STOCK PURCHASE AGREEMENT by and among ALCOA SECURITIES CORPORATION and ALCOA INC. and PLY GEM INDUSTRIES, INC. September 22, 2006
EXECUTION
COPY
by
and
among
ALCOA
SECURITIES CORPORATION
and
ALCOA
INC.
and
PLY
GEM
INDUSTRIES, INC.
September
22, 2006
Doc
#:NY7:264571.6
TABLE
OF CONTENTS
Exhibits
Disclosure
Letter
Article
1
- DEFINITIONS
|
Section
1.01
|
Certain
Definitions
|
|
Section
1.02
|
Additional
Defined Terms
|
Article
2
- PURCHASE AND SALE
|
Section
2.01
|
Purchase
and Sale of the Shares
|
|
Section
2.02
|
Purchase
Price
|
|
Section
2.03
|
Payment
of the Purchase Price
|
|
Section
2.04
|
Conveyance
of Excluded Assets and Excluded
Liabilities
|
Article
3
- ADJUSTMENTS TO PURCHASE PRICE
|
Section
3.01
|
Preparation
of Closing Date Balance Sheet, Closing Working Capital Statement
and
Section 481 Inventory Adjustment
|
|
Section
3.02
|
Adjustments
to Closing Date Balance Sheet
|
Article
4
- REPRESENTATIONS AND WARRANTIES
|
Section
4.01
|
Seller’s
Authority; Consents and Approval
|
|
Section
4.02
|
Organization
and Good Standing of the Company
|
|
Section
4.03
|
Capitalization;
Title to Shares
|
|
Section
4.04
|
Consents
and Approvals; No Violation
|
|
Section
4.05
|
Intellectual
Property
|
|
Section
4.06
|
Title
to Company Personal Property
|
|
Section
4.07
|
Real
Property
|
|
Section
4.08
|
Labor
Matters
|
|
Section
4.09
|
Litigation
and Proceedings
|
|
Section
4.10
|
Legal
Compliance
|
|
Section
4.11
|
Tax
Matters
|
|
Section
4.12
|
Financial
Statements; Undisclosed Liabilities; Indebtedness
|
|
Section
4.13
|
Contracts
|
|
Section
4.14
|
Employee
Benefits
|
|
Section
4.15
|
Environmental
|
|
Section
4.16
|
No
Brokers
|
|
Section
4.17
|
Products
Liability
|
|
Section
4.18
|
Product
Warranties
|
|
Section
4.19
|
Absence
of Certain Changes
|
|
Section
4.20
|
Material
Suppliers and Customers
|
|
Section
4.21
|
Related
Party Transactions
|
|
Section
4.22
|
Insurance
|
|
Section
4.23
|
Accounts
Receivable
|
|
Section
4.24
|
Inventories
|
|
Section
4.25
|
No
Other Warranties or Representations
|
Article
5
- REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
Section
5.01
|
Authority;
Consents and Approval
|
|
Section
5.02
|
Organization
and Good Standing
|
|
Section
5.03
|
Consents
and Approvals; No Violation
|
|
Section
5.04
|
No
Brokers
|
|
Section
5.05
|
Investment
Intent
|
|
Section
5.06
|
Litigation
and Proceedings
|
|
Section
5.07
|
Availability
of Funds
|
|
Section
5.08
|
No
Other Warranties or Representations
|
Article
6
- COVENANTS PENDING CLOSING
|
Section
6.01
|
Conduct
of Business
|
|
Section
6.02
|
Exercise
of Best Efforts
|
|
Section
6.03
|
No
Solicitation of Other Bids
|
|
Section
6.04
|
Supplements
to Disclosure
|
|
Section
6.05
|
Permissible
Activities
|
|
Section
6.06
|
Examination
of Books and Records; Access to Premises
|
|
Section
6.07
|
Tax
Covenants
|
|
Section
6.08
|
Cooperation
with Financing
|
|
Section
6.09
|
Termination
of Affiliate Relations; Repayment of Indebtedness
|
|
Section
6.10
|
Privacy
Policy
|
Article
7
- CONDITIONS PRECEDENT TO THE CLOSING
|
Section
7.01
|
Conditions
to the Obligations of Both Parties
|
|
Section
7.02
|
Conditions
Precedent to Obligation of Purchaser
|
|
Section
7.03
|
Conditions
Precedent to Obligation of Seller
|
Article
8
- ADDITIONAL COVENANTS OF PURCHASER AND SELLER
|
Section
8.01
|
Press
Releases
|
|
Section
8.02
|
Included
Seller Owned Software
|
|
Section
8.03
|
Assignments
|
|
Section
8.04
|
Access
and Cooperation
|
|
Section
8.05
|
Employee
Matters
|
|
Section
8.06
|
Tax
Matters
|
|
Section
8.07
|
Intentionally
Omitted
|
|
Section
8.08
|
Alcoa
Names; Purchaser’s Obligations Post-Closing
|
|
Section
8.09
|
Confidentiality
|
|
Section
8.10
|
Insurance
|
|
Section
8.11
|
Non-Competition;
Non-Solicitation
|
Article
9
- TERMINATION
|
Section
9.01
|
Termination
|
|
Section
9.02
|
Effect
of Termination
|
Article
10 - THE CLOSING
|
Section
10.01
|
Time,
Date and Place of Closing
|
|
Section
10.02
|
Seller’s
Obligations at the Closing
|
|
Section
10.03
|
Purchaser’s
Obligations at the Closing
|
Article
11 - REAL PROPERTY AND ENVIRONMENTAL MATTERS
|
Section
11.01
|
Definitions
|
|
Section
11.02
|
Environmental
Report
|
|
Section
11.03
|
Purchaser’s
Assessment
|
|
Section
11.04
|
Restrictions
on Purchaser’s Assessment
|
|
Section
11.05
|
Environmental
Indemnification
|
|
Section
11.06
|
Survival
|
Article
12 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
|
Section
12.01
|
Survival
|
Article
13 - INDEMNIFICATION
|
Section
13.01
|
Indemnification
of Purchaser by Seller
|
|
Section
13.02
|
Indemnification
of Seller by Purchaser
|
|
Section
13.03
|
Limitations
on Indemnification
|
|
Section
13.04
|
Procedures
for Indemnification
|
|
Section
13.05
|
Exclusive
Remedies
|
|
Section
13.06
|
Treatment
of Payments
|
Article
14 - MISCELLANEOUS PROVISIONS
|
Section
14.01
|
Legend
|
|
Section
14.02
|
Amendment
and Modification; Waiver
|
|
Section
14.03
|
Expenses
|
|
Section
14.04
|
Notices
|
|
Section
14.05
|
Entire
Agreement
|
|
Section
14.06
|
Successors
and Assigns
|
|
Section
14.07
|
Section Headings
|
|
Section
14.08
|
Governing
Law; Jurisdiction and Venue
|
|
Section
14.09
|
Intentionally
Omitted
|
|
Section
14.10
|
Counterparts
|
|
Section
14.11
|
Parties
in Interest
|
|
Section
14.12
|
Interpretation
|
|
Section
14.13
|
Further
Assurances
|
|
Section
14.14
|
Seller
Parent Undertaking
|
EXHIBITS
|
Support
Services Agreement
|
A
|
|
Trademark
License Agreement
|
B
|
|
Warranty
Claims Indemnity Agreement
|
C
|
|
Cross-Indemnity
Agreement
|
D
|
DISCLOSURE
LETTER
Doc
#:NY7:264571.6
THIS
STOCK PURCHASE AGREEMENT
(this
“Agreement”) is made as of the 22nd day of September, 2006, among Alcoa
Securities Corporation, a corporation organized under the laws of Delaware,
U.S.A. (hereinafter “Seller”), Alcoa Inc., a corporation organized under the
laws of Pennsylvania, U.S.A. (hereinafter “Alcoa”), and Ply Gem Industries,
Inc., a corporation organized under the laws of Delaware, U.S.A. (hereinafter
“Purchaser”).
WHEREAS,
Seller
owns 100% of the outstanding shares of common stock of Alcoa Home Exteriors,
Inc., an Ohio corporation (the “Company”); and
WHEREAS,
Seller
desires to sell all of the capital stock of the Company to Purchaser, and
Purchaser desires to purchase the capital stock of the Company from Seller,
upon
the terms and conditions set forth below.
NOW,
THEREFORE,
in
consideration of the premises and the covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
Section 1.01 Certain
Definitions.
As used
in this Agreement, the following terms have the following meanings unless the
context otherwise requires:
(a) “Affiliate”
means,
with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by Contract or otherwise.
(b) “Applicable
Tax Rate”
means
the Federal income tax rate generally applicable to corporations plus 3
percent.
(c) “Best
Efforts”
means
commercially reasonable efforts that a prudent person desiring to achieve a
result would use in similar circumstances to cause the result to be achieved
in
a timely manner; provided,
however,
that an
obligation to use Best Efforts under this Agreement does not require the person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits to that person of this Agreement and the
transactions contemplated by this Agreement.
(d) “Books
and Records”
means
all books and records and operating data in the possession of Seller or any
of
its Affiliates (including the Company) and relating principally to the Company
or the Business, including all lists of customers, lists of suppliers, all
sales
and credit information, advertising and purchasing materials and correspondence,
quotation records, resume files, payroll master files and all collection and
credit records of the Business.
(e) “Business”
means
the
manufacture, marketing, distribution and sale of aluminum, steel, vinyl and
composite siding, rain removal systems, aluminum trim and injection-molded
siding, shutters, composite and PVC vinyl decking and railing, and accessory
products for resale by third party distributors to the residential remodeling,
new construction and light commercial markets, as conducted by the
Company.
(f) “Business
Day”
shall
mean any day other than a Saturday, Sunday, or a day on which the banks in
New
York, New York are authorized or obligated by Law to close.
(g) “Claim”
means
any claim, lawsuit, demand, audit, inquiry, investigation, suit, hearing, notice
of a violation, litigation, action, proceeding, or arbitration, whether civil,
criminal, administrative or otherwise, whether at law or in equity.
(h) “Closing
Date Balance Sheet” means
the
unaudited balance sheet of the Company as of the close of business on the
Closing Date (or, if the Closing Date does not occur on the Targeted Closing
Date, the Targeted Closing Date) prepared according to Section 3.01.
(i) “Code”
means
the
Internal Revenue Code of 1986, as amended. All citations to the Code or to
the
regulations promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto.
(j) “Company
Assets”
means
any and all assets owned, licensed or leased by the Company in the Business,
including all Intellectual Property, Personal Property, Computer Software and
Contracts (including rights arising under the Support Services Agreement and
Trademark License Agreement), and the Books and Records, but excluding the
Excluded Assets.
(k) “Company
Products”
means
products manufactured, designed, serviced, distributed, leased or sold on behalf
of the Business into the Market Segment as of, or any time prior to, the Closing
Date, including vinyl, metal, composite and polypropylene siding, cladding,
soffit, fascia, trim, decking and railing, rain removal systems, and exterior
designer accents.
(l) “Computer
Software”
means
any and all computer programs, including operating system and applications
software, databases, implementations of algorithms, and program interfaces,
whether in source code or object code and all documentation and specification
including user manuals relating to the foregoing.
(m) “Contracts”
means
all contracts, leases, deeds, mortgages, licenses, instruments, notes,
commitments, undertakings, indentures, joint ventures and all other agreements,
commitments and legally binding arrangements, whether oral or
written.
(n) “EBITDA”
means
earnings before interest, taxes, depreciation and amortization as reported
by
the Company in its regularly prepared financial statements.
(o) “Employee”
means
an individual who is or was employed by the Company, whether salaried or
hourly.
(p) “Encumbrance”
means
any
mortgage, covenant, condition, Claim, easement, encroachment, right of way,
restriction, option, lien (statutory or other), pledge, charge, license,
security interest or encumbrance of any nature whatsoever.
(q) “Excluded
Assets”
means
the following assets, properties and rights owned or used by or for the benefit
of the Company on or prior to the Closing Date, which shall be excluded from
and
shall not constitute any part of the Business as of and following the Closing
Date (subject to Seller’s licensing Company the right to use certain Seller
Intellectual Property solely in conjunction with the operation of the Business,
pursuant to the Trademark License Agreement, and Purchaser’s rights under the
Support Services Agreement), the right, title and interest to which shall,
as
necessary and at the sole expense of Seller, be transferred to Seller or any
of
its Affiliates (other than the Company):
(i) all
cash
and cash equivalents that would appear on a balance sheet prepared in accordance
with GAAP as of 11:59 p.m. on the Closing Date or, if the Closing Date does
not
occur on the Targeted Closing Date, the Targeted Closing Date (it being
acknowledged and agreed that any cash or cash equivalents of the Company at
any
time thereafter shall not be deemed to constitute Excluded Assets);
(ii) all
rights and Claims relating to any of the Excluded Liabilities or the Excluded
Assets, including rights and Claims under insurance policies relating
thereto;
(iii) all
rights of the Company, Seller or any of their respective Affiliates under or
with respect to any Intercompany Accounts;
(iv) any
asset
of any Employee Benefit Plan, which is sponsored by a parent of the Company
or
Seller, except to the extent otherwise provided in Section 8.05;
(v) all
Seller Intellectual Property, all Seller Computer Hardware, all Seller Owned
Software, all Licensed Software of Seller and its Affiliates (other than the
Company) and all Seller Data;
(vi) all
policies of insurance of the Company, Seller or any of their respective
Affiliates and all of the rights of the Company, Seller or any of their
respective Affiliates thereunder, except with respect to rights to insurance
coverage under all insurance policies which are in effect prior to the Closing
to the extent they relate to the Business or the Continuing Employees;
(vii) all
assets, properties and rights of the Company, Seller or any of their respective
Affiliates identified in Section 1.01(q)(vii)
of the
Disclosure Letter;
(viii) all
names, trade names and trademarks containing the names “Aluminum Company of
America”, “Alcoa” or “Alumax” or any names, trade names and trade marks
confusingly similar thereto;
(ix) all
rights to all refunds or credits of Taxes levied or imposed upon, or in
connection with the Business, pursuant to Section 8.06;
and
(x) all
legal, accounting and tax records of Seller.
(r) “Excluded
Liabilities”
or
“Excluded
Liability”
means
the liabilities set forth in Section 1.01(r)
of the
Disclosure Letter, which are excluded from the transaction contemplated by
this
Agreement, and shall, as necessary and at the sole expense of Seller, be
transferred to and assumed by Seller or any of its Affiliates (other than the
Company) on or prior to the Closing Date pursuant to Section 2.04.
(s) “Governmental
Entity”
means
any federal, state, local or foreign government or political subdivision
thereof, or any agency or instrumentality of such government or political
subdivision, or any self-regulated organization or other non-governmental
regulating authority (to the extent that the rules, regulations or orders of
such authority have the force of Law), or to any arbitrator, tribunal or court
of competent jurisdiction.
(t) “HSR
Act” means
the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
(u) “Indebtedness”
means
the aggregate amount of the principal of, premium, if any, accrued and unpaid
interest on and prepayment penalties, make wholes, brokerage and other costs
and
expenses payable to the lenders, trustees or noteholders, if any, with respect
to all (i) indebtedness and obligations of the Company for borrowed money;
(ii)
indebtedness and obligations of the Company evidenced by bonds, debentures,
notes or similar instruments, or representing the deferred and unpaid balance
of
the purchase price of any property or assets, including all seller notes and
“earn-out” payments in connection with mergers and acquisitions transactions
(excluding accounts payable and other current operating liabilities incurred
in
the ordinary course of the Business); (iii) indebtedness and obligations of
the
Company for capitalized lease obligations with respect to conditional sale
or
title retention agreements; (iv) reimbursement obligations of the Company for
the reimbursement of any obligor on any letter of credit, performance bond,
banker’s acceptance or similar credit transaction; (v) obligations of any Person
secured by an Encumbrance to which the property or assets owned or held by
the
Company are subject, whether or not the obligation or obligations secured
thereby shall have been assumed; (vi) guarantees of or other assurances of
payment by the Company with respect to any obligations described in subparts
(i)
through (v) immediately above of another Person; and (vii) obligations of the
Company under any interest rate cap, swap, collar or similar agreement
applicable to any of the foregoing. For the avoidance of doubt, Indebtedness
shall include the banking facility established between Orbian Corp., Citibank,
N.A. and Alcoa Inc. and its Affiliates (including the Company) pursuant to
which
Citibank pays the invoices of suppliers and vendors of the Company typically
within two days of approval of invoice, applying an agreed upon discount to
the
invoices, and the Company pays Citibank the invoice amount within ninety days
of
invoice.
(v) “Intellectual
Property”
means
patents and patent applications (including any reissue, re-examination, division
or continuation-in-parts thereof), trade secrets, patentable inventions, domain
names, confidential know-how and business information, customer lists, formulae,
processes, procedures, trademarks, service marks, copyrights and trade names,
whether registered or unregistered, including any applications therefore,
proprietary indicia, trade dress, symbols, logos, brand names, or goodwill
appurtenant thereto or any intellectual property or other proprietary
information rights included therein or related thereto.
(w) “Intellectual
Property Contracts”
means
all licenses, sublicenses, consent to use agreements, covenants not to xxx
and
permissions, whether written or otherwise, relating to any Intellectual
Property.
(x) “Intercompany
Accounts”
means
the accounts listed in Section 1.01(x)
of the
Disclosure Letter, which relate to various non-trade items including certain
intercompany payables, receivables, accounts, indebtedness and other liabilities
arising prior to the Closing between the Company, on the one hand, and Seller
or
any of its Affiliates (other than the Company), on the other.
(y) “IRS”
means
the Internal Revenue Service.
(z) “Law”
means
every applicable order, writ, judgment, injunction, decree, regulation, rule,
ordinance, common law, law, statute, code, constitution or treaty promulgated,
issued, passed, adopted or otherwise made effective by any Governmental
Entity.
(aa) “Licensed
Software”
means
the Computer Software licensed by Seller or any of its Affiliates (including
the
Company) from a third party.
(bb) “Losses”
(or
“Loss” in the singular) means all damages, losses, amounts paid in settlement,
Claims, liabilities, judgments, costs and expenses, interest, penalties and
charges, including reasonable attorneys’ fees and expenses but not including
(i) punitive damages, except in the case of fraud or to the extent
actually awarded to a Governmental Entity or other third party, or (ii) any
internal fees and expenses of the Indemnitor (including without limitation
in-house counsel fees and expenses).
(cc) “Market
Segment”
means
the manufacture of products substantially similar to the Company Products for
the residential remodeling, new residential construction and light commercial
construction markets.
(dd) “Marks”
means
proprietary indicia, trademarks, service marks, trade names, trade dress,
symbols, logos and/or brand names protected under Law that are owned by the
Company or used in the operation of Business.
(ee) “Material
Adverse Effect” means
one
or more facts, events or sets of circumstances that have had or would reasonably
be expected to have, individually or in the aggregate, a material and adverse
effect on the business, assets, properties, condition (financial or otherwise)
or results of operation of the Company taken as a whole; provided,
however,
that
the following shall not be taken into account in determining whether there
has
been or would reasonably be expected to be a “Material Adverse Effect”:
(i) any adverse changes or developments in the United States economy
generally; (ii) any adverse changes or developments affecting the Market
Segment generally; (iii) any adverse changes or developments in any Law
that are not specifically directed at the Company or its assets, properties
and
rights; (iv) any adverse changes or developments that are attributable to
seasonal fluctuations in the Business; and (v) except for purposes of
Section 4.04,
any
adverse changes or developments arising primarily out of, or resulting primarily
from, actions taken by any party in connection with (but not in breach of)
this
Agreement and the transactions contemplated hereunder, or which are primarily
attributable to the announcement of this Agreement and the transactions
contemplated hereby or the identity of Purchaser (including any litigation,
employee attrition, any loss or postponement of business resulting from the
termination or modification of any vendor, customer or other business
relationships, any delay of customer orders or otherwise).
(ff) “Patents”
means
all Letters Patent and all filed or pending applications for Letters Patent,
including any reissue, reexamination, division, continuation or
continuation-in-part applications throughout the world that are owned by the
Company or used in the operation of the Business.
(gg) “Permitted
Exceptions”
means
(i) those exceptions to title to the Company Assets listed in Section 4.06
of the
Disclosure Letter; (ii) statutory liens securing all or a portion of the
purchase price of an asset of the Business which arose in connection with the
purchase of an asset of the Business after the date of the June 30, 2006 Balance
Sheet in the ordinary course of the Business consistent with past practice;
(iii) carriers’, warehousemens’, mechanics’ and materialsmens’ and other similar
liens arising in the ordinary course of the Business consistent with past
practice for sums not yet due and payable or the validity of which is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP; (iv) Encumbrances for
Taxes, assessments and other governmental charges that are not yet due and
payable or that may thereafter be paid without penalty or that are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP; (v) Encumbrances
disclosed in the Financial Statements; and (vi) other Encumbrances that are
not
material in amount or do not materially detract from the value of or materially
impair the continued use of the property affected by such Encumbrance for the
Business; provided,
that
none of the foregoing types of Encumbrances in clauses (i) - (iv) above secure
any obligations in respect of any Indebtedness of the Company.
(hh) “Permitted
Real Property Encumbrances”
means
(i) easements, covenants, rights-of-way and other encumbrances or restrictions
of record in existence on the date hereof, (ii) zoning, building and other
similar restrictions, (iii) unrecorded easements, covenants, rights-of-way
or
other restrictions, (iv) all exceptions, restrictions, easements, rights of
way
and encumbrances identified in the Commitments, and (v) non-monetary
Encumbrances that have been placed by any developer, landlord or other Person
(other than Seller or the Company) on real property over which the Company
has
easement rights; provided,
that in
the case of clause (iii), none of the foregoing, individually or in the
aggregate, materially adversely affect the value of or continued use of the
property to which they relate in the conduct of the business currently conducted
thereon.
(ii) “Person”
means
any individual, corporation, partnership, limited liability company, joint
venture, trust, business association or other entity, including any Governmental
Entity.
(jj) “Personal
Property”
means
all furniture, fixtures, machinery, equipment, vehicles (including cars,
tractors, trailers, vans and all other transportation rolling stock) and other
items of tangible personal property located on the premises of the Real Property
or otherwise used principally for the benefit of the Company or the
Business.
(kk) “Post-Closing
Tax Periods”
means
taxable periods beginning after the Closing Date and the portion beginning
immediately after the Closing Date of any taxable period that includes but
does
not end on the Closing Date.
(ll) “Pre-Closing
Tax Periods”
means
taxable periods ending on or before the Closing Date and the portion ending
on
(and including) the Closing Date of any taxable period that includes but does
not end on the Closing Date.
(mm) [Intentionally
omitted.]
(nn) “Representatives”
means,
with respect to any Person, any and all directors, officers, employees,
consultants, financial advisors, counsel, accountants and other agents of such
Person.
(oo) “Return”
or “Returns”
means
all returns, declarations, reports, claims for refund, elections, disclosures,
estimates, information reports or returns, statements, and other documents
required to be filed with a Taxing Authority in respect of Taxes including
any
schedule or attachments thereto or amendments thereof.
(pp) “Seller
Computer Hardware”
means
any computer hardware, equipment and peripherals of any kind and of any
platform, including desktop and laptop personal computers, handheld computerized
devices, mid-range and mainframe computers, process control and distributed
control systems, and network telecommunications equipment related to or used
in
connection with the businesses of Seller or any of its Affiliates, and which
is
not solely or principally related to or used in connection with the
Business.
(qq) “Seller
Data”
means
all electronically stored information and data, whether contained in a database
or otherwise, which (i) is related to the businesses of Seller or any of its
Affiliates other than the Business or (ii) is related to the Business but is
not
physically or logically separate from information and data related to Seller’s
businesses or its Affiliates other than the Business. Notwithstanding the
foregoing, with respect to clause (ii), all such data which relates to the
Business shall be deemed to be a Company Asset and not an Excluded Asset;
provided,
that
Seller shall be under no obligation to purge such data from its records or
systems and Seller shall be permitted access to such data for reasonable use,
such as the preparation of tax filings.
(rr) “Seller
Owned Software”
means
Computer Software created by or on behalf of Seller or any of its Affiliates
and
owned by Seller or any of its Affiliates other than the Company.
(ss) “Target
Working Capital”
means
approximately $60,950,000. Section
1.01(xx)
of the
Disclosure Letter sets forth a sample calculation of the Target Working Capital
and the parties agree that the Closing Working Capital will be calculated in
a
manner consistent with such schedule.
(tt) “Tax”
or “Taxes”
means
all Federal, state, local, foreign or other governmental taxes, assessments,
duties, fees, levies or similar charges of any kind, including all income,
receipts, ad valorem, transfer, license, lease, service, service use, severance,
stamp, occupation, premium, property, windfall profits, customs, duties, profit,
franchise, excise, property, use, intangibles, sales, payroll, employment,
withholding, environmental and other taxes, fees, like assessments or charges
of
any kind whatsoever and including all interest, penalties, additions to tax
or
additional amounts imposed with respect to such amounts by a Taxing Authority,
whether disputed or not and including any obligations to indemnify or otherwise
assume or succeed to the tax liability of any other person.
(uu) “Taxing
Authority”
means
the IRS and any other domestic or foreign Governmental Entity responsible for
the administration and/or collection of any Tax.
(vv) “Transaction
Documents”
means
the Support Services Agreement, the Warranty Claims Indemnity Agreement and
the
Trademark License Agreement.
(ww) “to
the best of Seller’s knowledge”
or
“to
the best knowledge of Seller”
for the
purposes of this Agreement means the knowledge of the persons listed in
Section 1.01(ww)
of the
Disclosure Letter. Where any statement in this Agreement is expressed to be
given or made to Seller’s knowledge or is qualified in some other manner having
substantially the same effect, such statement shall be deemed to be qualified
by
the additional statement that such knowledge is limited to the actual knowledge
of the persons listed in Section 1.01(ww)
of the
Disclosure Letter, after having made reasonable enquiries of the senior
management of the Business prior to the Closing Date in respect of the subject
matter of the relevant statement; provided,
however,
that
such persons shall be deemed to have actual knowledge of the Financial
Statements, the documents posted in the electronic data room, the Environmental
Report, this Agreement and any and all Sections of the Disclosure Letter and
Exhibits.
(xx) “Working
Capital”
shall be
determined, as of the applicable date and time in accordance with Section 1.01(xx)
of the
Disclosure Letter. Notwithstanding anything to the contrary set forth in this
Agreement, in calculating Working Capital, (x) the portion of any prepaid
expense of which Purchaser will not receive the benefit following the Closing
Date (or, if the Closing Date does not occur on the Targeted Closing Date,
the
Targeted Closing Date) shall be disregarded, and (y) the portion of any item
attributable to any transactions or arrangements with Seller or any of its
Affiliates (other than the Company) shall be disregarded.
Section 1.02
Additional Defined Terms.
For
purposes of this Agreement, the following terms shall have the meaning specified
in the Section or Section of the Disclosure Letter indicated below:
TermSection or
Disclosure Letter Section
|
“AHE
Pension Plan”
|
Section 8.05(e)
|
|
“Acquisition
Proposal”
|
Section 6.03(a)
|
|
“Actions”
|
Section 6.07(c)
|
|
“Administered
Claims”
|
Section 8.10(b)
|
|
“Agreement”
|
Preamble
|
|
“Alcoa”
|
Preamble
|
|
“Applicable
Environmental Law”
|
Section 11.01(b)
|
|
“Audited
Financial Statements”
|
Section 4.12(a)(ii)
|
|
“Basis
of Financial Statement Presentation”
|
Section 3.01
|
|
“Cap
Amount”
|
Section 13.03(b)
|
|
“CERCLA”
|
Section 11.01(b)
|
|
“Consent”
|
Section
8.05(k)
|
|
“Closing”
|
Section 10.01
|
|
“Closing
Date”
|
Section 10.01
|
|
“Closing
Working Capital”
|
Section 3.01
|
|
“Closing
Working Capital Statement”
|
Section 3.01
|
|
“Commitments”
|
Section 4.07(a)
|
|
“Commitment
Letter”
|
Section 5.07(a)
|
|
“Company”
|
Preamble
|
|
“Company
Intellectual Property”
|
Section 4.05(c)
|
|
“Company
Marks”
|
Section 4.05(a)(i)
|
|
“Company
Patents and Copyrights”
|
Section 4.05(a)(ii)
|
|
“confidential
information or documents”
|
Section 8.09(b)
|
|
“Confidentiality
Agreement”
|
Section 6.06
|
|
“Consent”
|
Section
8.05(k)
|
|
“Contest”
|
Section 8.07(m)
|
|
“Continuing
Employees”
|
Section 8.05(a)
|
|
“CPA
Firm”
|
Section 3.02(a)
|
|
“Customer
Information”
|
Section
4.05(i)
|
|
“Deductible”
|
Section 13.03(a)
|
|
“Direct
Claim”
|
Section 13.04(c)
|
|
“Employee
Benefit Plans”
|
Section 4.14(a)
|
|
“Environmental
Permits”
|
Section 4.15(a)
|
|
“Environmental
Report
|
Section 11.02
|
|
“ERISA”
|
Section 4.14(a)(i)
|
|
“Excess
Plan”
|
Section 8.05(e)
|
|
“Final
Section 481 Inventory Adjustment”
|
Section 3.02(a)
|
|
“Final
Working Capital Statement”
|
Section 3.02(a)
|
|
“Financial
Statements”
|
Section 4.12(a)
|
|
“Financing”
|
Section 6.08(a)
|
|
“GAAP”
|
Section 4.12(a)(i)
|
|
“Gains
Taxes”
|
Section
4.04(b)
|
|
“Hazardous
Substance”
|
Section 11.01(a)
|
|
“HIP”
|
Section
8.05(h)
|
|
“HSR
Act
|
Section 4.04(b)
|
|
“IC”
|
Section
8.05(h)
|
|
“Included
Seller Owned Software”
|
Section 8.02
|
|
“Indemnitee”
|
Section 13.03
|
|
“Indemnitor”
|
Section 13.03
|
|
“Insurance
Payment”
|
Section 8.10(c)
|
|
“Interest
Rate”
|
Section 2.03
|
|
“June
30, 2006 Balance Sheet”
|
Section 4.12(a)
|
|
“June
30 Balance Sheet”
|
Section 4.12(a)(i)
|
|
“Lease”
|
Section 4.07(b)
|
|
“Leased
Property”
|
Section 4.07(b)
|
|
“Lenders”
|
Section 5.07(a)
|
|
“Liabilities”
|
Section 4.12(b)
|
|
“License”
|
Section 8.02
|
|
“Lenders”
|
Section 5.08(a)
|
|
“Material
Contract”
|
Section 4.13(a)
|
|
“MIP
|
Section
8.05(h)
|
|
“Multiple
Employer Plan”
|
Section 4.14(a)
|
|
“Necessary
Consents”
|
Section 8.02(b)
|
|
“Objection”
|
Section 3.02(a)
|
|
“Order”
|
Section 4.10
|
|
“Owned
Property”
|
Section 4.07(a
|
|
“participation”
|
Section 8.06(m)
|
|
“PBGC”
|
Section 4.14(a)(iii)
|
|
“Permits”
|
Section 4.10
|
|
“Post-Signing
Returns
|
Section 6.07(a)
|
|
“Post-Closing
Tax Period”
|
Section
8.05(k)
|
|
“Pre-Closing
Taxes”
|
Section
8.06(e)
|
|
“Purchaser”
|
Preamble
|
|
“Purchaser
Assignment”
|
Section 11.03
|
|
“Purchaser
DB Plans”
|
Section 8.05(e)
|
|
“Purchaser
DC Plans”
|
Section 8.05(d)
|
|
“Purchaser
Deductible Exclusion”
|
Section 13.03(a)
|
|
“Purchaser
Indemnitees”
|
Section
13.01
|
|
“Purchase
Price”
|
Section 2.02
|
|
“Purchase
Termination Fee”
|
Section 9.02
|
|
RCRA”
|
Section 11.01(b)
|
|
“Real
Property
|
Section 4.07(c)
|
|
“Related
Party”
|
Section 4.21
|
|
“Relocated
Employees”
|
Section 8.05(n)
|
|
“Relocation
Arrangements”
|
Section 8.05(n)
|
|
“Retiree
Eligible Employees”
|
Section
8.05(d)
|
|
“SEC”
|
Section 8.04
|
|
“Section
481 Inventory Adjustment Period”
|
Section
8.06(k)
|
|
“Securities
Act”
|
Section 5.06
|
|
“Seller”
|
Preamble
|
|
“Seller
DB Plans”
|
Section 8.05e)
|
|
“Seller
DC Plans”
|
Section 8.05(d)
|
|
“Seller
Indemnitees”
|
Section
13.02
|
|
“Seller
Intellectual Property”
|
Section
4.05(a)(i)
|
|
“Seller
Insurance Policies”
|
Section 8.10(a)
|
|
“Seller
Intellectual Property”
|
Section 4.05(a)(v)
|
|
“Shares”
|
Section 4.03
|
|
“SMIP”
|
Section
8.05(h)
|
|
“Straddle
Period”
|
Section 8.06(c)
|
|
“Targeted
Closing Date”
|
Section 10.01
|
|
“Tax
Benefits
|
Section 13.03(d)
|
|
“Tax
Loss”
|
Section 8.06(e)
|
|
“Tax
Sharing Agreement”
|
Section
8.06(e)
|
|
“Third
Party Claim”
|
Section 13.04(a)
|
|
“Third
Party Marks”
|
Section 4.05(a)(iv)
|
|
“Third
Party Patents”
|
Section 4.05(a)(v)
|
|
“Title
Company”
|
Section 4.07(a)
|
|
“Unaudited
Financial Statements”
|
Section 4.12(a)(i)
|
|
“WARN
Act”
|
Section
4.14(g)
|
ARTICLE
2
PURCHASE
AND SALE
Section 2.01
Purchase and Sale of the Shares. Subject
to the terms and conditions set forth in this Agreement, on the Closing Date,
Seller hereby agrees to transfer, sell and convey the Shares to Purchaser,
and
Purchaser hereby agrees to purchase the Shares from Seller for the consideration
specified in this Agreement. Notwithstanding anything to the contrary contained
herein, neither Purchaser nor any of its Affiliates (including the Company
after
the Closing) will purchase, assume or be bound by, or be obligated or
responsible for, any Excluded Asset or Excluded Liability.
Section 2.02
Purchase Price. As
consideration for the sale of the Shares to Purchaser, Purchaser shall pay
to
Seller US$305,000,000 plus or minus any amount owed to Seller or required to
be
refunded to Purchaser pursuant to Section 3.02(c).
This
sum is the “Purchase Price”.
Section 2.03
Payment of the Purchase Price.
Purchaser shall pay US$305,000,000 to Seller in cash on the Closing Date.
Purchaser shall transfer to a bank specified by Seller by wire transfer of
immediately available funds no later than 1:00 (one o’clock) in the afternoon
(New York City Time) the amount of US$305,000,000. Any adjustment to
the Purchase Price will be paid in accordance with Section 3.02(c).
Section 2.04
Conveyance of Excluded Assets and Excluded Liabilities.
Immediately prior to the Closing, Seller shall cause at Seller’s expense the
Company to sell, assign, transfer and convey to Seller or one or more of its
Affiliates (other than the Company), and Seller and such Affiliates shall accept
the sale, assignment, transfer and conveyance of, for no consideration, the
Excluded Assets and to deliver to Seller or such Affiliates appropriately
executed instruments of sale, assignments, transfers, tax declarations, and
other instruments of conveyance that are necessary or desirable to effect
transfer to Seller or such Affiliates of good and marketable title to the
Excluded Assets, including a xxxx of sale in form and substance reasonably
satisfactory to Seller. Immediately prior to the Closing, Seller shall cause
the
Company to assign to Seller or one or more of its Affiliates, and Seller and
such Affiliates shall assume or otherwise agree to perform and discharge when
due, for no consideration, all of the Excluded Liabilities and to deliver to
the
Company appropriately executed instruments of assignment, in form and substance
reasonably satisfactory to Purchaser, together with such other assignment,
transfer, tax declarations and other instruments of conveyance that are
necessary or desirable to effect transfer of the Excluded Liabilities to Seller
or it Affiliates.
ARTICLE
3
ADJUSTMENTS
TO PURCHASE PRICE
Section 3.01
Preparation of Closing Date Balance Sheet, Closing Working Capital Statement
and
Section 481 Inventory Adjustment.
Within
sixty (60) days following the Closing Date, Purchaser shall prepare, or cause
to
be prepared, and deliver to Seller (a) the Closing Date Balance Sheet, (b)
based
on the Closing Date Balance Sheet, a statement (the “Closing Working Capital
Statement”) which shall set forth an itemized calculation of the Working Capital
of the Company as of the close of business on the Closing Date (or, if the
Closing Date does not occur on the Targeted Closing Date, the Targeted Closing
Date) (the “Closing Working Capital”) and (c) the amount of the
Section 481 Inventory Adjustment (as defined in Section 8.06(k)).
Closing Working Capital shall be calculated in the same manner as the parties
calculated the Target Working Capital in accordance with Section
1.01(xx)
of the
Disclosure Letter, except that Closing Working Capital shall be calculated
as of
the close of business on the Closing Date (or, if the Closing Date does not
occur on the Targeted Closing Date, the Targeted Closing Date). The Closing
Date
Balance Sheet and Closing Working Capital Statement shall be prepared in
accordance with the Basis of Financial Statement Presentation set forth in
Section 3.01
of the
Disclosure Letter. Notwithstanding the foregoing, Excluded Assets and Excluded
Liabilities will not be taken into account for purposes of preparing the Closing
Balance Sheet and Closing Working Capital Statement.
Section 3.02
Adjustments to Closing Date Balance Sheet.
(a) Seller
and its accountants shall have thirty (30) days after the delivery of the
Closing Working Capital Statement and Section 481 Inventory Adjustment to
review the Closing Working Capital and Section 481 Inventory Adjustment. In
reviewing the Closing Working Capital Statement and Section 481 Inventory
Adjustment (and response to the Objection by Purchaser, if applicable), Seller
and its accountants shall have reasonable access to the work papers of Purchaser
and its accountants (subject to the reviewing parties executing any necessary
waivers or indemnifications required by Purchaser’s accountants) as well as the
accountants, finance personnel and other books and records of Purchaser relevant
to the review of the Closing Working Capital Statement and Section 481 Inventory
Adjustment. If Seller reasonably determines that the Closing Working Capital
Statement and/or the Section 481 Inventory Adjustment have not been prepared
in
the manner set forth in Section 3.01
of the
Disclosure Letter for the Closing Working Capital Statement or Section
8.06(k)
for the
Section 481 Inventory Adjustment, Seller shall inform Purchaser in writing
(an
“Objection”), setting forth a specific description of the basis of the Objection
and the adjustments to the amount of the Closing Working Capital or change
in
the Section 481 Inventory Adjustment that Seller believes should be made,
which Objection must be delivered to Purchaser on or before the last day of
such
30-day period. Purchaser shall then have thirty (30) days to review and respond
to the Objection. The parties shall attempt in good faith to reach an agreement
with respect to any matters in dispute. If the parties are unable to resolve
all
of their disagreements with respect to the determination of the foregoing items
within thirty (30) days following the delivery of Purchaser’s response to the
Objection, they shall refer their remaining differences to a nationally
recognized independent public accounting firm as mutually agreed to by the
parties (the “CPA Firm”), which shall, acting as experts and not as arbitrators,
determine in accordance with this Agreement, and only with respect to the
remaining differences so submitted, whether and to what extent, if any, the
Closing Working Capital or change in the Section 481 Inventory Adjustment
requires adjustment. Each party shall submit to the CPA Firm its position with
respect to the adjustments to the amount of the Closing Working Capital and/or
the change in the Section 481 Inventory Adjustment, as applicable. The parties
shall direct the CPA Firm to use its best efforts to render its determination
within thirty (30) days after such submission. The CPA Firm’s determination
shall be conclusive and binding upon Purchaser and Seller. Seller shall pay
a
portion of the fees and disbursements of the CPA Firm equal to 100% multiplied
by a fraction the numerator of which is the dollar amount of the Objections
submitted to the CPA Firm that are resolved in favor of Purchaser (that being
the difference between the CPA Firm’s determination and Seller’s determination)
and the denominator of which is the total amount of Objections submitted to
the
CPA Firm (that being the sum total by which Purchaser’s determination and
Seller’s determination differ from the determination of the CPA Firm). Purchaser
shall pay that portion of the fees and disbursements of the CPA Firm that Seller
is not required to pay hereunder. Purchaser and Seller shall make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties’ respective accountants (subject to the CPA Firm
executing any such waivers or indemnifications required by the parties’
accountants)) relating to the Closing Working Capital Statement and all other
items reasonably requested by the CPA Firm. The “Final Working Capital
Statement” shall be deemed to be (i) the Closing Working Capital Statement
if no Objection is delivered by Seller with respect thereto during the
thirty-day period specified above, or (ii) if an Objection is delivered by
Seller with respect thereto within
the 30-day period following delivery of the Closing Balance Sheet by Purchaser
to Seller, the Closing Working Capital Statement, as adjusted by either (A)
the
agreement of the parties or (B) the CPA Firm; and the “Final Section 481
Inventory Adjustment” shall be deemed to be (i) the Section 481 Inventory
Adjustment as determined by Purchaser if no Objection is delivered by Seller
with respect thereto during the thirty-day period specified above, or (ii)
if an
Objection is delivered by Seller with respect thereto within
the 30-day period following delivery of the Closing Balance Sheet by Purchaser
to Seller, the Section 481 Inventory Adjustment, as adjusted by either (A)
the
agreement of the parties or (B) the CPA Firm.
(b) In
reviewing any Objection, Purchaser and its accountants shall have access to
the
work papers of Seller and its accountants (subject to the reviewing party
executing any necessary waivers or indemnifications required by Seller’s
accountants).
(c) If
the
Closing Working Capital as reflected on the Final Working Capital Statement
is
less than the Target Working Capital, then the Purchase Price will be decreased
by the shortfall in the Closing Working Capital on a dollar-for-dollar basis
and, within ten (10) Business Days following the date on which the Closing
Working Capital Statement is deemed to be the Final Working Capital Statement,
Seller shall make payment in immediately available funds to Purchaser equal
to
such shortfall. If the Closing Working Capital as reflected on the Final Working
Capital Statement is more than the Target Working Capital, then the Purchase
Price will be increased by such excess of the Closing Working Capital on a
dollar-for-dollar basis and, within ten (10) Business Days following the date
on
which the Closing Working Capital Statement is deemed to be the Final Working
Capital Statement, Purchaser shall make payment in immediately available funds
to Seller equal to such excess.
(d) The
parties agree that any obligations that will be paid by Seller or its Affiliates
(other than the Company), including any obligations specifically retained by
Seller or its Affiliates (other than the Company) under the terms of this
Agreement, shall be excluded from the Closing Date Balance Sheet, the Closing
Working Capital Statement and the Final Working Capital Statement, and shall
therefore be excluded from the determination of Closing Working
Capital.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
hereby makes the following representations and warranties to
Purchaser:
Section 4.01
Seller’s Authority; Consents and Approval.
Seller
is a corporation duly organized, validly existing and in good standing under
the
Laws of the State of Delaware and has full corporate power and authority to
carry on its business as currently conducted and to own the Shares. Seller
and
Alcoa have full corporate power and authority to enter into this Agreement
and
the Transaction Documents and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and
each
of the Transaction Documents to which Seller and Alcoa is or will be a party
and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by Seller and Alcoa and no other corporate
proceedings on the part of Seller or Alcoa is necessary to authorize this
Agreement or the Transaction Documents or to consummate the transactions
contemplated hereby and thereby. This Agreement has been, and the Transaction
Documents will be at the Closing, duly and validly executed and delivered by
Seller and Alcoa and constitutes, or will constitute at the Closing, legal,
valid, binding and enforceable agreements of Seller and Alcoa, enforceable
against each in accordance with their terms, except as limited (a) by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Law
affecting creditors’ rights generally, and (b) by general principles of equity
(regardless of whether enforcement is sought in equity or at law). Subject
to
Section 4.04(b)
and
except as otherwise set forth in Section 4.01
of the
Disclosure Letter, no further action, approvals or consents are necessary from
any third persons, Governmental Entities or otherwise, to make this Agreement
and such Transaction Documents valid and binding upon and enforceable in
accordance with their respective terms, or to enable Seller and Alcoa to perform
this Agreement and such Transaction Documents and the transactions contemplated
thereby.
Section 4.02
Organization and Good Standing of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Ohio and has full corporate power and authority
to carry on its business as currently conducted and to own or lease and to
operate the properties and assets that it now owns or leases. The Company is
duly qualified and in good standing as a foreign corporation in each
jurisdiction where the current nature of its business or the ownership or
leasing of its properties and assets requires such qualification, except where
failure to so qualify or be in good standing would not have a Material Adverse
Effect. The certificate of incorporation and by-laws of the Company (as amended)
have heretofore been made available to Purchaser and are in full force and
effect and the Company is not in violation of any provision thereof. The minute
books of the Company have heretofore been made available to Purchaser and
accurately reflect in all material respects all transactions and discussions
referred to in such minutes and consents in lieu of meetings. The stock books
of
the Company have been made available Purchaser and are true and
complete.
Section 4.03
Capitalization; Title to Shares.
(a) Capital
Shares.
The
capital stock of the Company consists solely of 500 shares of common stock,
par
value of $100 per share, of which 275 shares are issued and outstanding, and
250
shares of preferred stock, par value of $100 per share, of which 0 shares are
issued and outstanding (collectively, the “Shares”). All of the issued and
outstanding Shares are duly authorized, validly issued and outstanding, fully
paid and non-assessable. The Shares have been issued, and will be transferred
to
Purchaser, in compliance with any preemptive rights or rights of first refusal
of any Person and all applicable Laws. There are no outstanding subscriptions,
options, warrants, calls, preemptive rights or rights of any kind to purchase
or
otherwise acquire, and no securities convertible into or exchangeable for,
capital stock or other securities of the Company and there is no commitment
or
agreement to grant any such right of security. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote or
convertible into, or exchangeable for, securities having the right to vote
on
any matters on which shareholders of the Company are required to
vote.
(b) Title
to Shares.
Seller
is the owner, beneficially and of record, of all of the Shares. All of the
Shares are free and clear of all Encumbrances. Upon delivery to Purchaser of
the
stock certificates representing the Shares and payment for the Shares at the
Closing as provided in this Agreement, Seller will convey to Purchaser good
and
valid title to the Shares, free and clear of any Encumbrance, other than those
created by Purchaser.
(c) No
Subsidiaries or Investments.
The
Company does not own, directly or indirectly, any capital stock of or other
equity or voting interests in any corporation, limited liability company,
partnership, joint venture, association or other entity.
Section 4.04
Consents and Approvals; No Violation. Neither
the execution, delivery or performance by Seller, Alcoa or the Company of this
Agreement or the Transaction Documents nor the consummation by Seller, Alcoa
or
the Company of the transactions contemplated hereby or thereby
will:
(a) conflict
with or result in any breach of any provision of the articles or certificates
of
incorporation or by-laws or comparable charter or organizational documents
of
Seller, Alcoa or the Company;
(b) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) in connection with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of
1976, as amended (the “HSR Act”), (B) in connection with any state or local tax
which is attribut-able to the beneficial ownership of the Company’s real
property (collectively, the “Gains Taxes”) set forth in Section 4.04(b)(B)
of the
Disclosure Letter, (C) such filings and consents as may be required under any
Applicable Environmental Law pertaining to any notification, disclosure or
required approval triggered by the transactions contemplated by this Agreement
set forth in Section 4.04(b)(C)
of the
Disclosure Letter, and (D) such filings, consents, approvals, orders,
registrations and declarations as may be required under the merger notification
or foreign investment Laws of any foreign country in which Seller or the Company
conducts any business or owns any assets set forth in Section 4.04(b)(D)
of the
Disclosure Letter;
(c) except
as
set forth in Section 4.04(c)
of the
Disclosure Letter, result in a violation or breach of, or constitute (with
or
without due notice or lapse of time or both) a default (or give rise to any
right of consent, termination, amendment, modification, cancellation or
acceleration or Encumbrance or loss of a material benefit) under any of the
terms, conditions or provisions of any Material Contract to which Alcoa is
a
party or any Material Contract, except in any such case where requisite waivers
or consents have been obtained; or
(d) assuming
the consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 4.04
are duly
and timely obtained or made, violate in any material respect any Law applicable
to Seller or the Company, to any of their respective properties or assets
(including the Shares).
Section 4.05
Intellectual Property.
(a) (i) Section 4.05(a)(i)
of the
Disclosure Letter sets forth a true and complete list of all Marks owned by
the
Company, indicating the owner of such Marks, and all applications, registrations
and grants with respect thereto (collectively, the “Company
Marks”).
(ii) Section 4.05(a)(ii)
of the
Disclosure Letter sets forth a true and complete list of all Patents and
copyright registrations or applications owned by the Company, indicating the
owner of such Patents and copyrights, and all applications, registrations and
grants with respect thereto (collectively, the “Company Patents and
Copyrights”).
(iii) Section 4.05(a)(iii)
of the
Disclosure Letter sets forth a true and complete list of all domain names owned
by and registered to the Company.
(iv) Section 4.05(a)(iv)
of the
Disclosure Letter sets forth a true and complete list of all Marks owned by
any
third party(ies) that are licensed to the Company and material to the Business,
indicating the licensor of such Marks (the “Third Party Marks”).
(v) Section 4.05(a)(v)
of the
Disclosure Letter sets forth a true and complete list of all Patents owned
by
any third party(ies) that are licensed to the Company and material to the
Business, indicating the licensor of such Patents (the “Third Party
Patents”).
(vi) Section 4.05(a)(vi)
of the
Disclosure Letter sets forth a true and complete list of all Marks and Patents
owned by Seller or an Affiliate of Seller (other than the Company) which are
used by the Company in the Business, indicating the owner of such Marks and
Patents (collectively, the “Seller Intellectual Property”).
(b) Section 4.05(b)
of the
Disclosure Letter sets forth a true and complete list of the Seller Owned
Software and Licensed Software necessary and material to the operation of the
Business other than subscription based services utilizing Computer Software
(e.g., anti-virus, anti-spam, filtering, Internet Services) that are
commercially available under non-discriminatory pricing terms and acquired
on a
retail basis and used solely on the desktop personal computers of the Company.
Subject to the terms of the applicable Intellectual Property Contract for such
software, the Company has the valid right to use the Seller Owned Software
and
Licensed Software; provided,
however,
that
subject to Section 8.02
and the
Support Services Agreement, Seller does not make any representation or warranty
that the Seller Owned Software and Licensed Software (other than Licensed
Software of the Company) identified in Section 4.05(b)
of the
Disclosure Letter, or any reasonable substitute thereof will be delivered with
the Company or to Purchaser on or after the Closing Date. The Seller Owned
Software and, to the best of Seller’s knowledge the Licensed Software, perform
substantially in conformance with its documentation and is free from any bugs,
viruses, malicious code or other defect which would materially affect the
Business; provided,
however,
that
Seller shall not be in breach of the foregoing with respect to defects and
bugs
corrected by updates and fixes supplied by the licensor of Licensed Software
from time to time. The Company is in compliance with each material Intellectual
Property Contract to which it is a party, and subject to this Section
4.05(b)
and
Section
8.02,
each
such Intellectual Property Contract shall remain in full force and effect
following the consummation of the transactions contemplated herein.
(c) Other
than as set forth in Section
4.05(c)
of the
Disclosure Letter, the Company owns or has the right to use all material
Intellectual Property used in connection with the Business (the “Company
Intellectual Property”), none of the Intellectual Property owned by the Company
is subject to an Encumbrance other than non-exclusive licenses, and no
Encumbrance materially interferes with the Company’s use of any Intellectual
Property owned by any third party.
(d) To
the
best knowledge of Seller, the Company Marks, the Company Patents and Copyrights,
the Seller Intellectual Property and the material trade secrets of the Company
are valid and enforceable and has not been cancelled, forfeited, expired or
abandoned except as provided in Section 4.05(d)
of the
Disclosure Letter.
(e) Except
as
set forth in Section 4.09
of the
Disclosure Letter, there are no Claims which relate to the conduct of the
Business pending, instituted, threatened or asserted in writing against Seller
or Company alleging any violation or infringement by Seller or any of its
Affiliates (including the Company) of any intellectual property rights of any
third party, and, to the best knowledge of Seller, the conduct of the Business
has not in the past three (3) years and does not infringe or otherwise violate
the Intellectual Property rights of any third party.
(f) Except
as
set forth in Section 4.05(f)
of the
Disclosure Letter, there are no Claims which relate to the conduct of the
Business pending, and none have been served, instituted or asserted by Seller
or
Company or any of their Affiliates, in which Seller, Company or any of their
Affiliates allege that any third party is infringing upon, or otherwise
violating, any Company Intellectual Property or Seller Intellectual Property,
and to the best of Seller’s knowledge, no person is infringing upon or otherwise
violating any rights of the Company with regard to Company Intellectual
Property.
(g) The
Company has put forth reasonable commercial efforts to maintain and protect
each
item of Company Intellectual Property owned or purported to be owned by the
Company, including taking reasonable or necessary actions and precautions to
protect the value of such Company Intellectual Property.
(h) Except
as
set forth in Section
4.09
of the
Disclosure Letter and as set forth in Section
4.05(b),
after
the consummation of the transactions contemplated by this Agreement and the
Transaction Documents, the Company will own or have the right to use the Company
Intellectual Property on identical terms and conditions as the Company enjoyed
immediately prior to such transactions or otherwise subject to the Trademark
License Agreement or the Support Services Agreement.
(i) The
Company has not collected, received or used any information, including
non-public financial information, from customers and other parties (“Customer
Information”) in an unlawful manner or in violation of any applicable privacy
policies. The Company has reasonable and appropriate security measures and
safeguards in place to protect the Customer Information it receives from illegal
or unauthorized access or use by its personnel or third parties or access or
use
by its personnel or third parties in a manner violative of any Laws, its privacy
policies or the privacy rights of third parties. To the best knowledge of
Seller, no Person has gained unauthorized access to or made any unauthorized
use
of any Customer Information. Subject to Section 4.05(i)
of the
Disclosure Letter, the consummation of the transactions contemplated herein
will
not violate the privacy policy of the Company as it currently exists or as
it
existed at any time during which any of the Customer Information was collected
or obtained.
Section 4.06
Title to Company Personal Property.
Subject
to the Permitted Exceptions and except as set forth in Section 4.06
of the
Disclosure Letter, the Company owns outright and has good, valid and marketable
title to, or, in the case of leased assets, has a valid leasehold interest
in,
all Personal Property owned or used by the Company, including the assets
reflected in the June 30, 2006 Balance Sheet (but excluding Personal
Property disposed of in the ordinary course of business since June 30,
2006). Subject to ordinary wear and tear and the continuing performance of
ordinary maintenance (including such maintenance as is recommended by the
manufacturer of Personal Property), the Personal Property currently being used
in the Business is free from material defects and is in satisfactory operating
condition and repair. Subject to the terms and conditions of the Transaction
Documents, and the exceptions and conditions set forth in Sections 4.05(b),
8.02
and
8.03,
the
Company Assets constitute all of the assets and properties owned, leased, used
or licensed by the Company and are sufficient for the continued conduct and
operation of the Business after the Closing in the same manner as conducted
and
operated prior to the Closing Date.
Section 4.07
Real Property.
(a) Section 4.07(a)
of the
Disclosure Letter sets forth a true and complete list of all real property
that
is owned by the Company (individually, an “Owned Property”). All improvements on
the Owned Property have been maintained in accordance with the Company’s usual
business practices, and to the best of Seller’s knowledge there exist no patent
defects with respect to said improvements. To the best of Seller’s knowledge,
none of the Owned Property or any current use thereof violates any applicable
building, zoning or other land-use Laws. Seller has, at its sole cost and
expense, caused Xxxxxxx Title Insurance Company (the “Title Company”) to issue
its commitments for an owner’s fee policy of title insurance on the Owned
Property and has furnished a copy to Purchaser (the “Commitments”). As of the
Closing Date, the Owned Property will be owned by the Company free and clear
of
all Encumbrances, excepting only the Permitted Real Property
Encumbrances.
(b) Section 4.07(b)
of the
Disclosure Letter sets forth a true and complete list of all leases of real
property that will be leased to the Company or leased by the Company to any
third party (the “Leased Property”). Where the Company is a lessee of Leased
Property, it is or on the Closing Date will be in possession of the Leased
Property purported to be leased thereunder (with the exception of any lease
set
forth in Section
4.07(b)
of the
Disclosure Letter which by its own terms provides that the lease term will
expire before the Closing Date, or which has a term that runs month-to-month).
Where the Company is a lessor of Leased Property, it is or on the Closing Date
will be the lessor of the Leased Property specified therein. Each Leased
Property is leased pursuant to a lease (a “Lease”) that is in full force and
effect and is enforceable against the Company and, to the best of Seller’s
knowledge, the other party or parties thereto, except as limited (a) by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Law affecting creditors’ rights generally, and (b) by general principles of
equity (regardless of whether enforcement is sought in equity or at law). Except
as set forth in Section 4.07(b)
of the
Disclosure Letter, true and complete copies of each Lease (including each
amendment, supplement or other modification thereto) have been made available
to
Purchaser. The Company is not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material respect under any
Lease. To the best of Seller’s knowledge, none of the other parties to any Lease
is (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder. The Company has not
received any written notice of the intention of any party to terminate
prematurely any Lease, whether as a termination for convenience or for default
of the Company thereunder.
(c) Except
as
disclosed as Section 4.07(c)
of the
Disclosure Letter, the Owned Property and Leased Property consists of all real
property owned or leased by the Company (the Owned Property and Leased Property
will be referred to collectively herein as the “Real Property”).
(d) None
of
the Owned Property is subject to a pending condemnation, expropriation, eminent
domain or similar proceeding and, to the best of Seller’s knowledge, no such
proceeding is pending against the Leased Property.
Section 4.08
Labor Matters.
Except
as set forth in Section 4.08
of the
Disclosure Letter, the Company is not subject to any (i) collective bargaining
or other labor agreement relating to the Business to which Seller or the Company
is a party, or by which either is bound; or (ii) employment, retainer, or
consulting agreement that gives rise to any payment obligation in excess of
$50,000 thereunder to any of the employees of the Business to which the Company
is a party, or by which it is bound. Since the date that is three (3) years
prior to the Closing Date, the Company has not committed any material unfair
labor practice with respect to the Business.
Section 4.09
Litigation and Proceedings. Except
as
set forth in Section 4.09
of the
Disclosure Letter, there are no Claims pending or, to the best of Seller’s
knowledge threatened against Seller or any of its Affiliates (including the
Company), relating to the Company or the Business (i) involving more than
$100,000 in claims or damages, (ii) that could reasonably result in
equitable relief, or (iii) that questions the legality of the transactions
contemplated by this Agreement or any Transaction Document. To the best of
Seller’s knowledge, no Claim set forth in Section 4.09
of the
Disclosure Letter, individually or in the aggregate where such Claims arise
out
of related events or circumstances, would reasonably be expected to have a
Material Adverse Effect on the Company or the Business. There are no outstanding
judgments, decrees, injunctions, rulings, awards, decisions, verdicts, writs
or
orders of any nature of any Governmental Entity (a) against or involving the
Business, the Company or the Company Assets, which have continuing obligations
that have not been fully satisfied or (b) to the best knowledge of Seller,
against or involving any officer or director of the Company that prohibit such
officer or director from engaging in or continuing any material conduct,
activity or practice relating to the Business or the Company.
Section 4.10
Legal Compliance.
Except
as set forth in Section 4.10
of the
Disclosure Letter and as otherwise set forth in this Section 4.10,
as it
pertains to the Business, the Company and the Company Assets, (a) Seller and
each of its Affiliates (including the Company) are and during the past three
years have been in compliance in all material respects with all Laws, and (b)
the Company possesses all requisite governmental franchises, licenses, permits,
authorizations, registrations, permanent certificates of occupancy,
certificates, approvals and consents (“Permits”) to carry on the Business as it
is now being conducted and Company is not and has not been in the past three
years in violation of or in default under any such Permit. Notwithstanding
the
foregoing, this Section 4.10
does not
apply to Labor Matters (for which Section 4.08
is
applicable), Tax Matters (for which Section 4.11
is
applicable), Employee Benefits Matters (for which Section 4.14
applicable) or Environmental Matters (for which Section 4.15
is
applicable.)
Section 4.11
Tax Matters.
(a) Filing
of Returns.
Seller
and the Company have each properly completed and filed on a timely basis all
Returns required to be filed on or prior to the date hereof with respect to
the
Company, and all such Returns (including information provided therewith or
with
respect to thereto) are true, complete and correct in all material
respects.
(b) Payment
of Taxes.
The
Company has fully and timely paid all Taxes due as of the Closing
Date.
(c) Audit
History.
Except
to the extent shown on the Section 4.11
of the
Disclosure Letter, no audit or other proceeding by any Taxing Authority is
pending or threatened with respect to any Taxes due from or with respect to
the
Company, no Taxing Authority has given notice asserting any deficiency or claim
for additional Taxes against the Company, no claim has been made by any Taxing
Authority in a jurisdiction where the Company does not file Returns that it
is
or may be subject to taxation by that jurisdiction, and all deficiencies
asserted or assessments made as a result of any examinations have been fully
and
timely paid, or are fully reflected as a liability in the Financial Statements
of the Company, or are being contested in good faith.
(d) Encumbrances.
There
are no Encumbrances for Taxes (other than for current Taxes not yet due and
payable) on the assets of the Company.
(e) Parachute
Payment.
Neither
the execution and delivery of this Agreement, shareholder approval of this
Agreement or the consummation of the transactions contemplated by this Agreement
could result, separately or in the aggregate, in the payment of any amount
that
could, individually or in combination with any other such payment, constitute
an
“excess parachute payments” within the meaning of Section 280G of the
Code.
(f) Foreign
Person.
Neither
Seller nor the Company is a person other than a United States person within
the
meaning of the Code.
(g) Consolidated
Group.
The
Company has not been a member of any affiliated or consolidated group within
the
meaning of Section 1504(a) of the Code (other than a group the common
parent of which is Alcoa Inc.).
(h) Extensions
or Waivers. Except as set forth in Section 4.11(h)
of the
Disclosure Letter, there are no outstanding agreements extending or waiving
the
statutory period of limitations applicable to any claim for, or the period
for
the collection or assessment or reassessment of, Taxes due from the Company
for
any taxable period and no request for any such waiver or extension is currently
pending.
(i) Adjustments.
There are no adjustments of Taxes of the Company made by the IRS which are
required to be reported to any state, local, or foreign Taxing
Authorities.
Section 4.12
Financial Statements; Undisclosed Liabilities; Indebtedness.
(a) Section 4.12
of the
Disclosure Letter sets forth the following financial statements of the
Company:
(i)
the
unaudited balance sheet of the Company as of June 30, 2006 (the
“June 30, 2006 Balance Sheet”) and the related unaudited statement of
income for the six-month period ended June 30, 2006 (collectively, the
“Unaudited Financial Statements”). The Unaudited Financial Statements present
fairly, in all material respects, the financial position and results of
operations of the Company as of the date and for the period set forth therein,
as prepared in accordance with the Basis of Financial Statement Presentation
consistently applied, which conforms with United States generally accepted
accounting principles (“GAAP”) except as set forth in Section
4.12(a)
of the
Disclosure Letter; and
(ii)
the
audited balance sheets as of December 31, 2005 and 2004, and the related audited
statements of income, comprehensive income and enterprise capital and cash
flows
for each of the three years in the period ended December 31, 2005, which
financial statements have been reported on by, and are accompanied by the report
of, PricewaterhouseCoopers LLP (collectively, the “Audited Financial
Statements”). The Audited Financial Statements have been prepared in accordance
with GAAP, consistently applied, and present fairly, in all material respects,
except for the qualification relating to the change in accounting principle
from
last-in, first-out inventory to first-in, first-out inventory, the financial
position of the Company as of December 31, 2005 and 2004, and the results of
its
operations and its cash flows for each of the three years in the period ended
December 31, 2005.
Collectively,
the Unaudited Financial Statements and Audited Financial Statements shall be
referred to herein as the “Financial Statements.”
(b) The
Company has no obligations or liabilities of any kind (whether accrued,
absolute, contingent, unliquidated or inchoate or otherwise, or whether due
or
to become due) (collectively, “Liabilities”) other than those (i) to the
extent reflected or disclosed in Audited Financial Statements, (ii) incurred
since December 31, 2005 in the ordinary course of the Business consistent with
past practice, (iii) that are immaterial to the Company or (iv) that are set
forth in Section 4.12(b)
of the
Disclosure Letter.
(c) The
Company has no outstanding Indebtedness other than (i) Indebtedness
incurred under the banking facility set forth in Section
4.12(c)
of the
Disclosure Letter and (y) Indebtedness to Seller or any of its Affiliates
(other than the Company) pursuant to Intercompany Accounts that, in each case,
will be cancelled or otherwise settled in full on or prior to the Targeted
Closing Date, pursuant to Section 6.09.
Section 4.13
Contracts.
(a) Except
for any Contracts excluded as Excluded Assets, the Support Services Agreement,
the Trademark License Agreement, and those Contracts identified in Section 4.13
of the
Disclosure Letter or Section 4.14(a)
of the
Disclosure Letter (it being understood that Seller shall be permitted to provide
Purchaser with a supplement to Section 4.13
of the
Disclosure Letter to reflect entering into, or amendment, supplement or other
modification of, any such agreements after the date hereof and prior to the
Closing Date in compliance with Section 6.01),
the
Company is not and will not on the Closing Date be a party to nor it nor any
of
its properties or assets bound by any Contract that is:
(i) a
Contract relating to the employment of any Person or consulting or similar
advisory or service arrangements with any Person involving payments to be made
or benefits to be provided by the Company with a value in excess of $200,000
in
any twelve-month period;
(ii) a
collective bargaining agreement or any other Contract with any labor
union or
other
employee representative of a group of employees relating to wages, hours and
other conditions of employment;
(iii) a
Contract with Seller or any of its Affiliates (other than the Company), or
any
current or former director, officer, or employee of any of the foregoing, or
any
Affiliate or immediate family member of any such director, officer or employee,
that will not be terminated without liability to the Company at or prior to
the
Closing;
(iv) other
than any of the following involving amounts of less than $25,000, in the
aggregate, an indenture, note, loan or credit agreement or other Contract
relating to the Indebtedness of the Company or relating to the direct or
indirect guarantee or assumption by the Company (contingent or otherwise) of
any
payment or performance obligations of any other Person;
(v) a
power
of attorney (other than powers of attorney given in the ordinary course of
the
Business consistent with past practice);
(vi) a
Contract which limits the right of the Company to engage in or compete with
any
Person in any business or in any geographic area or to sell any products or
services;
(vii) a
lease
or similar agreement under which (A) the Company is lessee of, or holds or
uses,
any machinery, equipment, vehicle or other Personal Property owned or leased
by
any third Person for an annual rent in excess of $150,000 or (B) the Company
is
lessor of, or makes available for use by any third Person, any Personal Property
owned (including ownership for Tax purposes) by the Company having a fair market
value in excess of $250,000;
(viii) a
mortgage, pledge, security agreement, deed of trust or other document granting
an Encumbrance (other than any Permitted Exceptions) upon any Company Assets
(including Encumbrances upon properties acquired under conditional sales,
capital lease or other title retention or security devices);
(ix) a
joint
venture agreement, partnership agreement, or limited liability company agreement
or other Contract (however named) involving a sharing of profits or losses
with
any other Person;
(x) a
Contract that relates to the acquisition or sale by the Company of any operating
business or the capital stock or other ownership interest of any other Person
and under which the Company has any continuing liability or
obligation;
(xi) a
Contract that has an obligation to make advances or loans of money to any other
Person;
(xii) a
Contract that restricts the transfer of capital stock of the Company, obligating
the Company to issue or repurchase shares of its capital stock, or relating
to
the voting of stock or the election of directors of the Company;
(xiii) a
Contract for the sale of goods or services by the Company and under which the
Company has received or could reasonably be expected to receive payments of
more
than $100,000 during the 12-month period following the date of this Agreement,
other than Contracts entered into by the Company with distributors and agents
for the sale of the Company’s goods and services, and sales orders entered into
in the ordinary course of the Business consistent with past
practices;
(xiv) a
Contract for a capital expenditure by Company of more than $250,000, or which
provide for the purchase of goods or services by the Company from any one Person
under which the Company has made or would reasonably be expected to make
payments of more than $500,000 during the 12-month period following the date
of
this Agreement, other than purchase orders entered into in the ordinary course
of the Business;
(xv) a
Contract involving or would reasonably be expected to involve payments of at
least $1,000,000 during the 12-month period following the date of this Agreement
and not otherwise disclosed pursuant to this Section 4.13
that
contains (A) a “most favored nations” provision binding the Company to
provide a third party pricing terms at least as favorable as those received
by
other similarly situated third parties who have contracted with the Company,
(B) exclusive marketing or distribution rights granted by the Company,
(C) an agreement to purchase a minimum quantity of goods or services from a
third party, or (D) an agreement to provide or purchase goods or services
exclusively to or from a third party;
(xvi) a
Contract entered into in connection with any settlement of any legal proceeding
(including any actions, suits, arbitrations, proceedings, investigations or
claims) involving unfulfilled or pending payments by the Company in excess
of
$25,000; and
(xvii) a
material Intellectual Property Contract.
Each
Contract required to be set forth in Section 4.13
of the
Disclosure Letter or Section 4.14(a)
of the
Disclosure Letter is referred to herein as a “Material Contract.”
(b) True
and
complete copies of each Material Contract (including each amendment, supplement
or other modification thereto) have been made available to Purchaser. Each
Material Contract is in full force and effect and is enforceable against the
Company and, to the best knowledge of Seller, the other party or parties
thereto, except as limited (a) by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Law affecting creditors’ rights
generally, and (b) by general principles of equity (regardless of whether
enforcement is sought in equity or at law). The Company is not (with or without
the lapse of time or the giving of notice, or both) in breach or default in
any
material respect under any Material Contract. To the best of Seller’s knowledge,
none of the other parties to any such Contract is (with or without the lapse
of
time or the giving of notice, or both) in breach or default in any material
respect thereunder. The Company has not received any written notice of the
intention of any party to terminate any Material Contract, whether as a
termination for convenience or for default of the Company thereunder.
Section 4.14
Employee Benefits.
(a) Section 4.14(a)
of the
Disclosure Letter lists each pension, profit-sharing, savings, retirement,
employment, consulting, severance pay, termination, executive compensation,
incentive compensation, deferred compensation, bonus, stock purchase, stock
option, phantom stock or other equity-based compensation, change-in-control,
retention, salary continuation, vacation, sick leave, disability, death benefit,
group insurance, hospitalization, medical, dental, life (including all
individual life insurance policies as to which the Company or any of its
subsidiaries is the owner, the beneficiary or both), Code Section 125
“cafeteria” or “flexible” benefit, employee loan, educational assistance or
fringe benefit plan, program, policy, practice, agreement or arrangement,
whether written or oral, formal or informal, including, without limitation,
(i)
each Employee Welfare Benefit Plan (as defined in section 3(1) of ERISA) or
Employee Pension Benefit Plan (as defined in section 3(2) of ERISA) , but not
including any multiemployer plan within the meaning of Section 3(37) or
Section 4001(a)(3) of ERISA (a “Multiemployer Plan”), and (ii) other
employee benefit plan, program, policy, practice, agreement or arrangement,
whether or not subject to ERISA (and any funding mechanism therefor now in
effect or required in the future as a result of the transactions contemplated
by
this Agreement or otherwise) that the Company maintains or sponsors or to which
it contributes or in which its Employees participate or have any present or
future right to benefits (individually, each an “Employee Benefit Plan” and
collectively “Employee Benefit Plans”).
(i) Each
Employee Benefit Plan (and each related trust, insurance contract, or fund)
has
been administered in accordance with its terms and complies in form and in
operation in all material respects with the applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Code
and all other Laws.
(ii) All
required reports, returns, notices, descriptions and other documentation
(including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1’s, and
Summary Plan Descriptions) have been filed or distributed correctly and on
a
timely basis with respect to each Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code Section 4980B have
been met with respect to each Employee Welfare Benefit Plan.
(iii) All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid on a timely basis to
each
Employee Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are
not
yet due have been paid to each such Employee Pension Benefit Plan or accrued
in
accordance with GAAP. All premiums or other payments for all periods ending
on
or before the Closing Date have been paid with respect to each such Employee
Welfare Benefit Plan. With respect to each Employee Benefit Plan that is an
Employee Pension Benefit Plan subject to Title IV of ERISA, all premiums due
to
the Pension Benefit Guaranty Corporation (the “PBGC”) have been
paid.
(iv) Each
Employee Pension Benefit Plan, that is intended to meet the requirements of
a
“qualified plan” under Code Section 401(a) has received a favorable
determination letter from the Internal Revenue Service upon which it may rely
to
the effect that the Employee Pension Benefit Plan is qualified and satisfies
the
requirements of Section 401(a) of the Code and that its related trust is
exempt from taxation under Section 501(a) of the Code and to the knowledge
of Seller, there are no facts or circumstances that could reasonably be expected
to cause the loss of such qualification.
(v) Transactions
contemplated hereby will not result in accrued but unused vacation amounts
becoming payable.
(b) With
respect to each Employee Benefit Plan:
(i) No
Employee Benefit Plan that is an Employee Pension Benefit Plan has been
completely or partially terminated or been the subject of a “reportable event”
as that term is defined in Section 403 of ERISA and the regulations
thereunder. No proceeding by the Pension Benefit Guaranty Corporation to
terminate any such Employee Pension Benefit Plan has been instituted or, to
the
best knowledge of Seller, threatened, and
the
PBGC has not threatened any action that would impede the transfer of sponsorship
of the AHE Pension Plan contemplated by Section 8.05.
Neither
the Company nor any of its subsidiaries has filed a notice of intent to
terminate any Employee Benefit Plan or adopted any amendment to treat such
plan
as terminated, and no event has occurred or circumstance exists that may
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer such plan.
(ii) There
have been no prohibited transactions within the meaning of Section 406 of
ERISA or Section 4975 of the Code with respect to any Employee Benefit Plan
that have not been exempted under Section 408 of ERISA or Section 4975
of the Code. No fiduciary has any liability for breach of fiduciary duty or
any
other failure to act or comply with the requirements of ERISA, the Code or
any
other applicable Laws in connection with the administration or investment of
the
assets of any Employee Benefit Plan. With respect to any Employee Benefit Plan,
no action, suit, proceeding, hearing, investigation or audit (including
administrative investigations, audits, proceedings by the U.S. Department of
Labor, the PBGC or the IRS (other than routine claims for benefits)) is pending
or in progress or, to the best knowledge of Seller, threatened. Seller has
no
knowledge of any basis for any such action, suit, proceeding, hearing, or
investigation. With respect to any Employee Benefit Plan there
are
no audits or proceedings initiated pursuant to the Employee Plans Compliance
Resolution System or similar proceedings pending with the IRS or DOL. No asset
of Company is subject to a lien arising under Section 412 of the Code or
Section 307 of ERISA, and none of the Company nor any of its subsidiaries
expects to be subject to any such lien or is subject to any requirement to
post
security pursuant to Section 412(f) of the Code.
(iii) Neither
Seller nor the Company has incurred, and Seller has no reason to expect that
the
Company will incur, any liability to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal Liability) or
under the Code with respect to any Employee Benefit Plan that is an Employee
Pension Benefit Plan. No Employee Benefit Plan subject to Section 412 of
the Code has incurred any accumulated funding deficit.
(c) The
Company has no obligation to contribute to any Multiemployer Plan or any
liability (including withdrawal liability) under any Multiemployer Plan or
under
any Employee Pension Benefit Plan that is not listed in Section 4.14(a)
of the
Disclosure Letter.
(d) With
respect to each Employee Benefit Plan, the Company has provided to Purchaser
a
true, correct and complete copy (or, to the extent no such copy exists, an
accurate description) thereof and, to the extent applicable: (i) the most recent
documents constituting the Employee Benefit Plan and all amendments thereto;
(ii) any related trust agreement or other funding instrument; (iii) the most
recent IRS determination or opinion letter, if applicable; (iv) the most recent
summary plan description and summary of material modifications; and (v) for
the
three most recent years (A) Forms 5500 and attached schedules, (B) audited
financial statements, and (C) actuarial valuation reports.
(e) Except
as
disclosed in Section 4.14(e)
of the
Disclosure Letter, neither the execution and delivery of this Agreement,
shareholder approval of this Agreement or the consummation of the transactions
contemplated by this Agreement could (either alone or in combination with
another event) result in (i) severance pay or any increase in severance pay
upon any termination of employment after the date of this Agreement,
(ii) any payment, compensation or benefit becoming due, or increase in the
amount of any payment, compensation or benefit due, to any Employee;
(iii) the acceleration of the time of payment or vesting or result in any
funding (through a grantor trust or otherwise) of compensation or benefits;
(iv) any material obligation pursuant to any of the Employee Benefit Plans;
or (v) any limitation or restriction on the right of the Company to merge,
amend or terminate any of the Employee Benefit Plans.
(f) None
of
Seller, the Company nor any of its subsidiaries has any plan, contract or
commitment, whether legally binding or not, or has announced (orally or in
writing) an intention, to create any additional employee benefit or compensation
plans, policies or arrangements applicable to Employees or, except as may be
required by applicable law, to modify, suspend or terminate any Employee Benefit
Plan.
(g) None
of
the Company or any of its subsidiaries has incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act and the regulations
promulgated thereunder (the “WARN Act”), or any similar state or local law that
remains unsatisfied.
(h) Except
as
set forth in Section 4.14(h)
of the
Disclosure Letter, no Employee Benefit Plan provides, and neither the Company
nor any of its subsidiaries has incurred any current or projected liability
in
respect of, post-employment health, medical, life insurance or death benefits
for any current or former employees of the Company or any of its subsidiaries,
except as may be required under COBRA, and at the expense of the employee or
former employee.
Section 4.15
Environmental
(a) Except
as
set forth in Section 4.15
of the
Disclosure Letter, the Company is in compliance in all material respects with
all Applicable Environmental Laws and possesses and is in compliance in all
material respects with all of the terms and conditions of all permits required
pursuant to Applicable Environmental Laws in connection with the conduct of
the
Business and the ownership and operation of the Real Property (“Environmental
Permits”), and each such Environmental Permit is in full force and effect.
Except as set forth in Section 4.15
of the
Disclosure Letter, there are no Claims pending or, to the best of Seller’s
knowledge, threatened against the Company or the Business under any
Environmental Permit or Applicable Environmental Law.
(b) Except
as
set forth in Section 4.15
of the
Disclosure Letter, (i) there have not been any releases of Hazardous Substances
on or at the Owned Property or, to the best of Seller’s knowledge, on or at the
Leased Property or any other property, that have resulted in, or would otherwise
be reasonably likely to form the basis of, a Claim against the Company or the
Owned Property, or has required, or would otherwise be likely to require,
remediation by the Company pursuant to Applicable Environmental Law, and (ii)
no
property now or previously owned, operated or leased by the Company is listed
on
the National Priorities List or, to the best of Seller’s knowledge, on CERCLIS
(each promulgated pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended) or any analogous state
list.
(c) Except
as
set forth in Section 4.15
of the
Disclosure Letter, no Encumbrances have arisen under or pursuant to any
Applicable Environmental Law on the Owned Property, or to the best of Seller’s
knowledge, on the Leased Property.
Section 4.16
No Brokers. Except
for Xxxxxx Brothers (whose fees will be paid by Seller), no broker, finder
or
investment banker acting on behalf of the Company or Seller is entitled to
any
fee, commission or other payment in connection with this Agreement or the
transactions contemplated hereby.
Section 4.17 Products
Liability.
(a) Except
as
set forth in Section 4.17(a)
of the
Disclosure Letter, there are not presently pending, or, to the best of Seller’s
knowledge, threatened, and since January 1, 2002, there were at no time, any
Claims, based on any legal or equitable theory of recovery whatsoever, relating
to any alleged defect in design, manufacture, materials or workmanship,
including any failure to warn or alleged breach of express or implied warranty,
representation or condition involving liability equal to or greater than
$100,000 individually relating to any Company Products. For the sake of clarity,
the value of any Claim that has been resolved as of the Closing Date, whether
by
settlement, the final determination of a Governmental Entity or otherwise,
shall
be the amount actually paid by the Company to dispose of such Claim, and shall
not be the amount demanded or claimed to be owed by the Person bringing such
Claim.
(b) Since
January 1, 2002, there have not been any product recalls or post-sale warnings
by Seller or any of its Affiliates (including the Company) relating to any
Company Products.
(c) There
are
no statements, citations or decisions by any Governmental Entity to the effect
that any Company Product is defective or unsafe or fails to meet any standards
promulgated by such Governmental Entity. Except as set forth in Section
4.17(c)
of the
Disclosure Letter, to the best of Seller’s knowledge, since January 1, 2002,
there have been no written internal communications, evaluations or expert
analysis received, written or commissioned by Seller or any of its Affiliates
or
any Representative thereof that identifies any material defect or malfunction
in
the design, manufacture or operation of any Company Product.
Section 4.18 Product
Warranties.
Company
Products sold by Company since January 1, 2002, have been sold subject to
written warranties set forth in Section 4.18
of the
Disclosure Letter. Except for warranty claims with respect to Company Products
made in the ordinary course of the Business and as otherwise set forth in
Section 4.18
of the
Disclosure Letter, there are no warranty claims with respect to Company Products
pending or, to the best of Seller’s knowledge, threatened, and since
January 1, 2002, there were at no time product warranty claims pending or,
to the best of Seller’s knowledge, threatened, relating to any Company Product.
The amount of accrued warranty reflected on the June 30, 2006 Balance Sheet
is
stated thereon in accordance with GAAP, consistently applied, subject to normal
year end adjustments, none of which are expected to be material, and the absence
of disclosure normally made in footnotes.
Section 4.19 Absence
of Certain Changes.
Since
December 31, 2005, except to the extent contemplated by or in connection with
this Agreement, (a) there has not been (i) any Material Adverse Effect or event
or occurrence that individually or together with other events or occurrences
would reasonably be expected to have a Material Adverse Effect or (ii) any
material damage, destruction or loss (whether or not covered by insurance)
with
respect to any material Company Assets and (b) neither Seller nor any of
its Affiliates (including the Company) has taken any action that would, after
the date hereof, be prohibited, or omitted to take any action that would, after
the date hereof, be required, as the case may be, by Section 6.01.
Section 4.20 Material
Suppliers and Customers.
Since
December 31, 2005, except as set forth in Section 4.20
of the
Disclosure Letter, no customer accounting for more than ten percent (10%) of
sales, and no supplier accounting for more than ten percent (10%) of purchases,
in the fiscal year ended December 31, 2005, has delivered to the Company any
written notice which cancelled, materially and adversely modified or otherwise
terminated its relationship with the Company nor has any such customer or
supplier indicated its intention to do any of the foregoing to the
Company.
Section 4.21 Related
Party Transactions.
Except
as set forth in Section 4.21
of the
Disclosure Letter or pursuant to a Material Contract or the Transaction
Documents, neither Seller nor any or its Affiliates (other than the Company)
or
any employee, officer or director of the Company or any of the foregoing, nor
any Affiliate or immediate family member of any such employee, officer or
director (each a “Related Party”) (a) owes any amount to the Company, nor does
the Company owe any amount to, or has the Company committed to make any loan
or
extend or guarantee credit to or for the benefit of any Related Party (other
than any participant loans under any Employee Benefit Plan and any payments
to,
and reimbursement of fees and expenses of, employees, directors and officers
of
the Company in the ordinary course of the Business consistent with past
practice), or (b) owns any property or right, tangible or intangible, that
is
used by the Company or the Business and that has a fair market value in excess
of $10,000 or (c) has made any Claim against the Company, other than claims
for accrued compensation and for benefits arising in the ordinary course of
employment or under any Employee Benefit Plan.
Section 4.22 Insurance. Section 4.22
of the
Disclosure Letter contains a true and complete list of all current policies
or
binders of fire, liability, product liability, umbrella liability, real and
personal property, workers’ compensation, vehicular, directors and officer’s
liability, fiduciary liability and other casualty and property insurance
maintained by Seller or its Affiliates (including the Company) for the benefit
of the Business, the Company, or any director or other fiduciary of the Company.
Such policies and binders set forth in Section 4.22
of the
Disclosure Letter: (a) are valid and binding in accordance with their terms;
(b)
all premiums that are due and payable with respect thereto for periods ending
on
or prior to the Closing Date have been or will be prior to the Closing Date
fully paid; (c) have not been subject to any lapse in coverage; and have
coverage limits that have not been exhausted or significantly diminished. Seller
and its applicable Affiliates (including the Company) have properly and timely
notified the providers of such policies and binders set forth in Section 4.22
of the
Disclosure Letter of any Claims set forth or required to be set forth in
Section 4.09
of the
Disclosure Letter. Except as set forth in Section 4.22
of the
Disclosure Letter, there are no pending Claims involving, in the aggregate,
more
than $100,000 in claims or damages related to the Business under any such
policies or binders set forth in Section 4.22
of the
Disclosure Letter as to which coverage has been questioned, denied or disputed
or in respect of which there has been a reservation of rights. None of Seller
or
any of its Affiliates (including the Company) is in default under, or has
otherwise failed to comply with, in any material respect, any provision
contained in any such policy or binder set forth in Section 4.22
of the
Disclosure Letter.
Section
4.23 Accounts
Receivable. The
accounts receivable reflected on the June 30, 2006 Balance Sheet and accounts
receivable arising after the date thereof (a) have arisen from bona fide
transactions entered into by the Company involving the sale of inventory or
the
rendering of a service in the ordinary course of the Business consistent with
past practice and (b) subject only to a reserve for bad debts shown on the
June
30, 2006 Balance Sheet or, with respect to accounts receivable arising
subsequent to June 30, 2006, on the accounting records of the Company, have
been
computed in a manner consistent with past practice and reasonably estimated
to
reflect the probable results of collection. The accounts receivable reflected
on
the June 30, 2006 Balance Sheet are stated thereon in accordance with GAAP,
consistently applied, subject to normal year end adjustments and the absence
of
disclosures normally made in footnotes. There is no material contest, claim
or
right of set-off, other than returns in the ordinary course of the Business
consistent with past practice, under any Contract with any obligor of any
accounts receivable relating to the amount or validity of such accounts
receivable. No payor of any accounts receivable reflected on the June 30, 2006
Balance Sheet or arising subsequent to the date thereof is a Related
Party.
Section
4.24 Inventories.
The
inventories reflected on the June 30, 2006 Balance Sheet are stated thereon
in
accordance with GAAP, consistently applied, subject to normal year end
adjustments and the absence of disclosures normally made in footnotes. All
of
the inventories of the Company (a) are the property of the Company, free and
clear of all Encumbrances other than Permitted Exceptions, and are not held
by
the Company on consignment from others, and (b) consist of a quality and
quantity usable and salable in the ordinary course of the Business consistent
with past practice, except for obsolete or slow-moving items that have been
written off or written down to fair market value or for which adequate reserves
have been established.
Section 4.25 No
Other Warranties or Representations.
SELLER
AND PURCHASER SPECIFICALLY ACKNOWLEDGE THAT SELLER IS SELLING AND PURCHASER
IS
PURCHASING THE SHARES AND, AS SUCH, IS BUYING THE ON-GOING BUSINESS OF THE
COMPANY. PURCHASER ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING THOSE REFERRED TO IN THE NEW YORK
UNIFORM COMMERCIAL CODE, AND PURCHASER IS NOT RELYING ON ANY REPRESENTATIONS
OR
WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS
OR REPRESENTATIVES, AS TO ANY MATTERS (INCLUDING ANY BUDGET, FORECAST OR OTHER
PROJECTION) CONCERNING THE SAME EXCEPT AS PROVIDED IN THIS AGREEMENT. NOTHING
HEREIN CONTAINED IS INTENDED TO CREATE ANY THIRD PARTY BENEFICIARY RIGHTS,
EXCEPT AS MAY BE SET FORTH IN ARTICLE 13.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
hereby makes the following representations and warranties to Seller on and
as of
the date hereof:
Section 5.01
Authority; Consents and Approval.
Purchaser has full corporate power and authority to enter into this Agreement
and each of the Transaction Documents to which Purchaser is or will be party
and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and each of the Transaction Documents
to which Purchaser is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by Purchaser and no other corporate proceedings on the part of
Purchaser are necessary to authorize this Agreement or the Transaction Documents
or to consummate the transactions contemplated hereby and thereby. This
Agreement has been, and the Transaction Documents will be at the Closing, duly
and validly executed and delivered by Purchaser and constitutes, or will
constitute at the Closing, legal, valid, binding and enforceable agreements
of
Purchaser, enforceable against Purchaser in accordance with their terms, except
as limited (a) by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar Laws affecting creditors’ rights generally, and (b) by general
principles of equity (regardless of whether enforcement is sought in equity
or
at law). Subject to Section 5.03(b)
and
except as set forth in Section 5.01
of the
Disclosure Letter, no further action, approvals or consents are necessary for
Purchaser to obtain any actions, approvals or consents from any third persons,
Governmental Entity or otherwise, to make this Agreement and the Transaction
Documents valid and binding upon and enforceable against Purchaser in accordance
with their respective terms, or to enable Purchaser to perform this Agreement
and the Transaction Documents and the transactions contemplated
thereby.
Section 5.02
Organization and Good Standing. Purchaser
is duly organized, validly existing and in good standing under the Laws of
Delaware and has full corporate power and authority to consummate the
transactions contemplated hereby.
Section 5.03
Consents and Approvals; No Violation. Neither
the execution, delivery or performance of this Agreement or any of the
Transaction Documents to which it is or will be a party, nor the consummation
by
Purchaser of the transactions contemplated hereby or thereby will:
(a)
conflict
with or result in any breach of any provision of the articles or certificates
of
incorporation or by-laws or comparable charter or organizational documents
of
Purchaser;
(b) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) in connection with the
applicable requirements of the HSR Act, (B) in connection with any Gains
Tax set forth in Section
5.03(b)(B)
of the
Disclosure Letter, (C) such filings and consents as may be required under any
Applicable Environmental Law pertaining to any notification, disclosure or
required approval triggered by the transactions contemplated by this Agreement
set forth in Section 5.03(b)(C)
of the
Disclosure Letter and (D) such filings, consents, approvals, orders,
registrations and declarations as may be required under the merger notification
or foreign investment Laws of any foreign country in which Purchaser conducts
any business or owns any assets set forth in Section 5.03(b)(D)
of the
Disclosure Letter;
(c) except
as
set forth in Section 5.03(c)
of the
Disclosure Letter, result in a violation or breach of, or constitute (with
or
without due notice or lapse of time or both) a default (or give rise to any
right of consent, termination, amendment, modification, cancellation or
acceleration or Encumbrance or loss of a material benefit) under any of the
terms, conditions or provisions of any Contract to which Purchaser is a party
or
any Material Contract, except in any such case where requisite waivers or
consents have been obtained; or
(d) assuming
the consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 5.03
are duly
and timely obtained or made, contravene, conflict with or result in a violation
of, or constitute a failure to comply with, in any material respect, any Law
applicable to Purchaser or to the properties or assets of
Purchaser.
Section 5.04
No Brokers. Purchaser
has neither entered into nor will enter into any agreement, arrangement or
understanding with any person or firm which will result in the obligation of
Seller to pay any finder’s fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
Section 5.05
Investment Intent.
Purchaser (a) understands that the Shares have not been, and will not be,
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or under any state securities laws, and are being offered and sold in reliance
upon Federal and state exemptions for transactions not involving any public
offering; (b) is acquiring the Shares solely for its own account for investment
purposes and not with a view to the distribution or resale thereof; (c) is
a
sophisticated investor with knowledge and experience in business and financial
matters; (d) has received certain information concerning the Company and the
Business and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and the risks inherent in holding the Shares
and
operating the Business; (e) is able to bear the economic risk and lack of
liquidity inherent in holding the Shares; (f) is an “Accredited Investor” (as
defined in Regulation D promulgated under the Securities Act) and
(g)
has no commitment or present intention to liquidate the Company or the
Business.
Section 5.06
Litigation and Proceedings. There
are
no material Claims pending or to the best knowledge of Purchaser, threatened
against Purchaser which seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
Section 5.07
Availability of Funds.
(a) Purchaser
has obtained a commitment letter, dated as of the date hereof (the “Commitment
Letter”) from UBS Loan Finance LLC; UBS AG, Stamford Branch; UBS Securities LLC;
Deutsche Bank Trust Company Americas; Deutsche Bank Securities Inc.; JPMorgan
Chase Bank, N.A.; and X.X. Xxxxxx Securities Inc. (collectively, “Lenders”) to
provide, upon the terms and subject solely to the conditions set forth therein,
the amount of debt financing set forth therein in connection with the
transactions contemplated by this Agreement. The Commitment Letter has been
duly
authorized and executed by Purchaser and by the Lenders and, as of the date
hereof, is in full force and effect. The obligations of the Lenders to fund
the
commitments under the Commitment Letter are not subject to any condition which
is not set forth expressly in the Commitment Letter.
(b) The
Commitment Letter provides Purchaser with aggregate financing in an amount
sufficient to enable Purchaser to consummate the transactions contemplated
by
this Agreement.
Section 5.08
No Other Warranties or Representations.
SELLER
AND PURCHASER SPECIFICALLY ACKNOWLEDGE THAT SELLER IS SELLING AND PURCHASER
IS
PURCHASING THE SHARES AND, AS SUCH, IS BUYING THE ONGOING BUSINESS OF THE
COMPANY. SELLER ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, PURCHASER MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING THOSE REFERRED TO IN THE NEW YORK UNIFORM
COMMERCIAL CODE, AND SELLER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES
OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM PURCHASER, ITS AGENTS OR
REPRESENTATIVES, AS TO ANY MATTERS CONCERNING THE SAME EXCEPT AS PROVIDED IN
THIS AGREEMENT. NOTHING HEREIN CONTAINED IS INTENDED TO CREATE ANY THIRD PARTY
BENEFICIARY RIGHTS, EXCEPT AS MAY BE SET FORTH IN ARTICLE 13.
ARTICLE
6
COVENANTS
PENDING CLOSING
Section 6.01
Conduct of Business.
Seller
shall, and shall cause its Affiliates (including the Company) to, from the
date
of this Agreement until the Closing Date, unless otherwise consented to in
writing by Purchaser in each instance (which consent shall not be unreasonably
withheld or delayed), (i) other than as permitted under this Section 6.01,
conduct
the Business in the ordinary course of the Business and (ii) use its Best
Efforts to maintain and preserve intact the Company’s business organization, to
retain the services of the Company’s employees and to preserve the goodwill of
the Company’s customers, suppliers, licensors, licensees, landlords and other
Persons with whom the Company has business relationships. Without limiting
the
generality of the foregoing, from the date of this Agreement until the Closing
Date, unless otherwise consented to in writing by Purchaser, in each instance,
and except as otherwise contemplated by this Agreement, Seller shall to the
extent consistent therewith:
(a) not
cause
or permit the Company to sell, convey, assign, subject to Encumbrance or
otherwise transfer any Company Assets or Real Property having a fair market
value in excess of $100,000 individually, or $200,000 in the aggregate, other
than sales of inventory in the ordinary course of the Business;
(b) not
(i)
sell, convey, assign, subject to Encumbrance or otherwise transfer the Shares
of
capital stock of the Company, or (ii) issue or sell, or cause or permit any
Affiliate of Seller (including the Company) to issue or sell, any subscriptions,
options, warrants, calls, preemptive rights or other rights of any kind to
purchase or otherwise acquire any shares of capital stock of the Company, or
securities convertible into or exchangeable for, or which otherwise confer
on
the holder thereof any right to acquire, any such shares;
(c) not
cause
or permit the Company to loan money to, or make any debt or equity investment
in
any other Person (not including advances, prepaid expenses and accounts
receivable arising in the ordinary course of the Business consistent with past
practice to the extent permitted by the Xxxxxxxx-Xxxxx Act of
2002);
(d) cause
the
Company to (i) pay its trade payables and other short term liabilities as and
when due in the ordinary course of the Business consistent with its historical
payment practices, except to the extent the validity or amount of any such
payables and other liabilities is disputed in good faith by the Company and
(ii)
use its Best Efforts to collect its receivables in the ordinary course of the
Business consistent with its historical collection practices;
(e) not
cause
or permit the Company to increase the compensation or benefits payable to any
Company Employee or consultant of the Company, other than in the ordinary course
of the Business consistent with past practice;
(f) not
cause
or permit the Company to enter into a new line of business or to abandon or
discontinue existing lines of business;
(g) not
cause
or permit the Company to adopt any plan of merger, consolidation, liquidation
or
dissolution or file a petition in bankruptcy under any provisions of Federal
or
state bankruptcy law or consent to the filing of any bankruptcy petition against
it under any similar law;
(h) not
cause
or permit the Company to (i) cancel or waive any right or claim of material
value or write off any material accounts receivable or (ii) cancel without
reasonable consideration any debts owing to or held by the Company, except
in
the case of either clause (i) or (ii) above, in the ordinary course of the
Business consistent with past practices or as contemplated by Section 6.09
relating
to the settlement of Intercompany Accounts;
(i) not
cause
or permit the Company to make any capital expenditures in excess of $250,000
in
the aggregate, except for capital expenditures for projects already in progress
as of the date of this Agreement of which the aggregate amount of future
obligations does not exceed $250,000 or otherwise made in the ordinary course
of
the Business consistent with past practice;
(j) not
cause
or permit the Company to alter or amend any of the rights, preferences or
privileges of, or to redeem, purchase or otherwise acquire, any Shares of the
Company;
(k) not
amend
or cause or permit the Company to amend its articles of incorporation or
bylaws;
(l) except
as
set forth in Section 6.01(l)
of the
Disclosure Letter, not cause or permit the Company to purchase, lease or
otherwise acquire the right to own, use or lease any property or assets for
an
amount in excess of $100,000 individually (in the case of a lease, per annum)
or
$500,000 in the aggregate (in the case of a lease, for the entire term of the
lease, not including any option term), except for purchases of inventory and
supplies in the ordinary course of the Business consistent with past
practice;
(m) not
cause
or permit the Company to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or stock of, or by any other
manner, any business or any Person or division thereof;
(n) not
cause
or permit the Company to (i) incur any Indebtedness (not including intercompany
borrowings from Affiliates or borrowings under the banking facility set forth
in
Section 4.12(c)
of the
Disclosure Letter, in each case, at any time prior to the Targeted Closing
Date,
accrued expenses and trade payables arising in the ordinary course of the
Business consistent with past practice) or (ii) assume, guarantee or endorse
any
payment or performance obligations of any other Person other than in the
ordinary course of the Business consistent with past practice;
(o) not
cause
or permit the Company to enter into any Material Contract or any Contract listed
on, or required to be listed on, Section 4.07(b)
of the
Disclosure Letter, or voluntarily terminate, waive any of its rights under,
or
materially amend or otherwise modify, any Material Contract or any Contract
listed on, or required to be listed on, Section 4.07(b)
of the
Disclosure Letter;
(p) not
cause
or permit the Company to make any change to any method of accounting or
accounting practice of the Company except for any such change required by reason
of a concurrent change in GAAP (provided,
that
Seller shall promptly inform Purchaser of any such required
change);
(q) not
cause
or permit the Company to settle or compromise any material action, suit,
litigation or other proceeding, whether administrative, civil or criminal,
in
law or in equity, or before any Governmental Entity or in any arbitral or
similar proceeding;
(r) not
cause
or permit the Company to engage in any hiring, employment termination or lay
off
other than in the ordinary course of the Business consistent with past
practice;
(s) not
cause
or permit the Company to grant any severance or termination pay to any Employee
other than as required by an Employee Benefit Plan or a Material
Contract;
(t) not
cause
or permit the Company to establish, adopt, amend (other than in the normal
course of business, or as required by Law) or terminate any Employee Benefit
Plan or agreement, program, policy, trust, fund or other arrangement that would
be an Employee Benefit Plan if in existence on the date of this
Agreement;
(u) not
cause
or permit the Company do any act or knowingly omit to do any act whereby any
Company Marks and Company Patents and Copyrights and material trade secrets
of
the Company may become invalidated, abandoned, unmentioned, unenforceable or
dedicated to the public domain;
(v) keep
in
full force and effect property and casualty insurance comparable in amount
and
scope of coverage to that maintained by it with respect to the Business and
the
Company before the date hereof, except for modifications or changes occurring
in
the ordinary course of the purchase of insurance coverage by Seller and
provided,
that
(i) in no event will Seller be required to enter into any replacement policy,
the premiums of which exceed 300% of the premiums of its current policies;
provided,
that
Seller shall purchase the maximum amount of replacement insurance as is
available up to such threshold amount, and (ii) the refusal of any insurer
to
renew any such policy (despite the Best Efforts of Seller and its Affiliates
(including the Company)) will not constitute a breach of this paragraph;
(w) not
make,
declare or pay any dividend or distribution on any Shares or other equity
interests of the Company at any time after the close of business on the Targeted
Closing Date; and
(x) not
enter
into or cause or permit the Company to enter into any agreement to take any
action prohibited by clauses (a) through (w).
Section 6.02
Exercise of Best Efforts.
(a) Subject
to the terms and conditions herein provided, each of the parties hereto shall
use its Best Efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under Law to
consummate and make effective the transactions contemplated by this Agreement
and the Transaction Documents, including using its Best Efforts to:
(i)
defend against any lawsuits, actions or proceedings, judicial or administrative,
challenging this Agreement or any of the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, including
seeking to have any preliminary injunction, temporary restraining order, stay
or
other legal restraint or prohibition entered or imposed by any Governmental
Entity that is not yet final and nonappealable, vacated or reversed;
provided,
however,
that
neither of the parties or any of their Affiliates shall be required to make
any
material monetary expenditure, commence or be a plaintiff in any litigation,
or
offer for sale of any portion of the Company Assets or Real Property;
and,
(ii)
obtain all necessary waivers, consents and approvals, to effect all necessary
registrations, filings and submissions (including, but not limited to, (i)
filings under the HSR Act and any other submissions requested by the Federal
Trade Commission or Department of Justice and (ii) such filings, consents,
approvals, orders, registrations and declarations as may be required under
the
Laws of any foreign country). Purchaser and Seller shall each be responsible
for
one half of all fees imposed by any Governmental Entity in association with
any
filings, submissions, consents, approvals, orders, registrations and/or
declarations. Subject to applicable Laws relating to the exchange of
information, Seller and Purchaser shall have the right to review in advance,
and
to the extent practicable each will consult the other on, all the information
relating to the Business or Purchaser and its Affiliates or Seller and its
Affiliates, as the case may be, that appears in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
(b) Seller
and Purchaser shall keep the other reasonably apprised of the status of matters
relating to the completion of the transactions contemplated hereby and work
cooperatively in connection with obtaining all required approvals or consents
of
any Governmental Entity. In that regard, each party shall without limitation:
(i) promptly notify the other of, and if in writing, furnish the other with
copies of (or, in the case of material oral communications, advise the other
of)
any communications from or with any Governmental Entity with respect to the
transactions contemplated by this Agreement and the Transaction Documents,
(ii)
permit the other to review and discuss in advance, and consider in good faith
the views of the other in connection with, any material proposed written (or
any
material proposed oral) communication with any such Governmental Entity, (iii)
not participate in any meeting with any such Governmental Entity unless it
consults with the other in advance and to the extent permitted by such
Governmental Entity gives the other the opportunity to attend and participate
thereat (to the extent such participation would be appropriate), (iv) furnish
the other with copies of all correspondence, filings and communications (and
memoranda setting forth the substance thereof) between it and any such
Governmental Entity with respect to this Agreement or any of the Transaction
Documents, and (v) furnish the other with such necessary information and
reasonable assistance as Seller and Purchaser may reasonably request in
connection with its preparation of necessary filings or submissions of
information to any Governmental Entity. Seller and Purchaser may, as each deems
advisable and necessary, reasonably designate any competitively sensitive
material provided to the other under this Section 6.02(b)(iv)
as
“outside counsel only.” Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will
not
be disclosed by such outside counsel to employees, officers, or directors of
the
recipient unless express permission is obtained in advance from the source
of
their materials (Seller and Purchaser, as the case may be) or its legal
counsel.
(c) Notwithstanding
the foregoing, nothing in this Section 6.02
shall
require, or be construed to require, Purchaser or any of its Affiliates to
agree
to (i) sell, hold, separate, divest, discontinue or limit, before or after
the
Closing Date, any assets, businesses or interest in any assets or businesses
of
Purchaser, the Company or any of their respective Affiliates, (ii) any
conditions relating to, or changes or restrictions in, the operations of any
such assets or businesses which, in either case, could reasonably be expected
to
(x) result in a Material Adverse Effect or (y) materially and adversely impact
the economic or business benefits to Purchaser and its direct and indirect
stockholders of the transactions contemplated by this Agreement or (iii) any
material modification or waiver of the terms and conditions of this
Agreement.
(d) In
the
event the transactions contemplated by this Agreement are not consummated as
a
result of Purchaser’s or any of its Affiliates refusal to agree pursuant to
Section 6.02(c),
then as
the exclusive right of Seller under this Agreement, Purchaser shall pay within
three (3) days to Seller, Seller’s direct, out-of-pocket costs of negotiating,
entering into, and complying with this Agreement, including all reasonable
payments made by or due and owing by Seller for external legal counsel and
professional consultant advice relating hereto; provided,
that
the payment obligations of Purchaser under this Section
6.02(d)
shall
not exceed $1,000,000.
Section 6.03
No Solicitation of Other Bids.
(a) Seller
shall not, and shall not authorize or permit any of its Affiliates (including
the Company), or any Representatives of any of the foregoing, to, directly
or
indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries
regarding an Acquisition Proposal, as defined below, (ii) enter into discussions
or negotiations with, or provide any information to, any Person concerning
the
possible Acquisition Proposal or (iii) enter into any agreements or other
instruments (whether or not binding) regarding an Acquisition Proposal.
“Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person
(other than Purchaser or its Affiliates) concerning (A) merger, consolidation,
recapitalization, share exchange or other business combination transaction
involving the Company; (B) the issuance or acquisition of shares of capital
stock or other equity securities of the Company; (C) any stock purchase, that
if
consummated, would result in any Person (other than Buyer and its Affiliates)
owning any shares of capital stock or other equity securities of the Company;
or
(D) the sale, lease, exchange or other disposition of any significant portion
of
the Company Assets. Seller shall immediately cease and cause to be terminated,
and shall cause its Affiliates (including the Company) and all the
Representatives of each of the foregoing to immediately cease and cause to
be
terminated, all existing discussions or negotiations with any Persons conducted
heretofore with respect to, or that could lead to, an Acquisition
Proposal.
(b) In
addition to the other obligations under this Section 6.03,
Seller
shall promptly (and in any event within three Business Days after receipt
thereof by Seller or its Representatives) advise Purchaser orally and in writing
of any Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to result in an Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity
of
the Person making the same.
(c) Seller
agrees that the rights and remedies for noncompliance with this Section 6.03
shall
include having such provision specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Purchaser and that money
damages would not provide an adequate remedy to Purchaser.
Section 6.04
Supplements to Disclosure.
From
time to time prior to the Closing, Seller will promptly supplement or amend
the
Disclosure Letter hereto with respect to any matter hereafter arising which,
if
existing or occurring at the date of this Agreement, would have been required
to
be set forth or described in such sections of the Disclosure Letter. Any
disclosure in any such supplement or amendment shall not be deemed to have
cured
any breach of or inaccuracy in any representation or warranty contained in
this
Agreement, including for purposes of the indemnification rights contained in
this Agreement or of determining whether or not the conditions set forth in
Section 7.02(a)
have
been satisfied.
Section 6.05
Permissible Activities.
Notwithstanding the provisions of this Article 6, nothing in this Agreement
shall be construed or interpreted to prevent Seller or any Affiliate of Seller,
at any time prior to the close of business on the Targeted Closing Date, from
(i) paying or making regular or special dividends or other withdrawals or
distributions of cash or marketable securities or of any property that is not
necessary for conducting the present operations of the Business; (ii) making,
accepting or settling intercompany loans or advances, or (iii) engaging in
any
other transaction incident to the normal cash management procedures of Seller
and its Affiliates, including short-term investments in time-deposits,
certificates of deposit and banker’s acceptances made in the ordinary course of
the Business. For the avoidance of doubt, neither Seller nor any Affiliate
of
Seller shall be permitted to take any of the actions of the type described
in
this Section 6.05
at any
time following the close of business on the Targeted Closing Date except in
compliance with the other provisions of this Agreement or the Support Services
Agreement.
Section 6.06
Examination of Books and Records; Access to Premises.
During
the period prior to the Closing, Seller shall, and shall cause its Affiliates
(including the Company) to, give Purchaser and its Affiliates and financing
sources and the Representatives of each of the foregoing reasonable access
during normal business hours to all of the Books and Records, Real Property,
premises, agents, personnel of the Company and including, but not limited to,
access to the personnel of Seller and its Affiliates for the purpose of
transitional planning in the following areas: informational technology, account
procurement, human resources (including employee benefits and compensation),
and
access to the employees of the Company for the purpose of conducting interviews;
provided,
that
such examinations shall be conducted in such a manner so as not to unreasonably
disrupt the normal business operations of the Company; and, provided further,
that
such examinations shall be solely to facilitate consummation of the transactions
contemplated in this Agreement. Seller shall, and shall cause its Affiliates
(including the Company) to, furnish Purchaser during such period with such
information concerning the affairs of the Company which Purchaser may reasonably
request, so that Purchaser may have a full opportunity to ascertain such matters
concerning the financial condition, operations, results of operations, business
or prospects of the Company as Purchaser may deem necessary or appropriate.
No
investigation by Purchaser shall obviate any of the representations, warranties,
covenants or agreements of Seller contained in this Agreement. Notwithstanding
the foregoing, Seller is under no obligation to disclose to Purchaser: (i)
any
information the disclosure of which is restricted by Contract or Law except
in
strict compliance with the applicable Contract or Law; and (ii) any information
as to which the attorney-client privilege is available as reasonably determined
by Seller. Purchaser acknowledges that any information being provided to it
or
its Representatives by Seller or any of its Affiliates or Representatives
pursuant to or in connection with this Agreement is subject to Section 6.02(b)
and the
terms of that certain Confidentiality Agreement executed by Purchaser on or
about April 17, 2006 (the “Confidentiality Agreement”), the terms of which are
incorporated herein by reference. If privileged and/or attorney work product
documents or information, including communications between any party hereto
or
its Affiliates and any of their respective counsel, are disclosed to any other
party pursuant to or in connection with this Agreement and the transactions
contemplated hereby, then Seller and Purchaser hereby acknowledge and agree
that
(i) such disclosure is inadvertent, (ii) such disclosure will not constitute
a
waiver, in whole or in part, of any privilege or work product, and (iii) the
receiving party will promptly return to the disclosing party all copies of
such
documents or information in its possession or in the possession of its
Affiliates or Representatives. Additionally, each of Seller and Purchaser agrees
that it and its Affiliates shall not waive the attorney-client, work product,
or
like privilege of the other party with respect to any of such documents or
information, without the other party’s prior written consent.
Section 6.07
Tax Covenants.
During
the period from the date of this Agreement to the Closing Date, Seller shall,
and shall cause the Company to:
(a) prepare,
in the ordinary course of the Business consistent with past practice (except
as
otherwise required by Law), and timely file all Returns required to be filed
by
it (or them) on or before the Closing Date (“Post-Signing
Returns”);
(b) fully
and
timely pay all Taxes due and payable in respect of such Post-Signing Returns
that are so filed, and properly reserve, in accordance with past practice and
in
the ordinary course of the Business, for all Taxes payable by it (or them)
for
which no Post-Signing Return is due prior to the Closing Date;
(c) promptly
notify Purchaser of any federal, state, local or foreign income or franchise
and
any other suit, claim, action, investigation, proceeding or audit (collectively,
“Actions”) pending against or with respect to the Company in respect of any Tax
matter, and not settle or compromise any such Tax matter or Action without
Purchaser’s consent, which shall not be unreasonably conditioned, delayed or
withheld; and
(d) not
make
or revoke any election with regard to Taxes of the Company or file any amended
Returns.
Section 6.08
Cooperation with Financing.
(a) Seller
agrees to provide, and shall cause its Affiliates (including the Company) and
the Representatives of each of the foregoing to provide, reasonable cooperation
in connection with the arrangement of the financing (the “Financing”)
contemplated by the Commitment Letter as may be reasonably requested by
Purchaser including (i) participation in meetings, presentations, drafting
sessions and due diligence sessions, (ii) furnishing Purchaser and its
Affiliates and their financing sources with financial and other pertinent
information regarding the Company as may be reasonably requested by Purchaser,
including (A) using its Best Efforts to prepare, at Purchaser’s expense,
financial statements and financial data of the type required by Regulation
S-X
and Regulation S-K under the Securities Act of 1933, as amended, and using
its
Best Efforts to cause Seller’s accountants to issue an unqualified opinion with
respect to such annual financial statements (B) and such monthly financial
information as is prepared by the Company in the ordinary course of the Business
consistent with past practice, (iii) assisting Purchaser and its Affiliates
and their financing sources, at Purchaser’s expense, in the preparation of an
information memorandum for any debt to be raised to complete the transactions
contemplated by this Agreement and materials for rating agency presentations,
(iv) reasonably cooperating with the marketing efforts of Purchaser and its
Affiliates and their financing sources, at Purchaser’s expense, for any debt to
be raised to complete the transactions contemplated by this Agreement,
(v) using Best Efforts to obtain consents, legal opinions, surveys and
title insurance, as reasonably requested by Purchaser. Notwithstanding the
foregoing, Purchaser acknowledges and agrees that: (i) except for the
representations and warranties made to Purchaser pursuant to this Agreement
set
forth in this Agreement, neither Seller, its Affiliates (including the Company)
and the Representatives of any of the foregoing are making any representation
to
Purchaser respecting any of the information provided to any Person providing
the
Financing; and (ii) the only representations or warranties made by Seller,
its
Affiliates (including the Company) and the Representatives of any of the
foregoing in relation to the Company and the Business are those expressly set
forth in this Agreement and solely on the terms and conditions thereof and
such
representations and warranties are made exclusively to Purchaser and no one
else, except as set forth in Section 14.12.
(b) Purchaser
agrees to indemnify and hold harmless Seller, its Affiliates (including the
Company) and the Representatives of any of the foregoing against any and all
Losses, as incurred, arising out of or connected with the Financing except
for
(i) in the instance of fraud, intentional misrepresentation or intentional
misleading omission by any of Sellers, its Affiliates (including the Company)
or
the Representatives of any foregoing; (ii) with respect to any information
provided to Purchaser’s financing sources that has been specifically approved by
Seller for inclusion in any information memorandum or (iii) any Loss if
Purchaser has a right to indemnification from Seller under Sections 8.06,
11.05
or
Article 13 hereof for the matter that is the subject of such Loss
regardless of any survival periods set forth in Section 12.01
or any
limitations set forth in Section 13.03.
(c) Any
claim
for indemnity made by Seller pursuant to this Section 6.08
shall be
made in accordance with the procedures set forth in Article 13.
Notwithstanding the above, (i) Purchaser is not responsible for incidental
out-of-pocket costs incurred by Seller, its Affiliates (including the Company)
and the Representatives of any of the foregoing to cooperate as contemplated
by
this Section 6.08,
and
(ii) Purchaser is responsible for costs incurred by Seller in engaging Seller’s
outside accounting firm to assist with the Financing, with Purchaser to
reimburse Seller promptly for such costs incurred by Seller.
Section 6.09
Termination of Affiliate Relations; Repayment of
Indebtedness.
(a) On
or
prior to the Targeted Closing Date, all Liabilities owed to Seller and its
Affiliates (other than the Company) by the Company, including Intercompany
Accounts, or owed to the Company by Seller and its Affiliates (other than the
Company) shall in each case be settled or cancelled, such that immediately
prior
to the close of business on the Targeted Closing Date, all such Liabilities
shall have been extinguished.
(b) Other
than the Support Services Agreement, the Warranty Claims Indemnity Agreement
and
the Trademark License Agreement, and any agreements set forth in Section
6.09(b)
of the
Disclosure Letters, all agreements between the Company, on the one hand, and
Seller and its Affiliates (other than the Company), on the other hand, including
the Contracts set forth in Section 4.21
of the
Disclosure Letter shall be terminated as of the close of business on the
Targeted Closing Date, and all Liabilities thereunder shall thereupon be
discharged and released.
(c) If
the
Closing Date does not occur on the Targeted Closing Date, then notwithstanding
anything to the contrary set forth in this Agreement or the Support Services
Agreement, the parties hereto shall, and shall cause the Company to, enter
into
the Support Services Agreement effective as of the Targeted Closing Date;
provided,
that if
this Agreement is terminated at any time prior to the Closing Date in accordance
with its terms, the Support Services Agreement shall automatically terminate
at
such time.
(d) On
or
prior to the Targeted Closing Date, Seller shall cause all Indebtedness of
the
Company outstanding as of the close of the business on the Targeted Closing
Date, including the Indebtedness of the Company incurred under the banking
facility set forth in Section 4.12(c)
of the
Disclosure Letter, to be assumed by Seller, paid or otherwise settled in full,
and all obligations and Encumbrances on any properties or assets of the Company
thereunder to be terminated and otherwise released in full.
Section 6.10
Privacy Policy. Prior
to
the Closing Date, Seller shall or shall cause the Company to provide such notice
and fulfill any and all obligations to any Persons with respect to whom the
Company has personally identifiable information if required pursuant to its
published privacy policy.
ARTICLE
7
CONDITIONS
PRECEDENT TO THE CLOSING
Section 7.01
Conditions to the Obligations of Both Parties.
The
obligations of each of Purchaser and Seller to consummate the Closing of the
transactions contemplated hereby are subject to the fulfillment on or before
the
Closing Date, of the following conditions precedent:
(a) there
shall not be any preliminary or permanent injunction, writ, temporary
restraining order or any order of any nature issued by any Governmental Entity
which is in effect and prohibits or prevents the consummation of the
transactions contemplated by this Agreement;
(b) there
shall not be pending or known to be threatened any action, proceeding or
investigation before any Governmental Entity seeking as to any party hereto
any
such injunction, writ, temporary restraining order or other such order;
(c) there
shall not be any statute, rule or regulation entered, promulgated or enacted
by
any Governmental Entity which is in effect and prohibits the consummation of
the
transactions contemplated by this Agreement or has the effect of making them
illegal;
(d) any
waiting period or review required by the Department of Justice, the Federal
Trade Commission or any other Governmental Entity with respect to the
transactions contemplated by this Agreement shall have expired, lapsed or been
terminated, or such review has been completed and approved, as appropriate;
and
(e) all
other
consents, waivers, approvals, licenses, or permits from, filings with or
notification to any Government Entity that are required to be obtained prior
to
Closing and that are necessary to permit the consummation of the transactions
contemplated hereby shall have been received.
Section 7.02
Conditions Precedent to Obligation of Purchaser.
The
obligation of Purchaser to purchase the Shares at the Closing is subject to
the
satisfaction, or the waiver by Purchaser in writing, at or prior to the Closing,
of the following additional conditions precedent:
(a) Accuracy
of Representations and Warranties.
Other
than the representations and warranties of Seller contained in Sections 4.01
(excluding the last sentence thereof), 4.02,
4.03
and
4.19(a)(i),
the
representations and warranties of Seller contained herein and in the Disclosure
Letter hereto and the other documents to be delivered hereunder shall have
been
true and correct as of the date of this Agreement and shall be true and correct
as of the Closing Date as if made at and as of such date (except those
representations and warranties that address matters only as of a specified
date,
the accuracy of which shall be determined as of that specified date) in all
respects, without regard to any materiality or Material Adverse Effect
qualifications in them, except where the failure or failures of all such
representations and warranties to be so true and correct in all respects have
not had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or a material adverse effect on the ability
of Seller to consummate the transactions contemplated hereby. The
representations and warranties of Seller contained in Sections 4.01
(excluding the last sentence thereof), 4.02,
4.03
and
4.19(a)(i)
shall
have been true and correct as of the date of this Agreement and shall be true
and correct as of the Closing Date as if made at and as of such date (except
those representations and warranties that address matters only as of a specified
date, the accuracy of which shall be determined as of that specified date)
in
all respects.
(b) Performance
by Seller.
Seller
shall have duly performed and complied with, in all material respects, the
terms, agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
(c) Closing
Documents.
Purchaser has received all of the documents required to be delivered by Seller
to Purchaser pursuant to Section 10.02.
Section 7.03
Conditions Precedent to Obligation of Seller.
The
obligation of Seller to sell the Shares at the Closing is subject to the
satisfaction, or waiver by Seller in writing, at or prior to the Closing, of
the
following additional conditions precedent:
(a) Accuracy
of Representations and Warranties.
Other
than the representations and warranties of Purchaser contained in Sections 5.01
(excluding the last sentence thereof), 5.02
and
5.03,
the
representations and warranties of Purchaser contained herein and in the
Disclosure Letter and other documents to be delivered hereunder shall have
been
true and correct as of the date of this Agreement and shall be true and correct
as of the Closing Date as if made at and as of such date (except those
representations and warranties that address matters only as of a specified
date,
the accuracy of which shall be determined as of that specified date) in all
respects, without regard to any materiality qualifications in them, except
where
the failure or failures of all such representations and warranties to be so
true
and correct in all respects have not had and would not reasonably be expected
to
have, individually or in the aggregate, a material adverse effect on the ability
of Purchaser to consummate the transactions contemplated hereby.
(b) Performance
by Purchaser.
Purchaser shall have duly performed and complied with, in all material respects,
the terms, agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
(c) Closing
Documents.
Seller
has received all of the documents and the Purchase Price required to be
delivered by Purchaser to Seller pursuant to Section 10.03.
ARTICLE
8
ADDITIONAL
COVENANTS OF PURCHASER AND SELLER
Section 8.01
Press Releases.
Except
as may be required by Law, neither Purchaser nor Seller nor any of their
respective Affiliates will issue any press release or other public communication
relating to this Agreement or the transactions contemplated hereby without
the
prior consent of the other party hereto, which consent shall not be unreasonably
withheld.
Section 8.02
Included Seller Owned Software.
Seller
hereby provides to Purchaser and the Company, effective as of the Closing,
a
limited, perpetual, royalty-free, non-exclusive, non-transferable,
non-assignable (except as set forth below), license (the “License”) to use and
modify (other than during the applicable service periods in the Support Services
Agreement), for the internal operations of the Company only, the Seller Owned
Software specifically set forth in Section 8.02
of the
Disclosure Letter (the “Included Seller Owned Software”). The License shall not
permit Purchaser or Company to use the Included Seller Owned Software, other
than in and for the Business, or to sell, sublicense or otherwise assign any
such Included Seller Owned Software except as set forth in this subsection.
Notwithstanding the foregoing, Purchaser may assign the License to a purchaser
of all or substantially all of the assets of the Business after the Closing
Date; provided,
however,
that
the assignment contains a license executed by an authorized Representative
of
the assignee that contains terms and conditions of use and license that are
at
least as strict as those contained in this Agreement concerning (i) the License
and (ii) the warranty disclaimers and indemnification sections applicable to
the
Included Seller Owned Software. Additionally, the documents memorializing such
assignment must specifically name Seller as the owner of all right, title and
interest in the Included Seller Owned Software and the intended third party
beneficiary of such terms and conditions.
Section 8.03
Assignments.
(a) From
the
date hereof and after the Closing Date, Seller and Purchaser shall use their
Best Efforts to secure all necessary assignments, transfers, consents,
approvals, authorizations, exemptions and waivers from third parties required
to
complete and enable Purchaser to obtain the benefit of the transactions
contemplated hereby. Other than certain master agreements entered into by Seller
or its Affiliates for the benefit of the Company, Section 8.03
of the
Disclosure Letter sets forth a true and complete list of all guarantees provided
by Seller or any of its Affiliates (other than the Company) to any third party
of the payment, performance and/or compliance by the Company of any obligation.
Purchaser shall use its Best Efforts to promptly provide a guarantor to
substitute and take the place of Seller or its Affiliate solely with respect
to
those Seller Guarantees set forth in Section 8.03
of the
Disclosure Letter, and shall supply to the third party banking, financial,
and
other reasonably requested credit information relating to the proposed
substitute guarantor in reasonably sufficient detail to enable such third party
to determine that the proposed substitute guarantor can provide financial
assurances to satisfy such party that the proposed substitute guarantor is
financially responsible and able to meet the obligations of the Company under
the Contract or Law; provided,
however,
that
under no circumstances shall Purchaser or any of its Affiliates be obligated
to
pay any monetary amounts (other than the third party’s out-of-pocket costs or
de minimus processing expenses) or agree to any modifications to the terms
of such guarantees that, taken collectively, would have an adverse impact on
Purchaser or its Affiliates (including, for this purpose, the Company) in order
to effect such substitution.
(b) Notwithstanding
anything herein to the contrary, to the extent the assignment of any right
to be
assigned to Purchaser pursuant to this Agreement shall require the consent
of
any other party, failure to secure such consent will not constitute a breach
of
this Agreement. If any such consent is not obtained, and with respect to master
agreements referred to in Section
8.03(a)
as to
which Purchaser is not able to obtain separate agreements on a commercially
reasonable basis, Seller shall, with any related expenses borne equally between
Purchaser and Seller, cooperate with Purchaser in any reasonable arrangement
designed to provide for Purchaser the benefit of any such right or agreement,
including enforcement of any and all rights of Seller against the other party
to
any contract, commitment or other similar agreement arising out of the breach
or
cancellation thereof by such party or otherwise.
Section 8.04
Access and Cooperation.
(a) After
the
Closing, upon reasonable prior written notice, Purchaser and Seller shall
furnish or cause to be furnished to each other and their respective
Representatives access, during normal business hours and upon reasonable prior
notice, at the sole cost and expense of the requesting party, such information
(including records pertinent to the Business and the Company) and assistance
relating to the Business and the Company as is reasonably necessary for
financial reporting and accounting purposes, the preparation and filing of
any
returns, reports or forms or the defense of, or response required under, or
pursuant to, any lawsuit, action or proceeding (including any proceeding
involving the Company or Seller and any environmental matters related to the
Company and the Business); provided,
that,
such access does not unreasonably interfere with the ongoing business of
Purchaser or any of its Affiliates (including the Company) or Seller or its
Affiliates. After the Closing, each of Purchaser and Seller agrees to deliver
promptly to the other all mail and other documents received by such party which
relate to any business conducted by such other party or its Affiliates after
the
Closing. Purchaser and Seller shall also furnish or cause to be furnished to
each other and their respective Representatives access, during normal business
hours and upon reasonable prior notice, at the sole cost and expense of the
requesting party, such information relating to the Business and the Company
for
any other reasonable business purpose.
(b) Purchaser
and Seller shall, and shall cause their Affiliates to, retain until seven (7)
years after the Closing Date all such records (other than retention of tax
records governed by Section 8.06)
pertinent to the Company and the Business that are owned by such Person
immediately after the Closing, except that Purchaser shall, and shall cause
its
Affiliates to, retain all records pertinent to any pre-Closing
Employment-related Obligations retained by Seller until the expiration of any
applicable statute of limitations. Cooperation with respect to Tax matters
shall
be governed by Section 8.06.
(c) Notwithstanding
anything else set forth herein to the contrary, in no event shall Seller or
Purchaser, or any of their respective Affiliates, be obligated under this
Agreement to disclose to any other party (i) any information the disclosure
of
which is restricted by contract or Law except in strict compliance with the
applicable contract or Law or (ii) any information as to which the
attorney-client privilege is available. Purchaser acknowledges that any
information being provided to it or its Representatives by Seller or any of
its
Affiliates or Representatives pursuant to or in connection with this Agreement
is subject to the terms of the Confidentiality Agreement, and Seller
acknowledges that any information being provided to it or its Representatives
by
Purchaser or any of its Representatives pursuant to or in connection with this
Agreement is subject to the provisions of Section 8.09(b).
If
privileged and/or attorney work product documents or information, including
communications between any party hereto or its Affiliates and any of their
respective counsel, are disclosed to any other party pursuant to or in
connection with this Agreement and the transactions contemplated hereby, then
Seller and Purchaser hereby acknowledge and agree that (i) such disclosure
is
inadvertent, (ii) such disclosure will not constitute a waiver, in whole or
in
part, of any privilege or work product, and (iii) the receiving party will
promptly return to the disclosing party all copies of such documents or
information in its possession or in the possession of its Affiliates or
Representatives. Additionally, each of Seller and Purchaser agrees that it
and
its Affiliates shall not waive the attorney-client, work product, or like
privilege of the other party with respect to any of such documents or
information, without the other party’s prior written consent.
(d) Upon
the
request of Purchaser and at Purchaser’s expense, Seller shall (i) use its Best
Efforts to cause its independent auditors to perform such work as is required
for the auditor to deliver (to the extent after the exertion of such Best
Efforts the auditor is professionally able to do so) to the Securities and
Exchange Commission (the “SEC”) an auditor’s consent that is required to be
included in any filing with the SEC that includes or incorporates by reference
the Financial Statements and (ii) to the extent Purchaser or any of its
Affiliates conducts or intends to conduct an offering of securities (and if
the
registration statement, prospectus or offering memorandum for such offering
includes or incorporates by reference the Financial Statements), at Purchaser’s
expense use its Best Efforts to cause its independent auditors to perform such
work as is required for the auditor to (to the extent after the exertion of
such
Best Efforts the auditor is professionally able to do so) deliver a letter
containing statements and information of the type ordinarily included in
accountant’s “comfort letters” with respect to the financial statements and
financial information relating to the Company contained or incorporated by
reference in any such document relating to any such offering, in the case of
each of (i) and (ii) above, within the time period reasonably requested by
Purchaser or any of its Affiliates. In addition, in connection with any SEC
filing required to be made by Purchaser or any of its Affiliates (or any SEC
review of such filing), Seller shall permit Purchaser and its Representatives
to
have reasonable access, during normal business hours and upon reasonable advance
notice, to the properties, books and records of Seller and its Affiliates
relating to the Company solely for the purpose of preparing any such SEC filing
or responding to SEC questions, comments or requests on such SEC
filing.
Section 8.05
Employee Matters.
(a) Comparable
Employment.
The
parties hereby acknowledge and agree that, as of the Closing, those Employees
who are employed by the Company immediately prior to the Closing including
an
Employee on medical, disability, family or other authorized leave of absence,
but not including any Employee on layoff, unauthorized leave of absence or
other
leave for bad behavior, will remain employees of the Company immediately
following consummation of the transactions contemplated by this Agreement,
and
will be referred to herein as “Continuing Employees.” Purchaser shall provide
initial terms of employment for such Continuing Employees at salary and wage
rates that are no less favorable in the aggregate than those provided to such
Continuing Employees immediately prior to the Closing Date and which terms
are,
in all other respects, comparable in the aggregate, to those provided to
similarly situated employees of Purchaser or its Affiliates. For a period of
six
months after the Closing, to the extent a Continuing Employee whose employment
is terminated by Purchaser would have been eligible for severance benefits
under
Seller’s severance plan, Purchaser will provide severance benefits equivalent to
those that would have been provided by Seller. Notwithstanding the foregoing,
nothing in this Section 8.05(a)
shall
require the Company or any of its Affiliates to continue the employment of
any
Continuing Employee following the Closing Date or to continue the initial terms
of employment for any period after the Closing Date or any particular employee
benefit plan after the Closing Date.
(b) Employee
Welfare Benefit Plans.
Purchaser shall, or shall cause the Company or its Affiliates to, sponsor
employee welfare benefit plans for the benefit of Continuing Employees on and
after the Closing Date. Any such employee welfare benefit plan will give effect,
in determining any deductible and maximum out-of-pocket limitations, to amounts
paid by such Continuing Employees with respect to similar Employee Benefit
Plans
in which such Continuing Employees participated prior to the Closing Date.
With
respect to employee welfare benefit plans that provide health, dental, medical,
life insurance, short-term disability, accidental death and dismemberment and
other welfare benefits (other than with respect to long-term disability benefits
and any benefits under an Employee Benefit Plan that are provided to pre-Closing
retirees), (i) Seller shall retain responsibility for and continue to pay all
plan expenses and benefits for each Continuing Employee with respect to claims
incurred by such Continuing Employees or their covered dependents before the
Closing provided such claims are submitted for payment within sixty (60) days
after the Closing Date (including expenses or hospital confinements existing
on
the Closing Date) and (ii) Seller shall have no responsibility for expenses
and
benefits relating to claims incurred by Continuing Employees after the Closing
Date (including for pre-existing conditions) under employee welfare benefit
plans sponsored by Purchaser or its Affiliates after the Closing). Purchaser
shall be responsible for and pay all benefits for each Continuing Employee
with
respect to claims incurred by such Continuing Employees or their covered
dependents before the Closing (including expenses or hospital confinements
existing on the Closing Date) to the extent such claims are submitted for
payment after December 31, 2006. All responsibilities, obligations,
liabilities and commitments retained by Seller pursuant to clause (i) of the
preceding sentence shall be considered Excluded Liabilities for purposes of
this
Agreement.
(c) Service
Credit.
Purchaser shall cause the Continuing Employees to be given full credit for
all
service with Seller, the Company or an Affiliate prior to the Closing Date
for
all purposes (other than benefit accrual under a defined benefit pension plan)
under any Employee Benefit Plan in which such Continuing Employees participate
from and after the Closing Date to the same extent such service was recognized
by Seller, the Company or an Affiliate immediately prior to the Closing
Date.
(d) Defined
Contribution Plans.
Immediately prior to the Closing Date, Seller shall take, or cause to be taken,
all such actions as may be necessary to cause the Company to cease to be a
participating employer under Seller’s defined contribution plans (the “Seller DC
Plans”) covering the Continuing Employees. Effective as of January 1, 2007,
Purchaser or its Affiliates shall have in effect one or more defined
contribution plans (the “Purchaser DC Plans”), which shall be intended to be
qualified under Section 401(a) and other applicable provisions of the Code.
Each Continuing Employee (other than each Continuing Employee who, as of the
Closing Date, is eligible for retirement from Seller and, as such, will be
considered “retired” for purposes of the Seller DC Plans (the “Retiree Eligible
Employees”)) participating in any Seller DC Plans immediately prior to the
Closing Date shall become a participant in a Purchaser DC Plan as of
January 1, 2007. At such time that is reasonably requested by Purchaser,
Seller shall cause the trustees of the Seller DC Plans to transfer, but no
later
than December 31, 2006, in accordance with Section 414(l) of the Code, the
full account balances of the Continuing Employees (excluding any account
balances of the Retiree Eligible Employees) under the Seller DC Plans to the
appropriate trustees as designated by Purchaser under the trust agreements
forming parts of the Purchaser DC Plans. Such transfer shall include and give
effect to outstanding loan balances under the Seller DC Plans as of the Closing
Date. Seller shall make all necessary amendments to the Seller DC Plans and
their related trust agreements to provide for the transfer of assets described
in this Section
8.05(d),
and
Seller and Purchaser shall cooperate to make all filings with applicable
government authorities required with respect to such transfer, including without
limitation any IRS Form 5310-A filings and to effect the transfer contemplated
by this Section
8.05(d).
Except
as expressly provided in this Section 8.05(d),
all
liabilities, obligations and commitments associated with the Seller DC Plans
that arise out of or relate to the period prior to the Closing shall remain
liabilities of Seller on and after the Closing Date and shall be considered
Excluded Liabilities for all purposes of this Agreement.
(e) Defined
Benefit Plans.
Seller
shall cause the sponsorship of the Alcoa Home Exteriors, Inc. Pension Plan
(the
“AHE Pension Plan”) and its related trust, the Xxxxxx Corporation Excess Pension
Plan (the “Excess Plan”) and all obligations under contracts with service
providers or third party administrators that relate to such plans to be
transferred to Alcoa Inc. immediately prior to the Closing. As of the Closing
Date, and without further action by the Company or Purchaser, all employees
and
officers of the Company with positions of responsibility or duties in respect
of
the AHE Pension Plan or the Excess Plan, shall be removed from such positions.
Seller shall not make any amendments to the AHE Pension Plan or the Excess
Plan,
or any plan into which either such plan is merged following the Closing, that
will adversely effect the rights of the Continuing Employees with respect to
their benefits under the AHE Pension Plan or the Excess Plan, as applicable,
except as required by law or
applied in a uniform manner to other similar situated employees or retirees
of
Seller. All obligations and liabilities arising out of or related to the AHE
Pension Plan and the Excess Plan shall be considered Excluded Liabilities for
all purposes under this Agreement.
(f) Workers’
Compensation.
On and
after the Closing Date, Purchaser shall be responsible for all obligations
for
workers’ compensation and other similar statutory claims asserted by or with
respect to Continuing Employees with respect to work-related injury or other
compensable event or occupational illness or disease which occurred or is
attributable to any event, state of facts or condition which existed or occurred
in whole on or after the Closing Date. Seller shall retain obligations for
workers’ compensation and other similar statutory claims asserted by or with
respect to Continuing Employees with respect to any work-related injury or
other
compensable event or occupational illness or disease which occurred or is
attributable to any event, state of facts or condition which existed or occurred
in whole on or prior to the Closing Date. If any such injury or other
compensable event or occupational illness or disease of a Continuing Employee
who is employed by Seller before the Closing Date and by Purchaser on or after
the Closing Date is attributable in part to causes occurring during the period
of time for which Seller has retained obligations under this paragraph and
in
part to causes occurring during the period of time for which Purchaser has
assumed obligation under this paragraph and is the basis of a workers’
compensation or other similar statutory claim, the liability for any such claims
shall be shared by Seller and Purchaser in the proportion of the periods of
exposure as would be taken into account under the applicable provisions of
the
statute or labor code applicable to the injury, occupational illness or disease
of such Continuing Employee. All liabilities and obligations retained by Seller
pursuant to this Section 8.05(f)
shall be
considered Excluded Liabilities for all purposes under this
Agreement.
(g) Vacation
Accruals.
As of
the Closing, Purchaser shall assume all liabilities of Seller or the Company
with respect to the Continuing Employees for vacation earned but not taken
during 2006 under Seller’s vacation policies applicable to such Continuing
Employees as in effect on the Closing Date.
(h) Alcoa
Home Exteriors Variable Compensation Plans.
Subject
to the remainder of this Section 8.05(h),
Purchaser shall be responsible for liabilities under the Alcoa Home Exteriors
Variable Compensation Plan, which includes an hourly incentive plan (the “HIP”),
a monthly incentive plan (the “MIP”), an incentive plan (the “IC”), and sales
managers’ incentive plan (the “SMIP”). Specifically, with respect to the HIP,
MIP, IC and SMIP, Purchaser shall pay out benefits up to one hundred percent
(100%) of target no
later
than bonuses are paid to similarly situated employees of Purchaser, but in
no
event later than March 15, 2007,
based on
actual performance of the Business for calendar year 2006. Seller shall be
responsible to pay benefits under the Alcoa Home Exteriors Variable Compensation
Plan to Continuing Employees who receive benefits under the HIP, MIP, IC and
SMIP to the extent that performance of the Business exceeds one hundred percent
(100%) of target as of September 30, 2006, and shall annualize such performance
and pay out benefits based on such performance within thirty (30) business
days
after Closing. In the event that any Continuing Employee ceases to be employed
by the Company during the period between Closing and December 31, 2006,
Purchaser shall pay out to such employee Incentive Compensation at target as
if
he had completed the entire year. All
liabilities and obligations retained by Seller pursuant to this Section
8.05(h)
shall be
considered Excluded Liabilities for all purposes under this
Agreement.
(i) Alcoa
Deferred Compensation Plan.
Notwithstanding any other provision of this Agreement to the contrary, Seller
shall retain all liabilities, obligations and commitments with respect to the
Alcoa Deferred Compensation Plan, which liabilities, obligations and commitments
shall be considered Excluded Liabilities for purposes of this
Agreement.
(j) Alcoa
Equity-Based Compensation Plans.
Notwithstanding any other provision of this Agreement to the contrary, Seller
shall retain all liabilities, obligations and commitments with respect to the
Alcoa Stock Incentive Plan and the Alcoa Employee Stock Purchase Plan, and
all
awards granted under such plans, which liabilities, obligations and commitments
shall be considered Excluded Liabilities for purposes of this
Agreement.
(k) Long-Term
Disability.
Purchaser shall assume all liabilities, obligations and commitments in respect
of long-term disability benefits to Continuing Employees on and after the
Closing Date.
(l) Retiree
Health and Life Benefits.
From
and after the Closing Date, Seller shall retain, or shall cause any applicable
Employee Benefit Plan to retain, all liabilities and obligations in respect
of
post-retirement medical, health and life insurance benefits to all Employees
who
are retired as of the Closing Date, including all Retiree Eligible Employees,
or
who retire within one year following the Closing Date; provided,
that
Seller shall not make any changes or modifications to any such Employee Benefit
Plan that adversely affect the rights of any Employees thereunder, unless such
changes or modifications are required by applicable law or applied in a uniform
manner to other similarly situated retirees of Seller. All liabilities and
obligations retained by Seller pursuant to this Section 8.05(l)
shall be
considered Excluded Liabilities for purposes of this Agreement.
(m) COBRA.
Effective as of the Closing Date, Purchaser shall assume all obligations,
Liabilities and commitments in respect of providing notices and making available
the health care continuation coverage required by COBRA for all Continuing
Employees (and their qualifying spouses or dependents) who become eligible
for
such coverage at any time following the Closing Date. With respect to all
Employees (and their qualifying spouses and dependents) who became eligible
for
such coverage at any time prior to Closing Date, and with respect to all
Employees who are not Continuing Employees and who become eligible for such
coverage at any time after the Closing Date, Seller shall retain all
obligations, liabilities and commitments in respect of such Employees under
COBRA, and such obligations, liabilities and commitments shall be considered
Excluded Liabilities for all purposes of this Agreement.
(n) Relocation
Arrangements.
Notwithstanding any other provision of this Agreement to the contrary, Seller
and/or Alcoa shall retain all liabilities, obligations and commitments under,
arising out of or relating to the Alcoa Transfer and Relocation Policy, the
Alcoa Relocation Plan and any other employee benefit plan, policy or arrangement
that provides benefits to Employees in connection with their relocation,
including, without limitation, the Transfer Policy, New Hire Policy and
Experienced New Hire Policy (the “Relocation Arrangements”), and neither the
Company nor Purchaser shall have any obligation to reimburse Seller, Alcoa
or
any Employee for any amounts paid pursuant to any Relocation Arrangement,
including, without limitation, amounts relating to the four individuals named
on
Section
4.13(a)(xi)
of the
Disclosure Letter or any other Employee who becomes eligible to receive benefits
under any Relocation Arrangement before the Closing Date (the “Relocated
Employees”). Seller and/or Alcoa agrees to pay, on or prior to the Closing Date,
to each Relocated Employee all amounts due to such Relocated Employee pursuant
to the Relocation Arrangements. All liabilities, obligations and commitments
retained by Seller or Alcoa pursuant to this Section
8.05(n)
shall be
considered Excluded Liabilities for purposes of this Agreement.
(o) General.
Except
as expressly set forth in this Section 8.05,
Seller
shall retain (i) all liabilities and obligations under or relating to all
Employee Benefit Plans, including, without limitation, the Retention Agreements
listed in Section 4.13(a)
of the
Disclosure Letter, whether or not such liabilities or obligations arise prior
to
or after the Closing Date, and (ii) all other liabilities relating to the
employment or termination of employment of any person arising from or relating
to the operation of the business of the Company prior to the Closing Date or
the
transactions contemplated by this Agreement (including, but not limited to,
all
severance, stay and incentive bonuses) or, with respect to any person who is
not
a Continuing Employee, arising on or after the Closing Date; provided,
that
Seller shall not retain any obligations or liabilities associated with the
Alcoa
Home Exteriors Salary Replacement Plan that arise after the Closing Date. The
liabilities and obligations retained by Seller that are set forth in the
preceding sentence shall be considered Excluded Liabilities for all purposes
of
this Agreement. Nothing in this Section 8.05(o)
shall
restrict the right of Purchaser to terminate or modify any employee benefit
plan, policy, program, agreement or arrangement after the Closing
Date.
(p) No
Rights Conferred on Employees.
Nothing
herein expressed or implied shall confer upon any of the current or former
employees of Seller, Purchaser, or any of their Affiliates, any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement,
including, without limitation, any right to employment or continued employment
for any specified period.
Section 8.06
Tax Matters.
(a) The
income of the Company will be determined for the period up to and including
the
Closing Date and the period after the Closing Date by closing the books of
the
Company as of the end of the Closing Date (or, if the Closing Date does not
occur on the Targeted Closing Date, the Targeted Closing Date), and if the
Closing Date does not occur on the Targeted Closing Date, the income for the
portion of the month that ends on the Closing Date shall be deemed to be the
amount of such income for such month multiplied by a fraction the numerator
of
which is the number of days in such month ending on and including the Closing
Date and the denominator of which is the number of days in the entire
month.
(b) Seller
shall (i) prepare (or cause to be prepared) and timely file (or cause to be
filed) all Tax Returns for the Company for all Tax periods which end on or
prior
to the Closing Date and which are filed after the Closing Date, and (ii) pay
all
pre-Closing Taxes of the Company, or shall reimburse Purchaser or any of its
Affiliates within thirty (30) days after the later of payment by Purchaser
or
any of its Affiliates of such pre-Closing Taxes and Purchaser’s written
notification to Seller of such payment. Seller shall prepare such Return in
a
manner consistent with past practice, except as otherwise required by Law,
and,
except in the case of consolidated, combined or unitary Returns that include
members of Alcoa Inc. (other than the Company), shall deliver any such Return
to
Purchaser for its review at least fifteen (15) days prior to the date such
Return is required to be filed. If Purchaser disputes any item on such Returns,
it shall notify Seller of such disputed item (or items) and the basis for its
objection. The parties shall act in good faith to resolve any such dispute
prior
to the date on which the relevant Return is required to be filed. If the parties
cannot resolve any disputed item, the item in question shall be resolved by
the
CPA Firm. The fees and expenses of the CPA Firm shall be borne equally by Seller
and Purchaser.
(c) Purchaser
shall prepare (or cause to be prepared), and shall timely file (or cause to
be
filed) all Tax Returns for the Company for Tax periods which end after the
Closing Date. Purchaser shall, promptly after filing, provide Seller with a
copy
of each Tax Return prepared for a period ending on or before December 31, 2006.
Purchaser shall pay (or cause to be paid) to the appropriate Taxing Authorities
all Taxes of the Company with respect to such Tax periods. In the case of
Returns that are filed with respect to Straddle Periods (as defined below),
Purchaser shall prepare such Returns in a manner consistent with past practice,
except as otherwise required by law. For purposes of this Section 8.06,
in the
case of any Taxes that are imposed on a periodic basis and are payable for
a Tax
period that includes (but does not end on) the Closing Date (a “Straddle
Period”), the portion of such Tax which relates to the Pre-Closing Tax Period
shall (i) in the case of any Taxes other than gross receipts, sales or use
Taxes
and income Taxes, be deemed to be the amount of such Tax for the entire Tax
period multiplied by a fraction the numerator of which is the number of days
in
the Tax period ending on and including the Closing Date and the denominator
of
which is the number of days in the entire Tax period, and (ii) in the case
of
all other Taxes, be deemed equal to the amount which would be payable if the
relevant Tax period ended on and included the Closing Date as determined
pursuant to Section 8.06(a).
The
portion of any refunds or credits relating to a Tax period that begins before
and ends after the Closing Date shall be determined as though the relevant
Tax
period ended on and included the Closing Date. All determinations necessary
to
give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of Seller and the Company, except as otherwise required
by
Law.
(d) Seller
and Purchaser agree that all matters relating to Taxes, with the exception
of
payroll and employment Taxes, will be excluded from the Final Working Capital
Statement. Without limiting the effectiveness of the provisions of Section 8.06(e),
Taxes
will be settled, from time to time, on a cash basis from the actual taxes paid
for each such Returns paid by the respective Seller and Purchaser for taxes
paid
in respect of the Straddle Period in a manner agreed to by the
parties.
(e) Seller
shall be responsible for payment of and shall indemnify, defend, hold harmless,
pay and reimburse the Purchaser Indemnitees from and against any and all Losses
(including, without limitation, reasonable fees for outside counsel, accountants
and other outside consultants) suffered or incurred (each a “Tax Loss” and
collectively, the “Tax Losses”) based upon arising out of or resulting from
(i) Taxes of Alcoa Inc. or the Company for periods or portions thereof
ending on or before the Closing Date (“Pre-Closing Taxes”) in excess of the
amount of payroll and employment Taxes included as current liabilities; (ii)
Taxes of any member of an affiliated, consolidated, combined or unitary group
of
which the Company is or was a member on or prior to the Closing Date by reason
of liability under Treasury Regulation §1.1502-6, Treasury Regulation §1.1502-78
or comparable provision of foreign, state or local law; (iii) without
duplication, Taxes imposed as a result of (x) a breach of or inaccuracy in
a
representation or warranty set forth in Section 4.11,
as of
the date such representation or warranty was made or as if such representation
or warranty were made on and as of the Closing Date (except for such
representations and warranties that expressly relate to a specified date, the
breach of or inaccuracy in which will be determined by reference to such
specified date) or (y) a breach of a covenant or agreement set forth in
Section 6.07;
provided,
that
for purposes of this Section 8.06(e)(iii)
only,
any breach of a representation, warranty, covenant or agreement shall be
determined without reference to any materiality qualifier with respect thereto;
and (iv) Taxes or other payments required to be paid after the date hereof
by the Company to any party under any agreement, whether written or not,
relating to the sharing, allocation or indemnification of Taxes, or any similar
agreement, contract or arrangement (collectively, “Tax Sharing
Agreement”).
(f) Purchaser
shall be responsible for payment of and shall indemnify, defend and hold
harmless Seller and any of its Affiliates from and against any and all Tax
Losses arising out of (i) all Taxes of the Company for any Post-Closing Tax
Period; (ii) any Tax Loss attributable to any breach by Purchaser or any of
its
Affiliates (including, after the Closing, the Company) of any covenant or
agreement contained in this Agreement; (iii) any additional Tax Liability of
Seller (including any amount owed by Seller due to indemnification payments
pursuant to this Agreement) resulting from any transaction, other than any
transaction or election contemplated by this Agreement, engaged in by the
Company not in the ordinary course of business occurring on the Closing Date
after Purchaser’s purchase of the Shares; and (iv) all reasonable legal,
accounting, appraisal, consulting or similar fees and expenses of Seller and
any
of its Affiliates in contesting any Tax Liability for which Purchaser is liable
under this Section 8.06.
(g) Any
Tax
refunds that are received by Purchaser, the Company, or any of their respective
Affiliates after the Closing, and any amounts credited or offset against Taxes
of Purchaser, the Company, or any of their respective Affiliates after the
Closing that are actually realized by such parties, that in each case relate
to
Pre-Closing Tax Periods of the Company shall be for the account of Seller.
The
amount or economic benefit of any refunds, credits or offsets of Taxes of the
Company for any Post-Closing Tax Period shall be for the account of Purchaser.
The amount or economic benefit of any refunds, credits or offsets of Taxes
of
the Company for any taxable period that includes but does not end on the Closing
Date shall be equitably apportioned between Seller and Purchaser within
forty-five (45) days of the Closing Date.
(h) Any
Tax
Sharing Agreement between Seller or any of its Affiliates, on the one hand,
and
the Company, on the other hand shall be terminated on or before the Closing
Date
and will have no further effect for any taxable year.
(i) Seller
and Purchaser shall each provide the other with such assistance as may be
reasonably requested (including access to Books and Records and making employees
reasonably available to provide information or testimony) in connection with
the
preparation of any Return or the determination of liability for Taxes with
respect to the Company or the Business (including those liabilities as may
arise
pursuant to Section 8.06(k)
relating
to any Contest (as defined below) or other proceeding relating to Taxes).
Purchaser shall complete Seller’s standard Tax packages relating to Returns that
Seller is responsible for filing pursuant to this Section 8.06.
Seller
and Purchaser shall, and shall cause their Affiliates to, cooperate with each
other in preparing and pursuing any claims for refunds or credits of income
Taxes (including refunds) of the Company. Seller and Purchaser each shall,
and
shall cause their Affiliates to, retain until the expiration of the applicable
statute of limitations all Tax Returns, schedules, work papers, accounting
records and other records that are owned by such Person immediately after the
Closing Date and that relate to the Company or the Business; after the end
of
such period, before disposing of any such Tax Returns, schedules, work papers
or
other records, each shall give notice to such effect to the other, and shall
give the other, at the other’s cost and expense, a reasonable opportunity to
remove and retain all or any part of such Tax Returns, schedules, work papers
or
other records as the other may select. Any information obtained under this
Section 8.06(i)
shall be
kept confidential, except as may be otherwise necessary in connection with
the
filing of Returns or in the conduct of a Contest or other Tax
proceeding.
(j) If
any
Taxing Authority informs Seller or Purchaser of any notice of a proposed audit,
claim, assessment or other dispute concerning an amount of Taxes with respect
to
which the other party may incur liability hereunder, the party so informed
shall
promptly notify the other party of such matter. Such notice shall contain
factual information (to the extent known) describing any asserted Tax Liability
in reasonable detail and shall be accompanied by copies of any notice or other
documents received from any Taxing Authority with respect to such matter. If
a
Party has knowledge of an asserted Tax Liability with respect to a matter for
which it is to be indemnified hereunder and such party fails to provide the
Indemnitor prompt notice of such asserted Tax Liability, (i) if the Indemnitor
is precluded from contesting the asserted Tax Liability in any forum as a result
of the failure to give prompt notice and could have asserted in good faith
that
the Tax Liability should be reduced, the Indemnitor shall have no obligation
to
indemnify the Indemnitee for the amount of such reduction; and (ii) if the
Indemnitor is not precluded from contesting the asserted Tax Liability in any
forum, but such failure to provide prompt notice results in a monetary detriment
to the Indemnitor, then any amount which the Indemnitor is otherwise required
to
pay pursuant to this Agreement shall be reduced by the amount of such
detriment.
(k)
Seller and Purchaser each acknowledge that the Company has used the
last-in-first-out (LIFO) method of inventory accounting for the Business and
that the Company will instead use the first-in-first-out (FIFO) method of
inventory accounting for all periods ending after the Closing Date (a
“Post-Closing Tax Period”). Purchaser will file Form 3115 in respect of this
change in accounting method, and such change will be effective the day after
the
Closing Date; provided,
that
Seller will be given an adequate opportunity to review such Form 3115 prior
to
its filing with the appropriate office of the IRS. If Seller disputes any item
on such Form, it shall notify Purchaser of such disputed item (or items) and
the
basis for its objection. The parties shall act in good faith to resolve any
such
dispute prior to the date on which the relevant Return is required to be filed.
If the parties cannot resolve any disputed item, the item in question shall
be
resolved by the CPA Firm, and the fees and expenses of the CPA Firm shall be
borne equally by Seller and Purchaser. For federal income tax purposes, such
change in accounting method will result in a requirement under
Section 481(a) of the Code that the Company must report, ratably during the
four taxable periods immediately after the Closing Date, additional income
that
is measured with reference to the difference at the time of the Closing between
inventory costs measured on a LIFO basis and inventory costs measured on a
FIFO
basis (the “Section 481 Inventory Adjustment”). Seller shall indemnify, pay and
reimburse the Purchaser Indemnitees for the amount of additional Taxes payable
in any Post-Closing Tax Period arising from the Final Section 481 Inventory
Adjustment in the following manner: by December 15, 2006, Seller shall pay
an amount equal to 25 percent (25%) of the Section 481 Inventory
Adjustment, multiplied by the Applicable Tax Rate, and on each of April 15,
June 15, September 15 and December 15 of the years 2007 through
2009, Seller shall pay an amount equal to one-twelfth (1/12) of the
Section 481 Inventory Adjustment, multiplied by the Applicable Tax
Rate.
(l) Payment
by an Indemnitor of any amount due to an Indemnitee under this Section 8.06
shall be
made within thirty (30) days following written notice by the Indemnitee that
payment of such amounts to the appropriate Taxing Authority or other applicable
third party is due by the Indemnitee, provided,
that
the Indemnitor shall not be required to make any payment earlier than five
(5)
Business Days before it is due to the appropriate Taxing Authority or applicable
third party. Any payments required pursuant to this Section 8.06
that are
not made within the time period specified shall bear interest at a rate and
in
the manner provided in the Code for interest on underpayments of federal income
tax.
(m) After
the Closing Date, except
as provided below, Purchaser shall control the conduct, through counsel of
its
own choosing, of any audit, claim for refund, administrative or judicial
proceeding involving any asserted Tax Liability or refund with respect to
the
Company (any such audit, claim for refund, or proceeding relating to an asserted
Tax Liability referred to herein as a “Contest”). In the case of a Contest after
the Closing Date that relates solely to Taxes for which Purchaser is indemnified
under Seller
shall control the conduct of such Contest, but Purchaser shall have the right
to
participate in such Contest at its own expense, and Seller shall not be able
to
settle,
compromise and/or concede any portion of such Contest that is reasonably
likely
to affect the Tax liability of the Company for any taxable year (or portion
thereof) beginning after the Closing Date without the
reasonable consent of Purchaser,
which
consent shall not be unreasonably withheld or delayed;provided,
that, that if Seller fails to assume control of the conduct of any such Contest
within a reasonable period following the receipt by Seller of notice of such
Contest, Purchaser shall have the right to assume control of such Contest
and
shall be able to settle, compromise and/or concede such Contest in its sole
discretion. In the case of a Contest after the Closing Date that relates
both to
Taxes for which Purchaser is indemnified under Section 8.06(e) and Taxes
for which Purchaser is not indemnified under Section 8.06(e), Purchaser
shall control the conduct of such Contest, but Seller shall have the right
to
participate in such Contest at its own expense, and Purchaser shall not settle,
compromise and/or concede such Contest without the consent of Seller, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 8.06 the term “participation” shall include (i) participation in
conferences, meetings or proceedings with any Taxing Authority, the subject
matter of which includes an item for which such party may have liability
hereunder, (ii) participation in appearances before any court or tribunal,
the
subject matter of which includes an item for which a party may have liability
hereunder, and (iii) with respect to the matters described in the preceding
clauses (i) and (ii), participation in the submission and determination of
the
content of the documentation, protests, memorandum of fact and law, briefs,
and
the conduct of oral arguments and presentations.
(n) Purchaser
agrees except as required by applicable law, that it shall not, and shall not
cause or permit the Company, to carry back to any taxable period ending on
or
prior to the Closing Date any net operating loss, loss from operations or other
Tax attribute relating to the Company, and further agrees that Seller has no
obligation under this Agreement to return or remit any refund or other Tax
Benefit attributable to a breach by Purchaser of the foregoing
undertaking.
(o) At
Seller’s request, Purchaser shall cause the Company to make or join with Seller
in making any Tax election provided
that the
making of such election does not have a material adverse impact on Purchaser
or
the Company for any Post-Closing Tax Period. Purchaser shall not cause the
Company to make any Tax election, other than any elections contemplated by
this
Agreement, that would have a material adverse impact on Seller. Seller shall
not
make or change any Tax elections or file for any change in any method of
accounting with the IRS with respect to the Company without the prior consent
of
Purchaser.
(p) Seller
shall be responsible for and shall pay all wages paid or to be paid to Employees
for all periods through and including the Closing Date. Purchaser shall furnish
(or cause to be furnished) an IRS Form W-2 to each Employee disclosing all
wages
and other compensation paid for calendar year 2006, and Taxes withheld
therefrom, and shall prepare, furnish to the appropriate Employee and/or file
with the appropriate federal, state or local authority (including but not
limited to the Internal Revenue Service, and any comparable state or local
agency or authority) such other wage or compensation-related tax filings or
year-end reconciliations as are required with respect to calendar year 2006,
and
Seller and its Affiliates shall be relieved of any responsibility to provide
same to such Employees or file same with the appropriate authorities.
Additionally, Purchaser shall prepare and furnish any amended IRS Form W-2
that
is required to be furnished with respect to the 2006 calendar year and prepare
and file any amended IRS Form 941 that is required to be filed with respect
to
the 2006 calendar year. Seller shall provide Purchaser with all necessary
payroll records for the calendar year 2006 through the Closing for Purchaser
to
fulfill its obligations hereunder.
(q) Notwithstanding
anything herein to the contrary, Purchaser, on the one hand, and Seller on
the
other hand, will each pay one-half of all foreign, federal, state and local
transfer, stamp, vehicle, sales and use taxes, real estate transfer taxes,
and
any and all notarial fees imposed or incurred in connection with the
consummation of the transactions contemplated by this Agreement.
Section 8.07
Intentionally Omitted.
Section 8.08
Alcoa Names; Purchaser’s Obligations Post-Closing.
The
Company’s right to continue the use of the “Alcoa” and “Alumax” trademarks shall
be pursuant to the terms and conditions of the Trademark License Agreement
or as
otherwise permitted by Law, attached hereto as Exhibit B. Except as
explicitly set forth in the Trademark License Agreement, after the Closing
Date,
neither Purchaser, the Company, nor the Business may use the names “Alcoa,”
“Aluminum Company of America,” “Alumax” or any trademarks confusingly similar
thereto for any purpose whatsoever.
Section 8.09
Confidentiality.
(a) The
terms
of the Confidentiality Agreement are hereby incorporated by reference and shall
continue in full force and effect until the Closing, at which time the
obligations of Purchaser under such Confidentiality Agreement with respect
to
the Business shall terminate.
(b) Except
as
otherwise expressly set forth in this Agreement, for five (5) years
following the Closing Date, Seller agrees to, and agrees to cause each of its
Affiliates and Representatives of each of the foregoing to, keep confidential
any and all confidential information or documents relating to the Business
or
the Company known by Seller at the time of Closing and disclose such information
only to their Representatives, who shall hold such information confidential.
Seller shall have no liability hereunder for disclosure of any such information
which (i) is in the public domain other than as a result of an unauthorized
disclosure by Seller or any of its Affiliates or Representatives, (ii) is
required to be disclosed by Law (provided,
that
Seller shall provide Purchaser with prompt written notice of any such
requirement so that Purchaser has an opportunity to seek a protective order
or
other appropriate remedy), or (iii) has been provided to any third party
(other than its Representatives) by Purchaser or its Affiliates (including
the
Company) without restriction as to further disclosure. For purposes of this
Section 8.09(b),
“confidential information or documents” means any proprietary information,
documents or data owned or controlled by or relating to Purchaser or its
Affiliates (including the Company following the Closing Date).
Section 8.10 Insurance.
(a) Purchaser
acknowledges and agrees that effective upon the Closing Date, all insurance
policies carried by Seller or its Affiliates (other than the Company) for the
benefit of the Company with respect to the assets, operations, activities and
liabilities of the Company and the Business (the “Seller Insurance Policies”)
will cease to provide coverage: (i) for events, acts, or omissions that occur
after the Closing Date in the case of “occurrence-based” policies; and (ii) as
of the Closing Date in the case of “claims-made” policies for any claims made on
or after the Closing Date; provided,
however,
that,
subject to following Seller’s procedures for applicable Administered Claims
pursuant to paragraphs (b) and (c) below, Seller shall be responsible for
and shall indemnify, defend, hold harmless, pay and reimburse Purchaser from
any
and all Losses based upon, resulting from arising out of any auto or general
liability accidents or occurrences which occurred prior to the Closing Date
for
which a claim is first reported or made to Seller within seven (7) years after
the Closing Date and that would, except for the sale of the Company, have been
covered by Three Rivers Insurance Company Internal Deductible Claims-Made
Indemnification Policies Nos. 498-120 and 498-123, written with limits of
$4,000,000 each occurrence; $15,000,000 General Aggregate; $10,000,000
Products/Completed Operations; and $2,000,000 Aggregate Allocated Loss
Adjustment Expense; subject to a self-insured retention of $1,000,000 per
occurrence, covering damages resulting from an occurrence insured by ACE
Insurance Company, Zurich Insurance Company and their affiliates under policy
numbers HDO G2058602-3, ISA HO 767567-7, HDO G21738335, XXX XX 000000-0, XXX
X0
000000 6, ISA H07842594, CGL 3485897-01, HDO G2171804A, ISA H07936746, HDO
G21734548 and ISA H08224675. Seller’s indemnification obligations under this
Section 8.10(a)
with
respect to any claim which has not been reported or made to Seller within seven
(7) years after the Closing Date shall terminate on the seventh (7th)
anniversary of the Closing Date.
(b) Purchaser
acknowledges and understands that until the Closing Date the Company has
participated in Seller’s or Seller’s Affiliate’s insurance program and, as such,
is billed on an ongoing basis by Seller or one of its Affiliates for the
self-insured or deductible portion of all of the Company’s claims administered
under that program with respect to the Business and related expenses and
charges, as well as premium audit adjustments related to the Company under
the
program (collectively the “Administered Claims”).
(c) After
the
Closing Date, Seller or its Affiliates may pay or otherwise incur the following
costs and expenses (on behalf of the Company) to Seller’s brokers, insurance
carriers, and/or claims administrators insuring or administering the insurance
program of Seller and its Affiliates (other than the Company): (i) amounts
related to the self-insured portion (including, but not limited to, payment
obligations under deductibles and self insured retentions) payable on
Administered Claims, and (ii) expenses and charges arising out of the
administration of an Administered Claim (hereinafter, collectively referred
to
as an “Insurance Payment”). To the extent that any Insurance Payment relates to
an Administered Claim, Purchaser agrees to reimburse, or to cause the Company
to
reimburse, Seller, its Affiliates, or their respective assigns or designees,
as
the case may be, for the amount of the Insurance Payment within thirty (30)
days
of receipt of such request for reimbursement and customary documentation
evidencing such payment; provided,
that
Purchaser shall not be obligated to reimburse or cause the Company to reimburse
Seller, its Affiliates or their respective assigns or designees of any such
Insurance Payment (A) related to an Administered Claim that is subject to an
indemnification or other payment or reimbursement obligation of Seller under
this Agreement or the Transaction Documents, (B) related to an Administered
Claim under Seller’s or Seller’s Affiliate’s (including Three Rivers’) worker’s
compensation insurance policy or (C) that would have been covered under the
insurance policy(ies) of Three Rivers but for the bankruptcy or insolvency
of
Three Rivers.
(d) Cooperation.
Purchaser shall cause the Company to fully cooperate with Seller, its
Affiliates, their insurers and claims administrators in the defense of all
Administered Claims for which the Business is entitled to defense and
indemnification.
Section 8.11 Non-Competition;
Non-Solicitation.
(a) Seller
acknowledges that (v) the Company is engaged in the Business; (w) the Business
is conducted throughout the United States of America and Canada; (x) its
ownership until the Closing Date of the Company has given it access to the
trade
secrets of and confidential information concerning the Company; (y) the
agreements and covenants contained in this Section 8.11
are
essential to protect the Business and goodwill of the Company; and (z) Purchaser
would not purchase the Shares but for such agreements and covenants.
Accordingly, Seller covenants and agrees as follows:
(i) Subject
to the remainder of this clause (i), Seller shall not, and shall not permit
any
of its Affiliates to, in the United States of America or in Canada, directly
or
indirectly, (A) engage in the Business for a period of five (5) years commencing
on the Closing Date; (B) engage in the sale, manufacture or distribution of
the type of products that are substantially similar to the Company Products
to
or for any Person engaged in the Business or for the purpose of competing with
the Business for a period of five (5) years; (C) have an interest in any
Person engaged in the Business in any capacity, including as a partner,
shareholder, member, employee, principal, agent, trustee or consultant for
a
period of five (5) years commencing on the Closing Date; or
(D) intentionally interfere in any material respect with the business
relationships (whether formed prior to or after the date of this Agreement)
between the Company and customers or suppliers of the Company for a period
of
five (5) years commencing on the Closing Date. Notwithstanding the foregoing,
Seller or one of its Affiliates may own, directly or indirectly, solely as
an
investment, securities of any Person if Seller is not a controlling Person
of,
or a member of a group which controls, such Person and does not, directly or
indirectly, own 5% or more of any class of securities of such Person; and,
provided further,
that
nothing herein shall (i) restrict Seller or one of its Affiliates from merging
with or into or otherwise acquiring, any Person engaged in the Business, and
thereafter receiving all of the benefits of such merger or ownership, so long
as
at the time of such acquisition the revenues derived from such Person’s
engagement in the Business are less than twenty-five percent (25%) of the total
revenues of the Person or (ii) restrict Seller or any of its Affiliates from
continuing to participate in, own and operate the businesses conducted by such
parties as of the Closing Date; and
(ii) For
a
period of two (2) years commencing on the Closing Date, Seller shall not, and
shall not permit any of its Affiliates to, directly or indirectly, hire or
solicit any employee of the Company or encourage any such employee to leave
such
employment, nor shall Seller hire, or permit any of its Affiliates to hire,
directly or indirectly, any employee of the Company who has left such employment
for a period of six months from the time when such employee leaves his/her
employment (provided,
however,
that
such six month period shall not extend beyond two (2) years commencing on the
Closing Date) or with the prior written consent of Purchaser, except pursuant
to
a general solicitation or employment searches which are not directed
specifically to any such employees.
(b) If
Seller
breaches, or threatens to commit a breach of, any of the provisions of this
Section 8.11,
Purchaser and the Company shall have the following rights and remedies, each
of
which rights and remedies shall be independent of the others and severally
enforceable, and each of which is in addition to, and not in lieu of, any other
rights and remedies available to Purchaser or the Company under law or in
equity:
(i) the
right
and remedy to have such provision specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such breach
or
threatened breach will cause irreparable injury to each of Purchaser and the
Company and that money damages would not provide an adequate remedy to Purchaser
or the Company; and
(ii) the
right
and remedy to require Seller to account for and pay over to Purchaser or the
Company, as the case may be, all compensation, profits, monies, accruals,
increments or other benefits derived or received by Seller or its Affiliates
as
the result of any transactions constituting a breach of such
provision.
(c) Seller
acknowledges and agrees that as to it the provisions of this Section 8.11
are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court of competent jurisdiction determines that all or any
part
of any of this Section 8.11
is
invalid or unenforceable as to Seller, the remainder of this Section 8.11
shall
not be affected and shall be given full effect as to Seller, without regard
to
the invalid portions.
(d) If
any
court of competent jurisdiction determines that all or any part of this
Section 8.11
is
unenforceable as to Seller, such court shall have the power to reduce the scope
of this Section 8.11
and, in
its reduced form, such provision shall then be enforceable.
ARTICLE
9
TERMINATION
Section 9.01 Termination.
This
Agreement may be terminated and the transactions contemplated herein
abandoned:
(a) by
the
mutual written consent of Seller and Purchaser;
(b) by
either
Seller or Purchaser, at any time after December 31, 2006 if the conditions
set forth in Article VII have not been satisfied or waived; provided,
that no
party that is then in material breach of any provision of this Agreement shall
be entitled to terminate this Agreement pursuant to this Section 9.01(b);
(c) by
Seller
if it is not then in material breach of any provision of this Agreement and,
if
there has been a breach by Purchaser of any covenant, agreement, representation
or warranty contained in this Agreement that would give rise to the failure
of
any condition to the obligations of Seller set forth in Article VII and such
breach has not been cured by Purchaser within 20 Business Days after Purchaser’s
receipt of written notice of such breach from Seller;
(d) by
Purchaser if it is not then in material breach of any provision of this
Agreement, if there has been a breach by Seller of any covenant, agreement,
representation or warranty contained in this Agreement that would give rise
to
the failure of any condition to the obligations of Purchaser set forth in
Article VII and such breach has not been cured by Seller within 20 Business
Days
after Seller’s receipt of written notice of such breach from
Purchaser.
Section 9.02 Effect
of Termination.
If this
Agreement is terminated pursuant to Section 9.01,
then
all provisions of this Agreement shall thereupon become void without any
liability on the part of any party hereto to any other party hereto except
that
(x) this Section 9.02
and
Sections 8.09
and
14.02
shall
survive any such termination, (y) nothing herein shall relieve any party from
any liability for any willful or intentional breach hereof occurring prior
to
such termination, and (z) in the case of termination by Purchaser and Seller
pursuant to Section
9.01(a)
in the
event the transactions contemplated by this Agreement are not consummated as
a
result of Purchaser’s or any of its Affiliates’ refusal to agree pursuant to
Section
6.02(c),
or by
Seller pursuant to Section 9.01(b)
in the
event the transactions contemplated by this Agreement are not consummated as
a
result of Purchaser’s or any of its Affiliates refusal to agree pursuant to
Section
6.02(c),
Section 6.02(d)
shall
also survive any such termination. If Seller terminates this Agreement pursuant
to (x) Section 9.01(c)
or (y)
Section 9.01(b)
and, in
the case of this clause (y), all of the conditions to Purchaser’s obligation to
consummate the Closing under Article VII have been satisfied (other than any
such conditions which by their nature are to be satisfied by the Closing Date),
the parties agree that Seller shall have suffered loss and value to the Business
of an incalculable nature and amount, unrecoverable in law, and Purchaser shall
pay to Seller a fee of $15,000,000; provided,
that
only $10,000,000 of such termination fee will be payable in the event that
the
following EBITDA
test
is
not achieved: (i) if the most recent completed month prior to the Closing Date
is September, then the EBITDA of the Company during September shall be greater
than or equal to $2,934,000; (ii) if the most recent completed month prior
to
the Closing Date is October, then the cumulative EBITDA of the Company for
September and October shall be greater than or equal to $7,786,000; and (iii)
if
the most recent complete month prior to the Closing Date is November, then
the
cumulative EBITDA of the Company for September, October and November shall
be
greater than or equal to $8,010,000
(the
“Purchaser Termination Fee”). The Purchaser Termination Fee shall be payable in
immediately available funds no later than three (3) Business Days after such
termination. Notwithstanding anything to the contrary in this Agreement,
Seller’s right to receive payment of the Purchaser Termination Fee pursuant to
this Section 9.02
shall be
the sole and exclusive remedy of Seller or any of its Affiliates against
Purchaser or any of its Affiliates or any of their respective shareholders,
partners, members or Representatives for any and all losses that may be suffered
based upon, resulting from or arising out of the circumstances giving rise
to
such termination, and upon payment of the Purchaser Termination Fee in
accordance with this Section 9.02,
none of
Purchaser or any of its Affiliates or any of their respective shareholders,
partners, members or Representatives shall have any further liability or
obligation relating to or arising out of this Agreement or the transactions
contemplated by this Agreement.
ARTICLE
10
THE
CLOSING
Section 10.01
Time, Date and Place of Closing.
Subject
to the satisfaction or waiver of the conditions precedent set forth in Article
VII hereof (other than any such conditions precedent which by their nature
are
to be satisfied on the Closing Date), the closing of the purchase of the Shares
of the Company by Purchaser from Seller and the payment by Purchaser of the
Purchase Price (the “Closing”) shall take place at the offices of Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx LLP, 1285 Avenue of the Americas, Xxx Xxxx,
Xxx Xxxx, 00000-0000 at 10:00 am on October 31, 2006 (the “Targeted Closing
Date”) (subject to the right of Purchaser to, upon its reasonable request, defer
such date for a period of up to ten (10) Business Days), and shall be deemed
effective as of 12:01 am on the next day thereafter, or at such other place
and
time as may be agreed to by Seller and Purchaser. The date on which the Closing
occurs is referred to herein as (the “Closing Date”).
Section 10.02
Seller’s Obligations at the Closing. At
the
Closing, Seller shall deliver or cause to be delivered to Purchaser the
following, in form and substance reasonably satisfactory to Purchaser and its
counsel:
(a) the
share
certificate or certificates evidencing the Shares, duly endorsed for transfer
or
accompanied by a duly executed stock power or powers;
(b) written
resignations of all officers and directors of the Company requested by Purchaser
at least five (5) Business Days prior to the Closing;
(c) copies
of
all consents, waivers and approvals obtained under this Agreement as of the
Closing Date;
(d)
copies
of the Support Services Agreement, Warranty Claims Indemnity Agreement,
Trademark License Agreement and Cross-Indemnity Agreement duly executed by
Alcoa
and/or Seller;
(e) a
certificate, dated as of the Closing Date, executed on behalf of Seller by
its
President, to the effect that the conditions specified in Sections 7.02(a)
and
7.02(b)
have
been satisfied;
(f) affidavit
of Seller stating that Seller is not a “foreign person” within the meaning of
Section 1445 of the Code; and
(g) such
other evidence of the performance of all covenants and satisfaction of all
conditions required of Seller and Company at or prior to Closing as Purchaser
may reasonably require.
Section 10.03
Purchaser’s Obligations at the Closing. At
the
Closing, Purchaser shall deliver or cause to be delivered to Seller the
following, in form and substance reasonably satisfactory to Seller and its
counsel:
(a) a
wire
transfer of funds in an amount equal to the Purchase Price;
(b) copies
of
the Support Services Agreement, Warranty Claims Indemnity Agreement, Trademark
License Agreement and Cross-Indemnity Agreement duly executed by Purchaser
and/or the Company;
(c) a
certificate dated as of the Closing Date, executed on behalf of Purchaser by
its
chief executive officer or chief financial officer, to the effect that the
conditions specified in Sections 7.03(a)
and
7.03(b)
have
been satisfied; and
(d) such
other evidence of the performance of all covenants and satisfaction of all
conditions required of Purchaser at or prior to Closing as Seller may reasonably
require.
ARTICLE
11
REAL
PROPERTY AND ENVIRONMENTAL MATTERS
Section 11.01
Definitions.
(a) Hazardous
Substance.
For
purposes hereof, the term “Hazardous Substance” shall mean any substance,
chemical or waste that is defined by or regulated under Applicable Environmental
Law.
(b) Applicable
Environmental Law.
For
purposes hereof, the term “Applicable Environmental Law” shall mean any and all
Laws to which the Company, the Real Property or the Business is or has been
subject concerning pollution or the protection of the environment and human
health, including, but not be limited to, the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601
et seq.;
the
Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §§ 6901, et seq.;
the
Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq.;
the
Clean Air Act, 42 U.S.C. §§ 7401, et seq.;
the
Hazardous Materials Transportation Act, 49 U.S.C. §§ 1471 et seq.;
the
Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; and the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and the Oil Pollution Act,
33 U.S.C.§§ 2701, et seq.;
together with the rules and regulations promulgated pursuant to such
Laws.
Section 11.02
Environmental Report.
Seller
has made available to Purchaser all reports or information in Seller’s and/or
the Company’s possession concerning the environmental condition of and
contamination in, on, under, or about the Real Property or otherwise concerning
the Liability of the Company under Applicable Environmental Laws, including
the
Phase I Environmental Site Assessments undertaken by Seller (collectively,
the
“Environmental Report”). Until the occurrence of the Closing, the Environmental
Report, and any and all reports, surveys and assessments, including all copies
thereof, produced by Purchaser or its Representatives pursuant to this
Agreement, shall be held in strict confidence by Purchaser and shall not be
disclosed by Purchaser or its Representatives without the prior written consent
of Seller (which consent may not be unreasonably withheld or delayed) unless
required by Law or in connection with the financing contemplated by the
Commitment Letter. If Closing never occurs, Purchaser’s obligations with respect
to the Environmental Report, and any other information provided to Purchaser
regarding environmental matters related to the Company or the Business, shall
be
governed by the Confidentiality Agreement.
Section 11.03
Purchaser’s Assessment.
Purchaser, at its sole cost and expense, may conduct its own environmental
assessment and compliance review of the Real Property prior to Closing
(“Purchaser’s Assessment”). Subject to the limitations in Section 11.04,
Seller
shall permit Purchaser or its Representatives, at all reasonable times prior
to
the Closing Date, to enter upon any and all of the Real Property for the
purposes of Purchaser’s Assessment. All reports prepared in connection with
Purchaser’s Assessment and any information obtained thereby or from Seller or
the Company shall be held in strict confidence by Purchaser, shall not be
disclosed by Purchaser or its Representatives without the prior written consent
of Seller (which consent shall not be unreasonably withheld or delayed) unless
required by Law or in connection with the financing contemplated by the
Commitment Letter, and one copy shall be immediately delivered to Seller upon
receipt by Purchaser at no cost or expense to Seller.
Section 11.04
Restrictions on Purchaser’s Assessment.
Notwithstanding any other provision of this Agreement, Purchaser’s right to
enter the Real Property for purposes of conducting Purchaser’s Assessment is
subject to the following restrictions:
(a) Purchaser’s
or its Representative’s activities may not materially or unreasonably interfere
with normal operation of the Real Property or the Company’s
facilities;
(b) Purchaser
must notify Seller at least 48 hours prior to entry onto the Real Property
to
conduct such activity;
(c) All
activities undertaken in connection with Purchaser’s Assessment must fully
comply with any and all applicable Law and site requirements, including without
limitation Laws relating to worker safety and health;
(d) Seller
may have a Representative present at all times during activities related to
Purchaser’s conduct of the Purchaser’s Assessment;
(e) Purchaser
must take all actions and implement all protections necessary to ensure that
actions taken hereunder and equipment and materials, used or brought onto the
Real Property pose no threat to the safety or health of persons or the
environment, and cause no damage to the Real Property or any real property
of
any other person;
(f) Purchaser
is solely responsible for the security of the activities, equipment and
materials brought on the Real Property by Purchaser prior to the Closing Date,
except to the extent that harm, loss or liability results from the gross
negligence or willful misconduct of Seller;
(g) Purchaser
for itself, its successors and assigns, covenants and agrees that it will
indemnify and save harmless Seller and the Company, its successors and assigns,
from and against any and all loss or liability, and all Claims, damages, fees,
costs and expenses resulting from, incident to or in any way arising out of
the
entry onto the Real Property to conduct Purchaser’s Assessment, or any other act
done pursuant to the rights privileges and authority hereby granted, except
to
the extent that such loss, liability, claim, damage, fee, cost or expense is
caused by the gross negligence or willful misconduct of Seller or any of its
Affiliates or their respective successors or assigns.
(h) Purchaser
and its Representatives must comply in all material respects with all applicable
Laws and all policies and regulations of the Company in effect at such time,
including, those relating to health and safety and the taking of pictures,
and
with such special regulations, rules or policies as may be considered
appropriate by Seller under the circumstances, and Seller shall have the right
to refuse initial or continued access to the Real Property to any person when
it
determines that such refusal is necessary or desirable;
(i) Purchaser’s
right to access any of the Leased Property to conduct Purchaser’s Assessment as
described herein is subject to the consent of the Company’s
landlord.
Section 11.05
Environmental Indemnification.
Seller
will, subject to the limitations set forth in Sections 13.03
and
13.05
and the
procedures set forth in Section 13.04,
indemnify, defend, hold harmless, pay and reimburse the Purchaser Indemnitees
from and against any and all Losses to the extent arising out of or resulting
from:
(a) any
breach of or inaccuracy in any the representations and warranties set forth
in
Section 4.15,
as of
the date such representation or warranty was made or as if such representation
or warranty were made on and as of the Closing Date (except for such
representations and warranties that expressly relate to a specified date, the
breach of or inaccuracy in which will be determined by reference to such
specified date); or
(b) any
release or disposal of or exposure to (except employee exposure to the extent
resulting Losses are covered by workers compensation) any Hazardous Substances
prior to the Closing Date either (i) on the Real Property or (ii) otherwise
relating to the ownership or operation of the Business or the Company prior
to
the Closing;
(c) the
violation of any Applicable Environmental Law by the Company prior to the
Closing Date; or
(d) any
release, threatened release or disposal of any Hazardous Substances on any
real
property not owned or operated by the Company but at which the Company or any
of
its Affiliates or any predecessors of any of the foregoing arranged for the
disposal of Hazardous Substances prior to the Closing Date.
Section 11.06
Survival. The
obligations of Seller to indemnify Purchaser pursuant to Section 11.05
will
expire on the third anniversary of the Closing Date. Notwithstanding
the foregoing, the obligation of Seller to indemnify, defend and hold harmless
Purchaser pursuant to Section 11.05
shall
not terminate with respect to any item as to which Purchaser shall have, before
the expiration of Seller’s indemnification obligations, previously made a claim
by delivering a notice pursuant to Section 14.04
(stating
in reasonable detail the basis of such claim) to Seller.
ARTICLE
12
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
Section 12.01.
Survival.
Notwithstanding Purchaser’s right to investigate the affairs of the Company or
any knowledge of Purchaser or its Affiliates or their respective Representatives
obtained through such investigation, Purchaser shall have the right to rely
fully on the representations, warranties, covenants and agreements of Seller
contained in this Agreement and any instrument or certificate delivered
hereunder. Except with respect to environmental matters (which are exclusively
the subject of Section 11.06),
all of
the representations and warranties set forth in this Agreement or in any
exhibit, schedule or document, certificate or other instrument delivered
pursuant hereto shall, unless waived in writing by the party for whose benefit
such representation or warranty was made, remain in full force and effect and
will survive the Closing Date for a period of eighteen (18) months except for
the representations and warranties set forth in (i) Sections 4.01
(Seller’s Authority; Consents and Approval), excluding the last sentence
thereof, 4.02
(Organization and Good Standing of the Company), 4.03
(Capitalization; Title to Shares), 4.16
(No
Brokers), 5.01
(Purchaser’s Authority; Consents and Approval) and 5.04
(No
Brokers), which will survive without limitation; (ii) the representations
and warranties set forth in Sections 4.06
(Title
to Company Personal Property) and 4.07
(Real
Property), which will survive for a period of two years from the Closing Date;
and (iii) the representations and warranties set forth in Sections 4.11
(Tax
Matters) and 4.14
(Employee Benefits), which will survive until sixty (60) days after the
expiration of the applicable statute of limitations (including all periods
of
extension, whether automatic or permissive); provided,
however,
that
claims asserted in good faith with reasonable specificity (to the extent known
at such time and in writing by notice from the non-breaching party to the
breaching party) prior to the end of the applicable survival period shall not
thereafter be barred by the expiration of the applicable representation or
warranty to the extent that it relates to such asserted claims. Except as
otherwise provided in this Agreement, the covenants and agreements contained
in
Article 8 (other than Sections 8.02,
8.05
(other
than paragraphs (a) and (c) thereof), 8.06
and
8.10)
shall
survive the Closing Date for a period of five years, and all other
covenants and agreements contained in this Agreement (including Sections 8.02,
8.05
(other
than paragraphs (a) and (c) thereof), 8.06
and
8.10)
shall
survive without limitation.
ARTICLE
13
INDEMNIFICATION
Section 13.01
Indemnification of Purchaser by Seller.
Except
with respect to environmental matters (which are exclusively the subject of
Section 11.05)
and tax
matters (which is the subject of Section 8.06)
and
further subject to Section 13.03,
Seller
shall indemnify, defend, hold harmless, pay and reimburse Purchaser and its
Affiliates (including the Company) and their respective shareholders, partners,
members and Representatives (the “Purchaser Indemnitees”) from and against any
and all Losses, based upon, resulting from or arising out of:
(i) any
breach by Seller of or any inaccuracy in any of the representations or
warranties of Seller contained in this Agreement or in any certificate or
instrument delivered by or on behalf of Seller pursuant to this Agreement,
as of
the date such representation or warranty was made or as if such representation
or warranty was made on and as of the Closing Date (except for representations
and warranties that expressly relate to a specified date, the breach of or
inaccuracy in which will be determined with reference to such specified
date);
(ii) any
breach or nonfulfillment of any of the covenants or agreements of Seller
contained in this Agreement;
(iii) the
ownership, use and possession of the Excluded Assets prior to, on or after
the
Closing Date;
(iv) failure
of Seller to discharge the Excluded Liabilities; or
(v) any
Third
Party Claim based upon, resulting from or arising out of the business,
operations, properties, assets, liabilities or obligations of Seller or any
of
its Affiliates (other than the Company) conducted, existing or arising on or
prior to the Closing Date.
Section 13.02
Indemnification of Seller by Purchaser.
Subject
to Section 13.03,
Purchaser agrees to indemnify, defend, hold harmless, pay and reimburse Seller
and its Affiliates and their respective shareholders, partners, members and
Representatives (the “Seller Indemnitees”) from and against any and all Losses
based upon, resulting from or arising out of:
(i) any
breach of or inaccuracy in any of the representations or warranties of Purchaser
contained in this Agreement or in any certificate or instrument delivered by
or
on behalf of Purchaser pursuant to this Agreement, as of the date such
representation or warranty was made or as if such representation or warranty
was
made on and as of the Closing Date (except for representations and warranties
that expressly relate to a specified date, the breach of or inaccuracy in which
will be determined with reference to such specified date); or
(ii) any
breach or nonfulfillment of any of the covenants or agreements of Purchaser
contained in this Agreement.
Section 13.03
Limitations on Indemnification.
The
party making a claim under this Article 13 is referred to as the “Indemnitee,”
and the party against whom such claims are asserted under this Article 13 is
referred to as the “Indemnitor.” The indemnification provided for in
Sections 13.01
and
13.02
shall be
subject to the following limitations:
(a) Deductible.
Subject
to Section 13.03(b),
Seller
shall not be liable to the Purchaser Indemnitees for indemnification under
Sections 11.05
or
13.01(i),
(except
in the case of an indemnification claim under Section 13.01(i),
those
based upon, arising out of or resulting from any breach of or inaccuracy in
any
representation or warranty in Sections 4.01
(Seller’s Authority; Consents and Approval), (excluding the last sentence
thereof), 4.03
(Capitalization; Title to Shares), 4.12(c)
(Financial Statements; Undisclosed Liabilities; Indebtedness), 4.16
(No
Brokers), and any Loss incurred in the successful enforcement of Purchaser’s
indemnity rights provided for in Sections 13.01
or
11.05
(the
“Purchaser Deductible Exclusions”), until the aggregate amount of Losses in
respect of indemnification under Sections 11.05
or
13.01(i)
(except
those based upon, arising out of or resulting from the Purchaser Deductible
Exclusions) exceeds $2,500,000 (the “Deductible”), in which event the amount
which the Purchaser Indemnitees shall be entitled to recover is all such Losses
in excess of the Deductible. Seller shall be obligated to pay any amounts for
indemnification based upon, arising out of or resulting from any of Purchaser
Deductible Exclusions, without regard to the individual or aggregate amounts
thereof and without regard to whether all other indemnification payments shall
have exceeded, in the aggregate, the Deductible.
(b) Cap.
The
indemnification obligations of Seller under Sections 11.05
and
13.01(i)
(except
in the case of any indemnification claim under Section
13.01(i),
those
based upon, arising out of or resulting from the Purchaser Deductible
Exclusions) will not exceed $45,750,000 in the aggregate (the “Cap Amount”).
Seller shall be obligated to pay any amounts for indemnification based upon,
arising out of or resulting from a Purchaser Deductible Exclusion, without
regard to the individual or aggregate amounts thereof and without regard to
whether all other indemnification payments shall have exceeded, in the
aggregate, the Cap Amount.
(c)
Duration.
All
obligations of an Indemnitor to indemnify an Indemnitee with respect to the
breach of a particular representation or warranty under Sections 13.01(i)
or
13.02(i)
will
expire when such representation or warranty expires pursuant to Section 12.01,
the
obligations of Seller to indemnify Purchaser pursuant to Section 11.05
(Environmental Indemnification) will expire as set forth in Section 11.06,
and the
obligations of an Indemnitor to indemnify an Indemnitee with respect to the
breach of a covenant or agreement under Sections
13.01(ii)
or
13.02(ii)
will
expire two (2) years after the date on which the obligation to perform such
covenant or agreement expires; provided,
however,
that
the obligation of the Indemnitor to indemnify and hold harmless the Indemnitee
pursuant to this Article 13 shall not terminate with respect to any matter
as to
which the Indemnitee shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice pursuant to Section 14.04
(stating
in reasonable detail the basis of such claim) to the other party
hereto.
(d)
Additional
Limits.
The
amount of any Loss for which indemnification is provided under this Article
13
will be net of (and the cumulative amount of all Losses for the purposes of
determining the Deductible and the Cap Amount will be net of): (1) any amount
reflecting Losses specifically reflected in the calculation of the Closing
Working Capital on the Final Working Capital Statement, (2) any amount
actually received by the Indemnitee or paid to Third Parties on behalf of the
Indemnitee under insurance policies of the Indemnitee with respect to such
Loss
(and the Indemnitee will be required to submit a claim under such insurance
policies with respect to such Loss), (3) any Tax savings attributable to any
deduction, credit or other tax benefit actually realized by the Indemnitee
with
respect to such Loss (“Tax Benefits”) and (4) the amount of any benefit to, or
saving for, actually realized by the Indemnitee as a result of the payment
or
settlement of any item giving rise to such claim. In computing the amount of
any
Tax Benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising
from
the receipt of any indemnification payment hereunder or the incurrence or
payment of any indemnified Loss; provided,
that,
if a Tax Benefit is not realized in the taxable period during which an
Indemnitor makes an indemnification payment or the Indemnitee incurs or pays
any
Loss, the parties hereto shall thereafter make payments to one another at the
end of each subsequent taxable period to reflect the net Tax Benefits realized
by the parties hereto in each such subsequent taxable period. For purposes
of
determining the amount of Loss arising from a breach of or inaccuracy in any
representation, warranty, covenant or agreement, but not for the purposes of
determining whether any such representation, warranty, covenant or agreement
has
been breached or is inaccurate, limitations or qualifications as to dollar
amount, materiality or Material Adverse Effect (or similar concept) set forth
in
such representation, warranty, covenant or agreement shall be disregarded.
Notwithstanding any other provision in this Agreement, with respect to the
Lake
Forest Liability (as defined in Section 1.01(r)
of the
Disclosure Letter), Seller’s obligation to indemnify, defend or hold harmless
the Purchaser Indemnitees shall also be governed by the terms of the Warranty
Claims Indemnity Agreement and shall not be subject to the Deductible, or the
Cap Amount set forth in Section 13.03(b).
Section 13.04
Procedures for Indemnification.
(a) Third
Party Claims.
If any
Indemnitee receives notice of the assertion or commencement of any Claim made
or
brought by any Person who is not a party to this Agreement or an Affiliate
of a
party to this Agreement or a Representative of any of the foregoing (a “Third
Party Claim”) against such Indemnitee with respect to which the Indemnitor is
obligated to provide indemnification under this Agreement, the Indemnitee will
give the Indemnitor reasonably prompt written notice thereof, but in any event
not later than 30 calendar days after receipt of such notice of such Third
Party
Claim. The failure to give such prompt written notice shall not, however,
relieve the Indemnitor of its indemnification obligations, except and only
to
the extent that the Indemnitor forfeits rights or defenses by reason of such
failure. Such notice by the Indemnitee will describe the Third Party Claim
in
reasonable detail, will include copies of all material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of the Loss
that has been or may be sustained by the Indemnitee. The Indemnitor will have
the right to participate in, or by giving written notice to the Indemnitee,
to
assume the defense of any Third Party Claim at the Indemnitor’s expense and by
the Indemnitor’s own counsel, and the Indemnitee will cooperate in good faith in
such defense; provided,
that if
the Indemnitor is Seller, such Indemnitor shall not have the right to defend
or
direct the defense of any such Third Party Claim that (x) is asserted directly
by or on behalf of a Person that is a supplier or customer of the Company if
in
the reasonable judgment of the Purchaser Indemnitee (which may be asserted
at
any time) the Indemnitor’s defense of such Third Party Claim would reasonably be
expected to have a material adverse effect on the Purchaser Indemnitee’s (or the
Company’s) existing or prospective relationship with such supplier or customer,
or (y) seeks an injunction or other equitable relief against the
Indemnitee. In the event that Indemnitor assumes the defense of any Third Party
Claim, subject to Section 13.04(b),
it
shall have the right to take such action as it deems necessary to avoid,
dispute, defend, appeal or make counterclaims pertaining to any such Third
Party
Claim in the name and on behalf of Indemnitee. The Indemnitee shall have the
right to participate in the defense of any Third Party Claim with counsel
selected by it subject to the Indemnitor’s right to control the defense thereof.
The fees and disbursements of such counsel shall be at the expense of the
Indemnitee, provided,
that,
if in the reasonable opinion of counsel to the Indemnitee, (A) there are
legal defenses available to an Indemnitee that are different from or additional
to those available to the Indemnitor or (B) there exists a conflict of
interest between the Indemnitor and the Indemnitee that cannot be waived, the
Indemnitor shall be liable for the reasonable fees and expenses of one separate
counsel to all of the applicable Indemnitees in addition to one local counsel
in
each jurisdiction that may be necessary or appropriate. If the Indemnitor elects
not to compromise or defend such Third Party Claim, fails to promptly notify
the
Indemnitee in writing of its election to defend as provided in this Agreement,
or fails to diligently prosecute the defense of such Third Party Claim, the
Indemnitee may, subject to Section 13.04(b),
pay,
compromise or defend such Third Party Claim and seek indemnification for any
and
all Losses based upon, arising from or relating to such Third Party Claim.
Seller and Purchaser shall cooperate with each other in all reasonable respects
in connection with the defense of any Third Party Claim, including making
available (subject to the provisions of Section 8.09)
records
relating to such Third Party Claim and furnishing, without expense (other than
reimbursement of actual out-of-pocket expenses) to the defending party,
management employees of the non-defending party as may be reasonably necessary
for the preparation of the defense of such Third Party Claim or for testimony
as
a witness in any proceeding relating to such Third Party Claim.
(b) Settlement
of Third Party Claims.
Notwithstanding any other provision of this Agreement, the Indemnitor will
not
enter into settlement of any Third Party Claim without the prior written consent
of the Indemnitee, except as provided in this Section
13.04.
If a
firm offer is made to settle a Third Party Claim without leading to liability
or
the creation of a financial or other obligation on the part of the Indemnitee
and provides, in customary form, for the unconditional release of each Purchaser
Indemnitee from all liabilities and obligations in connection with such Third
Party Claim and the Indemnitor desires to accept and agree to such offer, the
Indemnitor will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within 10 calendar days after
its
receipt of such notice, the Indemnitee may continue to contest or defend such
Third Party Claim and in such event, the maximum liability of the Indemnitor
as
to such Third Party Claim will not exceed the amount of such settlement offer.
If the Indemnitee fails to consent to such firm offer and also fails to assume
defense of such Third Party Claim, the Indemnitor may settle the Third Party
Claim upon the terms set forth in such firm offer to settle such Third Party
Claim. If the Indemnitee has assumed the defense pursuant to Section 13.04(a)
it will
not agree to any settlement without the consent of the Indemnitor which shall
not be reasonable withheld.
(c) Direct
Claims.
Any
Claim by an Indemnitee on account of a Loss which does not result from a Third
Party Claim (a “Direct Claim”) will be asserted by Indemnitee giving the
Indemnitor reasonably prompt written notice thereof, but in any event not later
than 30 calendar days after the Indemnitee becomes aware of such Direct Claim.
The failure to give such prompt written notice shall not, however, relieve
the
Indemnitor of its indemnification obligations, except and only to the extent
that the Indemnitor forfeits rights or defenses by reason of such failure.
Such
notice by the Indemnitee shall describe the Direct Claim in reasonable detail,
will include copies of all material written evidence thereof and will indicate
the estimated amount, if reasonably practicable, of the Loss that has been
or
may be sustained by the Indemnitee. The Indemnitor will have 30 calendar days
to
respond in writing to such Direct Claim. The Indemnitee shall allow the
Indemnitor and its professional advisers to investigate the matter or
circumstance alleged to give rise to the Direct Claim, and whether and to what
extent any amount is payable in respect of the Direct Claim and the Indemnitee
shall assist the Indemnitor’s investigation by giving such information and
assistance (including access to the Business’ premises and personnel and the
right to examine and copy any accounts, documents or records) as the Indemnitor
or any of its professional advisers may reasonably request. If the Indemnitor
does not so respond within such 30 calendar day period, the Indemnitor will
be
deemed to have rejected such claim, in which case the Indemnitee will be free
to
pursue such remedies as may be available to the Indemnitee on the terms and
subject to the provisions of this Agreement.
(d) Cooperation.
Upon a
reasonable request by the Indemnitor, each Indemnitee seeking indemnification
hereunder in respect of any Direct Claim, hereby agrees to consult with the
Indemnitor and act reasonably to take actions reasonably requested by the
Indemnitor in order to attempt to reduce the amount of Losses in respect of
such
Direct Claim. Any costs or expenses associated with taking such actions shall
be
included as Losses hereunder.
Section 13.05
Exclusive Remedies.
Subject
to the terms of the Support Services Agreement and Trademark License Agreement,
the parties acknowledge and agree that their sole and exclusive remedy with
respect to any and all claims (other than claims arising from fraud, criminal
activity or willful misconduct on the part of a party hereto in connection
with
the transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant or agreement set forth herein or otherwise
relating to the subject matter of this Agreement, shall be pursuant to the
indemnification provisions set forth in Section 8.06
(with
respect to tax matters), Articles 11 (with respect to environmental matters)
and
Article 13. In furtherance of the foregoing, each party hereby waives, to the
fullest extent permitted under Law, any and all rights, claims and causes of
action for any breach of any representation, warranty, covenant or agreement
set
forth herein or otherwise relating to the subject matter of this Agreement
it
may have against the other parties hereto and their Affiliates and each of
their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in Section 8.06
(with
respect to tax matters), Article 11 (with respect to environmental matters)
and
this Article 13. Nothing in this Section 13.05
shall
limit any Person’s right to seek and obtain any equitable relief to which any
Person shall be entitled or to seek any remedy on account of any Person’s
fraudulent, criminal or intentional misconduct.
Section 13.06 Treatment
of Payments.
All
payments made under indemnity provisions of this Agreement, including payments
under Section 8.06
(Tax
Matters), will be treated by the parties as purchase price
adjustments.
ARTICLE
14
MISCELLANEOUS
PROVISIONS
Section 14.01
Legend.
Each
certificate representing shares of Shares sold pursuant to the provisions hereof
shall bear the following legend:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR EXEMPTION THEREFROM UNDER SAID ACT OR THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.”
Section 14.02
Amendment and Modification; Waiver.
This
Agreement may be amended, supplemented or otherwise modified only by a written
instrument authorized and executed on behalf of each of the parties hereto.
No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent
breach.
Section 14.03
Expenses. Except
as
otherwise set forth in this Agreement, Purchaser shall pay its own costs and
expenses, and Seller shall pay its own costs and expenses and the costs and
expenses of the Company (which obligation shall be satisfied in full prior
to
the Closing), in each case, each of the parties incurred or to be incurred
in
connection with the negotiation, preparation and execution of this Agreement
and
in closing and carrying out the transactions contemplated by this
Agreement.
Section 14.04
Notices. Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be hand delivered or sent by certified mail (return
receipt requested) or by reputable overnight courier, or sent by facsimile,
delivered to the respective addresses set forth below or, as to each party,
at
such other address as shall be designated by such party. All such notices and
communications shall be effective when hand delivered or, in the case of notice
by mail on the third Business Day following the date when mailed addressed,
or
in the case of notice by overnight courier, on the next succeeding Business
Day
following the date when sent addressed, or in the case of notice by facsimile,
when electronically confirmed, as set forth below:
If
to
Seller: Alcoa
Inc.
000
Xxxxxxxx
Xxxxxx
Xxxxxxxxxx,
Xxxxxxxxxxxx 00000
Fax:
000-000-0000
Attn.:
Vice President, Corporate Development
Copy to: Alcoa Inc.
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
000-000-0000
Attn.:
General Counsel
If
to
Purchaser: Ply
Gem
Industries, Inc.
000
Xxxxxx Xxxx Xxx, Xxxxx X
Xxxxxxx,
XX 00000
Fax:
000-000-0000
Attn.:
Xxxxx X. Xxx
Copy
to: Xxxx,
Weiss, Rifkind, Xxxxxxx
& Xxxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000-0000
Fax:
000-000-0000
Attn.:
Xxxx X. Xxxxxxx, Esq.
Section 14.05
Entire Agreement.
This
Agreement, including the Disclosure Letter (each of which is attached and
incorporated into this Agreement) and other documents referred to herein which
form a part hereof, represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof, supersedes all
other agreements or understandings, written or oral, between the parties with
respect to the subject matter hereof. Seller and Purchaser acknowledge and
agree
that (i) the Disclosure Letter that is arranged in sections corresponding to
the
sections and paragraphs of this Agreement shall qualify the corresponding
representations and warranties of Seller contained in this Agreement; (ii)
inclusion of information in the Disclosure Letter shall not be construed as
an
admission that such information is material to the operation and use of the
Company Assets, Real Property or the Business, or the business, assets,
properties, condition (financial or otherwise) or results of operations of
the
Company, Seller or Purchaser or their respective Affiliates; (iii) matters
reflected in the Disclosure Letter are not necessarily limited to matters
required by the Agreement to be reflected in the Disclosure Letter and such
additional matters are set forth for informational purposes and do not
necessarily include other matters of a similar nature; (iv) any matter disclosed
pursuant to one provision, subprovision, section or subsection of the Disclosure
Letter shall be deemed disclosed for all purposes of the Disclosure Letter
to
the extent this Agreement requires such disclosure and the relevance of the
disclosure to such other portions of the Disclosure Letter is reasonably
apparent on its face; and (v) Section numbers and titles inserted in the
Disclosure Letter are for convenience of reference only and shall to no extent
have the effect of amending or changing the express description of such Sections
of the Disclosure Letter as set forth in the Agreement.
Section 14.06
Successors and Assigns. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Neither party may assign
its
rights or obligations hereunder without the prior written consent of the other
party, except by operation of Law; provided,
however,
that
prior to the Closing Date, Purchaser may, without the prior written consent
of
Seller, assign this Agreement and all of its rights hereunder to its lenders
and
debt providers for collateral security purposes only and (y) assign all or
any portion of its rights hereunder to one more of its direct or indirect wholly
owned Subsidiaries; and, provided further,
that
Seller may assign this Agreement or performance of any part hereof to any
Affiliate, in whole or in part, without the consent of Purchaser. No assignment
shall relieve the assigning party of any of its obligations
hereunder.
Section 14.07
Section Headings. The
section headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 14.08
Governing Law; Jurisdiction and Venue.
(a) Governing
Law.
This
Agreement shall be governed, construed and enforced in accordance with the
Laws
of the State of New York, without regard to its conflict of laws doctrine.
(b) Jurisdiction
and Venue.
Each of
the parties hereto (a) submits to the exclusive jurisdiction of any state or
federal court sitting in the State of New York, county of New York in any action
or proceeding arising out of or relating to this Agreement or any other
Transaction Document, (b) agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and (c) agrees not
to
bring any action or proceeding arising out of or relating to this Agreement
or
any other Transaction Document in any other court. Each of the parties hereto
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security that might
be required of any other party with respect thereto. Any party may make service
on another party by sending or delivering a copy of the process to the party
to
be served at the address and in the manner provided for giving of notices in
Section 14.04.
Nothing
in this Section 14.08,
however, will affect the right of any party to serve legal process in any other
manner permitted by Law. Each party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the
judgment or in any other manner provided by law or at equity.
Section 14.09
Intentionally Omitted.
Section 14.10
Severability. If
at any
time subsequent to the date hereof, any provision of this Agreement is held
by
any court of competent jurisdiction to be illegal, void or unenforceable, such
provision will be of no force and effect, but the illegality or unenforceability
of such provision will have no effect upon and will not impair the
enforceability of any other provision of this Agreement.
Section 14.11
Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
Section 14.12
Parties in Interest. Nothing
in this Agreement, whether express or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any person other than the
parties to it, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement, other than
Sections 8.06(e)
and
11.05
and
Article 13, which are intended to be for the benefit of the applicable
indemnities thereunder and may be entered by such indemnitees.
Section 14.13
Interpretation. Unless
the context requires otherwise, all words used in this Agreement in the singular
number shall extend to and include the plural, all words in the plural number
shall extend to and include the singular, and all words in any gender shall
extend to and include all genders. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”
whether or not they are in fact followed by such words or words of like
import.
Section 14.14
Further Assurances. From
time
to time after the Closing, at the request of either party, the other shall,
and
shall cause its Affiliates to, execute and deliver any further instruments
and
take such other action as such requesting party may reasonably request to carry
out the transactions contemplated hereby.
Section 14.15
Seller Parent Undertaking. Alcoa
agrees to cause Seller and its Affiliates (including the Company prior to the
Closing) to perform all of Seller’s obligations and agreements, including, any
obligation of Seller with respect to any Claim brought by Purchaser arising
out
of or related to this Agreement.
IN
WITNESS WHEREOF,
the
parties hereto have duly executed this Agreement, as of the day and year first
above written.
SELLER:
ALCOA
SECURITIES CORPORATION
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By:
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Title:
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ALCOA
INC.
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By:
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Title:
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PURCHASER:
PLY
GEM INDUSTRIES, INC.
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By:
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Title:
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