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Asset Purchase Agreement
By And Among
Colorstrip, Inc.,
Material Sciences Corporation
And
MSC Pinole Point Steel Inc.
Dated as of November 14, 1997
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Table of Contents
Page
Article I Purchase And Sale Of Assets.................................. 1
1.1 Basic Transaction............................................ 1
1.2 Purchase Price for Purchased Assets.......................... 6
1.3 Closing...................................................... 8
1.4 Nonassignable Contracts...................................... 8
Article II Conditions To Closing........................................ 9
2.1 Conditions to Designated Buyer's Obligations................. 9
2.2 Conditions to the Seller's Obligations....................... 11
Article III Representations And Warranties Concerning Seller............. 12
3.1 Organization and Corporate Power............................. 13
3.2 Subsidiaries; Investments.................................... 13
3.3 Authorization of Transactions................................ 13
3.4 Absence of Conflicts......................................... 13
3.5 Financial Statements......................................... 13
3.6 Absence of Certain Developments.............................. 14
3.7 Personal Property............................................ 15
3.8 Real Property................................................ 15
3.9 Contracts and Commitments.................................... 17
3.10 Proprietary Rights........................................... 18
3.11 Litigation; Proceedings...................................... 19
3.12 Brokerage.................................................... 19
3.13 Governmental Licenses and Permits............................ 19
3.14 Employees.................................................... 19
3.15 Employee Benefit Plans....................................... 20
3.16 Insurance.................................................... 20
3.17 Compliance with Laws......................................... 21
3.18 Environmental Matters........................................ 21
3.19 Product Warranties........................................... 22
3.20 Product Liability; Recalls................................... 23
3.21 Absence of Undisclosed Liabilities........................... 23
3.22 Disclosure................................................... 23
3.23 Knowledge.................................................... 23
Article IV Representations And Warranties Of
MSC And Designated Buyer..................................... 23
4.1 Organization and Corporate Power............................. 23
4.2 Authorization of Transaction................................. 24
4.3 Absence of Conflicts......................................... 24
4.4 Litigation................................................... 24
4.5 Brokerage.................................................... 24
4.6 Availability of Financing.................................... 24
4.7 Liability Categories......................................... 24
4.8 Inventory.................................................... 25
ASSET PURCHASE AGREEMENT Page ii
Article V Termination.................................................. 25
5.1 Termination.................................................. 25
5.2 Effect of Termination........................................ 26
Article VI Indemnification And Related Matters.......................... 26
6.1 Survival..................................................... 26
6.2 Indemnification.............................................. 26
Article VII Pre-Closing Covenants........................................ 30
7.1 General...................................................... 30
7.2 Notices and Consents......................................... 30
7.3 Operation of Business........................................ 30
7.4 Preservation of Business..................................... 31
7.5 Full Access.................................................. 31
7.6 Notice of Developments....................................... 31
7.7 Title Insurance.............................................. 31
7.8 Surveys...................................................... 32
7.9 Customer, Supplier and Employee Contact...................... 32
7.10 Expenses..................................................... 32
Article VIII Certain Environmental Matters................................ 32
8.1 Definitions.................................................. 32
8.2 Phase II Audits.............................................. 33
8.3 Seller's Responsibility for On-Site Environmental Matters.... 34
8.4 Buyer's Responsibility for On-Site Environmental Matters..... 34
8.5 Shared Responsibility for On-Site Environmental Matters...... 34
8.6 Reimbursement................................................ 35
8.7 Remedial Action.............................................. 35
Article IX Other Agreements............................................. 35
9.1 Continuing Assistance........................................ 35
9.2 Tax Matters.................................................. 36
9.3 Press Releases and Announcements............................. 37
9.4 Further Assurances........................................... 37
9.5 Confidentiality.............................................. 37
9.6 Change of Corporate Name and Trade Name...................... 38
9.7 Real Property Adjustments.................................... 38
9.8 Agreements Regarding Certain Labor Matters................... 38
9.9 MSC Obligation............................................... 39
9.10 Certain Uses of Proceeds..................................... 40
9.11 Maintenance of Net Worth; Stockholder Guaranties............. 40
Article X Certain Payments And Fees.................................... 41
10.1 Initial Payment into Escrow.................................. 41
10.2 Delay Fees................................................... 42
10.3 Break-up Fees................................................ 43
10.4 Topping Fee.................................................. 44
ASSET PURCHASE AGREEMENT Page iii
Article XI Miscellaneous................................................ 44
11.1 Amendment and Waiver......................................... 44
11.2 Notices...................................................... 44
11.3 Binding Agreement; Assignment................................ 45
11.4 Severability................................................. 46
11.5 No Strict Construction....................................... 46
11.6 Captions..................................................... 46
11.7 Entire Agreement............................................. 46
11.8 No Third-Party Beneficiaries................................. 46
11.9 Counterparts................................................. 46
11.10 Governing Law................................................ 47
11.11 Waiver Of Jury Trial......................................... 47
11.12 Consent To Jurisdiction...................................... 47
11.13 Attorneys' Fees.............................................. 47
11.14 Aid to Interpretation........................................ 48
ASSET PURCHASE AGREEMENT Page iv
Index of Exhibits
Exhibit A Form of Promissory Note
Exhibit B Form of Shareholder Guaranty
Exhibit C Capital Expenditures Schedule
Exhibit D Intentionally Omitted
Exhibit E Purchase Price Allocation Schedule
Exhibit F Consulting Agreement
Exhibit G Seller's Certificate
Exhibit H Buyer's Certificate
Exhibit I Opinion of Seller's Counsel
Exhibit J Opinion of Buyer's Counsel
Exhibit K Intentionally Omitted
Exhibit L Real Property Adjustments
Exhibit M Audited Financial Statements
Exhibit N Unaudited Financial Statements
Exhibit O Escrow Agreement
Exhibit P [Intentionally Omitted]
Exhibit Q Shareholder Guaranties
Exhibit R Designated Buyer's Reports
Index of Schedules
Schedule 1.1(a)(i) Purchased Assets - List of Categories
Schedule 1.1(b)(xii) Certain Excluded Assets
Schedule 1.1(c)(i) Assumed Liabilities - List of Categories
Schedule 1.1(d)(xviii) Excluded Liabilities
Schedule 1.2(c) Working Capital Accounts
Schedule 2.1 Required Consents
Schedule 3.4 Absence of Conflicts
Schedule 3.6 Absence of Certain Developments
Schedule 3.7 Personal Property
Schedule 3.8(a) Owned Real Property
Schedule 3.8(b) Leased Real Property
Schedule 3.9 Contracts and Commitments
Schedule 3.10 Proprietary Rights
Schedule 3.11 Litigation; Proceedings
Schedule 3.12 Brokerage
Schedule 3.13 Governmental Licenses and Permits
Schedule 3.14 Employees
Schedule 3.15 Employee Benefit Plans
Schedule 3.16 Insurance
Schedule 3.18 Environmental Matters
Schedule 3.19 Product Warranties
Schedule 3.20 Product Liability; Recalls
Schedule 3.23 Due Diligence "Knowledge" Individuals
Schedule 4.7 MSC Liability Categories
Schedule 7.3 Extraordinary Actions
Schedule 8.2(a) Scope of Environmental Work
Schedule 8.2(b) Listing of Environmental Consultants Approved by B of A
Schedule 9.8 Arbitration Procedures
ASSET PURCHASE AGREEMENT Page v
Index of Defined Terms
Adjustments................................................................. 38
Affiliated Group............................................................ 4
Agreement................................................................... 1
Alleged Harassment Action................................................... 38
Apportioned Obligations..................................................... 36
Apportionment Claims........................................................ 39
Approved Capital Expenditures............................................... 7
Assumed Contracts........................................................... 2
Assumed Liabilities......................................................... 3
Benefit Plans............................................................... 20
Business.................................................................... 1
Buyer Break-up Fee.......................................................... 43
Buyer Delay Fee............................................................. 42
Buyer Indemnified Parties................................................... 26
Buyer Indemnifying Parties.................................................. 28
Buyer Starting Date......................................................... 42
Cap......................................................................... 27
CERCLA...................................................................... 5
Closing..................................................................... 8
Closing Approved Capital Expenditures....................................... 7
Closing Capital Expenditure Statement....................................... 7
Closing Date................................................................ 8
Closing Working Capital Balance............................................. 7
Closing Working Capital Statement........................................... 7
COBRA....................................................................... 20
Code........................................................................ 37
Confidential Information.................................................... 37
Consent Decree.............................................................. 4
Consulting Agreement........................................................ 10
Controlled Group............................................................ 20
Deductible.................................................................. 28
Designated Buyer............................................................ 1
Designated Buyer Parcel..................................................... 11
Designated Buyer's Phase II Audit Report.................................... 34
Designated Buyer's Phase II Audit........................................... 34
Environmental and Safety Requirements....................................... 22
Environmental Lien.......................................................... 22
Environmental Losses........................................................ 32
Environmental Matters....................................................... 33
ERISA....................................................................... 20
Escrow Account.............................................................. 41
Escrow Agent................................................................ 41
Escrow Amount............................................................... 41
Excluded Assets............................................................. 2
Excluded Employees.......................................................... 2
Excluded Liabilities........................................................ 4
Final Purchase Price........................................................ 6
GE.......................................................................... 40
Government Consents......................................................... 9
Governmental Entity......................................................... 2
HSR Act..................................................................... 10
Improvements................................................................ 16
Indemnified Party........................................................... 29
Indemnifying Party.......................................................... 29
Independent Accountants..................................................... 8
Intangible Property......................................................... 2
Knowledge................................................................... 23
Known On-Site Environmental Matters......................................... 33
Latest Balance Sheet........................................................ 13
Leased Properties........................................................... 16
Lender...................................................................... 40
Letter of Credit............................................................ 6
Lien........................................................................ 15
Loss(es).................................................................... 26
▇▇▇▇........................................................................ 2
Material Adverse Effect..................................................... 9
Matters..................................................................... 33
MSC......................................................................... 1
Offsite Environmental Liabilities........................................... 5
On-Site Environmental Matters............................................... 33
Owned Real Property......................................................... 15
Party(ies).................................................................. 1
Permit...................................................................... 2
Phase II Audit.............................................................. 33
Post-Closing On-Site Environmental
Preliminary Determination Notice............................................ 34
Preliminary Purchase Price.................................................. 6
Preliminary Sampling........................................................ 33
Promissory Note............................................................. 6
Purchased Assets............................................................ 1
Release..................................................................... 22
Remedial Action............................................................. 35
Remediation Cost Threshold.................................................. 33
Remediation Costs........................................................... 33
Scope of Work............................................................... 33
Seller...................................................................... 1
Seller Break-up Fee......................................................... 43
Seller Delay Fee............................................................ 42
Seller Indemnified Parties.................................................. 28
Seller Starting Date........................................................ 42
Seller's Phase II Audit Report.............................................. 34
Seller's Phase II Audit..................................................... 33
Shareholder Guaranty........................................................ 10
Subsequent Sale Fee......................................................... 44
Survey...................................................................... 32
Tax......................................................................... 37
Tax Returns................................................................. 37
Temporary Easement.......................................................... 11
Undiscovered Post-Closing On-Site
Working Capital Balance..................................................... 7
Asset Purchase Agreement Page vi
Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is made as of
November 14, 1997, by and among Colorstrip, Inc., a California corporation
("Seller") Material Sciences Corporation, a Delaware corporation ("MSC"), and
MSC Pinole Point Steel Inc., a Delaware corporation ("Designated Buyer").
Seller, MSC and Designated Buyer are each individually referred to as a "Party"
and together as the "Parties."
Whereas, Seller operates one plant which hot dip galvanizes steel and
another plant which continuously coats steel coils located at 5000 and ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (collectively the "Business"); and
Whereas, Designated Buyer desires to acquire from Seller, and Seller
desires to sell to Designated Buyer, to the extent provided herein,
substantially all of the assets and property of Seller related to the Business
(other than Excluded Assets) in exchange for cash, a promissory note and the
assumption of certain of the liabilities of Seller.
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
Article I
Purchase And Sale Of Assets
1.1 Basic Transaction.
(a) Purchased Assets. On the terms and subject to the
conditions contained in this Agreement, on the Closing Date (as defined in
Section 1.3), Designated Buyer shall purchase from Seller, and Seller shall
sell, convey, assign, transfer and deliver to Designated Buyer, all of Seller's
right, title and interest in and to the following assets used in, useful for or
otherwise associated with the Business, but excluding all Excluded Assets
(collectively, the "Purchased Assets"):
(i) All assets of the types that are set forth on
Schedule 1.1(a)(i);
(ii) All of Seller's transferable rights and interests
arising under or in connection with any Contracts to which Seller is a
party and which relate to the Business and other documents relating to
the Business, but excluding Seller's insurance policies ("Assumed
Contracts"). "Contract" means any agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease,
license or understanding, whether or not in writing, but excluding
Seller's insurance policies;
(iii) Sales data, customer lists, other information relating
to customers, suppliers' names, mailing lists, and, if any,
advertising matter and all rights thereto relating to the Business;
Asset Purchase Agreement Page 1
(iv) All of Seller's Intangible Property and corporate names
(including without limitation "Colorstrip, Inc." and "Pinole Point
Steel Company") and Marks, including all of Seller's rights in the
corporate names and Marks in any location in the United States or in
any foreign country; all of Seller's books and records relating to the
Business, including employees other than ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Excluded Employees"); and
transferable Permits. "Intangible Property" means any trade secret,
secret process or other confidential information or know-how and any
and all Marks. "▇▇▇▇" means any brand name, copyright, patent, service
▇▇▇▇, trademark, tradename, and all registrations or applications for
registration of any of the foregoing. "Permit" means any license,
permit, franchise, certificate of authority, or order, or any waiver
of the foregoing, required to be issued by any Governmental Entity.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal,
state or local, domestic or foreign;
(v) All claims, warranties, guarantees, refunds, causes of
action, rights of action, rights of recovery, rights of offset, rights
of recoupment or insurance proceeds arising in the ordinary course of
the Business, but not those related to Excluded Assets or Excluded
Liabilities;
(vi) All loans to employees (other than the Excluded
Employees); provided, however, that notwithstanding anything to the
contrary contained herein, Seller may forgive loans to employees prior
to the Closing Date not in excess of $100,000 in the aggregate;
(vii) All rights to receive mail and other communications
addressed to Seller and relating to the Purchased Assets or Assumed
Liabilities;
(viii) all of the phone numbers (including 800 numbers) and
e-mail and internet addresses of Seller which relate to the Business;
and
(ix) all goodwill as a going concern and associated with the
Business and the Purchased Assets.
(b) Excluded Assets. Notwithstanding the provisions of Section 1.1(a),
the following assets are expressly excluded from the purchase and sale
contemplated hereby (the "Excluded Assets") and, as such, are not included in
the Purchased Assets:
(i) The consideration delivered to Seller pursuant to this
Agreement (including all cash consideration, the Promissory Note and
the proceeds thereof);
(ii) Seller's articles of incorporation, non-transferable
franchises, corporate seals, minute books, stock books and other
corporate records having to do with the corporate organization and
capitalization of Seller, Seller's insurance policies and all income
tax records and nontransferable Permits; provided, however, that
copies of such corporate and tax records and nontransferable Permits
shall be provided to Buyer at the Closing;
Asset Purchase Agreement Page 2
(iii) Seller's books of account; provided, however, that
copies of such books of account shall be provided to Buyer at the
Closing;
(iv) Any shares of the capital stock of Seller held as
treasury shares;
(v) Any Tax refund relating to any time or period ending on
or prior to the Closing Date;
(vi) all cash and cash equivalents (including, without
limitation, certificates of deposit);
(vii) Seller's rights under or pursuant to this Agreement
and the other agreements contemplated hereby;
(viii) any right to receive mail and other communications
addressed to Seller not relating to the Business, Purchased Assets or
Assumed Liabilities (which mail or other communications Designated
Buyer shall promptly forward to Seller);
(ix) the action entitled Marwais Steel v. Pacific Indemnity
and any recovery therefrom;
(x) San Francisco 49ers football tickets, rights to use the
skybox at 3Com Park (formerly Candlestick Park), and all rights to
purchase the foregoing in the future;
(xi) the company airplane;
(xii) the assets listed on Schedule 1.1(b)(xii); and
(xiii) the Marwais name and logo.
(c) Assumed Liabilities. Subject to the terms and conditions set
forth in this Agreement, in addition to the Final Purchase Price and as
additional consideration for the Purchased Assets, Designated Buyer agrees that
from and after the Closing, Designated Buyer shall assume on the Closing Date
and shall pay, perform or discharge in a timely manner, to the extent not paid,
performed or discharged by the Seller on or before the Closing, only the
following liabilities, commitments and obligations of the Business, except for
the Excluded Liabilities (the "Assumed Liabilities");
(i) all liabilities of Seller of the types that are set
forth on Schedule 1.1(c)(i).
(ii) all liabilities and obligations of the Business under
the Assumed Contracts;
Asset Purchase Agreement Page 3
(iii) any liabilities or obligations with respect to any
products that were manufactured, marketed or sold prior to the
Closing, including without limitation product liability and
infringement claims;
(iv) all liabilities or obligations of Seller Indemnified
Parties with respect to that certain Consent Decree Regarding
Injunctive and Monetary Relief for Gender and Race Hiring Claims filed
June 18, 1996 (the "Consent Decree") executed by Seller (as successor
to Pinole Point Steel Company); and
(v) all amounts payable with respect to periods after the
Closing Date on account of the Richmond Atlas Road Refunding
assessment.
(d) Excluded Liabilities. Except for the Assumed Liabilities,
Designated Buyer shall not and does not assume any of the following liabilities,
obligations or commitments of the Business, whether accrued, absolute or
contingent, whether known or unknown, whether disclosed on the Schedules to this
Agreement, whether due or to become due and whether related to the Purchased
Assets, the Business or otherwise and regardless of when or by whom asserted,
(collectively, the "Excluded Liabilities") which shall be retained and timely
discharged by Seller:
(i) any of Seller's liabilities or obligations under this
Agreement or the agreements contemplated hereby;
(ii) any of Seller's liabilities or obligations for expenses
or fees incident to or arising out of the negotiation, preparation,
approval or authorization of this Agreement or the consummation (or
preparation for the consummation) of the transactions contemplated
hereby (including all attorneys' and accountants' fees and brokerage
fees);
(iii) except as expressly contemplated herein and except for
Tax liabilities included in the Closing Working Capital Balance, any
liability or obligation of Seller for Taxes, including any liability
or obligation of Seller in respect of any amount of federal, state or
other Taxes (including interest, penalties and additions to such Taxes
and any liabilities relating to Taxes arising as a result of Seller at
any time being a member of an affiliated group (as defined in Section
1504(a) of the Code (an "Affiliated Group"));
(iv) any liabilities or obligations relating to fines or
penalties imposed by any Governmental Entity with respect to the
period prior to the Closing relating to Seller's failure to comply
with the air emission requirements of the operating permit for the
Business;
(v) any liabilities or obligations (whether or not asserted
against Seller in the first instance) arising from the offsite
treatment, storage, disposal, or arrangement for disposal of hazardous
materials, substances or wastes generated prior to, on or after the
Closing Date by Seller, including, without limitation, all liability
with respect to the foregoing arising under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended from time to time, or any state counterpart of
CERCLA ("Offsite Environmental Liabilities");
Asset Purchase Agreement Page 4
(vi) any liabilities or obligations solely in respect of any
of the Excluded Assets (including under any contracts, leases,
commitments or understandings related thereto);
(vii) any liabilities or obligations of Seller for the
vacation pay, sick pay, salary, bonuses, severance or other payments
of liabilities of any kind to the Excluded Employees and any severance
payments to any other employee with respect to a termination of
employment prior to the Closing Date;
(viii) any liability or obligation under the Benefit Plans
(other than medical insurance for union employees);
(ix) any liabilities or obligations of Seller to indemnify
its directors and officers in connection with the transactions
contemplated by this Agreement and obligations to indemnify directors,
officers, employees and agents in connection with the Excluded Assets
or other Excluded Liabilities;
(x) any liabilities or obligations of Seller, if any,
arising as a result of breaches of, or transactions entered into in
violation of, this Agreement;
(xi) any liabilities or obligations of Seller under any
Contract which would be included in the Purchased Assets but for the
provisions of Section 1.4 (except as contemplated in Section 1.4);
(xii) any liability or obligation of Seller resulting from
any claim, action, suit or proceeding brought by any shareholder of
Seller;
(xiii) any liability or obligation of Seller resulting from
any claim, action, suit or proceeding brought by any person or entity
claiming to have a right to purchase Seller or the Business (whether
by merger, sale of assets, sale of shares, recapitalization or
otherwise);
(xiv) any liability or obligation of Seller relating to the
Alleged Harassment Action (as defined herein) solely with respect to
facts and circumstances existing on or prior to the Closing;
(xv) all liabilities or obligations of Seller arising from
Seller's activities after the Closing Date;
(xvi) all liabilities or obligations of Seller in connection
with the merger of PPSC with and into Seller;
(xvii) all liabilities or obligations of Seller set forth on
Schedule 3.11; or
(xviii) all liabilities or obligations of Seller set forth
on Schedule 1.1(d)(xviii)
Asset Purchase Agreement Page 5
1.2 Purchase Price for Purchased Assets.
(a) Final Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Final Purchase Price") shall be equal to $126,670,000,
subject to increase or decrease as provided in this Section 1.2(a):
(i) The Final Purchase Price shall be increased by:
A. the amount, if any, by which the Closing Working Capital
Balance (as defined in Section 1.2(e)), as shown on the Closing
Working Capital Statement (as defined in Section 1.2(e)) exceeds
$19,150,000; and
B. the amount, if any, by which the Closing Approved
Capital Expenditures (as defined in Section 1.2(e)) as shown on the
Closing Capital Expenditure Statement (as defined in Section 1.2(e))
exceed $1,750,000;
(ii) The Final Purchase Price shall be decreased by:
A. the amount, if any, by which $18,150,000 exceeds the
Closing Working Capital Balance; and
B. the amount, if any, by which $1,750,000 exceeds the
Closing Approved Capital Expenditures.
(b) Preliminary Purchase Price. At the Closing, Designated Buyer shall
pay Seller an amount (the "Preliminary Purchase Price") equal to the Final
Purchase Price as estimated in good faith by Seller on the basis of a projected
working capital statement of Seller as of the Closing Date and a projected
capital expenditure statement of Seller as of the Closing Date, in each case
prepared in good faith by Seller and delivered to Designated Buyer not less than
five days prior to the Closing. Designated Buyer shall pay $64,082,000 of the
Preliminary Purchase Price by Designated Buyer's promissory note (the
"Promissory Note") substantially in the form of Exhibit A issued to Seller for
the assets associated with Pinole Point Steel Company's business immediately
prior to the merger with Colorstrip, Inc. and shall pay the balance in cash
(including amounts received from the Escrow contemplated in Article X as partial
payment of the purchase price) for the assets associated with the business of
Colorstrip immediately prior to its merger with Pinole Point Steel Company and
its total working capital at the Closing Date. To secure the payment of the
Promissory Note, Designated Buyer shall obtain and deliver to Seller at the
Closing a standby letter of credit (the "Letter of Credit") substantially in the
form attached to Exhibit A issued by Bank of America NT&SA or other bank
reasonably satisfactory to Seller. The Letter of Credit shall be in a face
amount equal to the principal amount of the Promissory Note plus the interest
that will be due and payable thereon assuming payment of the Promissory Note in
accordance with its terms. The Letter of Credit shall (i) be irrevocable, (ii)
expire not earlier than thirty days after the final maturity of the Promissory
Note; and (iii) permit drawing by Seller upon presentation of Seller's
certificate that Seller has not been fully paid in accordance with the terms of
the Promissory Note.
Asset Purchase Agreement Page 6
(c) Working Capital Balance. The "Working Capital Balance" of Seller
means, as of any date of determination, the excess of the current assets of
Seller set forth on Schedule 1.2(c) as of such date over the current liabilities
set forth on Schedule 1.2(c) as of such date, determined in accordance with the
GAAP but determined without taking into account any Excluded Assets or Excluded
Liabilities. "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, and as consistently applied by
Seller with respect to the accounting methods used (consistent application shall
be determined by reference to the work papers of Seller's independent
accountants relating to Seller's most recent audited financial statements);
(d) Approved Capital Expenditures. "Approved Capital Expenditures" of
Seller means (i) capital expenditures made by Seller on or after January 1, 1997
and before the Closing Date as set forth on the Capital Expenditures Schedule
attached hereto as Exhibit C and (ii) any other capital expenditures made by
Seller made on or after January 1, 1997, provided that Seller obtains the
approval of Designated Buyer as to any non-emergency capital expenditure in
excess of $25,000 and, if practicable, any emergency capital expenditure in
excess of $200,000; provided that Approved Capital Expenditures shall exclude
any expenditures by Seller required by Section 15 of the Consent Decree for
building a locker room and bathroom. If it is not practicable for Seller to
seek Designated Buyer's prior approval to an emergency capital expenditure,
Seller shall give Designated Buyer notice thereof as soon as practicable.
Designated Buyer shall approve or disapprove any non-emergency capital
expenditure within three business days and any emergency capital expenditure
within four hours after notice thereof from Seller, such approval in any case
not to be unreasonably withheld.
(e) Purchase Price Adjustment.
(i) Within 45 days after the Closing Date, Seller shall prepare
and deliver to Designated Buyer together with supporting information, and
its outside accountants will issue a report in accordance with the
standards specified in such report on the following: (A) a computation of
the Final Purchase Price and (B) a working capital statement (the "Closing
Working Capital Statement") of the Business setting forth its determination
of the Working Capital Balance as of the Closing Date (the "Closing
Working Capital Balance") and (C) a capital expenditure statement of the
Closing Date ("Closing Capital Expenditure Statement") of the Business
setting forth Approved Capital Expenditures (the "Closing Approved Capital
Expenditures"), all as defined in this Agreement. In each case (A), (B) and
(C) above, the information will be prepared in accordance with GAAP
consistent with the financial statements prepared by Seller and furnished
in accordance with Section 3.5. Within 30 days following receipt,
Designated Buyer shall notify Seller whether it accepts or disputes the
determination of the Final Purchase Price. If Designated Buyer disputes the
Final Purchase Price, Designated Buyer shall concurrently with such
notification furnish Seller with a reasonably detailed explanation in
writing of its reasons for the dispute. Seller's and Designated Buyer's
respective outside accountants shall meet to resolve the dispute. If
Seller's and Designated Buyer's respective outside accountants are not able
to resolve the dispute within 30 days, such dispute shall be referred to
Price Waterhouse or if Price Waterhouse is unavailable or unwilling to
perform such services, then an accounting firm of national reputation which
does not provide material services to either Party (the "Independent
Accountants") for resolution. The Independent Accountant's determination of
the dispute
Asset Purchase Agreement Page 7
shall be made within 30 days and shall be final and binding on the parties.
Designated Buyer and Seller shall each bear the fees and expenses of its
outside accountants, and shall evenly split the fees and expenses of the
Independent Accountants. Seller and Designated Buyer shall cooperate in the
resolution of any dispute involving the Final Purchase Price and shall
provide each other's outside accountants and the Independent Accountants
access to their respective books and records and facilities. The review by
Designated Buyer's outside accountants and the Independent Accountants will
be limited to determining whether GAAP has been followed and whether any
difference for any general ledger item exceeds by $5,000 or more Seller's
accountant's determination (any lesser difference shall be disregarded).
(ii) For purposes of determining Closing Working Capital Balance
and Closing Approved Capital Expenditures, Designated Buyer and Seller
shall jointly take a physical count of all inventory included in the
Purchased Assets as of the Closing, conducted and valued in accordance with
GAAP.
(iii) If the Final Purchase Price is greater than the
Preliminary Purchase Price, Designated Buyer shall pay the difference in
cash to Seller within three business days of the final determination of the
Final Purchase Price. If the Preliminary Purchase Price is greater than
the Final Purchase Price, Seller shall refund the difference in cash to
Designated Buyer within three business days of the final determination of
the Final Purchase Price.
(iv) The party making the payment under (iii) above shall
concurrently pay interest on such payment between the Closing Date and the
date of such payment at the annual rate set forth in the Promissory Note.
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Coblentz, Cahen,
▇▇▇▇▇▇ & Breyer, LLP, Attorneys at Law, Seventh Floor, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, commencing at 10:00 a.m. on the later of the date 30 days
following the execution and delivery of this Agreement or at such place and
date promptly following (but not more than five business days following) the
satisfaction of all conditions precedent to the Closing or at such other place
and time as may be agreed by the Parties, but in no event later than April 30,
1998. The date and time of the Closing are herein referred to as the "Closing
Date."
1.4 Nonassignable Contracts. To the extent that the assignment hereunder
by Seller to Designated Buyer of any Assumed Contract is not permitted or is not
permitted without the consent of any other party to such Assumed Contract, this
Agreement shall not be deemed to constitute an assignment of any such Assumed
Contract if such consent is not given or if such assignment otherwise would
constitute a breach of, or cause a loss of contractual benefits under, any such
Assumed Contract, and Designated Buyer shall assume no obligations or
liabilities under any such Assumed Contract until such consent is obtained.
Seller shall use its best efforts to advise Designated Buyer promptly in writing
with respect to any Assumed Contract which either Seller knows or has
substantial reason to believe will or may not be subject to assignment to
Designated Buyer hereunder. If any consent or waiver necessary for the sale,
transfer, assignment and delivery of an Assumed Contract is not obtained or if
such assignment is not permitted irrespective of consent and the Closing
hereunder is consummated, Seller shall cooperate with
Asset Purchase Agreement Page 8
Designated Buyer following the Closing Date in any reasonable arrangement
designed to provide Designated Buyer with the rights and benefits (subject to
Designated Buyer's assumption of all of the obligations and liabilities
thereunder) under any such Assumed Contract, including enforcement for the
benefit of Designated Buyer and at Designated Buyer's expense of any and all
rights of Seller against any other party arising out of any breach or
cancellation of any such Assumed Contract by such other party and, if requested
by Designated Buyer, acting as an agent on behalf of Designated Buyer or as
Designated Buyer shall otherwise reasonably require; provided that Designated
Buyer shall bear Seller's out-of-pocket expenses as such agent (and shall
advance Seller's anticipated out-of-pocket expenses).
Article II
Conditions To Closing
2.1 Conditions to Designated Buyer's Obligations. The obligation of
Designated Buyer to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) the representations and warranties set forth in Article III hereof
are true and correct at and as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout such representations and warranties, except to the extent that a
breach or breaches of such representations and warranties would not have a
material adverse effect on the Business or financial condition, results of
operations or assets of the Business, in any case taken as a whole ("Material
Adverse Effect") (disregarding (i) any such effect caused by changes in the
United States or Northern California economy or capital markets in general,
changes in the industry in which the Business operates or changes in law and
(ii) any such effect directly or indirectly resulting from contact between
Designated Buyer and Seller's labor union) and except that any such breach or
breaches discovered by Seller and disclosed to Designated Buyer shall be
disregarded if Seller has an indemnification obligation therefor under Section
6.2(a)(i)(A);
(b) Seller shall have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it under
this Agreement on or prior to the Closing, except to the extent that such
failure would not have a Material Adverse Effect;
(c) all consents by the third parties identified in Schedule 2.1 shall
have been obtained unless the goods or services provided for in the contracts
with such parties may be obtained on a commercially equivalent basis, and, with
respect to any other third party consents, except to the extent that the failure
to obtain such consent would not have a Material Adverse Effect;
(d) all governmental filings, authorizations and approvals that are
required of Seller for the transfer of the Purchased Assets to Designated Buyer
and the consummation of the transactions contemplated hereby ("Government
Consents") shall have been duly made and obtained, except Government Consents
the absence of which would not have a Material Adverse Effect;
Asset Purchase Agreement Page 9
(e) all applicable waiting periods (and any extensions thereof) under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or otherwise been terminated;
(f) no action, suit, or proceeding shall be pending or, to the Knowledge
(as defined in Section 3.23) of Seller, threatened by any Governmental Entity
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of
Designated Buyer to own, operate or control the Purchased Assets, and no
judgment, decree, injunction, order or ruling shall have been entered which has
any of the foregoing effects;
(g) ▇▇▇▇▇ ▇▇▇▇ shall have entered into a Consulting agreement (the
"Consulting Agreement"), in the form set forth in Exhibit F, and such Consulting
Agreement shall be in full force and effect concurrently with the Closing;
(h) Designated Buyer shall have received an opinion, dated the Closing
Date, of Coblentz, Cahen, ▇▇▇▇▇▇ & Breyer, LLP, counsel to Seller, in form and
substance as set forth in Exhibit I addressed to MSC and Designated Buyer;
(i) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ shall have entered into a shareholder guaranty (a
"Shareholder Guaranty"), substantially in the form of Exhibit B and such
guaranty shall be in full force and effect;
(j) on or prior to the Closing Date, Seller shall have delivered to
Designated Buyer all of the following:
(i) a certificate from the Seller in the form set forth in
Exhibit G, dated the Closing Date, stating that the preconditions specified
in Sections 2.1(a) and (b) have been satisfied;
(ii) certified copies of the resolutions duly adopted by Seller's
board of directors and shareholders authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated
hereby to which Seller is a party, and the consummation of all other
transactions contemplated hereby and thereby;
(iii) copies of all third party and Government Consents,
approvals, filings, releases and terminations required by this Agreement;
(iv) certificate of the Secretary of State of California stating
that Seller is in good standing;
(v) a recordable temporary access easement agreement ("Temporary
Easement") benefitting the Owned Real Property (hereafter defined) parcel
located in Richmond, California to be acquired by Designated Buyer (the
"Designated Buyer Parcel") and burdening Seller's adjacent parcel which
Temporary Easement shall be on mutually
Page 10
satisfactory terms and conditions (including Designated Buyer's
indemnification of Seller for claims arising from the use of the Temporary
Easement in the operation of the Business) and shall expire at such time as
the Designated Buyer Parcel has direct access to a public road; and
(vi) such other documents or instruments as Designated Buyer may
reasonably request to effect the transactions contemplated hereby.
Any condition specified in this Section 2.1 may be waived by Designated Buyer;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Designated Buyer or unless Designated Buyer agrees in
writing to consummate the transactions contemplated by this Agreement without
satisfaction of such condition.
2.2 Conditions to the Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) the representations and warranties set forth in Article IV are true
and correct in all material respects at and as of the Closing Date as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties;
(b) Designated Buyer shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement on or prior to the Closing;
(c) all Government Consents shall have been duly made and obtained,
except Government Consents the absence of which would not have a material
adverse effect on MSC's and Designated Buyer's ability to perform their
obligations under this Agreement and the other instruments and agreements
contemplated hereby;
(d) Seller shall have received an opinion dated the Closing Date from
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, MSC's and Designated Buyer's counsel in form and substance as
set forth in Exhibit J addressed to Seller and on which ▇▇▇▇▇ ▇▇▇▇ may rely in
pertinent part.
(e) all applicable waiting periods (and any extensions thereof) under
the HSR Act, shall have expired or otherwise been terminated;
(f) no action, suit or proceeding shall be pending or, to the knowledge
of Designated Buyer, threatened by any Governmental Entity before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects;
Page 11
(g) Designated Buyer shall have entered into the Consulting Agreement
and such Consulting Agreement shall be in full force and effect as of the
Closing;
(h) Designated Buyer shall have delivered a resale certificate with
respect to California sales tax on the inventory contained in the Purchased
Assets;
(i) on or prior to the Closing Date, Designated Buyer shall have
delivered to Seller all of the following:
(i) a certificate from Designated Buyer in the form set forth in
Exhibit H attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.2(a) and (b) have been satisfied;
(ii) certified copies of the resolutions duly adopted by MSC's
and Designated Buyer's respective boards of directors authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby (including without limitation the Promissory
Note and the Consulting Agreement), and the consummation of all other
transactions contemplated hereby and thereby;
(iii) copies of all third party and Government Consents,
approvals, filings, releases and terminations required by this Agreement;
(iv) certificates of the Secretary of State of Delaware that MSC
and Designated Buyer are each in good standing and of the Secretary of
State of Illinois that MSC is duly qualified and in good standing; and
(v) such other documents or instruments as Seller may reasonably
request to effect the transactions contemplated hereby.
Any condition specified in this Section 2.2 may be waived by Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Seller or unless Seller agrees in writing to consummate the
transactions contemplated by this Agreement without the satisfaction of such
condition.
Article III
Representations And Warranties
Concerning Seller
As a material inducement to Designated Buyer to enter into this Agreement,
Seller hereby represents and warrants that as of the date of this Agreement and
at the Closing Date; provided, however, that such warranty as of the Closing
Date shall not be deemed to be a covenant that the representations and
warranties will be true as of the Closing Date:
3.1 Organization and Corporate Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of California
and is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to
Page 12
qualify, except where failure to qualify would not have a Material Adverse
Effect. Seller possesses all requisite corporate power and authority and all
licenses, permits and authorizations necessary to own and operate the Purchased
Assets, to carry on the Business as now conducted and presently proposed to be
conducted and to enter into this Agreement and perform its obligations
hereunder. The copies of Seller's charter documents and bylaws which have been
furnished to Designated Buyer reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
3.2 Subsidiaries; Investments. Seller does not own or hold any rights to
acquire any shares of stock or any other security or interest in any other
person or entity, and Seller has never had any subsidiary.
3.3 Authorization of Transactions. This Agreement and all other
transactions contemplated hereby to which Seller is a party have been duly
authorized by all necessary corporate action on the part of Seller and its
shareholders. No other corporate proceedings on the part of Seller are necessary
to approve and authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Seller and constitutes the
valid and binding agreement of Seller, enforceable against Seller in accordance
with its terms.
3.4 Absence of Conflicts. Except as set forth in Schedule 3.4, Seller is
not subject to or obligated under its articles of incorporation, its bylaws, any
applicable law or rule or regulation of any governmental authority, or any
material agreement or instrument, or any material license, franchise or Permit,
or subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
3.5 Financial Statements. Attached hereto as Exhibits M and N,
respectively, are the following financial statements:
(a) the audited balance sheets of Seller and of Pinole Point Steel
Company ("PPSC") as of December 31, 1996, December 31, 1995 and December 31,
1994, and the related statements of income and cash flows (or the equivalent)
for the respective twelve-month periods then ended; and
(b) the unaudited balance sheet of Seller as of September 30, 1997 (the
"Latest Balance Sheet"), and the related pro forma combined statements of income
and cash flows (or the equivalent) for the nine-month period then ended.
All such financial statements referred to in clauses (a) and (b) have been
prepared in conformity with GAAP (except for changes, if any, disclosed
therein). Such statements of income and cash flow referred to in clauses (a)
and (b) present fairly in all material respects the results of operations and
cash flows of Seller and PPSC for the respective periods covered, and the
balance sheets referred to in clauses (a) and (b) present fairly in all material
respects the financial condition of Seller and PPSC as of their respective
dates. The unaudited statements of income and cash flows (or the equivalent) for
the nine month period ended September 30, 1997 referred to in clause (b) reflect
the operations of Seller and PPSC independently owned and operated from January
1, 1997 through July 5, 1997, and merged on July 5, 1997. Such statements to
the extent
Page 13
of the period from January 1, 1997 to July 5, 1997 have been prepared on a pro
forma combined basis, eliminating intercompany items.
3.6 Absence of Certain Developments. Except as set forth in Schedule 3.6
and except as expressly contemplated by this Agreement, since September 30,
1997, Seller has not suffered a change which could reasonably be anticipated to
have a Material Adverse Effect. Without limiting the generality of the
foregoing, since that date Seller has not taken any of the following actions
outside of the ordinary course of business:
(a) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(b) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible, exchangeable or
exercisable into any capital stock or other equity securities;
(c) borrowed any amount or consensually incurred any material
liabilities or incurred liabilities under contracts;
(d) mortgaged or pledged any of its properties or assets or subjected
them to any Lien, except Liens for current property taxes not yet due and
payable;
(e) sold, assigned or transferred any of its tangible assets or
canceled any debts or claims;
(f) sold, assigned, licensed or transferred any Intangible Property
or disclosed any Intangible Property to any person or entity;
(g) suffered any losses or waived any rights of material value;
(h) made capital expenditures or commitments other than as
contemplated by this Agreement;
(i) suffered any casualty loss exceeding in the aggregate $50,000,
whether or not covered by insurance;
(j) made any investment in or taken steps to incorporate any
subsidiary;
(k) entered into any employment agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
agreements;
(l) lost any material contracts with any customer or supplier;
(m) made any change in the Seller's charter or bylaws; or
Page 14
(n) entered into any other material transaction.
3.7 Personal Property.
(a) Seller has good and marketable title to, or a valid leasehold
interest in, the personal property used by it, located on its premises or shown
on the Latest Balance Sheet or acquired after the date thereof, free and clear
of all Liens, except for personal property disposed of in the ordinary course of
the Business since the date of the Latest Balance Sheet and except as disclosed
in Schedule 3.7. Without limiting the generality of the foregoing, Seller has
good and marketable title to all of the personal property included in the
Purchased Assets, free and clear of all Liens except as disclosed in Schedule
3.7. For purposes of this Agreement, "Lien" means any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof), any sale of receivables with recourse against Seller, any
filing or agreement to file a financing statement as debtor under the applicable
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any Seller under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of the Business).
(b) Except as set forth in Schedule 3.7, to Seller's Knowledge, the
machinery, equipment, vehicles and other personal property of Seller included in
the Purchased Assets are in good condition and repair, reasonable wear and tear
excepted, and are usable in the ordinary course of the Business. Seller owns or
leases under valid leases all machinery, equipment and other personal property
reasonably necessary for the conduct of the Business as currently conducted.
3.8 Real Property.
(a) Schedule 3.8(a) lists and describes briefly all real property
that Seller owns (the "Owned Real Property"). With respect to each such parcel
of Owned Real Property:
(i) Seller has good and marketable title to the parcel of real
property, free and clear of any Lien, easement, covenant, or other
restriction, except for "Permitted Encumbrances" which means installments
of real property taxes not yet due and payable, recorded easements,
covenants, and other restrictions, and utility easements, building
restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character which
do not adversely affect the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting materially and adversely the
current use, occupancy, or value thereof;
Page 15
(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, each such parcel is
independently assessed for real property tax purposes, the buildings are
improvements are located within the boundary lines of the described parcels
of land, are not in material violation of applicable setback requirements,
zoning laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and do not encroach
on any easement which may burden the land;
(iv) to Seller's Knowledge, all facilities have received all
approvals of Governmental Entities (including material licenses and
permits) required in connection with the ownership or operation thereof,
and have been operated and maintained in accordance with applicable laws,
rules, and regulations in all material respects;
(v) except as contemplated by Section 9.7 of this Agreement,
there are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use or
occupancy of any portion of any such parcel of real property;
(vi) there are no outstanding options or rights of first
refusal to purchase any such parcel of real property, or any portion
thereof or interest therein;
(vii) there are no parties (other than Seller) in possession of
any such parcel of real property; and
(viii) each building on the Owned Real Property has direct
access to a public street or will have direct access upon recordation of
the Temporary Easement.
(b) Schedule 3.8(b) lists and describes briefly all real property
leased or subleased to Seller (the "Leased Properties"). Seller has delivered
to Designated Buyer correct and complete copies of the leases and subleases
listed in Schedule 3.8(b) (as amended to date). Seller warrants that none of
such leases is material to the Business.
(c) Other than those defects set forth in Schedule 3.8 and in
Designated Buyer's reports described in Exhibit R, to Seller's Knowledge all
buildings and all components of all buildings, structures and other improvements
included within the Owned Real Property (the "Improvements"), including,
without limitation, the roofs and structural elements thereof and the heating,
ventilation, air conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and parking
equipment systems and facilities included therein, are (subject to reasonable
wear and tear) in operating condition and repair and adequate to operate such
facilities as currently used. Other than those defects set forth in Schedule 3.8
and in such Designated Buyer's reports, to Seller's Knowledge, there are no
facts or conditions affecting any of the Improvements (including latent defects)
which would, individually or in the aggregate, materially interfere with the
use, occupancy or operation thereof as currently used or occupied.
Page 16
3.9 Contracts and Commitments.
(a) Except as specifically contemplated by this Agreement and except
as set forth in Schedule 3.8, Schedule 3.9, Schedule 3.10 or Schedule 3.15,
Seller is not a party to or bound by, whether written or oral, any of the
following executory agreements or arrangements if an Assumed Contract or an
Assumed Liability:
(i) contract for the employment of any officer, individual
employee or other person on a full-time, part-time, consulting or other
basis or contract relating to loans to officers, directors, employees or
Affiliates or any severance agreements;
(ii) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a Lien on any of the
Purchased Assets;
(iii) guarantee of any obligation for borrowed money or
otherwise in excess of $10,000;
(iv) material license or royalty agreements relating to the
Purchased Assets (other than off-the-shelf software);
(v) material lease or agreement under which it is lessee of,
or holds or operates, any personal property owned by any other party which
constitutes a part of the Purchased Assets;
(vi) lease or agreement under which it is lessor of or permits
any third party to hold or operate any Purchased Assets owned or controlled
by Seller;
(vii) contract relating to the distribution, marketing or sales
of its products or the products of others by the Business;
(viii) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
consideration in excess of $25,000, other than purchase orders cancelable
upon less than 30 days notice;
(ix) assignment, license, indemnification or agreement with
respect to any Intangible Property (other than off-the-shelf software);
(x) warranty agreement with respect to its services rendered
or its products sold or leased;
(xi) agreement relating to any business acquisition, merger,
sale or purchase of substantial assets, equity financings, recapitalizing
or reorganizations;
(xii) agreement involving payments in excess of $10,000 with a
term of more than six months which is not terminable by Seller upon less
than 30 days notice without penalty;
Page 17
(xiii) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world; or
(xiv) any other agreement which is material to the Business.
(b) All of the contracts, agreements and instruments set forth on
Schedule 3.9 are valid, binding and enforceable against Seller in accordance
with their respective terms. Seller has performed in all material respects all
obligations required to be performed by it under the contracts, agreements and
instruments listed on Schedule 3.9 and is not in default under or in breach of
nor in receipt of any claim (other than credit or debit memos of less than
$60,000) of default or breach under any contract, agreement or instrument listed
on Schedule 3.9; no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
noncompliance by Seller under any contract, agreement or instrument listed on
Schedule 3.9 ; Seller does not have any present expectation or intention of not
fully performing all such obligations; Seller has no Knowledge of any breach or
anticipated breach by the other parties to any contract, agreement, instrument
or commitment listed on Schedule 3.9; and Seller is not a party to any contract
or commitment which would have a Material Adverse Effect.
(c) Seller has provided Designated Buyer with a true and correct copy
of all written contracts which are required to be disclosed on Schedule 3.9, in
each case together with all amendments, waivers or other changes thereto (all of
which are disclosed on Schedule 3.9). Schedule 3.9 contains an accurate and
complete description of all material terms of all oral contracts referred to
therein.
3.10 Proprietary Rights.
(a) Except as set forth on Schedule 3.10, Seller does not have any
Intangible Property that is material to the Business, including (i) patents or
registered Marks and pending patent applications or other applications for
registrations of the Marks; (ii) unregistered trademarks, unregistered service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names; (iii) unregistered copyrights; (iv) non-confidential descriptions
of trade secrets and confidential information; (v) computer software; (vi) any
other Intangible Property; and (vii) all licenses or similar agreements or
arrangements covering Intangible Property to which Seller is a party, either as
licensee or licensor, or a third-party beneficiary.
(b) Except as set forth in Schedule 3.10: (i) the Seller owns and
possesses free and clear of all Liens and without restriction as to use, all
right, title and interest in and to the Intangible Property necessary for the
operation of the Business as currently conducted; (ii) no claim by any third
party contesting the validity, enforceability, use or ownership of any of the
Intangible Property has been made, is currently outstanding or to the Knowledge
of Seller is threatened; (iii) to the Knowledge of Seller, Seller has not
interfered with, infringed upon, misappropriated or otherwise conflicted with,
and the operation of the Business of the Seller as currently conducted will not
infringe, misappropriate or otherwise conflict with, the Intangible Property of
third parties; (iv) to the Knowledge of Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intangible Property; and (v) immediately subsequent to the Closing, Seller's
Intangible Property will be owned by or available for use by Buyer on terms and
conditions identical to those under which Designated
Page 18
Seller owned and used such Intangible Property immediately prior to the Closing.
Seller has informed Designated Buyer that all the computer software and hardware
used by Seller will not correctly process, provide and receive date-related data
into and between the twentieth and twenty-first centuries or beyond.
3.11 Litigation; Proceedings. Except as set forth in Schedule 3.11, there
are no actions, suits, proceedings, orders, judgments, decrees or investigations
pending or, to Seller's Knowledge, threatened against or affecting Seller, the
Purchased Assets or the Business at law or in equity, or pending or threatened
by Seller against any third party, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would reasonably be expected to
result in a judgment in excess of $250,000; Seller is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise or,
to Seller's Knowledge, any governmental investigations or inquiries (including,
without limitation, inquiries as to the qualification to hold or receive any
license or permit) which would reasonably be expected to result in a judgment in
excess of $250,000. Seller is not subject to any outstanding order, judgment or
decree issued by any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or any arbitrator relating to the
Purchased Assets, the Business or the transactions contemplated by this
Agreement which would reasonably be expected to result in a judgment in excess
of $250,000.
3.12 Brokerage. Except as set forth in Schedule 3.12, there are no claims
for brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Seller or Seller's shareholder. Seller shall
pay, and hold Designated Buyer and MSC harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and out-of-
pocket expenses) arising in connection with any such claim.
3.13 Governmental Licenses and Permits. Schedule 3.13 contains a complete
listing and summary description of all material Permits owned or possessed by
Seller. To Seller's knowledge, except as indicated on Schedule 3.13, Seller owns
or possesses all right, title and interest in and to all Permits. To Seller's
Knowledge, no loss or expiration of any Permit is pending or threatened
(including, without limitation, as a result of the transactions contemplated
hereby) other than expiration in accordance with the terms thereof.
3.14 Employees. Except as set forth on Schedule 3.14, to the Knowledge of
Seller, no employee and no group of employees or independent contractors of
Seller has any plans to terminate his, her or its employment or independent
contractor relationship with Seller. Seller has complied in all material
respects with all applicable laws relating to the employment of personnel and
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes, the
Worker Adjustment and Retraining Act, and the Immigration Reform and Control Act
of 1986. Except as set forth on Schedule 3.14, Seller is not a party to or bound
by any collective bargaining agreement, nor since January 1, 1996, has it
experienced any strikes, material grievances, material unfair labor practices
claims or other material employee or labor disputes. To Seller's Knowledge,
Seller has not engaged in any unfair labor practice. Schedule 3.14 sets forth
the names, present annual or, as the case may be, hourly rate of compensation
(including salary, bonuses and commissions) of all persons employed by Seller
(including independent contractors, but excluding the Excluded
Asset Purchase Agreement Page 19
Employees), their job descriptions and whether each employee is absent from
active employment for any reason, including, without limitation, leave of
absence or disability.
3.15 Employee Benefit Plans.
(a) Except as set forth on Schedule 3.15, with respect to current or
former employees of Seller, Seller does not maintain or contribute to or have
any actual or potential liability with respect to any (i) deferred compensation
or bonus or retirement plans or arrangements, (ii) qualified or nonqualified
defined contribution or defined benefit plans or arrangements which are employee
pension benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")), or (iii) employee welfare benefit
plans, (as defined in Section 3(1) of ERISA), (iv) stock option or stock
purchase plans, or (v) material fringe benefit plans or programs whether in
writing or oral and whether or not terminated (collectively, the "Benefit
Plans").
(b) Except for obligations which are accrued but not yet paid with
respect to current periods, Seller has not incurred any liability to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, any multiemployer
plan or otherwise with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of Seller (as defined
in Section 414 of the Code, the "Controlled Group") that has not been
satisfied in full, and to Seller's Knowledge no condition exists that would
reasonably be expected to present a material risk to Seller or any member of the
Controlled Group of incurring such a liability.
(c) To Seller's Knowledge, none of the Benefit Plans has any
material unfunded liabilities.
(d) To Seller's Knowledge, all reporting and disclosure obligations
as they apply to the Benefit Plans and the requirements of Section 4980B of the
Code ("1 COBRA") and Health Insurance Portability and Accountability Act of 1996
have been timely met.
(e) To Seller's Knowledge, with respect to any Benefit Plan which
intended to be a qualified plan which meets the requirements of Code Section
401(a), a favorable determination letter from the Internal Revenue Service has
been received by Seller with respect to any such Benefit Plan to the effect that
it is qualified under Section 401(a) of the Code (including requirements imposed
by the Tax Reform Act of 1986 and subsequent legislation with an effective date
prior to January 1, 1995), and, to Seller's Knowledge, there are no
circumstances which would reasonably be expected to cause the Benefit Plan to
lose such qualified status.
3.16 Insurance. Schedule 3.16 lists and briefly describes each insurance
policy maintained by Seller with respect to the Purchased Assets and the
Business. All of such insurance policies are in full force and effect, and
Seller is not in default with respect to its obligations under any such
insurance policies and Seller has not been denied insurance coverage. None of
such policies are transferrable or will inure to the benefit of Designated
Buyer.
Asset Purchase Agreement Page 20
3.17 Compliance with Laws. To the Knowledge of Seller, Seller and its
respective officers, directors and employees have complied with all applicable
material laws, regulations and ordinances of foreign, federal, state and local
governments and all agencies thereof which are material to the Business.
3.18 Environmental Matters.
(a) Except as disclosed on Schedule 3.18, to the Knowledge of
Seller, Seller has complied with and is currently in compliance in all material
respects with all Environmental and Safety Requirements, and Seller has not
received any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements which relate to Seller, the Business, the
Owned Real Property or the Leased Real Property.
(b) Without limiting the generality of the foregoing, except as
disclosed on Schedule 3.18, to the Knowledge of Seller, Seller has obtained and
complied with, and is currently in compliance with, all material permits,
licenses and other authorizations that have been required pursuant to any
Environmental and Safety Requirements for the occupancy of the Leased Properties
or the operation of the Business. A list of all such permits, licenses and other
authorizations which are material to Seller is set forth on Schedule 3.18.
(c) Neither this Agreement nor the consummation of the transactions
contemplated hereby shall impose any obligations for site investigation or
cleanup, or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations), except for any such obligations which arise as
a result of facts or circumstances peculiar to Designated Buyer's future use of
the Owned Real Property or Leased Real Property.
(d) Except as set forth on Schedule 3.18, to Seller's Knowledge,
none of the following exists at any Owned Real Property or Leased Real Property:
(i) underground storage tanks or surface impoundments; (ii) asbestos-containing
material in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills, surface impoundments or other
disposal areas.
(e) Except as set forth on Schedule 3.18, to Seller's Knowledge,
Seller has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any facility
or property (and no such facility or property (including without limitation the
Owned Real Property and the Leased Real Property is contaminated with such
substances), so as to give rise to material or potentially material liabilities
or investigatory, corrective or remedial obligations of Seller or the Business
under Environmental and Safety Requirements, including without limitation
liability for response costs, natural resource damages or attorneys fees
pursuant to CERCLA.
(f) No Environmental Lien has attached to any Owned Real Property or
Leased Real Property.
Asset Purchase Agreement Page 21
(g) Seller has disclosed to the Designated Buyer all material facts,
and have provided copies of all material documents, in its possession with
respect to environmental, health or safety liabilities or obligations relating
to the past or present properties, facilities, and operations of the Business.
(h) For purposes of this Agreement, the following terms shall have
the following respective meanings:
(i) "Environmental and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and
all common law, in each case concerning public health and safety, worker
health and safety and pollution or protection of the environment
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or byproducts, asbestos, polychlorinated biphenyls, noise or radiation) as
such of the foregoing are constituted prior to, on, or after the Closing
Date.
(ii) "Release" shall have the meaning set forth in CERCLA.
(iii) "Environmental Lien" shall mean any Lien, whether
recorded or unrecorded, in favor of any governmental entity, relating to
any liability of Seller arising under any Environmental and Safety
Requirements.
(i) To the extent there is a breach of a representation or warranty
contained in this Section 3.18 relating to contamination at or beneath, or
emanating onto or from the Owned Real Property or Leased Real Property, the
indemnification for any resulting Loss shall be governed by Article VIII.
3.19 Product Warranties. Except as disclosed in Schedule 3.19, Seller has
not made any warranties with respect to the products manufactured and/or sold by
it other than those warranties expressly made in the literature accompanying
such products, true and complete copies of which are attached hereto as Schedule
3.19. Substantially all of the products manufactured, sold, leased and delivered
by Seller have conformed in all material respects with all applicable
contractual commitments and all express and implied warranties and the Seller
does not have any material liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product liability claims set forth on the Latest Balance
Sheet, as adjusted for operations and transactions through the Closing Date in
the ordinary course of the Business.
Asset Purchase Agreement Page 22
3.20 Product Liability; Recalls. Except as set forth in Schedule 3.20,
there is no existing liability, claim or obligation arising from or alleged to
arise from any actual or alleged injury to persons or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by Seller. Except as set forth on the Schedule 3.20, there have been
no product recalls or requests therefor by any governmental authorities or
customers.
3.21 Absence of Undisclosed Liabilities. Except for Assumed Liabilities,
Excluded Liabilities and obligations expressly disclosed in the Schedules to
this Agreement, Seller does not have any material obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known to Seller, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing.
3.22 Disclosure. There is no fact which has not been disclosed to
Designated Buyer of which Seller has Knowledge which has or could reasonably be
expected to have a Material Adverse Effect (disregarding (i) any such effect
caused by changes in the United States or Northern California economy or capital
markets in general, changes in the industry in which the Business operates or
changes in law and (ii) any such effect directly or indirectly resulting from
contact between Designated Buyer and Seller's labor union).
3.23 Knowledge. As used in this Article III and elsewhere in this
Agreement, the term "Knowledge" as used in the phrases "to the Knowledge of
Seller," "to Seller's Knowledge" or phrases of similar import shall mean and
include the actual knowledge or awareness of Seller (which shall mean the actual
knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ after due inquiry of the persons
identified in Schedule 3.23).
Article IV
Representations And Warranties Of
MSC And Designated Buyer
As a material inducement to Seller to enter into this Agreement, MSC and
Designated Buyer represent and warrant to Seller as of the date hereof and as of
the Closing Date that:
4.1 Organization and Corporate Power. Designated Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and (as of the Closing Date) California, with full corporate
power and authority to enter into this Agreement and the other agreements
contemplated hereby to which Designated Buyer is a party and perform its
obligations hereunder and thereunder. Designated Buyer possesses all requisite
corporate power and authority and (within a reasonable time after the Closing
Date will possess) all licenses, permits and authorizations necessary to own and
operate the Purchased Assets to carry on the Business as now conducted and
presently proposed to be conducted and to enter into this Agreement and perform
its obligations hereunder. MSC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to enter into this Agreement and the other
agreements contemplated hereby to which MSC is a party and perform its
Obligations
Asset Purchase Agreement Page 23
hereunder and thereunder. The copies of MSC's and Designated Buyer's charter
documents and bylaws which have been (or prior to closing will be) furnished to
Seller reflect all amendments made thereto at any time prior to the Closing Date
and are correct and complete.
4.2 Authorization of Transaction. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which either
of Designated Buyer and MSC is a party have been duly and validly authorized by
all requisite corporate action on the part of Designated Buyer and MSC, as
applicable, and no other corporate proceedings on their part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes, and each of the other agreements contemplated hereby to
which either Designated Buyer or MSC is a party shall when executed constitute,
a valid and binding obligation of Designated Buyer or MSC, as applicable,
enforceable in accordance with their respective terms.
4.3 Absence of Conflicts. Neither Designated Buyer nor MSC is subject to
or obligated under its certificate of incorporation, its by-laws, any applicable
law, or rule or regulation of any governmental authority, or any material
agreement or instrument, or any material license, franchise or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement and the
other agreements contemplated hereby to which either Designated Buyer or MSC is
a party.
4.4 Litigation. There are no actions, suits, proceedings or orders pending
or, to Designated Buyer's knowledge or MSC's knowledge, threatened against or
affecting Designated Buyer or MSC at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would materially
and adversely affect Designated Buyer's or MSC's performance under this
Agreement and the other agreements contemplated hereby to which either
Designated Buyer or MSC is a party or the consummation of the transactions
contemplated hereby or thereby.
4.5 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Designated Buyer or MSC. Designated Buyer shall pay, and hold Seller harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
4.6 Availability of Financing. After due inquiry of MSC's financial
advisor and placement agent, neither the Chief Executive Officer nor the Vice
President and Chief Financial Officer of MSC has any reason to believe that MSC
and Designated Buyer cannot obtain the financing to perform their obligations
under this Agreement.
4.7 Liability Categories. MSC has no liability categories for its
electrogalvanizing and coil coating business except as set forth on Schedule
4.7.
4.8 Inventory. Designated Buyer is acquiring the inventory acquired
hereunder for resale.
Asset Purchase Agreement Page 24
Article V
Termination
5.1 Termination. This Agreement may be terminated prior to the Closing:
(a) by mutual written consent of Seller and Designated Buyer at any
time;
(b) by Seller if there has been a misrepresentation or breach on the
part of MSC or Designated Buyer of its representations, warranties or covenants
set forth in this Agreement that would have a material adverse effect on MSC's
or Designated Buyer's abilities to perform their obligations hereunder or if
other events have occurred which have made it impossible to satisfy a condition
precedent to Seller's obligations to consummate the transactions contemplated
hereby unless Seller's willful or knowing breach of this Agreement has caused
the condition to be unsatisfied; provided that Seller must notify Designated
Buyer in writing that it is terminating this Agreement within five business days
after discovering the basis for the termination;
(c) by Designated Buyer if there has been a misrepresentation or
breach on the part of Seller of its representations, warranties or covenants set
forth in this Agreement that would have a Material Adverse Effect (disregarding
(i) any such effect caused by changes in the United States or Northern
California economy or capital markets in general, changes in the industry in
which the Business operates or changes in law and (ii) any such effect directly
or indirectly resulting from contact between Designated Buyer and Seller's labor
union) or if other events have occurred which have made it impossible to satisfy
a condition precedent to Designated Buyer's obligations to consummate the
transactions contemplated hereby unless Designated Buyer's willful or knowing
breach of this Agreement has caused the condition to be unsatisfied; provided
that Designated Buyer must notify Seller in writing that it is terminating this
Agreement within five business days after discovering the basis for the
termination;
(d) by Seller if Seller determines in good faith that inaccuracies or
breaches of any representations or warranties made by Seller contained in this
Agreement that are discovered on or prior to the Closing Date could reasonably
be expected to result in Losses in excess of $3,000,000; provided that Seller
must notify Designated Buyer in writing that it intends to terminate this
Agreement within five business days after discovering the basis for the
termination and provided further that Designated Buyer may negate this intention
to terminate if Designated Buyer and MSC waive any right to be indemnified by
Seller with respect to such Losses in excess of $3,000,000 within five business
days after receiving Seller's notice of intent to terminate;
(e) by Seller or Designated Buyer if the Closing has not occurred on
or prior to April 30, 1998 upon written notice to the other; or
(f) by Seller if it determines in the exercise of its sole, but
reasonable discretion prior to November 26, 1997, that Seller's Phase II Audit
has identified matters as to which Losses which otherwise would be subject to
the indemnification contained in Section 8.3 would exceed the Remediation Cost
Threshold defined in Section 8.2.
Asset Purchase Agreement Page 25
5.2 Effect of Termination. In the event of termination of this Agreement
by either Seller or Designated Buyer as provided in Section 5.1, this Agreement
shall forthwith become void and there shall be no liability on the part of any
Party to any other Party or its shareholders or directors or officers under this
Agreement, except that the provisions of Section 9.5 and Article X shall
continue in full force and effect. The payments pursuant to Article X shall be
considered liquidated damages and no Party shall be entitled to any other
payments if the transactions contemplated by this Agreement do not close for any
reason.
Article VI
Indemnification And Related Matters
6.1 Survival. All of the representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby. Notwithstanding the
foregoing, the representations and warranties set forth in this Agreement or in
any writing or certificate delivered in connection with this Agreement shall
expire as follows:
(i) Sections 3.3, 3.12, 4.2 and 4.5 shall not expire (except to
the extent of any applicable statute of limitations); and
(ii) all other Sections of Article III and IV shall expire on
the second anniversary of the Closing Date and shall be of no further force
or effect thereafter.
6.2 Indemnification.
(a) Indemnification provisions for the benefit of MSC and Designated
Buyer.
(i) Seller shall indemnify MSC, Designated Buyer and each of
their respective officers, directors, shareholders, employees, agents,
representatives, affiliates, successors and permitted assigns
(collectively, the "Buyer Indemnified Parties") and hold each of them
harmless from and against and pay on behalf of or reimburse such Buyer
Indemnified Parties in respect of any loss, liability, demand, claim,
action, cause of action, cost, damage, deficiency, Tax, penalty, fine or
expense, whether or not arising out of third party claims (including,
without limitation, interest, penalties, reasonable attorneys' fees and
expenses, court costs and all amounts paid in investigation, defense or
settlement of any of the foregoing), net of any Tax benefit or available
insurance proceeds (collectively, "Losses" and individually, a "Loss")
which any such Buyer Indemnified Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to
or by virtue of (in each case, for the applicable survival period):
(A) subject to Sections 7.6 and 6.2(a)(ii)(A) hereof, the
breach of any representation or warranty made by Seller contained in
this Agreement that
Asset Purchase Agreement Page 26
is known to Designated Buyer (regardless of how discovered or by whom)
on or prior to the Closing Date;
(B) the breach of any representation or warranty made by
Seller contained in this Agreement or any certificate delivered by
Seller to MSC or Designated Buyer in connection with the Closing other
than breaches covered by clause (A) above;
(C) the breach of any covenant or agreement made by Seller
contained in this Agreement or in the Side Labor Agreement between the
parties dated the date hereof or any certificate delivered by Seller
to MSC or Designated Buyer in connection with the Closing;
(D) any Excluded Assets;
(E) any Excluded Liabilities;
(F) any claim or action by any shareholder of Seller
challenging Seller's ability to perform this Agreement or any aspect
of the transactions contemplated by this Agreement;
(G) any claim or action by any third party to the extent
based on an allegation that such third party has the right to buy the
Business;
(H) any liability or obligation as set forth in Article
VIII.
(ii) The indemnification provided for in Section 6.2(a)(i) above
is the Buyer Indemnified Parties' exclusive remedy for breaches of
representations, warranties, covenants, agreements and the other matters
for which indemnification is made and is subject to the following
limitations:
(A) Seller's liability pursuant to Section 6.2(a)(i)(A)
shall be subject to the following limitations: (1) Seller shall be
responsible for the first $500,000 in Losses; (2) Seller shall be
responsible for 75% of the next $2,500,000 in Losses; (3) Seller shall
be responsible for all Losses in excess of $3,000,000 unless
Designated Buyer and MSC waived any right to be indemnified by Seller
with respect to Losses in excess of $3,000,000 to reinstate the
Agreement pursuant to Section 5.1(d), in which event Seller shall not
be responsible for any Losses in excess of $3,000,000; and (4) Seller
shall not be responsible for Losses pursuant to Section 6.2(a)(i)(A)
and (B) exceeding 10% of the Final Purchase Price (the "Cap");
(B) Seller's liability pursuant to Section 6.2(a)(i)(B)
shall be subject to the following limitations: (1) Seller shall not
be responsible for any individual Loss less than $10,000; (2) Seller
shall not be responsible for any Losses unless and to the extent all
such Losses exceed an amount equal to 1% of the Final Purchase Price
(the "Deductible") (at which ▇▇▇▇ ▇▇▇▇▇▇ shall only be liable for
the amount of such Losses in excess of the Deductible) and (3) Seller
Asset Purchase Agreement Page 27
shall not be responsible for Losses pursuant to Section 6.2(a)(i)(A)
and (B) exceeding the Cap.
(b) Indemnification Provisions for the Benefit of Seller.
(i) MSC and Designated Buyer (the "1 Buyer Indemnifying
Parties") shall jointly and severally indemnify Seller and its respective
officers, directors, shareholders, employees, agents, representatives,
affiliates, successors and permitted assigns (collectively, the "1 Seller
Indemnified Parties") and hold each of them harmless from and against and
pay on behalf of or reimburse such Seller Indemnified Parties in respect of
any Loss which any such Seller Indemnified Party may suffer, sustain or
become subject to, as the result of, in connection with, relating to or
incidental to or by virtue of :
(A) the breach by MSC or Designated Buyer of any
representation or warranty made by MSC or Designated Buyer contained
in this Agreement or any certificate delivered by MSC or Designated
Buyer to Seller with respect thereto in connection with the Closing;
(B) the breach of any covenant or agreement made by MSC or
Designated Buyer contained in this Agreement or in the Side Labor
Agreement, dated as of the date hereof, by and among the Parties;
(C) any Assumed Liability;
(D) any Purchased Asset;
(E) with respect to employees who are employed by Seller
immediately prior to the Closing, any liability or obligation of MSC
or Designated Buyer from Designated Buyer's decision not to hire such
employees or decision to hire such employees but change the terms and
conditions of their employment with Designated Buyer from the terms
and conditions such employees maintained with Seller prior to the
Closing Date;
(F) any liability or obligation as set forth in Article
VIII; and
(G) Post-closing operations of the Business.
(ii) MSC and Designated Buyer shall not be liable to the Seller
Indemnified Parties pursuant to Section 6.2(b)(i)(A) for (A) any individual
Loss less than $10,000, (B) any Losses unless and until the aggregate of
all Losses exceed the Deductible (at which time the Buyer Indemnified
Parties shall only be liable for the amount of such Losses in excess of the
Deductible) or (C) any Losses exceeding the Cap.
Asset Purchase Agreement Page 28
(c) If a party hereto seeks indemnification under this Article VI,
such party (the "1 Indemnified Party") shall give prompt written notice to the
other party (the "1 Indemnifying Party") after receiving written notice of any
action, lawsuit, proceeding, investigation or other claim against it (if by a
third party) or discovering the liability, obligation or facts giving rise to
such claim for indemnification, describing the claim, the amount thereof (if
known and quantifiable), and the basis thereof; provided that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure prejudices the defense
of the claim. If any action, lawsuit, proceeding, investigation or other claim
shall be brought or asserted by any third party which would entitle the
Indemnified Party to indemnity pursuant to Article VI, the Indemnifying Party
shall undertake the defense of such action, lawsuit, proceeding, investigation
or other claim giving rise to the Indemnified Party's claim for indemnification
at the Indemnifying Party's expense; provided that the Indemnified Party shall
have the right to defend at the Indemnifying Party's expense if the claim (i)
primarily seeks non-monetary relief against the Indemnified Party, (ii) involves
criminal allegations against the Indemnified Party, (iii) involves a claim
which, upon petition by the Indemnified Party, the appropriate court rules that
the Indemnifying Party failed or is failing to prosecute or defend vigorously,
or (iv) involves a claim which could reasonably be expected to involve a Loss in
excess of the Cap. In any such case, the Indemnifying Party may participate in
the defense thereof at its expense. The Indemnifying Party shall (and shall
cause its counsel to) fully inform the Indemnified Party (and its counsel) from
time to time of the status of the action, lawsuit, proceeding, investigation or
other claim.
If the Indemnifying Party is conducting the defense, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing or
(ii) the Indemnifying Party has been advised by its counsel that a conflict of
interest prevents it from representing the Indemnified Party without consent and
such consent is reasonably withheld, in which case, the fees and expenses of
such counsel will be the expense of the Indemnifying Party.
If the Indemnifying Party shall control the defense of any such claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, an injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(d) The Indemnified Party and the Indemnifying Party shall use their
reasonable best efforts to mitigate any Losses arising under this Agreement.
The Parties will cooperate in the defense of any third party action, claim or
lawsuit.
(e) Amounts paid on behalf of any Party as indemnification (other
than indemnification with respect to Excluded Assets or Excluded Liabilities)
shall be treated as adjustments to the Final Purchase Price.
Asset Purchase Agreement Page 29
(f) Within three days after any claim brought by an Indemnified Party
is fully and finally determined (as defined below) under the provisions of this
Agreement, the Indemnifying Party shall pay the Indemnified Party in immediately
available funds the amount of the Indemnified Party's Loss; provided that if the
Seller and/or the shareholders of the Seller do not pay such amount within such
three-day period then Designated Buyer may, at its election, reduce the
principal and/or accrued interest on the Promissory Note for the amount of the
Loss which is unpaid. Full and final determination as used herein shall
exclusively mean one of the following: (i) written agreement of the Parties and
(ii) a final judgment of a court of competent jurisdiction or final award of an
arbitration pursuant to Section 9.8. If at any time the Indemnifying Party
agrees that it is liable for Losses under the provisions of the Agreement, but
disputes the amount of Losses for which it is responsible, the Indemnifying
Party shall promptly pay the amount of such Losses that are not in dispute.
Article VII
Pre-Closing Covenants
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
7.1 General. Each of the Parties will use its reasonable best efforts to
take all actions and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article
II).
7.2 Notices and Consents. Seller will give any notices to third parties,
and Seller and Designated Buyer will use their commercially reasonable efforts
to obtain any third party consents, that Designated Buyer reasonably may request
in connection with the matters referred to in Schedule 3.4. Each of the Parties
will give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section 3.4
or Schedule 3.13. Without limiting the generality of the foregoing, each of the
Parties will file any Notification and Report Forms and related material that it
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act, will use
its reasonable best efforts to obtain a termination from the applicable waiting
period, and will make reasonably promptly any further filings pursuant thereto
that may be necessary in connection therewith.
7.3 Operation of Business. Prior to 30 days after the date hereof, unless
an emergency condition shall exist, Seller shall obtain Designated Buyer's prior
consent before (a) entering into any contract with a term extending beyond 30
days after the date hereof and involving in excess of $500,000 other than
purchase or sales agreements in the ordinary course of the Business aggregating
not more than $20,000,000 in case of purchases or $24,000,000 in the case of
sales or (b) make any material purchases of computer software or hardware during
such period. At all times prior to the Closing Date, Seller will not engage in
any practice, take any action, or enter into any transaction outside the
ordinary course of the Business, except as set forth on Schedule 7.3.
Asset Purchase Agreement Page 30
7.4 Preservation of Business. Seller will use commercially reasonable
efforts to keep its Business and properties substantially intact, including its
present operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, customers, and employees, and to maintain
insurance coverage.
7.5 Full Access. Seller will permit representatives of MSC and Designated
Buyer to have reasonable access at all reasonable times, and in a manner so as
not to unreasonably interfere with the normal business operations of Seller, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Seller. MSC and Designated Buyer
will treat and hold as such any Confidential Information they receive from
either Seller or its shareholders in the course of the reviews contemplated by
this Section 7.5, will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, will return to Seller all tangible embodiments (and all
copies) of the Confidential Information which are in its possession.
7.6 Notice of Developments. Each Party will forthwith give written
notice to the other Party of any breach of any of its own representations and
warranties in Articles III and IV or any breach of the other Party's
representations and warranties which it discovers or of which it otherwise
becomes aware (except for notice from such other Party).
7.7 Title Insurance. At Buyer's expense, Seller will obtain and deliver
within a reasonable time after the Closing Date the following title insurance
commitments, policies, and riders with respect to each parcel of real estate
included in the Purchased Assets, an ALTA Owner's Policy of Title Insurance Form
B-1987 (or equivalent policy reasonably acceptable to Designated Buyer if the
real property is located in a state in which an ALTA Owner's Policy of Title
Insurance Form B-1987 is not available) issued by a title insurer reasonably
satisfactory to Designated Buyer (and, if requested by Designated Buyer,
reinsured in whole or in part by one or more insurance companies and pursuant to
a direct access agreement reasonably acceptable to Designated Buyer), in such
amount as Designated Buyer reasonably may determine to be the fair market value
of such real property (including all improvements located thereon), insuring
title to such real property to be in Designated Buyer as of the Closing (subject
only to Permitted Encumbrances).
Each title insurance policy shall (A) insure title to the real property and
all recorded easements benefiting such real property, (B) contain an "extended
coverage endorsement" insuring over the general exceptions contained customarily
in such policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent),
(D) contain an endorsement insuring that the real property described in the
title insurance policy is the same real estate as shown on the Survey delivered
with respect to such property, (E) contain an endorsement insuring that each
street adjacent to the real property is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from the real
property, (F) contain an inflation endorsement providing for annual adjustments
in the amount of coverage corresponding to the annual percentage increase, if
any, in the United States Department of Commerce Composite Construction Cost
Index (Base Year = 1997), (G) if the real property consists of more than one
record parcel, contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, and (H) contain a "non-imputation"
endorsement to the effect that title defects known to the officers, directors,
and shareholders of the owner prior to the Closing shall not be deemed "facts
known to the insured" for purposes of the policy. Prior to closing, Seller
Asset Purchase Agreement Page 31
shall deliver to Designated Buyer the forms of the policies of title insurance
and endorsements proposed by the title insurance company with respect to such
policies together with a statement of the exceptions proposed by the title
insurance company as of a date after the date of this Agreement. Designated
Buyer shall communicate directly with the title insurance company with respect
to any matters with which it is dissatisfied.
7.8 Surveys. With respect to each parcel of real property that Seller
owns and as to which a title insurance policy is to be procured pursuant to
Section 7.7, at Buyer's expense, Seller will procure prior to the Closing a
current survey of the real property certified to Designated Buyer and any Lender
of MSC or Designated Buyer, prepared by a licensed surveyor and conforming to
current ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, and other matters shown customarily on such surveys, and showing
access affirmatively to public streets and roads (the "1 Survey").
7.9 Customer, Supplier and Employee Contact. Prior to the Closing Date,
Seller and Designated Buyer shall mutually agree upon all communications with
customers, suppliers and employees of Seller relating to this Agreement and the
transactions contemplated hereunder (it being understood that Designated Buyer
shall have the right after consultation with Seller to contact such customers
and suppliers in connection with its investigation of the Business).
7.10 Expenses. Seller, MSC and Designated Buyer shall pay all of their
own fees, costs and expenses (including, without limitation, fees, costs and
expenses of legal counsel, investment bankers, brokers or other representatives
and consultants and appraisal fees, costs and expenses) incurred in connection
with the negotiation, execution and delivery of this Agreement, the performance
of its obligations hereunder and the consummation of this Agreement and the
transactions contemplated hereby. The filing fee in connection with the filing
under the HSR Act will be split evenly between Designated Buyer and Seller.
Article VIII
Certain Environmental Matters
8.1 Definitions. The following terms shall have the following meanings
for purposes of this Article VIII:
"Environmental Losses" means (i) all costs required to investigate
and/or remediate an On-Site Environmental Matter (including response costs
paid to others) to the extent required by a governmental entity with
authority to require investigations and/or remediation or otherwise
required by Environmental and Safety Requirements, and (ii) all other
Losses to the extent caused by or arising from such Onsite Environmental
Matters, including without limitation, damages for personal injury, damages
to adjacent property, and natural resource damages.
Asset Purchase Agreement Page 32
"Known On-Site Environmental Matters" means On-Site Environmental
Matters that are identified by a Phase II Audit and On-Site Environmental
Matters discovered thereafter in locations assessed in the Phase II Audit
and on the Phase II Audit sites for which persuasive evidence exists of
pre-Closing origin.
"On-Site Environmental Matters" means contamination that exists on or
has emanated from the Owned Real Property or the Leased Real Property.
"Phase II Audit" means the extraction and analyzing of soil and ground
water samples from the Owned Real Property pursuant to Section 8.2 as
reported to Designated Buyer and Seller in Designated Buyer's Phase II
Audit.
"Post-Closing On-Site Environmental Matters" means On-Site
Environmental Matters that (i) arise or result from operations or
activities which occur on or after the Closing Date, or (ii) are discovered
in locations assessed in the Phase II Audit but which were not discovered
or identified by such Phase II Audit (absent persuasive evidence of pre-
Closing origin, which evidence may include indications of environmental
impact occurring after completion of the Phase II Audits).
"Undiscovered Post-Closing On-Site Environmental Matters" means On-
Site Environmental Matters that are discovered in locations not assessed in
the Phase II Audit that arose or resulted from operations or activities
occurring prior to the Closing Date.
8.2 Phase II Audits. Seller shall complete its investigation to
determine the presence of hazardous materials in, on or about the soil, soil gas
or groundwater at the Owned Real Property and Leased Real Property ("Seller's
Phase II Audit") by November 26, 1997. The scope of work shall be as set forth
in Schedule 8.2(A) ("Scope of Work"). Seller shall have sole discretion to
direct the work for Seller's Phase II Audit. Seller shall have sole discretion
to select the consultant to perform the work for Seller's Phase II Audit,
provided the consultant is one appearing on the list set forth in Schedule
8.2(B). Seller may implement the Scope of Work by conducting preliminary soil
and soil vapor sampling ("Preliminary Sampling") without conducting
groundwater sampling. If Seller determines from the results of the Preliminary
Sampling that the Remediation Costs (as defined below) will exceed a sum which
makes the consummation of this Agreement commercially impractical ("Remediation
Cost Threshold"), Seller may elect to terminate this Agreement pursuant to
Section 5.1(f), and Seller shall immediately notify Buyer of that determination,
but in no event later than November 26, 1997. If Seller determines the
Remediation Costs will not likely exceed the Remediation Cost Threshold based
upon the results of the Preliminary Sampling, Seller shall complete the work set
forth in the Scope of Work. All work performed and information developed in
conjunction with the Seller's Phase II Audit shall remain the confidential
information of Seller unless and until it is disclosed to Designated Buyer.
Designated Buyer agrees to pay Seller on demand for all costs of the consultant
performing the work for Seller's Phase II Audit incurred in conducting Seller's
Phase II Audit. After Seller completes Seller's Phase II Audit, Seller shall
determine whether the cost to remove, remediate or cleanup any hazardous
materials identified in the Seller's Phase II Audit will exceed the Remediation
Cost Threshold, including, without limitation, all costs and fees for
consultants, contractors, attorneys, disposal, treatment, taxes, fees,
transportation and oversight ("Remediation Costs"). Seller's preliminary
determination shall be made by November 26, 1997.
Asset Purchase Agreement Page 33
If Seller determines the Remediation Costs will not exceed the Remediation
Cost Threshold, Seller shall (i) inform Designated Buyer of that determination
in writing (the "Preliminary Determination Notice") and (ii) provide Buyer
immediately with the consultant's report which documents completion of and
contains all data gathered in the course of Seller's Phase II Audit ("Seller's
Phase II Audit Report"). Upon receipt of Seller's Phase II Audit Report,
Designated Buyer shall determine in its discretion whether to verify or
supplement the results in Seller's Phase II Audit Report. If Designated Buyer so
elects, which election must be made within two business days after receipt of
Seller's Phase II Audit Report, Designated Buyer shall immediately notify Seller
of the election, Designated Buyer shall be given reasonable access to the Owned
Real Property and Leased Real Property for the purpose of allowing Designated
Buyer's consultant to collect samples of soil, soil vapor and surface or ground
water at the locations identified in the Scope of Work at such additional
locations as are reasonably warranted by the results of the Seller's Phase II
Audit ("Designated Buyer's Phase II Audit").
Designated Buyer shall memorialize the results of Designated Buyer's Phase
II Audit in a report ("Designated Buyer's Phase II Audit Report") and provide
it immediately to Seller. If the Phase II Audit identifies hazardous materials
to be removed, transported and disposed of, to the extent such materials are not
removed prior to the Closing Date, Seller will acquire a Temporary Generator
Identification Number in order to arrange for the removal, transportation and
disposal of such hazardous materials.
8.3 Seller's Responsibility for On-Site Environmental Matters. Seller
shall be responsible and pay for Environmental Losses to the extent arising from
any Known On-Site Environmental Matters, including any Environmental Losses
relating to the offsite treatment, storage, disposal or arrangement for disposal
of materials, substances or wastes identified in the Phase II Audit.
8.4 Buyer's Responsibility for On-Site Environmental Matters. Buyer
shall be responsible and pay for Environmental Losses to the extent arising from
any Post-Closing On-Site Environmental Matters.
8.5 Shared Responsibility for On-Site Environmental Matters. Buyer and
Seller agree to share responsibility and costs between them for Environmental
Losses to the extent arising from any Undiscovered Post-Closing On-Site
Environmental Matters, in accordance with the following percentages during the
time periods specified:
Seller Buyer
Environmental Losses as to which notification of an 75% 25%
indemnification claim is properly given pursuant to Section 6.2
hereof during the first year following the Closing Date
Environmental Losses as to which notification of an 50% 50%
indemnification claim is properly given pursuant to Section 6.2
during the second year following the Closing Date
Asset Purchase Agreement Page 34
Environmental Losses as to which notification of an
indemnification claim is properly given pursuant to Section 6.2 25% 75%
during the third year following the Closing Date
Environmental Losses as to which notification of an
indemnification claim is not properly given during the first three 0% 100%
years incurred following the Closing Date incurred thereafter
8.6 Reimbursement. Buyer and Seller each agree to reimburse the other for
Environmental Losses incurred by such other Party as needed to achieve the
allocation set forth in Sections 8.3, 8.4 and 8.5 above. Such reimbursement
shall be made immediately upon presentation of evidence of the Environmental
Loss incurred.
8.7 Remedial Action. With respect to any indemnification claim hereunder
with respect to Onsite Environmental Matters after the Closing Date as to which
investigatory, corrective or remedial work ("Remedial Action") is to be
conducted at the Owned Real Property or the Leased Real Property, the Party who
bears the greater proportion of liability with respect to such matters shall
have the right to principally manage the subject matter of the Claim, which
right shall include, without limitation, the right acting reasonably to select
and retain technical and legal experts, determine the type and scope of any
Remedial Action, determine appropriate cleanup levels, and conduct negotiations
and reach settlements with government agencies and third parties. In connection
therewith, such Party shall reasonably consult with the other Party throughout
the course of the Remedial Action, provide the other Party with copies of all
material reports and correspondence submitted to governmental agencies with
respect to the Remedial Action, and provide a reasonable opportunity for the
other Party to participate in the planning of and attend any material meetings
or negotiations with governmental agencies and third parties and to afford such
other Party the right to approve material decisions relating to such matter (not
to be unreasonably withheld). When the liability is identical, Designated Buyer
shall control the Remedial Action; provided, however, that if Seller desires
joint control, the Parties shall control the Remedial Action jointly.
Article IX
Other Agreements
9.1 Continuing Assistance. Seller and Designated Buyer shall (a) each
provide the other with such assistance as may reasonably be requested by either
of them including, without limitation, in connection with the preparation of any
Tax Return, audit or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes (including staff
assistance without charge in connection with Seller's 1997 Tax Returns and
Seller's financial statements for the period including the Closing Date and
otherwise on a reasonable basis and at the requesting Party's expense equal to
the providing Party's base salary cost), (b) each retain and provide the other,
with any records of other information which may be relevant to such Tax Return,
audit or examination, proceeding or determination, and (c) each provide the
other with any final determination of any such audit or examination, proceeding
or determination that affects any amount required to be shown on any Tax Return
of the other for any period. Without limiting the generality of the foregoing,
MSC shall retain, and shall cause
Asset Purchase Agreement Page 35
Designated Buyer to retain, and Seller shall retain, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
Tax Returns, supporting work schedules and other records or information which
may be relevant to such Tax Returns for all tax periods or portions thereof
ending before or including the Closing Date and shall not destroy or otherwise
dispose of any such records without first providing the other Party with a
reasonable opportunity to review and copy the same.
9.2 Tax Matters.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by Seller when due, and
Seller shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law,
Designated Buyer shall, and shall cause its affiliates to, join in the execution
of any such Tax Returns and other documentation. Promptly after the Closing
Date, Seller shall make its books and records available to the State of
California State Board of Equalization and cooperate with Designated Buyer's
request for a sales tax clearance certificate from the State of California State
Board of Equalization indicating that all sales tax, interest and penalties due
from Seller have been paid.
(b) All real property taxes, personal property taxes, ad valorem
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Purchased Assets, other than conveyance taxes provided for
in Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date (collectively, the "1 Apportioned Obligations") shall be
apportioned between Seller and Designated Buyer as of the Closing Date based on
the number of days of such taxable period included in the post-Closing tax
period. Seller shall be liable for the proportionate amount of such Taxes that
is attributable to the pre-Closing tax period. Within 10 days after receiving a
▇▇▇▇ for such Taxes, Seller and Designated Buyer shall present a statement of
the reimbursement to which each is entitled under this Section 9.2(b), together
with such supporting evidence as is reasonably necessary to calculate the
proration amount. The proration amount shall be paid by the party owing it to
the other within 10 days after delivery of such statement. Thereafter, Seller
shall notify Designated Buyer upon receipt of any ▇▇▇▇ for real or personal
property taxes relating to the Purchased Assets, part or all of which are
attributable to the post-Closing tax period, and shall promptly deliver such
▇▇▇▇ to Designated Buyer who shall pay the same to the appropriate taxing
authority; provided that if such ▇▇▇▇ covers the pre-Closing tax period, Seller
shall also remit prior to the due date of assessment to Designated Buyer payment
for the proportionate amount of such ▇▇▇▇ that is attributable to the pre-
Closing tax period. In the event that either Seller or Designated Buyer shall
thereafter make a payment for which it is entitled to reimbursement under this
Section 9.2(b), the other party shall make such reimbursement promptly but in no
event later than 30 days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any such payment required under this Section 9.2(b) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
Asset Purchase Agreement Page 36
(c) Designated Buyer and Seller shall allocate the Final Purchase
Price among the Purchased Assets under the residual method as described in
Section 1060 of the Code in accordance with the fair market value of the assets
as set forth on the Purchase Price Allocation Schedule in Exhibit E and shall be
used by both Designated Buyer and Seller for all purposes (including financial
accounting and tax purposes). Designated Buyer and Seller agree to timely file
IRS Form 8594.
(d) As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Code" means the Internal Revenue Code of 1986, as
amended.
(ii) "Tax" or "Taxes" means any federal, state, local or
foreign income, gross receipts, franchise, alternative or add-on minimum,
estimated, sales, use, transfer, registration, value added, excise, stamp,
environmental, customs, duties, real property, personal property, capital
stock, license, social security, unemployment, disability, payroll,
employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts
in respect of the foregoing.
(iii) "1 Tax Returns" means returns, declarations, reports,
claims for refund, information returns or other documents (including any
related or supporting schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
9.3 Press Releases and Announcements. Prior to the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of Seller shall be
issued without the mutual approval of MSC and Seller, except for any public
disclosure which any Party in good faith believes is required by law or
regulation. After the Closing Date, Seller shall not issue a press release
related to this Agreement without Designated Buyer's consent, which shall not be
unreasonably withheld. After the Closing Date, no press releases containing any
disclosure of the dollar amounts of the consideration paid to Seller under this
Agreement or disclosure of the names of Seller's shareholders shall be issued
without Seller's consent. Designated Buyer shall attempt to obtain confidential
treatment of the dollar amount of the consideration paid to Seller in any filing
with the Securities and Exchange Commission.
9.4 Further Assurances. Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as
Designated Buyer may reasonably request to effect, consummate, confirm or
evidence the transfer to Designated Buyer of the Purchased Assets and any other
transactions contemplated hereby, including causing the release of any Liens
with respect to the Purchased Assets.
9.5 Confidentiality. Seller shall treat and hold as confidential any
confidential information concerning the Business, the Purchased Assets or this
Agreement (the "Confidential Information"), refrain from using any of the
Confidential Information except in connection with this Agreement, and after the
Closing deliver promptly to Designated Buyer or destroy, at the request and
option of Designated Buyer, all tangible embodiments (and all copies) of the
Asset Purchase Agreement Page 37
Confidential Information (other than the Agreement) which are in its possession
or under its control except for the Excluded Assets; provided, that the term
"Confidential Information" shall not include information that is or subsequently
becomes generally available to the public through no fault of Seller. In the
event that Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller shall notify Designated Buyer promptly of the request or
requirement so that Designated Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 9.5. If, in the absence of
a protective order or the receipt of a waiver hereunder, Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Seller may disclose the Confidential
Information to the tribunal; provided that Seller shall give prior written
notice of such disclosure to Designated Buyer as promptly as possible and shall
use its best efforts to obtain, at the request of Designated Buyer, an order or
other assurance that confidential treatment shall be accorded to such portion of
the Confidential Information required to be disclosed as Designated Buyer shall
designate.
9.6 Change of Corporate Name and Trade Name. Seller shall prepare and
deliver at Closing an amendment to Seller's articles of incorporation to delete
"Colorstrip, Inc." from its corporate name and to otherwise change its corporate
name to a name dissimilar to its present name. Seller shall, at its own
expense, immediately following Closing, file such name change document with the
Secretary of State of the State of California. Seller shall not use or permit
any of its Affiliates to use the names "Colorstrip" or "Pinole Point Steel
Company" or any names confusingly similar thereto in any manner anywhere in the
world after Closing.
9.7 Real Property Adjustments. Prior to the fifth anniversary of the
date of this Agreement, Seller shall be permitted access to and across
Designated Buyer's property for the purposes identified on Exhibit L (the
"Adjustments"). Seller will give Designated Buyer written notice of its
intention to make any Adjustment. Designated Buyer and Seller shall mutually
determine a date for Seller to access Designated Buyer's property to make the
Adjustments.
9.8 Agreements Regarding Certain Labor Matters.
(a) Certain Racial Harassment Matters. With respect to that certain
litigation stylized ▇▇▇▇▇ v. Pinole Point Steel Company et al., Case No. #-92-
1962 MHP (the "Alleged Harassment Action"):
(i) No Buyer Indemnified Party shall be responsible for any
Losses or have any obligation to defend any claims, including, without
limitation, claims of racial harassment relating to the Alleged Harassment
Action with respect to facts and circumstances existing on or prior to the
Closing. Seller shall indemnify, defend and hold harmless each of the
Buyer Indemnified Parties from and against any and all Losses which any
Buyer Indemnified Party may suffer, sustain or become subject to, as a
result of, in connection with, relating to or incidental to or by virtue of
the Alleged Harassment Action with respect to facts and circumstances
existing on or prior to the Closing.
(ii) No Seller Indemnified Parties shall be responsible for any
Losses or have any obligation to defend any claims, including, without
limitation, claims of racial harassment relating to the Alleged Harassment
Action with respect to facts and
Asset Purchase Agreement Page 38
circumstances occurring solely due to the conduct of Designated Buyer after
the Closing. Designated Buyer shall indemnify, defend and hold harmless
each of the Seller Indemnified Parties from and against any and all Losses
which any Seller Indemnified Party may suffer, sustain or become subject
to, as a result of, in connection with, relating to or incidental to or by
virtue of the Alleged Harassment Action with respect to facts and
circumstances occurring solely due to the conduct of Designated Buyer after
the Closing.
(iii) In the event that as part of the Alleged Harassment Action,
a factual finding is made (or the record reflects that facts and
circumstances exist which indicate) that the Losses, if any, to be assessed
against Seller are due, in part, to the conduct of MSC or Designated Buyer
after the Closing, or the Losses, if any, to be assessed against MSC or
Designated Buyer are due, in part to the conduct of Seller on or prior to
the Closing, the Parties agree that such Losses which are imposed upon
Seller or Designated Buyer, as the case may be, shall be apportioned
between Seller and Designated Buyer pursuant to Section 9.8(b).
(b) Apportionment of Certain Claims. In the event that from and after
the Closing, any claims, suits, actions or proceedings relating to any employee
or former employee related matters, including, but not limited to, the Alleged
Harassment Action (collectively, the "Apportionment Claims") are initiated
which may result in liability to Seller, on the one hand, and MSC or Designated
Buyer, on the other hand, the Parties Agree that any Losses which are incurred,
suffering or sustained as a result of any Apportionment Claim shall be
apportioned between Seller and Designated Buyer as follows:
(i) by mutual written agreement within 20 days after Designated
Buyer or Seller gives written notice to Seller or Designated Buyer, as the
case may be;
(ii) If Seller and Designated Buyer are unable to reach mutual
written agreement within such 20 day period, Seller and Designated Buyer
agree to attend a non-binding, confidential mediation for the purposes of
reaching such an agreement (it being understood that such mediation shall
be held in San Francisco, California on consecutive business days, shall
commence within 15 business days after the conclusion of the 20-day period
described in the foregoing clause (i), shall continue for no longer than
three business days and shall be supervised by a mediator reasonably
acceptable to Seller and Designated Buyer); and
(iii) if Seller and Designated Buyer are unable to reach mutual
written agreement upon conclusion of the mediation described in the
foregoing clause (ii) or the mediation is not timely commenced and
completed, Seller and Designated Buyer shall submit such dispute to binding
arbitration, as the sole and exclusive method of resolving such
apportionment (it being understood that the arbitration shall be conducted
in accordance with the provisions of Schedule 9.8).
9.9 MSC Obligation. MSC shall cause Designated Buyer to perform all of its
obligations under this Agreement, the Promissory Note, the Consulting Agreement
and the Side Labor letter.
Asset Purchase Agreement Page 39
9.10 Certain Uses of Proceeds.
(a) Seller has incurred certain borrowings from Bank of America
NT&SA ("Lender") under a credit agreement, and such borrowings are secured by
a security interest in certain of Seller's assets. In connection with the
Closing, Seller shall use cash proceeds of the Preliminary Purchase Price to pay
in full all of Seller's borrowings from Lender and to obtain Lender's release of
its security interest in Seller's assets.
(b) Seller has obtained financing from General Electric Capital
Corporation ("GE") to acquire ownership of a certain aircraft through a lease
arrangement, and GE has taken a security interest in certain of Seller's assets
to secure such financing until such time as Seller provides GE with a certain
letter of credit to secure such financing. In connection with the Closing,
Seller shall use cash proceeds of the Preliminary Purchase Price to obtain such
letter of credit in favor of GE and GE's release of its security interest in
Seller's assets.
9.11 Maintenance of Net Worth; Stockholder Guaranties.
(a) As set forth in this Section 9.11, Seller shall maintain
liquidity to provide means to perform its indemnification obligations hereunder.
From the Closing Date until the second anniversary of the Closing Date, Seller
shall maintain liquidity equal to the Cap. Thereafter, until the third
anniversary of the Closing Date, Seller shall maintain liquidity equal to
$7,000,000. Thereafter, until the fifth anniversary of the Closing Date, Seller
shall maintain liquidity equal to $3,500,000. At any time during any of the
foregoing periods, Seller's obligation to maintain liquidity shall be reduced by
the aggregate Losses, if any, paid by or on behalf of Seller under Sections
6.2(a)(i)(A) and (B) at or prior to such time.
(b) For purposes of determining compliance with Seller's liquidity
obligations, at any time of determination, Seller's liquidity shall be equal to
the sum of the following: (i) Seller's cash and cash equivalents at such time,
determined in accordance with GAAP, and (ii) the aggregate face amount of
standby letters of credit (issued by a reputable financial institution in favor
of Seller to support Seller's liquidity obligations to Designated Buyer)
outstanding at such time and securing demand loans from Seller to its
shareholders. Seller's indebtedness and other obligations shall be disregarded
in determining Seller's compliance with its liquidity obligations.
(c) Subject to the limitations hereinafter provided, Seller may make
distributions or loans to its shareholders from time to time provided that,
after giving effect to each such distribution, Seller is in compliance with its
liquidity obligations. Seller shall not make distributions or loans to any
shareholder unless and until such shareholder agrees in writing to reimburse
Seller on demand from the amounts distributed or loaned as needed to enable
Seller to satisfy the liquidity obligations; provided that Seller may make a
distribution or loan to its shareholders from time to time in amounts reasonably
estimated to enable them to pay income tax obligations attributable to the
transactions contemplated by this Agreement without the shareholders so agreeing
to reimburse such distribution or loan if after making such distributions or
loans Seller is in compliance with its liquidity obligations.
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Asset Purchase Agreement
(d) Unless all of Seller's shareholders have executed and delivered
to Designated Buyer Stockholder Guaranties, if at any ▇▇▇▇ ▇▇▇▇▇▇ is not in
compliance with its liquidity obligations, Seller shall demand that its
shareholders contribute and repay to Seller such amounts as are necessary to
cause Seller to be in compliance with such obligations.
(e) At such time as all of the Seller's shareholders have executed
and delivered to Designated Buyer Shareholder Guaranties in the form attached
hereto as Exhibit Q (with such insertions thereto as are appropriate for such
shareholder and as approved by Designated Buyer, which approval shall not be
unreasonably withheld), Seller's obligations and limitations under this Section
9.11 shall cease.
Article X
Certain Payments And Fees
10.1 Initial Payment into Escrow. Concurrently with the execution and
delivery of this Agreement, Designated Buyer shall deposit into escrow (the
"Escrow Account") the sum of $5,000,000 (the "Escrow Amount"), pursuant to the
escrow agreement substantially in the form of Exhibit O, embodying the following
terms and conditions and such additional terms and conditions as may reasonably
be required by the Escrow Agent:
(a) The Escrow Account shall be maintained with Bank of America NT&SA
or other financial institution reasonably acceptable to Seller and Designated
Buyer (the "Escrow Agent").
(b) The fees and expenses of the Escrow Agent shall be paid from the
investment earnings on the funds on deposit in the Escrow Account; any interest
in excess of such fees and expenses shall be for the account of Designated
Buyer.
(c) Upon a written certification from either Seller or Designated
Buyer that Buyer Delay Fees are due and payable and the amount thereof, the
Escrow Agent shall make a distribution of such amount from the Escrow Account to
Seller (or in accordance with its written directions).
(d) Upon a written certification from either Seller or Designated
Buyer that the Buyer Break-up Fee is due and payable and the amount thereof, the
Escrow Agent shall make a distribution of such amount from the Escrow Account to
Seller (or in accordance with its written directions).
(e) Upon a written direction from Designated Buyer to do so, the
Escrow Agent shall make a distribution to Seller (or in accordance with its
written directions) from the Escrow Account to be applied to the Preliminary
Purchase Price.
Asset Purchase Agreement Page 41
(f) Upon a written certification from Designated Buyer that this
Agreement has been terminated in accordance with Section 5.1(a), (c), (d), (e)
(unless a Buyer Breakup Fee is payable) or (f) hereof, the Escrow Agent shall
make a distribution of all amounts then remaining in the Escrow Account to
Designated Buyer (or in accordance with its written directions).
10.2 Delay Fees.
(a) Designated Buyer shall be obligated to pay Seller a delay fee
("Buyer Delay Fee") subject to the following terms and conditions:
(i) the Buyer Delay Fee shall be equal to $200,000 per week (or
partial week) for weeks ending on or before December 31, 1997; $1,000,000
for a delay from December 31, 1997 to January 1, 1998; and $400,000 per
week (or partial week) for weeks beginning on or after January 1, 1998.
(ii) the Buyer Delay Fee shall be payable for the period from
the Buyer Starting Date (as hereinafter defined) through the Closing Date
or the termination of this Agreement, as the case may be. The "Buyer
Starting Date" is the date on which all of the conditions specified in
Section 2.1 are satisfied (excluding: (A) deliveries to be made on the
Closing Date such as the legal opinion of Seller's counsel, the Consulting
Agreement executed by ▇▇▇▇▇ ▇▇▇▇ and Seller's officer's certificate
provided that Seller certifies that it is prepared to make such deliveries,
and (B) performance by Seller of its obligations under Section 9.10);
provided that the Buyer Starting Date shall not be earlier than the later
to occur of (i) 30 days following the date of this Agreement; (ii) December
15, 1997 and (iii) one day later than December 15, 1997 for each day after
November 26, 1997 that Seller has not delivered the Preliminary
Determination Notice referred to in Section 8.2 hereof.
(iii) Designated Buyer shall pay the Buyer Delay Fee without
demand in advance on the first business day of each week during any period
during which the Buyer Delay Fee is payable. Either Seller or Designated
Buyer may request the payment of the unpaid Buyer Delay Fee from the Escrow
Account from time to time.
(iv) The maximum aggregate amount of Buyer Delay Fees payable
hereunder shall be $5,000,000.
(b) Seller shall be obligated to pay Designated Buyer a delay fee
("Seller Delay Fee") subject to the following terms and conditions:
(i) the Seller Delay Fee shall be equal to $150,000 per week
(or partial week).
(ii) the Seller Delay Fee shall be payable for the period from
the Seller Starting Date (as hereinafter defined) through the Closing Date
or the termination of this Agreement, as the case may be. The "Seller
Starting Date" is the date on which all of the conditions specified in
Section 2.2 are satisfied (excluding deliveries to be made on the Closing
Date such as the legal opinion of MSC's and Designated Buyer's counsel, the
Consulting Agreement executed by Designated Buyer and Designated Buyer's
officer's
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Asset Purchase Agreement
certificate provided Designated Buyer certifies that it is prepared to make
such deliveries); provided that the Seller Starting Date shall not be
earlier than January 1, 1998.
(iii) Seller shall pay the Seller Delay Fee without demand in
advance on the first business day of each week during any period during
which the Seller Delay Fee is payable.
(iv) The maximum aggregate amount of Seller Delay Fees payable
hereunder shall be $1,500,000.
(c) For purposes of determining the payment of the Buyer Delay Fees
or Seller Delay Fees, a week shall be deemed to begin on the day of the week
(e.g., Wednesday) that is the Buyer Starting Date or the Seller Starting Date,
as the case may be.
10.3 Break-up Fees.
(a) Designated Buyer shall be obligated to pay Seller a break-up fee
("Buyer Break-up Fee") in the amount of $5,000,000 (reduced by the amount of
any Buyer Delay Fees previously paid) if either: (1) Seller terminates this
Agreement pursuant to Section 5.1(b) or (2) Seller terminates this Agreement
pursuant to Section 5.1(e) and all of the conditions specified in Section 2.1
are satisfied (excluding: (A) deliveries to be made on the Closing Date such as
the legal opinion of Seller's counsel, the Consulting Agreement executed by
▇▇▇▇▇ ▇▇▇▇ and Seller's officer's certificate provided that Seller certifies
that it is prepared to make such deliveries and (B) performance by Seller of its
obligations under Section 9.10).
(b) Seller shall be obligated to pay Designated Buyer a break-up fee
("Seller Break-up Fee") in the amount of $1,500,000 (reduced by the amount of
any Seller Delay Fees previously paid) if either: (1) Designated Buyer
terminates this Agreement pursuant to Section 5.1(c) or (2) Designated Buyer
terminates this Agreement pursuant to Section 5.1(e) and all of the conditions
specified in Section 2.2 are satisfied (excluding deliveries to be made on the
Closing Date such as the legal opinion of MSC's and Designated Buyer's counsel,
the Consulting Agreement executed by Designated Buyer and Designated Buyer's
officer's certificate provided Designated Buyer certifies that it is prepared to
make such deliveries).
(c) Notwithstanding paragraph (a) above, Designated Buyer shall not
be obligated to pay a Buyer Break-up Fee if either (i) the conditions specified
in any of Section 2.2(c), (e) or (f) have not been satisfied or (ii) Designated
Buyer has a right to terminate this Agreement under Section 5.1(c).
(d) Notwithstanding subsection (b) above, Seller shall not be
obligated to pay a Seller Break-up Fee if either (i) the conditions specified in
any of Section 2.1(c), (d), (e) or (f) have not been satisfied or (ii)
Designated Buyer has a right to terminate this Agreement under Section 5.1(b).
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Asset Purchase Agreement
10.4 Topping Fee.
(a) If on or prior to the first anniversary of the date of this
Agreement, Seller sells the Business (whether by merger, sale of assets, sale of
shares, recapitalization, reorganization or otherwise) except pursuant to this
Agreement, then Seller shall promptly pay to Designated Buyer without demand a
fee (the "Subsequent Sale Fee").
(b) Notwithstanding paragraph (a) above, Seller shall not be
obligated to pay the Subsequent Sale Fee if (i) Seller terminated this Agreement
pursuant to Section 5.1(b), (ii) Designated Buyer terminated this Agreement but
Seller had the right to terminate this Agreement pursuant to Section 5.1(b),
(iii) either Designated Buyer or Seller terminated this Agreement and any of the
conditions specified in Section 2.1(c), (d), (e) or (f) were not satisfied (iv)
either Designated Buyer or Seller terminated this Agreement pursuant to Section
5.1(e) and any of the conditions specified in Section 2.2 were not satisfied
(disregarding deliveries to be made on the Closing Date such as the legal
opinion of MSC's and Designated Buyer's counsel, the Consulting Agreement
executed by Designated Buyer and Designated Buyer's officer's certificate
provided Designated Buyer certifies that it was prepared to make such
deliveries) or (v) the parties terminated this Agreement by mutual agreement.
(c) The Subsequent Sale Fee shall be in the amount of $5,000,000 if
the purchaser is any of Seller's shareholders or an entity controlled by any of
Seller's shareholders. In the case of any other purchaser and a purchase price
in excess of $126,670,000, the Subsequent Sale Fee shall be in an amount equal
to the lesser of (i) the amount by which the purchase price exceeds $126,670,000
and (ii) $5,000,000. If the purchase price is $126,670,000 or less, no
Subsequent Sale Fee shall be payable. In any case in which a Subsequent Sale Fee
is payable, such fee shall be reduced by the amount of any Seller Delay Fees and
any Seller Break-up Fee previously paid.
Article XI
Miscellaneous
11.1 Amendment and Waiver. This Agreement may be amended and any provision
of this Agreement may be waived if set forth in a writing executed by all
Parties. No course of dealing between or among any persons or entities having
any interest in this Agreement shall be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any party
under or by reason of this Agreement. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
11.2 Notices. All notices, demands and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, one business day after being sent by
reputable overnight courier, transmitted by facsimile or telecopied (with hard
copy to follow). Notices, demands and communications to Seller, MSC and
Designated Buyer shall, unless another address is specified in writing, be sent
to the address or telecopy number indicated below:
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Asset Purchase Agreement
Notices to Seller: With a copy to:
(prior to Closing) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ & Breyer, LLC
Colorstrip, Inc. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Post Office Box 4050 Attn: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
(after Closing) With a copy to:
c/o ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Cahen ▇▇▇▇▇▇ & Breyer, LLC
▇▇▇▇▇▇▇▇, Cahen ▇▇▇▇▇▇ & Breyer, LLC ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇
Notices to MSC: With a copy to:
Material Sciences Corporation ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer Attention: ▇▇▇▇ Sugar Factor
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Designated Buyer: With a copy to:
MSC Pinole Point Steel Inc. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
c/o Material Sciences Corporation ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Elk ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇ Sugar Factor
Attention: Chief Financial Officer Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change its address for notice by giving notice of such change to
the other Parties in accordance with this Section.
11.3 Binding Agreement; Assignment.
(a) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns; provided that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by Seller without the prior
written consent of Designated Buyer. Without limiting the generality of the
foregoing:
Page 45
(i) Designated Buyer may (at any time prior to the Closing), at
its sole discretion, assign, in whole or in part, its rights and
obligations pursuant to this Agreement to one or more wholly owned
subsidiaries (including subsidiaries which may be organized subsequent to
the date hereof) of MSC;
(ii) MSC and Designated Buyer may assign its rights under this
Agreement for collateral security purposes to any lender providing
financing to MSC or Designated Buyer, or any of their affiliates and any
such lender may exercise all of the rights and remedies of Designated
Buyer, as applicable, hereunder; and
(iii) MSC and Designated Buyer may assign their respective
rights under this Agreement, in whole but not in part, to any subsequent
purchaser of MSC or Designated Buyer or any of their respective divisions
or any material portion of their respective assets (whether such sale is
structured as a sale of stock, a sale of assets, a merger or otherwise).
11.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
11.5 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any person or
entity.
11.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
11.7 Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way, except
for (i) any confidentiality agreement, (ii) the Labor Side Letter and (iii) the
side letter regarding proforma income statements, in each case between the
Parties which will continue in full force and effect.
11.8 No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the Parties hereto, their successors, their permitted assigns and the other
Buyer Indemnified Parties and other Seller Indemnified Parties and nothing
herein expressed or implied shall give or be construed to give any person or
entity, other than the Parties hereto, such successors, such permitted assigns
and other Buyer Indemnified Parties and other Seller Indemnified Parties, any
legal or equitable rights hereunder.
11.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
Page 46
11.10 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
11.11 Waiver Of Jury Trial. As A Specifically Bargained Inducement For Each
Of The Parties To Enter Into This Agreement (Each Party Having Had Opportunity
To Consult Counsel), Each Party Expressly Waives The Right To Trial By Jury In
Any Lawsuit Or Proceeding Relating To Or Arising In Any Way From This Agreement
Or The Transactions Contemplated Herein.
11.12 Consent To Jurisdiction. The Parties Agree That Jurisdiction And
Venue In Any Action Brought By Any Party Pursuant To This Agreement Shall
Properly And Exclusively Lie In Any Federal Or State Court Located In The City
of San Francisco, California. By Execution And Delivery Of This Agreement, Each
Party Irrevocably Submits To The Jurisdiction Of Such Courts And In Respect Of
His Or Its Property With Respect To Such Action. The Parties Irrevocably Agree
That Venue Would Be Proper In Such Court, And Hereby Waive Any Objection That
Such Court Is An Improper Or Inconvenient Forum For The Resolution Of Such
Action. The Parties Further Agree That The Mailing By Certified Or Registered
Mail, Return Receipt Requested, Of Any Process Required By Any Such Court Shall
Constitute Valid And Lawful Service Of Process Against Them, Without Necessity
For Service By Any Other Means Provided By Statute Or Rule Of Court.
Notwithstanding The Foregoing, The Parties Agree To Submit Any Dispute Under
This Agreement To Mediation In San Francisco, California Before A Mutually
Acceptable Mediator; Provided, However, That A Party May First File A Lawsuit To
Toll Any Applicable Statute Of Limitations So Long As Such Party Does Not
Proceed With Such Lawsuit Until The Mediation Is Completed Or First File a
Lawsuit In Order To Seek Specific Performance, Injunctive Relief and/or
Equitable Relief. The Cost For Such Mediation Will Be Shared Equally By The
Parties.
11.13 Attorneys' Fees. In the event of litigation hereunder, the prevailing
party therein (as determined by the court) shall be entitled to reimbursement of
reasonable attorneys' fees and costs of suit.
[Balance of this page intentionally left blank]
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11.14 Aid to Interpretation. As an aid in interpreting this Agreement,
where a matter is covered by a specific provision of this Agreement, such as a
particular representation and warranty, and would also appear to be within the
ambit of a more general provision of this Agreement, the parties intend that
matter be governed solely by the specific provision and not by the general
provision. As examples: (i) if the warranty with respect to governmental
licenses and permits is restricted to Seller's Knowledge, the existence of
unknown governmental licenses and permits would not violate any other warranty,
and (ii) environmental liabilities and warranties shall be governed solely by
the sections specifically addressing such matters and not by any other sections.
* * * *
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
Colorstrip, Inc.
By: ____________________________________
Its: ___________________________________
Material Sciences Corporation
By: ____________________________________
Its: ___________________________________
MSC Pinole Point Steel Inc.
By: ____________________________________
Its: ___________________________________
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