EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
between
U. S. CASTINGS, LLC ("Buyer"),
USCRE PROPERTIES, LLC ("USCRE"),
ADVANCED ALUMINUM, LLC ("Advanced Aluminum"),
AEROMET AMERICA, INC. ("Seller"),
and
PACIFIC AEROSPACE & ELECTRONICS, INC. ("PA&E")
Effective Date: June 1, 2001
Closing Date: June 14, 2001
TABLE OF CONTENTS
Page
Section 1 - Purchase and Sale of Assets...................................................................... 1
1.1 Purchase and Sale of Operating Assets........................................................... 1
1.2 Purchase and Sale of Real Property Assets....................................................... 2
1.3 Excluded Assets................................................................................. 2
1.4 Conveyance of Assets............................................................................ 2
1.5 Further Assurances.............................................................................. 3
Section 2 - Assignment and Assumption of Liabilities......................................................... 3
2.1 Assignment and Assumption....................................................................... 3
2.2 Excluded Liabilities............................................................................ 3
Section 3 - Purchase Price................................................................................... 3
3.1 Purchase Price.................................................................................. 3
3.2 Purchase Price Adjustments...................................................................... 4
3.3 Escrow Account.................................................................................. 5
3.4 Allocation of Purchase Price.................................................................... 5
Section 4 - Closing; Effective Date.......................................................................... 5
4.1 Closing......................................................................................... 5
4.2 Effective Date.................................................................................. 6
Section 5 - Representations and Warranties of Seller and PA&E................................................ 6
5.1 Corporate Existence............................................................................. 6
5.2 Authority....................................................................................... 6
5.3 Consents........................................................................................ 6
5.4 No Violations................................................................................... 6
5.5 Financial Statements............................................................................ 6
5.6 Taxes........................................................................................... 7
5.7 Absence of Indebtedness and Other Obligations................................................... 7
5.8 Assets.......................................................................................... 8
5.8.1 Real Property.......................................................................... 8
5.8.2 Personal Property...................................................................... 9
5.8.3 Inventory.............................................................................. 9
5.8.4 Contracts.............................................................................. 9
5.8.5 Intellectual Property Rights........................................................... 9
5.8.6 Accounts Receivable.................................................................... 10
5.8.7 Customer and Supplier Lists............................................................ 10
5.9 Compliance...................................................................................... 10
5.10 Certain Interests............................................................................... 10
5.11 Employment Matters.............................................................................. 10
5.12 Labor Matters................................................................................... 11
5.13 Environmental Matters........................................................................... 11
5.14 Insurance....................................................................................... 13
5.15 Litigation...................................................................................... 13
5.16 Letters of Credit and Powers of Attorney........................................................ 14
5.17 Banks........................................................................................... 14
5.18 Brokers......................................................................................... 14
5.19 Undisclosed Liabilities......................................................................... 14
5.20 Absence of Certain Changes or Events............................................................ 14
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TABLE OF CONTENTS
Page
5.21 Operation of the Business...................................................................... 15
Section 6 - Representations and Warranties of Buyer, USCRE and Advanced Aluminum............................ 15
6.1 Authorization.................................................................................. 15
6.2 Capitalization of Buyer and USCRE.............................................................. 15
6.3 Consents....................................................................................... 16
6.4 No Violations.................................................................................. 16
6.5 Brokers........................................................................................ 16
Section 7 - Pre-Closing Covenants........................................................................... 16
7.1 Conduct of the Parties......................................................................... 16
7.2 Access to Properties, Books and Records........................................................ 17
7.3 Operation of the Business...................................................................... 17
7.4 KeyCorp Leasing................................................................................ 18
Section 8 - Further Agreements.............................................................................. 18
8.1 News Releases.................................................................................. 18
8.2 Confidentiality................................................................................ 18
8.3 Covenant Not to Compete........................................................................ 18
Section 9 - Closing Conditions.............................................................................. 19
9.1 Closing Conditions of Buyer and USCRE.......................................................... 19
9.2 Closing Conditions of Seller and PA&E.......................................................... 22
Section 10 - Closing Costs.................................................................................. 23
10.1 Closing Costs and Prorations................................................................... 23
10.2 Other Costs, Expenses and Professional Fees.................................................... 24
Section 11 - Termination.................................................................................... 24
11.1 Right to Terminate............................................................................. 24
11.2 Effect of Termination.......................................................................... 24
Section 12 - Survival; Indemnification...................................................................... 24
12.1 Survival....................................................................................... 24
12.2 Indemnification by Seller and PA&E............................................................. 25
12.3 Indemnification by Buyer, USCRE and Advanced Aluminum.......................................... 27
12.4 Indemnification Period......................................................................... 27
12.5 Threshold Amount............................................................................... 27
12.6 Indemnification Procedures..................................................................... 28
Section 13 - Other Provisions............................................................................... 29
13.1 Assignment; Benefit............................................................................ 29
13.2 Amendment; Waiver.............................................................................. 29
13.3 Severability................................................................................... 29
13.4 Governing Law; Arbitration; Waiver of Jury Trial............................................... 29
13.5 Legal Counsel.................................................................................. 29
13.6 Notices........................................................................................ 30
13.7 Attorneys' Fees................................................................................ 30
13.8 Entire Agreement............................................................................... 30
13.9 Counterparts................................................................................... 30
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Schedules
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1.1.2 Personal Property
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1.1.3 Contracts
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1.2 Real Property
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1.3 Excluded Assets
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1.4 Permitted Liens
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2.1 Liabilities
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3.4 Allocation of Purchase Price
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5.3 Consents (Seller)
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5.5 Financial Statements
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5.6 Taxes
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5.7 Indebtedness
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5.8.1 Real Property
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5.8.2 Personal Property
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5.8.3 Inventory
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5.8.4 Contracts
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5.8.5 Intellectual Property
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5.8.6 Accounts Receivable
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5.8.7 Customers and Suppliers
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5.9 Compliance
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5.10 Certain Interests
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5.11 Employment Matters
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5.12 Labor Matters
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5.13 Environmental Matters
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5.15 Litigation
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5.16 Powers of Attorney
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5.17 Bank Accounts
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5.20 Absence of Changes
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6.3 Consents (Buyer)
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7.3.3 Material Contracts
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Exhibits
A Xxxx of Sale
B Deed
C Assumption Agreement
D Note
E Buyer's LLC Operating Agreement
F USCRE's LLC Operating Agreement
G Escrow Agreement
H Transition Services Agreement
I Guarantee
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into on June 14,
2001, by and between AEROMET AMERICA, INC., a Washington corporation ("Seller");
PACIFIC AEROSPACE & ELECTRONICS, INC., a Washington corporation ("PA&E"); U.S.
CASTINGS, LLC, a Delaware limited liability company ("Buyer"); USCRE PROPERTIES,
LLC, a Delaware limited liability company ("USCRE"); and ADVANCED ALUMINUM, LLC,
a Delaware limited liability company ("Advanced Aluminum").
RECITALS
A. Seller is a wholly-owned subsidiary of PA&E and is engaged in the
aluminum foundry business. Buyer and USCRE are each wholly-owned subsidiaries
of Advanced Aluminum.
B. Seller desires to sell, and Buyer desires to purchase, substantially
all of Seller's operating assets, on the terms and conditions set forth in this
Agreement. Seller also desires to sell, and USCRE desires to purchase, certain
real property owned by Seller and located in Entiat, Washington.
AGREEMENT
In consideration of the covenants in this Agreement, and intending to be
legally bound the parties agree as follows:
Section 1
Purchase and Sale of Assets
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1.1 Purchase and Sale of Operating Assets. On the Closing Date (as
defined in Section 4.1 below), Seller will sell, transfer, assign, convey and
deliver to Buyer, and Buyer will purchase from Seller, all of Seller's operating
assets, personal property and rights (except the Excluded Assets, as defined in
Section 1.3 below, and except the Real Property, as defined in Section 1.2
below), whether tangible or intangible, and wherever located (the "Assets"),
which Assets include, without limitation, all Seller's right, title and interest
in the following:
1.1.1 cash and cash equivalents;
1.1.2 tangible personal property (the "Personal Property"),
including but not limited to manufacturing and office equipment, vehicles,
inventory (whether raw materials, work in process, or finished goods (together,
the "Inventory")), furniture, fixtures, tools, drawings, designs and blueprints,
forms, patterns, materials and supplies, and spare and replacement parts,
including without limitation the items listed on Schedule 1.1.2;
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1.1.3 the contracts, agreements, commitments, leases, licenses,
purchase orders, sales orders, and documents described on Schedule 1.1.3 (the
"Contracts");
1.1.4 governmental licenses, permits, approvals, authorizations,
consents, franchises, tariffs, orders and other registrations required for the
conduct of the Seller's business, to the extent that they are assignable (the
"Licenses");
1.1.5 patents, copyrights, trademarks, service marks and trade names
(other than any trade name that includes either the name "Pacific Aerospace &
Electronics" or the name "Aeromet"), and all derivatives thereof; all
registrations therefor; all applications pending or allowed therefor; and all
other proprietary rights and intangible property, such as trade secrets,
technology, software, operating systems, customer and supplier lists, know-how,
formulae, slogans, processes and operating rights (the "Intellectual Property");
1.1.6 accounts receivable that are reflected in the Baseline Balance
Sheet (as defined in Section 3.2.1), or that have arisen since the date of the
Baseline Balance Sheet, (collectively, the "Accounts Receivable");
1.1.7 prepaid and deferred items ("Prepaids"), including but not
limited to prepaid rentals, insurance, taxes and unbilled charges and deposits,
to the extent they are assignable and relate to the Assets or the Real Property;
1.1.8 operating data and records, including but not limited to
financial and accounting records, correspondence, budgets, and engineering and
manufacturing records (the "Records");
1.1.9 goodwill; and
1.1.10 certain telephone numbers to be agreed upon by Buyer and
Seller prior to Closing.
1.2 Purchase and Sale of Real Property Assets. On the Closing Date,
Seller will sell, transfer, convey and deliver to USCRE, and USCRE will purchase
from Seller, good, marketable and insurable fee simple title to the real
property owned by Seller, as more particularly described on Schedule 1.2 (the
"Real Property"), including but not limited to all improvements, easements, and
appurtenances to or located on the Real Property, and all contractual and other
rights pertaining to the Real Property, such as road and access rights, water
rights, condemnation awards, and insurance proceeds.
1.3 Excluded Assets. The Assets and Real Property shall not include
Seller's corporate seal, minute books, charter documents and corporate stock
record books, or any assets set forth on Schedule 1.3 (collectively, the
"Excluded Assets").
1.4 Conveyance of Assets. Subject to the terms and conditions of this
Agreement, the sale, assignment, transfer and delivery of the Assets shall be
effected by Seller's execution and delivery to Buyer at Closing of all vehicle
titles and a xxxx of sale in substantially the form attached as Exhibit A (the
"Xxxx of Sale"), and the sale, conveyance and delivery of the Real
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Property will be effected by Seller's execution and delivery to USCRE at Closing
of a statutory warranty deed with respect to the Real Property in substantially
the form attached as Exhibit B (the "Deed"), together with any other instruments
of transfer described herein or reasonably requested by Buyer or USCRE. The
instruments of transfer shall be in form and substance sufficient to vest in
Buyer all of Seller's right, title and interest in and to the Assets, and to
vest in USCRE fee simple title to the Real Property, all free and clear of any
liens, claims or encumbrances of any kind, except as set forth on Schedule 1.4
(the "Permitted Liens").
1.5 Further Assurances. Upon request of Buyer or USCRE, and without
further consideration, Seller will take such further actions and will execute
such further documents, on and after the Closing Date, as are reasonably
necessary to: (a) place Buyer in possession and operating control of the
Assets; (b) vest in Buyer good, valid and marketable title to the Assets, free
and clear of any liens, claims or encumbrances, except for the Permitted Liens;
(c) place USCRE in possession and operating control of the Real Property; (d)
vest in USCRE good, marketable and insurable fee simple title to the Real
Property, free and clear of any liens, claims or encumbrances; (e) complete the
transactions described this Agreement; and (f) comply with all laws and
regulations applicable to such transactions.
Section 2
Assignment and Assumption of Liabilities
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2.1 Assignment and Assumption. At the Closing and effective as of the
Effective Date (as defined in Section 4.2 below), Seller will assign to Buyer,
and Buyer will assume, only those liabilities and obligations of Seller
described on Schedule 2.1 (the "Liabilities"), pursuant to the terms of an
Assignment and Assumption Agreement in substantially the form attached as
Exhibit C (the "Assumption Agreement").
2.2 Excluded Liabilities. Buyer will not assume and will not be liable
for any liabilities of Seller other than those described on Schedule 2.1 (the
"Excluded Liabilities"). Buyer is not assuming any Plans (as defined in Section
5.7) or liabilities or obligations under any Plans.
Section 3
Purchase Price
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3.1 Purchase Price. Subject to any adjustment resulting from the
application of the provisions of Section 3.2 below, the purchase price for the
Assets and the Real Property (the "Purchase Price") will be as follows:
3.1.1 Cash. Up to $1,600,000 to be paid to Seller in cash at Closing
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by wire transfer or other immediately available funds, subject to the escrow
account described in Section 3.3;
3.1.2 Note. A non-negotiable, subordinated promissory note in the
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original principal amount of $1,000,000, to be delivered by Buyer to Seller or
PA&E (at Seller's
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option) at Closing, in substantially the form attached as Exhibit D (the
"Note"), guaranteed by USCRE.
3.1.3 Interest in Buyer. A Class A membership interest in Buyer,
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which the parties value at $900,000.00, to be delivered by Buyer to Seller or
PA&E (at Seller's option) at Closing, having the rights, preferences and
privileges contained in Buyer's Limited Liability Company Operating Agreement,
in substantially the form attached as Exhibit E.
3.1.4 Interest in USCRE. A Class A membership interest in USCRE,
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which the parties value at $100,000.00, to be delivered by Buyer to Seller or
PA&E (at Seller's option) at Closing, having the rights, preferences and
privileges contained in USCRE's Limited Liability Company Operating Agreement,
in substantially the form attached as Exhibit F.
3.1.5 Assumption of Liabilities. Assumption of certain of Seller's
-------------------------
liabilities, as set forth on Schedule 2.1, in accordance with the terms and
conditions of the Assumption Agreement.
3.2 Purchase Price Adjustments. The Purchase Price shall be subject to
adjustment as follows:
3.2.1 Adjustment at Closing. Prior to the Closing Date, Seller shall
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provide to Buyer a written statement of Seller's good faith estimate of the
amounts of Seller's Accounts Receivable and Inventory as of the Effective Date
(the "Estimated Closing Accounts Receivable and Inventory"). Seller shall
calculate Estimated Closing Accounts Receivable and Inventory using accounting
principles and methods consistent with those used to calculate the Accounts
Receivable and Inventory of Seller as of February 28, 2001 (the "Baseline
Accounts Receivable and Inventory"), which amounts are set forth on Seller's
February 28, 2001 balance sheet, as previously provided to Buyer (the "Baseline
Balance Sheet"). If the amount of the Estimated Closing Accounts Receivable and
Inventory, as calculated by Seller and confirmed by Buyer's lender's auditors,
as of the Effective Date, is less than the amount of the Baseline Accounts
Receivable and Inventory, the cash portion of the Purchase Price payable at
Closing under Section 3.1.1 (not the escrowed amount) shall be reduced at
Closing by such amount.
3.2.2 Adjustments After Closing. Within 120 days after the Closing
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Date, Buyer shall provide to Seller a written statement of the actual net
amounts of the Assets acquired as of the Effective Date (the "Closing Accounts
Receivable and Inventory"). To the extent that such principles and methods are
consistent with and conform to Generally Accepted Accounting Principles
("GAAP"), Buyer shall calculate Closing Accounts Receivable and Inventory using
accounting principles and methods consistent with those used by Buyer to
calculate the Baseline Accounts Receivable and Inventory, for those two current
asset accounts and consistent with GAAP for all other pertinent accounts. If,
however, the principles and methods used to determine the amounts of the Closing
Accounts Receivable and Inventory accounts are determined not to be consistent
with GAAP, GAAP will be substituted and used to determine the correct amounts
thereof. Buyer's calculation of the Closing Accounts Receivable and Inventory
amounts shall be deemed finally determined and binding if it is provided to
Seller no later than 120 days after Closing unless Seller presents to Buyer,
within
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30 days after its receipt from Buyer of the statement of Closing Accounts
Receivable and Inventory, written notice of disagreement with such statement.
If Buyer and Seller are unable to resolve their disagreement within 15 days of
Buyer's receipt of Seller's written disagreement with the statement of Closing
Accounts Receivable and Inventory, then the matter shall be referred for final
determination to a mutually-agreeable, independent accounting firm. The parties
agree to use their good faith efforts to agree upon such a firm. If the parties
cannot agree on such a firm within 20 days, then the disagreement shall be
submitted to arbitration pursuant to Section 13.4 of this Agreement. Unless the
parties otherwise agree, the determination of the independent accounting firm
shall be made within 30 days after the accounting firm's receipt of the request
and shall be binding on both parties. If the amount of the Closing Accounts
Receivable and Inventory, as finally determined, is less than the amount of the
Estimated Closing Accounts Receivable and Inventory, such amount shall be
deducted from the Purchase Price as described below. In addition, to the extent
that Buyer demonstrates, in the same manner and subject to the same dispute
resolution mechanism, that Seller caused there to be any reduction in any of the
other Assets as reflected on the Baseline Balance Sheet, whether by sale,
transfer or any other means prior to Closing, other than decreases in book value
as a result of depreciation or book value as a result of accounting only
adjustments in accordance with GAAP, such amount shall also be deducted from the
Purchase Price. Notwithstanding the foregoing, no more than $660,000 of
Purchase Price adjustments may be made pursuant to this Section. Any deductions
to the Purchase Price shall be made in the following manner: (i) the first
$160,000 shall be deducted from the Escrow Account and paid to Buyer (as defined
in Section 3.3 below), and (ii) up to $500,000 may be deducted from the
principal amount owing under the Note.
3.3 Escrow Account. At Closing, Buyer shall deliver $160,000 of the cash
portion of the Purchase Price payable pursuant to Section 3.1.1 to an escrow
agent (the "Escrow Agent") mutually agreeable to Buyer and Seller. The amount
so deposited will be held in escrow and disbursed in accordance with an escrow
agreement to be delivered at Closing in substantially the form attached as
Exhibit G (the "Escrow Agreement").
3.4 Allocation of Purchase Price. The parties agree, for purposes of IRS
Form 8594, to allocate the fair market value of the Assets that constitute Class
I, II, III, IV, V, VI and VII Assets (as defined in Treasury Regulation Section
1.1060-IT(d), as amended) in accordance with Schedule 3.4, which Buyer will
deliver to Seller and PA&E within 120 days after Closing. Buyer and Seller
shall prepare and file all Tax Returns (as hereinafter defined) consistent with
the allocation on Schedule 3.4. Buyer and Seller agree to attach the Form 8594
in the agreed form to their applicable federal income tax returns.
Section 4
Closing; Effective Date
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4.1 Closing. Subject to satisfaction of the closing conditions set forth
in Section 9, the closing of the transactions contemplated in this Agreement
(the "Closing") shall take place at 10:00 a.m. on June 14, 2001 (the "Closing
Date"), at the offices of Buyer's lender in New York City, or at such other time
and place as the parties may agree upon.
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4.2 Effective Date. The parties agree that the effective date of this
Agreement for state and federal tax and financial accounting purposes is the
beginning of business on June 1, 2001 (the "Effective Date")
Section 5
Representations and Warranties of Seller and PA&E
-------------------------------------------------
Seller and PA&E represent and warrant to Buyer, USCRE and Advanced Aluminum
that the following are true and correct as of the date of this Agreement and
will be true and correct as of the Closing Date:
5.1 Corporate Existence. Seller and PA&E are each corporations, duly
organized and validly existing under the laws of the State of Washington.
Seller has all necessary corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted. Seller is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which it owns or
leases property or does business, except in those jurisdictions where the
failure to be so qualified would not have a material adverse effect on Seller.
Seller has no subsidiaries and no partnership, joint venture or other similar
relationships with any other person or entity. Seller is wholly owned by PA&E.
5.2 Authority. Seller and PA&E have each taken all corporate action
necessary to authorize the execution and delivery of, and the performance of
their obligations under, this Agreement. Seller and PA&E each have full
corporate power and authority to enter into, and to carry out their obligations
under, this Agreement. Seller and PA&E have duly executed and delivered this
Agreement, and this Agreement is a valid and binding obligation of Seller and
PA&E, enforceable against Seller and PA&E in accordance with its terms.
5.3 Consents. Except as set forth on Schedule 5.3, no consent or approval
by any third person or public authority is required to authorize, or is required
in connection with, the sale of the Assets and Real Property or the execution,
delivery or performance of this Agreement by Seller or PA&E.
5.4 No Violations. Except for any required consents set forth on
Schedule 5.3, the execution and delivery of this Agreement by Seller and PA&E,
and the performance of their obligations hereunder, will not conflict with,
result in the breach of, or constitute a default under (a) the Articles of
Incorporation or Bylaws of Seller or PA&E; (b) any note, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which Seller or
PA&E is a party or by which Seller or PA&E is bound; or (c) any statute, order,
injunction, judgment, decree, rule or regulation of any court or regulatory
authority or governmental body applicable to Seller or PA&E.
5.5 Financial Statements. Seller has furnished to Buyer complete and
accurate copies of (a) its financial statements dated February 28, 2001,
including without limitation the Baseline Balance Sheet, and (b) its financial
statements for the fiscal year ended May 31, 2000 (collectively, the "Company
Financial Statements"). Except as described on Schedule 5.5, the
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Company Financial Statements (i) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods specified, and (ii) fairly present the financial condition of Seller as
of the dates specified and the results of its operations for the periods
specified.
5.6 Taxes. Since December 1, 1995, except as described on Schedule 5.6,
Seller has timely paid all federal, state, local or foreign taxes, assessments,
duties, fees, imposts, levies and other charges that have become due and
payable, including without limitation all income, sales, use, business and
occupation, withholding, payroll, employment, excise, franchise, ad valorem or
property taxes or assessments, and interest and penalties thereon (collectively,
"Taxes"). Seller has timely filed all required returns, statements and reports
with respect to such Taxes (the "Tax Returns"), except as described on Schedule
5.6. Seller has not waived any statute of limitations relating to Taxes.
Seller is not subject to any dispute, audit or proceeding regarding Taxes that
might adversely affect the financial condition of Seller. Seller has not
received any notice of assessment or proposed assessment from the Internal
Revenue Service (the "IRS") or any other taxing authority in connection with any
Tax Returns and there are no pending Tax examinations of or Tax claims asserted
against the Company or any of its assets or properties. To the knowledge of
Seller and PA&E, there is no basis for any additional assessment of any Taxes.
There is no examination by the IRS or any other taxing authority affecting
Seller presently pending or, to the knowledge of Seller and PA&E, contemplated
and Seller has not waived any statute of limitations in respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
All payroll, sales and any other employment Taxes which Seller is required by
law to withhold or collect have been withheld or collected and have been paid
over to the proper governmental authorities or are properly held by Seller for
such payment. Seller has not made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Section 280G
of the Code. Seller is not a party to any Tax allocation, Tax sharing, Tax
indemnification or similar agreement.
5.7 Absence of Indebtedness and Other Obligations. Except as set forth in
the Company Financial Statements, as of the date thereof, or on Schedule 5.7,
Seller has no (a) Indebtedness (as defined below) of a material nature, or (b)
other obligations of a material nature, whether accrued, absolute, contingent or
otherwise (including without limitation liabilities as a surety or guarantor)
and whether due or to become due, including without limitation any liabilities
for Taxes. "Indebtedness" means (i) all indebtedness of Seller for borrowed
money or for the deferred purchase price of property or services, including
without limitation any indebtedness of Seller to PA&E or any other affiliate of
Seller, and (ii) any other indebtedness of Seller which is evidenced by a note,
bond, debenture or similar instrument, mortgage, deed of trust and/or security
agreement.
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5.8 Assets.
5.8.1 Real Property. Except as set forth on Schedule 5.8.1:
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(a) Schedule 1.2 sets forth a true and complete list of the Real
Property. At the Closing, the Real Property shall be conveyed to USCRE free and
clear of all encumbrances other than (i) the Permitted Liens, and (ii) Liens for
Taxes not yet due and payable, subject to proration through the Closing Date.
(b) Seller is not a party to any lease of real property, either as
lessor or lessee, that is in effect as of the date hereof or will be in effect
as of the Closing Date.
(c) To the best of Seller's knowledge: (i) all of the Real Property
is structurally sound and in good condition, ordinary wear and tear excepted,
and is reasonably sufficient to satisfy the current operational requirements of
Seller; (ii) none of the Real Property, nor the ownership, possession,
occupancy, maintenance or use thereof, is in violation of, or breach or default
under, any Contract or applicable Law, code, regulation, rule or ordinance, and
no notice or threat from any governmental authority or other person or entity
has been received by any of Seller or served upon any such Real Property
claiming any violation of, or breach, default or liability under, any Contract
or applicable Law, code, regulation, rule or ordinance, or requiring or calling
attention to the need for any material work, repairs, construction, alteration,
installations or environmental remediation; (iii) no accident has occurred with
respect to any of the Real Property within the last twelve (12) months which has
had a material adverse effect on the use or operation of the Real Property. No
proceedings are pending or to the best of Seller's knowledge threatened
(including but not limited to any proceeding for condemnation by any
governmental authority) which would affect the zoning or use of any of the Real
Property.
(d) Seller is the sole occupant of the Real Property. No Person has
any right or option to acquire the Real Property or any portion thereof or lease
or occupy any space in the Real Property.
(e) Seller or its agent is not currently contesting the Real Property
tax assessments for the Real Property. The Real Property is separately assessed
for real property tax assessment purposes and is not combined with any
other real property for tax assessment purposes.
(f) The Real Property is presently zoned for its current uses, and to
the best of Seller's knowledge, the improvements thereon comply with the
particular zoning classification and zoning requirements. Seller has no
knowledge of any fact, action or proceeding, whether actual, pending or
threatened, which would affect such zoning or could result in a modification or
termination of such zoning.
(g) To the best of Seller's knowledge, the Real Property and the
present uses are in material compliance with all applicable Laws, codes,
regulations, rules and ordinances and the requirements of any insurance policy,
board of fire underwriters or any
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board exercising similar functions, and all licenses and permits are in full
force and effect and are registered in the name of Seller.
(h) There are no offsite parking facilities used in connection with
the operation of the Real Property.
(i) There are no property interests (whether fee or leasehold
interests), buildings, structures, or other improvements that are owned or held
by Seller, and which are necessary or useful for the operation of the Assets
which are being acquired pursuant hereto, which are not being conveyed pursuant
to the terms of this Agreement.
5.8.2 Personal Property. Seller has provided Buyer with lists
-----------------
describing in reasonable detail the Personal Property. Except as set forth on
Schedule 5.8.2, (a) Seller is not a party to any material lease of personal
property, either as lessee or lessor, (b) Seller has good and marketable title
to all of the Personal Property, free and clear of all liabilities, claims,
liens, sales agreements (conditional or otherwise), leases, or other
encumbrances of any kind and Seller is the sole owner thereof, and (c) the
Personal Property is all of the personal property necessary for the proper
conduct of Seller's business as currently conducted is in good operating
condition, ordinary wear and tear excepted. None of the Excluded Assets are
used in or necessary for the conduct of Seller's ongoing business.
5.8.3 Inventory. Except as described on Schedule 5.8.3, the
---------
Inventory constitutes items of a quality usable or saleable in the ordinary
course of Seller's business, except for inventory items that have been written
down to an amount not in excess of realizable market value or for which adequate
reserves or allowances have been provided in the Baseline Balance Sheet.
5.8.4 Contracts. Except as set forth in Schedule 5.8.4, (a) the
---------
Contracts are valid, binding and enforceable in accordance with their terms; (b)
Seller has performed, or is now performing, its obligations, and is not in
material default (and would not by the lapse of time or the giving of notice be
in material default) under, any Contracts; (c) no party has raised any claim,
dispute or controversy or withheld payments from Seller with respect to any
Contracts, which claim, dispute, controversy or withholding of payment currently
exists and could, if such party were to prevail, have a material adverse effect
on Seller's operations; (d) to the knowledge of Seller and PA&E, no other party
to a Contract is in material default or has breached any material term or
provision of such Contract that has not previously been cured; and (e) Seller
has not received notice or warning of alleged nonperformance, delay in delivery
or other material noncompliance with respect to any of the Contracts that has
not previously been cured, nor any notice that the other parties may totally or
partially terminate any of the Contracts.
5.8.5 Intellectual Property Rights. Seller owns or has the right to
----------------------------
use the Intellectual Property and to transfer the Intellectual Property to
Buyer, free and clear of all liabilities, claims, liens, licenses, or other
encumbrances of any kind, except as set forth on Schedule 5.8.5. To the
knowledge of Seller and PA&E, the use by Seller of the Intellectual Property has
not conflicted with or infringed, and no one has asserted that such use
conflicts
-9-
with or infringes, upon any proprietary rights owned by any third party. To the
knowledge of Seller and PA&E, there are no claims, disputes, actions,
proceedings, suits or appeals pending with respect to any of the Intellectual
Property, and none has been threatened. Seller has not licensed to others or
agreed to license any Intellectual Property, and Seller has not entered into any
contracts with respect thereto.
5.8.6 Accounts Receivable. Seller has furnished to Buyer a complete
-------------------
and accurate aging of the Accounts Receivable as of February 28, 2001. Except
as set forth on Schedule 5.8.6, the Accounts Receivable have arisen in the
ordinary course of Seller's business and represent valid obligations due to
Seller, enforceable in accordance with their terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally or general
principles of equity which are within the discretion of courts of applicable
jurisdiction.
5.8.7 Customer and Supplier Lists. Schedule 5.8.7 sets forth (a) a
---------------------------
true and correct list of Seller's ten largest customers in terms of sales, and
(b) a true and correct list of Seller's ten largest suppliers, in terms of
purchases, during the nine months ended February 28, 2001. Except as set forth
on Schedule 5.8.7, Seller has no reason to believe that any such customer or
supplier intends to cancel any existing orders or materially reduce the amount
of business it conducts with Seller.
5.9 Compliance. Except as set forth on Schedule 5.9, Seller (a) has all
permits, registrations, authorizations, and other approvals required in order to
operate Seller's business, as now conducted, (b) has at all times since December
1, 1995 maintained and operated its business in material compliance with
applicable laws, ordinances, codes and regulations, and (c) has not received any
notice of (and Seller and PA&E have no knowledge of) any violation that has not
been cured of (i) any applicable governmental permit, zoning regulation or
ordinance, (ii) Environmental Law (as defined in Section 2.15), Federal
Occupational, Safety and Health Act, or comparable state laws, regulations and
rulings, or (iii) other law, order, regulation or requirement relating to the
operation of Seller's business or its ownership of the Real Property.
5.10 Certain Interests. Except as set forth on Schedule 5.10, no current
director or officer of Seller or PA&E, and no entity owned or controlled by any
of them (a) has any material interest in Seller's assets, (b) is indebted to
Seller, or (c) has any material financial interest, direct or indirect, in any
supplier or customer of, or other outside business which has any material
transactions with, Seller. Except as set forth on Schedule 5.10, Seller is not
indebted to PA&E or any current officer, director or employee of Seller or PA&E,
except for amounts due under normal compensation arrangements or for
reimbursement of ordinary business expenses.
5.11 Employment Matters. Except as set forth on Schedule 5.11, Seller is
not a party to or bound by any employment, commission, or consulting agreement,
and each of Seller's employees is an "at-will" employee. Seller has provided
Buyer with a complete list of the names, positions and current salaries of its
employees. Seller has provided Buyer access to
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complete lists of each plan, program, agreement or arrangement relating to
bonuses, deferred compensation, incentive compensation, stock purchases, stock
options, severance or termination pay, hospitalization or other medical, dental,
life or other insurance, supplemental unemployment benefits, profit-sharing,
savings, pensions or retirement (collectively, the "Plans"), sponsored,
maintained or contributed to or required to be contributed to by Seller or PA&E
for the benefit of any employee or former employee. Each of the Plans has been
and is maintained, operated and administered in all material respects in
compliance with its terms and any related documents or agreements and in
accordance with all applicable laws. Seller has paid all salaries, vacation pay,
medical and other employment benefits or severance payments due to be paid.
Seller has provided Buyer with copies of all relevant information regarding
current (a) vacation, holiday or sick leave policies or arrangements with
employees, and (b) compensation arrangements with employees and any consultants.
Seller has also provided Buyer a true and complete copy of its employee
handbook.
5.12 Labor Matters. Seller is not a party to or bound by any collective
bargaining agreement and, except as described in Schedule 5.12, has not, since
December 1, 1995, been subject to any union organizing effort, labor strike,
employee slowdown or work stoppage, representation petition brought before the
National Labor Relations Board, or grievance or arbitration proceeding arising
out of or under any collective bargaining agreements.
5.13 Environmental Matters. Except as set forth on Schedule 5.13 or as
otherwise disclosed in information provided to Buyer or in the Environmental
Report (as defined in Section 12.2.2):
(a) Since December 1, 1995, neither Seller nor any employee or agent has
caused or permitted any Hazardous Substances to have been stored, used,
generated, manufactured, refined, treated, discharged, disposed of, deposited,
transported, handled, released, threatened to be released, or otherwise be
present on any of the Real Property except as in full compliance with
Environmental Laws and no Hazardous Substances currently are stored, used,
generated, transported, handled or otherwise present thereon, except as in full
compliance with applicable Environmental Laws.
(b) Seller is operating its business in material compliance with all
applicable Environmental Laws. A description of any outstanding notice,
citation, inquiry or complaint which Seller has received of any alleged material
violation of any Environmental Law or Environmental Permit relating to Seller's
business is contained in Schedule 5.13. To the best of Seller's knowledge, there
is not any radon, asbestos, or PCBs or any condition with respect to surface
soil, subsurface soil, ambient air, surface waters, groundwaters, leachate, run-
on or run-off, stream or other sediments, wetlands or similar environmental
media on, in, under, above, from or off any of the Real Property, which does or
may (i) require investigation and/or remedial or corrective action on or off
such Real Property by Seller or any other person, (ii) require additional
actions, including but not limited, to the purchase of pollution control
abatement equipment, by Seller to fully comply with Environmental Laws, and/or
(iii) result in any claim for personal injury, property or natural resource
damages, Remediation costs, or any other related proceeding against Buyer, USCRE
or any of its affiliates by any Governmental Authority or other person or entity
pursuant to Environmental Laws.
-11-
(c) Seller has not received any written notice that any part of the Real
Property or the operations thereon, or any offsite facility, is the subject of
any proceeding or judgment, and, to the best of such party's knowledge, no part
of the Real Property or the operations thereon is the subject of any proceeding
or judgment. Seller has not received any written notice from any governmental
authority or other person or entity regarding any material environmental, health
or safety concerns or claims that have not been resolved and, to the best of
Seller's knowledge, no such claims are anticipated.
(d) To the best of Seller's knowledge, there is no sinkhole, coastal
zone, flood plain, flood hazard area or state or federal wetlands in or on the
Real Property which would restrict any use or impair the value of the Real
Property.
(e) Seller has made available to USCRE copies of any and all permit
applications, Environmental Permits, agency correspondence, compliance audits,
safety records and other studies relating to environmental, health and safety
matters in their possession, custody or control. These studies shall include,
but not be limited to, any environmental engineering studies, any tests or
testing performed on the Real Property, any health studies or compliance audits,
and copies of any reports known to Seller issued by any Governmental Authority
regarding such Real Property.
(f) Since December 1, 1995, no information request has been issued to
Seller pursuant to Section 104 of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended 42 U.S.C. (S)9601 et seq. or any
other Environmental Laws with regard to the Real Property or any activities
conducted thereon, including off-site waste disposal.
(g) As used in this Agreement:
(i) "Hazardous Substances" means substance, waste, contaminant,
pollutant or material that has been determined by any Governmental Authority,
subdivision, agency, instrumentality, department, commission, board or bureau,
in, under or pursuant to any Environmental Law to be capable of posing a risk of
injury or damage to health, safety, property or the environment including (a)
all substances, wastes, contaminants, pollutants and materials defined,
designated or regulated as hazardous, dangerous or toxic pursuant to any Law,
and (b) asbestos, polychlorinated biphenyls ("PCBs"), petroleum, petroleum
products and urea formaldehyde;
(ii) "Environmental Laws" means all applicable Laws (including
consent decrees and administrative orders) approved or related to environmental
matters, or the protection of the environment or the protection of public health
and safety from environmental concerns including but not limited to Common Law
and Laws governing the use, generation, handling, storage and disposal or
cleanup of Hazardous Substances, all as amended;
(iii) "Laws" means federal, state or local law, statute, ordinance,
charter, constitution, code, rule regulation or guidelines or any order, decree
or ruling;
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(iv) "Environmental Condition" means the Environmental Condition of
the Real Property at the time of Closing and as more specifically described in
the Environmental Report;
(v) "Environmental Permits" means licenses, permits,
registrations, governmental approvals, orders, directives, agreements, consents
and the like which are required for the Business under or are issued under
Environmental Laws;
(vi) "Governmental Authority" means any federal, state, local,
provincial, foreign or other governmental, legislature, regulatory,
administrative agency, commission, official, department, board or other
governmental subdivision, court, tribunal, or other governmental agency;
(vii) "Offsite Facility" means any Facility which is not presently,
and has not heretofore been owned, leased or occupied by Seller with respect to
the Business;
(viii) "Release" shall have the meaning ascribed to it under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended, 42 U.S.C. (S)9601, and the Washington Model Toxics Control Act,
("MTCA"), Ch. 70.105D RCW; and
(ix) "Remediation" means any action taken to investigate, cleanup,
monitor or otherwise respond to or contain Releases or threatened Releases of
Hazardous Substances at, or emanating from, or being released from the Real
Property or any other matter that requires Remediation resulting from or in
connection with the Recognized Environmental Condition referred to in Section
12.2.2.
5.14 Insurance. Seller has provided Buyer a complete list of all insurance
policies maintained by Seller. All premiums due on such polices have been paid,
and no notice of cancellation or termination has been received with respect to
any such policies. Such policies (a) are in full force and effect, (b) are
sufficient for compliance with all material requirements of law and of material
agreements to which Seller is a party, and (c) provide insurance coverage for
the assets and operations of Seller comparable to that of companies similarly
situated. Seller has not been refused any insurance with respect to its real or
personal properties or its operations or had its coverage limited by any
insurance carrier. Seller has not made any representation to Buyer regarding the
transferability of such insurance policies upon a change of control of Seller.
5.15 Litigation. Except as described on Schedule 5.15, there is no action,
dispute, claim, proceeding, suit, appeal or investigation pending or threatened
against Seller that involves the Assets, the Real Property, or the business of
Seller or that questions the validity of this Agreement. To the knowledge of
Seller and PA&E, there are no facts that could reasonably be expected to cause
this Agreement to be prohibited or enjoined.
-13-
5.16 Letters of Credit and Powers of Attorney. Except as set forth on
Schedule 5.16, Seller does not have outstanding letters of credit or powers of
attorney that relate to or could in any way affect the value of its assets.
5.17 Banks. Schedule 5.17 contains a complete and accurate list of all
banks in which Seller has an account or safe deposit box, and the names of all
persons authorized to draw thereon or have access thereto.
5.18 Brokers. Neither Seller nor PA&E has entered into or authorized any
arrangements with any broker, finder, or investment banker that will result in
payment of a fee in connection with this transaction, except Quarterdeck
Investment Partners, Inc., whose fees shall be PA&E's sole obligation Seller and
PA&E will be responsible for payment and shall indemnify Buyer against any claim
for payment of any such fee in connection with this transaction.
5.19 Undisclosed Liabilities. Seller has no material liability or
obligation (whether absolute, accrued, contingent or other, and whether due or
to become due) not otherwise disclosed on the attached Schedules, or accrued,
reserved against, or otherwise disclosed in the most recent Company Financial
Statements, except liabilities incurred in the ordinary course of business
within 60 days prior to the Closing Date.
5.20 Absence of Certain Changes or Events. Except as described on Schedule
5.20, since February 28, 2001, there has not been:
5.20.1 Adverse Changes. Any materially adverse change in the
---------------
business, results of operations, or financial condition of Seller;
5.20.2 Dividends. Any direct or indirect declaration, setting aside
---------
or payment of any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of Seller's common stock or any
direct or indirect repurchase, redemption or other acquisition by Seller of any
shares of its capital stock, or any payment by Seller to or for the account of
PA&E, except in the ordinary course of business in accordance with past
practices;
5.20.3 Damage. Any material damage, destruction or casualty loss,
------
whether insured against or not, to any of the assets or properties of Seller;
5.20.4 Increased Compensation. Except in the ordinary course of
----------------------
business in accordance with past practices, (i) any increase in the rate or
terms of compensation payable or to become payable by Seller to its officers or
key employees; (ii) any increase in the rate or terms of any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made to, for or
with any such officers or key employees; (iii) any special bonus or remuneration
paid; or (iv) any written employment contract executed or amended;
5.20.5 Expenditures. Any entry into any agreement, commitment or
------------
transaction (including without limitation any borrowing, capital expenditure or
capital financing or any amendment, modification or termination of any existing
agreement,
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commitment or transaction) by Seller that is material to the business, results
of operations, or financial condition of Seller, except agreements, commitments
or transactions in the ordinary course of business or as contemplated in this
Agreement;
5.20.6 Accounting Changes. Any change by Seller in accounting
------------------
methods, principles or practices;
5.20.7 Sales of Stock. Any issuance or sale of any capital stock of
--------------
Seller;
5.20.8 Options. Any option, warrant or right granted to purchase
-------
any capital stock of Seller;
5.20.9 Acquisitions or Sales. Any purchase or other acquisition of
---------------------
property, or any sale, lease or other disposition of property having a value
more than $20,000, except in the ordinary course of business;
5.20.10 Liabilities. Any incurrence of any liability which, either
-----------
singly or in the aggregate, could materially and adversely affect the business,
results of operations, or financial condition of Seller; or
5.20.11 Encumbrances. Any encumbrance or consent to encumbrance of
------------
any property or assets, except in the ordinary course of business.
5.21 Operation of the Business. Since April 27, 2001, Seller has operated
its Business in the manner prescribed in Section 7.3 below.
Section 6
Representations and Warranties of Buyer, USCRE and Advanced Aluminum
--------------------------------------------------------------------
Buyer, USCRE and Advanced Aluminum represent and warrant to Seller and PA&E
that the following are true and correct as of the date of this Agreement and
will be true as of the Closing Date:
6.1 Authorization. Buyer, USCRE and Advanced Aluminum are each limited
liability companies, duly organized and validly existing under the laws of
Delaware. Buyer, USCRE and Advanced Aluminum have each taken all action
necessary to authorize the execution and delivery of, and the performance of
their obligations under, this Agreement. Buyer, USCRE and Advanced Aluminum have
full power and authority to enter into, and to carry out their obligations
under, this Agreement. Buyer, USCRE and Advanced Aluminum have duly executed and
delivered this Agreement, and this Agreement is a valid and binding obligation
of each of them, enforceable in accordance with its terms.
6.2 Capitalization of Buyer and USCRE. Accurate and complete copies of
the Limited Liability Company Agreements of Buyer and USCRE are attached as
Exhibits E and F to this Agreement (the "LLC Agreements"). Advanced Aluminum is
the only Class B Member (as defined in the LLC Agreements) of either Buyer or
USCRE. Seller or PA&E will be the only Class A Member of either Buyer or USCRE.
Exhibit A to each of the LLC
-15-
Agreements contains a complete and accurate description of the capitalization of
each of Buyer and USCRE as of Closing. Neither Buyer, USCRE, nor Advanced
Aluminum has offered or sold, or will offer or sell, any other ownership
interests in Buyer or USCRE.
6.3 Consents. Except for closing of Buyer's financing or as set forth on
Schedule 6.3, no consent or approval by any third person or public authority is
required to authorize, or is required in connection with, the purchase of the
Assets or the Real Property or the execution, delivery or performance of this
Agreement by Buyer, USCRE or Advanced Aluminum.
6.4 No Violations. Except for any required consents set forth on Schedule
6.3, the execution and delivery of this Agreement by Buyer, USCRE and Advanced
Aluminum, and the performance of their obligations hereunder, will not conflict
with, result in the breach of, or constitute a default under: (a) the LLC
Agreements of Buyer, USCRE or Advanced Aluminum; (b) any material note,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which any of them is a party or by which any of them is bound; or (c) any
statute, order, injunction, judgment, decree, rule or regulation of any court or
regulatory authority or governmental body applicable to any of them.
6.5 Brokers. Neither Buyer, USCRE, nor Advanced Aluminum has entered into
or authorized any arrangements with any broker, finder, or investment banker
that will result in payment of a fee in connection with this transaction other
than CPC Enterprises, whose fees shall be Buyer's sole obligation. Buyer, USCRE
and Advanced Aluminum will be responsible for payment of, and shall indemnify
Seller and PA&E against any claim for payment of any such fee in connection with
this transaction.
Section 7
Pre-Closing Covenants
---------------------
7.1 Conduct of the Parties. Before the Closing, each of the parties will
fully cooperate with the other party and its counsel and accountants in
connection with any steps required to be taken as part of the obligations of the
parties under this Agreement. Each party will use its best efforts to close the
transactions described by this Agreement and will take no action inconsistent
with its obligations under this Agreement or that could hinder or delay the
Closing, except that nothing in this Section 7 will limit the rights of the
parties under Sections 9 or 11. None of the parties will take any actions prior
to the Closing that would cause their respective representations and warranties
made in this Agreement to become untrue, without the other parties' prior
written consent.
-16-
7.2 Access to Properties, Books and Records. To permit Buyer, USCRE and
Advanced Aluminum to complete their due diligence investigation, Seller will
permit Buyer, USCRE and Advanced Aluminum and their agents to have reasonable
access to the premises in which Seller conducts its business, and to all of the
relevant books and records of Seller. Seller will furnish to Buyer, USCRE and
Advanced Aluminum such financial data, operating data, and other relevant
information related to Seller as Buyer, USCRE or Advanced Aluminum shall
reasonably request.
7.3 Operation of the Business. Before the Closing, Seller agrees to
operate its business as follows:
7.3.1 Business Operations. Seller will operate the business in a
-------------------
reasonable and prudent manner, in accordance with past practices.
7.3.2 Assets. Except as permitted under Section 5.20, Seller will
------
not and will not agree to (a) transfer, encumber, lease, or dispose of any of
the Assets or the Real Property, except in the ordinary course of the business;
(b) grant any powers of attorney pertaining in any way to its assets; or (c)
acquire any assets which would be material to the business, without Buyer's
prior written consent.
7.3.3 Contracts. Seller will use its best efforts to secure the
---------
transfer to Buyer at Closing of the Contracts listed on Schedule 7.3.3.
7.3.4 Dividends; Changes in Capital Stock; Borrowings. Seller will
-----------------------------------------------
not, and will not agree to, (a) merge or consolidate with, or sell its assets
to, any other entity; (b) make any distribution or dividend payments to
shareholders; (c) sell, repurchase or redeem shares of its capital stock; (d)
engage in any borrowing other than trade debt in the normal course of conducting
business; (e) pay any dividends to shareholders; or (f) pay any bonuses or
severance payments to any person. PA&E will not, and will not agree to, sell
any of the capital stock of Seller.
7.3.5 Preservation of Business. Seller will (a) preserve its
------------------------
existing business and relationships with its employees, customers, suppliers and
others; (b) preserve its assets; and (c) conduct its business in material
compliance with all applicable laws and regulations; and (d) maintain the Real
Property in substantially the same condition as on the date hereof, ordinary
wear and tear excepted, manage such Real Property in accordance with Seller's
past practices and not make any material alterations thereto without USCRE's
prior written consent.
7.3.6 Litigation; Material Changes. Seller will advise Buyer in
----------------------------
writing within 5 days of receiving notice of (a) any litigation, governmental
investigation, or administrative proceeding, or threat thereof, that challenges
or otherwise materially affects Seller's business or the transactions described
in this Agreement, or (b) any material adverse change or any event, occurrence
or circumstance that is likely to cause a material adverse change in Seller's
business.
-17-
7.3.7 Books and Records. Seller will maintain its books and records
-----------------
in accordance with past practices, and will not change its accounting methods,
policies or practices.
7.3.8 No Solicitation. So long as this Agreement remains in effect,
---------------
neither Seller nor PA&E shall, directly or indirectly, encourage, solicit,
initiate, engage or participate in discussions or negotiations with, or provide
any information to, any Person other than Buyer or its affiliates (a "Third
Party") in connection with any exchange offer, merger, consolidation, sale of
substantially all of the assets, sale of securities, acquisition of beneficial
ownership of or the right to vote securities, liquidation, dissolution or
similar transactions involving Seller, the Assets or the Real Property (such
proposals, announcements or transactions being referred to herein as
"Acquisition Proposals"), except to the extent that PA&E's Board of Directors
determines, based on advice of legal counsel, that a response to any unsolicited
offer would be required to comply with its fiduciary duties. Seller and PA&E
shall immediately inform Buyer in writing of any inquiry (including the terms
thereof and the identity of the Third Party making such inquiry) which it may
receive in respect of an Acquisition Proposal and furnish to Buyer a copy of any
such written inquiry.
7.4 KeyCorp Leasing. The parties will cooperate with each other to obtain
---------------
a pay-off figure from KeyCorp Leasing for the equipment currently leased by PA&E
on behalf of Buyer from KeyCorp Leasing (the "KeyCorp Equipment").
Section 8
Further Agreements
------------------
8.1 News Releases. Except as otherwise required by law, none of the
parties to this Agreement, and no person affiliated with any of them, will issue
or approve a news release or other announcement concerning this Agreement or the
transactions contemplated by this Agreement without the prior approval of the
other party as to the contents of the announcement and its release.
Notwithstanding the foregoing, the parties agree that PA&E may issue a press
release and, if it deems necessary or appropriate, file a Current Report on Form
8-K, regarding the execution of this Agreement and/or the Closing; provided
Buyer has had reasonable opportunity to review and provide Seller with comments
on the same.
8.2 Confidentiality. No information concerning one party that has been
furnished to or obtained by another party in connection with this Agreement may
be disclosed to any person other than in confidence to employees, legal counsel,
appraisers, financial advisers, independent public accountants, or lenders who
reasonably need to know such information and who agree to be bound by this
Section. Each party agrees not to use any such information for any purpose other
than fulfilling its obligations under this Agreement. Each party agrees that,
upon request, it will immediately return to the other party all such information
in the event this Agreement is terminated before Closing. Notwithstanding the
foregoing, this obligation shall not apply to information that (a) is, or
becomes, publicly available from a source other than the other party; (b) was
known and can be shown to have been known by the other party at the time of its
receipt; (c) is received by the other party from a third party without breach of
this Agreement; (d) is required by law or court order to be disclosed; or (e) is
disclosed in
-18-
accordance with the written consent of the other party. Notwithstanding the
foregoing, Buyer will not be prohibited from disclosing or freely using
information regarding Seller after the Closing.
8.3 Covenant Not to Compete.
8.3.1 PA&E and Seller each agrees that, for a period of three years
after the Closing Date, it will not design, market, manufacture or sell any
products which are competitive with those (i) which have been manufactured or
sold by Seller within one year prior to the Closing Date or (ii) with respect to
which Seller has submitted a bid to a customer or prospective customer prior to
the Closing Date. This covenant shall in no event affect PA&E's ability to
continue the ongoing business of its other subsidiaries and divisions as
presently conducted, including without limitation Aeromet International PLC or
PA&E's machining and fabrication operations. Following the Closing Date, Seller
and PA&E will discontinue use of the name U.S. Castings and similar names or
derivatives thereof.
8.3.2 For a period of three years after the Closing Date, neither
Seller nor PA&E will solicit, divert, take away or interfere with any customers,
investors, vendors/suppliers, strategic partners, or identified prospects of the
Buyer; provided that the covenant contained in this Section 8.3.2 is not
intended to restrict PA&E or Seller from conducting their ongoing business with
existing or new customers, and Seller and PA&E may solicit business from, or
engage in other activities with, any of the foregoing persons for purposes that
do not violate the covenant contained in Section 8.3.1 without being deemed to
have violated this Section 8.3.2.
8.3.3 For a period of one year after the Closing Date, neither
Seller nor PA&E will solicit, divert, or induce any person who is an employee,
executive or consultant of Buyer or any of Buyer's affiliates, to leave or to
work for Seller, PA&E or any affiliate.
8.3.4 For a period of one year after the Closing Date neither Buyer
nor Buyer's affiliates will solicit, divert, or induce any person who is an
employee, executive or consultant of Seller or PA&E to leave or to work for
Buyer or any of Buyer's affiliates.
Section 9
Closing Conditions
------------------
9.1 Closing Conditions of Buyer and USCRE. The obligations of Buyer and
USCRE to close the transactions described in this Agreement are subject to
satisfaction, at or before the Closing, of each of the following conditions:
9.1.1 Consent. All material releases, authorizations, consents, and
-------
approvals required to be obtained from any third party shall have been obtained
in a form satisfactory to Buyer and USCRE.
9.1.2 Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Seller and PA&E contained in this Agreement shall be true and
correct in all material respects as if made at the Closing. Seller and PA&E
shall have complied with or
-19-
performed, in all material respects, all covenants, obligations and agreements
to be complied with or performed by them at or before the Closing Date.
9.1.3 Officer's Certificates. Seller and PA&E shall have executed
----------------------
and delivered to Buyer officer's certificates, certifying: (a) satisfaction of
the conditions set forth in Sections 9.1.1 and 9.1.2 as of the Closing Date; (b)
copies of the resolutions of their respective Board of Directors authorizing the
execution, delivery and performance of this Agreement and all other agreements
executed in connection with this Agreement; (c) copies of their respective
Articles of Incorporation and Bylaws, as currently in effect; and (d) recent
certificates of existence and authorization from the State of Washington and
each other state where Seller is qualified to do business, if any.
9.1.4 Litigation. No litigation, investigation or proceeding shall
----------
have been instituted or threatened by any third party since the date of this
Agreement that would materially adversely affect Seller's business or the
ability of any party to this Agreement to comply with the provisions of this
Agreement.
9.1.5 Due Diligence. Buyer and USCRE shall have completed their due
-------------
diligence investigations with respect to Seller, the Assets and the Real
Property, and the results shall have been reasonably satisfactory to them.
9.1.6 Financing. Buyer and USCRE shall have obtained transaction
---------
financing in an amount reasonably determined by Buyer as sufficient to fund the
Purchase Price, working capital and acquisition costs, all on terms reasonably
acceptable to Buyer and USCRE.
9.1.7 Liabilities. Seller shall have obtained and delivered to Buyer
-----------
or USCRE, or caused to be filed with the applicable authorities, such UCC-3
termination statements and other applicable releases of security interests in
the Assets and the Real Property as Buyer, USCRE, their lender, or their counsel
may require.
9.1.8 Transition Services Agreement. Seller and PA&E shall have
-----------------------------
executed and delivered to Buyer an agreement to provide temporary service
support, in substantially the form attached as Exhibit H.
9.1.9 Conveyance Documents. Seller shall have executed and delivered
--------------------
to Buyer, subject to no exceptions other than the Permitted Liens: (a) the Xxxx
of Sale; (b) vehicle titles; and (c) such other bills of sale, change of title
forms, endorsements, assignments, tax forms and other instruments of conveyance
and transfer as Buyer may reasonably request in order to effect the transfer,
assignment and conveyance of the Assets, other than the Real Property.
9.1.10 Real Property Documents. Seller shall have executed and
-----------------------
delivered to USCRE the following documents:
(a) a warranty deed in form and substance reasonably
satisfactory to USCRE, with respect to the Real Property so as to convey to
USCRE good, marketable and
-20-
insurable title to the Real Property free and clear of all liens, claims or
encumbrances of any kind (other than Permitted Liens), to be conveyed at
Closing, executed by Seller;
(b) an affidavit from Seller in form and content reasonably
satisfactory to the title company to facilitate the deletion of the mechanic's
lien exception and the "parties in possession" exception, other "standard"
exceptions and the insuring of the "gap";
(c) an assignment and assumption of service contracts assigning
to USCRE all of Seller's right, title and interest in and to the service
contracts USCRE determines to assume. USCRE shall assume all obligations of
Seller under the designated service contracts as of the Closing Date. The
Assignment and Assumption of Service Contracts shall contain a mutual
indemnification whereby Seller shall indemnify USCRE, against any action or
inaction relating to the Service Contracts occurring or related to matters prior
to the Closing Date, and USCRE shall indemnify Seller against any action or
inaction relating to the foregoing occurring or related to matters after the
Closing Date;
(d) the originals of all service contracts, permits and
warranties, copies of all maintenance records and operating manuals pertaining
to the Personal Property or any portion of the Real Property in Seller's
possession;
(e) a FIRPTA Non-Foreign Transferor Certificate in accordance
with Section 1445 of the Internal Revenue Code and any applicable law of the
State of Washington; and
(f) all other documents, certificates, instruments or writings
reasonably requested by USCRE in connection herewith.
9.1.11 KeyCorp Equipment. Buyer shall have received from KeyCorp
-----------------
Leasing documentation reasonably satisfactory to Buyer to the effect that title
to the KeyCorp Equipment will be conveyed to Buyer upon KeyCorp's receipt of
payment therefor.
9.1.12 Escrow Agreement; Subordination Agreement. Seller and PA&E
-----------------------------------------
shall have executed and delivered the Escrow Agreement to the Escrow Agent, and
a Subordination Agreement, consent to assignment and liquidation assistance
letter to Buyer's senior lender.
9.1.13 Title Insurance. USCRE shall have obtained an ALTA owner's
---------------
title insurance policy issued by Land Title Company or such other national title
insurance company reasonably acceptable to USCRE insuring the Real Property in
the amount of $2,750,000.00 subject only to the Permitted Liens. Such insurance
shall contain a tie-in endorsement, and shall name USCRE or USCRE's designee as
the insured owner. Said insurance policy shall have the mechanic's lien, tax
lien and gap exceptions removed.
9.1.14 Control of Assets. Seller shall have taken all steps
-----------------
necessary or desirable to place Buyer and USCRE in actual possession and
operating control of the Assets and the Real Property, including but not limited
to delivering to Buyer all keys, passcards and other access devices to Seller's
facility.
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9.1.15 Assignment of Liabilities. Seller or PA&E, or both, as
-------------------------
appropriate, shall have executed and delivered the Assumption Agreement.
9.1.16 Real Property Survey. USCRE shall have obtained completed
--------------------
"as-built" surveys of the Real Property, prepared in accordance with the Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The survey shall
show the Real Property free and clear of any easements and encroachments that
materially limit its current use, and shall be prepared with reference to the
title insurance policy.
9.1.17 Environmental Assessment. USCRE shall have obtained a Phase I
------------------------
environmental assessment of the Real Property showing results reasonably
satisfactory to USCRE.
9.1.18 Material Adverse Change. There shall not have occurred a
-----------------------
material deterioration in Seller's performance or financial condition compared
to the information disclosed to Buyer in Exhibit C to Buyer's proposal letter
dated April 27, 2001.
9.1.19 Actions Satisfactory to Buyer's Counsel. All actions,
---------------------------------------
proceedings, instruments and documents required to be carried out by or in
connection with this Agreement, and all other relevant legal matters, will be
reasonably satisfactory, in all material respects, to counsel for Buyer.
9.2 Closing Conditions of Seller and PA&E. The obligations of Seller and
PA&E to close the transactions described in this Agreement are subject to
satisfaction, at or before the Closing, of each of the following conditions:
9.2.1 Consents. All material releases, authorizations, consents and
--------
approvals required to be obtained from any third party or any regulatory
authorities shall have been obtained in a form reasonably satisfactory to Seller
and PA&E.
9.2.2 Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Buyer, USCRE and Advanced Aluminum contained in this Agreement
shall be true and correct in all material respects as if made at the Closing.
Buyer, USCRE and Advanced Aluminum shall have complied with or performed, in all
material respects, all covenants, obligations and agreements to be complied with
or performed by them at or before the Closing Date.
9.2.3 Officer's Certificate. Buyer, USCRE and Advanced Aluminum
---------------------
shall have executed and delivered to Seller and PA&E officer's certificates,
certifying: (a) satisfaction of the conditions set forth in Sections 9.2.1 and
9.2.2 as of the Closing Date; (b) copies of the resolutions of their respective
Managers authorizing the execution, delivery and performance of this Agreement;
(c) copies of their respective LLC Agreements, as currently in effect; and (d)
recent good standing certificates from the State of Delaware.
9.2.4 Litigation. No litigation, investigation or proceeding shall
----------
have been instituted or threatened by a third party since the date of this
Agreement that would materially
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adversely affect the ability of any party to this Agreement to comply with the
provisions of this Agreement.
9.2.5 Purchase Price. Buyer and USCRE shall have delivered the
--------------
Purchase Price as required by Section 3.1, including without limitation delivery
of the cash portion of the Purchase Price, execution and delivery of the Note,
delivery of the Class A interests in Buyer and USCRE, and execution and delivery
of the Assumption Agreement.
9.2.6 KeyCorp Equipment. Buyer shall have delivered to KeyCorp
-----------------
Leasing an amount equal to the payoff figure for the KeyCorp Equipment.
9.2.7 Guarantee. USCRE shall have executed and delivered to Seller
---------
or PA&E, as determined by Seller and PA&E, a guarantee of the Note, in
substantially the form set forth in Exhibit I.
9.2.8 Escrow Agreement. Buyer, USCRE and Advanced Aluminum shall
----------------
have executed and delivered the Escrow Agreement to the Escrow Agent.
9.2.9 Actions Satisfactory to Seller's Counsel. All actions,
----------------------------------------
proceedings, instruments and documents required to be carried out by or in
connection with this Agreement, and all other relevant legal matters, shall be
reasonably satisfactory, in all material respects, to Seller's counsel.
Section 10
Closing Costs
-------------
10.1 Closing Costs and Prorations.
10.1.1 Closing Costs of Seller. Except as otherwise agreed by the
-----------------------
parties in writing, Seller will pay (a) any sums due with respect to licenses,
fees, and charges related to the Assets and the discharge of any encumbrances
affecting the Assets, except Permitted Liens, (b) the prorations described
below, (c) the real estate excise tax payable with respect to transfer of the
Real Property, (d) one-half of any sales or use taxes payable imposed on the
conveyance of the Assets, (e) one-half of the premiums for USCRE's owners policy
of title insurance, and (f) any other applicable usual and customary closing
costs paid by sellers in the State of Washington.
10.1.2 Closing Costs of Buyer and USCRE. Except as otherwise agreed
--------------------------------
by the parties in writing, Buyer and USCRE will pay (a) any recording fees in
connection with conveyance of the Assets or the Real Property, (b) one-half of
any sales or use taxes imposed on the conveyance of the Assets, (c) the
prorations described below, (d) one-half of the premiums for USCRE's owner's
policy of title insurance and the full cost of any title insurance policy
required by USCRE's lender, and (e) any other applicable usual and customary
closing costs paid by buyers in the State of Washington.
10.1.3 Prorations. Buyer and Seller agree to pay their respective
----------
prorated shares of all real estate and operating expenses of Seller, including
but not limited to property
-23-
taxes, utilities, services, and other applicable items that are customarily
prorated with respect to real estate in the State of Washington. All prorations
shall be as of the Effective Date.
10.1.4 Insurance. Seller is solely responsible for insuring the
---------
Assets against casualty and general liability until the Closing. After the
Closing, Buyer is solely responsible for either assuming Seller's existing
insurance policies, to the extent they are assumable, or obtaining such other
insurance as Buyer may desire. If Buyer elects to assume Seller's existing
assumable insurance polices, the current year premium for such policies will be
prorated under Section 10.1.3, above.
10.2 Other Costs, Expenses and Professional Fees. Except as provided
otherwise in this Agreement, the parties each agree to bear their own costs and
expenses, including without limitation all fees of brokers, advisors, attorneys,
accountants, appraisers, environmental consultants, and other service providers
that are incurred in connection with the negotiation and preparation of this
Agreement, and with any due diligence conducted, and documents required to be
executed, in connection with this Agreement and the consummation of the
transactions contemplated in this Agreement.
Section 11
Termination
-----------
11.1 Right to Terminate. This Agreement may be terminated:
11.1.1 by written agreement of the parties; or
11.1.2 by either Seller or Buyer if the Closing has not occurred on
or before June 14, 2001, unless the terminating party's failure, or the failure
of such party's affiliate, to fulfill or perform any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date; provided, however, that so long as a party is
proceeding diligently toward closing, it may propose an extension of up to 30
days, to which the other party shall not unreasonably withhold its consent and
agreement.
11.1.3 by Buyer if there are material changes in Seller's performance
or financial condition relative to the information reported in Exhibit C to the
Buyer's proposed letter dated April 27, 2001.
11.2 Effect of Termination. The party choosing to terminate this Agreement
under Section 11.1 will give written notice of termination to the other party.
The parties will thereafter be released from all liabilities and obligations
arising under this Agreement, unless such termination arises from a breach of
this Agreement or except as otherwise provided in this Agreement.
Section 12
Survival; Indemnification
-------------------------
12.1 Survival. The representations, warranties, covenants and agreements
of the parties contained in this Agreement or in any certificate or agreement
delivered in accordance
-24-
with this Agreement shall survive the execution and delivery of this Agreement,
any investigation by or on behalf of any party, and the consummation of the
transactions contemplated hereby for a period of one year after the Closing.
12.2 Indemnification by Seller and PA&E.
12.2.1 Seller and PA&E shall jointly and severally indemnify Buyer,
USCRE and Advanced Aluminum, and any of their affiliates, directors, officers,
employees and agents (together "Buyer's Affiliates"), and hold each of them
harmless from and against all losses, costs, expenses, damages or liabilities,
including reasonable attorneys' fees (collectively, "Damages"), incurred by any
of them as the result of or directly related to: (a) any material breach or
inaccuracy of any representation or warranty of Seller or PA&E made in this
Agreement; (b) any material breach of any covenant or agreement of Seller or
PA&E contained in this Agreement or the other Transaction Documents; (c) any
liability relating to the Excluded Assets or a breach by Seller or PA&E of the
Contracts on or before the Closing Date; (d) any liability that may be imposed
upon Buyer as a result of the failure to perform its obligations under any bulk
sales, bulk transfer, fraudulent conveyance or similar law of any jurisdiction
that may be applicable to some or all of the transactions contemplated by this
Agreement; (e) any liability imposed upon the Buyer as a result of a
determination that Buyer or its Affiliates have successor liability for any
Taxes owed by Seller or PA&E, environmental claims attributable to Seller for
the period preceding the Closing Date other than those covered by Section 12.2.2
below (regardless of when such claims first arise or are made) or liabilities
under ERISA or the Code incurred with respect to Seller's employees which arise
out of action or inaction by Seller preceding the Closing Date; and (f) any
action, suit or claim arising out of, caused by or based upon any act or
omission of Seller, or any of its shareholders, directors, executives, officers,
employees, agents or representatives at any time on or before the Closing, or
any event which has occurred on or before the Closing. The acts, omissions or
events for which Buyer is entitled to indemnification hereunder include, but are
not limited to, claims asserted after the Closing (whether such claims are tort
claims, warranty claims, contract claims or otherwise) which are based in whole
or in part upon (i) alleged defects in products or services which were either
sold, delivered or rendered by Seller on or before the Closing, and (ii) alleged
defects in products which were in the Inventory of Seller at the time of the
Closing and sold or delivered thereafter by Buyer.
12.2.2 Buyer has obtained a Phase I Environmental Site Assessment
Report ("the Environmental Report") prepared by Xxxxxxx Group Services on May
21, 2001 regarding the Environmental Condition of the Real Property. The
Environmental Report identifies one Recognized Environmental Condition ("REC")
related to the prior disposal of wastewaters and sludges discharged at the
ground surface at the edge of the south parking lot of the Real Property and
into percolation beds that are currently used for stormwater disposal (the "REC
Area"). Given the identification of this REC, Seller and Buyer agree that
further environmental investigation of the REC Area will be conducted
immediately following the Closing Date, as described further herein. In the
event that such investigation reveals the presence of REC Impacts, as defined
herein, then Remediation shall be implemented, as described further herein.
Buyer shall pay all costs of any investigation. Buyer shall also pay all costs
of any required Remediation, but shall be entitled to a reduction in the
principal
-25-
amount of the Note in an amount equal to the reasonable costs of such
Remediation, as described further herein; provided, however, that Seller's
liability for such costs shall not exceed the original principal amount of the
Note and any costs exceeding such amount shall be the liability of the Buyer;
provided, further, that each party shall bear its own attorneys' fees and costs,
if any.
(a) Phase 2 Investigation. Within fifteen (15) days of the Closing
Date, Buyer shall obtain a proposal or work plan for a Phase 2 Environmental
Site Assessment ("Phase 2"). The scope of the Phase 2 shall be limited to
investigation of the potential impacts from the REC in or on the REC Area ("REC
Impacts"). Buyer shall timely provide Seller with copies of any such proposal
or work plan for its review. Buyer shall cooperate with Seller and reasonably
attempt to address any concerns of Seller; however, Seller's approval of the
work plan shall not be required if Seller and Buyer are unable to reasonably
resolve Seller's concerns within seven (7) days of Seller's receipt of such work
plan. Buyer shall thereafter diligently pursue completion of such Phase 2
investigation, at Buyer's sole cost. Buyer shall deliver to Seller a copy of
the report of the Phase 2 results ("Phase 2 Report") immediately upon receipt of
same.
(b) Remediation. If the Phase 2 Report identifies as a REC Impact
the presence of Hazardous Substances in the REC Area at levels exceeding the
Method A Industrial Cleanup Level or Method C Industrial Cleanup Level (if an
Industrial Cleanup Level does not exist under Method A for a particular
substance) applicable to such Hazardous Substances ("Cleanup Levels"), as such
levels are established under MTCA in Washington Administrative Code ("WAC")
Section 000-000-000 (as amended on February 12, 2001 and effective on August 15,
2001), then Buyer shall obtain proposals for Remediation of such REC Impacts as
follows. Within fifteen days of receipt of the Phase 2 Report, Buyer shall seek
proposals (on a not-to-exceed basis) for Remediation of such REC Impacts from
one consultant selected by Buyer and one consultant selected by Seller. The
proposals shall be limited to the most cost-effective Remediation of the REC
Impacts detected in the REC Area above the Cleanup Levels and shall contemplate
a Remediation pursuant to the Voluntary Cleanup Program with the Washington
Department of Ecology; provided that in no event shall the Remediation include
remediation of pesticides relating to current or historic pesticide application
on the Real Property or its surroundings. Should Buyer elect to remediate any
pesticides detected, Buyer shall solely bear all costs related to such
remediation. Buyer shall select the consultant proposing the least cost
alternative ("Remediation Consultant"). Both parties agree that the selection of
a Remediation Consultant shall not waive any attorney-client privilege either
party may have with such consultant. Buyer shall promptly and diligently
implement the Remediation. In any event, Buyer shall begin such Remediation (by
at a minimum engaging the Remediation Consultant) within ninety (90) days of
closing. Buyer shall be primarily responsible for preparation, submission,
negotiation, amendment and implementation of the Remediation with any applicable
Governmental Authority that may have jurisdiction over such Remediation. Buyer
shall control such Remediation, including but not limited to the approach to be
taken in all communications with Governmental Authorities. Buyer shall provide
Seller with copies of any reports, data, plans, submissions, and correspondence
to any Governmental Authority sufficiently in advance of such submission to
allow Seller to meaningfully comment on same. Seller shall timely provide any
such
-26-
comments to Buyer, in any event within seven (7) days of receipt of submissions
from Seller. Buyer shall cooperate with Seller and reasonably attempt to address
any concerns of Seller. Buyer may proceed with the Remediation notwithstanding
Seller's objections, if Buyer and Seller are unable to resonably agree on a
resolution of Seller's objections or concerns within seven (7) days of Buyer's
receipt thereof. Buyer shall also timely provide Seller with copies of all such
materials received from such Governmental Authorities. Any Remediation conducted
pursuant to this Section 12.2.2, must be conducted diligently by Buyer and the
Remediation Consultant, and Buyer shall proceed diligently to obtain any
required governmental approvals.
(c) Reduction of Note Principal. To obtain a reduction in the
principal amount of the Note, following completion of the remediation or within
eighteen (18) months after the Closing Date, Buyer shall provide Seller with (i)
verified invoices from the Remediation Consultant, including without limitation
any required fees under the Voluntary Cleanup Program, and (ii) evidence of
Buyer's payment thereof. Following receipt of same, Seller shall execute such
documents as necessary to effect the reduction in Note principal. In no event
shall Seller be responsible, nor shall Buyer be entitled to a reduction in
principal, for any Remediation conducted more than eighteen (18) months after
the Closing Date. Whenever Buyer is entitled to a reduction in Note principal
under this Section 12.2.2, such reduction shall be applied first to any accrued
interest owing on the Note, then the remainder to a reduction in the Note
principal.
12.3 Indemnification by Buyer, USCRE and Advanced Aluminum. Buyer, USCRE
and Advanced Aluminum will jointly and severally indemnify Seller and PA&E and
any of their respective affiliates, directors, officers, employees and agents,
and hold each of them harmless from and against all losses, costs, expenses,
damages or liabilities, including reasonable attorneys' fees (collectively,
"Damages"), incurred by any of them as the result of or directly related to any
material breach or inaccuracy of: (a) any representation or warranty of Buyer,
USCRE or Advanced Aluminum made in this Agreement; (b) any material breach of
any covenant or agreement of Buyer or USCRE contained in this Agreement or the
other Transaction Documents; and (c) use or the operation of the Assets or the
Real Property after the Closing Date.
12.4 Indemnification Period. Except as otherwise specified in this
Agreement, no claim for indemnification under this Section 12 for a breach of
the warranties in Section 5 or 6 (other than subsections 5.6, 5.8, and 5.13
which are not subject to this limit, but rather to the applicable statute of
limitations) will be effective if not made within 18 months after the Closing
Date (the "Indemnification Period").
12.5 Threshold Amount. No party that is entitled to indemnification under
this Agreement shall be indemnified unless and until the aggregate of all claims
for indemnification against Buyer, USCRE and Advanced Aluminum, on the one hand
(other than claims under Section 12.2.2), or Seller and PA&E on the other hand,
exceed $50,000, which shall (a) act as a threshold to discourage the pursuing of
insubstantial claims, and not as a deductible, (b) not apply to claims relating
to Purchase Price adjustments under this Agreement and (c) not apply to claims
under Section 12.2.2. The maximum liability of any party under this Section 12
shall be equal to the amount of cash actually received by Seller in payment of
the Purchase Price
-27-
(including without limitation from any Note payments and any redemption payments
related to Seller's Class A membership interests in Buyer and USCRE).
12.6 Indemnification Procedures.
12.6.1 Claim Notice. Any claim for indemnification must be made in
------------
writing, with notice delivered by the party seeking indemnification to the
party from whom indemnification is sought within the Indemnification Period.
The claim notice must specify in reasonable detail the nature and estimated
amount of the claim.
12.6.2 Third-Party Claims. If the claim specified in the claim
------------------
notice relates to a third-party claim, the indemnifying person shall have 15
days after its receipt of the claim notice to notify the indemnified person
whether the indemnifying person agrees that the claim is subject to
indemnification pursuant to this Section 12 and whether the indemnifying person
elects to defend such third-party claim at its own expense. If the claim
relates to a third-party claim that the indemnifying person elects to defend,
the indemnifying person shall control the defense or settlement of the claim and
the indemnified person shall not consent to the entry of any judgment or settle
the claim and shall reasonably cooperate with such defense or settlement. The
indemnified person shall, however, be entitled to participate in the defense or
settlement of such a third-party claim through its own counsel and at its own
expense and shall be entitled to approve or disapprove any proposed settlement
that would impose a duty or obligation on the indemnified person. If the
indemnifying person does not timely elect to defend a third-party claim, does
not provide reasonable evidence of its financial capacity to defend the claim
diligently, or if the indemnifying person fails to conduct such defense with
reasonable diligence, the indemnified party may conduct the defense of, or
settle, such claim at the risk and expense of the indemnifying person. If the
indemnifying person does not timely elect to defend a third-party claim, it can
later assume the defense of such claim. In such event, the indemnifying person
will reimburse the indemnified person for all costs and expenses of defense
(including attorneys' fees) incurred by the indemnified person to defend the
claim through the date the defense is assumed.
12.6.3 Claims Other Than Third-Party Claims. If the claim does not
------------------------------------
relate to a third-party claim, the indemnifying person shall have 30 days after
receipt of the claim notice to notify the indemnified person in writing whether
the indemnifying person accepts liability for all or any part of the claim and
the method and timing of any proposed payment. If the indemnifying person does
not so notify the indemnified party, the indemnifying persons shall be deemed to
have accepted liability for all damages described in the claim notice if: (i)
the claim notice contains a statement that failure to respond will constitute
acceptance of liability; (ii) the indemnified person sends a second claim notice
by certified mail giving the indemnifying persons an additional 10 days in which
to respond and the indemnifying persons do not deny liability within the 10-day
period; and (iii) the indemnified person sends a copy of the second claim notice
to the indemnified person's legal counsel named in this Agreement.
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Section 13
Other Provisions
----------------
13.1 Assignment; Benefit. Neither Buyer, USCRE or Advanced Aluminum, on
one hand, nor Seller or PA&E on the other hand, may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party except that Buyer, USCRE and Advanced Aluminum can freely assign
to its senior lender. Subject to the foregoing, this Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns.
13.2 Amendment; Waiver. The provisions of this Agreement, or of any
agreement or document executed in connection with this Agreement, may be amended
or waived only in a written agreement signed by the party against which
enforcement of such amendment or waiver is sought. Any waiver of any right or
breach under this Agreement shall not be construed as a waiver of any other or
any subsequent right or breach.
13.3 Severability. If any portion of this Agreement is held to be invalid
by a court of competent jurisdiction, the remaining terms of this Agreement
shall remain in full force and effect to the extent possible.
13.4 Governing Law; Arbitration; Waiver of Jury Trial. The construction
and performance of this Agreement will be governed by the laws of the State of
New York (except for the choice of law provisions thereof). Each party hereby
waives its right to trial by jury in any case arising under this Agreement. Any
controversy or claim arising out of or relating to this Agreement or the breach
thereof, other than a claim for specific performance or other injunctive relief,
shall be settled by arbitration before a single arbitrator in Philadelphia,
Pennsylvania if brought by Buyer, or in Seattle, Washington if brought by
Seller, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (AAA)(Expedited Procedures), and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Each party shall submit to the arbitrator such information as the
arbitrator deems necessary to reach a conclusion on the dispute. Unless
otherwise agreed, the arbitrator shall be directed to conclude the arbitration
within sixty (60) days after it commences and to reach a written determination
within ten (10) business days after the arbitration is completed and to deliver
such determination to Buyer and Seller, whereupon such determination shall be
final, binding and conclusive upon the parties. All fees and costs of the
arbitrator and the AAA shall be borne equally by the Buyer, USCRE and Advanced
Aluminum, on the one hand, and by Seller and PA&E on the other hand. The
arbitrator shall be authorized in its discretion to assess the reasonable fees
of attorneys and experts equitably among the parties based on the arbitrator's
assessment of the relative merits and the outcome of the arbitration.
13.5 Legal Counsel. Each party acknowledges that it has been represented
by legal counsel with regard to this Agreement, and has had an adequate
opportunity to consult legal counsel with regard to all documents executed in
connection with this Agreement.
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13.6 Notices. The parties shall deliver any notices required under this
Agreement in writing by personal or courier delivery, facsimile transmission, or
by registered or certified U.S. mail, return receipt requested, postage prepaid,
to the addresses or facsimile numbers set forth below, or to such other address
or facsimile number as may be specified by a party in writing. Notices shall
be deemed effective as of the date of personal or courier delivery, confirmed
facsimile transmission, or three days after the date on the U.S. postmark
affixed to the notice.
--------------------------------------------------------------------------------------------------
If to Seller or PA&E: With a copy to:
--------------------------------------------------------------------------------------------------
Pacific Aerospace & Electronics, Inc. Pacific Aerospace & Electronics, Inc.
000 Xxxx Xxxxxxx Xx., 0/xx/ Xxxxx 000 Xxxx Xx., Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
--------- ---------
Attention: Xxxxxx X. Xxxxxx, Attention: Xxxxxx X. Xxxxxxx,
--------- ---------
President and CEO Vice President Administration
and General Counsel
--------------------------------------------------------------------------------------------------
If to Buyer, USCRE or Advanced
Aluminum: With a copy to:
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c/o Advanced Aluminum LLC Blank, Rome, Xxxxxxx & XxXxxxxx, llp
00 Xxxxxx Xxxx Xxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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Attention: Xxxxx X. Xxxxxxxx, President Attention: Xxxxxxxx X. Xxxxx XX, Esq.
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13.7 Attorneys' Fees. The prevailing party in any arbitration or
litigation concerning this Agreement is entitled to reimbursement of its
reasonable attorneys' fees, costs and expenses from the non-prevailing party,
including fees, costs and expenses incurred on appeal or in bankruptcy
proceedings.
13.8 Entire Agreement. This Agreement, its attached schedules and
exhibits, and the documents executed in connection with this Agreement,
including without limitation a separate confidentiality agreement between the
parties, contain the entire agreement of the parties with respect to the subject
matter of this Agreement, and supersede any and all prior agreements, written or
oral, relating to their subject matter.
13.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute the same instrument.
-30-
Executed as of the first date written above.
SELLER: AEROMET AMERICA, INC.
By /s/ Xxx X. Xxxxxx
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Its: Executive V.P.
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PA&E: PACIFIC AEROSPACE & ELECTRONICS, INC.
By /s/ Xxx X. Xxxxxx
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Its: President/CEO
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BUYER: U. S. CASTINGS, LLC
By /s/ Xxxxx X. Xxxxxxxx
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Its: Manager
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USCRE: USCRE PROPERTIES, LLC
By /s/ Xxxxx X. Xxxxxxxx
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Its: Manager
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ADVANCED ALUMINUM: ADVANCED ALUMINUM, LLC
By /s/ Xxxxx X. Xxxxxxxx
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Its: Manager
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-31-
The following Exhibits and Schedules are omitted from the Asset Purchase
Agreement, dated as of June 14, 2001, between U.S. Castings, LLC, USCRE
Properties, LLC, Advanced Aluminum, LLC, Aeromet America, Inc., and Pacific
Aerospace & Electronics, Inc. filed as Exhibit 2.1 to the foregoing current
report on Form 8-K. The Company agrees to furnish supplementally a copy of the
omitted Exhibits and Schedules to the Securities and Exchange Commission upon
request.
Exhibits
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A Xxxx of Sale
B Deed
C Assumption Agreement
D Note
E Buyer's LLC Operating Agreement
F USCRE's LLC Operating Agreement
G Escrow Agreement
H Transition Services Agreement
I Guarantee
Schedules
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1.1.2 Personal Property
1.1.3 Contracts
1.2 Real Property
1.3 Excluded Assets
1.4 Permitted Liens
2.1 Liabilities
3.4 Allocation of Purchase Price
5.3 Consents (Seller)
5.5 Financial Statements
5.6 Taxes
5.7 Indebtedness
5.8.1 Real Property
5.8.2 Personal Property
5.8.3 Inventory
5.8.4 Contracts
5.8.5 Intellectual Property
5.8.6 Accounts Receivable
5.8.7 Customers and Suppliers
5.9 Compliance
5.10 Certain Interests
5.11 Employment Matters
5.12 Labor Matters
5.13 Environmental Matters
5.15 Litigation
5.16 Powers of Attorney
5.17 Bank Accounts
5.20 Absence of Changes
6.3 Consents (Buyer)
7.3.3 Material Contracts
