STOCK PURCHASE AGREEMENT
AGREEMENT dated as of September 16, 1999 between Eagle Pacific
Industries, Inc., a Minnesota corporation with offices at 2430 Metropolitan
Center, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 ("Buyer"),
Mitsubishi Chemical America, Inc., a Delaware corporation with offices at Xxx
Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000 ("MCA") and Mitsubishi
Plastics, Inc., a Japanese corporation, with offices at 0-0, Xxxxxxxxxx 0-xxxxx,
Xxxxxxx-xx, Xxxxx, Xxxxx 100-0005 ("MPI").
WITNESSETH:
WHEREAS, Pacific Western Extruded Plastics Company (formerly named MCA
Acquiring Company), a Delaware corporation (the "Company"), is a manufacturer of
polyvinyl chloride ("PVC") pipe and fittings in the United States, operating six
manufacturing facilities located in Tacoma and Sunnyside, WA, Eugene, OR and
Cameron Park, Perris and Visalia, CA, respectively, with headquarters in Eugene,
Oregon;
WHEREAS, MCA is the record and beneficial owner of 900 of the Shares
and MPI is the record and beneficial owner of 100 of the Shares; and
WHEREAS, Sellers desire to sell the Shares to Buyer, and Buyer desires
to purchase the Shares from Sellers, upon the terms and subject to the
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions.
(a) The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that the Company shall not be considered an Affiliate of
Sellers.
"Applicable Laws" means applicable laws, statutes, orders, rules,
regulations and requirements promulgated by governmental or other authorities
relating to the Company, the Real Properties, the Leased Premises or the
Business.
"Balance Sheet" means the balance sheet of the Company as of the
Balance Sheet Date.
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"Balance Sheet Date" means August 29, 1999.
"Business" means the Company's operation of six PVC pipe and fittings
manufacturing facilities located in Tacoma and Sunnyside, WA, Eugene, OR and
Cameron Park, Perris and Visalia, CA, respectively.
"Cameron Park Facility" means the Company's PVC pipe manufacturing
plant, property and equipment located at 0000 Xxxxx Xxxx, Xxxxxxx Xxxx,
Xxxxxxxxxx, on the real property that is owned by the Company and legally
described in Schedule 1.1.1 hereto.
"Closing Date" means the date of the Closing.
"Common Stock" means the common stock, par value $1.00 per share, of
the Company.
"Controlled Group" means each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code) with Seller, each trade or business (whether or not incorporated) which is
under common control (as defined in Section 414(c) of the Code) with Seller,
each member of an affiliated service group (within the meaning of Section 414(m)
of the Code) which includes Seller and each other entity required to be
aggregated with Seller under Section 414(o) of the Code.
"Employee Benefit Plan" means any pension, retirement, disability,
medical, dental, or other health insurance plan, life insurance or other death
benefit plan, profit sharing, deferred compensation, stock option, bonus or
other incentive plan, vacation benefit plan, severance plan, or other employee
benefit plan or arrangement including, without limitation, any "pension plan" as
defined in Section 3(2) of ERISA, and any "welfare plan" as defined in Section
3(1) of ERISA, whether or not any of the foregoing is funded, (i) to which the
Company is a party or by which the Company is bound, or (ii) with respect to
which the Company has made any payments or contributions since September 29,
1995, or may otherwise have any liability (including any such plan or other
arrangement formerly maintained by the Company).
"Environment" means ambient air, surface water, ground water, sediment,
land surface or land subsurface strata or drinking water supply.
"Environmental Claims" means all notices of violation, liens, claims,
demands, suits, and causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values) or lost use of property arising
out of any Environmental Law.
"Environmental Law" means any Applicable Law that relates to the
pollution, protection or clean-up of the Environment, including, without
limitation, laws, statutes, regulations, judgments, orders or binding
interpretations that relate to (i) emissions, discharges, spills, releases or
threatened releases of Hazardous Substances into the Environment or (ii) the
use, treatment, storage, disposal, handling, manufacturing, transportation or
shipment of Hazardous Substances. Environmental Laws shall include, without
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limitation, common law, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended,
the Occupational Safety and Health Act, as amended ("OSHA"), and all state
counterparts to those laws.
"Environmental Liability" means any fine, penalty, liability or expense
that is based on or related to (i) an Environmental Law or Environmental Permit,
(ii) any Release, or (iii) any Remedial Action, in each case to the extent
arising from or relating to events that occur, on or prior to the Closing, on or
from the Real Properties or at the Pipe Facilities.
"Environmental Permit" means any federal, state or local governmental
permit, certificate, approval, registration or other authorization related to
the pollution or protection of the Environment.
"Environmental Reports" means any and all written analyses, summaries
or explanations in the possession or control of the Company, as set forth on
Appendix A attached hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Eugene Corporate Headquarters" means the Company's corporate
headquarters building, property and equipment located at 0000 Xxxxxx Xxxxx
Xxxxx, Xxxxxx, Xxxxxx, on the real property that is owned by the Company and
legally described in Schedule 1.1.2 hereto.
"Eugene Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 0000 Xxxxxx Xxx, Xxxxxx, Xxxxxx, on the real
property that is leased by the Company and legally described in Schedule 1.1.3
hereto.
"Hazardous Substance" means a hazardous substance as defined in Section
101(14) of CERCLA, plus oil, petroleum and petroleum products, asbestos, PCBs
and any substance similarly classified or regulated as a "hazardous substance,"
"hazardous material," "toxic substance" or "hazardous waste" under any
Environmental Law (excluding OSHA), including, without limitation, the Federal
Insecticide, Fungicide, Rodenticide Act, 7 U.S.C.
ss. 136 et seq., as amended.
"Leased Premises" means (i) the real property that is located at the
Xxxxxx Facility and legally described in Schedule 1.1.3 hereto and (ii) the real
property that is located on a portion of the Tacoma Facility and legally
described in Schedule 1.1.4 hereto.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
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"Material Adverse Effect" and "material" mean a material adverse effect
on, or material and adverse to, as the case may be, the financial condition of
the Company, it being understood none of the following shall be deemed by itself
or by themselves, either individually or in the aggregate, to constitute a
material event or a Material Adverse Effect: (a) a failure by the Company to
meet internal earnings, revenue or other projections or earnings, revenue or
other predictions of any analyst or (b) any event, circumstance or market
condition occurring as a result of general economic or financial conditions or
other developments which are not unique to the Company but also affect other
Persons who participate or are engaged in the lines of business in which the
Company participates or is engaged.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which MCA has made or has accrued any obligation to make
contributions within the preceding six years.
"Patents" means all domestic and foreign letters patents and patent
applications used by the Company.
"Perris Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 00000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx, on the
real property that is owned by the Company and legally described in Schedule
1.1.5 hereto.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Pipe Facilities" means the Cameron Park Facility, Eugene Corporate
Headquarters, Eugene Facility, Perris Facility, Sunnyside Facility, Tacoma
Facility and Visalia Facility.
"Plan" means, at any time, an employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either: (i) maintained by MCA or any member of
the Controlled Group for employees of MCA, or by MCA for any other members of
such Controlled Group; or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which MCA or any member of the Controlled Group is then
making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Real Properties" means the real properties at all of the Pipe
Facilities other than the Leased Premises.
"Release" means any spill, leak, pumping, pouring, emission, discharge,
injection, escape, leaching, disposal, or other release into the Environment of
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any Hazardous Substance at, in, on, under, by, from or related to Real
Properties and Leased Premises included in the Pipe Facilities or any activities
or operations thereon.
"Remedial Action" means any action required pursuant to any
Environmental Law to cleanup or contain or otherwise ameliorate or remedy any
Release.
"Scheduled Environmental Liability" means any Environmental Liability
based upon information related to the Environment disclosed in any Disclosure
Schedule.
"Sellers" means the collective reference to MCA and MPI, and "Seller"
means either of MCA or MPI, as the context dictates.
"Sellers' Knowledge" means the best actual knowledge after due inquiry
of the Company's current directors, President, Senior Vice President -
Operations, Senior Vice President - Sales & Marketing, Vice President -
Controller, Vice President - Human Resources, Vice President - Technical
Director and each of the Company's Plant Managers.
"Shares" means 1,000 shares of Common Stock.
"Sunnyside Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx, xx
the real property that is owned by the Company and legally described in Schedule
1.1.6 hereto.
"Systems" means all computer hardware and/or software applications used
by the Company as well as embedded microcontrollers in manufacturing equipment
used by the Company.
"Tacoma Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 2330 Port of Tacoma Road, Tacoma, Washington,
on the real property that is owned by the Company and legally described in
Schedule 1.1.7 hereto and the real property located at 0000 Xxxx xx Xxxxxx Xxxx,
Xxxxxx, Xxxxxxxxxx that is leased by the Company and legally described in
Schedule 1.1.4 hereto.
"Technology" means all technology, trade secrets, manufacturing
processes, formulae, drawings, designs and computer software programs used in
the Business.
"Trademark" means all tradenames, trademarks or service xxxx
registrations and applications, common law trademarks, copyrights and copyright
registrations and applications used by the Company.
"Unscheduled Environmental Liabilities" means Environmental Liabilities
that are not Scheduled Environmental Liabilities.
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"Visalia Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 0000 Xxxxxx 000, Xxxxxxx, Xxxxxxxxxx on the
real property that is owned by the Company and legally described in Schedule
1.1.8 hereto.
"Year 2000 Problem" means the risk that Systems may be unable to
recognize and perform properly date-sensitive functions involving any date after
December 31, 1999.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Audited Financial Statements....................................3.7
Closing.........................................................2.2
Closing Balance Sheet .......................................2.3(b)
Closing Financial Statements.................................2.3(b)
Code ...........................................................7.1
Company Securities ..........................................3.5(b)
Damages .....................................................8.1(a)
Disclosure Schedules .............................................3
Federal Tax ....................................................7.1
Final Purchase Price.........................................2.3(h)
Indemnified Party ...........................................8.3(a)
Indemnifying Party ..........................................8.3(a)
Intercompany Debt............................................2.3(d)
IRS.........................................................3.21(a)
Net Working Capital .........................................2.3(c)
Pre-Closing Tax Period .........................................7.1
Preliminary Purchase Price...................................2.3(a)
Purchase Price...............................................2.3(e)
Returns......................................................7.2(a)
Section 338 Forms............................................7.3(d)
Section 338(h)(10) Election..................................7.3(d)
Tax ..........................................................7.1
Taxing Authority ...............................................7.1
Total Current Assets.........................................2.3(c)
Total Current Liabilities....................................2.3(c)
Transfer Taxes...............................................7.5(a)
Unaudited Financial Statements..................................3.7
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, Sellers hereby sell to Buyer, and Buyer hereby
purchases from Sellers, the Shares. The Purchase Price shall be as determined in
Section 2.3.
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SECTION 2.2. Closing. The closing of the purchase and sale of the
Shares hereunder (the "Closing") took place at the offices of Xxxxxxxxxx &
Xxxxx, P.A., 1100 International Centre, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, on September 16, 1999 at 7:00 a.m. Pacific Daylight Time. At
the Closing:
(a) Buyer shall deliver fifty-five million three hundred
thousand dollars ($55,300,000) in immediately
available funds to Sellers by wire transfer to
Sellers' respective accounts, as designated by each
Seller, respectively, by notice to Buyer;
(b) Buyer shall cause the Company to deliver eighteen
million one hundred thousand dollars ($18,100,000) in
repayment of intercompany debt in immediately
available funds to MCA by wire transfer to MCA's
account, as designated by MCA by notice to Buyer; and
(c) Sellers shall deliver to Buyer certificates
representing the Shares duly endorsed or accompanied
by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
SECTION 2.3. Calculation of Purchase Price.
(a) The Preliminary Purchase Price will be fifty-five million three
hundred thousand dollars ($55,300,000).
(b) Within sixty (60) days after the Closing, Sellers shall deliver to
Buyer a final balance sheet of the Company as of the Closing (the "Closing
Balance Sheet") with the related statement of operations, shareholders' equity
and statement of cash flows for the period from December 28, 1998 to the
Closing, audited by Ernst & Young LLP in accordance with the books and records
of the Company and in accordance with generally accepted accounting principles
and procedures applied on a consistent basis and which present fairly the
financial position of the Company as of the Closing and the results of its
operations and its cash flows for the period from December 28, 1998 to the
Closing (collectively, the "Closing Financial Statements"). The Sellers shall
prepare the Closing Financial Statements using the same method used in the
preparation of the Unaudited Financial Statements and the Closing Balance Sheet
shall not reflect any entries, transactions or activities which occurred as a
result of, or after, the Closing. Buyer will cause the Company to afford
promptly to Sellers and their respective agents, including, but not limited to,
Ernst & Young LLP, reasonable access to the Real Properties and the Company's
books and records relating to the Business prior to the Closing, for purposes of
preparing the Closing Balance Sheet and Closing Financial Statements in
accordance with this Section 2.3(b); provided that in connection with such
access Sellers will at all times comply with Buyer's normal visitor safety and
security procedures and requirements.
(c) Concurrent with the delivery of the Closing Financial Statements,
Sellers shall deliver to Buyer a calculation of the Net Working Capital of the
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Company as of the Closing based on the Closing Balance Sheet. The "Net Working
Capital" shall be the amount determined by subtracting the Total Current
Liabilities set forth on the Closing Balance Sheet from the Total Current Assets
set forth on the Closing Balance Sheet. The Sellers shall calculate Net Working
Capital in the Closing Financial Statements using the same method used in the
calculation of Net Working Capital in the Unaudited Financial Statements. The
"Total Current Liabilities" and the "Total Current Assets" shall mean the total
current liabilities and total current assets of the Company determined in the
same manner as those items were determined for the purposes of the Audited
Financial Statements.
(d) Concurrent with the delivery of the Closing Financial Statements,
Sellers shall deliver to Buyer a calculation of the Intercompany Debt based on
the Closing Balance Sheet. The "Intercompany Debt" shall mean the total of all
amounts owed to MCA by the Company set forth on the Closing Balance Sheet.
(e) The Purchase Price will be the amount determined by subtracting the
total of all liabilities of the Company set forth on the Closing Balance Sheet
other than (i) those used to calculate Net Working Capital and (ii) deferred tax
liability as reflected on the Closing Balance Sheet from eighty million dollars
($80,000,000), and then either (i) adding the amount by which the Net Working
Capital exceeds twenty-eight million five hundred thousand dollars ($28,500,000)
or (ii) subtracting the amount by which twenty-eight million five hundred
thousand dollars ($28,500,000) exceeds the Net Working Capital.
(f) If the Purchase Price exceeds the Preliminary Purchase Price, Buyer
shall within ten (10) business days of the final determination of the Purchase
Price pay to Sellers an amount equal to the amount by which the Purchase Price
exceeds the Preliminary Purchase Price plus interest on such amount from the
Closing Date to the payment date at the rate of eight percent (8%) per annum. If
the Preliminary Purchase Price exceeds the Purchase Price, Sellers shall within
ten (10) business days of the final determination of the Purchase Price pay to
Buyer an amount equal to the amount by which the Preliminary Purchase Price
exceeds the Purchase Price plus interest on such amount from the Closing Date to
the payment date at the rate of eight percent (8%) per annum. The Purchase Price
shall be deemed to be finally determined on the earlier of (A) notice by Buyer
to Sellers that it agrees with the Closing Balance Sheet, Closing Financial
Statements and calculations done by Sellers pursuant to Sections 2.3(b), (c) and
(d), (B) the thirty-first (31st) day after receipt by Buyer of the Closing
Balance Sheet, Closing Financial Statements and the calculations done by Sellers
pursuant to Sections 2.3(b), (c) and (d), if Buyer has not given Sellers notice
of a disagreement pursuant to Section 2.3(g) or (C) the delivery to Buyer and
Sellers of the independent auditors' report establishing the Net Working Capital
pursuant to Section 2.3(h).
(g) If Buyer disagrees with the Closing Balance Sheet, Closing
Financial Statements or any of the calculations done by Sellers pursuant to
Sections 2.3(b), (c) or (d), Buyer may within thirty (30) days of receipt of the
Closing Balance Sheet, Closing Financial Statements and the calculations done by
Sellers pursuant to Sections 2.3(b), (c) and (d) deliver a notice to Sellers
disagreeing with the Closing Balance Sheet, Closing Financial Statements and
such calculations setting forth Buyer's version of the Closing Balance Sheet,
Closing Financial Statements and other such calculations.
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(h) If a notice of disagreement shall be delivered pursuant to Section
2.3(g), Buyer and Sellers shall, during the thirty (30) days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to agree on the Closing Balance Sheet, Closing Financial
Statements and the calculations based on them for the calculation of the
Purchase Price. If, at the end of such period, Buyer and Sellers are unable to
reach such an agreement, they shall promptly jointly retain independent auditors
of nationally recognized standing reasonably satisfactory to Buyer and Sellers
(who shall not have any material relationship with Buyer or Sellers at the time
or at any time during the preceding twelve months) promptly to review this
Agreement and the disputed items or amounts for the purpose of calculating the
Purchase Price. Such independent auditors shall deliver to Buyer and Sellers, as
promptly as practicable, a report setting forth their analysis and calculation
of the Purchase Price (the "Final Purchase Price") and the Closing Balance Sheet
and Closing Financial Statements. The cost of the independent auditors analysis
and calculation shall be borne (i) by Buyer if the difference between Final
Purchase Price and the Purchase Price determined by using Buyer's calculations
delivered pursuant to Section 2.3(g) is greater than the difference between
Final Purchase Price and the Purchase Price determined by using Sellers'
calculations delivered pursuant to Section 2.3(b), (c) and (d), or (ii) by
Sellers if the first such difference is less than the second such difference and
(iii) otherwise equally by Buyer and Sellers.
(i) Buyer and Sellers agree that they will, and agree to cause their
respective independent auditors and the Company to, cooperate and assist in the
preparation of the Closing Balance Sheets, Closing Financial Statements and the
calculations required to determine the Purchase Price and in the conduct of the
reviews referred to in this Section 2.3, including without limitation, the
making available to the extent reasonably necessary of books, records, work
papers and personnel.
(j) In the event that the Closing Balance Sheet as finally determined
pursuant to the foregoing provisions of this Section 2.3 indicates that the
Intercompany Debt was greater than eighteen million one hundred thousand dollars
($18,100,000), Buyer shall within five (5) business days of the final
determination of the Purchase Price cause the Company to pay to MCA an amount
equal to the amount by which the Intercompany Debt exceeds eighteen million one
hundred thousand dollars ($18,100,000) plus interest on such amount from the
Closing Date to the payment date at the rate of eight percent (8%) per annum. In
the event that the Closing Balance Sheet as finally determined pursuant to the
foregoing provisions of this Section 2.3 indicates that the Intercompany Debt
was less than eighteen million one hundred thousand dollars ($18,100,000), MCA
shall within five (5) business days of the final determination of the Purchase
Price pay to the Company an amount equal to the amount by which eighteen million
one hundred thousand dollars ($18,100,000) exceeds the Intercompany Debt plus
interest on such amount from the Closing Date to the payment date at the rate of
eight percent (8%) per annum.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth on the schedules attached to this Agreement (the
"Disclosure Schedules"), Sellers, jointly and severally, represent and warrant
to Buyer as of the date hereof that:
SECTION 3.1. Corporate Existence and Power. The Sellers are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on their respective businesses. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
the Business, except for those licenses, authorizations, permits, consents and
approvals the absence of which would not, individually or in the aggregate, have
a Material Adverse Effect. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. Sellers have heretofore delivered to Buyer true and complete
copies of the certificate of incorporation and bylaws of the Company. Schedule
3.1 lists the jurisdictions in which the Company is qualified as a foreign
corporation.
SECTION 3.2. Corporate Authorization. The execution, delivery and
performance by Sellers of this Agreement are within Sellers' corporate powers
and have been duly authorized by all necessary corporate action on the part of
Sellers. This Agreement has been executed and delivered by each of the Sellers
and constitutes a valid and binding agreement of Sellers, enforceable against
Sellers in all material respects so that Buyer receives substantially all of the
benefits of the bargain. No other corporate action or proceeding by or in
respect of Sellers is or was necessary to authorize this Agreement or the
transactions contemplated herein.
SECTION 3.3. Governmental Authorization. Except as otherwise provided
in Section 3.16, the execution, delivery and performance by Sellers of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency, or official.
SECTION 3.4. Non-Contravention. The execution, delivery and performance
by Sellers of this Agreement do not and will not (i) violate the certificate of
incorporation or bylaws of Sellers or the Company, (ii) assuming compliance with
the matters referred to in Section 3.3, materially violate any Applicable Law,
(iii) require any consent other than the consent of MCA's parent company,
Mitsubishi Chemical Corporation, or other action by any Person under, constitute
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of the Company to a loss of any benefit
to which the Company is entitled under, any agreement or other instrument
binding upon the Company or any license, franchise, permit or other similar
authorization held by the Company except where there would not, individually or
in the aggregate, be a Material Adverse Effect, or (iv) result in the creation
or imposition of any Lien on any asset of the Company or on the Shares.
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SECTION 3.5. Capitalization.
(a) The authorized capital stock of the Company consists of one
thousand (1,000) shares of Common Stock. There are outstanding one thousand
(1,000) shares of Common Stock.
(b) All outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. Except as set forth in
this Section 3.5, there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company, or
(iii) except as contemplated by this Agreement, subscriptions, options,
warrants, puts, calls, agreements, understandings or other rights to acquire
from the Company or from Sellers, or either of them, or other obligations of the
Company, or of Sellers, or either of them, to cause the Company, to issue any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company (the items in clauses
3.5(b)(i), 3.5(b)(ii) and 3.5(b)(iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities.
SECTION 3.6. Ownership of Shares. Collectively, Sellers are the record
and beneficial owners of all of the Shares, free and clear of any Lien and any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of the Shares), and will transfer and deliver to Buyer
at the Closing valid title to the Shares free and clear of any Lien and any such
limitation or restriction.
SECTION 3.7. Financial Statements. Sellers have provided to Buyer true
and correct copies of the audited balance sheets of the Company as of December
29, 1996, December 28, 1997 and December 27, 1998, and the related consolidated
statements of income and cash flows for each of the years ended December 29,
1996, December 28, 1997 and December 27, 1998, together with the report of Ernst
& Young LLP, independent certified public accountants (collectively, the
"Audited Financial Statements") and the unaudited balance sheet of the Company
as of the Balance Sheet Date and the related consolidated statements of income
and cash flows for the period ended on the Balance Sheet Date (collectively the
"Unaudited Financial Statements"). The Audited Financial Statements and the
Unaudited Financial Statements present fairly, in all material respects, the
financial position of the Company as of the dates thereof and the results of
operations and changes in consolidated financial position for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis; provided, however, that the Unaudited Financial Statements
shall be subject to normal year-end adjustments consistent with those set forth
in the Audited Financial Statements.
SECTION 3.8. Absence of Certain Changes. To Sellers' Knowledge, since
the Balance Sheet Date, the Business has been conducted in the ordinary course
of business consistent with past practices and there has not been:
(a) any event or occurrence, which constitutes a Material
Adverse Effect;
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(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership
interests in, the Company;
(c) any amendment of any material term of any outstanding
security of the Company;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money, other than in the
ordinary course of business consistent with past practices;
(e) any creation or assumption by the Company of any Lien on
any material asset other than in the ordinary course of
business consistent with past practices;
(f) any sale, lease or other disposition of, or any agreement
to sell, lease or otherwise dispose of, any of the Real
Properties, the Leased Premises or assets of the Company,
other than in the ordinary course of business consistent with
past practices.
(g) any making of any loan, advance or capital contributions
to or investment in any Person, other than in the ordinary
course of business consistent with past practices;
(h) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or the assets
of the Company which, individually or in the aggregate,
constitutes a Material Adverse Effect;
(i) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets
or the Business (including the acquisition or disposition of
any assets) or any relinquishment by the Company of any
contract or other right, in either case, material to the
Company other than transactions and commitments in the
ordinary course of business consistent with past practices and
those contemplated by this Agreement;
(j) any change in any method of accounting or accounting
practice by the Company;
(k) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any
director or officer of the Company (or any amendment to any
such existing agreement), (ii) grant of any severance or
termination pay to any director or officer of the Company, or
(iii) change in compensation or other benefits payable to any
director, officer or employee of the Company pursuant to any
severance or retirement plans or policies thereof; or
12
(l) any purchase of real property.
SECTION 3.9. No Undisclosed Material Liabilities. To Sellers'
Knowledge, on the Balance Sheet Date, there were no, and on the Closing Date
there shall not be, material liabilities of the Company other than:
(a) liabilities provided for on the Balance Sheet or the
Closing Balance Sheet or disclosed in the notes thereto;
(b) liabilities disclosed on the Disclosure Schedules or in
the Environmental Reports or this Agreement;
(c) undisclosed liabilities which, individually or in the
aggregate, are not material to the Company; and
(d) undisclosed liabilities not required under generally
accepted accounting principles to be shown on the Balance
Sheet or the Closing Balance Sheet.
SECTION 3.10. Intercompany Accounts. Since the Balance Sheet Date,
there has not been any accrual of liability by the Company to Sellers or any of
their Affiliates or any other transaction between the Company, on the one hand,
and Sellers and any of their Affiliates, on the other hand, except in the
ordinary course of business consistent with past practice.
SECTION 3.11. Material Contracts.
(a) To Sellers' Knowledge, the Company is not bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of one hundred thousand dollars ($100,000)
or more;
(ii) any sales, distribution or other similar agreement
providing for the sale by the Company of materials, supplies,
goods, services, equipment or other assets of one hundred
thousand dollars ($100,000) or more or which extend beyond one
year or both;
(iii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that provides for
annual payments by the Company of one hundred thousand dollars
($100,000) or more or which extend beyond one year or both;
(iv) any partnership, joint venture or other similar agreement
or arrangement;
(v) any agreement relating to the acquisition or disposition
of all or any part of the Business (whether by merger, sale of
stock, sale of assets or otherwise), other than for sales of
product in the ordinary course of business;
13
(vi) any agreement that limits the freedom of the Company to
compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Company after
the Closing Date;
(vii) any agreement with any present director or officer of
the Company or any immediate family member of such person
other than as set forth in the Company's certificate of
incorporation or bylaws;
(viii) loans, credits, financing agreements, promissory notes
or other evidences of indebtedness, including all agreements
for any commitments for future loans, credit, or financing,
other than in the ordinary course of business;
(ix) guarantees, other than in the ordinary course of
business;
(x) any written employment agreement other than the employment
agreements listed on Schedule 3.11; or
(xi) any agreements entered into with the intention that the
performance of such agreements would result in a loss to the
Company.
(b) Each agreement, commitment, arrangement or plan disclosed in any
Disclosure Schedule or required to be disclosed pursuant to this Section is a
valid and binding agreement of the Company and is in full force and effect, and,
to Sellers' Knowledge, neither the Company nor any other party thereto is in
default or breach in any material respect under the terms of any such agreement,
commitment, arrangement or plan.
(c) Sellers have delivered to Buyer true and correct copies of each of
the agreements listed on Schedule 3.11.
(d) The Asset Purchase Agreement dated as of September 29, 1995 between
Pacific Western Extruded Plastics Company, a Washington corporation, Xxxxxxx
Investment Company, a Washington company, the Company f/k/a MCA Acquiring
Company and MCA (the "Acquisition Agreement") is the only agreement between MCA
and the Company on the one hand and Xxxxxxx Investment Company, on the other
hand, relating to the subject matter of Article 7 thereof. The Acquisition
Agreement has not been amended, altered, repealed or superceded.
SECTION 3.12. Litigation. To Sellers' Knowledge, there is no action,
suit, investigation or proceeding pending against, or threatened against, the
Company or any of its officers, in their capacities as officers of the Company,
before any court or arbitrator or any governmental body, agency or official
which, individually or in the aggregate, is likely to have a Material Adverse
Effect. To Sellers' Knowledge, there is no action, suit, investigation or
proceeding pending against, or threatened against, Sellers or the Company before
any court or arbitrator or any governmental body, agency or official, which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
14
transactions contemplated by this Agreement. To Sellers' Knowledge, neither the
Company nor any of its officers, in their capacities as officers of the Company,
are subject to any judgment, order or decree.
SECTION 3.13. Properties.
(a) To Sellers' Knowledge, the Company has good title to, or in the
case of leased property has valid leasehold interests in, all personal property
and assets (whether tangible or intangible) reflected on the Balance Sheet or
acquired after the Balance Sheet Date, except for property and assets sold, or
otherwise disposed of, since the Balance Sheet Date in the ordinary course of
business consistent with past practices.
(b) To Sellers' Knowledge, the Company has indefeasible, fee simple
title to, or in the case of leased real property has valid leasehold interests
in, all real property reflected on the Balance Sheet or acquired after the
Balance Sheet Date, except for any such real property sold since the Balance
Sheet Date in the ordinary course of business consistent with past practices.
None of such property or assets (whether real or personal) is subject to any
Liens, except:
(i) Liens for taxes not yet due and payable;
(ii) Liens for taxes being contested in good faith (and for
which adequate accruals or reserves have been established on
the Balance Sheet);
(iii) Liens and other exceptions set forth in the title
insurance policies listed in Schedule 3.13; and
(iv) Liens, easements, reservations, restrictions, covenants,
conditions, and other exceptions that do not materially
detract from the value or materially interfere with any
present use of such property.
(c) To Sellers' Knowledge, all leases of real property by the Company
are valid and binding and, to Sellers' Knowledge, there does not exist under any
such lease any default or any event which with notice or lapse of time or both
would constitute a default.
(d) The property and assets owned or leased by the Company or which the
Company otherwise has the right to use, constitute all of the property and
assets held for use or used in connection with the Business.
(e) Sellers, without inquiry of others, have not intentionally or
knowingly failed to disclose the existence of any encroachments, overlaps or
boundary disputes affecting the Real Properties or the Leased Properties.
15
SECTION 3.14. Intellectual Property.
(a) To Sellers' Knowledge, Schedule 3.14 contains a list of all assumed
names under which the Company does business and all U.S. and foreign Trademarks
used or owned by the Company, specifying as to each the country or countries in
which it has been issued or registered or in which an application for such
issuance or registration has been filed, including the respective registration
or application numbers.
(b) To Sellers' Knowledge, the Company has good title to, and the full
and unrestricted right to use, the Trademarks free and clear of all Liens,
charges, encumbrances, or third party claims or interests of any kind
whatsoever. To Sellers' Knowledge, the use of such Trademarks does not infringe
on any rights of any other person or entity; such Trademarks are not licensed to
or licensed from any other person or entity; and there are no outstanding claims
of any infringement regarding the Company's use of such Trademarks.
(c) The Company does not own or license any Patents.
(d) To Sellers' Knowledge, the Company has good title to the
Technology, and the full and unrestricted right to use the same, and such rights
are free and clear of all liens, charges, encumbrances or third party claims,
except rights related to licensed computer software. To Sellers' Knowledge, the
practice by the Company of the Technology does not infringe on any intellectual
property rights of any other person or entity and there have been no claims by
any person or entity of such infringement. None of such Technology is licensed
to or licensed from any other person or entity, other than licenses related to
computer software.
SECTION 3.15. Insurance Coverage. To Sellers' Knowledge, Schedule 3.15
contains a list of all insurance policies and fidelity bonds obtained or
maintained by the Company. To Sellers' Knowledge, such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since September 29, 1995 and remain in full force
and effect up to Closing and no notice of cancellation or termination has been
received by the Company with respect thereto.
SECTION 3.16. Licenses and Permits. To Sellers' Knowledge, except for
Environmental Permits disclosed in Schedule 3.22.1, Schedule 3.16 correctly
describes each material license, franchise, permit or other similar
authorization in effect and affecting, or relating in any way to, the assets or
Business (the "Permits") together with the name of the government agency or
entity issuing such Permit. To Sellers' Knowledge, the Company has obtained and
maintains in full force and effect all licenses and permits necessary for the
ownership and operation of the Business.
SECTION 3.17. Inventories. The inventories set forth in the Balance
Sheet were, and those set forth in the Closing Balance Sheet shall be, properly
stated therein at the lesser of cost or fair market value determined in
accordance with generally accepted accounting principles consistently applied.
Since the Balance Sheet Date, the inventories of the Company have been
maintained in the ordinary course of business. All such inventory is owned free
and clear of all Liens, except liens for taxes not yet due and payable. To
16
Sellers' Knowledge, all of the inventory recorded on the Balance Sheet consists
of, and all inventory of the Company on the Closing Date will consist of items
of a quality and in quantities consistent with past practice.
SECTION 3.18. Receivables. All accounts, notes receivable and other
receivables (other than receivables collected since the Balance Sheet Date)
reflected on the Balance Sheet are, and all accounts and notes receivable
reflected on the Closing Balance Sheet will be, valid, genuine and, to Sellers'
Knowledge, collectible in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded on
the Balance Sheet and Closing Balance Sheet, as appropriate. Accounts, notes
receivable and other receivables arising out of or relating to the Business as
of the Balance Sheet Date have been included in the Balance Sheet in accordance
with generally accepted accounting principles applied on a consistent basis.
Accounts, notes receivable and other receivables arising out of or relating to
the Business as of the Closing Date shall be included in the Closing Balance
Sheet in accordance with generally accepted accounting principles applied on a
consistent basis.
SECTION 3.19. Finders' Fees. Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, whose fees relating to the sale of the Company will be
paid by Sellers, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Sellers or the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.20. Labor Matters. To Sellers' Knowledge, the Company is in
compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice, failure to comply with which or engagement
in which, as the case may be, would reasonably be expected to have a Material
Adverse Effect. There is no unfair labor practice complaint pending or, to
Sellers' Knowledge, threatened against the Company before the National Labor
Relations Board. The Company is not a party to any collective bargaining
agreement. During the last three (3) years, the Company has experienced no work
stoppages, walkouts, strikes or requests by a union for recognition for the
purposes of negotiating terms and conditions of employment. To Sellers'
Knowledge, there is no labor strike, dispute, slowdown or stoppage threatened or
any request by a union for recognition for the purposes of negotiating terms and
conditions of employment pending against the Company. No labor grievance has
been served upon the Company.
SECTION 3.21. Employee Benefit Plans.
(a) Except as disclosed in Schedule 3.21, the Company has no Employee
Benefit Plan, including without limitation any Multiemployer Plan, and the
Company is not a participating employer in any Employee Benefit Plan in which
more than one employer makes contributions as described in Sections 4063 and
4064 of ERISA. Except as disclosed on Schedule 3.21, the Company has no
contingent liability with respect to any post-retirement benefit under any
employee welfare benefit plan (as defined in Section 3(1) of ERISA), other than
liability for health plan continuation coverage described in Code Section 4980B
and Part 6 of Title I of ERISA, which, together with any disclosed liability on
Schedule 3.21, will not have a Material Adverse Effect. Sellers have given to
17
Buyer true and complete copies of all the following: each Employee Benefit Plan
and related trust agreement (including all amendments and commitments with
respect to such Employee Benefit plan or trust) which the Company maintains or
is committed to contribute to as of the date hereof, if applicable, and the most
recent summary plan description, actuarial report, determination letter issued
by the Internal Revenue Service ("IRS") and Form 5500 filed in respect of each
such Employee Benefit Plan.
(b) The Company has never participated in a Multiemployer Plan.
(c) Each Employee Benefit Plan complies, in both form and operation, in
all material respects, with its terms, and, to the extent applicable, with ERISA
and the Code including, without limitation, Code Section 4980B and Part 6 of
Title I of ERISA. The Company has not incurred any liability to the Pension
Benefit Guaranty Corporation. The Company has not engaged in any transaction
which could subject it to liability under Section 4069 or Section 4212(c) of
ERISA. Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so qualified, and each
trust related to such Plan has been determined to be exempt under Section 501(a)
of the Code. No Employee Benefit Plan is being audited or investigated by any
government agency or subject to any pending or threatened claim or suit.
(d) Each Plan currently meets and always has met the minimum funding
standard of Section 302 of ERISA and Section 412 of the Code (without regard to
any funding waiver). All contributions or payments due and owing as required by
Section 302 of ERISA, Section 412 of the Code or the terms of any Plan have been
made by the due date for such contributions or payments. The Company is not
required to provide security to a Plan pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code.
(e) Neither the Company nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under Section 406 of ERISA or Section
4975 of the Code or engaged in an action which would constitute a breach of
fiduciary duty that would have a Material Adverse Effect. The execution,
delivery and carrying out of the terms of any agreements that are related to
this transaction will not constitute a prohibited transaction under the
aforementioned sections.
(f) There are no agreements which will provide payments to any officer,
employee, shareholder or highly compensated individual which will be "parachute
payments" under Section 280G of the Code that are nondeductible to the Company
or Sellers and which will be subject to the tax under Section 4999 of the Code
for which Sellers would have a material withholding liability.
SECTION 3.22. Environmental Matters. Except as otherwise provided
herein or disclosed to Buyer in the Environmental Reports:
18
3.22.1. Environmental Permits. Schedule 3.22.1 includes a complete list
of all Environmental Permits that the Company has obtained and maintains in full
force and effect. To Sellers' Knowledge, the Environmental Permits listed on
Schedule 3.22.1 are all of the Environmental Permits necessary for the ownership
and operation of the Business as conducted by the Company.
3.22.2. Environmental Permit Compliance. To Sellers' Knowledge, the
Company is, and the Business is operated or conducted by the Company, in
material compliance with all Environmental Permits, and all prior instances of
noncompliance with Environmental Permits have been fully and finally resolved.
3.22.3. Environmental Law Compliance. To Sellers' Knowledge, the
Company is, and the Business is operated or conducted by the Company, in
material compliance with all Environmental Laws, which, if violated, would have
a Material Adverse Effect on the ownership or operation of any of the Pipe
Facilities or the conduct of the Business as conducted by the Company, and all
prior instances of noncompliance have been fully and finally resolved.
3.22.4. Environmental Liabilities. To Sellers' Knowledge: (i) there are
no Environmental Claims pending or threatened against the Company, (ii) there
are no writs, injunctions, decrees, orders or judgments outstanding or
threatened relating to compliance with or liability under any Environmental Law,
and (iii) the Company has no material liability under any Environmental Law.
3.22.5. Certain Environmental Matters. To Sellers' Knowledge, there are
no asbestos-containing materials, PCB-contaminated electrical equipment or PCB
transformers (as defined in 40 C.F.R., Section 761.3), or underground storage
tanks at the Pipe Facilities, and there has been no unpermitted Release which
presently requires Remedial Action at any of the Pipe Facilities.
3.22.6. Hazardous Substances. To Sellers' Knowledge, Schedule 3.22.6
lists (i) all storage, manufacture or processing of Hazardous Substances at any
of the Pipe Facilities, except where such storage, manufacture or processing was
necessary to the conduct of the Business and in material compliance with all
applicable Environmental Laws, and (ii) the sites where all Hazardous Substances
and other solid waste materials from the Pipe Facilities were disposed, released
or threatened to be released over the last ten (10) years.
3.22.7. Liens, Restrictive Covenants. To Sellers' Knowledge, there are
no liens, restrictive covenants or other land use restrictions under
Environmental Laws on any of the Real Properties or the Leased Premises, and no
government actions have been taken or are threatened that could subject any of
the Real Properties or Leased Premises to such liens, restrictive covenants or
other land use restrictions, and the Company is not required to place any notice
or restriction relating to Hazardous Substances in any deed to such property.
3.22.8. Waiver. To Sellers' Knowledge, the Company has not expressly
released any Person nor waived any rights or defenses with respect to any
Environmental Claim.
19
3.22.9. Disclosure. To Sellers' Knowledge, the Company has delivered or
made available all Environmental Reports to Buyer.
SECTION 3.23. Predominant Customers. To Sellers' Knowledge, Schedule
3.23 contains a true and complete list of customers of the Company which
accounted for more than nine hundred thousand dollars ($900,000) of the
Company's sales during the 1998 fiscal year.
SECTION 3.24. Predominant Suppliers. To Sellers' Knowledge, Schedule
3.24 contains a true and complete list of suppliers of the Company which
accounted for more than one million dollars ($1,000,000) of the Company's
purchases during the 1998 fiscal year.
SECTION 3.25. Absence of Certain Payments. To Sellers' Knowledge,
neither of the Sellers, nor the Company, nor any director, officer, agent,
employee or other person associated with or acting on their behalf, has used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, or made any direct or indirect
unlawful payments to government officials or employees from corporate funds, or
established or maintained any unlawful funds.
SECTION 3.26. Compliance with Laws. To Sellers' Knowledge, neither the
Company nor Sellers have received any notice of any sort of alleged violation by
the Company of any Applicable Law that has not been resolved.
SECTION 3.27. Accuracy of Disclosures. To Sellers' Knowledge, none of
the representations or warranties made by Sellers in this Agreement or the
Disclosure Schedules, and no written statement, certificate or schedule
furnished or to be furnished by or on behalf of Sellers to Buyer or its agents
pursuant hereto, or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact.
SECTION 3.28. Year 2000. To Sellers' Knowledge, the Company is taking
steps to address the Year 2000 Problem and expects that the Systems will be
ready to conduct business prior to, during, and after January 1, 2000.
SECTION 3.29. Company Books and Records. To Sellers' Knowledge, the
Company's books of account and records either provided to Buyer or made
available to Buyer for review by Sellers or PW Pipe Management to date are true
and correct in all material respects.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Disclosure Schedules, Buyer represents and
warrants to Sellers as of the date hereof that:
SECTION 4.1. Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Minnesota
and has all corporate powers and all material governmental licenses,
20
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
SECTION 4.2. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement are within Buyer's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been executed and delivered by Buyer and constitutes a
valid and binding agreement of Buyer, enforceable against Buyer in all material
respects so that Sellers receive substantially all of the benefits of the
bargain. No other corporate action or proceeding by or in respect of Buyer is or
was necessary to authorize this Agreement or the transactions contemplated
herein.
SECTION 4.3. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement require no material action by or in
respect of, or material filing with, any governmental body, agency or official.
SECTION 4.4. Non-contravention. The execution, delivery and performance
by Buyer of this Agreement do not and will not (i) violate the articles of
incorporation or bylaws of Buyer or (ii) assuming compliance with the matters
referred to in Section 4.3, violate any Applicable Law, or (iii) require any
consent or other action by any Person under, constitute a default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of the Buyer to a loss of any benefit to which the Buyer is entitled
under, any agreement or other instrument binding upon the Buyer.
SECTION 4.5. Purchase for Investment. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
SECTION 4.6. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 4.7. Finders' Fees. Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, whose fees for assisting Buyer in arranging financing
for the transaction contemplated by this Agreement will be paid by Buyer, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Buyer who might be entitled to
any fee or commission from Sellers or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
21
ARTICLE 5
COVENANTS OF SELLERS
SECTION 5.1. Covenant Not to Compete.
(a) Sellers hereby covenant and agree that for a period of four (4)
years after the Closing Date they will not engage in the manufacture or sale of
PVC pipe or fittings in North America. This covenant of noncompetition shall be
interpreted to prohibit, without limiting the generality of the foregoing,
Sellers from serving as shareholders, agents of or independent contractors to,
any person or entity which directly or indirectly competes with the Company in
the PVC pipe business in North America.
(b) Buyer and Sellers hereby stipulate and agree that the remedy at law
for breach of this covenant not to compete would be inadequate and that Buyer
shall be entitled to injunctive relief to enforce this clause. Buyer and Sellers
further stipulate and agree that the prohibitions contained herein are
reasonable as to time and area, and they specifically waive any objection to the
reasonableness of said prohibitions.
(c) Buyer shall have a right to bring an action for breach of this
Section 5.1 until the fifth (5th) anniversary of the Closing Date.
SECTION 5.2. Confidentiality.
(a) For four (4) years from the date hereof, Sellers and their
Affiliates will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold all information concerning the Company and the operations of its
Business in confidence, except to the extent that such information (i) can be
shown to have been in the public domain through no fault of Sellers; (ii) can be
shown to have been known to Sellers or their Affiliates from a source other than
the Company; (iii) does not constitute a trade secret; or (iv) is requested by
judicial or administrative process or by other requirements of law, provided
that Sellers may disclose such information to their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement so long as such
Persons are informed by Sellers of the confidential nature of such information
and are directed by Sellers to treat such information confidentially.
(b) Buyer shall have a right to bring an action for breach of this
Section 5.2 until the fifth (5th) anniversary of the Closing Date.
SECTION 5.3. Auditor Consents. For three (3) years from the date
hereof, Sellers will use all reasonable efforts to cause Ernst & Young LLP to
consent to the use of the Audited Financial Statements by Buyer in connection
with filings that Buyer is required to make with the Securities and Exchange
Commission and any exchange on which Buyer's securities are traded.
22
SECTION 5.4. Resignations. Sellers will deliver to Buyer the
resignations of all directors of the Company, effective upon Closing.
ARTICLE 6
COVENANTS OF BUYER AND SELLERS
Buyer and Sellers agree that:
SECTION 6.1. Best Efforts. Subject to the terms and conditions of this
Agreement, Buyer and Sellers will use their best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Laws to consummate the transactions contemplated by
this Agreement. Buyer agrees to cause the Company to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
SECTION 6.2. Documents Delivered at Closing.
(a) Buyer shall deliver the following documents to Sellers:
(i) Resolutions adopted by the Board of Directors of
Buyer approving this Agreement, certified by the
corporate secretary.
(ii) Opinion of Xxxxxxxxxx & Xxxxx, counsel to Buyer,
dated the Closing Date, to the effect specified in
Sections 4.1, 4.2, 4.3, and 4.4. In rendering such
opinion, such counsel may rely upon certificates of
public officers and, as to matters of fact, upon
certificates of officers of Buyer.
(b) Sellers shall deliver the following documents to Buyer:
(i) Resolutions adopted by the Board of Directors of MCA
approving this Agreement, certified by the corporate
secretary.
(ii) Certificate of Resolution adopted by the Board of
Directors of Mitsubishi Chemical Corporation,
certified by the Chairman of the Board.
(iii) Certificate of Approval of MPI approving this
Agreement, certified by the President of MPI.
(iv) Copy of the Certificate of Incorporation of the
Company certified by the Secretary of State of the
State of Delaware to be a true and complete copy
thereof, which certification by said Secretary of
State shall be dated within twenty (20) days of the
Closing Date.
23
(v) Good Standing Certificates from the states in which
the Company is qualified to do business.
(vi) Such instruments as are in form and substance
sufficient to transfer to Buyer all of Sellers'
rights, title and interest in and to the Company.
(vii) Opinion of Xxxxx Xxxxx, General Counsel to MCA, dated
the Closing Date, to the effect specified in Sections
3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 with respect to MCA
and the Company. In rendering such opinion, such
counsel may rely upon certificates of public officers
and, as to matters of fact, upon certificates of
officers of MCA and the Company.
ARTICLE 7
TAX MATTERS
SECTION 7.1. Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax (a "Taxing Authority"), (ii) any liability of the Company for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group, or being a
party to any agreement or arrangement whereby liability of the Company for
payment of such amounts was determined or taken into account with reference to
the liability of any other person for any Pre-Closing Tax Period, and (iii)
liability of the Company for the payment of any amounts of the type described in
(i) or (ii) as a result of any express or implied obligation to indemnify any
other Person (including the tax sharing provisions of this Agreement relating to
the period from December 29, 1998 to the Closing Date as set forth in Section
7.4 below).
SECTION 7.2. Tax Representations. Except as set forth on Schedule 7.2,
Sellers, jointly and severally, represent and warrant to Buyer as of the date
hereof that:
24
(a) (i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
the Company (or including the Company) (collectively, the "Returns") have, to
the extent required to be filed on or before the Closing Date, been or will be
filed when due in accordance with all Applicable Laws; (ii) all Taxes shown as
due and payable on the Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority; (iii) the charges,
accruals and reserves for Taxes with respect to the Company for any Pre-Closing
Tax Period (including any Pre-Closing Tax Period for which no Return has yet
been filed) reflected on the books of the Company (excluding any provision for
deferred income taxes) are adequate to cover such Taxes; (iv) the Company is not
delinquent in the payment of any Tax or has requested any extension of time
within which to file any Return and, has not yet filed such return; (v) there
are no requests for rulings or determinations in respect of any Tax pending
between the Company and any Taxing Authority.
(b) Schedule 7.2 contains a list of all jurisdictions (whether foreign
or domestic) to which any Tax was properly payable by the Company at any time
after June 1, 1997.
(c) The Company is a member of an affiliated group filing consolidated
Federal Income Tax Returns pursuant to Sections 1501 through 1504 of the Code
(the "Affiliated Group") in which MCA is the common parent as described in
Section 1504 of the Code. The Company has been a member of the Affiliated Group
since August 18, 1995.
SECTION 7.3. Covenants.
(a) Without the prior written consent of Buyer, none of MCA, the
Company or any Affiliate of MCA shall, to the extent it may affect or relate to
the Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Return,
enter into any closing agreement, settle any Tax claim or assessment, surrender
any right to claim a Tax refund or take or omit to take any other action, if any
such action or omission would have the effect of increasing the Tax liability of
the Company.
(b) Except as otherwise provided in this Article 7, for any Pre-Closing
Tax Period, Sellers shall prepare and file, and Buyer shall cooperate in the
preparation of, all Returns not required to be filed on or before the Closing
Date which Returns will be filed when due in accordance with all Applicable
Laws.
(c) MCA shall include the Company in its consolidated Federal Tax
Return through the close of business on the Closing Date.
(d) Sellers and Buyer shall join in making a timely, effective and
irrevocable election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local or foreign tax law) (collectively a "Section
338(h)(10) Election") with respect to the purchase and sale of the Shares.
25
Sellers and Buyer shall jointly prepare the Section 338 Forms (as hereinafter
defined) to the extent such preparation has not been completed prior to the
Closing, and shall timely make any required filings and take any and all other
actions necessary to effect the Section 338(h)(10) Election. MCA shall include
in its federal income tax return for its taxable period which includes the
Closing Date and Buyer shall include in its federal income tax return for its
first taxable period ending on or after the Closing Date any Section 338 Forms
that are required to be so included on account of the Section 338(h)(10)
Election. Sellers and Buyer shall cooperate fully and in good faith with each
other in making the Section 338(h)(10) Election. The Purchase Price shall be
allocated among the Company's assets in accordance with Section 338 of the Code,
as Buyer and MCA shall in good faith agree in writing within sixty (60) days
after Closing. Sellers and Buyer agree that such allocation shall be
accomplished by a good faith determination of the fair market value of the
respective assets, and Sellers and Buyer shall report, act and file in all
respects and for all purposes consistent with such determination. "Section 338
Forms" shall include, without limitation, any "statement of section 338
election" and IRS Form 8023 (or any successor form, together with any Disclosure
Schedules or attachments thereto) that are required pursuant to Treas. Reg.
Section 1.338-1 or Treas. Reg. Section 1.338(h)(10)-1.
SECTION 7.4. Tax Sharing Agreements. Any and all existing Tax sharing
agreements to which the Company is a party shall be terminated as of the date
hereof. After the date hereof, the Company shall not have any further rights or
liabilities thereunder. This Agreement shall be the sole Tax sharing agreement
relating to the Company for all Pre-Closing Tax Periods. Seller shall compensate
Buyer for and hold the Company harmless against any Tax imposed by a Taxing
Authority as a result of such termination and, if any such termination is not
binding on any Taxing Authority, any adverse effect which would have been
avoided if such termination had been given effect by such Taxing Authority.
SECTION 7.5. Other Tax Matters.
(a) All excise, transfer, documentary, filing, sales, use, stamp,
registration, value added and other such Taxes, levies, fees and charges
(including any penalties and interest but expressly excluding income taxes)
incurred in connection with the purchase of the Shares from Sellers pursuant to
this Agreement ("Transfer Taxes") shall be borne and paid by Buyer when due,
irrespective of which party has the tax obligations under Applicable Law or
practice; provided, however, that if such tax obligations fall upon Sellers, the
parties shall, to the extent possible, calculate the full amount of Sellers' tax
obligations, and Buyer shall pay said amount to Sellers on the Closing Date. If
required by Applicable Law, Buyer will join in the execution of any tax returns
and other documentation relating to such Transfer Taxes.
(b) In the event that it is determined subsequent to the Closing that
additional Transfer Taxes are required to be paid in connection with the
transaction described in this Agreement, Buyer agrees to pay such additional
Transfer Taxes.
(c) Sellers agree to pay or cause payment to be made to Buyer of the
amount of any refund, rebate or similar payment that Sellers receive for any
Transfer Taxes paid by Buyer in connection with this Agreement.
26
SECTION 7.6. Cooperation on Tax Matters.
(a) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the preparation and
filing of any Tax return, statement, report or form (including any report
required pursuant to Section 6043 of the Code and all Treasury Regulations
promulgated thereunder), and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Company and
Sellers agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company relating to any Pre-Closing Tax Period, and to abide by
all record retention agreements entered into with any Taxing Authority and (ii)
to give the other party reasonable written notice prior to destroying or
discarding any such books and records and, if the other party so requests, the
Company or Sellers, as the case may be, shall allow the other party to take
possession of such books and records. For a period of ten (10) years following
the Closing, Buyer will cause the Company to afford promptly to Sellers and
their respective agents reasonable access to the Real Properties and the
Company's books and records relating to the Business prior to the Closing, for
purposes of preparing tax returns, prosecution and defense of litigation of any
kind; provided that in connection with such access Sellers will at all times
comply with Buyer's normal visitor safety and security procedures and
requirements. If within such ten (10) year period destruction of any records,
files, documents or correspondence of the Company is desired (other than
records, files, documents or correspondence which would not normally be retained
in the records because of the Company's record retention policies existing on
the date hereof), Buyer shall not destroy or permit the destruction of such
items without giving thirty (30) days prior written notice to Sellers, upon
which notice Sellers shall have the right to take possession of such records,
files, documents and correspondence.
(b) Buyer and Sellers further agree, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or customer of the Company or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
ARTICLE 8
INDEMNIFICATION
SECTION 8.1. Indemnification. Except as provided in Section 8.2
(governing Environmental Indemnification):
(a) Sellers hereby agree to indemnify Buyer against and agree to hold
Buyer harmless from any and all damage, loss, liability and reasonable expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
27
proceeding) ("Damages") incurred or suffered by Buyer or the Company arising out
of any misrepresentation or breach of warranty made by Sellers pursuant to this
Agreement as follows:
(i) for any claim for indemnity based on a breach of
Sections 3.1, 3.2, 3.5 and 3.6; and
(ii) for any claim for indemnity arising out of any other
misrepresentation or any breach of warranty, provided
that Sellers shall not be required to provide any
indemnity under this sub-Section 8.1(a)(ii) for such
claim after the first anniversary of Closing.
(b) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any Damages incurred or suffered by Buyer or the Company arising
out of or relating to any non-environmental liability or obligation of the
Company that arose out of the operations of the Company on or prior to Closing
and was not provided for on the Closing Balance Sheet or disclosed in the notes
thereto. The percentage of Damages indemnified hereunder shall be: (i)
determined pursuant to the table set forth in Section 8.2(a) if the liability
was within Sellers' Knowledge; or (ii) 50% if the liability was not within
Sellers' Knowledge. Sellers shall not be required to provide any indemnity under
this sub-Section 8.1(b) for claims for indemnity made after the third
anniversary of Closing.
(c) Buyer hereby agrees to indemnify Sellers against and agrees to hold
them harmless from any and all Damages incurred or suffered by Sellers arising
out of or relating to: (i) any misrepresentation or breach of warranty or
covenant made by Buyer pursuant to this Agreement, or (ii) any operations of the
Company after the Closing.
(d) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of a breach of covenant made by Sellers pursuant to this Agreement,
provided that a claim for indemnity is made to Sellers within one year after the
covenant expires.
(e) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of Sellers' intentional and knowing failure to disclose to Buyer
facts or circumstances that Sellers had reason to believe would have a Material
Adverse Effect on the Business or the Company.
SECTION 8.2. Environmental Indemnification. Notwithstanding anything to
the contrary in this Agreement, the rights and obligations of the parties, as
between each other, with respect to Environmental Liabilities, shall be governed
entirely by this Section 8.2.
(a) Sellers agree to indemnify Buyer against and agree to hold Buyer or
the Company harmless from a percentage of any Scheduled Environmental
Liabilities pursuant to the following table:
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When Claim Made to Seller: Sellers' Percentage:
------------------------- -------------------
On or before second anniversary of Closing 80%
After second anniversary but on or before third 60%
After third anniversary but on or before fourth 40%
After fourth but on or before fifth 20%
For any claim for indemnity for a Scheduled Environmental Liability that is not
disclosed to Sellers on or before the fifth anniversary of Closing, Sellers
shall have no responsibility to Buyer.
(b) Sellers hereby agree to indemnify Buyer against and agree to hold
Buyer harmless from any and all Damages incurred or suffered by Buyer or the
Company arising out of or relating to any breach of, or claim under, Section
3.22 pursuant to the formula set forth in Section 8.2(a), provided, however,
that Sellers shall not be required to provide any indemnity under this
sub-Section 8.2(b) for claims for indemnity made to Sellers after the third
anniversary of Closing.
(c) Sellers agree to indemnify Buyer against and agree to hold Buyer or
the Company harmless from fifty percent (50%) of any Unscheduled Environmental
Liability, provided that Sellers shall not be required to provide any indemnity
under this sub-Section 8.2(c) for claims for indemnity made to Sellers after the
third anniversary of Closing.
(d) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of Sellers' intentional and knowing failure to disclose to Buyer
facts or circumstances that Sellers had reason to believe would have a Material
Adverse Effect on the Business or the Company.
SECTION 8.3. Procedures.
(a) In the event that any person shall incur or suffer any Damages in
respect of which indemnification may be sought under Section 8.1 or 8.2, such
person (the "Indemnified Party") may assert a claim for indemnification by
written notice (the "Notice") to the party from whom indemnification is being
sought (the "Indemnifying Party"), stating the amount of Damages, if known, and
the nature of and basis for such claim. In the case of Damages arising or which
may arise by reason of any third-party claim, promptly after receipt by an
Indemnified Party of written notice of the assertion or the commencement of any
action with respect to any matter in respect of which indemnification may be
sought hereunder, the Indemnified Party shall give notice to the Indemnifying
Party and shall thereafter keep the Indemnifying Party reasonably informed with
respect thereto, provided that failure of the Indemnified Party to give the
Indemnifying Party prompt notice as provided herein shall not relieve the
Indemnifying Party of any of its obligations hereunder, except to the extent
29
that the Indemnifying Party is materially prejudiced by such failure. In case
any such action is brought against any Indemnified Party, the Indemnifying Party
shall be entitled to assume the defense thereof, by written notice of its
intention to do so to the Indemnified Party within thirty (30) days after
receipt of the notice. If the Indemnifying Party shall assume the defense of
such action, such assumption of defense shall constitute an acceptance of its
obligation to indemnify, provided that such acceptance shall not in any way bar
the Indemnifying Party from enforcing the limitations of liability afforded to
it under this Article or otherwise provided by law. If the Indemnifying Party
shall assume the defense of such action, it shall not (x) permit to exist any
lien, encumbrance or other adverse charge upon any asset of the Indemnified
Party or (y) settle such action without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, an Indemnified Party shall not be required to
consent to any settlement that (i) does not include as an unconditional term
thereof the giving by the claimant or the plaintiff of a release of the
Indemnified Party from all liability with respect to such action, or (ii)
involves the imposition of equitable remedies or the imposition of any material
obligations on such Indemnified Party other than financial obligations for which
such Indemnified Party will be indemnified hereunder. As long as the
Indemnifying Party is contesting any such action in good faith and on a timely
basis, the Indemnified Party shall not pay or settle any claims brought under
such action. Notwithstanding the assumption by the Indemnifying Party of the
defense of any action as provided in this Section, the Indemnified Party shall
be permitted to participate in the defense of such action and to employ counsel
at its own expense, provided that if the defendants in any action shall include
both an Indemnifying Party and an Indemnified Party and such Indemnified Party
shall have reasonably concluded that counsel selected by Indemnifying Party has
a conflict of interest because of the availability of different or additional
defenses to such Indemnified Party, such Indemnified Party shall have the right
to select separate counsel to participate in the defense of such action on its
behalf, at the expense of the Indemnifying Party.
(b) If the Indemnifying Party shall fail to notify the Indemnified
Party of its desire to assume the defense of any such action within the
prescribed period of time, or shall notify the Indemnified Party that it will
not assume the defense of any such action, then the Indemnified Party may assume
the defense of any such action, in which event it may do so acting in good faith
in such a manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determination made in such action, provided that the Indemnified
Party shall not be permitted to settle such action without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. No such
determination or settlement shall affect the right of the Indemnifying Party to
dispute the Indemnified Party's claim for indemnification. In the event the
Indemnified Party has assumed the defense of an action and the Indemnifying
Party later desires to take over the defense, it may do so, provided that doing
so shall constitute an acceptance of its obligation to indemnify.
Notwithstanding the foregoing, the Indemnifying Party shall be permitted to join
in the defense of any action and to employ counsel at its own expense.
(c) In the event of any dispute between the parties regarding the
applicability of the indemnification provisions of this Agreement, the
prevailing party shall be entitled to recover all Damages incurred by such party
arising out of, resulting from or relating to such dispute.
(d) The Indemnified Party shall use its best efforts to recover Damages
under its insurance policies and/or from third parties before seeking Damages
30
from the Indemnifying Party, and thereafter the Indemnifying Party's liability
shall be net any amounts recovered by the Indemnified Party under such insurance
policies and/or from such third parties, provided that the Indemnified Party
does not have to wait to resolve insurance coverage or third-party liability
before seeking Damages from the Indemnifying Party. In the event the Indemnified
Party recovers Damages under an insurance policy and/or from a third party after
receiving payment from the Indemnifying Party, the Indemnified Party shall
immediately reimburse to the Indemnifying Party an amount equal to the amount so
recovered.
SECTION 8.4. Threshold. Notwithstanding anything herein to the
contrary, Buyer shall not have a right to any indemnity from Sellers for any
breach of, or claim under, this Agreement including, without limitation,
Sections 8.1 and 8.2 unless Damages suffered or incurred as a result of or
arising out of such claim or breach exceed fifty thousand dollars ($50,000),
provided, however, that this threshold shall not apply to (a) any Damages based
upon claims under Section 8.1 credited toward the basket provided for in Section
8.5 or (b) any claim under Sections 8.1(a)(i), 8.1(e), or 8.2(d).
SECTION 8.5. Basket. Notwithstanding anything herein to the contrary,
the Sellers shall not be required to provide any indemnity under this Agreement
including, without limitation, Sections 8.1 and 8.2, unless and until the
aggregate and cumulative amount of all Damages exceeds two million dollars
($2,000,000), and then only on amounts of Damages in excess of two million
dollars ($2,000,000), provided, however, that this basket shall not apply to any
claim under Sections 8.1(a)(i), 8.1(e), 8.2(c), or 8.2(d).
SECTION 8.6. Sellers' Cap. Notwithstanding anything herein to the
contrary, Sellers' obligation to make indemnification payments pursuant to this
Agreement, including, without limitation, Sections 8.1 and 8.2 is subject to an
aggregate cumulative cap of fifteen million dollars ($15,000,000), provided
however, that the aggregate cumulative cap on Sellers' obligation shall be
eighty million dollars ($80,000,000) for indemnification payments made pursuant
to Sections 8.1(a)(i), 8.1(e) and 8.2(d).
SECTION 8.7. General Limitation of Liability. Notwithstanding anything
herein to the contrary, no party obligated to provide indemnity under this
Agreement shall be liable to provide indemnity for indirect, incidental,
consequential or punitive damages.
SECTION 8.8. Rights and Obligations. All of Sellers' obligations under
this Article shall be joint and several. All of Buyer's rights under this
Article shall extend to the Company and any successors to all or substantially
all of the Business.
ARTICLE 9
SURVIVAL
Except as otherwise expressly provided in this Agreement, the
representations, warranties and covenants, and obligations connected therewith,
and the parties' indemnity obligations contained in Article 8 for
31
misrepresentations and breach of warranty or covenant, shall survive the Closing
until 5:00 p.m. Eastern Daylight Time on the first annual anniversary of the
Closing Date, notwithstanding any investigation heretofore made or omitted by
the parties, and shall expire and be of no further effect after such time. The
representations and warranties and covenants contained in Sections 3.1, 3.2,
3.5, 3.6, 4.1, 4.2, and 10.3 shall survive indefinitely. Except as otherwise
expressly provided in Article 8, the covenants, agreements, representations,
warranties and obligations contained in Article 8 shall expire upon the fifth
anniversary of the Closing Date. The covenants, agreements, representations and
warranties contained in Section 3.21 shall survive until expiration of the
statute of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof). Notwithstanding the foregoing,
any claim brought within the terms of this Agreement shall survive and be
preserved until its resolution.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
Eagle Pacific Industries, Inc.
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: 000-000-0000
if to MCA, to:
Mitsubishi Chemical America, Inc.
Legal Department
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: General Counsel
Fax: 000-000-0000
if to MPI, to:
Mitsubishi Plastics, Inc.
0-0, Xxxxxxxxxx 0-xxxxx, Xxxxxxx-xx
Xxxxx 000-0000, Xxxxx
Attention: Hiroshi Iihashi, General Manager, Pipe Division
Fax: 00-0-0000-0000
32
All notices, consents, requests and approvals, any notice of change in address
for the purpose of this Article, and other communications provided for or
required herein, shall be deemed validly given, made or served, if in writing,
and delivered to the parties as specified above (a) on the day given if served
personally, (b) one day following if sent by (i) telecopy with a confirmatory
notice or (ii) delivery to a nationally-recognized express delivery service with
instructions and payment for overnight delivery, or (c) three days following if
sent by U.S. Certified Mail, postage prepaid.
SECTION 10.2. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.3. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 10.4. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party.
SECTION 10.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 10.6. Jurisdiction. Except as otherwise expressly provided in
this Agreement, any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in the United States
District Court for the Southern District of New York or any other New York State
court sitting in New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
33
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 10.1
shall be deemed effective service of process on such party.
SECTION 10.7. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.8. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 10.9. Third Party Beneficiaries. Buyer and Sellers agree and
acknowledge that with respect to the provisions of Article 8 the Company is a
third party beneficiary to this Agreement; otherwise no provision of this
Agreement is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 10.10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto.
SECTION 10.11. Severability. In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby so long as the remaining provisions do not fundamentally alter
the relations among the parties hereto.
SECTION 10.12. Headings. The section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EAGLE PACIFIC INDUSTRIES, INC.
By:______________________________
Name:
Title
(Signatures continue
on following page)
34
MITSUBISHI PLASTICS, INC.
By:_______________________________
Name:
Title:
MITSUBISHI PLASTICS, INC.
By:_______________________________
Name:
Title
35
