MEMBER INTEREST PURCHASE AGREEMENT
BY AND AMONG
SGL CARBON FIBERS AND COMPOSITES, INC.,
SGL TECHNIK GmbH,
ALDILA MATERIALS TECHNOLOGY CORP.
AND
ALDILA, INC.
OCTOBER 20, 1999
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS........................................................................1
ARTICLE 2 SALE AND TRANSFER OF MEMBER INTEREST; CLOSING.....................................10
SECTION 2.1. SALE OF MEMBER INTEREST......................................................10
SECTION 2.2. PURCHASE PRICE...............................................................10
SECTION 2.3. CLOSING......................................................................10
SECTION 2.4. CLOSING OBLIGATIONS..........................................................10
SECTION 2.5. ADJUSTMENT AMOUNT............................................................11
SECTION 2.6. ADJUSTMENT PROCEDURE.........................................................11
ARTICLE 3 SELLER'S REPRESENTATIONS AND WARRANTIES...........................................12
SECTION 3.1. ORGANIZATION AND GOOD STANDING...............................................12
SECTION 3.2. AUTHORITY; NO CONFLICT.......................................................13
SECTION 3.3. CAPITALIZATION...............................................................15
SECTION 3.4. FINANCIAL STATEMENTS.........................................................15
SECTION 3.5. BOOKS AND RECORDS............................................................15
SECTION 3.6. TITLE TO PROPERTIES; ENCUMBRANCES............................................16
SECTION 3.7. CONDITION AND SUFFICIENCY OF ASSETS..........................................16
SECTION 3.8. ACCOUNTS RECEIVABLE..........................................................17
SECTION 3.9. INVENTORY....................................................................17
SECTION 3.10. NO INDEBTEDNESS..............................................................17
SECTION 3.11. TAXES........................................................................17
SECTION 3.12. NO MATERIAL ADVERSE CHANGE...................................................19
SECTION 3.13. EMPLOYEE BENEFITS............................................................19
SECTION 3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS..............20
SECTION 3.15. LEGAL PROCEEDINGS; ORDERS....................................................22
SECTION 3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS........................................23
SECTION 3.17. CONTRACTS; NO DEFAULTS.......................................................24
SECTION 3.18. INSURANCE....................................................................27
SECTION 3.19. ENVIRONMENTAL MATTERS........................................................29
SECTION 3.20. EMPLOYEES....................................................................30
SECTION 3.21. LABOR RELATIONS; COMPLIANCE..................................................31
SECTION 3.22. INTELLECTUAL PROPERTY........................................................31
SECTION 3.23. DISCLOSURE...................................................................33
SECTION 3.24 RELATIONSHIPS WITH RELATED PERSONS...........................................33
SECTION 3.25. BROKERS OR FINDERS...........................................................33
SECTION 3.26. MILLENIUM COMPLIANT SOFTWARE.................................................33
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...........................................34
SECTION 4.1. ORGANIZATION AND GOOD STANDING...............................................34
SECTION 4.2. AUTHORITY; NO CONFLICT.......................................................35
SECTION 4.3. INVESTMENT INTENT............................................................36
SECTION 4.4. CERTAIN PROCEEDINGS..........................................................37
SECTION 4.5. BROKERS OR FINDERS...........................................................37
SECTION 4.6 FINANCING....................................................................37
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SECTION 4.7 ANTI-TRUST ISSUES............................................................37
ARTICLE 5 COVENANTS PRIOR TO CLOSING DATE...................................................37
SECTION 5.1 ACCESS AND INVESTIGATION.......................................................37
SECTION 5.2 OPERATION OF THE BUSINESSES OF THE AMT PREDECESSORS............................38
SECTION 5.3 NEGATIVE COVENANT..............................................................38
SECTION 5.4 REQUIRED APPROVALS.............................................................38
SECTION 5.5 NOTIFICATION...................................................................38
SECTION 5.6. NO INDEBTEDNESS................................................................39
SECTION 5.7 NO NEGOTIATION.................................................................39
SECTION 5.8 BEST EFFORTS...................................................................39
SECTION 5.9 CAPITAL EXPENDITURES...........................................................39
SECTION 5.10 AGREEMENTS/COMMITMENTS.........................................................39
SECTION 5.11. BENEFIT PLANS..................................................................40
SECTION 5.12. ENVIRONMENTAL ACTIONS..........................................................40
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE...............................41
SECTION 6.1. ACCURACY OF REPRESENTATIONS....................................................41
SECTION 6.2. SELLER'S PERFORMANCE...........................................................41
SECTION 6.3. CONSENTS.......................................................................41
SECTION 6.4. ADDITIONAL DOCUMENTS...........................................................41
SECTION 6.5. NO PROCEEDINGS.................................................................42
SECTION 6.6. NO CLAIM REGARDING EQUITY OWNERSHIP OR SALE PROCEEDS...........................42
SECTION 6.7. NO PROHIBITION.................................................................42
SECTION 6.8. NO MATERIAL ADVERSE CHANGE.....................................................42
SECTION 6.9 DISCHARGE OF LIABILITIES.......................................................42
SECTION 6.10. RELEASE OF FOOTHILL LIEN.......................................................43
ARTICLE 7 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO CLOSE.............................43
SECTION 7.1. ACCURACY OF REPRESENTATIONS....................................................43
SECTION 7.2. BUYER'S PERFORMANCE............................................................43
SECTION 7.3. CONSENTS.......................................................................44
SECTION 7.4. ADDITIONAL DOCUMENTS...........................................................44
SECTION 7.5. NO PROCEEDINGS.................................................................44
SECTION 7.6. NO PROHIBITION.................................................................44
ARTICLE 8 INDEMNIFICATION; REMEDIES.........................................................45
SECTION 8.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY INVESTIGATION...............45
SECTION 8.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER...............................45
SECTION 8.3 [INTENTIONALLY OMITTED]........................................................45
SECTION 8.4. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER................................45
SECTION 8.5. TIME LIMITATIONS...............................................................46
SECTION 8.6 INTENTIONALLY OMITTED..........................................................47
SECTION 8.7. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS..............................47
SECTION 8.8. PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS....................................48
ARTICLE 9 TERMINATION.......................................................................48
SECTION 9.1. TERMINATION EVENTS.............................................................48
SECTION 9.2. EFFECT OF TERMINATION..........................................................49
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ARTICLE 10 GENERAL PROVISIONS................................................................49
SECTION 10.1 DISPUTE RESOLUTION.............................................................49
SECTION 10.2. EXPENSES.......................................................................50
SECTION 10.3. PUBLIC ANNOUNCEMENTS...........................................................50
SECTION 10.4. NOTICES........................................................................51
SECTION 10.5. JURISDICTION; SERVICE OF PROCESS...............................................52
SECTION 10.6. FURTHER ASSURANCES.............................................................52
SECTION 10.7. WAIVER.........................................................................52
SECTION 10.8. ENTIRE AGREEMENT AND MODIFICATION..............................................52
SECTION 10.9. DISCLOSURE SCHEDULES...........................................................53
SECTION 10.10. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.............................53
SECTION 10.11. SEVERABILITY...................................................................53
SECTION 10.12. SECTION HEADINGS, CONSTRUCTION.................................................53
SECTION 10.13. GOVERNING LAW..................................................................53
SECTION 10.14. COUNTERPARTS...................................................................54
EXHIBITS
Exhibit A Aldila Supply Agreement
Exhibit B Amended and Restated Limited Liability Company Agreement
Exhibit C Assignment of Member Interest
Exhibit D SGL Supply Agreement
Exhibit E Inventory Practices/Valuation
Exhibit F Opinion of Seller's Counsel
Exhibit G Opinion of Buyer's Counsel
Exhibit H Opinion of Buyer's Parent's Counsel
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LIST OF SCHEDULES
Part 1.1 Excluded Assets
Part 3.1(a), (b) Organization
Part 3.2 Consents
Part 3.3(c) Ownership Interests in Other Entities
Part 3.6 Facilities
Part 3.7 Condition and Sufficiency of Assets
Part 3.8 Accounts Receivable
Part 3.9(b) Consigned Inventory
Part 3.11 Taxes
Part 3.12 Material Adverse Change
Part 3.13 Employee Benefit Plans
Part 3.14 Legal Requirements; Governmental Authorizations
Part 3.15 Legal Proceedings; Orders
Part 3.16 Absence of Certain Changes and Events
Part 3.17(a) Contracts
Part 3.17(b) Certain Rights Relating to Contracts
Part 3.17(c) Enforceability of Contract
Part 3.17(d) Compliance with Contracts
Part 3.18(a) Insurance
Part 3.18(b) Self-insurance Arrangements
Part 3.18(c) Claims History under Insurance Policies
Part 3.18(d) Exceptions Concerning Insurance Policies
Part 3.19 Environmental Matters
Part 3.20 Employees
Part 3.22(b) Intellectual Property-Related Matters
Part 3.22(c) Limitation on Rights to use Intellectual Property Assets
Part 3.24 Relationships with Related Persons
Part 3.26 Software
Part 4.2 Buyer's Consents
Part 5.9 Capital Expenditures Budget
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MEMBER INTEREST PURCHASE AGREEMENT
THIS MEMBER INTEREST PURCHASE AGREEMENT ("Agreement") is made as of
October 20, 1999, by SGL CARBON FIBERS AND COMPOSITES, INC., a Nevada
corporation ("Buyer"), SGL TECHNIK GMBH, a German limited liability company
("Buyer Parent"), ALDILA MATERIALS TECHNOLOGY CORP., a Delaware corporation
("Seller") and ALDILA, INC., a Delaware corporation ("Seller Parent").
RECITALS:
A. On August 23, 1999, Aldila Wyoming Building Corp., a Delaware
corporation ("Building Corp.") merged with and into Seller in a merger pursuant
to which Seller was the surviving entity.
B. Seller entered into the Limited Liability Company Agreement dated
August 19, 1999 (the "Original Limited Liability Company Agreement") which
provided for the formation and capitalization of AMTC LLC, a Delaware limited
liability company ("AMT"). AMT was formed by the filing of a certificate of
formation with the Delaware Secretary of State on August 19, 1999. AMT was
capitalized pursuant to the terms and conditions of the Original Limited
Liability Company Agreement during August of 1999. The Seller made the initial
capital contributions to AMT as set forth in the Original Limited Liability
Company Agreement and received 100% of the member interests in AMT in exchange
therefor. Seller also entered into the Contribution and Amendment to LLC
Agreement dated September 1, 1999, as amended (the "Contribution Agreement")
pursuant to which the Seller made an additional capital contribution to AMT of
the Contributed Business (as defined in the Contribution Agreement) on September
1, 1999.
C. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, a 50% member interest in AMT on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1:
"Accounts Payable" -- all accounts payable of the AMT Predecessor that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the AMT Predecessor as of the Closing Date, as the context requires.
"Accounts Receivable" -- all accounts receivable of the AMT Predecessor
that are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the AMT Predecessor as of the Closing Date, as the context
requires.
"Accrued Expenses" -- all accrued expenses of the AMT Predecessors that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the AMT Predecessor as of the Closing Date, as the context
requires.
"Adjustment Amount" -- the amount by which the Purchase Price may be
adjusted as determined in accordance with Section 2.5.
"Affiliate" -- any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person.
"Agreement" -- this Member Interest Purchase Agreement.
"Aldila Supply Agreement" -- the supply agreement to be entered into
between AMT and Aldila Golf Corp., substantially in the form of Exhibit A
attached hereto.
"Amended and Restated Limited Liability Company Agreement" -- the
Agreement which constitutes an amendment and restatement of the Original Limited
Liability Company Agreement in the form of Exhibit B attached hereto.
"AMT" -- AMTC LLC, a Delaware limited liability company.
"AMT Predecessor" -- as the context requires, (i) prior to the
Contribution, Seller and Building Corp., taken together (whether or not merged),
but excluding the Excluded Assets, and AMT and (ii) after the Contribution, AMT.
"Applicable Contract" -- any Contract (a) under which any AMT Predecessor
has or may acquire any rights, (b) under which the AMT Predecessor has or may
become subject to any obligation or liability, or (c) by which the AMT
Predecessor or any of the assets owned or used by it is or may become bound.
"Assignment" -- the assignment of Member Interest in the form of Exhibit C
attached hereto.
"Balance Sheet" -- the unaudited balance sheet of the AMT Predecessor for
the fiscal year ended December 31, 1998.
"Building Corp." -- Aldila Wyoming Building Corp., a Delaware corporation.
"Business Day" -- a day other than a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California are authorized or required by
law to close.
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"Buyer" -- SGL Carbon Fibers and Composites, Inc., a Nevada corporation.
"Buyer Parent" -- SGL Technik GmbH, a German limited liability company.
"Closing" -- the closing of the purchase and sale of the Member Interest
provided for in this Agreement.
"Closing Accounting Statements" -- the Closing Balance Sheet, the Closing
Net Working Capital Statement and the other statements to be prepared pursuant
to Section 2.6.
"Closing Balance Sheet" -- the consolidated balance sheet of AMT as of the
Closing Date to be prepared in accordance with Section 2.6.
"Closing Date" -- the date and time as of which the Closing actually takes
place.
"Closing Net Working Capital Statement" -- the closing net working capital
statement of AMT as of the Closing Date to be prepared in accordance with
Section 2.6.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Consolidated Income Taxes" -- with respect to a Person, taxes based on
income (whether of such Person or another entity) if such Person owes such taxes
as a member of a consolidated group that includes an entity that owns a
controlling interest in such Person.
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Member Interest by Seller to Buyer;
(b) the execution, delivery, and performance of the Amended and Restated
Limited Liability Company Agreement, the Assignment and the Supply Agreements;
(c) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Member Interest.
"Contract" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Contribution" -- as defined in Section 3.1(c).
"Contribution Agreement" -- as defined in Recital B.
3
"Credit Agreement" -- the Loan and Security Agreement dated as of July 9,
1999, by and between Aldila Golf Corp. and Foothill, and all agreements executed
pursuant thereto.
"Damages" -- with respect to any indemnified party: (i) any direct loss,
liability, claim, damage, Tax, cost, fine, penalty, expense (including costs of
investigation and defense and reasonable attorneys fees) or (ii) any diminution
in the value of the Member Interest (or other membership interests in AMT of
such indemnified party) which shall be deemed equal to the amount of relevant
indemnification claim(s)), in the case of either subsection (i) or (ii) hereof
whether or not involving a third party claim. For the purpose of calculating any
diminution in the value of the Member Interest (or other membership interests in
AMT of an indemnified party) of an indemnified party, the following principles
shall apply: (a) such diminution shall be deemed to include any amounts that
both have been or will be contributed by the indemnified party to AMT to provide
sufficient funds to AMT to pay any amount which constitutes Damages within the
meaning of subsection (i) of this definition; (b) such diminution shall be
deemed to include the application by AMT to the payment of an amount which
constitutes Damages within subsection (i) above of all or any portion of the
$500,000 payment made to AMT by an indemnified party pursuant to Section 2.2(b)
of the Amended and Restated Limited Liability Company Agreement; (c) such
diminution shall be deemed to include the application by AMT to the payment of
an amount which constitutes Damages within subsection (i) above of all or any
portion of payments made to AMT by an indemnified party pursuant to Section
2.2(c) of the Amended and Restated Limited Liability Company Agreement or
pursuant to Section 3(a) of the SGL Supply Agreement or the Aldila Supply
Agreement, as the case may be, but only to the extent of the portion of such
payments made in excess of [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment]; and (d) notwithstanding
subsection (a) above and except to the extent otherwise set forth in subsections
(b) and (c) above, such diminution shall not include the application by AMT to
the payment of an amount which constitutes Damages within subsection (i) above
of all or any portion of all other amounts required to be paid to AMT by an
indemnified party pursuant to the Amended and Restated Limited Liability Company
Agreement, the SGL Supply Agreement or the Aldila Supply Agreement, as the case
may be.
"Disclosure Schedules" -- the Disclosure Schedules delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement, as may be
amended or supplemented pursuant to the terms hereof.
"Encumbrance" -- any charge, claim, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal, or restriction of any
kind, including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership, in all events excluding Permitted
Encumbrances.
"Environment" -- soil, land surface or subsurface strata, surface waters,
groundwaters, drinking water supply, stream sediments, ambient air, plant and
animal life, and any other environmental medium or natural resource.
4
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of (i)
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and (ii) the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) protecting resources or species;
(e) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
5
(f) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(g) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, as amended and regulations and rules issued pursuant to that Act
or any successor law.
"Excluded Assets" -- the assets identified on Part 1.1 of the Disclosure
Schedules.
"Facilities" -- (i) any real property, leaseholds, or other interests in
real property currently or formerly owned, operated or used by the AMT
Predecessor or its predecessors, (ii) any buildings, plants or structures
currently or formerly owned, operated or used by the AMT Predecessor or its
predecessors and (iii) equipment (including motor vehicles and rolling stock)
currently owned, operated or used by the AMT Predecessor.
"Foothill" - Foothill Capital Corporation, a California corporation.
"GAAP" -- generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any governmental body or pursuant to any
Legal Requirement.
"Hazardous Activity" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that materially increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or AMT.
"Hazardous Materials" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Indebtedness" -- shall mean (a) all indebtedness for borrowed money or
for the deferred purchase price of property or services, other than accounts
payable and accrued expenses incurred in the ordinary course of business, (b)
any other indebtedness which is
6
evidenced by a note, bond, debenture or similar instrument, (c) all obligations
under any financing leases, (d) all obligations in respect of banker's
acceptances, (e) all liabilities secured by (or for which the holder of such
liabilities has an existing right, contingent or otherwise, to be secured by)
any lien on any property owned by any person or entity even though such person
or entity has not assumed or otherwise become liable for the payment thereof,
other than Permitted Encumbrances (f) all obligations under conditional sale or
other title retention agreements relating to property or assets acquired by such
person or entity and (g) any guarantee, reimbursement, counterindemnity or
similar obligation pursuant to which any person or entity guarantees, or in
effect guarantees, any indebtedness, liability, obligation, lease, dividend, or
other obligation of any other person or entity in any manner.
"Intellectual Property Assets" -- as defined in Section 3.22.
"Interim Balance Sheet" -- the unaudited balance sheet of AMT Predecessor
as at August 31, 1999.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, as
amended, and regulations issued by the IRS pursuant to the Internal Revenue Code
or any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- a Person will be deemed to have "Knowledge" of a particular
fact or other matter if such Person (or, in the case of Seller, Xxxx X. Xxxxxxx,
Xxxxxx Xxxxxxx or Xxxxx Xxxxxxx) is actually aware of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, rule, regulation, statute, or treaty.
"Member Interest" -- a 50% member interest in AMT.
"Net Working Capital" -- all of AMT's PAN precursor inventory (reduced by
any credits granted by PAN precursor suppliers prior to Closing that apply to
unconsumed PAN precursor) and sizing and ammonium bicarbonate inventory plus
certain other assets consisting of prepaid spare parts as of the Closing,
reduced by AMT's Accounts Payable and Accrued Expenses, each as determined and
valued as of the Closing in accordance with Section 2.6.
"Occupational Safety and Health Law" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other governmental body or by any arbitrator.
7
"Organizational Documents" -- (a) the articles or certificate of
incorporation, the bylaws and any stockholder's agreement of a corporation; (b)
the limited liability company agreement, the Contribution Agreement (in the case
of AMT only) and any certificate or articles of formation or organization of a
limited liability company; and (c) any amendment to any of the foregoing.
"Original Limited Liability Company Agreement" -- the Limited Liability
Company Agreement entered into by Seller dated August 19, 1999, providing for
the formation and capitalization of AMT.
"Permitted Encumbrances" -- all of the following: (a) security interests
incurred in connection with the purchase of personal property after the date of
the Balance Sheet (such security interests being limited to the property so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) has occurred, (b) liens for unpaid
taxes that either (i) are not yet due and payable or (ii) are the subject of
good-faith protests, (c) the interests of lessors under operating leases, (d)
purchase money liens as long as each such lien only attaches to the asset
purchased and only secures the purchase price of the asset, (e) liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
and not in connection with the borrowing of money, (f) utilities liens, and (g)
with respect to any real property, easements, rights of way, zoning, building
use restrictions, exceptions, variances, reservations, limitations and similar
covenants and restrictions (including any liens held or restrictions imposed, as
a matter of course, by any governmental authority that was the seller of any
such real property), to the extent such covenants and restrictions do not
materially impair the value of the property and do not materially interfere with
the current use or occupancy of the underlying real property in the ordinary
course of business.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or governmental body.
"Plan" -- as defined in Section 3.13.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any governmental body or arbitrator.
"Purchase Price" -- $7,000,000, as adjusted by the Adjustment Amount
determined in accordance Section 2.5 and Section 2.6.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
8
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, member, manager or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"Securities Act" -- the Securities Act of 1933 or any successor law, as
amended, and regulations and rules issued pursuant to that Act or any successor
law.
"Seller" -- Aldila Materials Technology Corp., a Delaware corporation.
"Seller Parent" -- Aldila, Inc., a Delaware corporation.
"SGL Supply Agreement" -- the supply agreement to be entered into between
AMT and Buyer, substantially in the form of Exhibit D attached hereto.
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests representing 50.1% or
more of the equity ownership interests or having the power to elect a majority
of that corporation's or other Person's board of directors or similar governing
body, or otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries; when used without
reference to a particular Person, "Subsidiary" means a Subsidiary of AMT.
"Taxes" -- with respect to a Person, any federal, state, local, foreign or
other income, alternative minimum, accumulated earnings, franchise, capital,
profits, gross receipts, value added, sales, use, goods and services, excise,
transfer, conveyance, real property, personal property, ad valorem, intangibles,
rent, occupancy, license, occupational, employment, unemployment insurance,
social security, disability, workers compensation, payroll, withholding,
estimated or other similar taxes, duty or other governmental charge or
assessment or deficiencies thereof (including all interest and penalties
thereon, in each case excluding Consolidated Income Taxes.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any governmental
body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other
9
circumstances exist, that would lead a reasonable Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
ARTICLE 2
SALE AND TRANSFER OF MEMBER INTEREST; CLOSING
Section 2.1 Sale of Member Interest
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Member Interest to Buyer, and Buyer will
purchase the Member Interest from Seller. It is agreed that in accordance with
federal and state income tax provisions, the purchase of the Member Interest in
AMT, a single-member LLC prior to the date hereof, shall be treated as a deemed
sale and purchase of a 50% undivided interest in the assets of AMT for an amount
equal to the Purchase Price plus one-half of AMT's liabilities as of the time
immediately following the closing.
Section 2.2 Purchase Price
The Purchase Price for the Member Interest shall be paid by Buyer to
Seller at the Closing in immediately available funds. The Purchase Price shall
be subject to adjustment after Closing pursuant to Section 2.5 and Section 2.6.
Section 2.3 Closing
The Closing will take place at the offices of Fried, Frank, Harris,
Xxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx,
at 10:00 a.m. on a date no later than five (5) Business Days after the
satisfaction or waiver of all conditions to closing set forth in Sections 6 and
7 hereof (except to the extent that the satisfaction of such closing conditions
must occur at the Closing) or such other date as the parties mutually agree.
Section 2.4 Closing Obligations
At the Closing:
(a) Seller will deliver to Buyer:
(i) the Assignment;
(ii) the Amended and Restated Limited Liability Company Agreement
executed by Seller, Seller Parent and the managers appointed
by Seller;
(iii) the Aldila Supply Agreement, executed by AMT and Aldila Golf
Corp.; and
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(iv) all closing deliveries required to satisfy the conditions
precedent to Buyer's obligation to close which are set forth
in Article 6 hereof.
(b) Buyer will deliver to Seller:
(i) the Purchase Price by wire transfer to an account specified by
Seller;
(ii) the Amended and Restated Limited Liability Company Agreement,
executed by Buyer, Buyer Parent and the managers appointed by
Buyer;
(iii) the SGL Supply Agreement, executed by AMT and Buyer; and
(iv) all closing deliveries required to satisfy the conditions
precedent to Seller's obligations to close which are set forth
in Article 7 hereof.
Section 2.5 Adjustment Amount
The "Adjustment Amount" will be the total of (a) 50% of any payments
made by Seller or AMT Predecessor prior to the Closing for the purchase of a
dust collection system to be used by AMT (the "DCS Payment") plus or minus
(b) the percentage stipulated below of the amount by which AMT's Net Working
Capital as of the Closing differs from 258,000. If AMT's Net Working Capital
as of the Closing is greater than 258,000, the Purchase Price shall be
increased by the DCS Payment plus 50% of the amount of such difference. If
AMT's Net Working Capital as of the Closing is less than 258,000, the
Purchase Price shall be increased by the DCS payment but decreased by 50% of
the amount of such difference.
Section 2.6 Adjustment Procedure
(a) AMT will prepare the Closing Balance Sheet, which shall include a
computation of AMT's consolidated members' equity as of the Closing, and the
Closing Net Working Capital Statement, which shall include a computation of
AMT's Net Working Capital as of the Closing for the purposes of determining the
Adjustment Amount. AMT shall also prepare a statement which sets forth (after
giving effect to Buyer's purchase of the Member Interest) (i) a good faith
estimate of the tax basis of AMT's assets as of the Closing, it being agreed
that Buyer's share of the aggregate adjusted tax basis of AMT's assets as of the
Closing shall, to the extent legally permissible, equal the Purchase Price plus
50% of AMT's liabilities and that AMT has no IRC Section 197 Intangibles (i.e.,
all of AMT's assets are Classes I through III as defined in Treas. Reg. ss.
1.338(b)-2T) (the parties also agree that they will allocate the Purchase Price
pursuant to the terms of IRC ss. 1060 and that they will report such allocation
in such manner on their own tax returns consistently therewith), and (ii) the
"Capital Accounts" of the "Members" as of the "Effective Date" (as such terms
are defined in the Amended and Restated Limited Liability Company Agreement).
The Closing Accounting Statements shall be prepared in accordance with
11
GAAP. For the purposes of determining AMT's inventory levels as of the Closing,
the parties shall cause a full inventory of AMT's inventory to be taken as of
the Closing Date and shall use the inventory practices and valuation principles
described in Exhibit E attached hereto, with the results of such inventory
submitted for use in connection with the preparation of the Closing Accounting
Statements.
(b) AMT will deliver the Closing Accounting Statements to Buyer and Seller
within 60 days after the Closing Date. If within 30 days following delivery of
the Closing Accounting Statements to Buyer, Buyer has not given Seller notice of
its objection to the Closing Accounting Statements (such notice must contain a
statement setting forth in reasonable detail the basis of Buyer's objection),
then the Closing Accounting Statements shall be deemed accepted by the parties
and the Closing Net Working Capital Statement will be used in computing the
Adjustment Amount. If Buyer gives such notice of objection to Seller within the
time required and Buyer and Seller cannot resolve the issues set forth in the
Buyer's notice of objection within 15 Business Days after Buyer's delivery of
such notice, then the remaining issues in dispute will be submitted to an
independent nationally recognized accounting firm other than Deloitte & Touche
LLP or KPMG Peat Marwick, certified public accountants (the "Accountants"), for
resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will furnish to the Accountants such workpapers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to that party or its independent
public accountants, and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties; and (iii) AMT shall bear the fees of the
Accountants for such determination.
(c) On or before the tenth Business Day following the final determination
of the Adjustment Amount, if the Purchase Price is less than $7,000,000, Seller
will pay the amount required to Buyer pursuant to Section 2.5, or, if the
Purchase Price is greater than $7,000,000, Buyer will pay the amount required to
Seller pursuant to Section 2.5. Any such payment will be made together with
simple interest at 8% beginning on the Closing Date and ending on the date of
payment. Payment must be made in immediately available funds by wire transfer to
such bank account as the receiving party shall specify.
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller and Seller Parent, jointly and severally, hereby represent and
warrant to Buyer as follows:
Section 3.1 Organization and Good Standing
(a) Part 3.1(a) of the Disclosure Schedules contains a complete and
accurate list for AMT of its name, its legal form, its jurisdiction of
incorporation or formation, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
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member or stockholder and the percentage of equity interest held by each). AMT
is a limited liability company, duly organized, validly existing, and in good
standing under the laws of its jurisdiction of formation, with full limited
liability company power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations hereunder and under Applicable
Contracts.
(b) Attached hereto as Part 3.1(b) of the Disclosure Schedules are copies
of the Organizational Documents of AMT and each of its predecessors, as
currently in effect or were in effect immediately prior to the transactions
described in Section 3.1(c).
(c) On August 23, 1999, Building Corp. merged with and into Seller in a
merger pursuant to which Seller was the surviving entity which acquired all of
the rights, title and interest in and to all of the assets and liabilities of
Building Corp. and Seller. On August 19, 1999, Seller formed AMT by filing a
Certificate of Formation with the Delaware Secretary of State. On September 1,
1999, Seller contributed to AMT all of the rights, title and interest in and to
all of the assets and liabilities of the AMT Predecessor on such date (including
all of the assets and liabilities appearing on the Interim Balance Sheet, other
than the inventory items sold and receivables paid in the ordinary course of
business since such date), but excluding the Excluded Assets (such contribution
to be referred to in this Agreement as the "Contribution") in accordance with
the terms and conditions of the Original Limited Liability Company Agreement and
the Contribution Agreement. There is no other holder of a member interest in AMT
other than the Seller.
(d) There are no documents, agreements, certificates, instruments or
understandings (written or verbal) between Seller and AMT relating to the
formation or capitalization of AMT other than those which are identified on Part
3.1(b) or Part 3.17 of the Disclosure Schedules, complete and accurate copies of
which have been provided to the Buyer.
Section 3.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Seller and Seller Parent, enforceable against Seller and Seller Parent in
accordance with its terms. Upon the execution and delivery by Seller and/or the
Seller Parent of the Amended and Restated Limited Liability Company Agreement,
the Assignment and all other documents or agreements required of Seller and/or
the Seller Parent hereunder and the execution and delivery of the Aldila Supply
Agreement by Aldila Golf Corp. (collectively, the "Seller's Closing Documents"),
the Seller's Closing Documents will constitute the legal, valid, and binding
obligations of Seller and/or Seller Parent or Aldila Golf Corp., as the case may
be, enforceable against Seller and/or the Seller Parent or Aldila Golf Corp. in
accordance with their respective terms. Seller, Seller Parent and Aldila Golf
Corp. each has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Seller's Closing
Documents to which it is a party and to perform its obligations under this
Agreement and the Seller's Closing Documents to which it is a party.
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(b) Except as set forth in Part 3.2 of the Disclosure Schedules, neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Seller Parent,
Seller or of AMT Predecessor, or (B) any resolution adopted by
the board of directors (or similar governing body) or the
stockholders or members of Seller Parent, Seller or of AMT
Predecessor;
(ii) contravene, conflict with, or result in a violation of, or
give any governmental body or other Person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement
or any Order to which Seller Parent, Seller or AMT
Predecessor, or any of the assets owned or used by Seller or
AMT Predecessor, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any governmental body
the right to revoke, withdraw, suspend, cancel, terminate, or
modify, in each case in any material respect, any Governmental
Authorization that is held by Seller Parent, Seller or AMT
Predecessor or that otherwise relates to the business of, or
any of the assets owned or used by, Seller Parent, Seller or
AMT Predecessor;
(iv) cause AMT to become subject to, or to become liable for the
payment of, any Tax (and Seller will pay or cause to be paid
all income tax on any gain recognized by it in connection with
the purchase of the Member Interest by Buyer as provided for
herein);
(v) cause any of the assets owned by AMT Predecessor to be
reassessed or revalued by any taxing authority or other
governmental body (other than with respect to tax basis
adjustments);
(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract, in each case in any material
respect; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by AMT in
any material respect.
Except as set forth in Part 3.2 of the Disclosure Schedules, AMT
Predecessor will not be required to give any notice to or obtain any Consent
from any Person in connection with the
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execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
Section 3.3 Capitalization
(a) The equity ownership interests of AMT consist solely of one class of
member interests described in the Original Limited Liability Company Agreement,
a complete and accurate copy of which (with all amendments thereto) is attached
to Part 3.1(b) of the Disclosure Schedules. All of the outstanding member
interests of AMT are held by the Seller, free and clear of all Encumbrances,
other than security interests in favor of Foothill pursuant to the Credit
Agreement. The Member Interest is a 50% member interest in AMT and will be
transferred to Buyer free and clear of all Encumbrances (other than the
restrictions placed on member interests generally in the Amended and Restated
Limited Liability Company Agreement and restrictions imposed by federal
securities laws).
(b) All of AMT's outstanding member interests have been duly authorized
and validly issued and are fully paid and non-assessable. There are no Contracts
relating to the issuance, sale or transfer of any member interests of AMT (other
than this Agreement and with respect to security interests in favor of
Foothill). None of the outstanding member interests of AMT was issued in
violation of the Securities Act or any other Legal Requirement. AMT does not
own, or have any Contract to acquire, any equity ownership interest or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
Section 3.4 Financial Statements
Seller has delivered to Buyer: (a) balance sheets of the AMT Predecessor
as at December 31 of each of the years 1997 and 1998, and the related statements
of income for each of the fiscal years then ended and (b) the Interim Balance
Sheet and the related statements of income for the period then ended. Such
financial statements fairly present the financial condition and the results of
operations of the AMT Predecessor as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
subject, in the case of the Interim Balance Sheet, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Balance Sheet). The financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person would be required by GAAP to be included in AMT
Predecessor's financial statements if AMT Predecessor was audited on a
stand-alone basis.
Section 3.5 Books and Records
The books of account, minute books, stock record books, and other records
of AMT and each AMT Predecessor, all of which have been made available to Buyer,
are complete and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal
controls. The minute books of AMT and each
15
AMT Predecessor contain accurate and complete records of all meetings held of,
and corporate or limited liability company action taken by, the stockholders,
the Boards of Directors (or similar governing body), and committees of the
Boards of Directors (or similar governing body) of AMT and each AMT Predecessor,
and no meeting of any such stockholders, Board of Directors (or similar
governing body), or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of AMT.
Section 3.6 Title to Properties; Encumbrances
Part 3.6 of the Disclosure Schedules contains a complete and accurate list
of all Facilities (excluding equipment currently owned, operated or used by the
AMT Predecessor and any real property that AMT or any AMT Predecessor did not
lease), with the exception of the Excluded Assets. The AMT Predecessor owns good
and marketable title (subject to Permitted Encumbrances) to all the properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
that they purport to own located in the Facilities currently owned or operated
by the AMT Predecessor or reflected as owned in the books and records of the AMT
Predecessor, including all of the properties and assets reflected in the Interim
Balance Sheet (except for assets held under capitalized leases disclosed in Part
3.6 of the Disclosure Schedules and personal property sold or disposed of since
the date of the Interim Balance Sheet, in the ordinary course of business), and
all of the properties and assets purchased or otherwise acquired by the AMT
Predecessor since the date of the Interim Balance Sheet (except for personal
property acquired and sold or disposed of since the date of the Interim Balance
Sheet in the ordinary course of business and consistent with past practice),
which subsequently purchased or acquired properties and assets (other than
inventory and short-term investments), if material, are listed in Part 3.6 of
the Disclosure Schedules. The AMT Predecessor does not have any obligation to
purchase, or owe any indebtedness on, any real property. All material properties
and assets reflected in the Interim Balance Sheet are free and clear of all
Encumbrances (other than Permitted Encumbrances). All buildings, plants, and
structures owned by the AMT Predecessor lie wholly within the boundaries of the
real property owned by the AMT Predecessor and do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person, except
to the extent that any such condition would not have a material adverse effect
on the AMT Predecessor.
Section 3.7 Condition and Sufficiency of Assets
Except as set forth on Part 3.7 of the Disclosure Schedules, the
buildings, plants, structures, and equipment of the AMT Predecessor are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. Except as set forth on Schedule 3.7, the building, plants, structures, and
equipment of the AMT Predecessor are sufficient for the continued conduct of
AMT's businesses immediately after the Closing in substantially the same manner
as conducted by AMT Predecessor immediately prior to the Closing.
16
Section 3.8 Accounts Receivable
All Accounts Receivable (other than those representing sales to Affiliates
of Buyer) represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business
(including sales to Affiliates of Seller). Unless paid prior to the Closing
Date, the Accounts Receivable (other than those representing sales to Affiliates
of Buyer) are or will be as of the Closing Date current and collectible net of
the respective reserves shown on the Interim Balance Sheet or on the accounting
records of AMT as of the Closing Date (which reserves are calculated consistent
with past practice). There is no pending or threatened contest, claim, or right
of set-off, other than returns in the ordinary course of business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Part 3.8 of the Disclosure Schedules
contains a complete and accurate list of all Accounts Receivable as of the date
of the Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
Section 3.9 Inventory
(a) All inventory of the AMT Predecessor consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Interim Balance Sheet
or on the accounting records of AMT as of the Closing Date, as the case may be.
The value (excluding the Excluded Assets) of the inventory of the AMT
Predecessor reported on the Balance Sheet and the Interim Balance Sheet does not
include any amount for consigned inventory owned by a third party or for any
inventory for which AMT Predecessor is serving as bailee. All such inventories
not written off have been priced at the lower of cost (on a first in, first out
basis) or market.
(b) AMT Predecessor serves as the consignee or bailee of consigned
inventory owned by parties unrelated to the AMT Predecessor in the amounts, of
the types and pursuant to the relationships described on Part 3.9(b) of the
Disclosure Schedules. Except as disclosed on Part 3.9(b) of the Disclosure
Schedules, the AMT Predecessor does not itself own any consigned inventory or
inventory subject to a bailment relationship being held by any third party off
the premises of the AMT Predecessor.
Section 3.10 No Indebtedness. AMT will not have any Indebtedness as of the
Closing Date. AMT will not have any obligations or liabilities (including any
Accounts Payable) to Seller or to any Affiliate of Seller as of the Closing
Date.
Section 3.11 Taxes
(a) AMT and the AMT Predecessors have filed or caused to be filed on a
timely basis all Tax Returns that are or were required to be filed by or with
respect to any of them. Seller has made available to Buyer copies of all such
Tax Returns relating to franchise taxes solely of the AMT Predecessors filed
since December 31, 1995. The AMT Predecessors have paid, or made
17
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the AMT Predecessors, except such Taxes, if any, as are listed in
Part 3.11 of the Disclosure Schedules and are being contested in good faith and
as to which adequate reserves (determined in accordance with GAAP) have been
provided in the Interim Balance Sheet.
(b) AMT Predecessor has not filed any income Tax Returns relating solely
to the Taxes of AMT Predecessor other than those Tax Returns listed in Part 3.11
of the Disclosure Schedules. No such Tax Returns have been subject to an audit.
Except as described in Part 3.11 of the Disclosure Schedules, no AMT Predecessor
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of any AMT Predecessor or for which
any AMT Predecessor may be liable which such requests are currently outstanding.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each AMT Predecessor are adequate (determined in accordance
with GAAP) and are at least equal to that AMT Predecessor's liability for Taxes.
There exists no proposed tax assessment against any AMT Predecessor except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Schedules. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by any AMT
Predecessor. All Taxes that any AMT Predecessor is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental body or other
Person, in each case unless immaterial individually or in the aggregate.
(d) All Tax Returns filed by (or that include on a consolidated basis) any
AMT Predecessor are true, correct, and complete in all material respects. There
is no tax sharing agreement that will require any payment by AMT after the date
of this Agreement. No AMT Predecessor is, or within the five-year period
preceding the Closing Date has been, a Subchapter "S" Corporation pursuant to
the IRC.
(e) Seller's good faith estimate of the adjusted tax basis of the assets
of AMT as of August 31, 1999 is as set forth on Part 3.11, which estimate is
based solely upon the Tax Returns and the AMT Predecessor's books and records.
(f) Each AMT Predecessor is in compliance with, and its records contain
all information and documents (including properly completed IRS Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the IRC, except for such instances of noncompliance and
such omissions as are not reasonably likely to have, individually or in the
aggregate, a material adverse effect on AMT.
(g) All material elections with respect to Taxes affecting the AMT
Predecessors as of the date of this Agreement which form the basis for the Tax
Returns have been timely made.
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(h) AMT is not, and, at all times since its formation, has not been,
taxable as a separate corporation under the IRC.
Section 3.12 No Material Adverse Change
Except as set forth on Part 3.12 of the Disclosure Schedules or the
Interim Balance Sheet, since the date of the Balance Sheet, other than changes
in general economic or industry conditions, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any AMT Predecessor, and no event has occurred or circumstance
exists that may result in such a material adverse change.
Section 3.13 Employee Benefits
(a) Part 3.13 of the Disclosure Schedules sets forth, as of the date of
this Agreement, a list of all material "employee pension benefit plans" (as
defined in Section 3(2) of ERISA), "welfare benefit plans" (as defined in
Section 3(1) of ERISA), and deferred compensation, bonus, incentive, severance,
stock bonus, stock option, restricted stock, stock appreciation right, stock
purchase, and any other employee benefit plan, program, policy or arrangement
covering employees (or former employees) of AMT that is either maintained by or
contributed to by the Seller or Seller Parent or any of their subsidiaries or to
which the Seller or Seller Parent or any of their subsidiaries is obligated to
make payments or otherwise have any liability, in each case with respect to the
employees of AMT (collectively, the "Plans") and each employment, severance,
consulting or similar agreement currently in effect that has been entered into
by the Seller or Seller Parent or other subsidiaries, on the one hand, and any
employee of AMT, on the other hand (collectively, the "Employment Agreements").
(b) No Plan is subject to Title IV of ERISA. No withdrawal liability has
been incurred by or asserted against the Seller or AMT Predecessors with respect
to any "multiemployer plan" within the meaning of Section 3(7) of ERISA. The
Internal Revenue Service has issued a favorable determination letter for each
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code. Each of the Plans has been administered, operated and funded
in material compliance with its terms and in material compliance with all
applicable Legal Requirements.
(c) AMT does not have any retirement benefits obligations of any type to
any current or former employee of AMT or any AMT Predecessor.
(d) AMT or the AMT Predecessors have performed all of their respective
material obligations under all Plans that are due and have made appropriate
entries in their financial records and in the Balance Sheet and the Interim
Balance Sheet for all obligations and liabilities under such Plans that have
accrued but are not due. No statement, either written or oral, has been made by
AMT or any AMT Predecessor to any Person with regard to any Plan that was not in
accordance with the Plan to the extent that any such statement would have a
material adverse economic consequence to AMT. AMT does not and will not have any
liability to the IRS with
19
respect to any Plan to the extent that any such liability related to the
administration of any Plan prior to the Closing Date. No Plan is underfunded in
accordance with its terms and no accumulated funding deficiency, whether or not
waived, exists with respect to any Plan and no event has occurred or
circumstance exists that may result in an accumulated funding deficiency with
respect to any such Plan. AMT shall not have any accrued funding obligations to
any Plan that are not set forth on the Interim Balance Sheet (except for
immaterial obligations which normally occur monthly and have been so incurred
since the period covered by the Interim Balance Sheet). AMT does not have any
liability with respect to the administration or funding of any employee benefit
plan which was maintained by any Person other than an AMT Predecessor.
Section 3.14 Compliance with Legal Requirements; Governmental
Authorizations
(a) Except as set forth in Part 3.14 of the Disclosure Schedules:
(i) each AMT Predecessor is, and at all times since January 1,
1996 has been, in material compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) could reasonably be
expected to constitute or result in a material violation by
any AMT Predecessor of, or a material failure on the part of
any AMT Predecessor to comply with, any Legal Requirement, or
(B) could reasonably be expected to give rise to any material
obligation on the part of any AMT Predecessor to undertake, or
to bear all or any portion of the cost of, any remedial action
of any nature; and
(iii) AMT Predecessor has not received, at any time since January 1,
1996, any notice or other communication (whether oral or
written) from any governmental body or any other Person
regarding (A) any actual, alleged, possible, or potential
material violation of, or material failure to comply with, any
Legal Requirement, or (B) any actual, alleged, possible, or
potential material obligation on the part of any AMT
Predecessor to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Schedules contains a complete and accurate
list of each material Governmental Authorization that is held by any AMT
Predecessor or that otherwise relates to the business of, or to any of the
assets owned or used by, any AMT Predecessor. Each Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Schedules is
valid and in full force and effect. Except as set forth in Part 3.14 of the
Disclosure Schedules:
(i) each AMT Predecessor is, and at all times since January 1,
1996 has been, in material compliance with all of the terms
and requirements of each
20
Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Schedules;
(ii) no event has occurred or circumstance exists that could
reasonably be expected to (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a
material violation of or a material failure to comply with any
term or requirement of any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure
Schedules, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or
termination of, or any material modification to, any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Schedules;
(iii) neither Seller nor any AMT Predecessor has received, at any
time since January 1, 1996, any notice or other communication
(whether oral or written) from any governmental body or any
other Person regarding (A) any actual, alleged, possible, or
potential material violation of or material failure to comply
with any term or requirement of any Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure
Schedules, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination
of, or modification to any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure
Schedules; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Schedules have been duly
filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly
made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Schedules collectively constitute all of the Governmental Authorizations
necessary for AMT Predecessors to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the AMT Predecessors to own and use their assets in the manner in which they
currently own and use such assets, except for any failures that are immaterial
individually or in the aggregate.
(c) Except as described on Part 3.14 of the Disclosure Schedules, neither
Seller, Seller Parent, AMT, AMT Predecessor nor any of their Affiliates have
been subpoenaed in connection with, or is providing information to a
governmental agency in cooperation with, or to its Knowledge is the target of,
any investigation by the Federal Trade Commission, the Department of Justice or
any third party for any alleged failure to comply with anti-trust or
anti-competitive laws of any jurisdiction with respect to the market for
PAN-based carbon fiber and graphite prepreg.
21
Section 3.15 Legal Proceedings; Orders
(a) Except as set forth in Part 3.15 of the Disclosure Schedules, there is
no pending Proceeding:
(i) that has been commenced by or against Seller or any
AMT Predecessor or that otherwise relates to or could
reasonably be expected to materially affect the
business of, or any of the assets owned or used by,
any AMT Predecessor; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated
Transactions.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that could reasonably be
expected to give rise to or serve as a basis for the commencement of any such
Proceeding. None of the Proceedings listed in Part 3.15 of the Disclosure
Schedules could reasonably be expected to have a material adverse effect on the
business, operations, assets, condition, or prospects of any AMT Predecessor.
(b) Except as set forth in Part 3.15 of the Disclosure Schedules:
(i) the AMT Predecessors are not subject to any Order that
relates to the business of, or any of the assets owned
or used by, any AMT Predecessor; and
(ii) to the Knowledge of Seller, no officer, director, agent,
or employee of any AMT Predecessor is subject to any
Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct,
activity, or practice relating to the business of any
AMT Predecessor.
(c) Except as set forth in Part 3.15 of the Disclosure Schedules:
22
(i) each AMT Predecessor is, and at all times has been, in
full compliance with all of the terms and requirements
of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that could
reasonably be expected to constitute or result in (with
or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any
Order to which any AMT Predecessor, or any of the assets
owned or used by any AMT Predecessor, is subject; and
(iii) neither Seller nor any AMT Predecessor has received, at
any time since January 1, 1996, any notice or other
communication (whether oral or written) from any
governmental body or any other Person regarding any
actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any
Order to which any AMT Predecessor, or any of the assets
owned or used by any AMT Predecessor, is or has been
subject.
Section 3.16 Absence of Certain Changes and Events
Except as set forth in Part 3.16 of the Disclosure Schedules or the
Interim Balance Sheet or as described in the Recitals, since the date of the
Balance Sheet, the AMT Predecessors have conducted their businesses only in the
ordinary course of business and there has not been any:
(a) change in any AMT Predecessor's authorized or issued capital stock or
authorized or outstanding equity ownership interests; grant of any stock option
or right to purchase equity ownership interests of any AMT Predecessor; issuance
of any security convertible into such capital stock or equity ownership
interests; grant of any registration rights; purchase, redemption, retirement,
or other acquisition by any AMT Predecessor of any Member Interest of any such
capital stock or other equity ownership interests; or declaration or payment of
any dividend or other distribution or payment in respect of Member Interest of
capital stock or other equity ownership interests;
(b) amendment to the Organizational Documents of any of AMT Predecessor;
(c) payment or increase by any AMT Predecessor of any bonuses, salaries,
or other compensation to any stockholder, member, or (except in the ordinary
course of business) manager, director, officer, employee, entry into any
employment, severance, consulting, or similar Contract that is not terminable at
will by any AMT Predecessor upon reasonable notice without payment of any amount
in excess of salary or wages earned through the date of termination or entry
into any Contract providing for the payment of severance with any director,
officer, member, manager or employee;
23
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees, of any AMT
Predecessor;
(e) damage to or destruction or loss of any asset or property of any AMT
Predecessor, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the AMT Predecessors;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) as of the date of this Agreement, any
Contract or transaction involving a total remaining commitment by or to any AMT
Predecessor of at least $50,000;
(g) other than the Contemplated Transactions, sale (other than sales of
inventory in the ordinary course of business), lease, or other disposition
(except in the ordinary course) of any asset or property of any AMT Predecessor
or, other than Permitted Encumbrances, mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of any AMT
Predecessor, including the sale, lease, or other disposition of any of the
Intellectual Property Assets (other security interests granted to Foothill under
the Credit Agreement);
(h) cancellation or waiver of any claims or rights with a value to any AMT
Predecessor in excess of $50,000;
(i) material change in the accounting methods used by any AMT Predecessor;
or
(j) agreement, whether oral or written, by any AMT Predecessor to do any
of the foregoing.
Section 3.17 Contracts; No Defaults
(a) Part 3.17(a) of the Disclosure Schedules contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies, of:
24
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by one or more AMT
Predecessors of an amount in excess of $50,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more AMT
Predecessors of an amount in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
ordinary course of business and that involves expenditures or
receipts of one or more AMT Predecessors in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having aggregate
payments of less than $50,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non- disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs,
or liabilities by any AMT Predecessor with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any AMT
Predecessor or limit the freedom of any AMT Predecessor to
engage in any line of business or to compete with any Person;
(ix) each power of attorney that is currently effective and
outstanding;
(x) each Applicable Contract for capital expenditures in excess of
$25,000;
(xi) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended
by any AMT Predecessor other than in the ordinary course of
business; and
25
(xii) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Schedules:
(i) Except as contemplated by Section 3.22(b), Seller does not
have nor may it acquire any rights under any material Contract
that relates to the business of, or any of the assets owned or
used by any AMT Predecessor; and
(ii) to the Knowledge of Seller, no officer, director, agent,
employee, consultant, manager, member or contractor of any AMT
Predecessor is bound by any Contract that purports to limit
the ability of such officer, director, agent, employee,
consultant, manager, member or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
business of any AMT Predecessor, or (B) assign to any AMT
Predecessor or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Schedules, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Schedules is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Schedules:
(i) each AMT Predecessor is in compliance with all applicable
terms and requirements of each Contract under which such AMT
Predecessor has any obligation or liability or by which such
AMT Predecessor or any of the assets owned or used by such AMT
Predecessor is bound, except to the extent that failure to be
in compliance would not have a material adverse effect on the
business, operations or financial condition of the AMT
Predecessors;
(ii) to the Knowledge of Seller, each other Person that has or had
any obligation or liability under any Contract under which any
AMT Predecessor has or had any rights is in compliance with
all applicable terms and requirements of such Contract, except
to the extent that such Person's failure to be in compliance
would not have a material adverse effect on the business,
operations or financial condition of the AMT Predecessors;
(iii) to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation
or breach of, or any AMT Predecessor or
26
other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any material Applicable
Contract; and
(iv) no AMT Predecessor has given to or received from any other
Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any material
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
AMT Predecessor under current or completed Contracts with any Person and, to the
Knowledge of Seller, no such Person has made written demand for such
renegotiation.
(f) As of the Closing, there shall be no Event of Default (as defined in
the Credit Agreement) under the Credit Agreement, as may be amended in
connection with the Closing.
Section 3.18 Insurance
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
any AMT Predecessor is a party or under which any AMT
Predecessor, or any director, member or manager of any AMT
Predecessor is covered, which were obtained by or for the
benefit of any AMT Predecessor, all of which are listed on
Part 3.18 of the Disclosure Schedules;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of any AMT Predecessor's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Schedules describes any
self-insurance arrangement by or affecting any AMT Predecessor, including any
reserves established thereunder.
(c) Part 3.18(c) of the Disclosure Schedules sets forth, by year, for
the current policy year and each of the 3 preceding policy years:
27
(i) a summary of the loss experience under each policy relating to
AMT Predecessors only;
(ii) a statement describing each claim relating to AMT Predecessors
only under an insurance policy for an amount in excess of
$5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
relating to AMT Predecessors only that were self-insured,
including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Schedules:
(i) All policies to which any AMT Predecessor is a party or that
provide coverage to any AMT Predecessor, or, to the extent
that any AMT Predecessor pays the premium therefor, coverage
to any director, member or manager or officer of an AMT
Predecessor:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide reasonable insurance coverage
for the assets and the operations of the AMT
Predecessors for all customarily insurable risks to
which the AMT Predecessors are normally exposed;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which any AMT Predecessor
is a party or by which any of them is bound;
(E) will not be terminated by the consummation of the
Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of any
AMT Predecessor.
28
(ii) AMT Predecessor has not received (A) any refusal of coverage
or any notice that a defense will be afforded with reservation
of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations
thereunder.
(iii) The AMT Predecessors have paid all premiums due, and have
otherwise performed all of their respective obligations, under
each policy to which any AMT Predecessor is a party or that
provides coverage to any AMT Predecessor or director thereof.
(iv) The AMT Predecessors have given notice to the insurer of all
known claims that may be insured thereby.
Section 3.19 Environmental Matters
Except as set forth in Part 3.19 of the Disclosure Schedules:
(a) Each AMT Predecessor is, and at all times has been, in material
compliance with, and has not been and is not in material violation of or liable
under, any Environmental Law.
(b) Other than restrictions imposed by applicable Governmental
Authorizations, there are no pending or, to the Knowledge of Seller, Threatened
claims or liens resulting from any Environmental, Health, and Safety Liabilities
or arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets (whether
real, personal, or mixed) in which any AMT Predecessor has or had an interest.
(c) Neither Seller nor the AMT Predecessors expects, nor has any of them
or, to Seller's Knowledge, any other Person for whose conduct the AMT
Predecessor is or may be held responsible, received from any Person, any written
citation, directive, inquiry, notice, Order, summons, warning, or other written
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential material violation or failure to materially comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any AMT Predecessor has or
had an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by any AMT Predecessor or any other Person for whose conduct they are
or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(d) Neither AMT Predecessor, nor, to Seller's Knowledge, any other Person
for whose conduct AMT Predecessor is or may be held responsible, has any
material Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any other properties and assets (whether real,
personal, or mixed) in which any AMT Predecessor (or any
29
predecessors), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or, to the Knowledge of Seller, at any geologically or
hydrologically adjoining property, that are not stored and used in material
compliance with all applicable Environmental Laws including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither AMT Predecessor nor, to the
Knowledge of Seller, any other Person for whose conduct AMT Predecessor is or
may be held responsible, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which any AMT
Predecessor has or had an interest that has not been conducted in material
compliance with all applicable Environmental Laws.
(f) Except as permitted by Governmental Authorizations or in accordance
with Environmental Laws, there has been no material Release or, to the Knowledge
of Seller, Threat of Release, of any Hazardous Materials at or from the
Facilities or, to the Knowledge of Seller, at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, used, or processed from or by the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which any AMT
Predecessor has or had an interest, or to the Knowledge of Seller, any
geologically or hydrologically adjoining property, whether by any AMT
Predecessor or any other Person.
(g) Seller has delivered to Buyer true and complete copies of any reports
or environmental site assessments or audits possessed or initiated by Seller or
any AMT Predecessor pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by any AMT
Predecessor, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws which were prepared since January 1, 1996.
Section 3.20 Employees
(a) Part 3.20 of the Disclosure Schedules contains a complete and accurate
list of the following information for each employee of the AMT Predecessors,
including each employee on leave of absence or layoff status: name; job title;
current compensation paid or payable; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any AMT Predecessor's
benefits plans.
(b) To Seller's Knowledge, no employee, director, member or manager of any
AMT Predecessor is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee, director or officer of
the AMT
30
Predecessors, or (ii) the ability of any AMT Predecessor to conduct its
business, including any Proprietary Rights Agreement with Seller or the AMT
Predecessors by any such employee, director or officer. To Seller's Knowledge,
no director, officer or other key employee of any AMT Predecessor intends to
terminate his employment with such AMT Predecessor.
(c) Part 3.20 of the Disclosure Schedules also contains a complete and
accurate list of the following information for each retired employee or director
of the AMT Predecessors, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits.
Section 3.21 Labor Relations; Compliance
No AMT Predecessor has been, is a party to or is bound by any collective
bargaining or other labor Contract. There has not been since January 1, 1996,
there is not presently pending or existing, and to Seller's Knowledge, there is
not Threatened, (i) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (ii) any material Proceeding against or affecting any AMT
Predecessor relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable governmental
body, organizational activity, or other material labor or employment dispute
against or affecting any of the AMT Predecessors or their premises, or (iii) any
application for certification of a collective bargaining agent. To the Knowledge
of Seller, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any AMT Predecessor and no such action is contemplated by any AMT
Predecessor. Each AMT Predecessor has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. No AMT Predecessor is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
Section 3.22 Intellectual Property
(a) Intellectual Property Assets -- The term "Intellectual Property
Assets" includes the following, whether owned, used, or licensed by any AMT
Predecessor as licensee or licensor.
31
(i) AMT's name (but in no event the name "Aldila" or any
formulations thereof other than "Aldila Materials Technology"
and formulations thereof), all fictional business names, trade
names, registered and unregistered trademarks and service
marks and applications therefor (collectively, "Marks");
(ii) all patents and patent applications (collectively, "Patents");
(iii) all registered copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, inventions and discoveries and
blue prints (collectively, "Trade Secrets").
(b) Agreements. Part 3.22(b) of the Disclosure Schedules contains a
complete and accurate list of all Contracts that grant rights in or to the
Intellectual Property Assets to which any AMT Predecessor is a party or by which
any AMT Predecessor is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $5,000 under which an AMT Predecessor is the licensee.
There are no outstanding and, to Seller's Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for
the operation of the AMT Predecessors' businesses as they are
currently conducted or as currently proposed to be conducted.
Except as set forth on Part 3.22(c) of the Disclosure
Schedules, AMT has the right to use without payment to a third
party all of the Intellectual Property Assets (excluding Trade
Secrets which are in the public domain or are generally known
in the applicable industry). Except as set forth in Part
3.22(c) of the Disclosure Schedules, none of the Intellectual
Property Assets owned by any AMT Predecessor is subject to
expiration.
(ii) Except as set forth in Part 3.22(c) of the Disclosure
Schedules, all former and current employees of each AMT
Predecessor have executed written Contracts with Seller or one
or more of the AMT Predecessors or their Affiliates that
assign to one or more of the AMT Predecessors or their
Affiliates all rights of such employees to any Trade Secrets
relating to the business of any AMT Predecessor. To the extent
that any such Contracts relate to employees of AMT, all of
Seller's rights under such Contracts have been assigned to AMT
pursuant to the Contribution Agreement. To Seller's Knowledge,
no employee of any AMT Predecessor has entered into any
Contract that prohibits in any way any work in which the
32
employee is engaged at AMT Predecessor or requires the
employee to transfer, assign, or disclose information
concerning his work at AMT Predecessor to anyone other than
one or more of the AMT Predecessors.
(d) Trademarks; Patents; Copyrights
The AMT Predecessors do not own any registered Marks, Patents or any
registered Copyrights. To Seller's Knowledge, none of the Marks used by any AMT
Predecessor infringes or has been alleged in any written notice or other
communication received by Seller to infringe any trade name, trademark or
service xxxx of any third party.
(e) Trade Secrets. The AMT Predecessors have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets (to the extent owned by them).
Section 3.23 Disclosure
No representation or warranty of Seller in this Agreement and no statement
in the Disclosure Schedules omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
Section 3.24 Relationships with Related Persons
Other than as set forth in the Recitals, neither Seller nor any of its
Affiliates has, or since January 1, 1998 has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the AMT Predecessors' businesses that is not now owned or held
exclusively by the AMT Predecessors, excluding any assets or inventory disposed
of or sold in the ordinary course of business. Other than as set forth in the
Recitals, neither Seller nor any of its Affiliates is, or since January 1, 1998
has owned (of record or as a beneficial owner) more than 10% of all outstanding
equity interests in, a Person that has (i) had material business dealings or a
material financial interest in any transaction with any AMT Predecessor (other
than Aldila Golf Corp.'s purchases of carbon fiber from AMT Predecessor), or
(ii) engaged in competition with any AMT Predecessor with respect to any line of
the products or services of such AMT Predecessor (a "Competing Business") in any
market presently served by such AMT Predecessor. Neither Seller nor any of its
Affiliates will have any claim, right or cause of action against AMT as of the
Closing Date.
Section 3.25 Brokers or Finders
Neither Seller, the AMT Predecessors nor their agents have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment or obligation in connection with
this Agreement.
Section 3.26 Millennium Compliant Software.
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Part 3.26 of the Disclosure Schedules sets forth all computer
software that is owned, licensed or leased by the AMT Predecessors (other than
"off-the-shelf" software not modified in any material respect for AMT
Predecessors), including all software used by the AMT Predecessors in connection
with its information technology, manufacturing processes and facilities
operations (collectively, the "Software"). The AMT Predecessors are the owners
of all rights, title and interest in and to the Software that they own (as noted
on Part 3.26 of the Disclosure Schedules) and have the right to use such
Software under valid and effective licenses for the Software that they use but
do not own. Except as disclosed on Part 3.26 of the Disclosure Schedules, the
Software and all equipment used by the AMT Predecessors in the conduct of their
businesses is "Millennium Compliant". For purposes of this Agreement,
"Millennium Compliant" means:
(a) the functions, calculations and other computing processes of the
Software and such equipment (collectively, "Processes") perform in an accurate
manner regardless of the date and time which the Processes are actually
performed and regardless of the date being processed, whether before, on or
after January 1, 2000 and whether or not the dates are affected by leap years;
(b) the Software and such equipment accepts, stores, sorts, extracts,
sequences, and otherwise manipulates date inputs and date values, and returns
and displays date values, in an accurate manner regardless of the dates used,
whether before, on or after January 1, 2000;
(c) the Software and such equipment will function without interruptions
caused by the date and time in which the Processes are actually performed or by
the date input to the Software, whether before, on or after January 1, 2000;
(d) the Software and such equipment accepts and responds to two-digit year
and four-digit year date input in a manner that resolves any ambiguities as to
the century; and
(e) the Software or such equipment displays, prints and provides
electronic output of date information in ways that are unambiguous as to the
determination of the century.
Part 3.26 indicates which Software has been tested to determine whether it
is Millennium Compliant. AMT has notified Buyer of the results of all tests to
date and will continue to promptly notify Buyer of the results of any tests or
any claim or other information that indicates the Software or such equipment is
not Millennium Compliant.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Buyer's Parent, jointly and severally represent and warrant to
Seller as follows:
Section 4.1 Organization and Good Standing
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Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada. Buyer is a wholly owned
subsidiary of Buyer Parent, which itself is a wholly owned subsidiary of SGL
Carbon AG, a company organized under the laws of Germany.
Section 4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer and Buyer Parent, enforceable against Buyer and Buyer Parent in accordance
with its terms. Upon the execution and delivery by Buyer and Buyer Parent of the
Amended and Restated Limited Liability Company Agreement and by Buyer of the SGL
Supply Agreement and all other documents or agreements required to be executed
and delivered by Buyer and/or Buyer Parent hereunder (the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid and
binding obligations of Buyer or Buyer Parent, as the case may be, enforceable
against Buyer or Buyer Parent in accordance with their respective terms to the
extent that each is a party thereto. Buyer and Buyer Parent each has the
absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Buyer's Closing Documents to which they are a party and
to perform their obligations under such agreements.
(b) Except as set forth in Part 4.2 of the Disclosure Schedules, neither
the execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will, directly or
indirectly (with or without notice or lapse of time):
35
(i) contravene, conflict with or result in a violation of (A) any
provision of the Organizational Documents of Buyer, or (B) any
resolution adopted by the Board of Directors or stockholders
of Buyer;
(ii) contravene, conflict with, or result in a violation of, or
give any governmental body or other person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement
or any Order to which Buyer or any of the assets owned or used
by Buyer may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any governmental body
the right to revoke, withdraw, suspend, cancel, terminate or
modify any Governmental Authorization that is held by Buyer or
that otherwise relates to the business of, or any of the
assets owned or used by Buyer;
(iv) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify,
any contract to which Buyer is a party; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by AMT.
Except as set forth in Part 4.2 of the Disclosure Schedules, Buyer is not
and will not be required to give any notice or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
Section 4.3 Investment Intent
Buyer is acquiring the Member Interest for its own account and not with a
view to its distribution within the meaning of Section 2(11) of the Securities
Act. Buyer understands that there are substantial restrictions on the
transferability of the Member Interests under the provisions of this Agreement,
the Amended and Restated Limited Liability Company Agreement and the Securities
Act of 1933. Buyer's financial situation is such that Buyer can afford to bear
the economic risk of holding the Member Interest for an indefinite period of
time and suffer a complete loss of Buyer's investment in AMT. Buyer's knowledge
and experience in financial and business matters are such that Buyer is capable
of evaluating the merits and risks of Buyer's investment in the Member Interest,
or Buyer has been advised by a representative possessing such knowledge and
experience. Seller has provided Buyer with the opportunity to ask questions of,
and to receive answers from, its representatives concerning AMT, Buyer's
investment in AMT and the terms and conditions of the purchase of the Member
Interest. No representations or warranties have been made to Buyer or Buyer's
representatives concerning the Member Interest, AMT, its prospects or other
matters except as set forth in this Agreement. Buyer Parent
36
is an "accredited investor" as defined in Rule 501(a) under the Securities Act.
Section 4.4 Certain Proceedings
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions or that
relates to or could reasonably be expected to materially affect the business of,
or any of the assets owned or used by, AMT. To Buyer's Knowledge, no such
Proceeding has been threatened and no event has occurred or circumstance exists
that could reasonably be expected to give rise to or serve as a basis for the
commencement of any such Proceeding.
Section 4.5 Brokers or Finders
Neither Buyer nor its officers and agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
Section 4.6 Financing.
Buyer has available financing in an amount sufficient to consummate the
Contemplated Transactions, including the payment of the Purchase Price.
Section 4.7 Anti-Trust Issues.
Neither Buyer nor any of its Affiliates has been subpoenaed in connection
with, or is providing information to a governmental agency in cooperation with,
or to its Knowledge is the target of, any investigation by the Federal Trade
Commission, the Department of Justice or any third party for an alleged failure
to comply with anti-trust or anti-competitive laws of any jurisdiction with
respect to the markets for carbon fiber and graphite prepreg.
ARTICLE 5
COVENANTS PRIOR TO CLOSING DATE
Section 5.1 Access and Investigation
Between the date of this Agreement and the Closing Date, Seller will cause
AMT to: (a) afford Buyer and its Representatives full and free access to, at
reasonable times and upon prior notice, the AMT Predecessors' personnel,
properties, contracts, books and records, and other documents and data during
normal business hours, (b) permit Buyer and its Representatives to make copies
of all such contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and its Representatives
with such additional financial, operating, and other data and information as
Buyer may reasonably request. Buyer shall maintain the confidentiality of all
confidential information received by Buyer in connection therewith.
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Section 5.2 Operation of the Businesses of the AMT Predecessors
Between the date of this Agreement and the Closing Date, Seller will, and
will cause AMT to:
(a) conduct the business of AMT only in the ordinary course of business
(including paying its liabilities, collecting its accounts receivable and
applying funds received only to the furtherance of AMT's business, including the
payment of any amounts owed by AMT to Seller or Seller's Affiliates);
(b) use their commercially reasonable efforts to preserve intact the
current business organization of AMT, keep available the services of the current
officers, employees, and agents of AMT, and maintain the relations and goodwill
with suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with AMT;
(c) confer with Buyer concerning operational matters of AMT of a material
nature; and
(d) upon request, otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of AMT.
Section 5.3 Negative Covenant
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Seller will not, and will cause AMT
not to, without the prior consent of Buyer, take any affirmative action, or fail
to take any reasonable action within their or its control, as a result of which
any of the changes or events listed in Section 3.16 is reasonably likely to
occur.
Section 5.4 Required Approvals
As promptly as practicable after the date of this Agreement, each party
will, and will cause the AMT Predecessors to, make all filings required by Legal
Requirements to be made by them in order to consummate the transactions
contemplated hereby. Between the date of this Agreement and the Closing Date,
each party will, and will cause its Affiliates to, (a) cooperate with the other
party with respect to all filings that such party elects to make or is required
by Legal Requirements to make in connection with the transactions contemplated
hereby, and (b) cooperate with the other party in obtaining all consents
identified in Part 3.2 and Part 4.2 of the Disclosure Schedules. Anything herein
to the contrary notwithstanding, neither Buyer nor Seller nor AMT Predecessor
shall be required to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental Authorization.
Section 5.5 Notification
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Between the date of this Agreement and the Closing Date, each party will
promptly notify the other parties hereto in writing if the notifying party
becomes aware of any fact or condition that causes or constitutes a material
breach of any of such party's representations and warranties as of the date of
this Agreement, or if the notifying party becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a material breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. Should
any such fact or condition require any change in the Schedules if the Schedules
were dated the date of the occurrence or discovery of any such fact or
condition, the notifying party will promptly deliver to the other parties hereto
a supplement to the Schedules specifying such change. During the same period,
each party will promptly notify the other parties hereto of the occurrence of
any breach of any covenant of the notifying party in this Section 5.5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Sections 6 or 7 impossible or unlikely.
Section 5.6 No Indebtedness.
Seller and AMT will make all necessary arrangements to assure that AMT has
no Indebtedness as of the Closing Date and no obligations or liabilities
(including Accounts Payable) to Seller or its Affiliates as of the Closing Date.
Section 5.7 No Negotiation
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause the AMT Predecessors and each of
their Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
ordinary course of business) of the AMT Predecessors, or of any of the capital
stock of the AMT Predecessors, or any merger, consolidation, business
combination, or similar transaction involving the AMT Predecessors.
Section 5.8 Best Efforts
Between the date of this Agreement and the Closing Date, each party will
use its reasonable best efforts to cause the conditions in Sections 6 and 7 to
be satisfied which are within their control to pursue or obtain.
Section 5.9 Capital Expenditures
The Seller hereby represents and warrants that, prior to Closing, it will
cause AMT to make all capital expenditures included within the capital
expenditures budget set forth on Part 5.9 of the Disclosure Schedules in
accordance with the timetable set forth in such budget.
Section 5.10 Agreements/Commitments
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AMT hereby agrees that between the date hereof and the Closing Date it
shall not: (a) enter into any supply agreements of longer than 1 year in
duration or which provide for AMT's supply of goods or services at a price in
excess of $1,000,000 without SGL's prior written consent; nor (b) enter into or
make any long-term or other special employment agreements or arrangements with
any of its employees without SGL's prior written consent.
Section 5.11 Benefit Plans.
(a) Seller hereby agrees to procure prior to the Closing Date a commitment
from the Principal Group, or other administrator reasonably satisfactory to SGL,
to establish on behalf of AMT for the benefit of AMT's employees who, on the
Closing Date, are participants in the Aldila, Inc. 401(k) Savings Plan ("Aldila
Plan Participants") a defined contribution plan ("AMT Investment Plan") to
provide benefits which are substantially equivalent to the benefits provided to
the Aldila Plan Participants under the Aldila, Inc.'s 401(k) Savings Plan.
Seller shall pursue a favorable determination letter issued by the IRS that the
AMT Investment Plan and related trust satisfy the requirements for qualification
under Sections 401(a) and 401(k) of the Code, and as soon as practicable after
the receipt by Seller of such determination letter, Seller Parent shall cause
the trustee of the Aldila, Inc. 401(k) Savings Plan to transfer to the trust
forming a part of the AMT Investment Plan cash (or with respect to participant
loans granted prior to the Closing Date, if any, such loans and any promissory
notes or other documents evidencing such loans), or other property or
combination of cash and other property acceptable to Seller Parent and AMT, in
an amount equal to the account balances of Aldila Plan Participants as of the
most recent valuation date preceding the date of transfer (the "Valuation
Date"), increased by any contributions due for periods prior to the Closing Date
and not made as of the Valuation Date and reduced by any benefits paid during
the period following such Valuation Date and prior to the date of such transfer.
(b) Seller agrees to ensure as of the Closing Date that AMT shall have in
place for the benefit of AMT's employees substantially equivalent employee
benefit plans as currently provided by Seller or Seller Parent for such
employees as listed in Part 3.13 of the Disclosure Schedules (with the exception
of the 1999 Incentive Bonus Plan, the Aldila, Inc. 401(k) Savings Plan, the 1999
Employee Incentive Program and the 1994 Incentive Stock Option Plan); provided,
however, if Seller is unable to procure any such AMT replacement plan as of the
Closing Date, Seller or Seller Parent shall make appropriate arrangements to
provide substantially similar benefits to AMT's employees under its own
respective benefit plan or, in the case of the long-term disability plan,
pursuant to the Transition Services Agreement.
Section 5.12 Environmental Actions.
(a) AMT shall as soon as practicable add emergency generator data required
by permit to the Annual Emissions Report.
(b) AMT shall as soon as practicable, complete the source testing of its
thermal oxidizers, provided that such testing need not be completed by the
Closing. If, upon completion
40
of such testing, AMT reasonably determines that it must expend funds to modify
or upgrade such equipment to ensure operation in compliance with applicable
Environmental Laws or the manufacturer's specifications, Seller or Seller Parent
shall be solely responsible for paying such expense notwithstanding any
disclosure under Part 3.14 of the Disclosure Schedules.
Section 5.13 Termination of Sales Order. The parties agree that the AMT
Sales Order No. 10142 for sales to SGL Technique LTD shall terminate as of the
Closing.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Member Interest and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
Section 6.1 Accuracy of Representations.
Each of Seller's representations and warranties in this Agreement must be
accurate in all material respects as of the date of this Agreement and as of the
Closing Date as if such representations and warranties had been made as of the
Closing Date and Seller shall deliver an officer's certificate certifying such
at the Closing.
Section 6.2 Seller's Performance
(a) Each of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects and
Seller shall deliver an officer's certificate certifying such at the Closing.
(b) Each document required to be delivered pursuant to Section 2.4(a) must
have been executed and delivered.
Section 6.3 Consents
Each of the Consents identified in Part 3.2 of the Disclosure Schedules
and each Consent identified in Part 4.2, must have been obtained and must be in
full force and effect.
Section 6.4 Additional Documents
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Seller's counsel dated the Closing Date, in the form of
Exhibit F; and
41
(b) such other documents as Buyer may reasonably request for the purpose
of (i) enabling its counsel to provide the opinion referred to in Section 7.4(a)
and (b), (ii) evidencing the accuracy of any of Seller's representations and
warranties, (iii) evidencing the performance by Seller of, or the compliance by
Seller with, any covenant or obligation required to be performed or complied
with by Seller, (iv) evidencing the satisfaction of any condition referred to in
this Section 6, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
Section 6.5 No Proceedings
There must not have been commenced or Threatened against Buyer, or against
any Person affiliated with Buyer, any Proceeding (other than with respect to a
breach of this Agreement) (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
Section 6.6 No Claim Regarding Equity Ownership or Sale Proceeds
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any voting, equity,
stock or ownership interest in, any of the AMT Predecessors (other than the
security interests granted to Foothill under the Credit Agreement), or (b) is
entitled to all or any portion of the Purchase Price payable for the Member
Interest.
Section 6.7 No Prohibition
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or materially conflict with, or result in a
material violation of, or cause Buyer or the AMT Predecessors or any Person
affiliated with Buyer or the AMT Predecessors to suffer any material adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been published, introduced, or otherwise
formally proposed by or before any governmental body.
Section 6.8 No Material Adverse Change.
Other than changes in general economic or industry conditions, there shall
have been no material adverse change with respect to the assets, business,
operations or financial condition of any of the AMT Predecessors since the date
of the Interim Balance Sheet (except to the extent expressly disclosed in the
Disclosure Schedules).
Section 6.9 Discharge of Liabilities
AMT shall have satisfied and discharged all Indebtedness (other than
Accounts Payable and accrued expenses incurred in the ordinary course of
business) as of the Closing and shall
42
have provided reasonably satisfactory evidence of the discharge of such
obligations and all associated liens to the Buyer as of the Closing.
Section 6.10 Foothill Capital Matters.
(a) Buyer shall have been given an adequate opportunity to review, and
shall be reasonably satisfied with the terms and conditions of the amendment to
the Credit Agreement and any related consent or other agreements to be entered
into between Seller, Seller Parent and/or Aldila Golf Corp. and Foothill in
connection with the Contemplated Transactions to the extent that such amendment,
consent and related agreements relate to the provision of funds to AMT.
(b) Buyer shall have received evidence reasonably satisfactory to it of
the release by Foothill of the lien granted to it pursuant to the Credit
Agreement on the Member Interest to be sold to Buyer hereunder.
(c) Buyer shall have received a written acknowledgement from Foothill, in
a form reasonably satisfactory to Buyer, executed by Foothill for the benefit of
the Buyer pursuant to which Foothill acknowledges that (i) it has no lien on
AMT's assets, (ii) if it forecloses on its security interest on the member
interest in AMT held by Seller, that it will be bound by the terms and
conditions of the Amended and Restated Limited Liability Company Agreement, it
will promptly remedy any of AMTC's or Aldila Golf Corp.'s monetary defaults
under the Amended and Restated Limited Liability Company Agreement and the
Aldila Supply Agreement and that such foreclosure constitutes a Change of
Control under the Amended and Restated Limited Liability Company Agreement
thereby triggering an option for SGL to purchase the member interest Foothill
would then hold in AMT.
ARTICLE 7
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO CLOSE
Seller's obligation to sell the Member Interest and to take the other
actions required to be taken by Seller at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):
Section 7.1 Accuracy of Representations
Each of Buyer's representations and warranties in this Agreement must be
accurate in all respects as of the date of this Agreement and as of the Closing
Date as if such representations and warranties had been made as of the Closing
Date and Buyer shall deliver an officer's certificate certifying such at the
Closing.
Section 7.2 Buyer's Performance
(a) Each of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been performed and
43
complied with in all material respects and Buyer shall deliver an officer's
certificate certifying such at the Closing.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4(b) and must have made the payment
required to be made by Buyer pursuant to Section 2.4(b)(i).
Section 7.3 Consents
Each of the Consents identified in Part 3.2 and Part 4.2 of the Disclosure
Schedules must have been obtained and must be in full force and effect.
Section 7.4 Additional Documents
Buyer must have delivered to Seller:
(a) an opinion of Buyer's counsel, dated the Closing Date, in the form of
Exhibit G attached hereto;
(b) an opinion of Buyer's Parent's counsel, dated the Closing Date, in the
form of Exhibit H attached hereto; and
(c) such other documents as Seller may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
6.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer,
(iii) evidencing the performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or complied with by Buyer,
(iv) evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
Section 7.5 No Proceedings.
There must not have been commenced or Threatened against Seller or any AMT
Predecessor, or against any Person affiliated with them, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Contemplated Transactions.
Section 7.6 No Prohibition.
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Seller or any AMT Predecessor or any Person affiliated
with Seller to suffer any material adverse consequence under (a) any applicable
44
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
governmental body.
ARTICLE 8
INDEMNIFICATION; REMEDIES
Section 8.1 Survival; Right to Indemnification Not Affected by
Investigation.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedules and any other certificate, document or
agreement delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants, and obligations.
Section 8.2 Indemnification and Payment of Damages by Seller
Seller and Seller Parent, jointly and severally, hereby agree to indemnify
and hold harmless Buyer, its Representatives and successors and assigns
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of Damages arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by Seller in this
Agreement, the Disclosure Schedules, or any other certificate, agreement or
document delivered by Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of Seller in this
Agreement;
(c) any Consolidated Income Taxes assessed against AMT or any Affiliate of
AMT with respect to any period prior to the Closing and for which AMT is
ultimately held liable; or
(d) any failure by Seller, AMT Predecessors, Seller Parent or any of their
respective Affiliates to comply with any anti-trust or anti-competitive laws of
any jurisdiction at any time prior to the Closing, regardless of any disclosures
with respect thereto set forth in the Disclosure Schedules.
Section 8.3 [Intentionally omitted].
Section 8.4 Indemnification and Payment of Damages by Buyer
Buyer and Buyer Parent, jointly and severally, hereby agree to indemnify
and hold harmless Seller, its Representatives and their respective successors
and assigns and will pay to
45
such persons the amount of any Damages arising, directly or indirectly, from or
in connection with:
(a) any breach of any representation or warranty made by Buyer in this
Agreement or in any certificate, agreement or document delivered by Buyer
pursuant to this Agreement;
(b) any breach by Buyer of any covenant or obligation of Buyer in this
Agreement; or
(c) any failure by Buyer, Buyer Parent or any of their respective
Affiliates to comply with any anti-trust or anti-competitive laws of any
jurisdiction at any time prior to the Closing.
Section 8.5 Limitations
(a) Neither Seller nor Seller Parent will have any liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Section 3.3, Section 3.6, Section 3.10, Section 3.11,
Section 3.13, Section 3.19, Section 3.20(c), the last sentence of Section 3.24,
Section 3.25 and Section 8.2(c) or (d) unless, on or before the date occurring 2
years after the Closing Date, Buyer notifies Seller of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer. A claim with respect to Section 3.3, Section 3.6, Section 3.10, the last
sentence of Section 3.24, Section 3.25 or Section 8.2(d), or a claim based upon
fraud may be made at any time. Neither Seller nor Seller Parent will have any
liability (for indemnification or otherwise) with respect to the
representations, warranties and indemnities set forth in Section 3.13, Section
3.19 and Section 3.20(c), unless on or before the date occurring 3 years after
the Closing Date, Buyer notifies Seller of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer. A claim
with respect to Section 3.11 or Section 8.2(c) must be made prior to the
expiration of the applicable statutes of limitations with respect thereto or, if
later, the date occurring 60 days after Buyer learns that it may have an
indemnification claim with respect thereto. Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before the date occurring 2 years after the Closing Date
Seller notifies Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Seller.
(b) Except as expressly set forth below, neither Seller nor Seller Parent
will have any liability (for indemnification or otherwise) with respect to the
matters described in Section 8.2 (excluding Section 8.2(c) or (d)) until the
total of all Damages with respect to such matters exceeds $100,000, at which
point Seller's and Seller Parent's liability shall be for the entire amount of
such Damages (and not just the excess of such Damages over $100,000).
Notwithstanding the above, this Section 8.5(b) shall not apply to any claims for
indemnification arising pursuant to Section 8.2(c) or (d), any claims based on
breaches of the representations and warranties or covenants set forth in Section
3.3, Section 3.6, Section 3.10, Section 3.11, the last sentence of Section 3.24,
Section 3.25 or Section 5.12, any claims based on fraud or any breach of any of
the Sellers' representations and warranties of which Seller had actual knowledge
at any
46
time prior to the date on which such representation or warranty is made or any
intentional breach by Seller of any covenant or obligation and Seller or
Seller's Parent shall be liable from the first dollar of Damages arising
therefrom without regard to the $100,000 threshold.
Section 8.6 [Intentionally Omitted]
Section 8.7 Procedure for Indemnification--Third Party Claims
(a) Promptly after receipt by an Indemnified Person under Section 8.2 or
Section 8.4 or AMT (in the case of any Proceeding which might give rise to an
indemnification claim hereunder) of notice of the commencement of any Proceeding
against it, such indemnified party or AMT will, if a claim is to be made against
an indemnifying party under such Section, give notice to the indemnifying party
(or, in the case of a Proceeding against AMT, to the party which could
potentially become the indemnifying party) of the commencement of such claim,
but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice.
(b) If any Proceeding referred to in Section 8.7(a) is brought against an
Indemnified Person or AMT and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the Indemnified Person
or AMT determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the Indemnified Person or AMT of its financial capacity to defend
such Proceeding and fails to provide indemnification with respect to such
Proceeding within a reasonable period of time), to assume the defense of such
Proceeding with counsel reasonably satisfactory to the Indemnified Person or AMT
and, after notice from the indemnifying party to the Indemnified Person or AMT
of its election to assume the defense of such Proceeding, the indemnifying party
will not, as long as it diligently conducts such defense, be liable to the
Indemnified Person or AMT under this Section 8 for any fees of other counsel or
any other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnified Person or AMT in connection with the
defense of such Proceeding, other than reasonable costs of investigation and
participation. If the indemnifying party assumes the defense of a Proceeding,
(i) subject to the following sentence, it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the Indemnified
Person's or AMT's consent, as the case may be, unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
Indemnified Person or AMT, and (B) the sole relief provided is monetary damages
that does not exceed $50,000 in the aggregate and that are paid in full by the
indemnifying party; and (iii) the Indemnified Person or AMT will have no
liability with respect to any compromise or settlement of such claims effected
without its consent. Clause (i) of the immediately preceding sentence shall not
apply if (a) AMT may incur
47
any liability in connection with the Proceeding or (b) the indemnifying party
may incur any liability in connection with the Proceeding (directly or
indirectly through its direct or indirect investment in AMT) other than its
obligation to indemnify an Indemnified Person or AMT pursuant to Section 8.7(a).
If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within 10 Business Days after
the Indemnified Person's or AMT's notice is given, give notice to the
Indemnified Person or AMT of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made in
such Proceeding (to the extent the indemnified party or AMT is entitled to
indemnification), but shall not be bound by any compromise or settlement
effected by the Indemnified Person or AMT without its consent unless the
conditions set forth in (A) and (B) above in this Section 8.7(b) are met in such
case with respect to the indemnifying party (instead of the Indemnified Person
or AMT).
(c) Notwithstanding the other provisions of this Article 8 (including
Section 8.7(d)), AMT shall be primarily be responsible for defending and
directing the defense of any Proceeding against it, provided that if any such
Proceeding involves an action, event or occurrence which arose or occurred prior
to Closing which could reasonably be expected to become the subject of an
indemnification claim hereunder and the Board of Managers cannot agree on the
defense strategy for such Proceeding, then such disagreement shall not
constitute an Impasse (as defined in the Amended and Restated Limited Liability
Company Agreement) and the defense of such Proceeding shall become the primary
responsibility of the party which could potentially become the indemnifying
party with respect to such claim, but nothing in this clause (c) shall negate
any obligation that Seller or Seller Parent may have to indemnify an Indemnified
Person pursuant to Section 8.7(a) for any diminution in value of the Member
Interest.
(d) Notwithstanding the foregoing, but subject to Section 8.7(c), if an
Indemnified Person determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
Section 8.8 Procedure for Indemnification--Other Claims
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
ARTICLE 9
TERMINATION
Section 9.1 Termination Events
48
Provided that the party seeking termination is not in default hereunder,
this Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been cured within 10 Business Days of the defaulting party's receipt of written
notice thereof from the non-defaulting party or waived in writing by the
non-defaulting party;
(b) (i) by Buyer if any of the conditions in Section 6 has not been
satisfied as of December 31, 1999 or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition in
writing on or before such date; or (ii) by Seller, if any of the conditions in
Section 7 has not been satisfied as of December 31, 1999 or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller has not
waived such condition on or before such date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before December 31, 1999,
or such later date as the parties may agree upon in writing.
Section 9.2 Effect of Termination
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Section 10.1,
Section 10.2 and Section 10.4 will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by the
other party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1 Dispute Resolution
(a) Except as otherwise expressly provided herein, should any party hereto
have any claim arising out of or relating to this Agreement, such party shall
give written notice of such claim to the other parties hereto, specifying in
reasonable detail the nature and extent of such
49
claim. If the parties are unable to resolve any disagreement within thirty (30)
days following receipt of the notice referred to in the preceding sentence, the
disagreement shall be submitted for resolution to an independent person (the
"Arbitrator") mutually agreed by both sides to the dispute. If the sides cannot
agree on a single Arbitrator, then the disagreement shall be submitted to a
panel of three Arbitrators, one selected by the parties on each side of the
dispute and one by the two Arbitrators so selected. The Arbitration proceeding
shall be conducted in accordance with the Rules of the American Arbitration
Association and such proceeding shall be conducted in Los Angeles, California
within thirty (30) days of submitting the dispute to the Arbitrator(s). The
Arbitrator(s)' determination shall be made within thirty (30) days of the
submission of the dispute, shall be in accordance with this Agreement, shall be
set forth in a written statement delivered to the parties and shall be final,
binding and conclusive. Judgment upon the decision rendered by the Arbitrator(s)
may be entered in any court having jurisdiction thereof and may include the
award of attorneys' fees and other costs. The party who is prevailed against in
the resolution of such disagreement shall pay the fees and expenses of the
Arbitrator(s); and if one party does not prevail on all issues, the fees and
expenses shall be apportioned in such manner as the Arbitrator(s) shall
determine. Notwithstanding the foregoing, nothing herein shall preclude any
party from seeking an equitable remedy for any such breach or preclude any party
from seeking any remedy based on fraud.
(b) The dispute resolution mechanism set forth in Section 10.1(a) shall
not govern the resolution of disputes under the Amended and Restated Limited
Liability Company Agreement.
Section 10.2 Expenses
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, Representatives,
counsel, and accountants. Seller will cause the AMT Predecessors not to incur
any out-of-pocket expenses (including professional fees) in connection with this
Agreement and all Contemplated Transactions, agreements (including the Supply
Agreements, the Assignment and the Amended and Restated Limited Liability
Company Agreement) and other matters contemplated hereby.
Section 10.3 Public Announcements
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued at such time and in
such manner as the parties shall mutually determine, subject to the requirements
of applicable law. Unless consented to by both parties in advance or required by
Legal Requirements, prior to the Closing, both parties shall, and Seller shall
cause the AMT Predecessors to, keep this Agreement strictly confidential and may
not make any disclosure of this Agreement to any Person. Seller and Buyer will
consult with each other concerning the means by which the AMT Predecessors'
employees, customers, and suppliers and others having dealings with the AMT
Predecessors will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
50
Section 10.4 Notices
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
(a) If to Seller:
Aldila, Inc.
00000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax No.: (000) 000-0000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx-Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Fax No.: (000) 000-0000
(b) if to Buyer:
SGL Carbon Fibers and Composites, Inc.
c/o Hitco Carbon Composites, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Attn: President
Fax No.: (000) 000-0000
with a copy to:
SGL Carbon Corporation
0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: General Counsel
Fax No.: (000) 000-0000
51
and
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000, Xxxx xx Xxxxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax No.: (000) 000-0000
Section 10.5 Jurisdiction; Service of Process
Subject to the terms of Section 10.1, any action or proceeding seeking to
enforce Section 10.1 or any other provision of, or based on any right arising
out of, this Agreement may be brought against any of the parties in the courts
of the State of California, County of Los Angeles, or, if it has or can acquire
jurisdiction, in the United States District Court for the Central District of
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.
Section 10.6 Further Assurances
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
Section 10.7 Waiver
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
Section 10.8 Entire Agreement and Modification
52
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter, including but not limited to the letter of intent
between the parties dated July 1, 1999, as amended, and constitutes (along with
the documents referred to in this Agreement) a complete and exclusive statement
of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
Section 10.9 Disclosure Schedules
In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Schedules (other than an exception
expressly set forth as such in the Disclosure Schedules with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
Section 10.10 Assignments, Successors, and No Third-party Rights
Neither party may assign any of its rights under this Agreement without
the prior consent of the other party, except that Buyer may assign any of its
rights under this Agreement to any Affiliate of Buyer incorporated and with its
principal place of business in the United States without the Seller's prior
written consent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
Section 10.11 Severability
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
Section 10.12 Section Headings, Construction
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
Section 10.13 Governing Law
53
This Agreement will be governed by the laws of the State of California
without regard to conflicts of laws principles.
Section 10.14 Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
54
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
SGL CARBON FIBERS AND COMPOSITES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Title: President
------------------------------
ALDILA, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Title: Vice President
------------------------------
ALDILA MATERIALS TECHNOLOGY CORP.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Title: Vice President
------------------------------
SGL TECHNIK GmbH
By: /s/ Prokura Holder
---------------------------------
Title: Vice President
------------------------------
55
EXHIBIT A
[ALDILA]
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") is made and entered into as of
this 29th day of October, 1999, by and between Aldila Golf Corp., a Delaware
corporation ("Purchaser," or sometimes referred to herein as "Aldila Golf"), and
Carbon Fiber Technology LLC, a Delaware limited liability company ("Supplier").
RECITALS:
A. Pursuant to the Member Interest Purchase Agreement dated as of October
20, 1999 (the "Purchase Agreement") by and among SGL Carbon Fibers and
Composites, Inc., a Nevada corporation ("SGL"), Aldila Materials Technology
Corp., a Delaware corporation ("AMTC"), Aldila, Inc., a Delaware corporation
("Aldila"), and SGL Technik GmbH, a German limited liability company ("SGL's
Parent"), SGL acquired from AMTC a 50% member interest in Supplier.
B. Pursuant to the Purchase Agreement, Purchaser and Supplier are required
to enter into this Supply Agreement to provide the terms and conditions on which
Supplier will supply carbon fiber products to Purchaser.
C. On the date hereof, Supplier and SGL are also entering into a supply
agreement (the "SGL Supply Agreement") to provide for the terms and conditions
of Supplier's provision of carbon fiber products to SGL.
D. SGL and AMTC are parties to the Amended and Restated Limited Liability
Company Agreement dated as of the date hereof (the "LLC Agreement"), which
Agreement, among other things, allocates responsibility for the payment of all
fixed costs associated with the operation of Supplier's Evanston, Wyoming
manufacturing plant (the "Plant") between SGL and AMTC.
NOW, THEREFORE, the parties agree as follows:
1. Products to be Supplied; Specifications.
(a) Upon the terms and conditions of this Agreement, Supplier will
manufacture, sell and deliver to Purchaser the carbon fiber products identified
on Exhibit A attached hereto (the "Products").
(b) All Products to be supplied hereunder shall conform to the
specifications set forth on Exhibit B attached hereto (the "Specifications").
The Specifications may only be revised and amended by written agreement of
Purchaser and Supplier. Anything herein to the contrary notwithstanding,
Supplier will not introduce any material modifications to its manufacturing
processes, including any material changes in raw materials, sampling methods and
test procedures, without the prior written consent of Purchaser.
(c) Supplier will provide to Purchaser all test data sufficient to
characterize the quality of the material sold to Purchaser and certify that the
material complies with the Specifications. Purchaser will have the right to
inspect all Products upon receipt at the designated delivery point (the
"Delivery Point"); provided that such inspection rights will be without
prejudice to any subsequent claim arising from defects not reasonably
discoverable at the time of inspection.
(d) If Purchaser believes that any of the Products delivered by Supplier
fail to conform to the Specifications, Purchaser shall notify Supplier of its
belief within a reasonable time after such Products are delivered to Purchaser.
Upon receipt of the notice, Supplier shall have the right to inspect all
evidence of nonconformity, and Purchaser and Supplier shall attempt to reach
agreement as to whether there is a failure to conform. If Supplier agrees that
such Products fail to conform, Supplier's liability for any breach of the
warranty set forth herein shall be limited, at Supplier's option (which such
option shall be exercised by Supplier providing written notice to Purchaser of
its selection within ten (10) days of Supplier's receipt of a notice from
Purchaser stating that Purchaser has received non-conforming Products) and at
Supplier's expense, to (i) prompt replacement of non-conforming quantities with
conforming quantities at the delivery place agreed upon with respect to
conforming quantities or (ii) refund of the purchase price paid by Purchaser for
such non-conforming Products. The return (at Supplier's request) and replacement
of non-conforming quantities shall be at Supplier's expense (including all costs
generated by transportation, duties, taxes and insurance). Furthermore, if
Supplier elects to refund the purchase price for any non-conforming Products,
such refund shall include all costs incurred by Purchaser (including all costs
incurred with respect to transportation, duties, taxes and insurance) in its
acquisition of non-conforming Products.
2. [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
3. Prices.
(a) Basis for Pricing. [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment]
(b) Verification by Purchaser. Purchaser and its independent auditors
shall have the right to audit the books and records of Supplier two times each
calendar year during normal business hours and at mutually agreed upon times to
inspect such books and records to assess Supplier's compliance with the terms of
this Agreement. Purchaser shall bear its own costs incurred as the result of
Purchaser's audits, except to the extent such audits reveal material
overpayments by Purchaser (in which event such costs and expenses shall be
reimbursed by Supplier).
(c) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
2
4. Ordering; Invoicing and Payment.
(a) Purchaser shall submit written purchase orders to Supplier for the
amount of Products which Purchaser wishes to purchase pursuant to the terms of
this Agreement. Unless otherwise agreed, such written purchase orders shall be
submitted not later than [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] prior to the date of required
delivery and unless Supplier otherwise agrees, the delivery date for each
shipment must be at least [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] after the delivery date for
the previous shipment. Each purchase order must state the quantity of Products
ordered, specify the required date of delivery and specify the destination and
mode of transportation requested.
(b) Supplier must use its commercially reasonable efforts to accept
purchase orders for Products from Purchaser in quantities up to and including
the quantities provided for in Section 2 above; provided, however, Supplier's
obligation to accept such purchase orders shall be subject to the allocation of
its production capacity pursuant to the provisions of Sections 5 and 9.
(c) Supplier will promptly confirm in writing Supplier's acceptance or
rejection (to the extent permitted) of all written purchase orders submitted to
it by Purchaser. Supplier shall deliver the Products ordered by Purchaser
hereunder F.O.B. carrier at Supplier's Plant in Evanston, Wyoming on the date
set forth in the applicable written purchase orders from Purchaser.
(d) Supplier shall submit an invoice with each shipment of Products to
Purchaser setting forth charges associated with [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] (each
as determined in accordance with the terms of the LLC Agreement and pursuant to
Section 3 hereof). Purchases of Products hereunder shall be subject to
Supplier's standard terms and conditions of sale, except if such terms and
conditions conflict with this Agreement, this Agreement shall control.
(e) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(f) The prices, taxes and duties, if any, payable to Supplier pursuant to
this Section 4 shall be due and payable by Purchaser [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] after
its receipt of invoices. Any amounts payable to Purchaser pursuant to this
Section 4 shall be paid in cash within [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment] after the date of
determination of such amount (or, at Purchaser's option, in the form of a credit
to be applied to the current or next invoice).
(g) The parties' agreement on billing is summarized on Exhibit C attached
hereto.
5. Forecasts; Capacity Allocations.
3
(a) Rolling Forecasts. Beginning January 1, 2000 and on the first day of
each month thereafter during the term of this Agreement, Purchaser shall provide
Supplier with its good faith written estimate, by quantity (expressed in pounds
for each Product) and delivery date, of its anticipated need for the Products
for each month in the next ensuing 12 month period (a "Rolling Forecast"). The
forecasts are to be used by Supplier for planning purposes only. Purchaser's
forecast for the remainder of the 1999 calendar year is set forth on Exhibit D.
Subject to the terms of Section 2 hereof, Purchaser's Rolling Forecasts shall
not constitute binding purchase requirements of Purchaser.
(b) Allocation Procedure. Beginning with the year 2000, for each rolling
12 month period during the term hereof, Supplier shall allocate, by quantity
(expressed in pounds for each Product) and delivery date, its production
capacity to provide the Products to Purchaser during each rolling 12 month
period during the term hereof, as follows (the resulting allocations to
Purchaser, Purchaser's "Annual Allocation" with respect to such Product):
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
(c) Commitment to Supply. Supplier shall operate the Plant and use its
commercially reasonable efforts to meet the purchase orders of both Purchaser
and SGL for the Products, and [Material omitted and filed separately with the
SEC pursuant to a request for confidential treatment]. Notwithstanding the
foregoing, in no event shall Supplier be obligated to make any additional
investment of capital in order to satisfy its obligations under this Section
5(b) unless approved by the Board of Managers of Supplier in accordance with the
LLC Agreement.
6. [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
7. Term; Termination.
(a) Unless sooner terminated in accordance with the terms hereof, this
Agreement shall have a term which is coterminous with AMTC's term as a Member
(as defined in the LLC Agreement).
(b) Either party may, by delivering written notice thereof to the other
party, terminate its obligations under this Agreement, effective immediately, if
the other party hereto:
(i) is rendered bankrupt or becomes insolvent, and such insolvency
is not cured within 15 days after written notice, or files a written
petition in bankruptcy or an answer admitting the material facts recited
in such petition filed by another, or discontinues its business or is
unable to pay its bills as they become due, or has a receiver or other
custodian of any kind appointed to administer any substantial amount of
its property; or
(ii) commits a material breach of its material duties, obligations
or understandings under this Agreement, which breach is not cured within
90 days following written notice of such breach from the nonbreaching
party; provided, that a failure by
4
Supplier to comply with its obligations under Sections 8(c) and 11(a)
shall not constitute a material breach for purposes of this Section
7(b)(ii) unless Purchaser has incurred or is reasonably likely to incur a
material loss, liability or expense as a consequence of such
noncompliance.
Any such termination shall be in addition to any other rights or remedies
available at law or in equity to the terminating party and shall not affect any
rights or obligations which have accrued prior to the date of termination
(including the obligation to fill or pay for outstanding purchase orders or
Purchaser's right to have its requirements filled by third parties pursuant to
Section 10(b)).
(c) Each party hereto agrees to consult in advance with the other party
hereto and to bring to the attention of the other party any problems,
differences of opinion, disagreement or any other matters which may lead such
party to terminate or seek to terminate this Agreement. The purpose and intent
of the parties in including this provision is to ensure that both parties to
this Agreement are made aware of any problems arising out of or relating to this
Agreement or the relationship of the parties hereunder, so that the parties
hereto may, in good faith, consult with one another concerning such problems
and, where possible, resolve such problems to the parties' mutual satisfaction,
thereby preserving their contractual relationship and the goodwill and mutual
respect presently existing between the parties to this Agreement.
8. Additional Terms of Purchase.
(a) Payment of any invoice by Purchaser does not constitute acceptance of
Products covered by any invoice and is without prejudice to any or all claims
Purchaser may have against Supplier in connection therewith.
(b) Except as otherwise provided herein, time is of the essence in
performance by Supplier and Purchaser under this Agreement.
(c) The Products to be provided hereunder are each warranted by Supplier
to equal or surpass all federal, state and local occupational safety and health
standards applicable thereto.
(d) No reasonable delay in inspecting or in rejecting Products shall be
deemed an acceptance of them by Purchaser or a waiver of Purchaser's right to
reject the Products for any cause hereunder. Purchaser shall have the right to
accept any portion of Products delivered by Supplier to Purchaser
notwithstanding that it may reject the balance thereof. Acceptance by Purchaser
of all or any part of the Products shall not constitute a waiver of any claim
which Purchaser may have regarding the Products.
(e) EXCEPT AS EXPRESSLY SET FORTH HEREIN, SUPPLIER DOES NOT MAKE ANY OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, NEITHER PARTY HERETO
SHALL BE LIABLE TO THE OTHER
5
PARTY UNDER ANY CIRCUMSTANCES FOR ANY CONSEQUENTIAL DAMAGES OF ANY NATURE
WHATSOEVER, INCLUDING LOST PROFITS OR DAMAGES ARISING ON ACCOUNT OF
EXPENDITURES, INVESTMENTS, LEASES, PROPERTY IMPROVEMENTS OR COMMITMENTS MADE OR
ENTERED INTO IN RELIANCE UPON THE CONTINUITY OF THE RELATIONSHIP CREATED BY THIS
AGREEMENT.
9. Force Majeure.
Any failure or delay in the performance by Purchaser or Supplier of their
respective obligations hereunder shall not be a breach of this Agreement if such
failure or delay arises out of or results primarily from fire, storm, flood,
earthquake, or other acts of God, explosions, wars, insurrections, strikes, work
stoppages or slowdowns, unavailability of fuel or utilities, epidemic or
quarantine restrictions, or inability to obtain essential raw materials despite
commercially reasonable efforts to do so (the occurrence of any of the foregoing
shall be an "Event of Force Majeure"). In the event that an Event of Force
Majeure materially affects Supplier's capacity to manufacture and deliver
Products as required by this Agreement, Supplier shall, during the period of
Supplier's reduced capacity (the "Force Majeure Period"), not allocate its
remaining capacity pursuant to the provisions of Section 5(b) but, instead,
allocate its remaining capacity between AMTC and SGL in the same proportion as
capacity was allocated to AMTC and SGL in [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment]. In the event
that an Event of Force Majeure affects Purchaser's capacity to purchase and
accept Products as required by the Agreement, then Purchaser shall, during the
period of Purchaser's reduced capacity, purchase and accept the Products
affected by the Event of Force Majeure in the proportion that [Material omitted
and filed separately with the SEC pursuant to a request for confidential
treatment]. Both Purchaser and Supplier shall use their commercially reasonable
efforts to avoid the occurrence and remove the causes of an Event of Force
Majeure and to continue performance of their respective obligations hereunder
promptly following the removal of such causes.
10. Outsourcing; Operation of the Plant; Mitigating Purchases.
(a) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(b) During the term of this Agreement, Supplier will operate the Plant
consistent with past practices of its operation in such a manner as to ensure,
to the extent commercially reasonable, an uninterrupted supply of Products
meeting the Specifications. Supplier will promptly notify Purchaser of any
circumstances which may result in a delay in delivery of Products beyond the
times specified in Purchaser's forecast. In the event that Supplier is aware of
circumstances beyond its reasonable control that might reasonably interfere with
its ability to meet Purchaser's forecasted requirements of Products, Supplier
shall promptly notify Purchaser and [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment]
11. Compliance With Laws and Regulations.
6
(a) Supplier represents and warrants that all Products sold to Purchaser
pursuant to this Agreement will be manufactured substantially in accordance with
all applicable material laws and regulations of an agency or authority with
power over the manufacture of such Products or the Plant.
(b) Supplier agrees to allow Purchaser's personnel to be present at
Supplier's production runs of the Products at any reasonable time by reasonable
notice to the extent necessary for quality assurance of Products and processes
provided to Purchaser hereunder. Notwithstanding the authority granted to
Purchaser hereby, Supplier shall not be relieved of any responsibility or
liability hereunder or by law.
12. Insurance.
Each party shall, at its sole cost and expense, obtain and maintain from a
reputable insurance company adequate and suitable liability insurance coverage
covering all claims (including, without limitation, personal injury and/or
products liability claims) by third parties allegedly caused by or resulting
from the design, manufacture, machining, use or application of the Products, as
the case may be, and such coverage shall be reasonably satisfactory to the other
party. Each party shall give the other party thirty (30) days' prior written
notice of any termination of such insurance.
13. Assignment.
Except as otherwise permitted in this Section, neither party hereto may
assign this Agreement or any rights hereunder (by operation of law or otherwise)
to any other Person, without the prior written consent of the other party
hereto, except that Purchaser may assign any of its rights under this Agreement
to a person to whom Purchaser transfers all of its Interest (as defined in the
LLC Agreement) if such person is thereafter approved as a Member under the LLC
Agreement or to any direct or indirect wholly owned subsidiary of Purchaser or
of any person of whom Purchaser is a direct or indirect wholly owned subsidiary,
in each case incorporated in the United States, without Supplier's prior written
consent. Any permitted assignment hereof shall be pursuant to a written
assumption agreement whereby the assignee agrees to be bound by all of the terms
and conditions of this Agreement. Any attempt or effort at any unauthorized
assignment shall be null and void and of no force or effect. Any assignment by
either party shall not relieve such party of its obligations hereunder. This
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties hereto.
14. Administrative Expenses.
Each party hereto shall pay all of its own administrative expenses
(including without limitation the fees and expenses of its agents,
representatives and counsel) incident to the preparation and implementation of
this Agreement.
7
15. Waiver of Breach.
The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to constitute a waiver
of any such provision nor in any way to affect the validity of this Agreement or
any p7art hereof, including the right of any party thereafter to enforce each
and every provision. The waiver by any party to this Agreement of any breach or
violation of any provision of this Agreement by the other party hereto shall not
operate or be construed to be a waiver of any subsequent breach or violation
thereof.
16. Severability.
The terms and conditions of this Agreement are hereby deemed by the
parties to be severable, and the invalidity or unenforceability of any one or
more of the provisions of this Agreement shall not affect the validity and
enforceability of the other provisions hereof.
17. Notices.
Any notice contemplated by or required or permitted to be given under this
Agreement shall be in writing and (a) sent via telecopier to the telecopier
numbers set forth below, (b) delivered personally, (c) sent via next day or
overnight courier or delivery or (d) mailed by registered or certified mail,
return receipt requested, postage prepaid, to the parties' respective addresses
below (or, in each case, to such other address or facsimile number as may be
specified in writing to the other parties hereto):
Supplier: Carbon Fiber Technology LLC
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
Purchaser: Aldila Golf Corp.
00000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax No.: (000) 000-0000
8
SGL: SGL and Composites, Inc.
c/o Hitco Carbon Composites, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Fax No: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxxxx
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx-Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Bank of America Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax No.: (000) 000-0000
Such notices, requests and other communications sent as provided hereinabove
shall be effective: (w) if sent by telecopier on a Business Day before 6:00
p.m., Los Angeles, California time, on such Business Day, but if sent by
telecopier at any other time, upon the next Business Day; (x) upon receipt, when
personally delivered; (y) the next Business Day, if sent by overnight courier or
delivery; and (z) if sent by registered or certified mail, return receipt
requested, upon the expiration of the third business day after being deposited
in the United States mail.
18. Labels and Headings.
The labels and headings of the sections and subsections of this Agreement
are for the convenience of the parties hereto only and are not part of the text
of this Agreement.
19. Governing Law.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflicts or choice of law principles.
20. Arbitration.
Each of the parties hereto shall promptly provide the other party with
written notice (a "Dispute Notice") of any alleged breach or violation of this
Agreement by such other party or of any claim arising out of or relating to this
Agreement (any of the foregoing referred to herein as a "Dispute"). Purchaser
and Supplier shall endeavor to resolve any Dispute no later than the thirtieth
(30th) day following the date of receipt of a Dispute Notice. If Purchaser and
Supplier fail to resolve
9
a Dispute during such time, such Dispute shall be settled by arbitration in Los
Angeles, California before the American Arbitration Association (the "AAA") in
accordance with the commercial arbitration rules then obtaining of the AAA,
except that the parties shall be entitled to conduct discovery as, in the manner
and to the extent provided for in the Federal Rules of Civil Procedure in effect
from time to time. Any judgment or award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
21. Relationship of the Parties.
The relationship between Supplier and Purchaser under this Agreement shall
be solely that of vendor and vendee. With respect to this Agreement only, it is
expressly understood and agreed by the parties hereto that nothing in this
Agreement, its provisions or transactions and relationships contemplated hereby
shall constitute either party as the agent, employee, partner or legal
representative of the other for any purpose whatsoever, nor shall either party
hold itself out as such. Neither party to this Agreement shall have the
authority to bind or commit the other party hereto in any manner or for any
purpose whatsoever, except as may be expressly provided for herein or otherwise
agreed in writing, but rather each party shall at all times act and conduct
itself in all respects and events as an independent contractor. This Agreement
alone creates no relationships of joint venturers, partners, associates or
principal and agent between the parties hereto.
22. Construction of Agreement; Entire Agreement Amendments.
This Agreement may be executed in counterparts (all of which together
shall constitute one agreement). In that this Agreement was prepared as a result
of negotiation and mutual agreement between the parties hereto, neither this
Agreement nor any provision hereof shall be construed against either party
hereto as the party who prepared this Agreement or any such provision. This
Agreement reflects the complete understanding of the parties as of the date
hereof and constitutes their entire agreement regarding the subject matter
hereof, all prior negotiations, representations and statements having been
merged herein. This Agreement may not be changed or amended orally, but by a
written amendment signed by both parties hereto.
10
IN WITNESS WHEREOF, the parties have executed this Agreement by the
signature of their respective, duly authorized corporate officers as of the day
and year first above written.
CARBON FIBER TECHNOLOGY LLC
By:
------------------------------
Title:
---------------------------
ALDILA GOLF CORP.
By:
------------------------------
Title:
---------------------------
11
EXHIBIT A
PRODUCTS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
A-1
EXHIBIT B
PRODUCT SPECIFICATIONS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
B-1
EXHIBIT C
BILLING AGREEMENT WITH AMTC FOR PRODUCTS @ THE PLANT
[Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]
X-0
XXXXXXX X
0000 XXXXXX XXXXXXX XXXXXXXX
[Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]
D-1
EXHIBIT B
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
October 29, 1999
TABLE OF CONTENTS
OF THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
ARTICLE I FORMATION.....................................................2
SECTION 1.1 FORMATION; GENERAL TERMS......................................2
SECTION 1.2 NAME..........................................................2
SECTION 1.3 PURPOSES......................................................2
SECTION 1.4 REGISTERED AGENT; REGISTERED OFFICE...........................2
SECTION 1.5.COMMENCEMENT AND TERM.........................................3
SECTION 1.6.PROHIBITION ON INDEBTEDNESS...................................3
SECTION 0.0.XXXXXXXXXX LICENSE............................................3
ARTICLE II CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS......................4
SECTION 2.1 INITIAL CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS: TAX
ELECTIONS ....................................................4
SECTION 2.2 ADDITIONAL CAPITAL CONTRIBUTIONS, PAYMENTS OR LOANS...........4
SECTION 2.3 LIABILITY OF MEMBERS..........................................6
SECTION 2.4 MAINTENANCE OF CAPITAL ACCOUNTS; WITHDRAWALS; INTEREST........6
ARTICLE III INTERIM DISTRIBUTIONS.........................................7
SECTION 3.1 TAX DISTRIBUTIONS.............................................7
SECTION 3.2 DISCRETIONARY DISTRIBUTIONS...................................7
SECTION 3.3 WITHHOLDING...................................................7
SECTION 3.4 NONCASH INTERIM AND LIQUIDATING DISTRIBUTIONS.................7
ARTICLE IV ALLOCATIONS...................................................8
SECTION 4.1 PROFITS.......................................................8
SECTION 4.2 LOSSES........................................................8
SECTION 4.3 CODE SECTION 704(C) TAX ALLOCATIONS...........................8
SECTION 4.4 MISCELLANEOUS.................................................9
ARTICLE V MANAGEMENT...................................................10
SECTION 5.1 MANAGEMENT BY THE MANAGERS; DELEGATION OF AUTHORITY;
APPROVAL OF ANNUAL BUDGETS AND BUSINESS
PLAN.........................................................10
SECTION 5.2 NUMBER, DESIGNATION, RESIGNATION AND REMOVAL OF MANAGERS.....13
SECTION 5.3 ASCERTAINING THE ACTION OF THE MANAGERS......................13
SECTION 5.4 RESTRICTIONS ON AUTHORITY OF MANAGERS........................14
SECTION 5.5 DISPUTE RESOLUTION...........................................17
SECTION 5.6 LIMITATION OF LIABILITY......................................18
SECTION 5.7 INDEMNIFICATION..............................................19
SECTION 5.8 CONFIDENTIALITY..............................................19
SECTION 5.9 NONCOMPETITION; NONSOLICITATION..............................20
Article VI Manager Meetings.............................................21
SECTION 6.1 ACTUAL MEETINGS..............................................21
SECTION 6.2 WRITTEN CONSENT TO ACTION IN LIEU OF ACTUAL MEETINGS.........22
ARTICLE VII TRANSFER OF INTERESTS........................................22
SECTION 7.1 IN GENERAL...................................................22
SECTION 7.2 LIMITED EXCEPTION FOR SALES, ASSIGNMENTS OR TRANSFERS........22
SECTION 7.3 RIGHTS OF ASSIGNEES..........................................23
SECTION 7.4 ADMISSION OF ASSIGNEES AS MEMBERS............................24
SECTION 7.5 DISTRIBUTIONS AND ALLOCATIONS WITH RESPECT TO TRANSFERRED
INTERESTS ...................................................24
SECTION 7.6 CERTAIN PERMITTED TRANSFERS; PURCHASE RIGHTS UPON CHANGE OF
CONTROL; OPTIONS TO
PURCHASE ....................................................25
SECTION 7.7 SPECIAL PROVISIONS UPON FORECLOSURE ON AMTC'S INTEREST.......26
ARTICLE VIII CESSATION OF MEMBERSHIP......................................27
SECTION 8.1 WHEN MEMBERSHIP CEASES.......................................27
SECTION 8.2 DISSOLVED MEMBERS............................................27
SECTION 8.3 CONSEQUENCES OF CESSATION OF MEMBERSHIP......................27
ARTICLE IX DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS........27
SECTION 9.1 DISSOLUTION TRIGGERS.........................................27
SECTION 9.2 WINDING UP...................................................28
SECTION 9.3 LIQUIDATING DISTRIBUTIONS....................................28
ARTICLE X BOOKS AND RECORDS............................................29
SECTION 10.1. BOOKS AND RECORDS; INTERNAL CONTROL.......................29
SECTION 10.2. TAXABLE YEAR; ACCOUNTING METHODS; AUDITED FINANCIAL
STATEMENTS ...............................................29
SECTION 10.3. ACCURACY OF FINANCIAL STATEMENTS..........................29
SECTION 10.4 TAX INFORMATION...........................................29
ARTICLE XI MISCELLANEOUS................................................30
SECTION 11.1 NOTICES...................................................30
SECTION 11.2 BINDING EFFECT............................................30
SECTION 11.3 CONSTRUCTION..............................................30
SECTION 11.4 ENTIRE AGREEMENT; NO ORAL LIMITED LIABILITY COMPANY
AGREEMENTS; AMENDMENTS TO THE LIMITED LIABILITY COMPANY
AGREEMENT ................................................30
SECTION 11.5 HEADINGS..................................................31
SECTION 11.6 SEVERABILITY..............................................31
SECTION 11.7 ADDITIONAL DOCUMENTS......................................31
SECTION 11.8 VARIATION OF PRONOUNS.....................................31
SECTION 11.9 GOVERNING LAW; CONSENT TO JURISDICTION; DISPUTE
RESOLUTION ...............................................31
SECTION 11.10 WAIVER OF ACTION FOR PARTITION............................31
SECTION 11.11 COUNTERPART EXECUTION; FACSIMILE EXECUTION................31
SECTION 11.12 TAX MATTERS MEMBER........................................32
SECTION 11.13 TIME OF THE ESSENCE.......................................32
SECTION 11.14 EXHIBITS; SCHEDULES.......................................32
i
EXHIBITS
EXHIBIT A: ......Amended and Restated Certificate of Formation
EXHIBIT B: ......Information Exhibit.
EXHIBIT B-1: ...... Closing Accounting Statements.
EXHIBIT C: ......Glossary of Terms.
EXHIBIT D: ......Regulatory Allocations Exhibit.
EXHIBIT E: ......Indemnification Exhibit.
EXHIBIT F: ......Dispute Resolution Exhibit
EXHIBIT G: ......Supply Agreement
EXHIBIT H: ......Transition Services Agreement
EXHIBIT I: ......Appraisal Process
EXHIBIT J: ......Variable Costs
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is made and
entered into as of October 29, 1999 (the "Effective Date"), by and among the
Persons whose names, addresses and taxpayer identification numbers are listed on
the Information Exhibit attached hereto as Exhibit B. Unless otherwise
indicated, capitalized words and phrases in this Amended and Restated Limited
Liability Company Agreement (the "Agreement") shall have the meanings set forth
in the Glossary of Terms attached hereto as Exhibit C.
Recitals:
A. Aldila Materials Technology Corp. ("AMTC") is a Delaware corporation
formerly engaged in the manufacture of carbon fiber products. AMTC's sole
shareholder is Aldila, Inc.
B. AMTC entered into the Limited Liability Company Agreement dated
August 19, 1999 (the "Original Limited Liability Company Agreement") which
provided for the formation and capitalization of AMTC LLC, a Delaware limited
liability company ("AMT"). AMT was formed by the filing of a certificate of
formation with the Delaware Secretary of State on August 19, 1999. AMT was
capitalized pursuant to the terms and conditions of the Original Limited
Liability Company Agreement during August of 1999. AMTC made the initial capital
contributions to AMT as set forth in the Original Limited Liability Company
Agreement and received 100% of the member interests in AMT in exchange therefor.
AMTC also entered into the Contribution and Amendment to LLC Agreement dated
September 1, 1999, as amended (the "Contribution Agreement") pursuant to which
AMTC made an additional capital contribution to AMT of the Contributed Business
(as defined in the Contribution Agreement) on September 1, 1999.
C. Pursuant to the Member Interest Purchase Agreement dated October 29,
1999 (the "Member Interest Purchase Agreement"), SGL Carbon Fibers and
Composites, Inc. is purchasing a 50% Interest in the LLC from AMTC
simultaneously with the effectiveness of this Agreement.
D. In connection with the closing of the Member Interest Purchase
Agreement on the Effective Date, the Members wish to amend and restate the LLC's
Certificate of Formation and to amend and restate the Original Limited Liability
Company Agreement, as amended by the Contribution Agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
that the amended and restated limited liability company agreement of the LLC
shall read as follows:
ARTICLE I
FORMATION
SECTION 1.1 Formation; General Terms. The LLC was formed and capitalized
as described in the Recitals. The Persons listed on the attached Information
Exhibit are the Members of the LLC as of the Effective Date. The Certificate as
to be filed with the Delaware Secretary of State pursuant to the Act is attached
hereto as Exhibit A.
The rights and obligations of the Members and the terms and conditions of
the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern unless otherwise required by the Act. This Agreement
shall be effective as of the Effective Date.
The Board shall cause to be executed and filed on behalf of the LLC all
instruments or documents, and shall do or cause to be done all such filing,
recording, or other acts, including the filing of the LLC's annual report with
the Delaware Secretary of State, as may be necessary or appropriate from time to
time to comply with the requirements of law for the continuation and operation
of a limited liability company in Delaware and in the other states and
jurisdictions in which the LLC shall transact business.
SECTION 1.2 Name. The name of the LLC shall be Carbon Fiber Technology
LLC. The name of the LLC shall be the exclusive property of the LLC, and no
Member shall have any commercial rights in the LLC's name or any derivation
thereof, even if the name contains such Member's own name or a derivation,
except that the Members acknowledge and agree that: (a) AMTC and its Affiliates
shall have the exclusive right to use the name "Aldila" and all derivations
thereof, including without limitation the name "Aldila Materials Technology" and
all derivations thereof and (b) SGL and its Affiliates shall have the exclusive
right to use the name "SGL Carbon" and all derivations thereof, including
without limitation, the name "SGL Carbon Fibers" and all derivations thereof.
The LLC's name may be changed only by an amendment to the Certificate adopted
pursuant to the voting requirements set forth in this Agreement.
SECTION 1.3 Purposes. The purpose of the LLC shall be to engage in any
lawful act or activity for which limited liability companies may be organized
under the Act.
SECTION 1.4 Registered Agent; Registered Office. The LLC's registered
agent and registered office are set forth in the Certificate, and may be changed
from time to time upon the vote of the Members, in which case the Members shall
file a statement of change as required by the Act.
2
SECTION 1.5 Commencement and Term. The LLC commenced operations on
September 1, 1999, and shall continue until December 31, 2099 unless it is
dissolved earlier, its affairs are wound up and final liquidating distributions
are made pursuant to this Agreement.
SECTION 1.6 Prohibition on Indebtedness. AMTC and SGL each hereby agrees
that neither it nor its Affiliates shall incur any Indebtedness that would
result in an Encumbrance being placed on any Interest unless the party to which
such Indebtedness is owed and/or the secured party which holds such Encumbrance
complies with the requirements of a Lender under Section 7.7.
SECTION 1.7 Technology License. The Members hereby agree as follows:
(a) The LLC and each of its Members will share know-how, discoveries,
inventions, patents, technology, formulas and processes (collectively,
"Know-how") that derive or result from any work, including any research and
development work, performed at the expense of the disclosing entity or its
Affiliates, in the following manner:
(i) with respect to any Know-how developed entirely at the expense
of the LLC, the LLC shall automatically be deemed to have
granted a License to use such Know-how to the Members and
their Affiliates;
(ii) with respect to any Know-how developed entirely at the expense
of a Member or its Affiliates, if any such person discloses
such Know-how to the LLC, such person shall automatically be
deemed to have granted a License to use such Know-how to the
LLC; and
(iii) with respect to any Know-how developed at the joint expense of
the LLC and one or more of the Members or Affiliates of the
Members, including any Know-how that is developed, in part,
through the use of any Know-how licensed to such developing
person pursuant to this Section 1.7, (A) each of such
co-developing Members or Affiliates shall automatically be
deemed to have granted a License to use such Know-how
developed by it to the LLC, and (B) the LLC shall
automatically be deemed to have granted a License to use such
Know-how developed by it to the co-developing Member and its
Affiliates, and (C) the LLC shall automatically be deemed to
have granted a sublicense to the non-developing Member and its
Affiliates to use the Know-how described in the preceding
clause (A).
(b) A License from a Member or its Affiliates to the LLC, or from the LLC
to a Member or its Affiliates, will terminate immediately upon the consummation
of a transaction pursuant to which such Member ceases to be a Member of the LLC,
but such termination shall only apply to those rights under the License that
were not being used by such licensee at the time such transaction is
consummated.
3
(c) Any License granted pursuant to this Section 1.7 shall be subject to
restrictions set forth in Sections 5.8 and 5.9 and any other confidentiality or
noncompetition agreements that may be entered into by a Member or its Affiliates
upon the sale of its Interest in the LLC, including any such agreement executed
pursuant to Section 5.5, 5.9(c) or 7.6. As between a licensor and licensee, all
rights, title and interest in and to such Know-How and all intellectual property
rights contained therein, associated therewith or derived therefrom shall remain
the exclusive property of the party which licensed such Know-How hereunder,
subject only to the limited license provided for herein.
ARTICLE II
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
SECTION 2.1 Initial Capital Contributions; Capital Accounts: Tax
Elections. AMTC made Capital Contributions as described in the Recitals. No
further Capital Contributions have been made since the formation of the LLC.
SECTION 2.2 Additional Capital Contributions, Payments or Loans.
(a) When completed, the Managers shall cause the Closing Accounting
Statements to be attached hereto as Exhibit B-1, and the Capital Accounts of the
Members as of the Effective Date shall equal the Purchase Price (as defined in
the Member Interest Purchase Agreement) calculated therefrom. Except to the
extent otherwise expressly set forth herein, no Member shall be required to
make, or have any liability for, Capital Contributions. No Member shall be
required to loan money or otherwise extend credit for the benefit of the LLC.
(b) Upon the execution of this Agreement, each Member shall make a Capital
Contribution to the LLC in the amount of $500,000 in immediately available
funds.
(c) After the end of each calendar month, the LLC shall invoice each
Member for an amount equal to [Material omitted and filed separately with the
SEC pursuant to a request for confidential treatment]. Each Member hereby agrees
to pay such invoices within 10 days after each Member's receipt of such invoice.
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]. The LLC shall accept payments made by any Member's
Affiliates on behalf of such Member.
(d) If a Member shall fail to make any payment required pursuant to
Section 2.2(c) and such failure remains uncured for 15 days after written notice
of such failure has been delivered to the defaulting Member by the
non-defaulting Member, the non-defaulting Member must either (i) exercise its
option to make unsecured loans to the defaulting Member of the amounts of the
payments which the defaulting Member was required to make to the LLC pursuant to
Section 2.2(c) or (ii) extend the defaulting Member's obligation to make such
payment (with such payment to bear interest at the Default Rate) for an
additional period of six (6) months from the date of such Member's first default
hereunder (which extension shall be deemed to have been granted if the
non-defaulting Member does not exercise its option under the preceding clause
(i)). If the defaulting Member defaults on subsequent payments due after its
first payment default, the extension of its obligations to make such subsequent
payments shall
4
expire six (6) months from the date of its first payment default (i.e., not 6
months from the subsequent payment defaults). The non-defaulting Member may
exercise such option by promptly sending written notice thereof to the
defaulting Member and to the LLC and by disbursing such loan proceeds directly
to the LLC. The defaulting Member shall be required to execute a promissory note
for the amount of such loans in a form reasonably satisfactory to both parties,
which note shall provide that the loan shall bear interest at the Default Rate
until paid and that such loan shall be payable no later than six (6) months
after the date of the initial loan. The defaulting Member shall be entitled to
prepay the amount of any such loan at any time without any prepayment premium or
penalty. While any such loans are outstanding, the Managers designated by the
defaulting Member shall not have any right to vote on or control the taking of
any actions contemplated by Sections 5.4(a)(xi) (which shall be construed to
include any plant expansions approved by the Board prior to the date of default
by the defaulting Member), (xii), (xxiii), (xxiv) or (xxv) and the
non-defaulting Member shall have the right to lease from the LLC any reasonably
available space at the LLC's plant for fair market rental for a term of
reasonable length for the purpose of conducting its own operations outside the
scope of the LLC and the Managers appointed by the non-defaulting Member shall
have the right to cause the LLC to take or not take any such actions without
regard to the provision of Section 5.4(a) which requires the unanimous consent
of the Board with respect thereto. In any event, if any such loan (with all
accrued interest) is not repaid in full by the defaulting Member to the
non-defaulting Member within six (6) months after the date of the first payment
default hereunder, the non-defaulting Member shall have an option to purchase
all, but not less than all, of the Interest of the defaulting Member, which
option shall be exercised by the provision of written notice with respect
thereto within 45 days after the end of such six (6) month period. If the
non-defaulting Member exercises its option to purchase the Interest of the
defaulting Member, the purchase price to be paid to the defaulting Member for
its Interest shall be an amount equal to (i) 50% of the LLC's Net Book Value as
of the last day of the month immediately preceding the date upon which the
non-defaulting Member provides notice of its desire to exercise its option under
this section, multiplied by (ii) the percentage ownership interest in the LLC
represented by the Interest of the defaulting Member. At the closing, the
non-defaulting Member shall receive a credit against the purchase price due to
the defaulting Member in an amount equal to the outstanding principal and
interest due pursuant to the loan(s) made to the defaulting Member. The closing
shall take place within 15 days after the final determination of Net Book Value
for this purpose at the office of the LLC's attorneys or at such other location
as may be agreed upon by the Members. At the closing, the Members shall execute
and deliver such instruments of conveyance and transfer as may be reasonably
required to effect the purchase and the selling Member shall be required to
execute and deliver a carbon fiber purchase agreement with the LLC pursuant to
the terms and conditions of a Supply Agreement substantially in the form of
Exhibit G attached hereto. After a purchase pursuant to this Section 2.2(d), the
purchasing Member and the LLC shall indemnify and hold harmless the defaulting
Member and its officers, directors and Affiliates for any liabilities and
obligations that the LLC has incurred prior to such purchase or will incur after
such purchase, it being understood that the price paid by the purchasing Member
shall have taken into consideration all such liabilities and obligations. If the
non-defaulting Member elects to make a loan to the defaulting Member pursuant to
the terms hereof, but does not elect to exercise its option to purchase the
Interest of the defaulting Member, then promptly upon the expiration of the six
(6) month period during which the loan is outstanding, if such loan is not then
repaid, the
5
defaulting Member shall be deemed to have transferred (and shall
execute an assignment to evidence such transfer) to the non-defaulting Member a
portion of its Interest equal in value to the outstanding principal and interest
amount of such loan, with such Interest valued at its respective percentage of
the Net Book Value of the LLC at the end of such six (6) month period. In such
event, the size of the Board of Managers shall be automatically reduced to three
(3) Managers, the defaulting Member shall have the right to designate only one
(1) Manager hereunder, all unanimous vote requirements with respect to the
actions described under Sections 5.4(a)(vi), (vii), (ix), (xi), (xii), (xiii)
and (xvi) (provided that the foregoing clauses shall not be construed to permit
plant expansions), (to the extent such Distributions are made to all Members in
a fair manner) (xxii), (xxiii), (xxiv) and (xxv) shall become majority vote
requirements only and this Agreement shall be deemed to be amended accordingly
(and each Member shall execute an appropriate amendment).
(e) Notwithstanding the above, if a Member defaults on one or more
obligations to make payment pursuant to the terms of Section 2.2(c) for a period
of in excess of six (6) months after the 15 day cure period has expired during
any three year period during the term hereof, then the other Member shall have,
immediately upon the defaulting Member's failure to make a payment in the
seventh month during any such three year period, the option to purchase the
Interest of the Defaulting Member on the terms and conditions of the option to
purchase set forth above in subsection 2.2(c) without the non-defaulting Member
being required to first make any loans hereunder. The foregoing consequences
shall be in addition to any other remedies the non-defaulting Member and the LLC
may have under applicable law for breach by the defaulting Member, including,
but without limitation, a claim for attorney's fees and expenses.
(f) If AMTC fails to make a payment required by Section 2.2(c), the
failure shall be handled in the manner set forth in Sections 2.2(d) and (e)
regardless of whether or not a Lender (as defined in Section 7.7) has foreclosed
on AMTC's Interest. Notwithstanding any such foreclosure (which itself shall not
be deemed a default under this Agreement, but which shall constitute a Change of
Control), provided that the Lender has satisfied its obligations under Section
7.7 hereof, a non-defaulting Member shall have the rights set forth under
Sections 2.2(d) and (e) to the extent set forth herein.
SECTION 2.3 Liability of Members. No Member shall be liable for any debts
or losses of capital or profits of the LLC or be required to contribute or lend
funds to the LLC or guarantee the liabilities of the LLC.
SECTION 2.4 Maintenance of Capital Accounts; Withdrawals; Interest.
Capital Accounts shall be maintained for each of the Members. No Member shall be
entitled to withdraw any part of its Capital Account or to receive any
distribution except as provided in this Agreement. No Member shall be entitled
to receive any interest on its Capital Contributions or with respect to its
Capital Account. Each Member shall look solely to the assets of the LLC for the
return of its Capital Contributions and, except as otherwise provided in this
Agreement, shall have no right or power to demand or receive property or cash
from the LLC. No Member shall have priority over any other Member as to the
return of its Capital Contributions, or with respect to distributions.
6
ARTICLE III
INTERIM DISTRIBUTIONS
SECTION 3.1 Tax Distributions. If the Board expects that as of the end of
any Tax Estimation Period the LLC will have Adjusted Taxable Income, then the
LLC shall distribute on or before the 15th day after the end of the Tax
Estimation Period to the Members in accordance with their Percentage Interests,
cash in an amount equal to the Board's estimate of the Adjusted Taxable Income
with respect to such Tax Estimation Period multiplied by the Combined Effective
Marginal Tax Rate, and on or before March 15th of each year shall adjust the
distributions pursuant to this Section 3.1 with respect to the previous Fiscal
Year to conform with the LLC's income tax returns for such Fiscal Year, which
adjustments shall take into account any withholding required pursuant to Section
3.3.
SECTION 3.2 Discretionary Distributions. Prior to the dissolution of the
LLC, the LLC shall distribute cash or property, subject to Section 3.4, to the
Members in accordance with their Percentage Interests in such amounts, at such
times and as of such record dates as the Board shall determine.
SECTION 3.3 Withholding. In the event any federal, foreign, state or local
jurisdiction requires the LLC to withhold taxes or other amounts with respect to
any Member's allocable share of Profits, taxable income or any portion thereof,
or with respect to distributions, the LLC shall withhold from distributions or
other amounts then due to such Member (or shall pay to the relevant taxing
authority with respect to amounts allocable to such Member) an amount necessary
to satisfy the withholding responsibility. In such a case, the Member for whom
the LLC has paid the withholding tax shall be deemed to have received the
withheld distribution or other amount so paid, and to have paid the withholding
tax directly.
If, on the due date of the LLC's withholding obligation the Member's share
of cash distributions or other amounts due is less than the amount of the
withholding obligation, the Member to which the withholding obligation applies
shall have the option to pay to the LLC the amount of such shortfall. In the
event a Member fails to make such payment and the LLC nevertheless pays the
withholding, the amount paid by the LLC shall be deemed a nonrecourse loan from
the LLC to such Member bearing interest at the Prime Rate, and the LLC shall
apply all distributions or payments that would otherwise be made to such Member
toward payment of the loan and interest, which payments or distributions shall
be applied first to interest and then to principal until the loan is repaid in
full.
SECTION 3.4 Noncash Interim and Liquidating Distributions. The LLC shall
make interim and liquidating distributions to the Members other than in cash
only upon the vote of the Managers as prescribed in Section 5.4 below and only
in accordance with the Members' Percentage Interests. In the event of a noncash
distribution, the Agreed Value of the property to be distributed shall be
adjusted and any resulting Profits or Losses shall be posted to the Capital
Accounts as of the date the noncash distribution is made.
ARTICLE IV
ALLOCATIONS
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SECTION 4.1 Profits. Except as provided in the Regulatory Allocations
Exhibit, Profits shall be allocated as follows:
(a) First, to the Members who have been allocated Losses pursuant to
Subsection 4.2(c) below until the cumulative Profits allocated pursuant to this
Subsection 4.1(a) equal the cumulative prior allocations of Losses under that
Subsection.
(b) Next, to the Members who have been allocated Losses pursuant to
Subsection 4.2(b) below until the cumulative Profits allocated pursuant to this
Subsection 4.1(b) equal the cumulative prior allocations of Losses under that
Subsection.
(c) All remaining Profits shall be allocated to the Members in accordance
with their Percentage Interests.
SECTION 4.2 Losses. Except as provided in the Regulatory Allocations
Exhibit, Losses shall be allocated as follows:
(a) First, to the Members who have been allocated Profits pursuant to
Subsection 4.1(c) above until the cumulative Losses allocated pursuant to this
Subsection 4.2(a) equal the cumulative prior allocations of Profits under that
Subsection.
(b) Next, Losses shall be allocated to the Members with positive Adjusted
Capital Account balances in proportion to those balances.
(c) All remaining Losses shall be allocated to the Members in accordance
with their Percentage Interests.
SECTION 4.3 Code Section 704(c) Tax Allocations. If, at any time, the LLC
should have Section 704(c) Property, then income, gain, loss, and deduction with
respect to any property contributed to the capital of the LLC shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the LLC for federal
income tax purposes and its initial Agreed Value pursuant to the remedial
allocation method under Code Section 704(c) and the Treasury Regulations
promulgated thereunder.
In the event the Agreed Value of any LLC asset is adjusted after its
contribution to the LLC, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take into account any variation
between the adjusted basis of such asset for federal income tax purposes and its
Agreed Value pursuant to the remedial allocation method under Code Section
704(c) and the Treasury Regulations promulgated thereunder.
Allocations pursuant to this Section are solely for purposes of federal,
state, and local taxes and shall not be taken into account in computing any
Member's Capital Account or share of Profits, Losses, other items, or
distributions pursuant to any provision of this Agreement.
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For purposes of making allocations of income and losses, including the
determination of the remedial allocation in accordance with Treasury Regulation
Section 1.704-3(d)(1), the Agreed Value shall be equal to the book costs prior
to the Effective Date with respect to the accrued expenses, accounts payable,
prepaid expenses, and deposits. In addition, the Agreed Value of the inventory
contributed by AMTC to the LLC shall be equal to the tax basis of the inventory
as of the Effective Date. The remaining Agreed Value of the LLC shall be
allocated to the land and depreciable assets by multiplying the remaining fair
market value by the historical cost of the asset divided by the total historical
cost of the land and depreciable assets. For purposes of determining the book
depreciation necessary for making the remedial allocation in accordance with
Treasury Regulation Section .704-3(d)(2), the LLC will use the straight-line
method of depreciation for the amount by which the Agreed Value exceeds the
adjusted tax basis.
SECTION 4.4 Miscellaneous.
(a) Allocations Attributable to Particular Periods. Allocations of
Profits, Losses or any other allocable items shall be made for the period
commencing with the Effective Date. For purposes of determining Profits, Losses
or any other items allocable to any period, such items shall be determined on a
daily, monthly, or other basis, as determined by the Board using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(b) Other Items. Except as otherwise provided in this Agreement, all items
of LLC income, gain, loss, deduction, credit and any other allocations not
otherwise provided for shall be divided among the Members in the same proportion
as they share Profits or Losses, as the case may be, for the year.
(c) Tax Consequences; Consistent Reporting. The Members are aware of the
income tax consequences of the allocations made by this Article and by the
Regulatory Allocations and hereby agree to be bound by those allocations as
reflected on the information returns of the LLC in reporting their shares of LLC
income and loss for income tax purposes. Each Member agrees to report its
distributive share of LLC items of income, gain, loss, deduction and credit on
its separate return in a manner consistent with the reporting of such items to
it by the LLC. Any Member failing to report consistently, and who notifies the
Internal Revenue Service of the inconsistency as required by law, shall
reimburse the LLC for any legal and accounting fees incurred by the LLC in
connection with any examination of the LLC by federal or state taxing
authorities with respect to the year for which the Member failed to report
consistently.
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ARTICLE V
MANAGEMENT
SECTION 5.1 Management by the Managers; Delegation of Authority; Approval
of Annual Budgets and Business Plan.
(a) General Authority of Managers. The Managers shall have complete
authority and exclusive control over the management of the business and affairs
of the LLC, which authority may be delegated in part to the Operating Committee
or the Officers as provided in Sections 5.1(b) and (c) below. Except for matters
requiring a unanimous vote as set forth in Section 5.4 below, the vote, consent,
approval or ratification of at least a per capita majority of the Managers then
serving shall be required and shall be sufficient in order to constitute the
action of the Managers. The LLC is a manager-managed LLC under the Act and
accordingly, no Member (in its capacity as a Member) has the actual or apparent
authority to cause the LLC to become bound to any contract, agreement or
obligation; no Member (in its capacity as a Member) shall take any action
purporting to be on behalf of the LLC; and no Member (in its capacity as a
Member) shall have fiduciary duties to the LLC or to other Members. Except
pursuant to the proper exercise of authority delegated pursuant to Section
5.1(c), no Manager or Officer shall cause the LLC to become bound to any
contract, agreement or obligation, and no Manager or Officer shall take any
other action on behalf of the LLC, unless such matter has received the vote,
consent, approval or ratification as required pursuant to this Agreement with
respect to such matter.
(b) Operating Committee. At the discretion of the Board, the Board may
delegate responsibility for the day-to-day management of the business and
affairs of the LLC to an operating committee (the "Operating Committee"),
provided that the Operating Committee shall not have the authority to take any
of the acts described in Section 5.4(a) without the unanimous consent of the
Board and the Board's express delegation of the authority to take such acts.
Anything herein to the contrary notwithstanding, the LLC shall not sell its
products to parties other than the Members without the unanimous consent of the
Operating Committee. The Operating Committee shall consist of three individuals.
The initial Operating Committee shall consist of Xxxxx Xxxxxxx, Xxxxx Xxxxxx
(SGL designee) and Xxxxx X. Xxxxxxxxx (AMTC designee). Each group of two Board
designees designated by each Member shall appoint one representative to the
Operating Committee and shall notify the other Managers in writing of the name
of such representative. The third individual on the Operating Committee shall be
the LLC's Chief Executive Officer. The group of Board members who designate an
individual to serve on the Operating Committee may remove and appoint a
substitute or replacement for its representative on the Operating Committee at
any time upon written notice to the other Managers. Each member of the Operating
Committee shall have only one vote at any meeting, and no meeting of the
Operating Committee may be convened unless each representative is present at the
meeting. Except as expressly provided herein, all decisions made or actions
taken at a meeting of the Operating Committee shall require the unanimous vote
of the representatives. The Operating Committee shall hold monthly meetings (or
at such other intervals as the representatives shall determine) and shall fix
the times and places at which such meeting shall be held. Meetings of the
Operating Committee may be held by means of conference telephone or equivalent
communications equipment by which all representatives can hear each other
simultaneously. Participation by such means shall constitute presence in person
at any such
10
meeting. Any action required or permitted to be taken by the Operating Committee
may be taken without a meeting if each representative consents to such action in
writing.
(c) Delegation of Authority to Officers. The Managers shall elect one or
more individuals to hold the offices set forth below, which individuals when
elected shall have and exercise delegated authority of the Board as set forth
below (no officer shall be deemed a "manager" (within the meaning of the Act) of
the LLC unless such person also serves as a Manager):
(i) Chief Executive Officer. The Chief Executive Officer shall
have general charge and control over the affairs of the LLC,
subject to the direction of the Board, shall see that all
orders and resolutions of the Board are carried out, shall
report thereon to the Board, and shall have such other powers
and perform such other duties as shall be prescribed from time
to time by the Board. The Chief Executive Officer shall not
take any action inconsistent with the Approved Business Plan,
the Approved Annual Operating Budget and the Approved Annual
Capital Expenditure Budget.
(ii) President. The President shall report to the Chief Executive
Officer and shall be responsible for the day-to-day operations
of the LLC and for carrying out the policies and directives of
the Board in accordance with this Agreement and the Act, and
shall have all necessary power and authority, subject to
oversight by the Board, to cause the LLC to implement its
Approved Business Plan, subject to its Approved Annual
Operating Budget and Approved Annual Capital Expenditure
Budget. The President shall have the authority to execute and
deliver any deeds, mortgages, contracts, or other instruments
on behalf of the LLC, except in cases where the execution and
delivery thereof shall be expressly delegated by the Managers
to some other Officer or agent of the LLC, or shall be
required by law to be otherwise executed and delivered; and in
general shall have the authority and perform the duties
incident to the office of president as if the LLC were a
business corporation under the Delaware General Corporation
Law.
(iii) Vice Presidents. In the absence of the President or the event
of his or her death, inability or refusal to act, the Vice
Presidents, unless otherwise determined by the Managers, shall
have the authority and perform the duties of President, and
when so acting shall have all the powers of and be subject to
all the restrictions upon the President. The Vice Presidents
shall have the authority and perform the other duties as may
from time to time be assigned to them by the President or the
Managers, and in general shall perform all duties incident to
the office of vice president as if the LLC were a business
corporation under the Delaware General Corporation Law.
(iv) Secretary. The Secretary shall: (a) attend meetings of the
Managers and Members, keep the minutes of such meetings and
perform like duties for
11
any committees thereof when required; (b) see that all notices
required to be given by the LLC are duly given in accordance
with this Agreement or as required by law; (c) be custodian of
the LLC's records; (d) in general have the authority and
perform the duties incident to the office of secretary as if
the LLC were a business corporation under the Delaware General
Corporation Law.
(v) Treasurer. The Treasurer shall: (a) be responsible for all the
safekeeping of funds and securities of the LLC; (b) receive
and give receipts for money due and payable to the LLC, and
deposit such moneys in the name of the LLC in such
depositories as shall be selected by the Managers; (c)
establish and maintain accounting procedures and internal
controls for the financial operations of the LLC; (d) in
general have the authority and perform the duties incident in
the office of treasurer as if the LLC were a business
corporation under the Delaware General Corporation Law.
(vi) Assistant Secretaries. In the absence of the Secretary or the
event of his or her death, inability or refusal to act, the
Assistant Secretaries, unless otherwise determined by the
Managers, shall have the authority and perform the duties of
Secretary, and when so acting shall have all the powers of and
be subject to all the restrictions upon the Secretary. The
Assistant Secretaries shall have the authority and perform the
other duties as may from time to time be assigned to them by
the Secretary or the Managers, and in general shall perform
all duties incident to the office of assistant secretary as if
the LLC were a business corporation under the Delaware General
Corporation Law.
(vii) Assistant Treasurers. In the absence of the Treasurer or the
event of his or her death, inability or refusal to act, the
Assistant Treasurers, unless otherwise determined by the
Managers, shall have the authority and perform the duties of
Treasurer, and when so acting shall have all the powers of and
be subject to all the restrictions upon the Treasurer. The
Assistant Treasurers shall have the authority and perform the
other duties as may from time to time be assigned to them by
the Treasurer or the Managers, and in general shall perform
all duties incident to the office of assistant treasurer as if
the LLC were a business corporation under the Delaware General
Corporation Law.
Any Officer may hold more than one office of the LLC. No Officer may serve
as a director, manager, officer or other employee of either Member or of any
other Person without the prior express approval of the Members. The Managers may
remove an Officer at any time and from time to time and replace such Officer
with a successor. An Officer may resign at any time upon notice to the Board
provided that the Officer complies with the notice and other requirements set
forth in any employment agreement between the Officer and LLC. Until their
successors are appointed, the following persons shall hold the offices set forth
opposite their respective names:
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Xxxxx Xxxxxxx Chief Executive Officer/President,
Secretary and Treasurer
(d) Approval of Annual Budgets and Business Plan. The Officers (at the
direction of the Operating Committee) shall prepare annually prior to the
commencement of each Fiscal Year of the LLC written, line item operating and
capital expenditure budgets for the coming Fiscal Year and shall prepare
periodically a business plan for the LLC, and shall submit such budgets and
business plans to the Board. Upon approval of annual operating and capital
expenditure budgets by the Board such budgets shall become the Approved Annual
Operating Budget or the Approved Annual Capital Expenditure Budget for purposes
of this Agreement for the Fiscal Years to which they relate. A written business
plan approved by the Board shall become the Approved Business Plan for purposes
of this Agreement. Any Approved Annual Operating Budget, Approved Annual Capital
Expenditure Budget and Approved Business Plan may be amended from time to time
by the vote of the Board. If the Board fails to approve an annual operating
budget or annual capital expenditure budget, then for purposes of the various
limitations and restrictions on management authority in this Agreement, the
Approved Annual Operating Budget for the most recent Fiscal Year shall be the
Approved Annual Operating Budget for any subsequent Fiscal Year for which there
is no Approved Annual Operating Budget, and the most recent Approved Annual
Capital Expenditure Budget shall continue to be effective to the extent items on
such budget have not been expended. At the discretion of the Board, the budgets
referenced herein may be reviewed quarterly and revised semiannually, provided
that the Board may request that the Operating Committee or the Officers submit
revised budgets promptly if necessary to respond to changes in the LLC's target
markets.
SECTION 5.2 Number, Designation, Resignation and Removal of Managers. The
LLC shall have four (4) Managers (each of whom shall have one vote), each of
whom must be an officer, director or employee of a Member or its Affiliates, two
of whom shall be designated by SGL, and two of whom shall be designated by AMTC.
All Managers shall execute and be bound by the provisions of this Agreement.
Each Manager shall serve until his death, resignation or removal by the Member
entitled to designate such Manager. A Manager may resign at any time upon notice
to the other Managers and may be removed at any time by the Member entitled to
designate such Manager, with or without cause, upon notice given by the Member
entitled to designate such Manager, which notice shall be directed to the other
Managers and shall be effective as stated therein.
SECTION 5.3 Ascertaining the Action of the Managers. The requisite vote,
consent, approval or ratification of the Managers with respect to any matter may
be taken at a meeting called pursuant to Section 6.1 or without a meeting
pursuant to Section 6.2.
SECTION 5.4 Restrictions on Authority of Managers.
(a) Unanimous Consent Required. Without the unanimous consent of the
Board, no Manager, Officer or member of the Operating Committee shall have
authority to do any of the following:
(i) do any act in contravention of this Agreement;
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(ii) amend this Agreement, except as expressly provided
otherwise herein;
(iii) possess any property or assign, transfer, or pledge the
rights of the LLC in specific property, for other than the
exclusive benefit of the LLC;
(iv) employ, or permit to be employed, the funds or assets of
the LLC in any manner except for the exclusive benefit of
the LLC;
(v) commingle the LLC's funds with its own or any other
Person's funds;
(vi) cause the LLC to incur any Indebtedness in excess of
$100,000, except for Indebtedness provided for in an
Approved Annual Operating Budget or Approved Annual Capital
Expenditure Budget;
(vii) cause the LLC (a) to enter into any contract or agreement
or series of related contracts or agreements, whether oral
or written, obligating the LLC to expend money or provide
goods or services other than in the ordinary course of
Business or (b) obligate the LLC in any other manner,
unless in each case the amount involved is less than
$100,000 or provided for in an Approved Annual Operating
Budget or Approved Capital Expenditure Budget;
(viii) [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment], or grant
any Member a rate of return on any Capital Contribution,
including with respect to any capital project or major
maintenance expenditures made by the LLC for the primary
benefit of one of the Members;
(ix) cause the LLC to conduct or engage in any activities
outside of the scope of the Business or any activities
reasonably ancillary thereto;
(x) cause the LLC to be taxed as an entity other than a
partnership under the Code;
(xi) approve an annual operating budget for the then existing
Business and operations of the LLC, annual maintenance and
capital expenditure budget for the then existing Business
and operations of the LLC, or business plan for the then
existing Business and operations of the LLC, as submitted
to the Board by the Officers or amend such items once
approved or make or authorize the making of any
expenditures not authorized in such budgets or business
plan;
(xii) maintain or adopt any policy concerning any variable
incentive compensation or bonus plan, or adopt, enter into,
amend, modify or change any currently existing or
subsequently adopted agreement relating to employment,
compensation plan, bonus or any other benefit plan for
employees, independent contractors, Officers or Managers of
the LLC,
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including, but not limited to, adopting or entering into any
variable incentive compensation or bonus plan, employment
agreement, noncompetition agreement or non-solicitation
agreement with any employee of the LLC;
(xiii) cause the LLC to sell, transfer, lease or otherwise dispose
of, or mortgage or pledge, any assets of the LLC with a
fair market value greater than $50,000 except as reflected
in an Approved Annual Operating Budget or Approved Annual
Capital Expenditure Budget and except for the sale of
inventory in the ordinary course of Business;
(xiv) cause the LLC to enter into any contract, agreement or loan
or engage in any transaction with any Member or Manager or
with any Affiliate of or Related Party of any of them
(except for (A) the Transition Services Agreement attached
hereto as Exhibit H executed on the Effective Date, (B) the
Supply Agreements entered into as of the date hereof
between the LLC and each of its Members (or one of their
Affiliates, as the case may be), and (C) any agreements
entered into pursuant to Sections 5.5, 5.9(c) or 7.6);
(xv) cause the LLC to merge with or into any other entity or any
entity to merge with or into the LLC;
(xvi) take any voluntary action that would cause the LLC to
deviate to a material extent from the Approved Annual
Operating Budget, Approved Annual Capital Expenditure
Budget or Approved Business Plan;
(xvii) approve the Transfer of a Member's Interest and the form of
documents with respect thereto;
(xviii) revalue the property of the LLC as required under the
circumstances described under the definition of Agreed
Value;
(xix) issue any Interest in the LLC or rights to acquire an
Interest or admit new Members to the LLC;
(xx) accept draft Audited Financial Statements after an
objection by a Manager as provided in Section 10.3 below;
(xxi) dissolve the LLC;
(xxii) cause the LLC to make any Distributions other than tax
distributions described in Section 3.1;
(xxiii) settle any dispute or litigation or other proceeding,
whether administrative or otherwise, which would have a
material adverse affect on the LLC or
15
any Member, or waive any claim in excess of $100,000 which
the LLC may have against another Person;
(xxiv) engage any independent auditors, legal counsel or other
professional advisors to the LLC;
(xxv) cause the LLC's plant to shut down for any reason other
than routine maintenance, emergency repairs or regularly
scheduled holidays; or
(xxvi) approve an annual operating budget for expansions, annual
maintenance and capital expenditure budget for expansions
or business plan for expansions of the LLC as submitted to
the Board by the Officers or amend such items once approved
or make or authorize the making of any expansion
expenditures not authorized in such budgets or business
plan.
(b) Consent of AMTC's Designees or SGL's Designees Required.
(i) Other than transactions specifically contemplated hereunder
(including (A) the Supply Agreement entered into as of the
date hereof between the LLC and Aldila, Inc., (B) the
Transition Services Agreement attached hereto as Exhibit H,
and (C) any agreements entered into pursuant to Sections 5.5,
5.9(c) or 7.6), the LLC shall not engage in any transaction
with AMTC or any Affiliate of AMTC, including, without
limitation, the acquisition of assets from, the sale of assets
to, or the borrowing of money from or lending money or
providing credit support to, AMTC, unless those Managers
designated by SGL approve such transaction in writing.
(ii) Other than transactions specifically contemplated hereunder
(including (A) the Supply Agreement entered into on the date
hereof between the LLC and SGL or one of its Affiliates and
(B) any agreements entered into pursuant to Sections 5.5,
5.9(c) or 7.6), the LLC shall not engage in any transaction
with SGL or any Affiliate of SGL, including, without
limitation, the acquisition of assets from, the sale of assets
to, or the borrowing of money from or lending money or
providing credit support to, SGL, unless those Managers
designated by AMTC approve such transaction in writing.
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SECTION 5.5 Dispute Resolution.
(a) With respect to any Board proposal receiving the affirmative vote of
at least one of the Managers, but not the affirmative vote of the number of
Managers necessary to approve such proposal, and such proposal requires the
approval of the Board, including, but not limited to, any matter set forth in
Section 5.4 hereof, then, at the written request of the Member whose Manager
designees made such proposal, the Board shall reconvene to reconsider and vote
again with respect to such proposal not later than three (3) business days after
the date upon which such written request is made of the Board. If such decision
or action is not approved at the subsequent Board meeting, the decision or
action with respect to which the requisite approval has not been obtained shall
be submitted to the Chief Executive Officers of Aldila, Inc. and SGL who shall
attempt to resolve the dispute within five (5) business days after the referral
of such dispute to them. If the Chief Executive Officers are unable to resolve
the dispute within the requisite period, then (i) if the dispute constitutes an
Impasse, the Members shall have the rights set forth in Section 5.5(b) below or
(ii) if the dispute does not constitute an Impasse, the dispute shall be
resolved pursuant to the terms and conditions of the Dispute Resolution Exhibit
attached hereto as Exhibit F.
(b) In the event of an Impasse, after exhausting the dispute resolution
mechanisms set forth in Section 5.5(a), a Member (the "Electing Member") may
invoke this buy-sell procedure by the giving of a notice to that effect (the
"Election Notice") to the other Member (the "Notice Member"). The Election
Notice shall constitute an irrevocable offer by the Electing Member either to
purchase all, but not less than all, of the Interest of the Notice Member, or to
sell all, but not less than all, of the Electing Member's Interest to the Notice
Member. Within 30 days after the delivery of the Election Notice, the Electing
Member shall provide to the Notice Member a written statement of the aggregate
dollar amount which the Electing Member would be willing to pay for all of the
assets of the LLC, free and clear of all liabilities and obligations (other than
unknown contingencies) relating thereto as of the date of the Election Notice
(the "Buy-Sell Price"), together with evidence reasonably satisfactory to the
Notice Member of the Electing Member's ability to pay the Buy-Sell Price. For a
period of 30 days after receipt of the Buy-Sell Price, the Notice Member shall
have the option either (i) to sell all, but not less than all, its Interest to
the Electing Member for the amount the Notice Member would be entitled to
receive if the LLC sold all of its assets for the Buy-Sell Price and immediately
thereafter the LLC paid all liabilities and obligations (other than unknown
contingencies) of the LLC and distributed the net proceeds to each Member in
accordance with Article IX, or (ii) to purchase the Interest of the Electing
Member for the amount the Electing Member would be entitled to receive if the
LLC sold all of its assets for the Buy-Sell Price and immediately thereafter the
LLC paid all liabilities and obligations (other than unknown contingencies) of
the LLC and distributed the net proceeds to each Member in accordance with
Article IX. If the Notice Member fails to exercise either of its options within
such 30-day period, the Notice Member shall be conclusively deemed to have
elected to sell its Interest to the Electing Member.
(c) The Member obligated to purchase the Interest of the other Member
under this Section 5.5 shall set a closing date not later than 120 days after
the date of the exercise or expiration of the option described in paragraph (b)
above. The closing shall take place on such closing date at the office of the
LLC's attorneys or at such other location as may be agreed upon
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by the Members. At the closing, the Members shall execute and deliver such
instruments of conveyance and transfer as may be reasonably required to effect
the purchase and the selling Member shall be required to execute and deliver a
carbon fiber purchase agreement with the LLC pursuant to the terms and
conditions of a Supply Agreement substantially in the form of Exhibit G attached
hereto. The purchasing Member shall pay the purchase price in immediately
available funds and the selling Member shall transfer its interest at the
closing free and clear of all liens, claims and encumbrances. After a purchase
pursuant to this Section 5.5, the purchasing Member and the LLC shall indemnify
and hold harmless the selling Member and its officers, directors and Affiliates
for any liabilities and obligations that the LLC has incurred prior to such
purchase or will incur after such purchase, it being understood that the price
paid by the purchasing Member shall have taken into consideration all such
liabilities and obligations.
SECTION 5.6 Limitation of Liability.
(a) Notwithstanding any other provision to the contrary contained in this
Agreement, no Manager or Officer shall be liable, responsible, or accountable in
damages or otherwise to the LLC or to any Member or assignee of a Member for any
loss, damage, cost, liability, or expense incurred by reason of or caused by any
act or omission performed or omitted by such Manager, whether alleged to be
based upon or arising from errors in judgment, negligence, gross negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the Manager knew at
the time of the acts or omissions were clearly in conflict with the interests of
the LLC or criminal, (ii) any transaction from which the Manager derived an
improper personal benefit, or (iii) a willful breach of this Agreement or
intentional misconduct or fraud. Without limiting the foregoing, no Manager
shall in any event be liable for (A) the failure to take any action not
specifically required to be taken by the Manager under the terms of this
Agreement, (B) any action or omission taken or suffered by any other Manager, or
(C) any mistake, misconduct, negligence, dishonesty or bad faith on the part of
any employee or other agent of the LLC appointed by such Manager in good faith.
(b) Any Manager may consult with legal counsel selected by it, and any act
or omission suffered or taken by it on behalf of the LLC or in furtherance of
the interests of the LLC in good faith reliance upon and in accordance with the
prior written advice of such counsel shall be full justification for any such
act or omission, and the Manager shall be fully protected in so acting or
omitting to act, provided that if it is ultimately determined that such action
was a breach of this Agreement or results in the improper receipt, directly or
indirectly, of personal benefit to such Manager, the Manager shall be
accountable to the Members for such action or omission notwithstanding such
prior legal advice.
(c) The Managers may, but are not required to, provide for the limitation
of liability of Persons to whom the Managers delegate management authority,
which limitation of liability must be in writing in order to be effective.
SECTION 5.7 Indemnification. The provisions regarding the indemnification
of Members, Managers and Officers are set forth in the Indemnification Exhibit
attached hereto as Exhibit E.
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SECTION 5.8 Confidentiality.
(a) The LLC and the Members each acknowledges the confidential and
proprietary nature of the other parties' Confidential Information (as defined
below) and agrees to maintain the confidentiality thereof in accordance with the
terms of this Agreement. As used herein, "Confidential Information" means and
includes confidential and proprietary information of any kind in any format
disclosed to a party, including, but not limited to (a) trade secrets concerning
the business and affairs of the disclosing party, know-how, formula, processes,
research and development information, customer or vendor lists, price lists or
methods for establishing pricing, market studies, technologies and processes and
(b) other information concerning the business and affairs of the disclosing
party, including financial information, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, information
concerning key personnel, personnel training techniques and materials and
business plans. Except as expressly contemplated hereby (including in Section
1.7), the LLC and each of the Members hereby agree not to disclose or use any
such Confidential Information of any other disclosing party, whether received by
virtue of the relationship contemplated by this Agreement, any Supply Agreement
between the LLC and a Member or its Affiliate, the Transition Services Agreement
or otherwise, and the LLC and each of the Members hereby agree to use any
Confidential Information of any other party received from such disclosing party
only for the purposes contemplated by such disclosure and in furtherance of the
objectives of the relationship in the context of which such disclosure was made,
but for no other purposes. Nothing in this Section 5.8 shall restrict a Member
or its Affiliates from supplying specifications and other information (including
sources of raw materials) to any third party with respect to any carbon fiber it
purchases from such third party, as long as such purchase is not prohibited by
the Supply Agreement then in effect between such Member (or its Affiliate) and
the LLC. The receiving party shall not obtain any intellectual property rights
to the Confidential Information of any disclosing party as a result of any
disclosure protected hereby, except to the extent otherwise set forth in Section
1.7 hereof. All Confidential Information in a written or digital format shall be
retained by the receiving party in a secure place with access limited to only
those employees or agents who need access to such information to accomplish any
approved purposes, who are informed by the receiving party of the confidential
nature of such information and who are bound by a confidentiality obligation
consistent with the terms hereof. All Confidential Information shall remain the
property of the disclosing party, subject to the license thereof pursuant to the
terms of Section 1.7 hereof. Confidential Information shall not be reproduced in
any form except as required to accomplish any approved purposes. All
Confidential Information, including all copies and summaries thereof, shall be,
at the option of and as directed by the disclosing party, returned to the
disclosing party or destroyed by the receiving party upon the expiration of the
relationship in the context of which such disclosure was made to the extent such
information is not reasonably necessary for the receiving party to enjoy the
benefit of any License to which it is entitled pursuant to Section 1.7.
(b) Notwithstanding the above, any receiving party shall have no
obligation to maintain the confidentiality of Confidential Information which:
(i) has been or subsequent to the date hereof is published or is now or
subsequent to the date hereof otherwise in the public domain through no fault of
the receiving party; (ii) prior to disclosure by the disclosing party is within
the legitimate possession of the receiving party without obligation of
confidentiality,
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(iii) subsequent to disclosure hereunder, is received from a third party that,
to the receiving party's knowledge, has rights therein which do not restrict the
ability of such third party to disseminate such Confidential Information and
without notice of any restriction against its further disclosure; (iv) is
independently developed by the receiving party without breach of any obligation
of confidentiality through parties who have not had, either directly or
indirectly, access to or knowledge of such Confidential Information; (v) is
disclosed with the written approval of the disclosing party; or (vi) according
to the advice of the receiving party's outside counsel, is obligated to be
produced under order of a court of competent jurisdiction or by specific
direction of any regulatory authority having jurisdiction; provided, however,
that the receiving party shall give prompt notice of such order or direction to
the disclosing party, shall consult with the disclosing party on the
advisability of taking steps to resist or narrow such order or direction and, if
disclosure is required or deemed advisable, cooperate with the disclosing party
in any reasonable attempt that it may make to obtain an order or other reliable
assurance that confidential treatment will be accorded to designated portions of
such Confidential Information.
(c) The LLC and the Members hereby acknowledge that damages which may
result from a breach of the confidentiality obligations set forth herein may be
difficult to ascertain. Accordingly, without limiting any other rights or
remedies at law or in equity which they may have against each other, upon a
breach of the confidentiality obligations set forth herein, the parties agree
that a temporary restraining order, a preliminary or permanent injunction or a
decree of specific performance may be sought against any party receiving
Confidential Information from a disclosing party hereunder to protect its rights
hereunder. In the event of a breach of these confidentiality obligations, the
non-breaching party shall be entitled to receive promptly from the breaching
party a reimbursement of all of the non-breaching parties' reasonable attorneys'
fees, expenses and court costs incurred in connection with the enforcement of
its rights under this Section 5.8.
(d) Notwithstanding anything in this Agreement to the contrary, (i) a
Member's obligations under this Section 5.8 with respect to Confidential
Information of the LLC shall terminate upon such Member's acquisition of all of
the Interests, but such Member shall continue to be bound by this Section 5.8
indefinitely with respect to Confidential Information of the other Member, (ii)
a Member that Transfers its Interest shall continue to be bound by this Section
5.8 indefinitely, and (iii) the provisions of this Section 5.8 cannot be amended
with respect to any party's rights or obligations without the written consent of
such Person.
SECTION 5.9 Nonsolicitation; Noncompetition.
(a) Nonsolicitation of Employees and Customers. [Material omitted and
filed separately with the SEC pursuant to a request for confidential treatment].
(b) Covenant Not to Compete. [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
(c) Limited Exception to Nonsolicitation; Noncompetition. [Material
omitted and filed separately with the SEC pursuant to a request for confidential
treatment].
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(d) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment].
(e) Each Member hereby acknowledges that a breach by a Member of any of
the provisions of this Section 5.9 may cause irreparable damage to the LLC
incapable of measurement and that the remedy at law for such breach may be
inadequate to compensate the LLC for its losses in connection therewith.
Therefore, in the event of any such breach, the LLC, in addition to any other
remedies available to it at law, in equity or otherwise, shall be entitled, at
its option, to seek a temporary restraining order and preliminary and permanent
injunctions restraining a Member from breaching or continuing any breach of any
of the provisions of this Section 5.9. A breaching Member shall be liable for
any and all reasonable attorneys' fees, expenses and court costs incurred by the
LLC in connection with the successful enforcement of its rights hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, (i) a
Member's obligations under this Section 5.9 shall terminate upon such Member's
acquisition of all of the Interests, (ii) a Member that Transfers its Interest
shall continue to be bound by this Section 5.9 (excluding 5.9(c) in the case
where SGL has Transferred its Interest and is no longer a Member of the LLC) for
a period of five (5) years after such Transfer, and (iii) the provisions of this
Section 5.9 cannot be amended with respect to any Member's obligations without
the written consent of such Member.
ARTICLE VI
MANAGER MEETINGS
SECTION 6.1 Actual Meetings.
(a) The Board shall meet at least quarterly (unless and until the Board
determines that meetings are desired more or less frequently). The Secretary
shall schedule the quarterly meetings. Meetings of the Board may be called by
AMTC or SGL by notice to the Manager designees of the other party setting forth
the date and time of the meeting, the nature of the business to be transacted,
and unless the meeting is a conference call meeting as provided in Subsection
(d) below, the place of the meeting.
Notice of any meeting shall be given pursuant to Section 11.1 below to all
Managers not less than three (3) business days nor more than thirty (30) days
prior to the meeting. Notice of any meeting of the Board shall be deemed to have
been waived by attendance at the meeting, unless the Manager attends the meeting
solely for the purpose of objecting to notice and so objects at the beginning of
the meeting. Managers may attend and vote in person or by proxy at such meeting,
and the LLC shall make reasonable arrangements to permit Managers to attend and
vote at meetings by telephone. Whenever the vote or consent of Managers is
permitted or required under this Agreement, such vote or consent may be given at
a meeting of the Board or may be given in accordance with the procedure
prescribed in the following Section for written consent to action in lieu of
actual meetings. Except as otherwise provided in this Agreement, the vote,
consent, approval or ratification of a majority of the Managers shall be
required in order to constitute Board action.
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(b) At the beginning of any meeting of the Board, the Managers shall elect
by a majority of those Managers present a Manager to preside over the meeting,
and the meeting shall be conducted pursuant to such rules of order as the
presiding Manager deems appropriate. The presiding Manager shall cause the
Secretary to keep a record of the meeting and of all actions taken, which shall
be filed with the LLC's permanent records.
(c) Meetings may be held via conference call with no physical location
designated as the place of the meeting, provided that all Managers and other
persons on the conference call can hear and speak to one another and notice of
the conference call is given or waived as required in the case of a meeting
called for a specific place. The Secretary shall be responsible for arranging
the conference call and shall specify in the notice of the conference call
meeting the method by which the Members can participate in the conference call.
SECTION 6.2 Written Consent to Action in Lieu of Actual Meetings. Any
action that is permitted or required to be taken by the Board, may be taken or
ratified by written consent setting forth the specific action to be taken and
sent to all Managers and signed by that number of Managers required in order to
take the specified action.
ARTICLE VII
TRANSFER OF INTERESTS
SECTION 7.1 In General. Except as otherwise set forth in this Article, a
Member shall not Transfer all or any portion of his Interest. Any Transfer which
does not comply with the provisions of this Article shall be void. Each Member
hereby represents and warrants to the other Member that the Interest of the
Member making this representation has not been pledged to secure any debt of
such Member or such Member's Affiliates and that such Interest is free of all
liens, claims and encumbrances, with the exception of the security interest
granted by AMTC to Foothill Capital Corporation under the Credit Agreement.
SECTION 7.2 Limited Exception For Sales, Assignments or Transfers. Except
as otherwise expressly set forth herein (including Section 7.7), and subject to
Section 7.4, all, but not less than all, of a Member's Interest may be
Transferred if each of the following conditions are satisfied:
(a) Prior Notice. At least 30 days prior to any proposed Transfer of an
Interest otherwise permitted pursuant to this Section, the Member proposing to
Transfer its Interest gives written notice of all the details thereof to the
Board, including the name of the proposed transferee, the date of the proposed
Transfer, the price or other consideration, if any, to be received, and a
complete description of all noncash consideration to be received.
(b) No Tax Termination. Except for Transfers contemplated under Section
7.6 below, such Transfer does not result in the tax termination of the LLC
within the meaning of Code ss.708(b).
(c) Assignment Documents. Such Member and its transferee execute,
acknowledge, and deliver to the LLC such instruments of transfer and assignment
with respect to such
22
transaction as are in form and substance reasonably satisfactory to the Board,
including, without limitation, the written agreement of the purchaser,
transferee or assignee to assume and be bound by all of the obligations of the
transferor under this Agreement.
(d) Securities Law Compliance. Either (i) Transfer is to the heirs,
devisees or legatees of a deceased Member; (ii) the LLC determines that the
Interests are not securities; (iii) the Interests are registered under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "1933 Act"), and any applicable state securities laws; or (iv) the LLC
determines that the sale, assignment or transfer qualifies for an exemption from
the registration requirements of the 1933 Act and any applicable state
securities laws. The LLC has no obligation or intention to register Interests
for resale under any federal or state securities laws or to take any action
which would make available any exemption from the registration requirements of
such laws.
(e) Tax-Exempt Transferee. Such Member certifies to the LLC that the
Transfer will not cause the application of the so-called tax-exempt leasing
rules in Code ss. 168(h), or similar rules, to the LLC, the LLC's property, or
the Members.
(f) Transfer Notification. Such Member provides the LLC with the
notification required by Code ss.6050K(c)(1).
(g) Transfer Fee. Except for Transfers contemplated under Section 7.6
below, such Member pays the LLC a transfer fee that is sufficient to pay all
reasonable expenses of the LLC in connection with such transaction.
(h) Board Consent. Except for Transfers contemplated under Sections 5.5,
5.9(c) or 7.6 the Board of Managers (acting by unanimous vote) shall have
consented in writing to the Transfer, provided that such consent shall not be
unreasonably withheld by any Manager.
Any attempted Transfer (other than a Transfer contemplated by Sections
5.5, 5.9(c), 7.6 or 7.7 hereof) with respect to which any of the above
conditions have not been satisfied shall be null and void, and the LLC shall not
recognize the attempted purchaser, assignee, or transferee for any purpose
whatsoever, and the Member attempting such sale, transfer or assignment shall
have breached this Agreement for which the LLC and the other Members shall have
all remedies available for breach of contract.
SECTION 7.3 Rights of Assignees. If a Transfer complies with the
provisions of the preceding Section, but the Person acquiring such Interest is
not admitted as a Member pursuant to the following Section or Section 7.7, such
Person shall become an assignee with respect to such Interest.
An assignee with respect to an Interest is entitled only to receive
distributions and allocations with respect to such Interest as set forth in this
Agreement, and shall have no other rights, benefits or authority of a Member
under this Agreement or the Act, including without limitation no right to
receive notices to which Members are entitled under this Agreement, no right to
vote, no right to inspect the books or records of the LLC, no right to bring
derivative
23
actions on behalf of the LLC, no right to designate Managers and no other rights
of a Member under the Act or this Agreement; provided, however, the Interest of
an assignee shall be subject to all of the restrictions, obligations and
limitations under this Agreement and the Act, including without limitation the
restrictions on transfer of Interests contained in this Article.
SECTION 7.4 Admission of Assignees as Members. Subject to Section 7.7, no
Person taking or acquiring, by whatever means, the Interest of any Member in the
LLC shall be admitted as a Member without the consent of the Board (acting by
unanimous vote). The giving or withholding of such consent shall be in the sole,
absolute and arbitrary discretion of each Manager. In addition, no Person shall
be admitted as a Member unless such Person:
(a) Elects to become a Member by executing and delivering such Person's
written acceptance and adoption of the provisions of this Agreement;
(b) Executes, acknowledges, and delivers to the LLC such other instruments
as the LLC may deem necessary or advisable to effect the admission of such
Person as a Member; and
(c) Pays a transfer fee to the LLC in an amount sufficient to cover all
reasonable expenses of the LLC connected with the admission of such Person as a
Member.
The Members shall amend the Information Exhibit from time to time to
reflect the admission of Members pursuant to this Section.
SECTION 7.5 Distributions and Allocations With Respect to Transferred
Interests. If any Interest is transferred during any Fiscal Year in compliance
with the provisions of this Article, then (i) Profits, Losses, and all other
items attributable to the Interest for such period shall be divided and
allocated between the transferor and the transferee by taking into account their
varying interests during the period in accordance with Code Section 706(d),
using any conventions permitted by the Code and selected by the Managers; (ii)
all distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee;
and (iii) the transferee shall succeed to and assume the Capital Account,
Percentage Interest and Capital Contribution obligation amounts, and other
similar items of the transferor to the extent related to the transferred
Interest. Solely for purposes of making the allocations and distributions, the
LLC shall recognize such Transfer not later than the end of the calendar month
during which the LLC receives notice of such Transfer. If the LLC does not
receive a notice stating the date the Interest was transferred and such other
information as the LLC may reasonably require within 30 days after the end of
the Fiscal Year during which the Transfer occurs, then all of such items shall
be allocated, and all distributions shall be made, to the Person, who, according
to the books and records of the LLC on this last day of the Fiscal Year during
which the Transfer occurs, was the owner of the Interest. Neither the LLC nor
Manager shall incur any liability for making allocations and distributions in
accordance with the provisions of this Section, whether or not any Manager or
the LLC had knowledge of any Transfer of ownership of any Interest.
SECTION 7.6 Certain Permitted Transfers; Purchase Rights upon Change of
Control; Options to Purchase.
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(a) The Member with respect to which a Change of Control is expected to
occur (the "Selling Member") shall provide written notice of the proposed or
pending Change of Control to the other Member (the "Purchasing Member") promptly
upon the earlier of the date upon which the Change of Control occurs, the date
upon which the Change of Control is contracted for or the date upon which the
management of such Member believes that such Change of Control will likely
occur. The Purchasing Member shall have the option to acquire all, but not less
than all, of the Interest of the LLC held by the Selling Member, which option
may be exercised by written notice thereof at any time during the 90 day period
(the "Option Period") commencing on the date that the Purchasing Member shall
have received prior written notice thereof from the Selling Member (or, in the
event that the Purchasing Member never received written notice thereof in
accordance with the terms hereof, the Option Period shall commence on the date
that the Purchasing Member learns of the completed Change of Control with
respect to the Selling Member). The Option Period shall be extended in the event
any objections to the Audited Financial Statements for any relevant period
remain unresolved at the time the Option Period would otherwise end, such that
the Option Period shall end 30 days following final resolution pursuant to the
procedures set forth in Section 10.3 of all Manager objections to all Audited
Financial Statements covering any portion of the relevant period. If the
Purchasing Member exercises its option to purchase the Interest of the Selling
Member, then: (i) if the transaction which caused the Change of Control occurs
within thirty (30) months after the Effective Date of this Agreement or if the
transaction triggering the Change of Control occurs at any time after the
Effective Date of this Agreement and involves an acquisition or other
transaction by or with [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] or their respective
successors, assigns or Affiliates, or the appointment by any such entity, or the
acquisition of the right of appointment, of a member of the Board of Directors
of the Selling Member or Persons controlling such Selling Member, the purchase
price to be paid for the Interest of the Selling Member shall be the higher of
(x) the amount equal to the LLC's Net Book Value as of the last day of the month
immediately preceding the date upon which the Selling Member provides or was
required to provide notice of the Change of Control hereunder multiplied by the
percentage ownership interest in the LLC represented by the Interest then held
by the Selling Member or (y) the amount equal to the LLC's Net Book Value on the
Effective Date multiplied by the same percentage ownership interest used to make
the calculation in subsection (x) above; or (ii) if the transaction triggering
the relevant Change of Control occurs more than thirty (30) months after the
Effective Date of this Agreement and the Change of Control does not involve an
acquisition or other transaction by or with [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] or
their successors, assigns or Affiliates or the appointment by any such entity,
or the acquisition of the right of appointment, of a member of the Board of
Directors of the Selling Member or Persons controlling such Selling Member, then
the purchase price to be paid for the Selling Member's Interest shall be the
fair market value thereof as determined in accordance with the appraisal process
set forth in Exhibit I attached hereto (the "Option Price"). The exercise of the
option provided for in this Section 7.6(a) shall be conditioned upon the closing
of the Change of Control which was the subject of the applicable notice. The
Selling Member shall be required to sell its Interest to the purchasing Member
and shall be required to enter into a carbon fiber purchase agreement with the
LLC pursuant to the terms and conditions of a Supply Agreement substantially in
the form of Exhibit G attached hereto.
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(b) The closing of the purchase of any Interest pursuant to Section 7.6(a)
shall occur at the offices of the LLC's attorneys on the twentieth business day
after the later of the date of exercise of the option to purchase or the date of
occurrence of a Change of Control). The entire purchase price shall be delivered
at closing in cash or same day funds. At the closing, each selling Member shall
deliver to the purchaser of the Interest an executed assignment of the subject
Interest and the requisite Supply and Noncompetition Agreements. Both parties
shall also execute and deliver such other documents as may be reasonably
requested by the other party. Any Member selling its Interest pursuant to this
section shall deliver such Interest free and clear of all liens and encumbrances
and with the necessary rights and indicia of ownership. After a purchase
pursuant to this Section 7.6, the purchasing Member and the LLC shall indemnify
and hold harmless the selling Member and its officers, directors and Affiliates
for any liabilities and obligations that the LLC has incurred prior to such
purchase or will incur after such purchase, it being understood that the price
paid by the purchasing Member shall have taken into consideration all such
liabilities and obligations.
SECTION 7.7 Special Provisions regarding Encumbrances of Interests. Each
of the Members agrees not to permit an Encumbrance to exist upon their
respective Interest in favor of any third party (a "Lender") to which a Member
or an Affiliate of such Member has or may incur Indebtedness or which provides a
credit facility to such Member or an Affiliate of such Member (the "Encumbering
Member") unless: (a) the Encumbering Member gives prior written notice to the
other Member (the "Non-Encumbering Member") of the proposed Encumbrance at least
ten (10) business days before the anticipated closing of the Encumbrance
transaction; (b) on or prior to the closing of the Encumbrance transaction,
Lender executes and delivers to the Non-Encumbering Member an acknowledgment for
the benefit of the Non-Encumbering Member in a form reasonably satisfactory to
the Non-Encumbering Member which provides that if the Lender subsequently
forecloses on the encumbered Interest: (i) it will promptly provide notice of
such foreclosure to the Non-Encumbering Member; (ii) it will execute and thereby
agree to be bound by the terms and conditions of this Agreement, (iii) it will
promptly pay to the LLC and/or the Non-encumbering Member the aggregate amount
of any outstanding payment defaults or outstanding loan amounts, in each case
with all interest accrued thereon, then due to the LLC and/or the
Non-Encumbering Member or its Affiliates from the Encumbering Member under this
Agreement and all amounts due to the LLC from the Encumbering Member or its
Affiliates under the Supply Agreement between the Encumbering Member or its
Affiliates and the LLC entered into on the date hereof, and (iv) the foreclosure
by the Lender shall constitute a Change of Control under this Agreement thereby
triggering an option for the Non-Encumbering Member to purchase the Interest
that the Lender would then hold in the LLC. If the Lender forecloses on an
encumbered Interest and has satisfied the obligations set forth in this Section
7.7, the Encumbering Member shall be deemed to have validly Transferred its
entire Interest to the Lender, whether or not the conditions set forth in
Section 7.2 have been satisfied and the Lender shall be admitted as a Member,
whether or not the conditions set forth in Section 7.4 have been satisfied.
ARTICLE VIII
CESSATION OF MEMBERSHIP
26
SECTION 8.1 When Membership Ceases. A Person who is a Member shall cease
to be a Member only upon the occurrence of one of the following events:
(a) The Transfer as permitted under this Agreement of the Member's entire
Interest;
(b) The occurrence of an Event of Bankruptcy with respect to the Member;
or
(c) In the case of a Member that is a corporation, the dissolution of the
Member, or the revocation of its charter unless the charter is reinstated within
30 days of the corporation's actual notice of the revocation; provided, however,
Section 8.2 below shall apply with respect to the winding up and liquidation of
the corporation.
A Member is not entitled to withdraw voluntarily from the LLC.
SECTION 8.2 Dissolved Members. If a Member is dissolved, the legal
representative or successor of such Person may exercise the rights of the Member
pending liquidation. The distributees of such Person may become assignees of the
dissolved Member only upon compliance with the conditions of this Agreement.
SECTION 8.3 Consequences of Cessation of Membership. In the event a Person
ceases to be a Member as provided in Section 8.1 above, the Person (or the
Person's successor in interest) shall continue to be liable for all obligations
of the former Member to the LLC, including any obligation to make Capital
Contributions, and, with respect to any Interest owned by such Person, shall be
an assignee with only the rights and subject to the restrictions, conditions and
limitations described in Section 7.3 above.
ARTICLE IX
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 9.1 Dissolution Triggers. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) December 31, 2099;
(b) The unanimous vote of the Board;
(c) The entry of a decree of judicial dissolution or the administrative
dissolution of the LLC as provided in the Act; or
(d) The sale of all or substantially all of the assets of the LLC.
SECTION 9.2 Winding Up. Upon a dissolution of the LLC, the Managers, or,
if there are no Managers, a court appointed liquidating trustee, shall take full
account of the LLC's assets and liabilities and wind up the affairs of the LLC.
The Persons charged with winding up the LLC shall settle and close the LLC's
business, and dispose of and convey the LLC's noncash assets as promptly as
reasonably possible following dissolution as is consistent with obtaining the
fair market value for the LLC's assets.
27
SECTION 9.3 Liquidating Distributions. Upon the disposition of the LLC's
noncash assets, the LLC's cash and the proceeds from the disposition of the
LLC's noncash assets shall be distributed in the following order:
(a) To the LLC's creditors, including Members who are creditors, to the
extent otherwise permitted by law, in satisfaction of liabilities of the LLC
(whether by payment or the making of reasonable provision for payment thereof)
other than liabilities for which reasonable provision for payment has been made
and liabilities for distributions to Members as required pursuant to the terms
and conditions of this Agreement;
(b) To the Members who are creditors whose claims are not satisfied by
distributions pursuant to the preceding subsection;
(c) To the Members in accordance with their credit (i.e., positive)
Capital Account balances.
To the extent that the credit balances in the Capital Accounts, after
adjusting the Capital Accounts for all allocations of Profits and Losses and all
Regulatory Allocations and all distributions other than liquidating
distributions under this Subsection (c) (the "Tentative Liquidation Capital
Account") do not equal the amounts to be distributed pursuant to this Subsection
(c), then any provision in this Agreement to the contrary notwithstanding the
LLC shall allocate gross income or gross deductions for its last Fiscal Year to
the extent necessary in order that the Tentative Liquidation Capital Accounts
equal the distributions to be made to the Members pursuant to this Subsection
(c); and to the extent such gross income or gross deductions are not sufficient,
shall allocate gross income or gross deductions for the next preceding Fiscal
Year to the extent necessary in order that the Capital Accounts equal such
distributions; and to the extent such gross income or gross deductions are not
sufficient, shall allocate gross income or gross deductions for the second
preceding Fiscal Year, and so forth, with respect to all LLC taxable years for
which an amended return can be timely filed, to the extent necessary to cause
the Tentative Liquidation Capital Accounts to equal the amount of distribution
hereunder.
Distributions pursuant to Subsection (c) may be made to a trust
established by the Members or the LLC for the benefit of the Members for the
purposes of liquidating LLC assets, collecting amounts owed to the LLC, and
paying liabilities or obligations of the LLC. The assets of any such trust shall
be distributed to the Members from time to time, in the reasonable discretion of
the trustee of the liquidating trust, in the same proportions as the amount
distributed to such trust by the LLC would otherwise have been distributed to
the Members pursuant to this Agreement.
ARTICLE X
BOOKS AND RECORDS
SECTION 10.1 Books and Records; Internal Control. The LLC shall keep
adequate books and records at its principal place of business, which shall set
forth an accurate account of all transactions of the LLC as well as the other
information required by Section 18-305 of the Act, including the Agreed Value of
property or services contributed or to be contributed to the
28
capital of the LLC. Any Member or its designated representative shall have the
right, during normal business hours, to have access to and inspect and copy, at
the LLC's expense, the contents of such books or records. It is understood that
the Officers shall have primary responsibility for maintaining the books and
records and internal control and safeguarding of the LLC's assets. The Officers
shall cause the LLC to adopt such procedures and internal controls as may be
reasonably recommended by the Board or the LLC's independent certified public
accountants.
SECTION 10.2 Taxable Year; Accounting Methods; Audited Financial
Statements. The LLC shall use the Fiscal Year as its taxable year. The LLC shall
report its income for income tax purposes using the accrual method of
accounting. Within a reasonable period after the end of each Fiscal Year, each
Member shall be furnished with Audited Financial Statements containing a balance
sheet as of the end of such Fiscal Year, and a statement of cash flows and an
income statement for the Fiscal Year then ended, which financial statements
shall also include supplementary statements prepared pursuant to the Capital
Account accounting methods prescribed by this Agreement and Treasury Regulation
Section 1.704-1(b). The Audited Financial Statements shall be audited by a firm
of independent certified public accountants selected by the Board. The LLC shall
use its best efforts to provide such financial statements within 45 days after
the end of the Fiscal Year. The LLC shall also provide Audited Financial
Statements for the short periods from the Effective Date through the end of its
first Fiscal Year.
SECTION 10.3 Accuracy of Financial Statements. The Officers shall submit a
draft of the Audited Financial Statements to the Board prior to the issuance by
the LLC's independent accountants of their audit report with respect thereto,
which draft shall include the draft audit report. Any Manager may object to the
draft Audited Financial Statements provided such objection is made in writing to
the Board within 30 days after receipt of such draft Audited Financial
Statements by the Board and the objection details with specificity the items the
Manager believes are inaccurate. If a Manager makes a written objection within
such time, the Board in consultation with the LLC's firm of independent
certified public accountants shall attempt to resolve the objection. If the
Board fails to accept Audited Financial Statements by unanimous vote within 30
days after the Manager's objection shall be submitted to a nationally recognized
firm of certified public accountants for binding arbitration, which firm shall
be determined by the Board. If the Board cannot select such a firm, then one
shall be selected by lottery excluding any firm currently serving as the
auditors for either Member or the LLC.
SECTION 10.4 Tax Information. Tax information necessary to enable each
Member to prepare its state, federal, local and foreign income tax returns
relating to the Fiscal Year just ended shall be delivered to each Member by the
LLC by March 31 of each year and each Member shall complete its review and any
inquiries concerning such information in time for preparation by the Members of
their final tax returns in a timely manner.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Notices. Except as otherwise provided in this Agreement, any
notice, payment, demand, or communication required or permitted to be given by
any provision
29
of this Agreement shall be in writing and shall be delivered personally to the
Person or to an officer of the Person to whom the same is directed, or sent by
regular, registered, or certified United States mail, or by facsimile
transmission or by private mail or courier service, addressed as follows: if to
the LLC or any Manager elected by AMTC, to the principal office address of the
LLC, or to such other address as may be specified from time to time by notice to
the Members with a copy to all Members; if to a Member, to the address set forth
on the Information Exhibit attached hereto, or to such other address as the
Member may specify from time to time by notice to the Members; if to a Manager
elected by AMTC, to the address set forth for AMTC in the Information Exhibit
attached hereto; if to a Manager elected by SGL, to c/o if to a Manager elected
by SGL, to c/o Hitco Carbon Composites, Inc., 0000 Xxxx 000xx Xxxxxx, Xxxxxxx,
XX 00000, Attention: Xxxxxx X. Xxxxxxx, or to such other address as SGL may
specify from time to time by notice to the Members. Any such notice shall be
deemed to be delivered, given, and received for all purposes (i) as of the date
of actual receipt if delivered personally or if sent by regular mail, facsimile
transmission or by private mail or courier service, or (ii) two business days
after the date on which the same was deposited in a regularly-maintained
receptacle for the deposit of United States mail, if sent by registered or
certified United States mail, postage and charges prepaid, return receipt
requested.
SECTION 11.2 Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and Managers, and their
respective heirs, legatees, legal representatives, successors, transferees, and
assigns.
SECTION 11.3 Construction. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
The parties acknowledge that each party to this Agreement has shared equally in
the drafting and construction of this Agreement and, accordingly, no court
construing this Agreement shall construe it more strictly against one party
hereto than the other.
SECTION 11.4 Entire Agreement; No Oral Limited Liability Company
Agreements; Amendments to the Limited Liability Company Agreement. This
Agreement constitutes an amendment and restatement of the Original Limited
Liability Company Agreement and Contribution Agreement and is the entire
agreement among the Members with respect to the affairs of the LLC and the
conduct of its business, and supersedes all prior agreements and understandings,
whether oral or written. The LLC shall have no oral limited liability company
agreements. This Agreement may be amended only by a written amendment that
receives the vote of, and is signed by all of, the Members.
SECTION 11.5 Headings. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
30
SECTION 11.6 Severability. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Agreement.
SECTION 11.7 Additional Documents. Each Member and Manager, upon the
request of the LLC, agrees to perform all further acts and execute, acknowledge,
and deliver any documents that may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 11.8 Variation of Pronouns. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 11.9 Governing Law; Consent to Jurisdiction; Dispute Resolution.
The laws of the State of Delaware shall govern the validity of this Agreement,
the construction and interpretation of its terms, and organization and internal
affairs of the LLC and the limited liability of the Members. Each Member and
Manager hereby irrevocably consents to the personal jurisdiction of the courts
of the States of Delaware and California with respect to matters arising out of
or related to this Agreement. All disputes between or among any Members or
Managers arising out of or in any way connected with the LLC or with the
execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of the dispute resolution provisions
contained herein, but excluding objections to draft Audited Financial Statements
as described in Section 10.3 above) shall be solely and finally settled in
accordance with the Dispute Resolution Exhibit attached hereto (except to the
extent otherwise provided herein).
SECTION 11.10 Waiver of Action for Partition. Each of the Members
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the assets of the LLC.
SECTION 11.11 Counterpart Execution; Facsimile Execution. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members and Managers had signed the same document. Such executions may be
transmitted to the LLC and/or the other Members and Managers by facsimile and
such facsimile execution shall have the full force and effect of an original
signature. All fully executed counterparts, whether original executions or
facsimile executions or a combination, shall be construed together and shall
constitute one and the same agreement.
SECTION 11.12 Tax Matters Member. AMTC shall be the Tax Matters Member,
and as such shall have all power and authority with respect to the LLC and its
Members as a "tax matters partner" would have respect to a partnership and its
partners under the Code and in any similar capacity under state or local law. In
addition, the Tax Matters Member shall have the power and authority (i) to
extend the statute of limitations for assessment of tax deficiencies against
Members with respect to adjustments to the LLC's federal, state, or local tax
returns; and (ii) to represent the LLC and the Members before taxing authorities
or courts of competent jurisdiction in tax matters affecting the LLC and the
Members in their capacity as Members, and
31
to execute any agreements or other documents relating to or affecting such tax
matters, including agreements or other documents that bind the Members with
respect to such tax matters or otherwise affect the rights of the LLC or the
Members; provided, however, that the Tax Matters Member shall keep the LLC and
the other Members reasonably informed as to the status of any tax
investigations, audits, lawsuits or other judicial or administrative tax
proceedings and shall promptly copy all other Members on any correspondence to
or from the Internal Revenue Service or state, local or foreign taxing authority
relating to such proceedings. The Tax Matters Member shall continue to serve as
such until he is replaced by the majority vote of the Board.
SECTION 11.13 Time of the Essence. Time is of the essence with respect to
each and every term and provision of this Agreement.
SECTION 11.14 Exhibits; Schedules. The Exhibits and Schedules to this
Agreement, each of which are incorporated by reference, are:
EXHIBIT A: Amended and Restated Certificate of Formation
EXHIBIT B: Information Exhibit
EXHIBIT B-1: Closing Accounting Statements
EXHIBIT C: Glossary of Terms
EXHIBIT D: Regulatory Allocations Exhibit
EXHIBIT E: Indemnification Exhibit
EXHIBIT F: Dispute Resolution Exhibit
EXHIBIT G: Supply Agreement
EXHIBIT H: Transition Services Agreement
EXHIBIT I: Appraisal Process
EXHIBIT J: Variable Costs
IN WITNESS WHEREOF, the Members and Managers have executed this Agreement
on the following execution pages, to be effective as of the date described in
Article I.
32
EXECUTION PAGE
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC,
A DELAWARE LIMITED LIABILITY COMPANY
MEMBERS:
SGL CARBON FIBERS AND COMPOSITES, INC.,
a Nevada corporation
October 29, 1999 By:
------------------------ ----------------------------------
Date Executed Title: President
----------------------------------
ALDILA MATERIALS TECHNOLOGY CORP.,
a Delaware corporation
October 29, 1999 By:
------------------------ ----------------------------------
Date Executed Title: Vice President
----------------------------------
MANAGERS:
October 29, 1999
------------------------ -----------------------------------------
Date Executed Xxxxxx X. Xxxxxxx
October 29, 1999
------------------------ -----------------------------------------
Date Executed Xxxxx XxXxxxx
October 29, 1999
------------------------ -----------------------------------------
Date Executed Xxxx X. Xxxxxxx
October 29, 1999
------------------------ -----------------------------------------
Date Executed Xxxxx X. Xxxxxxxxx
EXECUTION PAGE
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
The undersigned parties are executing this Amended and Restated Limited
Liability Company Agreement for the sole purpose of acknowledging their
agreement to be bound by the terms and conditions of Sections 5.8 and 5.9 of
such Agreement.
ALDILA, INC.
By:
--------------------------------------
Title: Vice President
--------------------------------------
SGL TECHNIK GMBH
By:
--------------------------------------
Title: Director Finance and Accounting
--------------------------------------
EXHIBIT A
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
AMENDED AND RESTATED CERTIFICATE OF FORMATION
Amended and Restated
Certificate of Formation
of
AMTC LLC
a Delaware limited liability company
pursuant to sections 18-101, et. seq.
of the Delaware Limited Liability Company Act
The undersigned duly authorized person, desiring to amend and restate the
Certificate of Formation of AMTC LLC, a Delaware limited liability company,
pursuant to Section 18-208 of the Delaware Limited Liability Company Act, 6
Delaware code, Chapter 18, does hereby certify as follows:
1. The present name of the limited liability company is AMTC LLC.
2. The date of filing of the original Certificate of Formation is
August 19, 1999.
3. The provisions of the Certificate of Formation are deleted in their
entirety and the following provisions are inserted in place thereof:
"I. The name of the limited liability company is ___________ LLC.
II. The address of its registered office in the State of Delaware is
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx of New
Castle. The name of its registered agent for service of process in the
State of Delaware at such address is The Corporation Trust Company."
4. This Amended and Restated Certificate of Formation shall be effective
upon filing in the Office of the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has duly executed this Amended and
Restated Certificate of Formation on the ____ day of October, 1999 and is filing
the same in accordance with Section 18-208 of the Delaware Limited Liability
Company Act.
By:
---------------------------------------
---------------------------------------
Its:
------------------------------------
EXHIBIT B
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
INFORMATION EXHIBIT
CAPITAL ACCOUNTS
-------------------------------------------------
Income
Member Name and Notice Taxpayer Tax Basis Capital Percentage
Address ID No. (1) Accounts (2) Interest
------------------------------ ----------- ------------- ------------- ------------------
Aldila Materials Technology
Corp.
c/o Aldila, Inc.
00000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000-0000 00-0000000 $00,000,000.00 $00,000,000.00 50.00%
SGL Carbon Fibers and
Composites, Inc.
c/o Hitco Carbon Composites,
Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000 00-0000000 $00,000,000.00 $00,000,000.00 50.00%
(1) From Closing Accounting Statements to be attached as Exhibit B-1
(2) From Closing Accounting Statements to be attached as Exhibit B-1
EXHIBIT C
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
GLOSSARY OF TERMS
Many of the capitalized words and phrases used in this Agreement are
defined below. Some defined terms used in this Agreement are applicable to only
a particular Section of this Agreement or an Exhibit and are not listed below,
but are defined in the Section or Exhibit in which they are used.
"Act" shall mean the Delaware Limited Liability Company Act, as in effect
in Delaware and set forth at Title 6 xx.xx. 18-101 through 18-110 through
18-1109 (or any corresponding provisions of succeeding law).
"Adjusted Capital Account" means, with respect to any Member or assignee,
such Person's Capital Account (as defined below) as of the end of the relevant
Fiscal Year increased by any amounts which such Person is obligated to restore,
or is deemed to be obligated to restore, pursuant to the next to last sentences
of Treasury Regulations ss. 1.704-2(g)(1) (share of minimum gain) and
1.704-2(i)(5) (share of member nonrecourse debt minimum gain).
"Adjusted Taxable Income" shall mean, for any Tax Estimation Period, the
LLC's aggregate items of income or gain, less aggregate items of loss or
deduction, under the Code, except that (i) gain, less aggregate items of loss or
deduction, and/or loss from the sale or other disposition of all or
substantially all of the LLC's assets shall be excluded, and (ii) the effects of
the Section 743 Adjustment shall be excluded.
"Affiliate" shall mean, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person or (ii) any Person in which the specified Person or the specified
Person's Affiliates (as defined in subsection (i) only) holds 50% or more of the
outstanding equity interests.
"Agreed Value" shall mean with respect to any noncash asset of the LLC an
amount determined and adjusted in accordance with the following provisions:
(a) The initial Agreed Value of any noncash asset contributed to the
capital of the LLC by any Member shall be its gross fair market value, as agreed
to by the contributing Member and the LLC.
(b) The initial Agreed Value of any noncash asset acquired by the LLC
other than by contribution by a Member shall be its adjusted basis for federal
income tax purposes.
(c) The initial Agreed Values of all the LLC's noncash assets, regardless
of how those assets were acquired, shall be reduced by depreciation or
amortization, as the case may be, determined in accordance with the rules set
forth in Treasury Regulations ss. 1.704-1(b)(2)(iv)(f) and (g).
(d) The Agreed Values, as reduced by depreciation or amortization, of all
noncash assets of the LLC, regardless of how those assets were acquired, shall
be adjusted from time to time to equal their gross fair market values, as agreed
to by the Board, as of the following times:
(i) the acquisition of an Interest or an additional Interest in
the LLC by any new or existing Member in exchange for more
than a de minimis Capital Contribution; and
(ii) the distribution by the LLC of more than a de minimis amount
of money or other property as consideration for all or part of
an Interest in the LLC;
If, upon the occurrence of one of the events described in (i) or (ii)
above the Members do not agree in writing on the gross fair market values of the
LLC's assets, it shall be deemed that the fair market values of all the LLC's
assets equal their respective Agreed Values immediately prior to the occurrence
of the event and thus no adjustment to those values shall be made as a result of
such event.
"Agreement" shall mean this Amended and Restated Limited Liability Company
Agreement as amended from time to time.
"AMTC" shall mean Aldila Materials Technology Corp., a Delaware
corporation.
"Approved Annual Capital Expenditures Budget" shall mean, with respect to
each Fiscal Year of the LLC, the annual budget for the LLC's capital
expenditures for the existing Business and for expansions, as approved by the
Managers, including any revisions thereto.
"Approved Annual Operating Budget" shall mean, with respect to each Fiscal
Year of the LLC, the annual budget for the LLC's operations for the existing
Business and for expansions, as approved by the Managers, including any
revisions thereto.
"Approved Business Plan" shall mean the written, narrative statement of
the Managers' plans for the LLC's operations, finances, marketing, and capital
improvements for the existing Business and for expansions, as approved by the
Members, including any revisions thereto.
"Audited Financial Statements" shall mean the financial statements
prepared by the LLC's independent auditors. Such financial statements shall be
prepared on an annual basis unless otherwise required by this Agreement, shall
be prepared in accordance with GAAP
C-2
consistently applied and shall include supplementary statements prepared
pursuant to the Capital Account accounting methods prescribed by this Agreement
and Treasury Regulation Section 1.704-1(b).
"Board" shall mean the Board of Managers of the LLC.
"Business" shall mean the manufacture and sale of heavy tow continuous
carbon fibers manufactured from polyacrylonitrile precursor raw materials and
the provision of all goods and services which are extensions of or are closely
related or incidental to any of the foregoing, and any other businesses approved
by the unanimous vote of the Managers which are to be engaged in by the LLC.
"Capital Account" shall mean with respect to each Member or assignee an
account maintained and adjusted in accordance with the following provisions:
(a) Each Person's Capital Account shall be increased by such Person's
Capital Contributions, such Person's distributive share of Profits, any items in
the nature of income or gain that are allocated pursuant to the Regulatory
Allocations and the amount of any LLC liabilities that are assumed by such
Person or that are secured by LLC property distributed to such Person.
(b) Each Person's Capital Account shall be decreased by the amount of
cash and the Agreed Value of any LLC property distributed to such Person
pursuant to any provision of this Agreement, such Person's distributive share of
Losses, any items in the nature of loss or deduction that are allocated pursuant
to the Regulatory Allocations, and the amount of any liabilities of such Person
that are assumed by the LLC or that are secured by any property contributed by
such Person to the LLC.
In the event any Interest is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.
In the event the Agreed Values of the LLC assets are adjusted pursuant to
the definition of Agreed Value contained in this Agreement, the Capital Accounts
of all Members shall be adjusted simultaneously to reflect the aggregate
adjustments as if the LLC recognized gain or loss equal to the amount of such
aggregate adjustment.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations ss. 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such regulations.
"Capital Contribution" shall mean with respect to any Member, the amount
of money and the initial Agreed Value of any property (other than money)
contributed to the LLC with respect to the Interest of such Member.
C-3
"Certificate" shall mean the Amended and Restated Certificate of Formation
filed by the LLC pursuant to the Act together with any amendments thereto, a
copy of which is attached as Exhibit A.
"Change of Control" shall mean: (a) with respect to SGL, the issuance or
transfer (by operation of law, foreclosure or otherwise) of more than 50% of the
capital stock or other equity interests of SGL Technik GmbH or its successors or
assigns or of any of the capital stock of SGL, or a transfer (by operation of
law, foreclosure or otherwise) by SGL of its Interest, in any such case to any
Person who or which does not control, is not controlled by or is not under
common control with SGL Carbon AG or (b) with respect to AMTC, any transfer (by
operation of law, foreclosure or otherwise) by AMTC or its successors or assigns
of its Interest in the LLC to any Person which does not control, is not
controlled by or is not under common control with Aldila, Inc., (c) with respect
to AMTC, the issuance or transfer (by operation of law, foreclosure or
otherwise) by Aldila, Inc. or its successors or assigns of any of the capital
stock of AMTC or its successors or assigns to any Person which does not control,
is not controlled by or is not under common control with Aldila, Inc., (d) the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of Aldila, Inc. or AMTC or of SGL Carbon AG, SGL Technik GmbH
or SGL or their respective successors or assigns to any "person" or "group"
(with the meaning of Sections 13(b)(3) and 14(b)(2) of the Securities Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13-5(b)(1) under the Exchange Act) other than to any Person
who or which does not control, is not controlled by or is not under common
control with Aldila, Inc., AMTC, SGL Carbon AG, SGL Technik GmbH or SGL,
respectively, (e) the approval by the requisite shareholders of Aldila, Inc. or
of SGL Carbon AG or of their respective successors or assigns of a plan of
liquidation or statutory dissolution, unless existing stockholders "beneficially
own" (as defined in Rule 13b-3 under the Exchange Act) at least the same
percentage of voting power after the consummation of the plan as before or
otherwise retain the right or ability by voting power to control the Person that
acquires the proceeds of such liquidation or dissolution, (f) if [Material
omitted and filed separately with the SEC pursuant to a request for confidential
treatment] or their successors, assigns, Affiliates or any other Person acting
in concert with any of them becomes the "beneficial owner" of more than 20% of
the total voting power of all classes of voting stock of Aldila, Inc. or SGL
Carbon AG or of their respective successors or assigns and/or warrants or
options to acquire such voting stock, calculated on a fully diluted basis, or
appoints or acquires the right to appoint a member of Aldila, Inc.'s or AMTC's
or SGL's or their successors or assigns' Board of Directors or a member of SGL
Carbon AG's or SGL Technik GmbH's Executive Committee or (g) any other "person"
or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), becomes the "beneficial
owner" of more than 50% of the total voting power of all classes of the voting
stock of Aldila, Inc. or SGL Carbon AG or of their respective successors or
assigns and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis.
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"Closing Accounting Statements" shall mean the Closing Accounting
Statements as defined in Section 2.6(b) of the Member Interest Purchase
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor federal revenue law.
"Combined Effective Marginal Tax Rate" shall mean the highest single
effective rate (expressed as a percentage) of United States federal, state and
local income taxation applicable to a Member whose principal tax domicile is
within the United States determined as of the last day of each Tax Estimation
Period, giving effect to any limitation on the deductibility of state and local
taxes in computing United States federal taxable income, and assuming that such
Member is subject to the highest United States federal and highest state and
local marginal income tax rates then applicable in the jurisdictions in which
such Member is taxed.
"Default Rate" means a per annum rate of return on a specified principal
sum, compounded monthly, equal to the greater of (a) the Prime Rate plus 500
basis points, or (b) 15%, but in no event greater than the highest rate allowed
by law.
"Distributions" shall mean all distributions with respect to an Interest
pursuant to this Agreement (including tax distributions under Section 3.1 above)
from the Effective Date through the day prior to the day of closing of the
purchase of any Interest hereunder.
"Effective Date" shall mean the close of business on the date written in
the introductory paragraph of this Agreement.
"Encumbrance" shall mean any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income or exercise of any other attribute of ownership.
"Event of Bankruptcy" shall mean, with respect to any Person, the
occurrence any of the events set forth in Section 18-304 of the Act.
"Fiscal Year" shall mean, with respect to the first year of the LLC, the
period beginning upon the Effective Date and ending on the next December 31,
with respect to subsequent years of the LLC, the calendar year, and, with
respect to the last year of the LLC, the portion of the calendar year ending
with the date of the final liquidating distributions.
"Fixed Costs" shall mean [Material omitted and filed separately with the
SEC pursuant to a request for confidential treatment].
"GAAP" shall mean generally accepted accounting principles, rules and
procedures in the United States set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or any successor organization) that are applicable to the
circumstances as of the date of determination.
C-5
"Impasse" shall mean the failure of a Member's group of designees to the
Board to give their approval relative to any decision or action requiring such
approval which is set forth in the following subsections of Section 5.4(a): (i)
through (xi), (xiii), (xv), (xvi), (xvii), (xix), (xx) or (xxi), (xxv) or
(xxvi), after the completion of the portion of the dispute resolution process
described in Section 5.5(a).
"Indebtedness" shall mean (a) all indebtedness for borrowed money or for
the deferred purchase price of property or services, other than accounts payable
incurred in the ordinary course of business, (b) any other indebtedness which is
evidenced by a note, bond, debenture or similar instrument, (c) all obligations
under any financing leases, (d) all obligations in respect of banker's
acceptances, (e) all liabilities secured by (or for which the holder of such
liabilities has an existing right, contingent or otherwise, to be secured by)
any lien on any property owned by any person or entity even though such person
or entity has not assumed or otherwise become liable for the payment thereof,
other than Permitted Encumbrances (as defined in the Member Interest Purchase
Agreement), (f) all obligations under conditional sale or other title retention
agreements relating to property or assets acquired by such person or entity and
(g) any guarantee, reimbursement, counterindemnity or similar obligation
pursuant to which any person or entity guarantees, or in effect guarantees, any
indebtedness, liability, obligation, lease, dividend, or other obligation of any
other person or entity in any manner.
"Interest" shall mean all of the rights of each Member or assignee with
respect to the LLC created under this Agreement or under the Act. With respect
to any provision of this Agreement requiring the vote, approval, consent or
similar action by the Members or a group of Members with respect to any matter,
unless otherwise specified, reference to a majority (or a specified percentage)
in Interest of the Members or group thereof means Members whose (a) Percentage
Interests and (b) Capital Account balances constitute a majority (or specified
percentage) of the Percentage Interests and Capital Account balances of the
Members or group of Members, determined as the date of such vote, approval,
consent or action unless an earlier record date has been established for
determining the Members entitled to participate in such action, in which case
the determination shall be made as of the earlier record date.
"License" shall mean a royalty-free, perpetual (subject to termination as
set forth in Section 1.7), worldwide and unrestricted license to use the
Know-how being licensed, but never (except as set forth in Section 1.7(a)(iii))
to sublicense such Know-how without the consent of the person from whom the
license is obtained.
"LLC" shall mean [Carbon Fibers Technology LLC], a Delaware limited
liability company formed on August 19, 1999.
"Managers" shall refer collectively to the Persons designated as Managers
on the Information Exhibits and their successors until such Persons shall cease
to be Managers as provided herein.
C-6
"Members" shall refer collectively to the Persons listed on the
Information Exhibit as Members and to any other Persons who are admitted to the
LLC as Members or who become Members under the terms of this Agreement until
such Persons have ceased to be Members under the terms of this Agreement.
"Member" means any one of the Members.
"Member Interest Purchase Agreement" shall mean that certain Member
Interest Purchase Agreement dated October ___, 1999 among AMTC, SGL, SGL Technik
GmbH and Aldila, Inc.
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
"Net Book Value" shall mean an amount equal to the book value of the LLC's
assets reduced by the amount of the LLC's liabilities, each as determined in
accordance with GAAP by the LLC's independent certified accountants.
"Officers" shall mean the Chief Executive Officer, President, Vice
Presidents, Secretary, Treasurer, Assistant Secretaries and Assistant Treasurers
as selected by the Board.
"Option Period" shall have the meaning assigned to such term in Section
7.6(a).
"Option Price" shall have the meaning assigned to such term in Section
7.6(a).
"Percentage Interest" shall mean the percentage set forth opposite each
Member's name on the Information Exhibit in the column labeled "Percentage
Interest."
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"Prime Rate" as of a particular date shall mean the prime rate of interest
as published on that date in the Wall Street Journal, and generally defined
therein as "the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks." If the Wall Street Journal is not published on a
date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date on
which the Wall Street Journal was published.
"Profits and Losses" shall mean, for each Fiscal Year or other period, an
amount equal to the LLC's taxable income or loss for such year or period,
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the LLC that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses shall be added to
such taxable income or loss;
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(b) Any expenditures of the LLC described in Code ss. 705(a)(2)(B) or
treated as Code ss. 705(a)(2)(B) expenditures pursuant to Treasury Regulations
ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses, shall be subtracted from such taxable income or loss;
(c) Gain or loss resulting from dispositions of LLC assets shall be
computed by reference to the Agreed Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Agreed Value.
"Purchase Price" shall have the meaning assigned such term in the Member
Interest Purchase Agreement.
"Regulatory Allocations" shall mean those allocations of items of LLC
income, gain, loss or deduction set forth on the Regulatory Allocations Exhibit
and designed to enable the LLC to comply with the alternate test for economic
effect prescribed in Treasury Regulations ss. 1.704-1(b)(2)(ii)(d), and the
safe-harbor rules for allocations attributable to nonrecourse liabilities
prescribed in Treasury Regulations Section 1.704-2.
"Related Party" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), a spouse of any descendant, any ancestor, any trust 100% of the
beneficial interests of which are owned by such individuals or any of them, and
any corporation, association, partnership or limited liability company 100% of
the equity interests of which are owned by those above-described individuals or
trusts, (b) with respect to any trust, the owners of 100% of the beneficial
interests of such trust, and (c) with respect to any corporation, association,
partnership or limited liability company, the owners of 100% of the outstanding
equity interests in such entity.
"Section 704(c) Property" shall mean "Section 704(c) property" as defined
in Treasury Regulations ss. 1.704-3(a)(3), and shall include property treated as
Section 704(c) Property by virtue of regulations under Treasury Regulations ss.
1.704-1(b)(2)(iv)(f).
"SGL" shall mean SGL Carbon Fibers and Composites, Inc., a Nevada
corporation.
"Tax Estimation Periods" shall mean the periods for which estimates of
corporate federal income tax liability must be paid under the Code, provided,
that, the LLC's first Tax Estimation Period shall begin on the Effective Date of
this Agreement.
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
"Transfer" shall mean any sale, assignment, transfer, conveyance, pledge,
hypothecation, or other disposition, voluntarily or involuntarily, by operation
of law, with or without consideration, or otherwise (including, without
limitation, by way of intestacy, will, gift, bankruptcy, receivership, levy,
execution, charging order or other similar sale or seizure by legal process) of
all or any portion of any Interest in the LLC.
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"Treasury Regulations" shall mean the final and temporary income tax
regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Variable Costs" shall mean [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
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C-9
EXHIBIT D
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
REGULATORY ALLOCATIONS
This Exhibit contains special rules for the allocation of items of LLC
income, gain, loss and deduction that override the basic allocations of Profits
and Losses in Sections 4.1 and 4.2 of the Agreement to the extent necessary to
cause the overall allocations of items of LLC income, gain, loss and deduction
to have substantial economic effect pursuant to Treasury Regulations
ss.1.704-1(b) and shall be interpreted in light of that purpose. Subsection (a)
below contains special technical definitions. Subsections (b) through (h)
contain the Regulatory Allocations themselves. Subsections (i), (j) and (k) are
special rules applicable in applying the Regulatory Allocations.
(a) Definitions Applicable to Regulatory Allocations. For purposes of
the Agreement, the following terms shall have the meanings indicated:
(i) "LLC Minimum Gain" has the meaning of "partnership minimum
gain" set forth in Treasury Regulationsss. 1.704-2(d), and is
generally the aggregate gain the LLC would realize if it
disposed of its property subject to Nonrecourse Liabilities in
full satisfaction of each such liability, with such other
modifications as provided in Treasury
Regulations ss.1.704-2(d). In the case of Nonrecourse
Liabilities for which the creditor's recourse is not limited
to particular assets of the LLC, until such time as there is
regulatory guidance on the determination of minimum gain with
respect to such liabilities, all such liabilities of the LLC
shall be treated as a single liability and allocated to the
LLC's assets using any reasonable basis selected by the
Managers.
(ii) "Member Nonrecourse Deductions" shall mean losses, deductions
or Code ss. 705(a)(2)(B) expenditures attributable to Member
Nonrecourse Debt under the general principles applicable to
"partner nonrecourse deductions" set forth in Treasury
Regulations ss. 1.704-2(i)(2).
(iii) "Member Nonrecourse Debt" means any LLC liability with respect
to which one or more but not all of the Members or related
Persons to one or more but not all of the Members bears the
economic risk of loss within the meaning of Treasury
Regulations ss. 1.752-2 as a guarantor, lender or otherwise.
(iv) "Member Nonrecourse Debt Minimum Gain" shall mean the minimum
gain attributable to Member Nonrecourse Debt as determined
pursuant to Treasury Regulations ss. 1.704-2(i)(3). In the
case of Member Nonrecourse Debt for which the creditor's
recourse against the LLC is not limited to particular assets
of the LLC, until such time as there is regulatory guidance on
the determination of minimum gain with respect to such
liabilities, all such liabilities of the LLC shall be treated
as a single liability and allocated to the LLC's assets using
any reasonable basis selected by the Managers.
(v) "Nonrecourse Deductions" shall mean losses, deductions, or
Codess. 705(a)(2)(B) expenditures attributable to Nonrecourse
Liabilities (see Treasury Regulationsss. 1.704-2(b)(1)). The
amount of Nonrecourse Deductions for a Fiscal Year shall be
determined pursuant to Treasury Regulationsss.1.704-2(c), and
shall generally equal the net increase, if any, in the amount
of LLC Minimum Gain for that taxable year, determined
generally according to the provisions of Treasury
Regulationsss.1.704-2(d), reduced (but not below zero) by the
aggregate distributions during the year of proceeds of
Nonrecourse Liabilities that are allocable to an increase in
LLC Minimum Gain, with such other modifications as provided in
Treasury Regulationsss.1.704-2(c).
(vi) "Nonrecourse Liability" means any LLC liability (or portion
thereof) for which no Member bears the economic risk of loss
under Treasury Regulations ss. 1.752-2.
(vii) "Regulatory Allocations" shall mean allocations of Nonrecourse
Deductions provided in Paragraph (b) below, allocations of
Member Nonrecourse Deductions provided in Paragraph (c) below,
the minimum gain chargeback provided in Paragraph (d) below,
the member nonrecourse debt minimum gain chargeback provided
in Paragraph (e) below, the qualified income offset provided
in Paragraph (f) below, the gross income allocation provided
in Paragraph (g) below, and the curative allocations provided
in Paragraph (h) below.
(b) Nonrecourse Deductions. All Nonrecourse Deductions for any Fiscal
Year shall be allocated to the Members in accordance with their Percentage
Interests.
(c) Member Nonrecourse Deductions. All Member Nonrecourse Deductions for
any Fiscal Year shall be allocated to the Member who bears the economic risk of
loss under Treasury Regulations ss. 1.752-2 with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable.
(d) Minimum Gain Chargeback. If there is a net decrease in LLC Minimum
Gain for a Fiscal Year, each Member shall be allocated items of LLC income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Member's share of such net decrease
D-2
in LLC Minimum Gain, determined in accordance with Treasury Regulations ss.
1.704-2(g)(2) and the definition of LLC Minimum Gain set forth above. This
provision is intended to comply with the minimum gain chargeback requirement in
Treasury Regulations ss. 1.704-2(f) and shall be interpreted consistently
therewith.
(e) Member Nonrecourse Debt Minimum Gain Chargeback. If there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt for any Fiscal Year, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt as of
the beginning of the Fiscal Year, determined in accordance with Treasury
Regulations ss. 1.704-2(i)(5), shall be allocated items of LLC income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations xx.xx. 1.704-2(i)(4) and (5) and the definition of Member
Nonrecourse Debt Minimum Gain set forth above. This Paragraph is intended to
comply with the member nonrecourse debt minimum gain chargeback requirement in
Treasury Regulations ss. 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(f) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations xx.xx. 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of LLC income and
gain (consisting of a pro rata portion of each item of LLC income, including
gross income, and gain for such year) shall be allocated to such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, any deficit in such Member's Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as
possible.
(g) Gross Income Allocation. In the event any Member has a deficit in
its Adjusted Capital Account at the end of any Fiscal Year, each such Member
shall be allocated items of LLC gross income and gain, in the amount of such
Adjusted Capital Account deficit, as quickly as possible.
(h) Curative Allocations. When allocating Profits and Losses under
Sections 4.1 and 4.2, such allocations shall be made so as to offset any prior
allocations of gross income under Paragraph (g) above to the greatest extent
possible so that overall allocations of Profits and Losses shall be made as if
no such allocations of gross income occurred.
(i) Ordering. The allocations in this Exhibit to the extent they apply
shall be made before the allocations of Profits and Losses under Section 4.1 and
4.2 and in the order in which they appear above.
(j) Waiver of Minimum Gain Chargeback Provisions. If the Managers
determine that (i) either of the two minimum gain chargeback provisions
contained in this Exhibit would cause a distortion in the economic arrangement
among the Members, (ii) it is not expected that the LLC will have sufficient
other items of income and gain to correct that distortion, and (iii) the Members
have made Capital Contributions or received net income allocations that have
restored
D-3
any previous Nonrecourse Deductions or Member Nonrecourse Deductions, the
Managers shall have the authority, but not the obligation, after giving notice
to the Members, to request on behalf of the LLC the Internal Revenue Service to
waive the minimum gain chargeback or member nonrecourse debt minimum gain
chargeback requirements pursuant to Treasury Regulations xx.xx. 1.704-2(f)(4)
and 1.704-2(i)(4). The LLC shall pay the expenses (including attorneys' fees)
incurred to apply for the waiver. The Manager shall promptly copy all Members on
all correspondence to and from the Internal Revenue Service concerning the
requested waiver.
(k) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any LLC asset pursuant to Code ss. 734(b) or Code ss.
743(b) is required, pursuant to Treasury Regulations ss. 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Regulations.
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D-4
EXHIBIT E
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
INDEMNIFICATION EXHIBIT
(a) Rights to Indemnification.
(i) To the full extent permitted by law, the LLC shall indemnify
and save harmless each Member, Manager, and Officer and their
respective Affiliates, Related Parties, members, partners,
directors, officers, trustees, employees and agents
("Representatives") and Persons to whom the Managers have
delegated management authority pursuant to the Agreement
(collectively, the "Indemnitees") from and against any and all
claims, liabilities, damages, losses, costs and expenses
(including amounts paid in satisfaction of judgments,
compromises and settlements, as fines and penalties and legal
or other costs and expenses of investigating or defending
against any claim or alleged claim) of any nature whatsoever,
known or unknown, liquidated or unliquidated, that are
incurred by any Indemnitee and arise out of or in connection
with the business of the LLC or the performance by such
Indemnitee of any of the Person's responsibilities in
connection with the business of the LLC. The rights created by
this Exhibit shall continue as to an Indemnitee who has ceased
to be a Member, Manager, Officer, or Representative and shall
inure to the benefit of such Indemnitee's heirs, executors,
administrators, legal representatives, successors and assigns.
(ii) Without limiting any other provisions of this Exhibit, the LLC
shall pay or reimburse, and indemnify and hold harmless each
Indemnitee against, expenses incurred by such Person in
connection with his appearances as a witness or other
participation in a Proceeding involving or affecting the LLC
at a time when the Indemnitee is not a named defendant or
respondent in the Proceeding. For the purposes of this
Exhibit, a "Proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in
such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or
proceeding.
(iii) Notwithstanding any other provision of this Agreement, any
indemnification hereunder shall be provided out of and to the
extent of
LLC assets only, and no Member (or Related Party to, Affiliate
of, or Representative) shall have personal liability on
account thereof.
(b) Indemnification Procedures.
(i) Any Person seeking indemnification pursuant to this Exhibit
(including any Advancement of Expenses as provided in
Subsection (c) of this Exhibit) shall be subject to the
procedures of this Subsection (b) for indemnification.
(ii) Any indemnification under this Exhibit, unless ordered by a
court or arbitration panel, shall be made by the LLC only as
authorized in the specific case and only upon a determination
by a majority of the disinterested Managers (or by special
legal counsel pursuant to Subsection (v) below if so requested
by an Indemnitee) that (1) the Indemnitee acted in good faith,
(2) the Indemnitee reasonably believed that his or her conduct
was in the best interests of the LLC or at least not opposed
to the best interests of the LLC, and in the case of a
criminal Proceeding, had no cause to believe that its conduct
was criminal, and (3) Indemnitee's conduct did not constitute
intentional misconduct, fraud, or a knowing violation or
breach of this Agreement. The termination of any Proceeding by
judgment, order, settlement, conviction or on a plea of nolo
contendere or its equivalent shall not alone determine that
Indemnitee did not meet the requirements set forth in the
preceding sentence.
(iii) To claim indemnification under this Exhibit, Indemnitee shall
submit to the Board a written request for indemnification,
including therewith (or affirming that there will be made
available to the LLC) such documentation and information as is
reasonably available to Indemnitee and as the Board may
reasonably request to support such claims and enable the Board
to make or cause to be made the determinations hereinafter
provided for. If at the time of receipt of such request, the
LLC has in effect or is entitled to claim reimbursement for
such request under any policy of insurance covering such
claim, the LLC shall thereafter take proper action to cause
such insurers to accept coverage and thereafter shall take all
necessary action to cause such insurers to pay such claim to
or on behalf of Indemnitee.
(iv) Indemnitee and the LLC shall cooperate with each other and the
Person making the indemnification determination, including
providing upon reasonable advance request such information
that is not privileged or otherwise protected from disclosure
and which is reasonably necessary to such determination.
(v) Any determination required herein, if Indemnitee has so
requested, shall be made by "special legal counsel" selected
by the Indemnitee and reasonably
E-2
satisfactory to the Board. Any "special legal counsel"
selected to make any indemnification determination required
hereunder shall be a law firm, or member of a law firm,
experienced in matters of corporation, partnership and LLC law
and which neither presently is, nor in the past three years
has been, retained to represent the LLC, Indemnitee, an
Affiliate of or Related Party to the LLC or Indemnitee or any
other party to the Proceeding giving rise to the claim for
indemnification, and shall not include any Person who, under
prevailing applicable standards of professional conduct, would
have a conflict of interest with Indemnitee or the LLC or any
other party to the Proceeding.
(vi) An Indemnitee shall not be denied indemnification in whole or
in part under this Subsection (b) solely on the grounds that
it had an interest in the transaction with respect to which
the indemnification applies, if the transaction was fully
disclosed to the Board in advance and was otherwise permitted
to be carried out by the terms of the Agreement.
(vii) The indemnification provided in this Exhibit is solely for the
benefit of Indemnitees and shall not give rise to any right to
indemnification in favor of any other Persons.
(c) Advance Payment of Expenses. Expenses incurred by an Indemnitee in
defense or settlement of any claim that may be subject to a right of
indemnification hereunder may be advanced by the LLC prior to the final
disposition thereof (an "Advancement of Expense") upon receipt of a written
agreement by the Indemnitee to repay such amount to the extent that it shall be
determined ultimately that such Indemnitee is not entitled to be indemnified
hereunder.
(d) Right of Indemnitee to Commence Proceeding.
(i) If a claim under Subsection (a) of this Exhibit is not paid in
full by the LLC within 60 days after a written claim has been
received by the LLC, except in the case of a claim for an
Advancement of Expenses, in which case the applicable period
shall be 20 days, an Indemnitee may at any time thereafter
commence a Proceeding against the LLC pursuant to the dispute
resolution provisions set forth in the Dispute Resolution
Exhibit to recover the unpaid amount of the claim. If
successful in whole or in part in any such Proceeding, or in a
Proceeding brought by the LLC to recover any Advancement of
Expenses, the Indemnitee shall also be entitled to be paid the
expenses of prosecuting or defending such Proceeding.
(ii) In any Proceeding brought by an Indemnitee to enforce a right
to Indemnification hereunder (but not in a Proceeding brought
by Indemnitee to enforce a right to an Advancement of
Expenses) it shall be a defense that (and in any Proceeding by
the LLC to recover an Advancement of Expenses, the LLC shall
be entitled to recover such expenses upon a final adjudication
that) the Indemnitee has not met the requirements for
E-3
indemnification hereunder; provided, however, that in any such
Proceeding, neither (A) the failure of the Board to have made
the determination prior to the commencement of such Proceeding
that indemnification of Indemnitee is proper in the
circumstances, (B) an actual determination by the Board that
Indemnitee has not met such applicable requirements, nor (C)
termination of any Proceeding by any judgment, order,
settlement, or plea therein shall, of itself, create a
presumption that Indemnitee has not met such applicable legal
requirements or, in the case of such a Proceeding brought by
Indemnitee, be a defense to such a Proceeding.
(iii) In any Proceeding brought by Indemnitee to enforce a right to
indemnification or to an Advancement of Expenses hereunder, or
by the LLC to recover an Advancement of Expenses, the burden
of proving that Indemnitee is not entitled to be indemnified,
or to such Advancement or Expenses, under this Exhibit or
otherwise shall be on the LLC.
(iv) Without limiting the foregoing, any action commenced pursuant
to this Subsection (d) shall be conducted in all respect as a
de novo adjudication on the merits; provided, however, if a
determination shall have been made, or deemed to have been,
made pursuant to Subsection (b) above, that a Person is
entitled to indemnification, the LLC shall be bound thereby.
The LLC and all Indemnitees shall be precluded from asserting
in any action pursuant to this Subsection (d) that the
procedures and presumptions of this Exhibit are not valid,
binding and enforceable.
(e) Non-Exclusivity of Rights. The rights to indemnification and to the
Advancement of Expenses conferred in this Exhibit shall not be exclusive of any
other right which any Person may have or hereafter acquire under applicable law,
under any other agreement, pursuant to any vote of the Board or otherwise,
provided that the Indemnitee shall not be entitled to recover more than once for
the same damage.
(f) Insurance. The LLC shall be authorized to maintain insurance, in
reasonable amounts and with responsible carriers, at the LLC's expense, to
insure any amounts indemnifiable hereunder as well as to protect the Indemnitees
or any employee or agent of the LLC or another enterprise against any expense,
liability or loss of the kind referred to in this Exhibit, whether or not the
LLC would have the power to indemnify such Person against such expense,
liability or loss under the applicable law.
(g) Contribution by LLC. The LLC hereby agrees that, in the event that
the indemnification provided for in this Exhibit is for any reason finally
judicially determined to be unavailable, the LLC shall contribute to the payment
of any and all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA or other excise taxes or penalties, and amounts paid in
settlement) in such proportion as is appropriate to reflect the relative fault
of the LLC and the Indemnitee with respect to such expenses, liability and loss.
E-4
(h) Other Indemnification Sources. Any Indemnitees entitled to
indemnification from the LLC hereunder shall first seek recovery under any
insurance policies by which such Indemnitee is covered and shall obtain the
written consent of the Board prior to entering into any compromise or settlement
or plea of nolo contendere that would result in an obligation of the LLC to
indemnify such Indemnitee. If the amounts in respect of which such
indemnification is sought arise out of the conduct of the business and affairs
of the LLC and also of any other Person for which the Person entitled to
indemnification from the LLC hereunder was then acting in a similar capacity,
the amount of the indemnification provided by the LLC shall be limited to the
LLC's proportionate share thereof as determined in good faith by the Members.
(i) Survival. The provisions of this Exhibit shall survive any
termination or dissolution of the LLC.
[THE REMAINDER OF THIS PAGE INTENTIONALLY HAS BEEN LEFT BLANK.]
E-5
EXHIBIT F
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
DISPUTE RESOLUTION EXHIBIT
(a) Mandatory Arbitration. Except to the extent disputes are to be
otherwise resolved pursuant to Section 5.5 or as otherwise provided for herein,
all disputes between or among any Members or Managers, including without
limitation any disputes for which a derivative suit could otherwise be brought
pursuant to the Act, arising out of or in connection with the interpretation and
performance of this Agreement (including the validity, scope and enforceability
of this arbitration provision) shall be solely and finally settled by a board of
arbitrators consisting of either one arbitrator or three arbitrators, as set
forth below (the term "Arbitrators" shall refer to the board of arbitrators,
whether it consists of one or three members). The arbitration proceedings shall
be held in Los Angeles, California, and except as otherwise may be provided in
this Exhibit, the arbitration proceedings shall be conducted in accordance with
the Commercial Arbitration Rules (the "AAA Rules") of the American Arbitration
Association (the "AAA").
(b) Arbitration Notice. If a Member or Members determine to submit a
dispute for arbitration pursuant to this Exhibit, such Member(s) shall furnish
the other Members with a dated, written statement (the "Arbitration Notice")
indicating (i) such Member's intent to commence arbitration proceedings, (ii)
the nature, with reasonable detail, of the dispute and (iii) the remedy or
remedies such Member will seek.
(c) Selection of Sole Arbitrator. Within ten (10) days of the date of
the Arbitration Notice, the Member or Members commencing the arbitration
(collectively, the "Petitioner") and the party with whom the Petitioner has its
dispute (collectively, the "Respondent") shall attempt to agree on and then
select one neutral arbitrator (the "Sole Arbitrator"). A "neutral" arbitrator
shall be a Person who would not be subject to disqualification under rule No. 19
of the AAA Rules.
(d) Arbitration Panel. If, within such ten (10) day period, the
Petitioner and Respondent are unable to agree upon a Sole Arbitrator, each of
them shall have five (5) business days (following the expiration of the ten (10)
day period) to select (and provide written notice of such selection to the other
Members and the LLC) a qualifying arbitrator. A "qualifying" arbitrator is a
Person who is not (i) an affiliate of either the Petitioner or Respondent or
(ii) counsel to any such Person at such time. If either the Petitioner or
Respondent fails to select a qualifying arbitrator or provide such notice within
the five (5) day period, the AAA shall have the right to make such selection.
(Such qualifying arbitrators hereafter may be referred to, respectively, as the
"First Arbitrator" and the "Second Arbitrator.") Within ten (10) days
following their selection, the First and Second Arbitrator shall select (and
provide written notice to the Members and the LLC of such selection) a third
arbitrator (the "Third Arbitrator") from a list of members of the AAA's National
Panel of Commercial Arbitrators. The Third Arbitrator must be "neutral" as that
term is defined above. Notwithstanding the foregoing, if a dispute involves more
than two Members, all proceedings shall be conducted before a Sole Arbitrator,
who shall be selected by the AAA if the Members are unable to agree upon such
Sole Arbitrator within the ten (10) day period mentioned above.
(e) Discovery Requests. At any time within forty (40) days after the
date of the Arbitration Notice, the Petitioner and Respondent can make discovery
requests of the other (including, but not limited to, requests for delivery of
documents, production of witnesses for testimony and delivery of interrogatory
responses). The recipient of a discovery request shall have ten (10) days after
the receipt of such request to object to any or all portions of such request and
make an application to the Arbitrators to limit the scope of such discovery
request, and shall respond to any portions of such request not so objected to
within twenty (20) days of the receipt of such request. All objections shall be
in writing and shall indicate the reasons for such objections. Within five (5)
business days after the end of the period for the submission by the requested
party of an application to limit the discovery request, the Arbitrators shall
grant or deny such discovery request, in whole or in part, to the extent the
Arbitrators determine such discovery is or is not, as the case may be,
reasonably necessary to enable the requesting party to obtain information
relevant to the dispute without unreasonably burdening the requested party. The
requested party shall comply with a discovery request granted by the Arbitrators
within ten (10) business days after such discovery request is granted, or within
such longer period as the Arbitrators may determine upon application of the
requested party for extension thereof for reasonable cause. Neither party shall
be permitted to make more than one application for discovery to the Arbitrators.
All depositions shall be taken in the city in which the Person being deposed
resides or has its principal place of business, unless otherwise agreed by the
parties. The Arbitrators are not authorized to subpoena documents or perform
independent investigations.
(f) Timing of Hearings. Hearings must commence no later than ninety (90)
days following the date of the Arbitration Notice and such hearings shall be
conducted for no more than five (5) business days.
(g) Format of Hearings. Each of the Petitioner and the Respondent shall
submit a brief, outlining such party's claim for relief or defense to any claim,
to the other and to the Arbitrators on or before the tenth (10th) day following
the date of the last hearing. Reply briefs must be exchanged and submitted to
the Arbitrators on or before the twentieth (20th) day following the date of the
last hearing. The final decision of the Arbitrators is due on or before the
thirtieth (30th) day following the date of the last hearing. The Arbitrators
shall choose the form of final decision that, in their judgment, is most
consistent with the terms of this Agreement and the intent of the Members, as
supported by evidence presented by the Petitioner and Respondent in the
arbitration proceeding or, if the subject matter of the dispute is not clearly
addressed in or determinable under this Agreement, that, in their opinion, would
be most fair to the Petitioner and Respondent under the arbitration. The
Arbitrators shall not be required to provide reasons for their decision.
F-2
(h) Fees and Expenses. The fees of the First and Second Arbitrators
shall be borne by the Petitioner and Respondent, respectively. All other
expenses of the arbitration shall be shared equally by the Petitioner and
Respondent in accordance with the AAA Rules.
(i) Arbitrators' Discretion. The foregoing time periods and procedural
steps may be modified or extended by the Arbitrators in their discretion to the
extent they deem necessary to prevent fundamental unfairness; provided that at
all times the Arbitrators shall be mindful of the Members' desire for the most
expeditious possible resolution of the Members' disputes; and provided, further,
that a final decision of the Arbitrators shall be rendered within 120 days of
the Arbitration Notice.
(j) Enforceability. To the extent permissible under applicable law, the
Members agree that the award of the Arbitrators shall be final and shall not be
subject to judicial review. Judgment on the arbitration award may be entered and
enforced in any court having jurisdiction over the parties or their assets. It
is the intent of the parties that the arbitration provisions hereof be enforced
to the fullest extent permitted by applicable law, including the Federal
Arbitration Act, 9 U.S.C. ss. 2.
(k) Injunctive Relief. Nothing contained in this Exhibit shall prevent a
Member from seeking injunctive relief or require arbitration of any issue for
which injunctive relief is sought by either party hereto.
(l) Members to Include Managers. For purposes of this Exhibit only, any
reference to a Member or Members shall also be defined to include Managers.
F-3
EXHIBIT G
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
[POST-BUYOUT]
SUPPLY AGREEMENT
Note: This form of Supply Agreement will be executed by a selling Member
in accordance with the terms of the LLC Agreement. The actual form of this
Supply Agreement executed by a selling Member will depend in part upon whether
the selling Member is AMTC or SGL. For that reason, certain clauses in this form
are bracketed to indicate applicability to either, but not both, of AMTC (or, as
applicable, Aldila Golf Corp.) or SGL. In cases where it is not apparent to whom
the bracketed clause should apply, the bracketed clause is followed by either
[AMTC] or [SGL] to indicate to which Member the clause would apply.
THIS SUPPLY AGREEMENT (this "Agreement") is made and entered into as of
this ___ day of __________, ____, by and between [AMTC] [SGL], a ______________
corporation ("Purchaser," or sometimes referred to herein as "[AMTC] [SGL]"),
and ______________ LLC, a Delaware limited liability company ("Supplier").
RECITALS:
A. Pursuant to the Member Interest Purchase Agreement dated as of October
___, 1999 (the "Purchase Agreement") by and among SGL Carbon Fibers and
Composites, Inc., a Nevada corporation ("SGL"), Aldila Materials Technology
Corp., a Delaware corporation ("AMTC"), Aldila, Inc., a Delaware corporation
("Aldila"), and SGL Technik GmbH, a German limited liability company ("SGL's
Parent"), SGL Carbon Fibers acquired from AMTC a 50% member interest in
Supplier.
B. Pursuant to the Purchase Agreement and in connection with the closing
of the transaction contemplated thereby, (i) SGL and AMTC entered into the
Amended and Restated Limited Liability Company Agreement (the "LLC Agreement")
and (ii) [AMTC] [SGL] and Supplier entered into the Supply Agreement dated
October ____, 1999 (the "Original Supply Agreement").
C. Pursuant to the occurrence of the events specified in Section
[2.2(d)/5.5(c)/5.9(c)/7.6(a) - describe transaction] of the LLC Agreement and in
connection with the sale or transfer of the Purchaser's Interest (as defined in
the LLC Agreement) on the date hereof, Purchaser and Supplier now wish to
terminate the Original Supply Agreement and enter into this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Products to be Supplied; Specifications.
(a) Upon the terms and conditions of this Agreement, Supplier will
manufacture, sell and deliver to Purchaser the carbon fiber products identified
on Exhibit A attached hereto (the "Products").
(b) All Products to be supplied hereunder shall conform to the
specifications set forth on Exhibit B attached hereto (the "Specifications").
The Specifications may only be revised and amended by written agreement of
Purchaser and Supplier. [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] Anything herein to the
contrary notwithstanding, Supplier will not introduce any material modifications
to its manufacturing processes, including any material changes in raw materials,
sampling methods and test procedures, without the prior written consent of
Purchaser.
(c) Supplier will provide to Purchaser all test data sufficient to
characterize the quality of the material sold to Purchaser and certify that the
material complies with the Specifications. Purchaser will have the right to
inspect all Products upon receipt at the designated delivery point (the
"Delivery Point"); provided that such inspection rights will be without
prejudice to any subsequent claim arising from defects not reasonably
discoverable at the time of inspection.
(d) If Purchaser believes that any of the Products delivered by Supplier
fail to conform to the Specifications, Purchaser shall notify Supplier of its
belief within a reasonable time after such Products are delivered to Purchaser.
Upon receipt of the notice, Supplier shall have the right to inspect all
evidence of nonconformity, and Purchaser and Supplier shall attempt to reach
agreement as to whether there is a failure to conform. If Supplier agrees that
such Products fail to conform, Supplier's liability for any breach of the
warranty set forth herein shall be limited, at Supplier's option (which such
option shall be exercised by Supplier providing written notice to Purchaser of
its selection within ten (10) days of Supplier's receipt of a notice from
Purchaser stating that Purchaser has received non-conforming Products) and at
Supplier's expense, to (i) prompt replacement of non-conforming quantities with
conforming quantities at the delivery place agreed upon with respect to
conforming quantities or (ii) refund of the purchase price paid by Purchaser for
such non-conforming Products. The return (at Supplier's request) and replacement
of non-conforming quantities shall be at Supplier's expense (including all costs
generated by transportation, duties, taxes and insurance). Furthermore, if
Supplier elects to refund the purchase price for any non-conforming Products,
such refund shall include all costs incurred by Purchaser (including all costs
incurred with respect to transportation, duties, taxes and insurance) in its
acquisition of non-conforming Products.
2. [Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]
G-2
3. Prices.
(a) Basis for Pricing. [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment].
(b) Verification by Purchaser. Purchaser and its independent auditors
shall have the right to audit the books and records of Supplier two times each
calendar year during normal business hours and at mutually agreed upon times to
inspect such books and records to assess Supplier's compliance with the terms of
this Agreement. Purchaser shall bear its own costs incurred as the result of
Purchaser's audits, except to the extent such audits reveal material
overpayments by Purchaser (in which event such costs and expenses shall be
reimbursed by Supplier).
4. Ordering; Invoicing and Payment.
(a) Purchaser shall submit written purchase orders to Supplier for the
amount of Products which Purchaser wishes to purchase pursuant to the terms of
this Agreement. Unless otherwise agreed, such written purchase orders shall be
submitted not later than [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] prior to the date of required
delivery and unless Supplier otherwise agrees, the delivery date for each
shipment must be at least [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] after the delivery date for
the previous shipment. Each purchase order must state the quantity of Products
ordered, specify the required date of delivery and specify the destination and
mode of transportation requested.
(b) Supplier must use its commercially reasonable efforts to accept
purchase orders for Products from Purchaser in quantities up to and including
the quantities provided for in Section 2 above; provided, however, Supplier's
obligation to accept such purchase orders shall be subject to the allocation of
its production capacity pursuant to the provisions of Sections 5 and 9.
(c) Supplier will promptly confirm in writing Supplier's acceptance or
rejection (to the extent permitted) of all written purchase orders submitted to
it by Purchaser. Supplier shall deliver the Products ordered by Purchaser
hereunder F.O.B. carrier at Supplier's Plant in Evanston, Wyoming on the date
set forth in the applicable written purchase orders from Purchaser.
(d) Supplier shall submit an invoice with each shipment of Products to
Purchaser setting forth charges associated with [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] (each
as determined in accordance with the terms hereof). Purchases of Products
hereunder shall be subject to Supplier's standard terms and conditions of sale,
except if such terms and conditions conflict with this Agreement, this Agreement
shall control.
G-3
(e) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(f) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(g) The prices, taxes and duties, if any, payable to Supplier pursuant to
this Section 4 shall be due and payable by Purchaser [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] after
its receipt of invoices. Any amounts payable to Purchaser pursuant to this
Section 4 shall be paid in cash within [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment] after the date of
determination of such amount (or, at Purchaser's option, in the form of a credit
to be applied to the current or next invoice).
(h) The parties' agreement on billing is summarized on Exhibit C attached
hereto.
5. Forecasts; Capacity Allocations.
(a) Rolling Forecasts. On the first day of each month during the term of
this Agreement, Purchaser shall provide Supplier with its good faith written
estimate, by quantity (expressed in pounds for each Product) and delivery date,
of its anticipated need for the Products for each month in the next ensuing 12
month period (a "Rolling Forecast"). The forecasts are to be used by Supplier
for planning purposes only. Subject to the terms of Section 2 hereof,
Purchaser's Rolling Forecasts shall not constitute binding purchase requirements
of Purchaser.
(b) Allocation Procedure. For each rolling 12 month period during the term
hereof, Supplier shall allocate, by quantity (expressed in pounds for each
Product) and delivery date, its production capacity to provide the Products to
Purchaser during each rolling 12 month period during the term hereof, as follows
(the resulting allocations to Purchaser, Purchaser's "Annual Allocation" with
respect to such Product):
[Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]
(c) Commitment to Supply. Supplier shall operate the Plant and use its
commercially reasonable efforts to meet the purchase orders of both Purchaser
and [AMTC] [SGL] for the Products. Notwithstanding the foregoing, in no event
shall Supplier be obligated to make any additional investment of capital in
order to satisfy its obligations under this Section 5.
6. [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment].
G-4
7. Term; Termination.
(a) Unless sooner terminated in accordance with the terms hereof, this
Agreement shall have a term commencing on the date hereof and expiring on
[insert date occurring 2 years after date of signing of this Agreement].
(b) Either party may, by delivering written notice thereof to the other
party, terminate its obligations under this Agreement, effective immediately, if
the other party hereto:
(i) is rendered bankrupt or becomes insolvent, and such insolvency
is not cured within 15 days after written notice, or files a written
petition in bankruptcy or an answer admitting the material facts recited
in such petition filed by another, or discontinues its business or is
unable to pay its bills as they become due, or has a receiver or other
custodian of any kind appointed to administer any substantial amount of
its property; or
(ii) commits a material breach of its material duties, obligations
or understandings under this Agreement, which breach is not cured within
90 days following written notice of such breach from the nonbreaching
party; provided, that a failure by Supplier to comply with its obligations
under Sections 8(c) and 11(a) shall not constitute a material breach for
purposes of this Section 7(b)(ii) unless Purchaser has incurred or is
reasonably likely to incur an uncured material loss, liability or expense
as a consequence of such noncompliance.
Any such termination shall be in addition to any other rights or remedies
available at law or in equity to the terminating party and shall not affect any
rights or obligations which have accrued prior to the date of termination
(including the obligation to fill or pay for outstanding purchase orders or
Purchaser's right to have its requirements filled by third parties pursuant to
Section 10(b)).
(c) Each party hereto agrees to consult in advance with the other party
hereto and to bring to the attention of the other party any problems,
differences of opinion, disagreement or any other matters which may lead such
party to terminate or seek to terminate this Agreement. The purpose and intent
of the parties in including this provision is to ensure that both parties to
this Agreement are made aware of any problems arising out of or relating to this
Agreement or the relationship of the parties hereunder, so that the parties
hereto may, in good faith, consult with one another concerning such problems
and, where possible, resolve such problems to the parties' mutual satisfaction,
thereby preserving their contractual relationship and the goodwill and mutual
respect presently existing between the parties to this Agreement.
8. Additional Terms of Purchase.
(a) Payment of any invoice by Purchaser does not constitute acceptance of
Products covered by any invoice and is without prejudice to any or all claims
Purchaser may have against Supplier in connection therewith.
G-5
(b) Except as otherwise provided herein, time is of the essence in
performance by Supplier and Purchaser under this Agreement.
(c) The Products to be provided hereunder are each warranted by Supplier
to equal or surpass all federal, state and local occupational safety and health
standards applicable thereto.
(d) No reasonable delay in inspecting or in rejecting Products shall be
deemed an acceptance of them by Purchaser or a waiver of Purchaser's right to
reject the Products for any cause hereunder. Purchaser shall have the right to
accept any portion of Products delivered by Supplier to Purchaser
notwithstanding that it may reject the balance thereof. Acceptance by Purchaser
of all or any part of the Products shall not constitute a waiver of any claim
which Purchaser may have regarding the Products.
(e) EXCEPT AS EXPRESSLY SET FORTH HEREIN, SUPPLIER DOES NOT MAKE ANY OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, NEITHER PARTY HERETO
SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY CIRCUMSTANCES FOR ANY CONSEQUENTIAL
DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING LOST PROFITS OR DAMAGES ARISING ON
ACCOUNT OF EXPENDITURES, INVESTMENTS, LEASES, PROPERTY IMPROVEMENTS OR
COMMITMENTS MADE OR ENTERED INTO IN RELIANCE UPON THE CONTINUITY OF THE
RELATIONSHIP CREATED BY THIS AGREEMENT.
9. Force Majeure.
Any failure or delay in the performance by Purchaser or Supplier of their
respective obligations hereunder shall not be a breach of this Agreement if such
failure or delay arises out of or results primarily from fire, storm, flood,
earthquake, or other acts of God, explosions, wars, insurrections, strikes, work
stoppages or slowdowns, unavailability of fuel or utilities, epidemic or
quarantine restrictions, or inability to obtain essential raw materials despite
commercially reasonable efforts to do so (the occurrence of any of the foregoing
shall be an "Event of Force Majeure"); provided, however, that either Purchaser
or Supplier may, at its option, terminate this Agreement if an Event of Force
Majeure prevents the other party from meeting its obligations in whole or in
part under this Agreement for more than [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment] during this
Agreement. In the event that an Event of Force Majeure materially affects
Supplier's capacity to manufacture and deliver Products as required by this
Agreement, Supplier shall, during the period of Supplier's reduced capacity (the
"Force Majeure Period"), allocate its remaining capacity pursuant to the
provisions of Section 5(b). In the event that an Event of Force Majeure affects
Purchaser's capacity to purchase and accept Products as required by the
Agreement, then Purchaser shall, during the period of Purchaser's reduced
capacity, purchase and accept the Products affected by the Event of
G-6
Force Majeure in the proportion that [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment]. Both Purchaser and
Supplier shall use their commercially reasonable efforts to avoid the occurrence
and remove the causes of an Event of Force Majeure and to continue performance
of their respective obligations hereunder promptly following the removal of such
causes.
10. Outsourcing; Operation of the Plant; Mitigating Purchases.
(a) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(b) During the term of this Agreement, Supplier will operate the Plant
consistent with past practices of its operation in such a manner as to ensure,
to the extent commercially reasonable, an uninterrupted supply of Products
meeting the Specifications. Supplier will promptly notify Purchaser of any
circumstances which may result in a delay in delivery of Products beyond the
times specified in Purchaser's forecast. In the event that Supplier is aware of
circumstances beyond its reasonable control that might reasonably interfere with
its ability to meet Purchaser's forecasted requirements of Products, Supplier
shall promptly notify Purchaser and [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
11. Compliance With Laws and Regulations.
(a) Supplier represents and warrants that all Products sold to Purchaser
pursuant to this Agreement will be manufactured substantially in accordance with
all applicable material laws and regulations of an agency or authority with
power over the manufacture of such Products or the Plant.
(b) Supplier agrees to allow Purchaser's personnel to be present at
Supplier's production runs of the Products at any reasonable time by reasonable
notice to the extent necessary for quality assurance of Products and processes
provided to Purchaser hereunder. Notwithstanding the authority granted to
Purchaser hereby, Supplier shall not be relieved of any responsibility or
liability hereunder or by law.
12. Insurance.
Each party shall, at its sole cost and expense, obtain and maintain from a
reputable insurance company adequate and suitable liability insurance coverage
covering all claims (including, without limitation, personal injury and/or
products liability claims) by third parties allegedly caused by or resulting
from the design, manufacture, machining, use or application of the Products, as
the case may be, and such coverage shall be reasonably satisfactory to the other
party. Each party shall give the other party thirty (30) days' prior written
notice of any termination of such insurance.
G-7
13. Assignment.
Except as otherwise permitted in this Section, neither party hereto may
assign this Agreement or any rights hereunder (by operation of law or otherwise)
to any other person or entity, without the prior written consent of the other
party hereto, except that Purchaser may assign any of its rights under this
Agreement to any direct or indirect wholly owned subsidiary of Purchaser or of
any person or entity of whom Purchaser is a direct or indirect wholly owned
subsidiary, in each case incorporated in the United States, without Supplier's
prior written consent. Supplier may, without Purchaser's consent, assign its
rights and obligations hereunder to any successor in interest (by operation of
law or otherwise) which assumes all of its obligations hereunder (it being
understood that any such assignee must manufacture any Products to be purchased
hereunder at the facilities located at 0000 Xxxxx Xxxx, Xxxxxxxx, Xxxxxxx
82930). Any permitted assignment hereof shall be pursuant to a written
assumption agreement whereby the assignee agrees to be bound by all of the terms
and conditions of this Agreement. Any attempt or effort at any unauthorized
assignment shall be null and void and of no force or effect. Any assignment by
either party shall not relieve such party of its obligations hereunder. This
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties hereto.
14. Administrative Expenses.
Each party hereto shall pay all of its own administrative expenses
(including without limitation the fees and expenses of its agents,
representatives and counsel) incident to the preparation and implementation of
this Agreement.
15. Waiver of Breach.
The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to constitute a waiver
of any such provision nor in any way to affect the validity of this Agreement or
any part hereof, including the right of any party thereafter to enforce each and
every provision. The waiver by any party to this Agreement of any breach or
violation of any provision of this Agreement by the other party hereto shall not
operate or be construed to be a waiver of any subsequent breach or violation
thereof.
16. Severability.
The terms and conditions of this Agreement are hereby deemed by the
parties to be severable, and the invalidity or unenforceability of any one or
more of the provisions of this Agreement shall not affect the validity and
enforceability of the other provisions hereof.
17. Notices.
Any notice contemplated by or required or permitted to be given under this
Agreement shall be in writing and (a) sent via telecopier to the telecopier
numbers set forth below, (b) delivered personally, (c) sent via next day or
overnight courier or delivery or (d) mailed by
G-8
registered or certified mail, return receipt requested, postage prepaid, to the
parties' respective addresses below (or, in each case, to such other address or
facsimile number as may be specified in writing to the other parties hereto):
Supplier: Carbon Fiber Technology LLC
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
Purchaser: [SGL Carbon Fibers and Composites, Inc.]
c/o Hitco Carbon Composites, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Fax No.: (000) 000-0000
[or]
c/o Aldila, Inc.
00000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Bank of America Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax No.: (000) 000-0000
Xxxxxx X. Xxxxxxxxx
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx-Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Such notices, requests and other communications sent as provided hereinabove
shall be effective: (w) if sent by telecopier on a Business Day before 6:00
p.m., Los Angeles, California time, on such Business Day, but if sent by
telecopier at any other time, upon the next Business Day; (x) upon receipt, when
personally delivered; (y) the next Business Day, if sent by overnight courier or
delivery; and (z) if sent by registered or certified mail, return receipt
requested, upon the expiration of the third business day after being deposited
in the United States mail.
G-9
18. Labels and Headings.
The labels and headings of the sections and subsections of this Agreement
are for the convenience of the parties hereto only and are not part of the text
of this Agreement.
19. Governing Law.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflicts or choice of law principles.
20. Arbitration.
Each of the parties hereto shall promptly provide the other party with
written notice (a "Dispute Notice") of any alleged breach or violation of this
Agreement by such other party or of any claim arising out of or relating to this
Agreement (any of the foregoing referred to herein as a "Dispute"). Purchaser
and Supplier shall endeavor to resolve any Dispute no later than the thirtieth
(30th) day following the date of receipt of a Dispute Notice. If Purchaser and
Supplier fail to resolve a Dispute during such time, such Dispute shall be
settled by arbitration in Los Angeles, California before the American
Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules then obtaining of the AAA, except that the parties shall be
entitled to conduct discovery as, in the manner and to the extent provided for
in the Federal Rules of Civil Procedure in effect from time to time. Any
judgment or award rendered by the arbitrator(s) may be entered in any court
having jurisdiction.
21. Relationship of the Parties.
The relationship between Supplier and Purchaser under this Agreement shall
be solely that of vendor and vendee. With respect to this Agreement only, it is
expressly understood and agreed by the parties hereto that nothing in this
Agreement, its provisions or transactions and relationships contemplated hereby
shall constitute either party as the agent, employee, partner or legal
representative of the other for any purpose whatsoever, nor shall either party
hold itself out as such. Neither party to this Agreement shall have the
authority to bind or commit the other party hereto in any manner or for any
purpose whatsoever, except as may be expressly provided for herein, but rather
each party shall at all times act and conduct itself in all respects and events
as an independent contractor. This Agreement creates no relationships of joint
venturers, partners, associates or principal and agent between the parties
hereto.
22. Construction of Agreement; Entire Agreement Amendments.
This Agreement may be executed in counterparts (all of which together
shall constitute one agreement). In that this Agreement was prepared as a result
of negotiation and mutual agreement between the parties hereto, neither this
Agreement nor any provision hereof shall be construed against either party
hereto as the party who prepared this Agreement or any such provision. The
Original Supply Agreement is hereby terminated. This Agreement reflects the
complete understanding of the parties as of the date hereof and constitutes
their entire agreement
G-10
regarding the subject matter hereof, all prior negotiations, representations and
statements having been merged herein. This Agreement may not be changed or
amended orally, but by a written amendment signed by both parties hereto.
23. Definitions.
For purposes of this Agreement, the following terms shall have the
meanings set forth below.
"Fixed Costs" shall mean [Material omitted and filed separately with the
SEC pursuant to a request for confidential treatment].
"Variable Costs" shall mean [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
G-11
IN WITNESS WHEREOF, the parties have executed this Agreement by the
signature of their respective, duly authorized corporate officers as of the day
and year first above written.
CARBON FIBER TECHNOLOGY LLC
By:
---------------------------------------
Title:
---------------------------------------
[SGL] [ALDILA GOLF CORP.]
By:
---------------------------------------
Title:
---------------------------------------
G-12
EXHIBIT A
PRODUCTS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
G-13
EXHIBIT B
PRODUCT SPECIFICATIONS
[Material Specifications in effect at time of buyout to be attached]
G-14
EXHIBIT C
BILLING AGREEMENT WITH AMTC FOR PRODUCTS @ THE PLANT
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
G-15
EXHIBIT H
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into as
of October 29, 1999, by and between ALDILA, INC, a Delaware corporation
("Aldila"), and CARBON FIBER TECHNOLOCY LLC, a Delaware limited liability
company ("AMT"). Aldila and AMT are referred to herein collectively as the
"Parties" and individually as a "Party."
RECITALS
A. AMT was formed by Aldila Materials Technology Corp. ("Aldila
Materials"), a Delaware corporation and wholly owned subsidiary of Aldila, to
own and operate the carbon fiber processing and manufacturing facility in
Evanston, Wyoming formerly operated by Aldila Materials (the "Plant").
B. SGL Carbon Fibers and Composites, Inc., a Nevada corporation ("SGL"),
SGL Technik GmbH, a German limited liability company ("SGL's Parent"), Aldila
Materials and Aldila have entered into the Member Interest Purchase Agreement as
of October 20, 1999 (the "Purchase Agreement"). Pursuant to the terms of the
Purchase Agreement, SGL and Aldila Materials are entering into the Amended and
Restated Limited Liability Company Agreement as of the date hereof ("LLC
Agreement"). The LLC Agreement contemplates that AMT and Aldila will enter into
this Transition Services Agreement.
C. In connection therewith and to facilitate AMT's operation of the Plant
for a transitional period, Aldila agrees to provide, and AMT agrees to purchase,
certain transition services on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement.
2. Transition Services. Upon the terms and subject to the conditions set
forth in this Agreement, Aldila or its Affiliates shall provide to AMT, and AMT
shall purchase from Aldila or its Affiliates, the transition services set forth
on Exhibit A attached hereto (the "Services"). Each Service shall be provided in
a manner and at a relative level of proficiency, skill and priority consistent
in all material respects with that with which each Service was provided to
Aldila Materials or AMT by or on behalf of Aldila or its Affiliates during the
twelve months immediately preceding the date of this Agreement.
3. Term. The term for which each Service will be provided (with respect to
each Service, the "Transition Period") begins as of the date hereof and shall
end on the ninetieth (90th) day (or on such specified later date) after Aldila
has received written notice from AMT that such Service is no longer desired.
4. Price.
(a) Except as otherwise provided in this Section 4, the price (the
"Price") for each Service shall be [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
(b) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment].
(c) AMT and its independent auditors shall have the right, at AMT's
expense, to audit the books and records of Aldila during normal business hours
upon reasonable advance written notice and at mutually agreed upon times to
inspect such books and records to assess Aldila's compliance with the terms of
this Section 4 and other financial terms hereof. Only two such inspections may
be made during any fiscal year, provided that an additional inspection may be
made at the end of a Transition Period with respect to a Service.
(d) Any disputes concerning a Price charged by Aldila with respect to a
Service shall be handled in the manner set forth in Section 9.
5. Invoicing and Payment.
Within fifteen (15) days after the end of each month during the term
of this Agreement, Aldila shall provide AMT with an invoice setting forth in
reasonable detail, separately with respect to each Service, a description of the
Services provided during such month and the calculation of the Price therefor.
AMT shall pay the amount of each invoice not later than thirty (30) days
following its receipt of the invoice. Amounts disputed by AMT shall be paid and
disputed through the dispute resolution procedures set forth in Section 9 of
this Agreement. If any invoice is not being disputed in good faith and remains
unpaid after such thirty day period, then Aldila may, at its option, cease
providing the Services or require AMT to pay Aldila's good faith estimate of the
cost of any Services in advance of providing them.
6. Termination by Aldila. After the first anniversary of this Agreement,
Aldila may terminate its provision of any Service under this Agreement upon
ninety (90) days prior written notice. Also, Aldila may terminate the provision
of any and all Services under this Agreement after it ceases to be a Member of
AMT pursuant to the terms of the LLC Agreement.
H-2
7. Assignment, Successors, and Third-Party Rights.
(a) Except as expressly set forth in this Section 7, neither Party may
assign or delegate any of its rights or obligations under this Agreement without
the prior written consent of the other Party.
(b) Notwithstanding the prohibition on assignment and delegation set forth
herein, Aldila shall be entitled to perform any of the Services through
Affiliates, subcontractors or agents, provided that no assignment by Aldila of
any material portion of its obligations hereunder may be made to any
subcontractor without the prior written consent of AMT, which shall not be
unreasonably withheld. A material increase in cost to AMT shall be deemed
reasonable grounds for withholding consent.
(c) Notwithstanding the prohibition on assignment set forth herein, AMT
shall be entitled to execute collateral assignments of its rights under this
Agreement to its bank lenders (including all bank lenders who participate in any
syndicated financing and any lenders or participating lenders who refinance any
of AMT's debt) to secure the debt incurred by AMT to finance or refinance any of
its obligations incurred in the ordinary course of its business.
(d) Each Party hereby agrees that any permitted assignee of AMT under this
Agreement shall be entitled to enforce against Aldila any of the its obligations
arising pursuant to this Agreement. This Agreement will apply to, be binding in
all respects upon, and inure to the benefit of, the successors and permitted
assigns of the Parties. Nothing expressed or referred to in this Agreement will
be construed to give any person or entity other than the Parties and their
successors and permitted assigns any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.
8. Representatives. Each party shall designate a representative to act as
the primary contact person for the provision of the Services and administration
of this Agreement (the "Representatives"). To the extent practicable, all
communications relating to the provision of the Services shall be directed
through the Representatives. AMT's initial Representative shall be Xxxxx
Xxxxxxx, and Aldila's initial Representative shall be Xxxxxx X. Xxxxxxx. The
Parties shall advise each other in writing of any change of their respective
Representative.
9. Dispute Resolution.
(a) The Parties agree to attempt to resolve in good faith any disputes
that arise under this Agreement in accordance with the following procedures:
(i) The Representatives shall first meet to discuss resolution of
the dispute.
(ii) If the dispute is not resolved after the meeting held pursuant
to the preceding subsection, then the Party initiating the
dispute shall promptly deliver to the other Party a written
memorandum describing the dispute in reasonable detail and its
proposed resolution of the dispute. The corporate controllers
of the Parties shall promptly meet and attempt in good faith
to resolve the dispute.
H-3
(iii) If the dispute is not resolved after the meeting held pursuant
to the preceding subsection, then each Party shall promptly
deliver to the other Party a written memorandum describing the
dispute in reasonable detail and its proposed resolution of
the dispute. The senior executives in charge of overall
operations (or, if the matter is a financial dispute, the
chief financial officers) of the Parties shall then promptly
meet and attempt in good faith to resolve the dispute.
(b) If the internal procedures for resolution of disputes set forth in
Section 9(a) are exhausted or not completed within twenty (20) days of either
Party's institution of this dispute resolution process by its provision of
written notice with respect thereto and the dispute remains unresolved, then the
Parties shall promptly refer the dispute to a licensed mediator in the State of
California. If mediation is unsuccessful or is not completed within fifteen days
of either Party's submission of the dispute to the mediator, then either Party
may submit the matter to binding arbitration by three disinterested arbitrators
in the City of Los Angeles, California pursuant to the procedures of the
American Arbitration Association. Any award by the arbitrator shall be final and
binding on the Parties. The Parties consent to the jurisdiction of the federal
and state courts of California for enforcement of any arbitration award.
(c) Any arbitrator used by the Parties hereunder shall have the discretion
to allocate responsibility for the payment of the fees and expenses incurred by
the Parties in connection with this dispute resolution process (including
reasonable attorneys' fees). Any such allocation shall be based upon the
relative success of the Parties on the merits of the positions maintained by
them. In the absence of any such allocation, the Parties shall each pay their
own fees and expenses incurred in connection with this dispute resolution
process and shall share equally the fees assessed by any mediators or
arbitrators used to resolve any disputes hereunder.
(d) Neither Party shall cease to perform any of its obligations under this
Agreement pending the resolution of any dispute arising hereunder.
10. Miscellaneous.
(a) Relationship of the Parties. The relationship between the Parties as
contemplated by this Agreement shall be that of a seller and a purchaser.
Neither Party shall be the agent of the other nor have any authority to act on
behalf of the other in any manner or matter except in the manner and to the
extent that the other may expressly agree to in writing. Persons retained by
either Party as employees or agents shall not by reason thereof be deemed to be
employees or agents of the other Party, except as may be otherwise agreed in
writing. Nothing contained in this Agreement alone shall be construed as
creating a partnership, joint venture, agency, trust or other association of any
kind, each party being individually responsible only for its obligations as set
forth in this Agreement.
(b) Further Assurances. The Parties agree: (i) to furnish upon request to
each other such further information, (ii) to execute and deliver to each other
such other documents, and (iii) to do such other acts and things, all as the
other Party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
H-4
(c) Expenses. Except as otherwise expressly provided in this Agreement,
each Party will bear its respective expenses incurred in connection with the
preparation, execution and performance of this Agreement, including all fees and
expenses of its agents, subcontractors, employees, representatives, legal
counsel and accountants.
(d) Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be delivered in accordance with, and
subject to, Section 10.4 of the Purchase Agreement, provided that notice to AMT
shall be sent to AMT at 0000 Xxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000, Attn: Xxxxx
Xxxxxxx, Fax No. (000) 000-0000.
(e) Force Majeure. Aldila shall not be liable for any failure or delay in
performance if caused, in whole or in part, by fire, flood, earthquake, acts of
God, strikes, riots or civil disorder, unavoidable casualty, governmental order
or state of war, accidents, interruptions of transportation facilities or delays
in transit, supply shortages, equipment failure, failure of any third party to
perform any commitment to such party relating to the production or delivery of
Services, or any other cause, whether similar or dissimilar to the foregoing
causes, beyond the reasonable control of such party. In the event of any such
contingency, Aldila shall notify AMT of the contingency within a reasonable
period of time and shall make commercially reasonable efforts promptly to remove
the contingency such that performance may be resumed. If as a result of the
occurrence of any such contingency, performance hereunder cannot be completed
within the original period for performance, the period for performance shall be
extended for a period of time equal to the duration of such contingency and a
reasonable period thereafter to allow for completion of performance without
prejudice to any of the other rights under this Agreement.
(f) No Waiver. The rights and remedies of the Parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law: (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in a signed writing; (ii) no waiver that may be given by a Party
will be applicable except in the specific instance for which it is given; and
(iii) no notice to or demand on one Party will be deemed to be a waiver of any
obligation or of the right of the Party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
(g) Interpretation. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of its provisions. The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. Except
as otherwise indicated, all references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the
H-5
circumstances require. As used in this Agreement, "including" means including
without limitation.
(h) Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
(i) Jurisdiction; Consent to Service. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
shall be brought in the courts of the State of California, or, if it has or can
acquire jurisdiction, in the United States District Court for the Central
District of California, and each Party consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
(j) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California without giving effect to any
choice or conflict of law provision or rule (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.
(k) Entire Agreement; Modification. This Agreement supersedes all prior
agreements between the Parties with respect to its subject matter and
constitutes (along with all Exhibits hereto and all other documents referred to
herein) a complete and exclusive statement of the terms of the agreement of the
Parties with respect to its subject matter. Neither this Agreement nor any part
hereof may be changed, altered, or amended orally. Any modification must be by a
written agreement executed by both Parties, except that any Transition Period
may be terminated by AMT in accordance with Section 3 or by Aldila in accordance
with Section 6 hereof.
(l) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
H-6
IN WITNESS WHEREOF, the Parties have caused this Transition Services
Agreement to be executed by their duly authorized representatives as of the date
first written above.
ALDILA, INC.
By: ____________________________________
Name: ____________________________________
Title: ________________________________
CARBON FIBER TECHNOLOGY LLC
By: ____________________________________
Name: ____________________________________
Title: ________________________________
H-7
EXHIBIT A
TO
TRANSITION SERVICES AGREEMENT
SERVICES AND ESTIMATED ANNUAL MONTHLY COST
ATTRIBUTED TO C0NTINUED SUPPORT FOR AMTC
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
EXHIBIT I
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
APPRAISAL PROCESS
(a) Appraisal Process. This appraisal process shall only be used to the
extent and at the times expressly required by the terms of this Agreement. The
Member which is exercising its option to purchase, or the Member who is required
to purchase, the Interest of the other Member in accordance with the terms and
conditions of this Agreement in a context where this appraisal process applies
shall, within ten (10) days after the date upon which the option or requirement
to purchase arises, provide written notice to the selling Member of the
purchasing Member's determination of the fair market value of the Interest of
the LLC to be purchased. If the selling Member objects to such determination of
fair market value, it shall provide written notice thereof to the purchasing
Member within ten (10) days after receiving such determination (the "Notice")
and the provisions of this appraisal process exhibit (the "Appraisal Process")
shall be invoked. In order for the Notice to be effective under this Agreement
and invoke the provisions of the Appraisal Process, such Notice must comply with
the provisions of subparagraph (i) below and, if compliant, will be considered
the written Notice invoking the provisions the Appraisal Process for purposes of
the Appraisal Exhibit. The determination of fair market value in accordance with
this Appraisal Exhibit shall be final and binding on all parties to the
Agreement.
(i) First Appraisal. The written notice invoking the Appraisal
Process must be delivered to the selling Member within ten
(10) days following receipt of the purchasing Member's
determination of the fair market value and shall set forth the
name and address of an unrelated third party appraiser
selected by the party invoking the Appraisal Process. Any
appraiser selected pursuant to this Appraisal Exhibit shall be
a Person qualified with respect to determining the fair market
value of the Interest of the LLC which is to be sold. The
purchasing Member shall thereafter have ten (10) days
following its receipt of the notice of the selection of the
first appraiser to select a second unrelated third party
appraiser by sending to the other party written notice setting
forth the name and address of the second appraiser.
If a second appraiser is not selected within the 10 day time
period, the appraiser selected by the party invoking the
Appraisal Process shall prepare his appraisal report and
submit it to such party within sixty (60) days following the
notice of his selection as an appraiser, in which case the
Appraisal Process shall be concluded and the fair market value
of the Interest to be sold shall be the amount set forth in
the appraiser's report.
(ii) Second Appraisal. If a second appraiser has been selected
pursuant to subparagraph (i) above, the two appraisers so
selected shall consult with each other in an effort to reach
an agreement as to the fair market value of the Interest to be
sold. If the two appraisers shall agree in writing as to the
fair market value in question within forty-five (45) days
following the appointment of the second appraiser, the fair
market value of the Interest to be sold shall be the amount to
which the appraisers have agreed, and the Appraisal Process
shall be concluded.
In the event the two appraisers are unable to agree as to the
fair market value, the two appraisers shall prepare their
separate appraisal reports and submit them to the Members
within sixty (60) days following the appointment of the second
appraiser. If the higher fair market value exceeds the lower
fair market value by 20% or less of the lower fair market
value the Appraisal Process shall be concluded and the fair
market value of the Interest to be sold shall be the average
of the two fair market values as set forth in the two
appraisal reports. If the higher fair market value exceeds the
lower fair market value by more than 20% of the lower fair
market value, the Members shall further attempt to agree as to
the fair market value.
(iii) Third Appraisal. If the higher fair market value of the two
appraisals exceeds the lower fair market value by more than
20% of the lower fair market value and, as of the eleventh
(11th) day following the submission of both appraisal reports,
neither Member has sent written notice calling for a third
appraiser, the Appraisal Process shall be concluded and the
fair market value of the Interest to be sold shall be the
average of the two fair market values as set forth in the two
appraisal reports. If, however, the higher fair market value
exceeds the lower fair market value by more than 20% of the
lower fair market value and, within ten (10) days following
the submission of the first two appraisers' reports, either
Member sends written notice to the other calling for a third
appraiser, the two previously-selected appraisers shall
promptly (but in any event within fifteen (15) days following
the submission of both appraisal reports) select a third
appraiser to determine the fair market value of the Interest
to be sold. The first two appraisers shall notify the Members
of the name and address of the third appraiser so selected.
Neither the previously selected appraisers nor the Members nor
any Persons related to any of them shall disclose to the third
appraiser the appraisal reports of the first two
I-2
appraisers or the results of the first two appraisals. Within
thirty (30) days following his appointment, the third
appraiser shall submit his appraisal report to the Members, in
which case the Appraisal Process shall be concluded and the
fair market value of the Interest to be sold shall be the
average of the two appraisals that are closest to each other.
(b) Costs of Appraisal Process. The costs of the Appraisal Process shall
be borne equally by the Members.
(c) Scope of Appraisals. In appraising an Interest to be purchased
pursuant to the terms of this Agreement, (i) the appraiser shall determine the
price that a reasonable purchaser would be willing to pay and a reasonable
seller would be willing to accept for all of the Interests, assuming that the
purchase was an arms-length transaction between a purchaser and a seller of
equal bargaining power, with the purchaser and seller under neither a compulsion
to buy or to sell, as the case may be (the "Price"), and (ii) the Interest
should be valued at an amount equal to the Price multiplied by the percentage of
all of the Interests represented by the Interest being appraised.
[THE REMAINDER OF THIS PAGE INTENTIONALLY HAS BEEN LEFT BLANK]
I-3
EXHIBIT J
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
CARBON FIBER TECHNOLOGY LLC
A DELAWARE LIMITED LIABILITY COMPANY
VARIABLE COSTS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
EXHIBIT C
Assignment of Member Interest
This ASSIGNMENT OF MEMBER INTEREST (this "Assignment of Member Interest")
in AMTC LLC, a Delaware limited liability company (the "Company"), is made this
29th day of October 1999, by ALDILA MATERIALS TECHNOLOGY CORP., a Delaware
corporation (the "Assignor"), to SGL CARBON FIBERS AND COMPOSITES, INC., a
Nevada corporation (the "Assignee").
RECITALS:
A. During August and September of 1999, the Assignor caused the formation
and capitalization of the Company pursuant to the terms and conditions of the
Limited Liability Company Agreement dated August 19, 1999 and the Contribution
and Amendment to LLC Agreement dated as of September 1, 1999, as amended
(collectively, the "Original LLC Agreement").
B. On the date hereof, the Assignor is selling to the Assignee, and the
Assignee is purchasing from the Assignor, a 50% member interest in the Company
for the consideration and on the terms set forth in the Member Interest Purchase
Agreement dated October 20, 1999 (the "Member Interest Purchase Agreement")
among the Assignor, the Assignee, Aldila, Inc. and SGL Technik GmbH.
C. Section 2.4(a)(i) of the Member Interest Purchase Agreement requires
the execution and delivery of this Assignment of Member Interest as a condition
to the closing of the transactions contemplated thereby.
NOW, THEREFORE, the undersigned hereby stipulate and agree as follows:
1. Assignment. The Assignor hereby transfers, assigns, sells, and conveys
the Member Interest (as defined in the Member Interest Purchase Agreement) to
the Assignee.
2. Acceptance of Assignment. The Assignee, by the execution of this
Assignment of Member Interest, hereby accepts the Member Interest, assumes all
obligations in connection therewith and elects to be admitted to the Company as
a member pursuant to the terms and conditions of the Amended and Restated
Limited Liability Company Agreement of the Company of even date herewith.
3. Consent to Assignment. By execution hereof, the Assignor, constituting
the only member of the Company prior to the effectiveness of this Assignment of
Member Interest, and the Company consent to such assignment and assumption of
the Member Interest and to the Assignee's admission as a member of the Company
pursuant to the Amended and Restated
Limited Liability Company Agreement of even date herewith and waive any rights
either of them may have which may arise pursuant to the Original LLC Agreement
relating to the Assignment.
4. Binding Agreement. This Assignment of Member Interest shall be binding
upon and inure to the benefit of the successors and assigns of the Assignor and
the Assignee.
IN WITNESS WHEREOF, each of the Assignor, the Assignee and the Company
have executed this Assignment of Member Interest as of the day and year first
written above.
ASSIGNOR:
ALDILA MATERIALS TECHNOLOGY CORP.
By:
-----------------------------------
Title:
--------------------------------
ASSIGNEE:
SGL CARBON FIBERS AND COMPOSITES, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
COMPANY:
___________________ LLC
BY:
-----------------------------------
TITLE:
---------------------------------
EXHIBIT D
[SGL]
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") is made and entered into as of
this 29th day of October, 1999, by and between SGL Carbon Fibers and Composites,
Inc., a Nevada corporation ("Purchaser," or sometimes referred to herein as
"SGL"), and [Carbon Fiber Technology] LLC, a Delaware limited liability company
("Supplier").
RECITALS:
A. Pursuant to the Member Interest Purchase Agreement dated as of October
20, 1999 (the "Purchase Agreement") by and among SGL, Aldila Materials
Technology Corp., a Delaware corporation ("AMTC"), Aldila, Inc., a Delaware
corporation ("Aldila"), and SGL Technik GmbH, a German limited liability company
("SGL's Parent"), SGL acquired from AMTC a 50% member interest in Supplier.
B. Pursuant to the Purchase Agreement, Purchaser and Supplier are required
to enter into this Supply Agreement to provide the terms and conditions on which
Supplier will supply carbon fiber products to Purchaser.
C. On the date hereof, Supplier and Aldila Golf Corp., a Delaware
corporation ("Aldila Golf") are also entering into a supply agreement (the
"Aldila Supply Agreement") to provide for the terms and conditions of Supplier's
provision of carbon fiber products to Aldila Golf.
D. SGL and AMTC are parties to the Amended and Restated Limited Liability
Company Agreement dated as of the date hereof (the "LLC Agreement"), which
Agreement, among other things, allocates responsibility for the payment of all
fixed costs associated with the operation of Supplier's Evanston, Wyoming
manufacturing plant (the "Plant") between SGL and AMTC.
NOW, THEREFORE, the parties agree as follows:
1. Products to be Supplied; Specifications.
(a) Upon the terms and conditions of this Agreement, Supplier will
manufacture, sell and deliver to Purchaser the carbon fiber products identified
on Exhibit A attached hereto (the "Products").
(b) All Products to be supplied hereunder shall conform to the
specifications set forth on Exhibit B attached hereto (the "Specifications").
The Specifications may only be revised and amended by written agreement of
Purchaser and Supplier. [Material omitted and
13
filed separately with the SEC pursuant to a request for confidential treatment]
Anything herein to the contrary notwithstanding, Supplier will not introduce any
material modifications to its manufacturing processes, including any material
changes in raw materials, sampling methods and test procedures, without the
prior written consent of Purchaser.
(c) Supplier will provide to Purchaser all test data sufficient to
characterize the quality of the material sold to Purchaser and certify that the
material complies with the Specifications. Purchaser will have the right to
inspect all Products upon receipt at the designated delivery point (the
"Delivery Point"); provided that such inspection rights will be without
prejudice to any subsequent claim arising from defects not reasonably
discoverable at the time of inspection.
(d) If Purchaser believes that any of the Products delivered by Supplier
fail to conform to the Specifications, Purchaser shall notify Supplier of its
belief within a reasonable time after such Products are delivered to Purchaser.
Upon receipt of the notice, Supplier shall have the right to inspect all
evidence of nonconformity, and Purchaser and Supplier shall attempt to reach
agreement as to whether there is a failure to conform. If Supplier agrees that
such Products fail to conform, Supplier's liability for any breach of the
warranty set forth herein shall be limited, at Supplier's option (which such
option shall be exercised by Supplier providing written notice to Purchaser of
its selection within ten (10) days of Supplier's receipt of a notice from
Purchaser stating that Purchaser has received non-conforming Products) and at
Supplier's expense, to (i) prompt replacement of non-conforming quantities with
conforming quantities at the delivery place agreed upon with respect to
conforming quantities or (ii) refund of the purchase price paid by Purchaser for
such non-conforming Products. The return (at Supplier's request) and replacement
of non-conforming quantities shall be at Supplier's expense (including all costs
generated by transportation, duties, taxes and insurance). Furthermore, if
Supplier elects to refund the purchase price for any non-conforming Products,
such refund shall include all costs incurred by Purchaser (including all costs
incurred with respect to transportation, duties, taxes and insurance) in its
acquisition of non-conforming Products.
2. [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
3. Prices.
(a) Basis for Pricing. [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment]
(b) Verification by Purchaser. Purchaser and its independent auditors
shall have the right to audit the books and records of Supplier two times each
calendar year during normal business hours and at mutually agreed upon times to
inspect such books and records to assess Supplier's compliance with the terms of
this Agreement. Purchaser shall bear its own costs incurred as the result of
Purchaser's audits, except to the extent such audits reveal material
overpayments by Purchaser (in which event such costs and expenses shall be
reimbursed by Supplier).
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(c) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
4. Ordering; Invoicing and Payment.
(a) Purchaser shall submit written purchase orders to Supplier for the
amount of Products which Purchaser wishes to purchase pursuant to the terms of
this Agreement. Unless otherwise agreed, such written purchase orders shall be
submitted not later than [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] prior to the date of required
delivery and unless Supplier otherwise agrees, the delivery date for each
shipment must be at least [Material omitted and filed separately with the SEC
pursuant to a request for confidential treatment] after the delivery date for
the previous shipment. Each purchase order must state the quantity of Products
ordered, specify the required date of delivery and specify the destination and
mode of transportation requested.
(b) Supplier must use its commercially reasonable efforts to accept
purchase orders for Products from Purchaser in quantities up to and including
the quantities provided for in Section 2 above; provided, however, Supplier's
obligation to accept such purchase orders shall be subject to the allocation of
its production capacity pursuant to the provisions of Sections 5 and 9.
(c) Supplier will promptly confirm in writing Supplier's acceptance or
rejection (to the extent permitted) of all written purchase orders submitted to
it by Purchaser. Supplier shall deliver the Products ordered by Purchaser
hereunder F.O.B. carrier at Supplier's Plant in Evanston, Wyoming on the date
set forth in the applicable written purchase orders from Purchaser.
(d) Supplier shall submit an invoice with each shipment of Products to
Purchaser setting forth charges associated with [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] (each
as determined in accordance with the terms of the LLC Agreement and pursuant to
Section 3 hereof). Purchases of Products hereunder shall be subject to
Supplier's standard terms and conditions of sale, except if such terms and
conditions conflict with this Agreement, this Agreement shall control.
(e) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
(f) The prices, taxes and duties, if any, payable to Supplier pursuant to
this Section 4 shall be due and payable by Purchaser [Material omitted and filed
separately with the SEC pursuant to a request for confidential treatment] after
its receipt of invoices. Any amounts payable to Purchaser pursuant to this
Section 4 shall be paid in cash within [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment] after the date of
determination of such amount (or, at Purchaser's option, in the form of a credit
to be applied to the current or next invoice).
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(g) The parties' agreement on billing is summarized on Exhibit C attached
hereto.
5. Forecasts; Capacity Allocations.
(a) Rolling Forecasts. Beginning January 1, 2000 and on the first day of
each month thereafter during the term of this Agreement, Purchaser shall provide
Supplier with its good faith written estimate, by quantity (expressed in pounds
for each Product) and delivery date, of its anticipated need for the Products
for each month in the next ensuing 12 month period (a "Rolling Forecast"). The
forecasts are to be used by Supplier for planning purposes only. Purchaser's
forecast for the remainder of the 1999 calendar year is set forth on Exhibit D.
Subject to the terms of Section 2 hereof, Purchaser's Rolling Forecasts shall
not constitute binding purchase requirements of Purchaser.
(b) Allocation Procedure. Beginning with the year 2000, for each rolling
12 month period during the term hereof, Supplier shall allocate, by quantity
(expressed in pounds for each Product) and delivery date, its production
capacity to provide the Products to Purchaser during each rolling 12 month
period during the term hereof, as follows (the resulting allocations to
Purchaser, Purchaser's "Annual Allocation" with respect to such Product):
[Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]
(c) Commitment to Supply. Supplier shall operate the Plant and use its
commercially reasonable efforts to meet the purchase orders of both Purchaser
and Aldila Golf for the Products, and [Material omitted and filed separately
with the SEC pursuant to a request for confidential treatment]. Notwithstanding
the foregoing, in no event shall Supplier be obligated to make any additional
investment of capital in order to satisfy its obligations under this Section
5(b) unless approved by the Board of Managers of Supplier in accordance with the
LLC Agreement.
6. [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
7. Term; Termination.
(a) Unless sooner terminated in accordance with the terms hereof, this
Agreement shall have a term which is coterminous with Purchaser's term as a
Member (as defined in the LLC Agreement).
(b) Either party may, by delivering written notice thereof to the other
party, terminate its obligations under this Agreement, effective immediately, if
the other party hereto:
(i) is rendered bankrupt or becomes insolvent, and such insolvency
is not cured within 15 days after written notice, or files a written
petition in bankruptcy or an
4
answer admitting the material facts recited in such petition filed by
another, or discontinues its business or is unable to pay its bills as
they become due, or has a receiver or other custodian of any kind
appointed to administer any substantial amount of its property; or
(ii) commits a material breach of its material duties, obligations
or understandings under this Agreement, which breach is not cured within
90 days following written notice of such breach from the nonbreaching
party; provided, that a failure by Supplier to comply with its obligations
under Sections 8(c) and 11(a) shall not constitute a material breach for
purposes of this Section 7(b)(ii) unless Purchaser has incurred or is
reasonably likely to incur a material loss, liability or expense as a
consequence of such noncompliance.
Any such termination shall be in addition to any other rights or remedies
available at law or in equity to the terminating party and shall not affect any
rights or obligations which have accrued prior to the date of termination
(including the obligation to fill or pay for outstanding purchase orders or
Purchaser's right to have its requirements filled by third parties pursuant to
Section 10(b)).
(c) Each party hereto agrees to consult in advance with the other party
hereto and to bring to the attention of the other party any problems,
differences of opinion, disagreement or any other matters which may lead such
party to terminate or seek to terminate this Agreement. The purpose and intent
of the parties in including this provision is to ensure that both parties to
this Agreement are made aware of any problems arising out of or relating to this
Agreement or the relationship of the parties hereunder, so that the parties
hereto may, in good faith, consult with one another concerning such problems
and, where possible, resolve such problems to the parties' mutual satisfaction,
thereby preserving their contractual relationship and the goodwill and mutual
respect presently existing between the parties to this Agreement.
8. Additional Terms of Purchase.
(a) Payment of any invoice by Purchaser does not constitute acceptance of
Products covered by any invoice and is without prejudice to any or all claims
Purchaser may have against Supplier in connection therewith.
(b) Except as otherwise provided herein, time is of the essence in
performance by Supplier and Purchaser under this Agreement.
(c) The Products to be provided hereunder are each warranted by Supplier
to equal or surpass all federal, state and local occupational safety and health
standards applicable thereto.
(d) No reasonable delay in inspecting or in rejecting Products shall be
deemed an acceptance of them by Purchaser or a waiver of Purchaser's right to
reject the Products for any cause hereunder. Purchaser shall have the right to
accept any portion of Products delivered by
5
Supplier to Purchaser notwithstanding that it may reject the balance
thereof. Acceptance by Purchaser of all or any part of the Products shall not
constitute a waiver of any claim which Purchaser may have regarding the
Products.
(e) EXCEPT AS EXPRESSLY SET FORTH HEREIN, SUPPLIER DOES NOT MAKE ANY OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, NEITHER PARTY HERETO
SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY CIRCUMSTANCES FOR ANY CONSEQUENTIAL
DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING LOST PROFITS OR DAMAGES ARISING ON
ACCOUNT OF EXPENDITURES, INVESTMENTS, LEASES, PROPERTY IMPROVEMENTS OR
COMMITMENTS MADE OR ENTERED INTO IN RELIANCE UPON THE CONTINUITY OF THE
RELATIONSHIP CREATED BY THIS AGREEMENT.
9. Force Majeure.
Any failure or delay in the performance by Purchaser or Supplier of their
respective obligations hereunder shall not be a breach of this Agreement if such
failure or delay arises out of or results primarily from fire, storm, flood,
earthquake, or other acts of God, explosions, wars, insurrections, strikes, work
stoppages or slowdowns, unavailability of fuel or utilities, epidemic or
quarantine restrictions, or inability to obtain essential raw materials despite
commercially reasonable efforts to do so (the occurrence of any of the foregoing
shall be an "Event of Force Majeure"). In the event that an Event of Force
Majeure materially affects Supplier's capacity to manufacture and deliver
Products as required by this Agreement, Supplier shall, during the period of
Supplier's reduced capacity (the "Force Majeure Period"), not allocate its
remaining capacity pursuant to the provisions of Section 5(b) but, instead,
allocate its remaining capacity between Aldila Golf and SGL in the same
proportion as capacity was allocated to Aldila Golf and SGL in [Material omitted
and filed separately with the SEC pursuant to a request for confidential
treatment]. In the event that an Event of Force Majeure affects Purchaser's
capacity to purchase and accept Products as required by the Agreement, then
Purchaser shall, during the period of Purchaser's reduced capacity, purchase and
accept the Products affected by the Event of Force Majeure in the proportion
that [Material omitted and filed separately with the SEC pursuant to a request
for confidential treatment]. Both Purchaser and Supplier shall use their
commercially reasonable efforts to avoid the occurrence and remove the causes of
an Event of Force Majeure and to continue performance of their respective
obligations hereunder promptly following the removal of such causes.
10. Outsourcing; Operation of the Plant; Mitigating Purchases.
(a) [Material omitted and filed separately with the SEC pursuant to a
request for confidential treatment]
6
(b) During the term of this Agreement, Supplier will operate the Plant
consistent with past practices of its operation in such a manner as to ensure,
to the extent commercially reasonable, an uninterrupted supply of Products
meeting the Specifications. Supplier will promptly notify Purchaser of any
circumstances which may result in a delay in delivery of Products beyond the
times specified in Purchaser's forecast. In the event that Supplier is aware of
circumstances beyond its reasonable control that might reasonably interfere with
its ability to meet Purchaser's forecasted requirements of Products, Supplier
shall promptly notify Purchaser and [Material omitted and filed separately with
the SEC pursuant to a request for confidential treatment].
11. Compliance With Laws and Regulations.
(a) Supplier represents and warrants that all Products sold to Purchaser
pursuant to this Agreement will be manufactured substantially in accordance with
all applicable material laws and regulations of an agency or authority with
power over the manufacture of such Products or the Plant.
(b) Supplier agrees to allow Purchaser's personnel to be present at
Supplier's production runs of the Products at any reasonable time by reasonable
notice to the extent necessary for quality assurance of Products and processes
provided to Purchaser hereunder. Notwithstanding the authority granted to
Purchaser hereby, Supplier shall not be relieved of any responsibility or
liability hereunder or by law.
12. Insurance.
Each party shall, at its sole cost and expense, obtain and maintain from a
reputable insurance company adequate and suitable liability insurance coverage
covering all claims (including, without limitation, personal injury and/or
products liability claims) by third parties allegedly caused by or resulting
from the design, manufacture, machining, use or application of the Products, as
the case may be, and such coverage shall be reasonably satisfactory to the other
party. Each party shall give the other party thirty (30) days' prior written
notice of any termination of such insurance.
13. Assignment.
Except as otherwise permitted in this Section, neither party hereto may
assign this Agreement or any rights hereunder (by operation of law or otherwise)
to any other Person, without the prior written consent of the other party
hereto, except that Purchaser may assign any of its rights under this Agreement
to a person to whom Purchaser transfers all of its Interest (as defined in the
LLC Agreement) if such person is thereafter approved as a Member under the LLC
Agreement or to any direct or indirect wholly owned subsidiary of Purchaser or
of any person of whom Purchaser is a direct or indirect wholly owned subsidiary,
in each case incorporated in the United States, without Supplier's prior written
consent. Any permitted assignment hereof shall be pursuant to a written
assumption agreement whereby the assignee agrees to be bound by all of the terms
and conditions of this Agreement. Any attempt or effort at any unauthorized
assignment
7
shall be null and void and of no force or effect. Any assignment by either party
shall not relieve such party of its obligations hereunder. This Agreement shall
be binding upon and inure to the benefit of the successors and permitted assigns
of the parties hereto.
14. Administrative Expenses.
Each party hereto shall pay all of its own administrative expenses
(including without limitation the fees and expenses of its agents,
representatives and counsel) incident to the preparation and implementation of
this Agreement.
15. Waiver of Breach.
The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to constitute a waiver
of any such provision nor in any way to affect the validity of this Agreement or
any part hereof, including the right of any party thereafter to enforce each and
every provision. The waiver by any party to this Agreement of any breach or
violation of any provision of this Agreement by the other party hereto shall not
operate or be construed to be a waiver of any subsequent breach or violation
thereof.
16. Severability.
The terms and conditions of this Agreement are hereby deemed by the
parties to be severable, and the invalidity or unenforceability of any one or
more of the provisions of this Agreement shall not affect the validity and
enforceability of the other provisions hereof.
17. Notices.
Any notice contemplated by or required or permitted to be given under this
Agreement shall be in writing and (a) sent via telecopier to the telecopier
numbers set forth below, (b) delivered personally, (c) sent via next day or
overnight courier or delivery or (d) mailed by registered or certified mail,
return receipt requested, postage prepaid, to the parties' respective addresses
below (or, in each case, to such other address or facsimile number as may be
specified in writing to the other parties hereto):
Supplier: Carbon Fiber Technology LLC
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
Purchaser: SGL Carbon Fibers and Composites, Inc.
c/o Hitco Carbon Composites, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Fax No: (000) 000-0000
8
Aldila Golf: c/o Aldila Golf Corp.
00000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Chief Executive Officer
Fax No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Bank of America Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax No.: (000) 000-0000
Xxxxxx X. Xxxxxxxxx
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx-Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Such notices, requests and other communications sent as provided hereinabove
shall be effective: (w) if sent by telecopier on a Business Day before 6:00
p.m., Los Angeles, California time, on such Business Day, but if sent by
telecopier at any other time, upon the next Business Day; (x) upon receipt, when
personally delivered; (y) the next Business Day, if sent by overnight courier or
delivery; and (z) if sent by registered or certified mail, return receipt
requested, upon the expiration of the third business day after being deposited
in the United States mail.
18. Labels and Headings.
The labels and headings of the sections and subsections of this Agreement
are for the convenience of the parties hereto only and are not part of the text
of this Agreement.
19. Governing Law.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflicts or choice of law principles.
20. Arbitration.
Each of the parties hereto shall promptly provide the other party with
written notice (a "Dispute Notice") of any alleged breach or violation of this
Agreement by such other party or of any claim arising out of or relating to this
Agreement (any of the foregoing referred to herein as a "Dispute"). Purchaser
and Supplier shall endeavor to resolve any Dispute no later than the
9
thirtieth (30th) day following the date of receipt of a Dispute Notice. If
Purchaser and Supplier fail to resolve a Dispute during such time, such Dispute
shall be settled by arbitration in Los Angeles, California before the American
Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules then obtaining of the AAA, except that the parties shall be
entitled to conduct discovery as, in the manner and to the extent provided for
in the Federal Rules of Civil Procedure in effect from time to time. Any
judgment or award rendered by the arbitrator(s) may be entered in any court
having jurisdiction.
21. Relationship of the Parties.
The relationship between Supplier and Purchaser under this Agreement shall
be solely that of vendor and vendee. With respect to this Agreement only, it is
expressly understood and agreed by the parties hereto that nothing in this
Agreement, its provisions or transactions and relationships contemplated hereby
shall constitute either party as the agent, employee, partner or legal
representative of the other for any purpose whatsoever, nor shall either party
hold itself out as such. Neither party to this Agreement shall have the
authority to bind or commit the other party hereto in any manner or for any
purpose whatsoever, except as may be expressly provided for herein or otherwise
agreed in writing, but rather each party shall at all times act and conduct
itself in all respects and events as an independent contractor. This Agreement
alone creates no relationships of joint venturers, partners, associates or
principal and agent between the parties hereto.
22. Construction of Agreement; Entire Agreement Amendments.
This Agreement may be executed in counterparts (all of which together
shall constitute one agreement). In that this Agreement was prepared as a result
of negotiation and mutual agreement between the parties hereto, neither this
Agreement nor any provision hereof shall be construed against either party
hereto as the party who prepared this Agreement or any such provision. This
Agreement reflects the complete understanding of the parties as of the date
hereof and constitutes their entire agreement regarding the subject matter
hereof, all prior negotiations, representations and statements having been
merged herein. This Agreement may not be changed or amended orally, but by a
written amendment signed by both parties hereto.
10
IN WITNESS WHEREOF, the parties have executed this Agreement by the signature of
their respective, duly authorized corporate officers as of the day and year
first above written.
CARBON FIBER TECHNOLOGY LLC
By:
-----------------------------------
Title:
--------------------------------
SGL CARBON FIBERS AND COMPOSITES, INC.
By:
-----------------------------------
Title:
--------------------------------
11
EXHIBIT A
PRODUCTS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
1
EXHIBIT B
PRODUCT SPECIFICATIONS
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
EXHIBIT C
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
EXHIBIT D
0000 XXXXXX XXXXXXX FORECAST
[Material omitted and filed separately with the SEC pursuant to a request for
confidential treatment]
