impact on the Seller Parties or any Affiliate of the Seller
Parties, without obtaining the prior written consent of the
Seller Parties.
(e) Purchaser Consolidated Returns. Notwithstanding any
other provision of this Agreement, (i) Purchaser shall be entitled to
control in all respects, and none of the Seller Parties, nor any
Affiliate of the Seller Parties shall be entitled to participate in,
any Tax Proceeding with respect to any affiliated, consolidated,
combined or unitary Tax Return that includes Purchaser, and (ii)
Purchaser and its Affiliates shall not be required to provide any
Person with any affiliated, consolidated, combined or unitary Tax
Return or copy thereof that includes Purchaser (provided, however, that
to the extent that such Tax Returns would be required to be delivered
but for this Section 6.4(e), the person that would be required to
deliver such Tax Returns shall instead deliver pro forma Tax Returns
relating solely to the Company or the Subsidiary).
(f) Seller Party Consolidated Returns. Notwithstanding
any other provision of this Agreement, (i) the Seller Parties shall be
entitled to control in all respects, and neither Purchaser nor any of
its Affiliates shall be entitled to participate in, any Tax Proceeding
with respect to any affiliated, consolidated, combined or unitary Tax
Return that includes the Seller Parties, and (ii) the Seller Parties
shall not be required to provide any Person with any affiliated,
consolidated, combined or unitary Tax Return or copy thereof that
includes the Seller Parties (provided, however, that to the extent that
such Tax Returns would be required to be delivered but for this
subsection (ii) of Section 6.4(f), the person that would be required to
deliver such Tax Returns shall instead deliver pro forma Tax Returns
relating solely to the Company and/or the Subsidiary).
46
(g) Cooperation. Each Party hereto shall provide to the
other Party hereto such cooperation, documentation and information as
either of them reasonably may request in (i) filing any Tax Return,
amended Tax Return or claim for refund, (ii) determining a liability
for Taxes or an indemnity obligation therefor under the Tax Provisions
or a right to refund of Taxes, (iii) conducting any Tax Proceeding,
(iv) determining an allocation of Taxes between a Pre-Closing Tax
Period and Post-Closing Tax Period or (v) understanding the financial
and tax accounting of the Seller Parties for the Company and the
Subsidiary with respect to any Pre-Closing Tax Period or Straddle
Period. Such cooperation, documentation and information shall include
providing copies of all relevant portions of relevant Tax Returns,
together with all relevant portions of relevant accompanying schedules
and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property and other
information, which any such Party may possess or control. Each Party
will retain all Tax Returns, schedules and work papers, and all
material records and other documents relating to Tax matters, of the
relevant entities for their respective Tax periods ending on or prior
to the Closing Date until the later of (x) the expiration of the
statute of limitations for the Tax periods to which the Tax Returns and
other documents relate or (y) eight (8) years following the due date
(without extension) for such Tax Returns. Thereafter, the Party holding
such Tax Returns or other documents may dispose of them after offering
the other Party reasonable notice and opportunity to take possession of
such Tax Returns and other documents at such other Party's own expense.
Each Party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
(h) Tax Sharing Agreements. Anything in any other
agreement to the contrary notwithstanding, all liabilities and
obligations between the Seller Parties or any of their Affiliates
(other than the Company or the Subsidiary) on the one hand and the
Company or the Subsidiary on the other hand, under any Tax Sharing
Agreement in effect prior to the Closing Date (other than this
Agreement) that are not paid or satisfied at or prior to the Closing
shall cease and terminate as of the Closing Date as to all past,
present and future taxable periods.
(i) Tax Treatment.
(i) The Seller Parties, the Company, and the
Subsidiary, and each of their respective Affiliates shall
treat any and all payments under Sections 2.7(d), 6.4(c),
6.4(k), or Article 9 as an adjustment to the Purchase Price to
the maximum extent permitted by applicable Tax laws.
(ii) Neither Purchaser nor the Seller Parties
shall make or file any election under Code Section 338(h)(10)
(or any similar provision of the law of any state or other
taxing jurisdiction) with respect to the sale of the Company
Shares (or the acquisition of shares in the Subsidiary)
pursuant to this Agreement. For purposes of all Tax Returns
and other applicable filings, the Seller Parties and Purchaser
will report the transactions contemplated hereby as a sale of
the Company Shares.
47
(j) Survival of Obligations. Notwithstanding anything in
this Agreement to the contrary, (i) the obligations of the Parties set
forth in the Tax Provisions with respect to Taxes and indemnity
obligations therefor shall not be subject to any restrictions or
limitations of any kind other than as expressly set forth in the Tax
Provisions and shall survive the Closing, and (ii) the representations
and warranties in Section 4.9 with respect to Taxes and indemnity
obligations therefor shall survive, until thirty (30) days after the
expiration of all applicable statutes of limitations (giving effect to
any extensions or waivers thereof).
(k) Transfer Taxes. All Transfer Taxes that are payable
or that arise as a result of the consummation of the transactions
contemplated by this Agreement shall be borne by the Seller Parties.
The Seller Parties will prepare any Tax Returns that must be filed in
connection with any Transfer Taxes and will provide a copy to Purchaser
for its comment and approval.
(l) Approvals, Consents, etc. To the extent that the law
places such responsibility on Purchaser and solely to the extent set
forth on Schedule 6.4(l), Purchaser shall obtain material approvals,
Consents, licenses, Permits, waivers or authorizations relating to
Taxes or Tax Returns, and shall make filings with respect thereto, in
connection with the consummation of the transactions contemplated by
this Agreement. Except as provided pursuant to the preceding sentence,
the Seller Parties shall obtain all material approvals, Consents,
licenses, Permits, waivers or authorizations relating to Taxes or Tax
Returns, and shall make all filings with respect thereto, in connection
with the consummation of the transactions contemplated by this
Agreement.
(m) Dispute Resolution. In the event that the Seller
Parties and Purchaser disagree as to the amount or calculation of any
payment to be made under this Agreement relating to Taxes, or the
interpretation or application of any provision under this Agreement
relating to Taxes, the Parties shall attempt in good faith to resolve
such dispute. If such dispute is not resolved within sixty (60) days
following the commencement of the dispute, the Seller Parties and
Purchaser shall jointly retain a nationally recognized law or
accounting firm, which firm is independent of both Parties (the
"Independent Firm"), to resolve the dispute. The Independent Firm shall
act as an arbitrator to resolve all points of disagreement and its
decision shall be final and binding upon all Parties involved.
Following the decision of the Independent Firm, the Seller Parties and
Purchaser shall each take or cause to be taken any action necessary to
implement the decision of the Independent Firm. The fees and expenses
relating to the Independent Firm shall be borne fifty percent (50%) by
the Seller Parties and fifty percent (50%) by Purchaser.
(n) Coordination. Notwithstanding anything in this
Agreement to the contrary, in the event there is a conflict between the
Tax Provisions and any other provision contained in this Agreement, the
Tax Provisions shall control.
48
6.5 Employment Matters.
(a) The Company and the Subsidiary are and have been in
material compliance with all notice and other requirements under the
WARN Act. The Seller Parties shall not, and shall cause the Company and
the Subsidiary not to, at any time ninety (90) days before the Closing
Date, without complying fully with the notice requirements and other
requirements of the WARN Act, effectuate (i) a "plant closing" as
defined in the WARN Act affecting any site of employment or one or more
facilities or operating units within any site of employment of the
Company or the Subsidiary; or (ii) a "mass layoff" as defined in the
WARN Act affecting any site of employment of the Company or the
Subsidiary. In addition, the Seller Parties hereby agree to jointly and
severally indemnify Purchaser and to defend and hold Purchaser harmless
from and against any and all claims, losses, damages, expenses,
obligations and liabilities (including costs of collection, attorney's
fees and other costs of defense) which Purchaser may incur in
connection with any suit or claim of violation brought against
Purchaser under the WARN Act, which relates to actions taken by the
Company or the Subsidiary with regard to any site of employment or one
or more facilities or operating units within any site of employment of
the Company or the Subsidiary prior to the Closing Date.
(b) On or before the Closing Date, the Seller Parties
shall cause the Company to provide a list to Purchaser of the name and
site of employment of any and all of the employees of the Company and
the Subsidiary who have experienced, or will experience, an "employment
loss" under the WARN Act within the ninety (90) days prior to the
Closing Date. Purchaser agrees that, following the Closing, it will
cause the Company and the Subsidiary to maintain the employment of a
sufficient number of the Company's and the Subsidiary's employees so as
to preclude any requirement for the giving by the Company or the
Subsidiary or any of its Affiliates before the Closing of any layoff,
closing or other termination notice pursuant to the provisions of the
WARN Act.
(c) Effective not later than immediately before the
Closing, the Seller Parties shall (i) cause to be transferred to the
Company or the Subsidiary any assets held (other than assets held by
the Company, the Subsidiary, or any of their subsidiaries) on or after
the date hereof in any account where such assets are earmarked or
reserved for the payment of benefits under a Benefit Plan and (ii)
cause the Company or the Subsidiary to be treated as the sole settlor
of any trust whose assets are earmarked or reserved for the payment of
benefits under a Benefit Plan with all of the rights presently held by
any settlor thereunder.
6.6 Payment of Company and Subsidiary Debt Obligations. On or
before the Closing Date, the Seller Parties shall cause the Company or the
Subsidiary to pay or cause to be paid and discharged all outstanding
indebtedness of the Company and the Subsidiary for borrowed money, but excluding
any indebtedness of the Subsidiary to the Company or of the Company to the
Subsidiary; provided, however, that, unless otherwise expressly provided herein,
the Seller Parties will have no obligation to pay or discharge or cause to be
paid or discharged (i) any current account payable or other current liability of
the Company or the Subsidiary that is taken into account in the calculation of
the Net Working Capital Adjustment, (ii) any real estate lease or capital lease
obligation of the Company or the Subsidiary, or (iii) any guaranty, surety,
49
indemnity or similar obligation or other covenant or performance obligation of
the Company or the Subsidiary that arises under or in connection with any
contract (including any Material Contract) to which the Company or the
Subsidiary is party, by which the Company or the Subsidiary is bound or under
which the Company or the Subsidiary receives a direct benefit in connection with
the conduct of the Company's or the Subsidiary's business (other than any
contract or obligation identified on Schedule 6.6). For the avoidance of doubt,
on or before the Closing Date, the Seller Parties shall cause the Company to pay
or cause to be paid and/or discharged all indebtedness identified on Schedule
6.6.
6.7 No Solicitation.
(a) From the date hereof through the Closing, none of the
Seller Parties, their Affiliates nor their respective representatives
(including investment bankers, attorneys and accountants) shall,
directly or indirectly, enter into, solicit, initiate or continue any
discussions or negotiations with, or encourage or respond to any
inquiries or proposals by, or participate in any negotiations with, or
provide any information to, or otherwise cooperate in any other way
with, any Person, concerning any sale of all or a portion of the
Company or the Subsidiary, or of any shares of capital stock of the
Company or the Subsidiary or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Company or the
Subsidiary, except the Preliminary Merger (each such transaction being
referred to herein as a "Proposed Acquisition Transaction") other than
with (i) Purchaser and its representatives, or (ii) as required by
Applicable Law. None of the Seller Parties, the Company nor any of
their Affiliates shall, directly or indirectly, through any officer,
director, employee, representative, agent or otherwise, solicit,
initiate or encourage the submission of any proposal or offer from any
Person (including a "person" as defined in Section 13(d)(3) of the
Exchange Act) relating to any Proposed Acquisition Transaction. Each of
the Seller Parties represents that neither it nor the Company nor the
Subsidiary is directly or indirectly now engaged in discussions or
negotiations with any Person other than Purchaser with respect to any
of the foregoing.
(b) The Seller Parties shall promptly notify Purchaser if
any discussions or negotiations are sought to be initiated, any inquiry
or proposal is made, or any information is requested with respect to
any Proposed Acquisition Transaction and notify Purchaser of the
identity of the prospective purchaser or soliciting party and any other
information relating to such inquiry or proposal Known to the Seller
Parties, subject to any confidentiality agreements to which the Seller
Parties, the Company or the Subsidiary are party as of the date of the
Exclusivity Agreement, dated as of April 13, 2004, between Purchaser
and El Dorado.
6.8 Non-Competition; No Solicitation of Employees.
(a) Each of the Seller Parties agrees that effective upon
the Closing it will not, for a period of five (5) years following the
Closing Date, either directly or indirectly, through any subsidiary or
otherwise, engage in any business similar to or which competes with the
business of the Company or the Subsidiary as conducted as of the date
hereof and the Closing Date, including, but not limited to, the
licensing of, and manufacture and sale of products incorporating, the
New Cask Technology.
50
(b) For a period of two (2) years following the Closing
Date, none of the Seller Parties or their subsidiaries shall, directly
or indirectly, solicit for employment or otherwise solicit the services
of any of the officers, senior managers or key employeeS of the Company
or the Subsidiary as of the Closing Date; provided, however, that this
non-solicitation covenant shall not cover any officer, senior manager,
or key employee (i) terminated or otherwise released by the Company or
the Subsidiary from the date of such termination or release or (ii) who
contacts any of the Seller Parties or their subsidiaries on his or her
own initiative and without any solicitation by any of the Seller
Parties or their subsidiaries.
6.9 Termination of Affiliate Contracts. Except as set forth on
Schedule 6.9 and except as agreed to in writing by the Seller Parties and
Purchaser, all contracts, agreements or arrangements between the Company or the
Subsidiary, on the one hand, and any Affiliates of the Company or the
Subsidiary, on the other, including any agreements or understandings (written or
oral) with respect thereto, shall terminate simultaneously with the Closing
without any further action or liability on the part of the parties thereto or be
terminated by the Seller Parties and other parties thereto on or prior to the
Closing Date.
6.10 Change of Control Arrangements.
(a) Prior to the Effective Time, the Seller Parties shall
cause the Company and/or the Subsidiary (as applicable) to amend the
Second Amended Employment Agreement, dated July 1, 2004, with ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, to provide that, as of the Effective Time, one of the Seller
Parties, and not the Company or the Subsidiary, shall be liable to ▇▇.
▇▇▇▇▇▇ for any 2004 Retention Bonus (as defined therein) and for any
Incentive and any Bonus Incentive (each as defined therein) payable
thereunder in connection with the consummation of the transactions
contemplated by this Agreement, and the Seller Parties shall make such
payment pursuant to the Amended Employment Agreement, as so amended.
(b) Purchaser shall be responsible and shall pay or shall
cause the Company or the Subsidiary to pay any severance-related
Liabilities of the Company and the Subsidiary to officers and Employees
of the Company and the Subsidiary that arise under the Employment
Contracts after the Closing, including any severance-related
Liabilities arising from the resignations or terminations required by
Section 2.5(j) hereof.
6.11 Access to Company and Subsidiary Information. Upon reasonable
notice and subject to Applicable Laws and any confidentiality obligations, the
Seller Parties shall cause the Company and the Subsidiary to afford to the
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives (collectively, "Representatives")
of Purchaser reasonable access, during normal business hours throughout the
period prior to the Closing Date, to all of the Company's and the Subsidiary's
properties, books, contracts, commitments and records and, during such period,
the Seller Parties shall cause the Company and the Subsidiary to furnish
promptly to Purchaser and its Representatives, (a) access to each report,
schedule and other document filed or received by the Company or the Subsidiary
pursuant to the requirements of Applicable Laws or filed with or sent to any
Governmental Authority and (b) access to all information concerning the Company
or the Subsidiary and their
51
directors and officers and such other matters as may be reasonably requested by
the Purchaser or its Representatives in connection with any filings,
applications or approvals required or contemplated by this Agreement or for any
other reason related to the transactions contemplated by this Agreement.
Purchaser shall, and shall cause its Representatives to, hold in confidence all
documents and information concerning the Company or the Subsidiary furnished to
it in connection with the transactions contemplated by this Agreement. The
Seller Parties shall reasonably cooperate with Purchaser's integration planning
efforts. Without limiting the scope of the cooperation obligation related to Tax
matters under Section 6.4(g), after the Closing Date, the Seller Parties shall
provide Purchaser such supplementary information or documents as Purchaser, the
Company or the Subsidiary may reasonably request in order to understand the
records and information of the Company and the Subsidiary as of the Effective
Time.
6.12 Use of Company and Subsidiary Name After the Closing. From and
as of the Closing and continuing indefinitely thereafter, the Seller Parties and
their Affiliates shall not use the name "NAC" or "Nuclear Assurance Corporation"
or any similar variation thereof in any business venture or activity. Nothing
herein will prohibit the Seller Parties from using the names "NAC" or "Nuclear
Assurance Company" in any announcements or other descriptions of the
transactions contemplated in this Agreement or in Tax Returns or other filings
with Governmental Authorities.
6.13 Parent Support Obligations.
(a) Purchaser acknowledges that Parent has entered into
certain guarantee and indemnity obligations in support of the Company's
and/or the Subsidiary's obligations to certain of its customers,
certain of which parent support obligations are described on Schedule
6.13 (the "Parent Support Obligations"). At the Closing, Purchaser and
Parent shall enter into an indemnification agreement substantially in
the form set forth in Exhibit C to this Agreement (the "Indemnification
Agreement"), pursuant to which Purchaser shall agree to indemnify
Parent for up to $2 million of any liabilities incurred by Parent under
the Parent Support Obligations arising out of the performance of the
Company's and/or the Subsidiary's obligations under the applicable
customer contracts after the Closing (each such payment an "Indemnity
Payment").
(b) Following the Closing, neither the Company nor the
Subsidiary will utilize the General Agreement of Indemnity, dated March
1, 2001, by and between United States Fire Insurance Company, Parent,
the Company and the Subsidiary (the "US Fire Indemnity Agreement") for
any purpose other than to support that certain Agreement, dated April
27, 1999 between the Subsidiary and APS (as agent for the participants
in the Arizona Nuclear Power Project) for Supply of Transportable Dry
Spent Fuel Storage System (Contract No. 500219319) (the "APS
Agreement") (which does not include, for purposes of this Agreement,
the amendments thereof dated July 12, 2004 and June 9, 2004). When the
Subsidiary has received notice of final acceptance of all of its work
under the APS Agreement, Purchaser and the Seller Parties promptly will
take all steps necessary to cause the US Fire Indemnity Agreement to be
terminated and provide Parent with evidence satisfactory to Parent of
such termination, and Parent will have no further obligation
thereunder. When the Subsidiary has received notice of final acceptance
of all of its work under the UMS Hardware Supply Agreement (as such
term is defined in that
52
certain Amended and Restated Parent Guarantee, dated April 22, 2003, by
Parent for the benefit of Maine Yankee Atomic Power Company (the "Maine
Yankee Guarantee")), Purchaser and the Seller Parties promptly will
take all steps necessary to cause the Maine Yankee Guarantee to be
terminated and provide Parent with evidence satisfactory to Parent of
such termination, and Parent will have no further obligation
thereunder.
(c) The Seller Parties shall cause the reimbursement and
indemnity agreements of the Company and the Subsidiary to the Seller
Parties set forth on Schedule 4.7 and relating to the Parent Support
Obligations to terminate effective as of the Closing Date.
ARTICLE 7
CONDITIONS FOR CLOSING
7.1 Conditions to Obligations of the Seller Parties. The
obligation of the Seller Parties to consummate the transactions contemplated by
this Agreement will be subject to the fulfillment (or waiver by the Seller
Parties in their sole discretion) of the following conditions on or prior to the
Closing Date:
(a) the representations and warranties of Purchaser
contained in this Agreement that are qualified by materiality will be
true, accurate and complete, and the representations and warranties of
Purchaser contained in this Agreement that are not so qualified will be
true, accurate and complete in all material respects, in each case as
of the date hereof and on and as of the Closing Date with the same
effect as though made at such time, except for changes expressly
contemplated by this Agreement and except for any particular
representation or warranty that specifically addresses matters only as
of a particular date (which will remain true as of such date);
(b) Purchaser will have duly performed and complied in
all material respects with all of its covenants, obligations and
agreements required by this Agreement to be performed or complied with
by Purchaser on or before the Closing Date;
(c) no Applicable Law will have been enacted or made
effective and no order, judgment, decree or decision of any
Governmental Authority will have been issued or made that serves to
restrain, enjoin or prohibit the consummation of the transactions
contemplated hereby, and no Proceeding will have been commenced and be
continuing that seeks to restrain, enjoin or prohibit the consummation
of the transactions contemplated hereby;
(d) Purchaser will have obtained the Purchaser Required
Consents, the failure of which to obtain would prevent, materially
delay or materially impair Purchaser's ability to consummate the
transactions contemplated by this Agreement; and
(e) the Seller Parties will have received the
deliverables required to be made to them pursuant to Section 2.6.
7.2 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement will be
subject to the fulfillment
53
(or waiver by Purchaser in its sole discretion) of the following conditions on
or prior to the Closing Date:
(a) the representations and warranties of the Seller
Parties contained in this Agreement that are qualified by materiality
will be true, accurate and complete, and the representations and
warranties of the Seller Parties contained in this Agreement that are
not so qualified will be true, accurate and complete in all material
respects, in each case as of the date hereof and on and as of the
Closing Date with the same effect as though made at such time, except
for changes expressly contemplated by this Agreement and except for any
particular representation or warranty that specifically addresses
matters only as of a particular date (which will remain true as of such
date);
(b) the Seller Parties will have duly performed and
complied in all material respects with all of their covenants,
obligations and agreements required by this Agreement to be performed
or complied with by the Seller Parties on or before the Closing Date;
(c) no Applicable Law will have been enacted or made
effective and no order, judgment, decree or decision of any
Governmental Authority will have been issued or made that serves to
restrain, enjoin or prohibit the consummation of the transactions
contemplated hereby, no Proceeding will have been commenced and be
continuing that seeks to restrain, enjoin or prohibit the consummation
of the transactions contemplated hereby, and no antitrust agency shall
have threatened to restrain, enjoin or prohibit the consummation of the
transactions contemplated hereby or impose terms or conditions that
would reasonably be expected to have a Material Adverse Effect (which
would be deemed to include the divestiture, or placement in trust or
similar arrangement, of the Company, the Subsidiary or any material
assets or business thereof);
(d) no event, occurrence, fact, condition, change,
development, or circumstance will have occurred since the date of this
Agreement which has or would reasonably be expected to have a Material
Adverse Effect;
(e) the Seller Parties will have obtained the Company
Required Consents, the failure of which to obtain would have or would
be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect;
(f) Purchaser will have obtained the Purchaser Required
Consents, the failure of which to obtain would prevent, materially
delay or materially impair Purchaser's ability to consummate the
transactions contemplated by this Agreement;
(g) Purchaser will have received the deliverables
required to be made to it pursuant to Section 2.5;
(h) the Company or Subsidiary key employees identified on
Schedule 7.2(h) shall have entered into retention/confidentiality/non-
compete agreements with the Company and/or the Subsidiary substantially
in the form set forth in Exhibit D with such economic terms as are
disclosed by Purchaser to the Seller Parties;
54
(i) the DOE and the NRC, or their respective staffs,
shall have consented, or Purchaser shall have otherwise obtained
adequate assurance to its sole satisfaction that there is no objection
by the DOE or the NRC, or their respective staffs, to the operation by
the Subsidiary of the Nuclear Materials Management and Safeguards
System database ("NMMSS") after the Closing Date, on such terms and
conditions, if any, which would not have or reasonably be expected to
have a Material Adverse Effect (it being understood that terms or
conditions which materially impact the economic benefit of the
operation by the Subsidiary of NMMSS after the Closing Date, or that
require the divestiture, or placement in trust or similar arrangement,
of the Company, the Subsidiary or any material assets or business
thereof, would be deemed to be a Material Adverse Effect);
(j) no Proceeding will have been commenced, and be
continuing, by or on behalf of a Minority Shareholder or relating to
the Preliminary Merger which has or would reasonably be expected to
have a Material Adverse Effect or a material adverse effect on
Purchaser or the transactions contemplated hereby; and
(k) Purchaser shall be reasonably satisfied that there
has not been, and there is not reasonably likely to be, a materially
adverse development with respect to the NRC licensing of the New Cask
Technology, including the timing of completion thereof.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written agreement of the Seller Parties and
Purchaser;
(b) by the Seller Parties or Purchaser, by written notice
to the other, if the transactions contemplated hereby have not been
consummated pursuant hereto by 5:00 p.m. (New York, New York time) on
the date that is ninety (90) days from the date hereof (the "Initial
Termination Date"), unless the failure to close is due to the failure
of the notifying Party to perform or comply with any of the covenants,
agreements, or conditions hereof to be performed or complied with by it
prior to the Closing Date; provided, however, that, if on the Initial
Termination Date, the condition to Closing set forth in Section 7.2(e),
Section 7.2(f) or Section 7.2(i) shall not have been fulfilled but all
other conditions to the Closing shall have been fulfilled or shall be
capable of being fulfilled, and the applicable Parties are diligently
pursuing fulfillment of the condition, then the Initial Termination
Date shall be extended for an additional thirty (30) day period;
(c) by the Seller Parties, by written notice to
Purchaser, if there shall have been a material breach of any
representation or warranty, or a material breach of any covenant or
agreement of Purchaser hereunder, which breach would prevent,
materially delay or materially impair Purchaser's ability to consummate
the transactions contemplated by this Agreement, and such breach shall
not have been remedied within
55
thirty (30) days after receipt by Purchaser of notice in writing from
the Seller Parties, specifying the nature of such breach and requesting
that it be remedied;
(d) by Purchaser, by written notice to the Seller
Parties, if there shall have been a material breach of any
representation or warranty, or a material breach of any covenant or
agreement of the Seller Parties hereunder, which breach would result in
a Material Adverse Effect, and such breach shall not have been remedied
within thirty (30) days after receipt by the Seller Parties of notice
in writing from Purchaser, specifying the nature of such breach and
requesting that it be remedied; or
(e) by the Seller Parties or Purchaser, by written notice
to the other, if any Applicable Law is adopted or issued, which has the
effect, as supported by the written opinion of outside counsel for such
Party, of prohibiting the Closing, or by any Party if any court of
competent jurisdiction in the United States or any state shall have
issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the Closing, and such order, judgment or
decree shall have become final and nonappealable.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 8.1, this Agreement will become
void and have no effect, without any Liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any Party, or any of
their directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except, in connection with a termination
pursuant to Section 8.1(c) or Section 8.1(d), for any Liability resulting from
such Party's breach of this Agreement. For the avoidance of doubt, the Parties
agree that, in the event this Agreement is terminated because the transactions
contemplated hereby do not close solely because the condition to closing set
forth in Section 7.2(h) has not been fulfilled, no Party shall have any
Liability to another Party if the Seller Parties shall have used their
commercially reasonable efforts to cause the fulfillment of such condition.
Notwithstanding the foregoing, the provisions of Section 6.3, this Section 8.2,
and Article 10, and the definitions herein applicable to any of such provisions,
will survive termination of this Agreement indefinitely or until the earlier
specified time referred to in such provision.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
9.1 Survival. All representations, warranties, covenants and
obligations of the Seller Parties and Purchaser contained in this Agreement will
survive the Closing and the consummation of the transactions contemplated
hereby, subject to the provisions of Section 9.5. The waiver by the Seller
Parties or Purchaser of any of their respective conditions for Closing based
upon the accuracy of any representation or warranty of the other Party, or on
the performance of or compliance with any covenant or obligation of the other
Party, will not affect the right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants and obligations.
9.2 Indemnification By the Seller Parties. Subject to the
limitations set forth in this Article 9 and in Section 10.14, the Seller Parties
hereby covenant and agree that, to the fullest extent permitted by Applicable
Law, they will, jointly and severally, defend, indemnify and hold
56
harmless Purchaser, its Affiliates (which, after the Closing, will include the
Company, the Subsidiary and their respective successors) and its and their
respective officers, directors, employees and agents (collectively, the
"Purchaser Indemnitees") for, from and against any and all claims, Liabilities,
obligations, losses, fines, penalties, costs, interest, amounts paid in
settlement of claims, Proceedings, deficiencies or damages (whether absolute,
accrued, conditional, or otherwise) including any out-of-pocket expenses and
reasonable attorneys' fees incurred in the investigation or defense of any of
the same or in asserting any of their respective rights hereunder (each
individually, a "Loss" and collectively, "Losses"), whether or not involving a
Third Party Claim against any Purchaser Indemnitee, resulting from or arising
out of:
(a) any breach or inaccuracy of any representation or
warranty made by any of the Seller Parties in this Agreement or any
other agreement and instrument to be executed and delivered by it
pursuant hereto;
(b) any breach by any Seller Party of any of its
covenants or obligations hereunder or under any other agreement and
instrument to be executed and delivered by it pursuant hereto;
(c) the Preliminary Merger or any action initiated by
Minority Shareholders prior to or after the Closing; and/or
(d) any Reserve Shortfall pursuant to Section 9.7.
9.3 Indemnification by Purchaser. Subject to the limitations set
forth in this Article 9 and in Section 10.14, Purchaser hereby covenants and
agrees that, to the fullest extent permitted by Applicable Law, it will defend,
indemnify and hold harmless each of the Seller Parties, its Affiliates (which,
before the Closing, will include the Company, the Subsidiary and their
respective successors) and its and their respective officers, directors,
employees and agents (collectively, the "Seller Indemnitees") for, from and
against, and to pay or reimburse the Seller Indemnitees for, any and all Losses,
whether or not involving a Third Party Claim against any Seller Indemnitee,
resulting from or arising out of:
(a) any breach or inaccuracy of any representation or
warranty made by Purchaser in this Agreement or any other agreement and
instrument to be executed and delivered by it pursuant hereto;
(b) any breach by Purchaser of any of its covenants or
obligations hereunder or under any other agreement and instrument to be
executed and delivered by it pursuant hereto;
(c) the conduct by Purchaser, directly or indirectly,
(including through the Company or the Subsidiary) of the businesses of
the Company and the Subsidiary following the Closing; and/or
(d) any Reserve Excess pursuant to Section 9.7.
In no event shall the Seller Parties seek to enforce the foregoing indemnities
(or any other provision of this Agreement) with respect to Losses suffered by
their Affiliates pursuant to the
57
performance by the Company and the Subsidiary of contracts between the Company
and/or the Subsidiary and the Seller Parties' Affiliates, including APS. All
such Losses shall be addressed under the terms of such contracts or Applicable
Law.
9.4 Limitations on Indemnification Claims. Neither the Seller
Parties nor Purchaser will have any Liability pursuant to Section 6.5(a),
Section 9.2 or Section 9.3, as applicable, unless the aggregate amount of Losses
otherwise subject to its, or, in the case of the Seller Parties, taken together,
their, indemnification obligations thereunder exceeds Two Hundred Thousand
Dollars ($200,000) (the "Claim Threshold"), whereupon such Party shall be liable
for all Losses exceeding the Claim Threshold, subject to the further limitations
of this Agreement; provided, however, that in determining the Liability for any
breach of representation, warranty, covenant or agreement under this Agreement,
all references to a materiality or similar qualifier or Material Adverse Effect
shall be disregarded; and provided further that the Claim Threshold shall not
apply with respect to any breach by the Seller Parties of their representations
and warranties in Section 3.4, Section 4.4 or Section 4.5, Section 4.6(c) or
their covenants in Section 2.7 or Section 6.10(a), with respect to any breach by
Purchaser of its representations and warranties in Section 5.8 or its covenants
in Section 2.7, Section 6.10(b) or Section 6.13, or with respect to any
Liability arising pursuant to Section 9.2(c). Notwithstanding the foregoing or
any other provision of this Agreement other than the Tax Provisions:
(a) the Seller Parties will not have any indemnification
liability under this Agreement in respect of any Loss to the extent
that such Loss is covered by insurance held by Purchaser or any
Affiliate thereof (which, following the Closing, will include the
Company and the Subsidiary and their respective successors), and
Purchaser will not have any indemnification liability under this
Agreement in respect of any Loss to the extent that such Loss is
covered by insurance held by the Seller Parties or any Affiliate
thereof (which, following the Closing, will exclude the Company and the
Subsidiary and their respective successors); provided, however, that
(i) to the extent the insurance company denies coverage, such Loss
shall not be deemed to be "covered" by insurance and (ii) a Loss shall
not be deemed to be "covered" by insurance to the extent of any
applicable deductible or self-insurance retention;
(b) a Purchaser Indemnitee or Seller Indemnitee (as the
case may be) will be required to undertake reasonable efforts to
mitigate any Loss in respect of which a claim for indemnification is
made or in respect of which the amount of such Loss is added (or
permitted to be added) to the Claim Threshold; provided, however, that
a Purchaser Indemnitee or Seller Indemnitee (as the case may be) shall
not be required pursuant hereto to incur any material costs or
prosecute or defend any Proceeding;
(c) the aggregate Liability of the Seller Parties for all
Losses claimed by Purchaser Indemnitees under Section 6.5(a), Section
9.2(a), Section 9.2(b) (other than for breach of the Seller Parties'
obligations under Section 6.10(a)) or Section 9.2(d) will not exceed an
amount equal to thirty-five percent (35%) of the Purchase Price;
provided, however, that the aggregate liability of the Seller Parties
for all Losses claimed by Purchaser Indemnitees as a result of any
violation of Section 3.2, Section 4.4, or Section 4.5 will not exceed
an amount equal to the Purchase Price; and
58
(d) the aggregate liability of Purchaser for all Losses
claimed by Seller Indemnitees under Section 9.3(a), Section 9.3(b)
(other than for breach of Purchaser's obligations under Section 6.10(b)
or Section 6.13) or Section 9.3(d) will not exceed an amount equal to
thirty-five percent (35%) of the Purchase Price; provided, however,
that the aggregate liability of Purchaser for all Losses claimed by
Seller Indemnitees as a result of any violation of Section 5.2 will not
exceed an amount equal to the Purchase Price.
9.5 Timing of Indemnification Claims. No Purchaser Indemnitee will
be entitled to recover under an indemnification claim against the Seller Parties
under Section 6.5(a) or Section 9.2, and no Seller Indemnitee will be entitled
to recover under an indemnification claim against Purchaser under Section 9.3,
unless such claiming Person has delivered to the applicable indemnifying Party
written notice of such claim for indemnification within the following applicable
claims period (each, a "Claims Period"):
(a) with respect to any indemnification claim arising out
of (i) the breach by any Party of any representation, warranty,
covenant or agreement relating to such Party's authority and/or ability
to enter into this Agreement and each other agreement and instrument to
be executed and delivered by it pursuant hereto and consummate the
transactions contemplated hereby or thereby, (ii) the breach by the
Seller Parties of any representation, warranty or covenant regarding El
Dorado's title to the Company Shares or the Company's title to the
Subsidiary Shares, and their ability to transfer the same to Purchaser,
free and clear of all Liens, (iii) any fraudulent act or willful
misrepresentation by any Party with respect to this Agreement and/or
the transactions contemplated hereby, and (iv) the conduct by Purchaser
(directly or indirectly) of the businesses of the Company and the
Subsidiary following the Closing, the Claims Period will commence on
the date of the Closing and continue until thirty (30) days after
expiration of the limitation period applicable thereto under the
applicable statute of limitations;
(b) with respect to any indemnification claim arising out
of the breach by the Seller Parties of any of their covenants in
Section 6.8 and Section 6.12, the Claims Period will commence on the
date of the Closing and continue until thirty (30) days after the
expiration of the period specified in such provision;
(c) with respect to any indemnification claim arising out
of the breach by the Seller Parties or Purchaser of any other
representation, warranty, covenant or agreement in this Agreement or in
any agreement, instrument or other document executed and delivered
pursuant hereto, the Claims Period will commence on the date of the
Closing and continue until the second (2nd) anniversary of the Closing
Date; provided, however, that, with respect to any indemnification
claim arising out of the breach by the Seller Parties of any of their
representations and warranties in Section 4.12(c), the Claims Period
will commence on the date of the Closing and continue until the third
(3rd) anniversary of the Closing Date.
Notwithstanding the foregoing, if prior to 5:00 p.m. (New York time) on the last
day of the applicable Claims Period, the Party against which an indemnification
claim has been made hereunder has been properly notified in writing of such
claim for indemnity hereunder and such
59
claim has not been finally resolved or disposed of as of such date, then such
claim will continue to survive and will remain a basis for indemnity hereunder
until such claim is finally resolved or disposed of in accordance with the terms
of this Agreement.
9.6 Third-Party Claim Procedures.
(a) Promptly after receipt by a Seller Indemnitee or a
Purchaser Indemnitee, as the case may be (an "Indemnitee") of notice of
the assertion of a Third-Party Claim against it, such Indemnitee will
give prompt notice to the Party obligated to indemnify such Indemnitee
under Section 9.2 or Section 9.3 as the case may be (each, an
"Indemnitor") of the assertion of such Third-Party Claim, provided,
however, that the failure to so notify the Indemnitor will not relieve
the Indemnitor of any liability that it may have to such Indemnitee,
except to the extent that the Indemnitor demonstrates that the defense
of such Third-Party Claim was materially prejudiced by the Indemnitee's
failure to give such prompt notice.
(b) If an Indemnitee gives notice to an Indemnitor
pursuant to Section 9.6(a) of the assertion of a Third-Party Claim, the
Indemnitor will be entitled to participate in the defense of such
Third-Party Claim (at its sole cost) and, subject to Section 9.6(c), to
assume control of the defense of such Third-Party Claim with counsel
reasonably satisfactory to the Indemnitee. After notice from the
Indemnitor to the Indemnitee of its election to assume the defense of
such Third-Party Claim, the Indemnitor will not, so long as it
diligently conducts such defense, be liable to the Indemnitee under
Section 9.2 or 9.3 (as applicable) 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 Indemnitee in connection with
the defense of such Third-Party Claim, other than reasonable costs of
investigation. If the Indemnitor 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 as provided
herein, and (ii) no compromise or settlement of such Third-Party Claims
may be effected by the Indemnitor or will be binding on the Indemnitee
without the Indemnitee's prior written consent (not to be unreasonably
withheld or delayed), unless (A) there is no finding or admission of
any violation of law or of the rights of any Person, (B) an
unconditional term thereof is the release from all Liability with
respect to such claim to each Indemnitee that is the subject of such
Third-Party Claim, except as provided in clause (C), and (C) the sole
relief provided is monetary damages that are paid in full by the
Indemnitor. If notice is given by an Indemnitee to an Indemnitor of the
assertion of any Third-Party Claim and the Indemnitor does not, within
ten (10) Business Days after the Indemnitee's notice is given, give
notice to the Indemnitee of its election to assume the defense of such
Third-Party Claim, the Indemnitee will be entitled, to the Indemnitor's
exclusion and at the Indemnitor's cost, to fully assume the defense of
such Third-Party Claim, and the Indemnitor will be bound by any
determination made in such Third-Party Claim or any compromise or
settlement effected by the Indemnitee in respect thereof.
(c) Notwithstanding the foregoing provisions of this
Section 9.6, the Indemnitee may require that the Indemnitor not assume
or maintain control of, or actively
60
participate in (in which case, the Indemnitor will not assume, maintain
control of or actively participate in) the defense of, a Third Party
Claim against the Indemnitee if (i) the Indemnitor is also a Person
against whom the Third-Party Claim is made and the Indemnitee
determines in good faith that joint representation of the Indemnitor
and Indemnitee would be inappropriate, (ii) the Indemnitee requests,
and the Indemnitor fails to provide, reasonable assurance to the
Indemnitee of the Indemnitor's financial capacity to defend such
Third-Party Claim and to provide indemnification with respect thereto,
or (iii) the Indemnitee determines in good faith that there is a
reasonable probability that the Third-Party Claim may adversely affect
it or its Affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this Agreement. In
any of these events, the Indemnitee may, by written notice to the
Indemnitor, assume the exclusive right to defend, compromise or settle
such Third-Party Claim, but the Indemnitor will not be bound by any
compromise or settlement of such Third-Party Claim for the purposes of
this Agreement without its prior written consent to such compromise or
settlement.
(d) Each of the Seller Parties and Purchaser hereby
consents, to the extent that it is an Indemnitor in respect of a
Third-Party Claim, to the nonexclusive jurisdiction of any court or
arbitration panel in which a Proceeding in respect of such Third-Party
Claim is brought against any Indemnitee for purposes of any claim that
an Indemnitee may have under this Agreement with respect to such
Proceeding or the matters alleged therein, and agrees that process may
be served on any Indemnitor with respect to such a claim anywhere in
the world.
(e) With respect to any Third-Party Claim subject to
indemnification under Section 9.2 or Section 9.3, (i) the Indemnitee(s)
and the Indemnitor(s), as the case may be, will keep the other(s) fully
informed of the status of such Third-Party Claim and any related
actions or proceedings at all stages thereof, 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.
(f) With respect to any Third-Party Claim subject to
indemnification under Section 9.2 or Section 9.3, the Parties agree to
cooperate in such a manner as to preserve to the greatest extent
possible the confidentiality of all confidential and proprietary
information of the Parties and the attorney-client and work-product
privileges as between the Parties and their respective legal advisors.
In connection therewith, each Party agrees that (i) it will use all
reasonable efforts in respect of any Third-Party Claim in which it
assumes or participates in the defense to avoid production of
confidential and proprietary information (consistent with Applicable
Law and rules of procedure), and (ii) all communications between each
Party and counsel responsible for or participating in the defense of
any Third-Party Claim will, to the greatest extent possible, be made so
as to preserve any applicable attorney-client or work-product
privilege.
(g) With respect to any Third-Party Claim subject to
indemnification under Section 9.2(c), reasonable expenses (including
attorneys' fees) incurred by the Indemnitee
61
in connection therewith shall be paid by the Indemnitor as they are
incurred in advance of the final disposition of such Third-Party Claim.
9.7 Reserve Indemnity. If, within three (3) years of the Closing
Date, pursuant to any audit or review by any Governmental Authority in
connection with the Government Contracts set forth on Schedule 4.12(c), the
Company or the Subsidiary shall be required to make any payment or payments for
possible overcharges or potentially disputed or unallowable costs with respect
to work performed or costs incurred under such Government Contracts as of the
Closing Date in excess of the Reserve Amount plus any additional amounts
reserved between the date hereof and the Closing Date in respect thereof (the
"Additional Reserves"), then the Seller Parties shall indemnify Purchaser for
such excess amount (the "Reserve Shortfall"), subject to Section 9.4(c) and the
Claim Threshold. If, however, after such three-year period has expired, amounts
so payable by the Company or the Subsidiary, if any, are less than the Reserve
Amount plus the Additional Reserves, then Purchaser shall remit to the Seller
Parties for the difference between the amounts actually paid and the Reserve
Amount plus the Additional Reserves (the "Reserve Excess"), subject to Section
9.4(d) and the Claim Threshold. The Claims Period for claims pursuant to this
Section 9.7 will commence on the date of the Closing and continue until thirty
(30) days after the third anniversary of the Closing Date. Purchaser shall use
its commercially reasonable efforts to defend the position of the Company or the
Subsidiary, as the case may be, in connection with any such audit or review by a
Governmental Authority and, upon the written request of either of the Seller
Parties, will promptly provide the Seller Parties with reasonable information
regarding the scope or status of any such audit or review.
9.8 Exclusive Remedy. Except to the extent provided in Section
10.2, from and after the Closing, the indemnification obligations and remedies
set forth in this Article 9 will be the sole and exclusive remedy of the Seller
Parties and Purchaser with respect to the matters for which indemnification may
be sought pursuant to this Article 9, except in the event of fraud. Without
limiting the generality of the foregoing, no Proceeding based upon predecessor
or successor liability, contribution, tort or strict liability, in each case
except to the extent such claim is based on fraud, may be maintained by the
Seller Parties or Purchaser against the other with respect to the matters for
which indemnification is provided pursuant to this Article 9. Notwithstanding
anything to the contrary contained in this Article 9, the representations,
warranties, covenants, agreements, obligations, indemnities, and time limits
pertaining to matters addressed in the Tax Provisions shall be governed solely
as provided therein.
ARTICLE 10
MISCELLANEOUS
10.1 Expenses. Except as otherwise expressly provided in this
Agreement, the Seller Parties and Purchaser will bear their respective expenses,
costs and fees (including attorneys' and other advisors' fees) in connection
with the transactions contemplated hereby, including the preparation, execution,
and delivery of this Agreement and the other agreements and instruments to be
entered into pursuant hereto and the preparation and filing of any notices or
applications with respect to required Consents, whether or not the transactions
contemplated hereby are consummated.
62
10.2 Specific Performance. The Parties hereby acknowledge and
agree that the rights of each Party to consummate the transactions contemplated
hereby are special, unique and of extraordinary character, and that if any Party
refuses or otherwise fails to consummate the sale and purchase of the Company
Shares as contemplated herein (other than as permitted by the provisions
hereof), such refusal or failure would result in irreparable injury to the other
Party, the exact amount of which would be difficult to ascertain or estimate and
the remedies at law for which would not be reasonable or adequate compensation.
Accordingly, if any Party refuses or otherwise fails to consummate the sale and
purchase of the Company Shares as contemplated herein (other than as permitted
by the provisions hereof), then, in addition to any other remedy which may be
available to the other Party at law or in equity, such other Party will be
entitled to seek specific performance and injunctive relief, without posting
bond or other security, and without the necessity of proving actual or
threatened damages, which remedy such Party will be entitled to seek in any
court of competent jurisdiction.
10.3 Severability. If any provision of this Agreement, or the
application of any such provision to any Person or circumstance, is held to be
unenforceable or invalid by any Governmental Authority or arbitrator or under
any Applicable Law, the Parties will negotiate an equitable adjustment to the
provisions of this Agreement with the view to effecting, to the greatest extent
possible, the original purpose and intent of this Agreement, and in any event,
the validity and enforceability of the remaining provisions of this Agreement
will not be affected thereby.
10.4 Notices. All notices, requests, demands, claims and other
communications required or permitted to be given or made hereunder must be in
writing. Any notice, request, demand, claim, or other communication hereunder
will be deemed duly given and received (i) if personally delivered, when so
delivered, (ii) if mailed, five (5) Business Days after having been sent by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, (iii) if sent through an
overnight delivery service in circumstances to which such service guarantees
next day delivery, the next Business Day following being so sent, and (iv) if
sent by electronic facsimile, once such notice or other communication is
transmitted to the fax number specified below and the appropriate printed
confirmation of transmission is received, provided that such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (ii) above or sent by overnight delivery service in accordance with
clause (iii) above:
(a) If to the Seller Parties, addressed to:
El Dorado Investment Company
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
Mail Station 9988
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
63
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
One Arizona Center
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) If to Purchaser, addressed to:
USEC Inc.
2 Democracy Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including electronic mail), but no such notice,
request, demand, claim or other communication will be deemed to have been duly
given or received unless and until it actually is received by the Party for
which it is intended and the notifying Party can provide evidence of such actual
receipt. Any Party may change its address or fax number for the receipt of
notices, requests, demands, claims and other communications hereunder by giving
each other Party notice of such change in the manner herein set forth.
10.5 Dispute Resolution. Subject to the provisions of Section 10.2,
any dispute or difference between the Parties arising out of or in connection
with this Agreement or the transactions contemplated hereby, including any
dispute between an Indemnitee and any Indemnitor under Article 9, which the
Parties are unable to resolve themselves will be submitted to and resolved by
arbitration before a single arbitrator, for amounts in dispute under One Million
Dollars ($1,000,000), and otherwise before a panel of three (3) arbitrators,
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, as supplemented or modified by the provisions of this Section 10.5.
The arbitrator(s) will consider the dispute at issue in New York, New York
within one hundred twenty (120) days (or such other period as may be acceptable
to the Parties) of the designation of the arbitrator. The arbitrator(s) will be
bound to follow the laws of the State of Delaware, decisional and statutory, in
reaching any decision and making any award and will deliver a written award,
including written findings of fact and conclusions of law, with respect to the
dispute to each of the Parties, who will promptly
64
act in accordance therewith. In no event will the arbitrator(s) have the power
to award damages in connection with any dispute in excess of actual compensatory
damages. In particular, the arbitrator(s) may not multiply actual damages or
award consequential, indirect, special or punitive damages, including damages
for lost profits or loss of business opportunity. Any award of the arbitrator(s)
will be final, conclusive and binding on the Parties; provided, however, that
any Party may seek the vacating, modification or correction of the
arbitrator(s)' decision or award as provided under Section 10 and Section 11 of
the Federal Arbitration Act 9 U.S.C. Section 1-14. Any determination made or
award rendered pursuant to the arbitration provisions of this Section 10.5 shall
be subject to Section 6.3(a) hereof. Notwithstanding the foregoing sentence, any
Party may enforce any award rendered pursuant to the arbitration provisions of
this Section 10.5 by bringing suit in any court of competent jurisdiction. All
costs and expenses attributable to the arbitrator(s) will be allocated between
the Parties in such manner as the arbitrator(s) determine to be appropriate
under the circumstances. The Parties agree that either or both of them may file
a copy of this Section 10.5 with any arbitrator or court as written evidence of
the knowing, voluntary and bargained agreement between the Parties with respect
to the subject matter of this Section 10.5. Notwithstanding anything to the
contrary contained in this Section 10.5, any dispute or difference between the
Parties relating to Taxes, or the interpretation or application of any of the
Tax Provisions, shall be resolved solely as set forth in the Tax Provisions.
10.6 Headings; Interpretation. The headings contained in this
Agreement are for purposes of convenience only and will not affect the meaning
or interpretation of this Agreement. Unless otherwise expressly indicated, any
reference in this Agreement (including any Schedule hereto) to an "Article,"
"Section," "subsection," "paragraph" or "subparagraph" followed by a number or
letter or combination of the two will be a reference to the particular Article,
Section, subsection, paragraph or subparagraph of this Agreement bearing such
number, letter or combination thereof. The terms "hereof," "herein," "hereunder"
and comparable terms refer, unless otherwise expressly indicated, to this
Agreement as a whole and not to any particular Article, Section, subsection,
paragraph, subparagraph or other subdivision hereof or any Schedule, Exhibit or
other attachment hereto. The terms "include," "includes" and "including" will be
deemed to be followed by the words "without limitation." Whenever the context so
requires, the singular number will include the plural and the plural will
include the singular, and the gender of any pronoun will include the other
gender or neuter, as applicable. Any reference in this Agreement to a particular
statute, regulation or code (including any specific provision thereof) includes
all regulations and rules thereunder, all amendments thereto in force from time
to time (including amendments to provision references) and every Applicable Law
in effect that supplements, replaces or supercedes such statute, regulation or
code. Whenever consent or approval of any Party is required pursuant to this
Agreement, unless expressly stated that such consent or approval is to be given
in the sole discretion of such Party, such consent or approval shall not be
unreasonably withheld or delayed. Unless otherwise expressly indicated, the
phrase "the transactions contemplated hereby" will be deemed to include the sale
of the Company Shares to Purchaser and the Preliminary Merger, each in
accordance with the provisions of this Agreement.
10.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire and complete agreement between the
Parties with respect to the subject matter hereof and supersedes and replaces
all prior agreements, commitments, communications,
65
representations and understandings, both written and oral, between the Parties
with respect to the subject matter hereof (including any letter of intent
between the Seller Parties and Purchaser or any of their respective Affiliates).
10.8 Governing Law, etc. This Agreement will be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the conflict of laws
rules thereof.
10.9 Binding Effect; Assignment. This Agreement will be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign its rights or delegate or cause to be
assumed its obligations hereunder without the prior written consent of the other
Parties; provided, however, that Purchaser may assign its right to purchase the
Company Shares to any Affiliate of Purchaser as long as such Affiliate agrees in
writing to be bound by the applicable terms of this Agreement and no such
assignment shall relieve Purchaser from its obligations hereunder and El Dorado
may assign its rights to receive the Purchase Price to Parent and no such
assignment shall relieve El Dorado from its obligations hereunder. Any attempted
assignment, delegation or assumption not in accordance with this Section 10.9
will be null and void and of no effect whatsoever.
10.10 No Third Party Beneficiaries. Except as provided in Article 9
with respect to indemnification of Indemnitees hereunder, nothing in this
Agreement will confer any rights upon any Person other than the Parties and
their respective successors and permitted assigns.
10.11 Amendment; Waivers, etc. No amendment, modification, or
discharge of this Agreement, and no waiver hereunder, will be valid or binding
unless set forth in writing and duly executed by the Party against whom
enforcement of the amendment, modification, discharge, or waiver is sought. Any
such waiver will constitute a waiver only with respect to the specific matter
described in such writing and will in no way impair the rights of the Party
granting such waiver in any other respect or at any other time. Neither the
waiver by any Party of a breach of or a default under any provision of this
Agreement, nor the failure by any Party, on one or more occasions, to enforce
any provision of this Agreement or to exercise any right or privilege hereunder,
will be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights, or privileges
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any Party may otherwise have at law or
in equity. The rights and remedies of any Party based upon, arising out of or
otherwise in respect of any inaccuracy or breach of any representation,
warranty, covenant, or agreement, or failure to fulfill any condition will in no
way be limited by the fact that the act, omission, occurrence, or other state of
facts upon which any claim of any such inaccuracy or breach is based may also be
the subject matter of any other representation, warranty, covenant, or agreement
as to which there is no inaccuracy or breach. The representations and warranties
of the Seller Parties will not be affected or deemed waived by reason of any
investigation made by or on behalf of Purchaser (including by any of its
advisors, consultants or representatives) or by reason of the fact that
Purchaser or any of such advisors, consultants or representatives knew or should
have known that any such representation or warranty is or might be inaccurate.
10.12 Dates and Times. Dates and times set forth in this Agreement
for the performance of the Parties' respective obligations will be strictly
construed, time being of the
66
essence of this Agreement. All provisions in this Agreement which specify or
provide a method to compute a number of days for the performance, delivery,
completion or observance by a Party of any action, covenant, agreement,
obligation or notice hereunder will mean and refer to calendar days, unless
otherwise expressly provided. If the date specified or computed under this
Agreement for the performance, delivery, completion or observance of a covenant,
agreement, obligation or notice by any Party, or for the occurrence of any event
provided for herein, is a day other than a Business Day, then the date for such
performance, delivery, completion, observance or occurrence will automatically
be extended to the next Business Day following such date.
10.13 Joint Preparation. This Agreement and each agreement or
instrument entered into by the Parties pursuant to the provisions hereof will be
considered for all purposes as having been prepared through the joint efforts of
the Parties. No presumption will apply in favor of any Party in the
interpretation of this Agreement or any such other agreement or instrument or in
the resolution of any ambiguity of any provision hereof or thereof based on the
preparation, substitution, submission or other event of negotiation, drafting or
execution hereof or thereof.
10.14 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT, IN NO EVENT WILL ANY PARTY BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING DAMAGES FOR
LOSS OF PROFITS OR BUSINESS OPPORTUNITY, INCURRED BY ANY OTHER PERSON, WHETHER
IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF THE PARTY WHO IS THE SUBJECT
OF SUCH CLAIM HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.15 Counterparts. This Agreement may be executed in several
counterparts and delivered in original form or by electronic facsimile, each of
which will be deemed an original and all of which will together constitute one
and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
67
IN WITNESS WHEREOF, the Parties have duly executed this
Stock Purchase
Agreement as of the date first above written.
SELLER PARTIES:
PINNACLE WEST CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------
Its: Executive Vice President and Chief Financial Officer
----------------------------------------------------
EL DORADO INVESTMENT
COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------
Its: Treasurer
---------
PURCHASER:
USEC INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------
Its: Sr. V.P. and C.F.O.
-------------------
68