Exhibit 99.1
Asset Purchase Agreement
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of June
18, 2003 by and among INSITUFORM TECHNOLOGIES, INC., a Delaware corporation
("Buyer"), and INSITUFORM EAST, INCORPORATED, a Delaware corporation ("Seller"),
and its Subsidiaries (as defined below). Buyer, Seller and its Subsidiaries are
collectively referred to herein as the "Parties" and individually as a "Party."
WHEREAS, Seller and its Subsidiaries are engaged in the trenchless
rehabilitation of underground manholes, sewers and other pipelines (the
"Business") principally using the cured-in-place pipe rehabilitation process;
and
WHEREAS, Buyer desires to purchase certain specified assets and contracts
of Seller and its Subsidiaries used in connection with the Business and assume
certain specified liabilities of Seller, and Seller and its Subsidiaries desire
to sell such assets of Seller and its Subsidiaries and assign such liabilities
of Seller as provided in this Agreement (together with any other transaction
contemplated herein or in any other Transaction Document (as defined below), the
"Transaction").
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
SECTION 1
DEFINITIONS
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Certain capitalized terms used in this Agreement have the meanings
specified in the Glossary attached hereto. Other terms may be defined elsewhere
in the body of this Agreement and shall have the meaning indicated throughout
this Agreement.
SECTION 2
PURCHASE AND SALE OF ACQUIRED ASSETS; ESCROW; ASSUMED LIABILITIES;
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CLOSING; OTHER AGREEMENTS AND ACTIONS
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2.1. Acquired Assets. On the Closing Date, in accordance with this
Agreement, Seller and its Subsidiaries shall sell, convey, transfer, assign and
deliver to Buyer, free and clear of any and all Encumbrances, and Buyer will
purchase, acquire and accept, all of Seller's and its Subsidiaries' respective
right, title and interest in and to the following properties, assets and other
rights, personal or mixed, tangible or intangible (collectively, the "Acquired
Assets"):
(a) The Equipment of Seller and its Subsidiaries listed on Schedule
2.1(a), together with any Equipment transferred to Buyer pursuant to
Section 2.4 (c) (the "Acquired Equipment");
(b) The inventory of Seller and its Subsidiaries listed on Schedule
2.1(b) (the "Acquired Inventory");
(c) The Contracts of Seller and its Subsidiaries (including any
future claims arising from or related to such contracts) listed on Schedule
2.1(c) hereto and the Backlog related to such Contracts (the "Assumed
Contracts");
(d) Copies or originals of all books, records, data (in any media),
papers and instruments of whatever nature and wherever located to the
extent related to the Acquired Assets;
(e) All licenses, sublicenses and other contract rights held by
Seller and its Subsidiaries in connection with the Business listed on
Schedule 2.1(e), including all Insituform and NuPipe licenses, sublicenses
and rights to use or operate under Insituform or NuPipe patents or
trademarks, and intangible or intellectual property rights, including
know-how, relating thereto or to the Business (the "Acquired Intellectual
Property");
(f) All Permits required solely in connection with the Business in
effect as of the Closing Date, to the extent such Permits are transferable
(the "Acquired Permits"); and
(g) All rights to the name "Insituform", "Insituform East",
"MidSouth" and "insitu" and all derivatives thereof.
2.2. Purchase Price; Payment. In consideration of the sale, assignment,
and delivery of the Acquired Assets and subject to the provisions of Section
2.3, Buyer shall (i) pay Seller total consideration of $5,500,000.00, subject to
adjustments as provided in Section 2.4 hereof, in the form of cash, and (ii)
assume and agree to pay the Assumed Liabilities as provided in Section 2.6 (the
"Purchase Price"). Subject to the provisions of Section 2.3, the cash portion of
the Purchase Price shall be payable by Buyer to Seller on the Closing Date by
wire transfer as provided by Seller to Buyer in immediately available federal
funds.
2.3. Escrow. On the Closing Date, Buyer shall deposit an amount in cash
equal to $550,000.00 (the "Escrow Amount") with the Escrow Agent pursuant to the
terms of an escrow agreement entered into by the Parties in substantially the
form attached hereto as Exhibit 2.3 (the "Escrow Agreement") in an account held
pursuant to the terms of the Escrow Agreement (the "Escrow Account"). Seller
agrees not to make any dividend or distribution, in any form or manner
whatsoever, to its stockholders until one year following the Closing Date,
except for the repayment of its outstanding loans from CERBCO, Inc. The release
to Seller or Buyer of the Escrow Amount shall be made in accordance with this
Section:
(a) Claims. If Buyer makes a claim against Seller or any of its
Subsidiaries for any breach of a representation, warranty, covenant or
obligation (including, without limitation, indemnification obligations)
under this Agreement, such claim shall be handled as provided in Section 7
hereto. If Seller fails to satisfy its obligation to Buyer after notice as
required in Section 7 and pursuant to the claims procedures set forth in
Section 7.4 hereof, then Buyer may (i) notify the Escrow Agent to
distribute to Buyer the Escrow Amount (including any accrued interest
thereon), equal in value to its Damages
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and (ii) seek any other remedy available to it under this Agreement, at law
or in equity. Any portion of the Escrow Account to be distributed as
provided in subsection (b) below shall be reduced by the amount of any
indemnification claims finally resolved pursuant to Section 7 and paid out
of the Escrow Account. To the extent any claim for indemnification has been
asserted by Buyer but not finally resolved, the Escrow Agent shall also
withhold distribution of the Escrow Account in an amount equal to Buyer's
good faith estimate of the amount of the claim, and the amount so withheld
shall remain in the Escrow Account. In addition, Buyer may make a claim
against the Escrow Account as set forth in Sections 2.4(a) and (b).
(b) Distribution. Subject to (i) the filing of a certificate of
dissolution for the Seller and the delivery of an opinion of legal counsel
to Seller reasonably satisfactory to Buyer opining that Seller has taken
all necessary action with the Delaware Secretary of State regarding the
filing of such certificate sufficient to satisfy any requirements of the
Delaware Act for dissolving Seller and that such certificate fully complies
with the requirements of the Delaware Act, (ii) the distribution of amounts
in the Escrow Account to Buyer as contemplated in Section 2.3(a), and (iii)
the terms of the Escrow Agreement, the Escrow Agent shall distribute the
assets remaining, if any, in the Escrow Account to Seller on the first
anniversary of the Closing Date.
2.4. Pre-Closing Burn Rate; Guaranteed Direct Gross Profit; Changes in
Acquired Equipment and Acquired Inventory.
(a) Seller will not perform work under the Assumed Contracts at a
rate that generates revenue greater than an average of $860,000 per month
during the Burn Period (the "Maximum Monthly Burn Rate"). The Buyer and
Seller hereby agree that the starting backlog of revenue to be earned under
all Assumed Contracts as of May 3, 2003 is $3,986,586 (the "Starting
Backlog") and that such Starting Backlog minus the Maximum Monthly Burn
Rate during the Burn Period will result in the minimum amount of revenue
backlog guaranteed by Seller to be further available to Buyer after Closing
(the "Minimum Residual Backlog"). If Seller's actual average monthly
revenue from work performed during the Burn Period (the "Burn Rate")
exceeds the Maximum Monthly Burn Rate so as to reduce the Assumed Contract
backlog at Closing below the guaranteed Minimum Residual Backlog, then the
Purchase Price will be reduced by an amount equal to 30% of the amount of
such deficiency (such deficiency being hereinafter referred to as the "Burn
Rate Adjustment"). The Burn Rate, the Minimum Residual Backlog and the
resulting Burn Rate Adjustment, if any, shall be calculated as follows:
(i) Within 30 days after the Closing Date, Seller shall
deliver to Buyer a statement (the "Burn Rate Statement"), setting forth its
calculation of the Burn Rate, the Minimum Residual Backlog and the
resulting Burn Rate Adjustment, if any, as of the close of business on the
Closing Date. The Burn Rate Statement shall be prepared by Seller or its
independent accountants and be accompanied by a certificate of Seller or
its independent accountants stating that the Burn Rate Statement has been
prepared in compliance with the requirements of this Section 2.4.
(ii) During the 30-day period following Buyer's receipt of the
Burn Rate
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Statement, Seller shall provide or make commercially reasonable efforts to
cause Seller's independent accountants to provide, as the case may be,
Buyer or Buyer's independent accountants with such access, upon reasonable
prior notice and during normal business hours, to the work papers or other
supporting documentation of Seller or Seller's independent accountants, as
the case may be, as is reasonably necessary to verify the calculation of
the Burn Rate, the Minimum Residual Backlog and any resulting Burn Rate
Adjustment due from Seller. The Burn Rate Statement shall be final and
shall be accepted by and be binding on the parties on the thirtieth day
following delivery thereof unless Buyer gives written notice to Seller of
disagreement with the Burn Rate Statement (such notice, a "Burn Rate Notice
of Disagreement") prior to such date. Any Burn Rate Notice of Disagreement
shall (A) specify in reasonable detail the nature of any disagreement so
asserted and (B) only include disagreements based on the amount of the Burn
Rate, the Minimum Residual Backlog or the Burn Rate Adjustment set forth in
the Burn Rate Statement not being calculated in accordance with this
Section 2.4. If a Burn Rate Notice of Disagreement is received by Seller in
a timely manner, then the Burn Rate Statement (as revised in accordance
with clause (iii) below) shall become final and binding upon each of Seller
and Buyer, on the earlier of (1) the date Seller and Buyer resolve in
writing any differences they have with respect to the matters specified in
such Burn Rate Notice of Disagreement and (2) the date all disputed matters
specified in such Burn Rate Notice of Disagreement are finally resolved in
writing by a nationally recognized independent accounting firm mutually
agreed upon by Sellers and Buyer (the "Accounting Firm").
(iii) During the 30-day period following delivery of a Burn
Rate Notice of Disagreement, Seller and Buyer shall seek in good faith to
resolve in writing any differences which they may have with respect to the
matters set forth in such Burn Rate Notice of Disagreement. If any
disagreement properly included in the Burn Rate Notice of Disagreement is
not resolved in writing within such 30-day period, Seller and Buyer shall
submit to the Accounting Firm for review and resolution any and all matters
which remain in dispute and which were properly included in the Burn Rate
Notice of Disagreement. The scope of the Accounting Firm's review shall be
limited to only those matters that remain in dispute and that were properly
included in the Burn Rate Notice of Disagreement. Seller and Buyer shall
use all reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to the Accounting Firm within 30
days of the receipt of such submission. Seller and Buyer agree that
judgment may be entered upon the determination of the Accounting Firm
(which shall be deemed to be an arbitrator's award) in any court having
jurisdiction over the party against which such determination is to be
enforced. The Accounting Firm's determination shall be accompanied by a
certificate of the Accounting Firm that it reached its decision in
accordance with the provisions of this Section 2.4. The cost of any
arbitration (including the fees and expenses of the Accounting Firm)
pursuant to this Section 2.4 shall be borne by Seller and Buyer equally.
(iv) Within five business days after the Burn Rate Adjustment
has been finally determined in accordance with this Section 2.4, Seller
shall pay to Buyer an amount equal to the Burn Rate Adjustment together
with interest thereon at a rate per annum equal to the rate of interest
from time to time publicly announced by Citibank,
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N.A., in its New York office as its prime or base rate, calculated on the
basis of the actual number of days elapsed over 365 from the date of
delivery of the Burn Rate Statement pursuant to Section 2.4(a)(i) to the
date of payment. Payments in respect of this Section 2.4(a), if any, shall
be made promptly out of the Escrow Account.
(b) It is the intent of the parties that the work to be performed
under the Assumed Contracts by Buyer after Closing will generate, in the
aggregate, Direct Gross Profit that represents a Direct Gross Profit
Percentage of at least 30% ("Guaranteed Direct Gross Profit"). "Direct
Gross Profit" is defined as revenue from a specific job less costs that are
directly attributable to work performed on the specific job (e.g., labor,
materials, subcontract work and royalties) to generate that revenue, but
without considering indirect costs (e.g., depreciation on equipment,
wet-out, general consumable supplies, etc.) or general and administrative
("G&A") costs. "Direct Gross Profit Percentage" is the percentage that
represents Direct Gross Profit for a specific job relative to the
corresponding revenue for such specific job.
(I) The actual Direct Gross Profit and the resulting Direct
Gross Profit Percentage under the Assumed Contracts for work performed by
Buyer after Closing will be calculated by Buyer or its accountants (in a
writing delivered to Seller on a reasonably prompt basis) based on actual
operating results after Closing as the Assumed Contracts are completed.
Seller will not be responsible for deficiencies which are a result of
performance failures by Buyer in the course of routine work. Seller will be
responsible for deficiencies resulting from latent defects in the
estimates, work completed by Seller before Closing, and other aspects of
the jobs before Closing. Seller will have the right to contest Buyer's
calculation of the Direct Gross Profit Percentage utilizing procedures as
nearly equivalent as possible to the procedures for the calculation of the
Burn Rate described in Section 2.4(a) (including the provisions regarding
the timing of Seller's notice of disagreement with Buyer's's calculation,
Buyer's response thereto and the reference of any dispute to the Accounting
Firm); provided, however, that the parties shall not be entitled to refer
any remaining disputes over the calculation of aggregate Direct Gross
Profit or the resulting Direct Gross Profit Percentage to the Accounting
Firm until all work required to be performed under all Assumed Contracts
and all JV Contracts has been completed, but in no event later than 1 year
following the Closing Date.
(II) The scope of disputes concerning the calculation of
Direct Gross Profit and the Direct Gross Profit Percentage that the
Accounting Firm shall resolve is limited to disagreements based on the
Direct Gross Profit or the Direct Gross Profit Percentage set forth in the
writing or writings originally delivered to Seller not being calculated in
accordance with this Section 2.4.
(III) If Guaranteed Direct Gross Profit less Excess JV Profit
(as defined below) exceeds the amount of actual aggregate Direct Gross
Profit for all work on all Assumed Contracts, the resulting deficiency will
be paid out of the Escrow Account as of the close of the normal period of
the Escrow Agreement (one year from the Closing), following the parties'
agreement on the accuracy thereof or the resolution of any disputes
relating thereto. If any work under the Assumed Contracts is not completed
by the close
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of the normal period of the Escrow Agreement, such uncompleted work shall
not be included in the calculation of the aggregate Direct Gross Profit
required to be obtained under this Section 2.4(b) from the date of Closing.
(IV) The amount by which the aggregate Gross Profit Percentage
achieved by Buyer with respect to its work on all JV Contracts (whether
performed before or after Closing) exceeds 23% shall constitute "Excess JV
Profit". "Gross Profit" is defined as revenue from a specific job less
costs that are directly attributable to work performed on the specific job
(e.g., labor, materials, subcontract work and royalties) to generate that
revenue, together with indirect costs (e.g., depreciation on equipment,
wet-out, general consumable supplies, etc.). "Gross Profit Percentage" is
the percentage that represents Gross Profit for a specific job relative to
the corresponding revenue for such specific job. The actual Gross Profit
and the resulting Gross Profit Percentage under the JV Contracts for work
performed by Buyer will be calculated by Buyer or its accountants (in a
writing delivered to Seller on a reasonably prompt basis) based on actual
operating results after Closing as the JV Contracts are completed. Seller
will have the right to contest Buyer's calculation of the Gross Profit
Percentage utilizing procedures as nearly equivalent as possible to the
procedures for the calculation of the Burn Rate described in Section 2.4(a)
(including the provisions regarding the timing of Seller's notice of
disagreement with Buyer's calculation, Buyer's response thereto and the
reference of any dispute to the Accounting Firm); provided, however, that
the parties shall not be entitled to refer any remaining disputes over the
calculation of aggregate Gross Profit or the resulting Gross Profit
Percentage to the Accounting Firm until all work required to be performed
under all Assumed Contracts and all JV Contracts has been completed, but in
no event later than 1 year following the Closing Date.
(c) To the extent any Acquired Equipment or Acquired Inventory is
not or cannot be transferred to Buyer at Closing because such equipment or
inventory is missing, has been destroyed or consumed in the Ordinary Course
of Business or is mutually agreed in writing between Buyer and Seller to be
retained by Seller, Buyer may select additional Equipment to be transferred
to Buyer at Closing to replace the missing Acquired Assets on such terms as
may be agreed by the parties. The determination whether any Acquired
Inventory cannot be transferred at Closing shall be made as follows:
(i) On the Closing Date, Seller and Buyer shall jointly conduct
a physical count of the Acquired Inventory. Within 30 days after
the Closing Date, Buyer shall transmit to Seller a statement
setting forth Buyer's calculation of the value of the Acquired
Inventory as of the Closing Date (the "Closing Inventory
Value"). Seller will have the right to contest Buyer's
calculation of the Closing Inventory Value utilizing procedures
as nearly equivalent as possible to the procedures for the
calculation of the Burn Rate described in Section 2.4(a)
(including the provisions regarding the timing of Seller's
notice of disagreement with Buyer's calculation, Buyer's
response thereto and the reference of any dispute to the
Accounting Firm). The amount, if any, by which the final Closing
Inventory Value is less than $730,000 shall be payable to Buyer
by Seller
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in such form and manner as may be agreed upon by the parties.
(d) All calculations required by this Section 2.4 shall be made
using the same accounting principles and policies (whether or not in
accordance with generally accepted accounting principles ("GAAP")) as
Seller currently uses to determine revenue, cost, profit or any other item
required to be calculated hereunder, except for the calculation of Gross
Profit, which shall be made using the same accounting principles and
policies (whether or not in accordance with GAAP) as Buyer currently uses
to determine revenue, cost, profit or any other item required to be
calculated under clause (b) (IV) hereof.
2.5. Allocation. The Purchase Price for the Acquired Assets shall be
allocated in accordance with the agreement of the parties. Each Party agrees to
complete Internal Revenue Form 8594, Asset Acquisition Statement under Section
1060 of the Code consistent with such agreed allocation.
2.6. Assumed Liabilities. The Acquired Assets shall be sold and conveyed
to Buyer free and clear of all Encumbrances. On and after the Closing Date,
Buyer will assume and agree to pay, perform and otherwise discharge as the same
shall become due in accordance with their respective terms, only the liabilities
and obligations of Seller under the Assumed Contracts and the Acquired
Intellectual Property that (i) accrue or arise as normal contract payments on or
after the Closing Date or (ii) arise on or after the Closing Date in respect of
the period after the Closing Date, excluding in all such cases liabilities,
losses, claims, damages or expenses to the extent arising from any default under
any Assumed Contracts or Acquired Intellectual Property by or of Seller prior to
the Closing Date (the "Assumed Liabilities").
2.7. Liabilities Not Assumed. Except as set forth in Section 2.6, Buyer
assumes no other liabilities or obligations of Seller or its Subsidiaries (the
liabilities of Seller or its Subsidiaries which are not assumed by Buyer
pursuant to this Agreement are hereinafter referred to as the "Non-Assumed
Liabilities"), all of which shall be retained by Seller and its Subsidiaries.
Without in any way limiting the generality of the foregoing, Buyer does not
assume the following:
(a) Any liability or operating costs of Seller or its Subsidiaries
arising from, or in connection with, the conduct of the Business or the
ownership of the Acquired Assets prior to the Closing Date (whether or not
such liability accrues before, on or after the Closing Date);
(b) Any liabilities or obligations of Seller or its Subsidiaries to
their employees (or any of Seller's or its Subsidiaries' former employees)
or costs associated with such employees, including, without limitation, (i)
all obligations to make payments to employees or former employees on or
after Closing with respect to medical expenses incurred or accrued on or
before Closing, or from accidents or events occurring on or prior to
Closing, and (ii) liabilities and costs associated with Seller's retirement
plans, Benefit Plans, severance plans, employee discrimination claims,
worker's compensation claims, claims to holiday or sick leave, and any
medical benefit or other similar claim;
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(c) Any obligations of Seller or its Subsidiaries for indebtedness
for borrowed money, including without limitation, any indebtedness or
obligations owed by Seller to CERBCO, Inc.;
(d) Any Taxes of Seller or its Subsidiaries;
(e) Any liability or obligation arising under any Contracts of
Seller or its Subsidiaries other than Assumed Liabilities;
(f) Any liabilities based on or arising from (i) the presence, use,
disposal or treatment of any Hazardous Materials on or about any of
Seller's or its Subsidiaries' Facilities, (ii) any release or discharge of
Hazardous Materials, (iii) the failure by Seller or any of its Subsidiaries
to obtain any license or permit required in connection with any Hazardous
Materials or in connection with or under any Environmental Laws, or (iv)
otherwise arising out of any non-compliance with or violation of any
Environmental Laws or health or safety Laws; or
(g) Any warranty, product liability or similar claim for injury to
person or property, regardless of when made or asserted, which arises out
of or is based upon any action or inaction or express or implied
representation, warranty, agreement or guarantee made by Seller or any of
its Subsidiaries, or alleged to have been made by Seller or any of its
Subsidiaries, or which is imposed or asserted to be imposed by operation of
law, in connection with any service performed or product sold, manufactured
or leased by or on behalf of Seller or any of its Subsidiaries.
2.8. Closing. Subject to the terms and conditions hereof, the Closing of
the Transaction shall take place on the second business day after the
satisfaction of the conditions set forth in Section 6.2(k) hereof, or at such
other time and on such other date as the Parties may agree upon in writing (the
"Closing Date"). The Closing shall take place at the offices of Potter Xxxxxxxx
& Xxxxxxx LLP at Hercules Plaza, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, or at such other place as the Parties may agree upon in writing.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF SELLER
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Subject to, and except as disclosed in, Schedule 3 to this Agreement (the
"Seller Disclosure Schedule"), Seller and its Subsidiaries represent and warrant
to Buyer, as of the date hereof and as of the Closing Date, the following:
3.1. Seller and Subsidiaries Organization, Qualification and Good
Standing. Seller and each Subsidiary is duly organized and validly existing
under the Laws of its respective state of organization. Seller and each
Subsidiary which is currently active is in good standing under the Laws of its
respective state of organization. Seller and its Subsidiaries have all requisite
power and authority to own, lease and operate their respective assets and to
carry on their respective businesses as now owned, leased, operated and
conducted and as intended to be conducted.
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3.2. Seller and Subsidiaries Authorization. The consummation of the
Transaction is subject to the approval of this Agreement and the Transaction by
the stockholders of Seller. Assuming such approval is received and the Closing
occurs, (i) Seller and its Subsidiaries shall have all requisite power and
authority (A) to execute and deliver, and perform all of their respective
obligations under, this Agreement and the other Transaction Documents to which
Seller or its Subsidiaries are a party to and (B) to consummate the Transaction,
and (ii) this Agreement and the other Transaction Documents to which Seller or
its Subsidiaries is a party to, when executed and delivered, shall constitute
valid and legally binding obligations of Seller or its Subsidiaries, as the case
may be, enforceable against such Party in accordance with their respective
terms, except as enforcement thereof may be limited by bankruptcy,
reorganization, insolvency and similar Laws affecting creditors' rights
generally, and general equitable principles. This Agreement has been, and at the
Closing the other Transaction Documents to which Seller or its Subsidiaries are
a party will be, duly executed and delivered by Seller and its Subsidiaries.
3.3. No Seller Conflicts. The execution and delivery of, and performance
of the obligations under, this Agreement and the other Transaction Documents to
which Seller or its Subsidiaries are a party, and the consummation of the
Transaction by Seller and its Subsidiaries, will not (i) conflict with, or
result in any violation or breach of or default or loss of any benefit under
(either alone or with the giving of notice or the passage of time or both) (A)
any provision of the respective organizational or governing instruments of
Seller or its Subsidiaries, (B) any material Contract to which Seller or any of
its Subsidiaries is a party, or (C) any Requirement of Law of any Governmental
Authority or arbitrator applicable to Seller or its Subsidiaries, or (ii) result
in the creation or imposition of any Encumbrance on Seller, its Subsidiaries or
the Acquired Assets.
3.4 Seller Consents. No Requisite Approvals are required in connection
with Seller's or its Subsidiaries' execution and delivery of, or performance of
the obligations under, this Agreement or the other Transaction Documents to
which Seller or its Subsidiaries are a party to or the consummation of the
Transaction.
3.5 Contracts. Seller has delivered or made available to Buyer true,
accurate and complete copies of all Assumed Contracts and other material
Contracts, including amendments. Seller is not, and to the best of Seller's
knowledge no other party to any Assumed Contract is, in default under such
contract, nor, to Seller's knowledge, has any event occurred which, but for the
giving of notice or passage of time or otherwise, would constitute a breach or
default under any such contract. The consummation of the Transaction will not
result in the breach of any term or provision of, or constitute a default under,
any Assumed Contract, or constitute an event which with notice, lapse of time or
both could result in any such violation. Schedule 2.1(c) shall contain, in
addition to a listing of Assumed Contracts, a detailed WIP Schedule (including
Unbilled WIP) and a listing of retainage related to the Assumed Contracts as of
the date of this Agreement. This Section 3.5 shall not apply to any Contracts
relating to or constituting Intellectual Property, which is covered by Section
3.9.
3.6. Warranties. There is no known and undisclosed claim against or
liability pending or threatened against Seller or its Subsidiaries on account of
product or contract warranties or with respect to the manufacture or sale of
defective products or services, and there is no known
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and undisclosed basis for any such claim on account of defective products or
services heretofore manufactured or sold or contract warranties.
3.7. Acquired Equipment. Seller has provided or made available to Buyer a
true, accurate and complete list of all Equipment of Seller and its
Subsidiaries. The Acquired Equipment to the best of Seller's knowledge is
functional for the use for which it was intended in the normal operation of the
Business and is in good operating condition and repair (ordinary wear and tear
excepted).
3.8. Acquired Inventory. Seller has provided or made available to Buyer a
true, accurate and complete list of Seller's and its Subsidiaries' tangible
inventory. All Acquired Inventory is (i) suitable and useable for the production
or completion of services required under the Assumed Contracts in the Ordinary
Course of Business as first quality goods, (ii) valued at actual cost, and (iii)
the sole, unencumbered property of Seller or its Subsidiaries. No such Acquired
Inventory items have been or are held by Seller or its Subsidiaries on
consignment from or for the benefit of any other Person.
3.9. Intellectual Property. Seller has provided or made available to
Buyer (i) a true, accurate and complete list of all material Intellectual
Property (except know-how and goodwill) used by Seller or its Subsidiaries in
the Business other than any Intellectual Property that is generally available to
the public on market terms. Seller and its Subsidiaries have full right, title
and interest in and to the Intellectual Property included as Acquired
Intellectual Property and shown as owned by them on Schedule 2.1(e). Seller has
provided or made available to Buyer true, accurate and complete copies of all
material Intellectual Property Licenses used by Seller or its Subsidiaries in
the Business, and such licenses which are included as Acquired Intellectual
Property are in full force and effect. Seller is not, and, to the best of
Seller's knowledge, no other party to any such licenses being acquired hereunder
is, in default under any such license, nor, to Seller's knowledge, has any event
occurred which, but for the giving of notice or passage of time or both, would
constitute a breach or default under any Intellectual Property License being
acquired hereunder. The consummation of the Transaction will not result in the
breach of any term or provision of, or constitute a default under, any
Intellectual Property License being acquired hereunder, or constitute an event
which with notice, lapse of time or both would result in any such violation. To
the best of Seller's knowledge, Seller and its Subsidiaries are not infringing
upon or otherwise acting adversely to the intangible personal property owned by
any other Person in connection with the Business as it relates to the Assumed
Contracts and the Acquired Intellectual Property, and there is no notice, claim
or action by any such Person pending with respect thereto.
3.10. Ownership of Acquired Assets. Seller and its Subsidiaries have good
title to all of the Acquired Assets, subject to no Encumbrances. Upon
consummation of the Transaction, Buyer shall receive good title to the Acquired
Assets other than the items described in Section 2.1(d) and the Acquired
Permits, free and clear of all Encumbrances.
3.11. Employees. Seller has provided or made available to Buyer a true,
accurate and complete list of the following information for each employee of
Seller and its Subsidiaries (including each employee on leave of absence or
layoff status): job title, base rate of pay (together with any other
compensatory arrangement), fringe benefits (including any company-
10
owned or leased vehicles, club memberships and similar arrangements maintained
or sponsored by Seller) and date of hire. Neither Seller nor any of its
Subsidiaries has any employment or consulting agreements. No current employee of
Seller or any of its Subsidiaries is a party to, or is otherwise bound by, any
agreement or arrangement with Seller (or to Seller's knowledge with any other
party) which would in any way adversely affect (i) the performance of his (or
her) duties if he (or she) shall become an employee of Buyer or any of its
Affiliates after the Closing, or (ii) Buyer's ability to own the Acquired
Assets. Neither Seller nor any of its Subsidiaries has any outstanding
commitment or arrangement or agreement to effect any general wage or salary
increase for any of its employees.
3.12. Labor Matters. To the best of their knowledge and in all material
respects: Seller and its Subsidiaries have complied and are complying with all
Requirements of Law with respect to employment and employment practices
(including, without limitation, all applicable federal and state civil rights
statutes and the hiring, recordkeeping and other requirements of the Immigration
Reform and Control Act of 1986 and the rules and regulations thereunder and as
amended). Seller and its Subsidiaries have not, and are not, engaged in any
unfair labor practice or unlawful discriminatory act. There are no pending or,
to the best of Seller's knowledge, threatened charges or complaints by or
against Seller or any of its Subsidiaries before the National Labor Relations
Board, the Equal Employment Opportunity Commission, any other federal
Governmental Authority relating to labor or employee matters or any similar
state or local Governmental Authority. No labor strike, slowdown, work stoppage
or other labor trouble is pending or, to the best of Seller's knowledge,
threatened by or against Seller or any of its Subsidiaries. During the last five
(5) years, Seller and its Subsidiaries have not experienced any strike, work
stoppage, slowdown or other labor difficulty. Seller and its Subsidiaries do not
have any union or collective bargaining agreement. No collective bargaining
agent has been certified as a representative of any employee of Seller or its
Subsidiaries, and no representation campaign or election is now in progress with
respect to any employees of Seller or its Subsidiaries. Seller and its
Subsidiaries have not been, and Seller and its Subsidiaries are not in (and is
not being charged with being in) default under or in violation of any
Requirement of Law applicable to Seller, its Subsidiaries or to any of their
respective former or current employees or to applicants for employment,
including the National Labor Relations Act (as amended), the Fair Labor
Standards Act (as amended), the Age Discrimination in Employment Act of 1967,
Title VII of the Civil Rights Act of 1964, any Executive Order administered by
the Office of Federal Contract Compliance Programs or any similar state or local
fair employment practice laws.
3.13. Worker's Compensation Claims. Seller has provided or made available
to Buyer a true and complete listing, to the best of Seller's knowledge, of all
pending worker's compensation claims in connection with Seller's and its
Subsidiaries' employees and any former employee of Seller or its Subsidiaries
whose services were used in connection with the Business.
3.14. Litigation. There are no suits, actions, claims, demands, citations,
summons, subpoenas, or legal, administrative, arbitration or other proceedings
or governmental inquiries or investigations of any nature (civil, criminal,
regulatory or otherwise), at law or in equity, pending in any federal, state or
local court, or before any administrative agency, arbitrator, mediator or other
Governmental Authority (A) against, or otherwise adversely affecting in a
material way, the Acquired Assets or (B) which seeks to enjoin, prohibit, or
invalidate any action taken or to be taken pursuant to or in connection with
this Agreement. To the best of Seller's knowledge, there
11
are no judgments, decrees, injunctions or orders of any Governmental Authority
or arbitrator outstanding or unsatisfied against Seller, any of its Subsidiaries
or the Acquired Assets. In addition, to the best of Seller's knowledge, neither
Seller nor any of its Subsidiaries have received any notice, whether or not in
writing, threatening any of the above matters. If any of the matters set forth
on Section 3.14 of the Seller Disclosure Schedule is decided adversely to Seller
or its Subsidiaries, such adverse decision will not result in a loss or
forfeiture of, or creation of any Encumbrance upon, any of the Acquired Assets.
3.15. Compliance with Laws. Seller and its Subsidiaries have complied in
all material respects with all Requirements of Law in connection with the
conduct of the Business and the ownership of the Acquired Assets. Neither Seller
nor any of its Subsidiaries have received any written notice, asserting any
non-compliance with any such Requirement of Law.
(a) Permits. Seller has delivered or made available to Buyer a true,
accurate and complete list of, or copies of, all material Permits required
to be obtained or maintained in order presently to conduct the Business as
conducted as of the date hereof and as of the Closing Date. To the best of
their knowledge, Seller and its Subsidiaries have (or have made timely
application for) all Permits necessary to enable them to utilize the
Acquired Assets as currently employed in the Business, and their respective
employees and agents also have all such Permits (including Environmental
Permits) required of them in carrying out their duties. All Acquired
Permits are in full force and effect, there has been no violation of or
default or breach thereunder, and there is no pending or, to the best of
Seller's knowledge, threatened proceeding under which any may be revoked,
terminated or suspended. Seller shall cooperate with Buyer in having the
Permits transferred to Buyer or in issuing new permits, licenses or
certificates to Buyer to replace the Permits which are non-transferable.
(b) Environmental Matters. With respect to the Acquired Assets and
the Business (wherever conducted), except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect, (i) neither Seller nor any of its Subsidiaries has received any
written communication during the two years prior to the date hereof from a
Governmental Authority or any third party alleging that Seller or any of
its Subsidiaries are in violation of any Environmental Laws, the substance
of which communication has not been resolved, or that it is a potentially
responsible party under the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar state laws, regardless of
when such alleged violation originally occurred or when Seller or any of
its Subsidiaries received their original notice relating to such alleged
violation, (ii) each of Seller and its Subsidiaries are in compliance with
all Environmental Laws, (iii) neither Seller nor any of its Subsidiaries
have entered into any consent decree or order, which decree or order is
still in effect, or are subject to any outstanding judgments with respect
to any property currently or formerly owned or operated by Seller or its
Subsidiaries, relating to compliance with any Environmental Law or to the
investigation or cleanup of Hazardous Material under any Environmental
Laws, and (iv) there is no pending or, to the knowledge of Seller,
threatened proceeding against Seller or any of its Subsidiaries for a
violation of any Environmental Laws.
3.16. No Seller's Brokers. All negotiations related to this Agreement and
the
12
Transaction have been carried out by Seller directly with Buyer, without the
intervention of any broker, finder, investment banker or other Person on behalf
of Seller or any of its Subsidiaries in such a manner as to give rise to any
claim by any such Person against Buyer for any finder's fee, brokerage
commission or similar payment.
3.17. Business Relationships. No material customer or supplier of, or joint
venturer with, Seller or any of its Subsidiaries has, within the previous twelve
(12) months, cancelled or threatened to cancel or otherwise modify its
relationship with Seller or its Subsidiaries.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Subject to, and except as disclosed in, Schedule 4 to this Agreement (the
"Buyer Disclosure Schedule"), Buyer represents and warrants to Seller, as of the
date hereof and as of the Closing Date, the following:
4.1. Buyer Organization, Existence and Good Standing. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
4.2. Buyer Authorization. Buyer has all requisite power and authority (A)
to execute and deliver, and perform all of its obligations under, this Agreement
and the other Transaction Documents and (B) to consummate the Transaction. This
Agreement, and if the Closing occurs the other Transaction Documents to which
Buyer is a party, when executed and delivered, shall constitute valid and
legally binding obligations of Buyer enforceable against it in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy, reorganization, insolvency and similar laws affecting creditors'
rights generally, and general equitable principles. This Agreement has been, and
at Closing the other Transaction Documents to be executed by Buyer will be, duly
executed and delivered by Buyer.
4.3. No Buyer Conflicts. The execution and delivery of, and performance of
its obligations under, this Agreement and the other Transaction Documents to
which Buyer is or will be a party, and the consummation of the Transaction, will
not (i) conflict with, or result in any violation or breach of or default or
loss of any benefit under (either alone or with the giving of notice or the
passage of time or both) (A) any provision of the organizational or governing
instruments of Buyer, (B) any contract or agreement to which Buyer is a party or
(C) any Requirement of Law of any Governmental Authority or arbitrator
applicable to Buyer or (ii) result in the creation or imposition of any
Encumbrance on Buyer.
4.4. Buyer Consents. No Requisite Approvals are required in connection
with Buyer's execution and delivery of, and performance of the obligations
under, this Agreement and the other Transaction Documents or the consummation of
the Transaction.
4.5. No Buyer Brokers. All negotiations related to this Agreement and the
Transaction have been carried out by Buyer directly with Seller, without the
intervention of any broker, finder, investment banker or other Person on behalf
of Buyer in such a manner as to give rise to any claim by any such Person
against Seller for any finder's fee, brokerage commission or similar payment.
13
SECTION 5
COVENANTS AND ADDITIONAL AGREEMENTS OF THE PARTIES
--------------------------------------------------
5.1. Operations Pending Closing. Except as otherwise agreed by the
Parties, between the date of this Agreement and the Closing (or the sooner
termination of this Agreement), Seller and its Subsidiaries shall conduct the
Business in substantially the same manner as the Ordinary Course of Business
during the period preceding the date of this Agreement; provided, however, all
new customer contracts may be handled through joint venture, teaming or similar
agreements to be negotiated on a case by case basis between Seller and Buyer
(any such customer contracts being referred to herein as "JV Contracts");
provided, however, that, (x) in the event the Closing does not occur on or
before July 31, 2003, Seller may reduce the scope of its normal operations; and
(y) in the event the Closing does not occur on or before the later of (I) August
31, 2003 or (II) 20 days after the Seller has finally resolved any comments made
by the staff of the SEC with respect to the Seller Proxy Materials, but in no
event later than September 20, 2003 (the date provided in this clause (y) being
referred to as the "Outside Date"), Seller shall no longer be required to
conduct the Business in the Ordinary Course of Business (without limitation,
Seller shall have no further obligation to fund the Business), but, at Buyer's
written request, Seller shall agree irrevocably to lease or cause to be leased
to Buyer the Acquired Equipment, Acquired Inventory, employees of Seller and
other assets necessary to conduct the Business on a subcontracting basis,
including performing the Assumed Contracts (with the Buyer receiving the revenue
therefrom), all on terms reasonably agreed upon by the parties. Without limiting
the generality of the foregoing, Seller and its Subsidiaries shall not, without
the prior consent of the Buyer, which shall not be unreasonably withheld:
(i) take any action which would, or could reasonably be
expected to, result in a Material Adverse Effect;
(ii) mortgage, pledge, or subject to any Encumbrance the
Acquired Assets or otherwise enter into any agreement or commitment
that restricts the use of the Acquired Assets in any way;
(iii) sell, transfer, convey, assign or otherwise dispose of
any of the Acquired Assets, except for the consumption of Acquired
Inventory in the Ordinary Course of Business;
(iv) waive, release, settle, compromise or cancel any claims
against third parties or debts owing to it or any rights with respect
to Acquired Assets or Assumed Liabilities;
(v) settle or compromise, or agree to settle or compromise,
any suits, actions or claims by or against Seller or any of its
Subsidiaries with respect to Acquired Assets or Assumed Liabilities;
(vi) terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Assumed Contract, or pay any amount
in respect of any Assumed Contract not required by any Requirement of
Law or by any
14
Assumed Contract;
(vii) subject to Sections 5.3, 9.1(f) and 9.2(b), enter into
any arrangement or agreement that would not permit the consummation
of the Transaction; or
(viii) take any action or omit to take any action, which
omission or action would result in a material breach of this
Agreement, or intentionally take any action or omit to take any
action which action or omission would result in a breach of this
Agreement.
5.2. Preservation of Organization. Prior to the Closing, Seller shall use
its commercially reasonable efforts to preserve the Business and the Acquired
Assets, to keep available the services of its employees, and to preserve its
favorable business relationships with its suppliers, customers and others with
whom business relationships exist. Notwithstanding any provision of this
Agreement to the contrary, Seller shall not (i) take any action that would cause
a material decrease in the value of the goodwill of the Business, including
relationships with each of its customers or (ii) fail to take any reasonable
action of which it becomes aware that would prevent or would be reasonably
likely to prevent a material decrease in such value.
5.3. Similar Transactions Prohibited. Between the date of this Agreement
and the Closing (or the sooner termination of this Agreement), except as
expressly contemplated by this Agreement, Seller and its Subsidiaries and their
respective stockholders, directors, officers, partners, managers, members,
employees, Affiliates, agents or representatives (including any investment
banker, attorney or accountant retained by it) shall not, directly or
indirectly, (i) make, encourage, facilitate, solicit, assist or initiate any
inquiry or proposal, or provide any information to or participate in any
negotiations with, any Person or group (other than Buyer) relating to any of the
following transactions (collectively, an "Alternative Transaction"): (A)
liquidation, dissolution, recapitalization, share exchange, business
combination, merger or consolidation of Seller or its Subsidiaries, (B) purchase
or sale of any of the Acquired Assets, other than the consumption of Acquired
Inventory in the Ordinary Course of Business of the Business, (C) purchase or
sale of 15% or more of shares of any class of equity securities of Seller or its
Subsidiaries, (D) any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 15% or more of any class of equity
securities of Seller or its Subsidiaries, or (E) any similar actions or
transactions involving Seller and its Subsidiaries (other than the Transaction)
or (ii) agree to or consummate any Alternative Transaction. Notwithstanding the
foregoing, Seller or its Board of Directors shall be permitted to (A) make any
disclosure required by applicable law or by obligations pursuant to any listing
agreement with or rules of any securities exchange; or (B) engage in any
discussions or negotiations with, or provide any information (including, without
limitation, non-public information with respect to the Seller, the Business and
the Acquired Assets) to, any Person in response to an unsolicited bona fide
written proposal or offer for an Alternative Transaction by any such Person, if
and only to the extent that, in the case of the actions referred to in clause
(B), (i) the Board of Directors of Seller concludes in good faith, after
consultation with its outside legal counsel, that the failure to provide such
information or engage in such negotiations or discussions is or is reasonably
likely to result in a breach of its fiduciary duties to the stockholders of the
Seller in accordance with
15
Delaware law, (ii) prior to providing any information or data to any Person in
connection with a proposal or offer for an Alternative Transaction by any such
Person, the Board of Directors of Seller receives from such Person an executed
confidentiality agreement containing terms and provisions at least as
restrictive as those contained in the Confidentiality Agreement (which shall not
preclude discussions or negotiations relating to the proposal or offer from such
Person) and (iii) prior to providing any information or data to any Person or
entering into discussions or negotiations with any Person, the Board of
Directors of Seller notifies Buyer promptly of such inquiries, proposals or
offers received by, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives, indicating the name of
such Person and providing to Buyer a copy of such written proposal or offer for
an Alternative Transaction. Seller agrees that it will keep Buyer informed, on a
prompt basis, of the status and terms of any such proposals or offers and the
status of any such discussions or negotiations and that it will deliver to Buyer
copies of (or, if oral, summaries of) any changes to any proposals or offers.
Seller agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
prior to or on the date of this Agreement with respect to any Alternative
Transaction or similar transaction or arrangement and will not waive any rights
under any standstill or confidentiality agreements entered into with such
parties. Seller agrees that it will take the necessary steps to promptly inform
the individuals or entities referred to in the first sentence of this Section
5.3 of the obligations undertaken in this Section 5.3.
5.4. Change in Information. Seller and Buyer will advise the other in
writing immediately, but in any event prior to the Closing, of:
(a) the occurrence of any event which renders any of the
representations or warranties set forth herein materially inaccurate or the
awareness of either of them that any representation or warranty set forth
herein was not materially accurate when made; and
(b) the failure of any Party hereto to comply with or accomplish in
any material respect any of the covenants or agreements set forth herein.
At or before the Closing, all schedules to this Agreement shall be updated as of
the Closing Date. Any Party adversely affected by a change to a schedule may
elect to close the Transaction without prejudice to such Party's rights to
indemnification relating to any such change.
5.5. Financial Reports. Seller shall provide Buyer copies of all operating
and financial reports relating to the Acquired Assets prepared by or for Seller
in the Ordinary Course of Business consistent with past practices reasonably
promptly following the time such reports become available.
5.6. Fulfillment of Closing Conditions. Each Party shall act or refrain
from acting, as the case may be, so that each of its representations and
warranties set forth in this Agreement shall be true on and as of the Closing,
and each Party shall use its commercially reasonable efforts to ensure that the
Transaction will be consummated. If any event should occur, whether or not
within the control of any Party hereto, which would prevent fulfillment of the
conditions upon the obligations of any Party hereto to consummate the
Transaction, the Parties hereto will
16
use their commercially reasonable efforts to cure the event as expeditiously as
possible. Each Party shall cooperate fully with each other in taking any
actions, including actions to obtain any Requisite Approvals. If the Requisite
Approval of any Governmental Authority contains any condition, the Party upon
which such condition is imposed shall use its commercially reasonable efforts to
comply therewith before the Closing; provided, however, that for purposes of
this Section 5.6, the efforts of a Party shall not be deemed commercially
reasonable where such efforts would be unduly burdensome to the complying Party
or would have a Material Adverse Effect upon the complying Party.
5.7. Due Diligence; Employees. Between the date hereof and the Closing (i)
authorized representatives of Buyer shall have reasonable access to all
properties, books, records, contracts and documents of Seller relating to the
Transaction, (ii) Seller shall furnish to Buyer all information with respect to
its affairs, the Business and the Acquired Assets that Buyer may reasonably
request and (iii) Buyer shall have the right to discuss the affairs of Seller,
the Business and the Acquired Assets with Seller's employees, counsel and
independent accountants; provided, however, (A) subject to Section 7.1, that no
investigation or examination by Buyer in connection with the foregoing shall in
any way diminish or obviate any representation or warranty of Seller made in
this Agreement, and (B) Seller and its Subsidiaries shall not be required to
provide access to any minutes or similar communications to the Board of
Directors or similar governing body of Seller or any of its subsidiaries or to
any documents subject to any applicable privilege. Seller shall provide Buyer
and its representatives with reasonable access to its employees to facilitate
the smooth transition of such employees who become Transferred Employees from
Seller to Buyer. Seller shall use its commercially reasonable efforts to
encourage its employees who are offered employment by Buyer to agree to be
employed by Buyer.
5.8. Maintenance of Assets. From and after the date hereof until the
Closing Date, Seller shall make all repairs and replacements to the Acquired
Equipment, subject to the provisions of Section 5.1, necessary to preserve such
Acquired Equipment in normal operating condition, ordinary wear and tear
excepted, in accordance with the customary practice of Seller.
5.9. Confidentiality. The Confidentiality Agreement shall survive the
execution of this Agreement and remain fully enforceable through the Closing. As
of the Closing, the Confidentiality Agreement shall be automatically terminated
without further action by any Party.
5.10. Public Announcements. Prior to Closing, none of the Parties will, nor
will any Party permit its respective Affiliates or subsidiaries to, issue or
cause the publication of any press release or any other announcement with
respect to the Transaction contemplated by this Agreement without the prior
written consent of the other Parties, except where such release or announcement
is required by applicable law or pursuant to any applicable listing agreement
with, or rules or regulations of, Nasdaq or other securities exchange, in which
case such Party, prior to making such announcement, shall consult with the other
Parties regarding the same.
5.11. Other Matters. Each Party shall cooperate at its own expense with any
other Party, both before and after the Closing, to the extent such Party may
reasonably request, in the defense of any proceeding seeking to restrain,
prohibit or invalidate the Transaction.
17
5.12. Insurance. From and after the date hereof until the Closing Date,
Seller shall maintain insurance with reputable insurance companies, to the
extent and in the manner maintained as of the date hereof, on the Acquired
Assets and the operation of the Business.
5.13. Preparation of Seller Proxy Materials; Stockholder Approval.
(a) As promptly as practicable after the date hereof, but in no
event more than 10 days after the date hereof, Seller shall take, or cause
to be taken, all actions, and do or cause to be done, all things reasonably
necessary, proper or advisable to (i) prepare and file with the SEC and
Nasdaq any documents or materials necessary to meet its disclosure
obligations under the Exchange Act and the rules and regulations
promulgated thereunder, including but not limited to, a proxy statement and
related materials for the Seller Stockholders Meeting, or, if the
Stockholders' Written Consent has been obtained, the information statement
related thereto, as the case may be (the "Seller Proxy Materials"), and
(ii) have the Seller Proxy Materials cleared by the SEC. Seller will use
its reasonable best efforts to cause the Seller Proxy Materials to be
mailed to its stockholders as promptly as practicable after the SEC has
cleared the Seller Proxy Materials. Each Party agrees to correct any
information provided by it for use in the Seller Proxy Materials that shall
have become false or misleading at the time of mailing of such proxy
materials.
(b) Unless the holders of the requisite number of shares of Seller's
Common Stock and Class B Common Stock approve and adopt by written consent
this Agreement, the Transaction, and the Certificate of Incorporation
Amendment (defined hereafter) ("Stockholders' Written Consent"), (i) as
soon as practicable following the earlier of the date upon which the SEC
clears the Seller Proxy Materials or the date the SEC notifies Seller that
it will not review the Seller Proxy Materials, Seller, acting through its
Board of Directors, shall, subject to and in accordance with its restated
certificate of incorporation and by-laws, promptly and duly call, give
notice of, convene and hold a meeting of the holders of shares of Seller's
Common Stock and Class B Common Stock (the "Seller Stockholders Meeting")
for the purpose of voting to approve and adopt (A) this Agreement and the
Transaction, and (B) an amendment of its restated certificate of
incorporation so as to change its legal name as set forth in Section
5.16(c) hereof (the "Certificate of Incorporation Amendment"), (ii) Seller
agrees to use its reasonable best efforts to distribute the Seller Proxy
Materials to its stockholders in a timely manner such that the Seller
Stockholders Meeting shall occur on or before sixty (60) days after the
date of this Agreement, (iii) Seller shall (A) include in the Seller Proxy
Materials a recommendation by its Board of Directors to approve and adopt
this Agreement and the Transaction and the Certificate of Incorporation
Amendment by the stockholders of Seller, and (B) use its reasonable efforts
to solicit and obtain such approval; provided however that Seller shall
have no obligation pursuant to this Section 5.13 if this Agreement is
terminated in accordance with Section 9.1 hereof or pursuant to this
Section 5.13(b) in the event that the Board of Directors of Seller
determines to withhold, withdraw, amend or modify its recommendation with
respect to this Agreement as provided hereafter, and (iv) the Board of
Directors of Seller shall not withhold, withdraw, amend or modify in a
manner adverse to Buyer its recommendation referred to in clause (A) of
subsection (iii) above (or announce publicly its intention to do so),
except that
18
such Board of Directors shall be permitted to withhold, withdraw, amend or
modify its recommendation (or publicly announce its intention to do so) if
the Board of Directors of Seller determines in good faith, after
consultation with its outside legal counsel, that its failure to withhold,
withdraw, amend or modify its recommendation is, or is reasonable likely to
result in, a breach of its fiduciary duties to the stockholders of Seller
in accordance with Delaware law. In the event that the Stockholders'
Written Consent is obtained, Seller shall promptly, and in any event within
thirty days after delivery of such Stockholders' Written Consent, give, or
cause to be given, to the holders of Common Stock and Class B Common Stock
the notice required under Section 228(e) of the Delaware Act.
(c) None of the information supplied or to be supplied by Seller for
inclusion or incorporation by reference in the Seller Proxy Materials (or
any of the amendments or supplements thereto) will, on the date each is
first mailed to the stockholders of Seller or at the time of the Seller
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statement therein, in light of the circumstances under
which they were made, not misleading. The Seller Proxy Materials will
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC thereunder.
(d) None of the information supplied or to be supplied by Buyer for
inclusion or incorporation by reference in the Seller Proxy Materials (or
any of the amendments or supplements thereto) will, on the date each is
first mailed to Seller's stockholders, or at the time of the Seller
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing
provisions of this Section, no representation or warranty is made by Buyer
with respect to statements made or incorporated by reference in the Seller
Proxy Materials based on information supplied by any Person other than
Buyer.
5.14. Stock Transfer Records. Seller will cause its transfer agent to make
stock transfer records relating to Seller available to the extent reasonably
necessary to effectuate the intent of this Agreement.
5.15. Mutual Release. Seller and Buyer have had a business relationship for
many years, which has included, among other things, Seller being a licensee of
Buyer. It is the intent of the Parties that, as a result of the Transaction and
the purchase of the Acquired Assets, Buyer will acquire from Seller (and, to the
extent applicable, its Subsidiaries) all of the rights of Seller (and, to the
extent applicable, its Subsidiaries) relating to its business relationship with
Buyer, including any rights to, relating to or arising out of the Acquired
Assets and the business relationship conducted with respect to the Acquired
Assets, other than Seller's rights under this Agreement. To more fully ensure
the transfer of such rights to Buyer and the final separation of the business
relationship between Seller (and, to the extent applicable, its Subsidiaries)
and Buyer, the Seller (and, to the extent applicable, its Subsidiaries) and
Buyer desire to mutually release each other as provided in this Section.
19
Accordingly, effective as of the Closing Date, Seller for itself, its
Subsidiaries and any Person claiming through them, hereby releases Buyer and its
directors, officers, employees, agents and subsidiary and affiliated entities
(collectively, the "Buyer Released Parties") from any and all claims, demands,
debts, losses, actions, causes of action, suits, proceedings, accounts,
contracts, and demands of every kind and nature, whether known or unknown, in
contract, in tort, by statute, at law, in equity, or any other basis, which
Seller, its Subsidiaries or any Person claiming through them had or has or may
have as of the Closing Date against any of the Buyer Released Parties arising
from or relating to any business relationship between Seller (and, to the extent
applicable, its Subsidiaries) and Buyer relating to or arising out of the
Acquired Assets, other than any rights under this Agreement except for the
breach of any representation or warranty relating to the business relationship
between Seller and Buyer not created by this Agreement, which are released.
Further, effective as of the Closing Date, Buyer for itself, its
subsidiaries and any Person claiming through them, hereby releases Seller and
its directors, officers, employees, agents and subsidiary and affiliated
entities (collectively, the "Seller Released Parties") from any and all claims,
demands, debts, losses, actions, causes of action, suits, proceedings, accounts,
contracts, and demands of every kind and nature, whether known or unknown, in
contract, in tort, by statute, at law, in equity, or any other basis, which
Buyer, its subsidiaries or any Person claiming through them had or has or may
have as of the Closing Date against any of the Seller Released Parties arising
from or relating to any business relationship between Seller (and, to the extent
applicable, its Subsidiaries) and Buyer relating to or arising out of the
Acquired Assets, other than any rights under this Agreement except for the
breach of any representation or warranty relating to the business relationship
between Seller and Buyer not created by this Agreement, which are released.
5.16. Post-Closing Actions by Seller. After Closing, Seller agrees:
(a) to (A) consider in good faith the dissolution of Seller and,
unless it is determined by the Board of Directors of Seller in accordance
with its fiduciary duties that the dissolution of Seller is not in the best
interest of the Corporation and its stockholders, to submit the proposed
dissolution to a vote of Seller's Common Stock and Class B Common Stock no
later than Seller's next annual meeting currently scheduled for December
2003 and (B) file, or cause to be filed, a Certificate of Dissolution with
the Secretary of State of the State of Delaware in accordance with Section
275 of the Delaware Act if a majority of the outstanding voting power of
the shares of Common Stock and Class B Common Stock of Seller entitled to
vote thereon approve the dissolution at such meeting;
(b) (A) cause each of its Subsidiaries (other than Try-Tek Machine
Works, Inc.) to consider in good faith dissolution of its operations in
accordance with the applicable laws of its state of incorporation or
organization, as the case may be, and, if it is determined by the
respective Board of Directors of each Subsidiary (other than Try-Tek
Machine Works, Inc.) in accordance with their fiduciary duties that each
Subsidiary (other than Try-Tek Machine Works, Inc.) should be dissolved, to
approve each proposed dissolution by written consent and (B) file, or cause
to be filed, a certificate of dissolution or such other documents as
required under applicable law;
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(c) effective as soon as administratively possible, to file, or
cause to be filed, all necessary documentation required under the laws
applicable to the entity in question, to effect the Certificate of
Incorporation Amendment, and to amend the certificate of incorporation or
other organizational instrument of each Subsidiary whose legal name
contains the word "Insituform", "MidSouth" or "insitu" to change their
respective legal names, to new legal names which shall not include the name
"Insituform", "MidSouth" or "insitu" or any derivation thereof.
SECTION 6
CLOSING CONDITIONS, DOCUMENTS AND PROCEDURES
--------------------------------------------
6.1. Conditions to Obligation of Seller and its Subsidiaries. The
obligation of Seller and its Subsidiaries to consummate the Transaction is
subject to the fulfillment, prior to or at Closing, of each of the following
conditions, any of which Seller and its Subsidiaries may waive in writing:
(a) Buyer Representations and Warranties True. All representations
and warranties of Buyer made in this Agreement, or in any exhibit,
schedule, or certificate delivered pursuant hereto that are qualified by
materiality or Material Adverse Effect shall be true and correct in all
respects, and all such representations and warranties not so qualified
shall be true and correct in all material respects, in each case on and as
of the Closing Date with the same force and effect as if made on and as of
that date, except for changes contemplated by this Agreement.
(b) Buyer Covenants Performed. All of the terms, covenants and
conditions to be complied with and performed by Buyer on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
(c) No Adverse Proceedings. No suit, action or governmental
proceeding shall have been instituted (or in the case of governmental
proceedings, threatened in writing) against, and no order, decree, or
judgment of any court, agency, or other Governmental Authority shall have
been rendered against, any Party hereto or seeking to enjoin, restrain,
invalidate, prohibit, avoid, set aside or render illegal in whole or in
part the consummation of the Transaction.
(d) Compliance Certificate. Buyer shall have delivered a
certificate, dated as of the Closing Date and signed by an appropriate
representative of Buyer, certifying that the conditions specified in
Sections 6.1(a) and (b) have been fulfilled.
(e) Payment of Purchase Price and Delivery of Assignment and
Assumption Agreement. Buyer shall have paid the Purchase Price to Seller at
Closing as set forth in Section 2.2 hereof, including the delivery of the
Escrow Amount to the Escrow Agent as set forth in Section 2.3, and
delivered, or caused to be delivered, the Assignment and Assumption
Agreement signed by Buyer.
(f) Seller's Stockholder Approval. The adoption and approval of this
Agreement and the consummation of the Transaction and the Certificate of
Incorporation
21
Amendment shall have been duly approved under the Delaware Act at the
Seller Stockholders Meeting or by the Stockholders' Written Consent.
(g) Delivery of Escrow Agreement. Buyer shall have executed and
delivered to Seller the Escrow Agreement.
(h) Other Acts. Seller shall have received from Buyer such other
Closing documents as they may reasonably request in connection with the
Transaction, and all documents and instruments incident to the Transaction
shall be in form and substance satisfactory to Seller and its counsel.
6.2. Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the Transaction is subject to the fulfillment, prior to or at
Closing, of each of the following conditions, any of which Buyer may waive in
writing:
(a) Seller's and Subsidiaries' Representations and Warranties True.
All representations and warranties of Seller and its Subsidiaries made in
this Agreement, or in any exhibit, schedule, or certificate delivered
pursuant hereto that are qualified by materiality or Material Adverse
Effect shall be true and correct in all respects, and all such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case on and as of the Closing
Date with the same force and effect as if made on and as of that date,
except for changes contemplated by this Agreement.
(b) Seller's and Subsidiaries' Covenants Performed. All of the
terms, covenants and conditions to be complied with and performed by Seller
and its Subsidiaries on or prior to the Closing Date shall have been
complied with or performed in all material respects.
(c) Requisite Approvals and Consents. All Requisite Approvals to
authorize, approve or permit the execution, delivery and performance of
this Agreement, and the full, complete and effective consummation of the
Transaction, shall have been received, including all agreements, consents
and approvals of any third parties required to effect the consummation of
the Transaction, or otherwise pertaining to the matters covered by it, on
terms satisfactory to Buyer, including without limitation the consent of
Seller's or its Subsidiaries' customers to the assignment and assumption of
the Assumed Contracts as contemplated herein.
(d) No Material Adverse Effect. There shall have occurred no
Material Adverse Effect.
(e) No Adverse Proceedings. No suit, action or governmental
proceeding shall have been instituted (or in the case of governmental
proceedings, threatened in writing) against, and no order, decree, or
judgment of any court, agency, or other Governmental Authority shall have
been rendered against, any Party hereto or seeking to enjoin, restrain,
invalidate, prohibit, avoid, set aside or render illegal in whole or in
part the consummation of the Transaction.
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(f) Compliance Certificate. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date and signed by an appropriate
representative of Seller, certifying that the conditions specified in
Sections 6.2(a), (b), (c), (d), (h) and (k) have been fulfilled.
(g) Due Diligence. Buyer shall have completed its due diligence
investigation and review of Seller and its Subsidiaries, and the results of
such investigation and review (including with respect to the Acquired
Assets, Assumed Liabilities, Assumed Contracts, Business and business
prospects) shall be satisfactory to Buyer in its sole, unconditional, full
and unfettered discretion; provided, however, that Buyer must exercise its
right to terminate this Agreement resulting from the failure of the
condition contained in this section prior to the earlier of (i) the date
that the Seller Proxy Materials are mailed to the stockholders; or (ii) the
date such stockholder approval is obtained.
(h) Seller's Stockholder Approval. The adoption and approval of this
Agreement and the consummation of the Transaction and the Certificate of
Incorporation Amendment shall have been duly approved at the Seller
Stockholders Meeting or by the Stockholders' Written Consent.
(i) Delivery of Other Documents. Seller shall have delivered to
Buyer the following documents or agreements:
(1) a Xxxx of Sale in a form to be agreed upon by the parties
in good faith duly executed by Seller and its Subsidiaries regarding
the conveyance, transfer and assignment to Buyer of all Acquired
Assets other than the Acquired Intellectual Property, together with
possession of the Acquired Assets that are capable of being
transferred by delivery; and
(2) an Assignment and Assumption Agreement in a form to be
agreed upon by the parties in good faith duly executed by Seller and
its Subsidiaries regarding the assignment of the Assumed Contracts
and the Acquired Intellectual Property and the assumption of the
Assumed Liabilities; and
(3) the Escrow Agreement executed by Seller.
(j) Legal Opinion of Counsel of Seller. Buyer shall have received
the favorable legal opinion of counsel to Seller and its Subsidiaries in a
form to be reasonably agreed upon by the parties.
(k) Delivery of Shareholder Information Statement. If the
Stockholders' Written Consent has been obtained, then more than twenty (20)
calendar days shall have elapsed since the date that Seller sent or gave
the Seller Proxy Materials to its stockholders such that Rule 14c-2
promulgated under the Exchange Act is satisfied in all respects.
(l) Other Acts. Buyer shall have received from Seller and its
Subsidiaries such other Closing documents as Buyer may reasonably request
in connection with the
23
Transaction, and all documents and instruments incident to the Transaction
shall be in form and substance satisfactory to Buyer and its counsel, and
Buyer shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
SECTION 7
SURVIVAL AND INDEMNIFICATION
----------------------------
7.1. Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants, agreements and indemnification
obligations of the Parties contained in this Agreement shall survive the Closing
for a period ending on the third anniversary of the Closing Date; provided that,
(x) the representations and warranties in Sections 3.1, 3.2, 3.3 and 3.4 shall
survive indefinitely, unless Seller shall dissolve, in which case such
representations and warranties shall survive for a period ending three years
following the date the dissolution becomes effective under the Delaware Act, and
(y) any covenants expressly providing for a longer period of operation shall
survive until the end of such express period of operation. Each of the Parties
represents that it has notified the other Parties of any facts or circumstances
that has come to its attention which could result in a breach of any
representation or warranty by a Party signing this Agreement. The Parties shall
be entitled to rely on the representations and warranties contained herein,
notwithstanding any due diligence investigation conducted by the Parties after
the date hereof. If, as the result of any due diligence investigation or
otherwise, a Party learns of a breach of any representation or warranty, such
Party shall promptly inform the other Parties hereto in writing of such breach.
The waiver of any closing condition related to such breach by the Party intended
to benefit therefrom shall not waive or impair such Party's right to seek
indemnification after Closing for such breach.
7.2. Seller's Indemnity. Subject to the provisions of this Section 7,
following the Closing, Seller and its Subsidiaries shall indemnify, defend and
hold harmless Buyer and its directors, officers, employees, representatives and
agents from and against any and all Damages suffered, sustained, incurred or
required to be paid directly or indirectly by them in connection with, as a
result of or arising out of:
(a) any matter or event of any nature whatsoever arising from a
Non-Assumed Liability, whether occurring prior to or after Closing, or
(b) any matter or event of any nature whatsoever relating to Seller,
its Subsidiaries, the Business or the Acquired Assets which occurred on or
prior to the Closing and is not an Assumed Liability; or
(c) any matter or event of any nature whatsoever relating to Seller,
its Subsidiaries or their post-Closing business, operations or winding up
which occurs after the Closing; or
(d) any breach or nonfulfillment of any covenant (pre-Closing or
post-Closing) or agreement on the part of Seller or its Subsidiaries
contained in this Agreement or any other Transaction Document; or
24
(e) any inaccuracy or breach of any representation or warranty on
the part of Seller or its Subsidiaries contained in this Agreement or any
other Transaction Document without regard for (i) any materiality or other
qualification contained therein, or (ii) any matter specifically identified
on the Seller Disclosure Schedule as not qualifying Seller's
representations and warranties for purposes of this Section 7.2(e), unless
otherwise indicated therein.
7.3. Buyer's Indemnity. Subject to the provisions of this Section 7,
Buyer shall indemnify, defend and hold harmless Seller and their respective
directors, officers, employees, representatives and agents from and against any
and all Damages suffered, sustained, incurred or required to be paid directly or
indirectly by them in connection with, as a result of or arising out of:
(a) any matter or event of any nature whatsoever relating to
Buyer or the ownership of the Acquired Assets which occurs after the
Closing; or
(b) any breach or nonfulfillment of any covenant (pre-Closing or
post-Closing) or agreement on the part of Buyer contained in this Agreement
or any other Transaction Document, including Assumed Liabilities; or
(c) any inaccuracy or breach of any representation or warranty on
the part of Buyer under this Agreement or any Transaction Document.
7.4. Claims Procedure. All claims for indemnification by an Indemnified
Party against an Indemnifying Party pursuant to this Section 7 shall be asserted
and resolved as set forth in this Section 7.4. As soon as reasonably practicable
after becoming aware of a claim for indemnification under this Agreement
(including the assertion of any claim, or the commencement of any suit, action
or proceeding, by any Person not a party hereto for which indemnity may be
sought under this Agreement), an Indemnified Party shall promptly, but in no
event more than 30 days after such Indemnified Party becomes aware of such
claim, notify the Indemnifying Party of such claim and the amount or the
estimated amount thereof to the extent then feasible (which estimate shall not
be conclusive of the final amount of such claim) (the "Claim Notice"); provided,
however, that the right of an Indemnified Party to be indemnified hereunder
shall not be adversely affected by such Party's failure to give such Claim
Notice unless, and then only to the extent that, an Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party disputes its
liability to the Indemnified Party hereunder with respect to such claim and (ii)
if such claim involves a third-party claim, whether or not the Indemnifying
Party desires to defend the Indemnified Party against such claim. If the
Indemnifying Party does not dispute its liability for such claim in writing
within the Notice Period, then the Indemnified Party shall be entitled to
recover from the Indemnifying Party the amount of such claim on an as-incurred
basis, following the receipt by the Indemnifying Party of documentation
providing in reasonable detail a description of the costs and other Damages for
which the Indemnified Party is seeking indemnification (including, where
practicable, receipts or other proofs of payment of such amounts); provided,
however, if the Indemnifying Party agrees that it has an indemnification
obligation, but disputes the amount of its obligation, then the Indemnified
Party shall be entitled
25
so to recover from the Indemnifying Party the amount not in dispute, without
prejudice to the Indemnified Party's claim for the amount in dispute.
(a) Defense of Third-Party Claim. If the Indemnifying Party notifies
the Indemnified Party in writing within the Notice Period that it desires
to defend the Indemnified Party against any third-party claim, then the
Indemnifying Party may assume such defense upon delivery to the Indemnified
Party of a written agreement acknowledging that (i) the Indemnified Party
is entitled to indemnification for all Damages arising out of such claim
and (ii) the Indemnifying Party shall satisfy its obligations to make such
indemnity on an as-incurred basis as provided in this Section 7.4; provided
however, (i) the Indemnifying Party's counsel must be reasonably
satisfactory to the Indemnified Party and (ii) the Indemnifying Party shall
thereafter keep the Indemnified Party informed on a reasonable basis of the
status of such claim. All costs and expenses incurred by the Indemnifying
Party in defending such claim or demand shall be a liability of, and shall
be paid by, the Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right (but not the duty) to
participate in the defense thereof and to employ such counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party. If,
however, the Indemnified Party reasonably determines in its judgment that
representation by the Indemnifying Party's counsel of both the Indemnifying
Party and the Indemnified Party would present such counsel with a conflict
of interest, then such Indemnified Party may employ separate counsel
reasonably satisfactory to the Indemnifying Party and its counsel to
represent or defend it in any such claim and the Indemnifying Party shall
pay the reasonable counsel fees and disbursements of such separate counsel.
Notwithstanding anything contained herein to the contrary, to the extent
either the Indemnifying Party or the Indemnified Party has insurance
coverage that covers defense costs, such insurance shall pay the defense
costs of such third-party's claim.
The Indemnifying Party and the Indemnified Party shall give
each other and their respective counsel access, during normal business
hours, to relevant business records and other documents, and shall permit
them to consult with their respective agents and employees regarding the
defense of any third-party claim (including using reasonable efforts to
make such persons available for depositions or other discovery practice).
(b) Settlement or Compromise. Any settlement or compromise made or
caused to be made in accordance with the provisions of this Section 7.4 by
the Indemnified Party or the Indemnifying Party, as the case may be, of any
third-party claim shall also be binding upon the Indemnifying Party or the
Indemnified Party, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in
the amount of such settlement or compromise; provided, however, (i) no
obligation, restriction or Damages that will not be paid in full by the
Indemnifying Party shall be imposed on the Indemnified Party as a result of
any such settlement or compromise without its prior written consent, which
shall not be unreasonably withheld or delayed, and (ii) no statement or
admission of liability that could reasonably be expected to be detrimental
to Buyer, the Acquired Assets or the Business may be made as part of any
such settlement or compromise without the prior written consent of Buyer,
which shall not be unreasonably withheld or delayed. The
26
Indemnifying Party will give the Indemnified Party at least 30 days'
prior written notice of any proposed settlement or compromise of any
third-party claim it is defending, during which time the Indemnified Party
may reject such proposed settlement or compromise; provided, however, from
and after such rejection, the Indemnified Party shall be obligated to
assume the defense of and full and complete liability and responsibility
for such claim and any and all Damages in connection therewith in excess of
the amount of Damages which the Indemnifying Party would have been
obligated to pay under the proposed settlement or compromise upon payment
to the Indemnified Party of the amount of the proposed settlement.
(c) The aggregate liability of Seller or Buyer under Section 7.2 or
Section 7.3, as the case may be, shall in no event exceed the cash portion
of the Purchase Price. In addition:
(i) Seller shall not have any liability to Buyer under Section
7.2, and Buyer shall not have any liability to Seller under
Section 7.3, unless the aggregate of all Damages for which Seller
or Buyer, as the case may be, would be liable but for this
Section 7.4 (c) (i) exceeds on a cumulative basis an amount equal
to $10,000, and then only to the extent of such excess; and
(ii) Seller shall not have any liability to Buyer under Section
7.2 (e) for any inaccuracy or breach of any representation or
warranty on the part of Seller or its Subsidiaries contained in this
Agreement or any other Transaction Document that is qualified by
Seller's knowledge, unless the aggregate of all Damages for which
Seller would be liable but for this Section 7.4 (c) (ii) exceeds on
a cumulative basis an amount equal to $50,000, and then only to the
extent of the amount of such Damages that exceeds $15,000 in the
aggregate (calculated separately from the $10,000 limitation in
clause (i) above).
7.5. Insurance Proceeds. In calculating the amount of any Damages to be
paid hereunder, the amount of such Damages shall be reduced by all insurance
reimbursements credited to or received by the Indemnified Party, relating to
such Damages. The Indemnified Party shall be obligated to assert against the
appropriate insurance company any covered third-party claim. In connection
therewith, upon request, each Party shall obtain a waiver of subrogation with
respect to such reimbursements from its insurer(s).
7.6. Sales Tax. Seller and Buyer agree to share equally the expense of
any sales Tax (or tax substantially similar to a sales Tax) that may be imposed
on either Party as a result of the Transaction.
SECTION 8
POST-CLOSING COVENANTS
----------------------
8.1. Employees.
27
(a) Effective as of the Closing, Buyer shall offer employment to
those employees of Seller or its Subsidiaries that it desires to employ
post-Closing in its sole and unfettered discretion, provided that Buyer
shall not solicit or offer employment to the persons listed on Schedule
8.1. Seller shall use its reasonable efforts to encourage such employees to
become employees of Buyer and will not act in any derogatory manner towards
or with respect to Buyer or take any action to prevent any such employee
from being employed by Buyer from and after the Closing Date. Employees who
accept employment with Buyer shall be referred to herein as the
"Transferred Employees." Effective as of the Closing, Seller or its
Subsidiaries shall no longer employ the Transferred Employees. Nothing
contained in this Agreement shall be deemed to obligate Buyer to employ any
person for any particular period or on any particular terms or conditions
of employment. Nothing in this Section 8.1 shall be construed to confer any
rights or remedies on any employee of Seller or any of its Subsidiaries.
(b) Seller and its Subsidiaries shall be solely responsible for any
and all claims and obligations, if any, for wages, commissions, salary,
insurance, wage continuation, severance pay, termination pay and other
benefits (including accrued and unearned vacation, holiday, sick pay and
other benefits, if any) arising or accruing or claimed to arise or accrue
with respect to any employees of Seller or its Subsidiaries.
(c) To the extent required by law, Seller and its Subsidiaries shall
remain liable and responsible for all obligations to all past or present
employees of Seller and its Subsidiaries (or any predecessors thereto),
including those who are Transferred Employees, who may be currently
receiving or entitled to receive, or who from and after the date hereof
shall be entitled to receive, and shall continue to provide to such
employees, health care related benefits under COBRA, or any of the rules or
regulations thereunder, in connection with or by reason of any termination
of employment with Seller or any of its Subsidiaries (or any predecessor
thereto).
8.2. Actions after the Closing.
(a) Further Assurances. From time to time after the Closing, Seller
and its Subsidiaries (for no additional consideration) shall take such acts
and execute and deliver to Buyer such documents and instruments of sale,
transfer, conveyance, assignment, delivery and such consents, assurances,
powers of attorney and other similar instruments as may be reasonably
requested by Buyer or its counsel in order to vest in Buyer all right,
title and interest in and to the Acquired Assets and to carry out the
purposes and intent of this Agreement and the other Transaction Documents.
Seller agrees to provide Buyer reasonable access to its computer systems
and network to access, and to otherwise effect an orderly transition to
Buyer of, the data and information (in the current storage media) that
comprises part of the Acquired Assets.
(b) Failure to Obtain Certain Consents. Nothing contained in this
Agreement shall be construed as an attempt to agree or an agreement to
assign any Acquired Asset, including any Contract, agreement or license,
which is at law non-assignable or which is non-assignable without the
Requisite Approval of another Person, unless such Requisite Approval shall
be given. Seller shall use all commercially reasonable efforts to obtain
all
28
Requisite Approvals of such Persons to the assignment of any such
Acquired Assets. If the Requisite Approvals of any Person to the assignment
of any Acquired Asset cannot be obtained, or if any attempted assignment of
any Acquired Asset would be ineffective or would adversely affect, as
applicable, Seller's (or its Subsidiaries', as applicable) rights
thereunder so that Buyer would not in fact receive all such rights, Seller
shall cooperate in any arrangement Buyer may reasonably request to provide
for Buyer the benefit of any such Acquired Asset, including enforcement for
the benefit of Buyer of any and all of Seller's (or its Subsidiaries', as
applicable) rights against any other party thereto arising out of the
breach or cancellation thereof by such party or otherwise.
(c) Confidentiality and Nonsolicitation after Closing. After the
Closing, all information relating to the Business, Acquired Assets or the
Assumed Liabilities shall be the confidential information of Buyer. Seller
and its Subsidiaries will hold such confidential information in the
strictest confidence, and will not disclose such confidential information
without the prior written consent of Buyer, except as required by law (in
which case, Seller and its Subsidiaries will use their best efforts to give
Buyer adequate notice to seek a protective order or similar relief). In
addition to any other nonsolicitation provision contained in any other
Transaction Document and unless expressly agreed to in writing by Buyer,
for a period of the lesser of (i) 5 years following the Closing Date, and
(ii) 3 years following the effective date of Seller's dissolution (the
"Nonsolicitation Period"), Seller and its Subsidiaries will not, in any
manner or at any time, directly or indirectly, solicit or encourage any
Person to cease doing business with Buyer or any Affiliate of Buyer or
solicit or encourage any employee(s) of Buyer or of any Affiliate of Buyer
to cease being an employee of Buyer or such Affiliate.
(d) Personal Property Prorations. All personal property Taxes,
utilities and similar fees and charges and any Encumbrance Taxes and
Charges with respect to the Acquired Assets to be conveyed to Buyer
pursuant hereto (the "Personal Property Taxes and Charges") shall be
prorated through the Closing Date. If Buyer receives a statement for
payment of any Personal Property Taxes and Charges after Closing, it may
pay the amount of such statement, and Seller shall promptly reimburse Buyer
for the amount of such statement for which Seller is responsible for under
this section.
(e) Noncompete. During the Nonsolicitation Period, Seller and its
Subsidiaries will not engage in, be engaged by or consult with, or have any
interest in, directly or indirectly, any other Person engaged in any
business or activity similar to, related to, or competitive with the
Business, other than the ownership of less than 5% of the outstanding
shares or other securities of any publicly held company that engages in any
of the foregoing activities; provided, however, that Seller and its
Subsidiaries shall be permitted to: (i) sell or otherwise dispose of any
assets not purchased by Buyer to any third party; (ii) perform
Spraywall(TM)work unless and until Buyer shall have irrevocably exercised
its option to acquire the Spraywall(TM)license as agreed to by the parties;
(iii) with respect to Try-Tek Machine Works, Inc., continue to conduct its
business as previously conducted by it (but not by Seller or Seller's other
affiliates), other than the manufacture, use or sale of any items which are
subject to Buyer's patents or proprietary or confidentiality rights; and
(iv) perform or cause to be performed (including through subcontractors)
any work required to be performed by it under warranties given by Seller
29
or its Subsidiaries with respect to work performed before the Closing.
The geographical area for the purposes of this restriction shall be the
United States of America and its territories. Seller and its Subsidiaries
hereby acknowledge and agree that the durational and geographical
restrictions and the scope of the covenants set forth in this section are
reasonable, and Seller and its Subsidiaries hereby waive any objection or
defense that they may have with respect to these matters. If any
arbitrator, court or tribunal of competent jurisdiction shall refuse to
enforce any or all of the foregoing restrictions because they are more
extensive, whether as to duration, geographical area or otherwise, than is
deemed reasonable, it is expressly understood and agreed between the
Parties that such covenants shall not be void, but that for the purpose of
such proceedings and in such jurisdictions, the restrictions contained
herein shall be deemed to be reduced to the extent necessary to permit
enforcement of the covenants.
(f) Work in Process. Promptly following Closing, Seller agrees to
provide a true, accurate and complete list of the amount of all work in
progress performed by Seller under the Assumed Contracts but not billed by
Seller before Closing ("Unbilled Work"). Buyer agrees to include the
Unbilled Work in its bills to customers under the Assumed Contracts issued
by Buyer in the Ordinary Course of Business following the Closing, and to
remit to Seller promptly upon receipt of payment from such customers an
amount equal to the amount of Unbilled Work (or, if less, the amount of
such payment). In addition, after Closing, if Buyer shall receive, directly
or indirectly, (i) any refund or other repayment of any retentions under
Assumed Contracts that were made before the Closing Date, or (ii) any
payment with respect to work under the Assumed Contracts performed and
billed by Seller or any of its Subsidiaries prior to Closing, Buyer shall
promptly pay or cause to be paid to Seller the amount so received by Buyer.
(g) License to Use Marks. Strictly as an accommodation to the
Licensees (defined hereinafter), Buyer grants to Seller and those of its
Subsidiaries that currently use the Marks (the "Licensees") a
non-exclusive, royalty-free license to use the Marks, but only for the
limited purposes set forth below (the "License") and in connection with
conducting the operation of their respective businesses as are required
promptly to discontinue their respective businesses and affairs in an
orderly manner. The License shall be limited in all respects to the
following:
(i) to continue to use stationery on which their respective
Marks are set forth, provided that each Licensee clearly
identifies on such stationary that such Licensee formerly
operated its business under such Xxxx, and provided
further that the license to use such stationary shall
terminate at the time the stock of stationery in the
manner set forth herein bearing the Xxxx that is in
existence on the date hereof has been used and, in no
event shall the License include using the Marks on any
purchase of stock of stationery after the date hereof;
(ii) to continue to use existing signage on which their
respective Marks are displayed on any real or personal
property owned or leased by a Licensee on the date hereof,
but only until such real or personal
30
property is sold by the Licensee or the lease of such
property has expired, at which time the applicable
Licensee covenants and agrees that it shall remove, or
cause such signage to be removed, at its expense prior to
(A) delivery of such real or personal property to a
third-party purchaser, or (B) return of such real or
personal property to a third-party lessor.
The Licensor reserves and retains all rights of simultaneous use of the
Marks. The Licensees have no right to assign or grant sublicenses under the
License.
SECTION 9
TERMINATION
-----------
9.1. Termination. In addition to any other provisions expressly
providing a right to terminate this Agreement, this Agreement and the
Transaction may be terminated at any time prior to Closing by written notice
thereof delivered by a Party to the other Parties in the following instances:
(a) by Buyer, if (A) there has been a material breach of any
representation or warranty of Seller or any of its Subsidiaries that is not
otherwise qualified by materiality or Material Adverse Effect, (B) there
has been a breach of any representation or warranty of Seller or any of its
Subsidiaries that is qualified by materiality or Material Adverse Effect or
(C) there has been a material breach or nonfulfillment of any covenant or
agreement of Seller or any of its Subsidiaries;
(b) by Seller or its Subsidiaries, if (A) there has been a material
breach of any representation or warranty of Buyer that is not otherwise
qualified by materiality or Material Adverse Effect, (B) there has been a
breach of any representation or warranty of Buyer that is qualified by
materiality or Material Adverse Effect or (C) there has been a material
breach or nonfullfilment of any covenant or agreement of Buyer;
(c) by Buyer, if any event or series of events occurs that
individually or in the aggregate with all such events could result in a
Material Adverse Effect;
(d) by any Party, if all Parties agree by mutual consent in writing
to termination;
(e) by Buyer, if the Closing has not occurred on or before the
earlier of (x) September 30, 2003 or (y) the Outside Date (but only if
Seller shall have then determined to cease conducting the Business in the
Ordinary Course of Business);
(f) by Seller, by written notice to Buyer, at any time prior to the
receipt of the approval of its stockholders of this Agreement and the
Transaction, if the Board of Directors of Seller (i) receives a Superior
Proposal and (ii) determines in good faith that the transactions
contemplated by this Agreement are no longer in the best interests of the
31
Seller and its stockholders;
(g) by Buyer or Seller, by written notice to the other Parties, if
(i) the Stockholders' Written Consent shall not have been obtained, (ii)
the Seller Stockholders Meeting (including an adjournments and
postponements thereof) shall have been held and completed, (iii) Seller's
stockholders shall have voted at the Seller Stockholders Meeting on a
proposal to adopt this Agreement and the Transaction, and (iv) this
Agreement and the Transaction shall not have been adopted at the Seller
Stockholders Meeting (and shall not have been adopted at any adjournment or
postponement thereof) by the requisite vote; or
(h) by Buyer, by written notice to Seller and its Subsidiaries, if
the Board of Directors of Seller (A) withdraws or modifies in an adverse
manner its approval or recommendation of this Agreement and the Transaction
in accordance with Section 5.13(b), or (B) approves or publicly recommends
any Alternative Transaction.
9.2. Consequences of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1 (a) or
(b) above, this Agreement (other than Sections 10.1, 10.4 and 10.7) shall
become void and have no further effect provided that the non-breaching
Party may avail itself of all rights, power and remedies now or hereafter
existing at law or in equity, by statute or otherwise. If this Agreement is
terminated pursuant to Section 9.1 (c), (d) or (e) above, this Agreement
(other than Sections 10.1, 10.4 and 10.7) shall become void and have no
further effect, without any liability on the part of any Party hereto;
provided that, with respect to Section 9.1 (c) above, such Material Adverse
Effect was not the result of an intentional act or gross negligence of a
Party.
(b) If the Transaction shall fail to occur as a result of the Board
of Directors of Seller exercising its right to terminate this Agreement as
set forth in Section 9.1(f) hereof with respect to a Superior Proposal or
Buyer exercises its right to terminate this Agreement as set forth in
Section 9.1(h), then Seller shall pay Buyer $200,000, which the Parties
agree shall be in consideration of the expenses incurred by and efforts
expended by and opportunities lost by Buyer up to the date of termination.
SECTION 10
MISCELLANEOUS
-------------
10.1. Expenses. Each Party shall bear all of its own costs and expenses
incurred in connection with negotiating and consummating this Agreement and the
Transaction Documents. Expenses other than those provided for elsewhere in this
Agreement that are incurred in connection with the Transaction shall be borne by
the Party incurring such expenses. In addition, Seller shall bear the cost and
expense of the preparation, filing, printing and mailing of the Seller Proxy
Materials.
10.2. Entire Agreement. This Agreement incorporates by this reference the
Recitals at the beginning of this Agreement and any exhibits or schedules
hereto. Each Party represents and
32
warrants that any facts relating to such Party that are contained in the
Recitals are true. This Agreement and any agreement, instrument or document to
be executed in connection herewith (as referenced herein) contain the parties'
entire understanding and agreement with respect to the subject matter hereof.
Any discussions, agreements, promises, representations, warranties or statements
between the parties or their representatives (whether or not conflicting or
inconsistent) that are not expressly contained or incorporated herein shall be
null and void and are merged into this Agreement. If this Agreement and any
agreement, instrument or document to be executed in connection herewith contain
provisions which are inconsistent, then the provision which is most specific
with respect to the subject matter shall control.
10.3. Modification, Amendment and Waiver. Neither this Agreement, nor any
part hereof, may be modified or amended orally, by trade usage or by course of
conduct or dealing, but only by and pursuant to an instrument in writing duly
executed and delivered by the Party sought to be charged therewith. No covenant
or condition of this Agreement can be waived, except by the written consent of
the Party entitled to receive the benefit thereof. Forbearance or indulgence by
a Party in any regard whatsoever shall not constitute a waiver of a covenant or
condition to be performed by the other Party to which the same may apply, and,
until complete performance by such other Party of such covenant or condition,
the Party entitled to receive the benefit thereof shall be entitled to invoke
any remedy available to it under this Agreement, at law, in equity, by statute
or otherwise, despite such forbearance or indulgence.
10.4. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the Parties hereto and their respective successors and
permitted assigns. Except as expressly provided herein, neither this Agreement
nor any rights hereunder may be assigned or transferred, and no duties may be
delegated, by Seller without the prior written consent of Buyer. Buyer may
assign or transfer its rights, and delegate its duties, hereunder to any
Affiliate of Buyer.
10.5. No Third Party Beneficiary. This Agreement is for the benefit of,
and may be enforced only by, the Parties who are signatories hereto and their
respective successors and permitted assignees. This Agreement is not for the
benefit of, and may not be enforced by, any third party.
10.6. Construction. This Agreement shall not be construed more strictly
against one party than against another party merely because that this Agreement
may have been physically prepared by such Party, or such Party's counsel, it
being agreed that all Parties, and their respective counsel, have mutually
participated in the negotiation and preparation of this Agreement. Unless the
context of this Agreement clearly requires otherwise: (i) references to the
plural include the singular and vice versa; (ii) references to any Person
include such Person's successors and assigns but, if applicable, only if such
successors and assigns are permitted by this Agreement; (iii) references to one
gender includes all genders; (iv) neither the term "including" nor the term
"include" is limiting; (v) "or" has the inclusive meaning represented by the
phrase "and/or"; (vi) the words "hereof", "herein", "hereby", "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (vii) article, section, subsection,
clause, exhibit and schedule references are to this Agreement unless otherwise
specified; (viii) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as
33
amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof; and (ix) general or specific
references to any Requirement of Law means such law as amended, modified,
codified or re-enacted, in whole or in part, and in effect from time to time.
10.7. Notices. All notices or other communications required or permitted
under this Agreement shall be made in writing and shall be deemed given (i) upon
delivery, if sent by (A) personal delivery or (B) courier (e.g., overnight
delivery), (ii) 3 days after being sent by certified mail, return receipt
requested, postage and registration fees prepaid and correctly addressed to a
Party as set forth below or (iii) upon sending, if sent by telecopy to a Party
at the number listed below for such Party (with a telecopy machine generated
confirmation sheet retained by the sender):
(i) if to Seller or its Subsidiaries, to:
Insituform East, Incorporated
0000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Attention: President
Telecopy: (000) 000-0000
with a copy to:
Potter Xxxxxxxx & Xxxxxxx LLP
Hercules Plaza
0000 X. Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxxx
Telecopy: (000) 000-0000
(ii) if to Buyer, to:
Insituform Technologies, Inc.
000 Xxxxxx 00 Xxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
with a copy to:
Insituform Technologies, Inc.
702 Spirit 00 Xxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. X. Xxxx, General Counsel
Telecopy: (000) 000-0000
34
Any address or telecopy number listed above may be changed by a Party notifying
all other Parties of such change in the manner provided above. A notice sent
only to a Person to be copied with a notice shall not constitute notice to a
Party hereunder. The Parties shall acknowledge in writing any notice given by
personal delivery.
10.8. Equitable Relief; Remedies Cumulative. Seller and its Subsidiaries
hereby acknowledge that irreparable injury will result to Buyer in the event of
a breach of this Agreement by them. It is therefore agreed that, if they breach
this Agreement, Buyer shall be entitled, in addition to any other remedies and
damages available: (i) to an injunction to restrain the violation thereof by
such Party, or its agents, servants, employers or employees of such Party, and
all Persons acting for or with such Party and (ii) to compel specific
performance of the terms and conditions of this Agreement; provided, however,
nothing shall be construed to prohibit Buyer from pursuing any other legal or
equitable remedy available for such breach, including the recovery of damages.
All rights and remedies granted in this Agreement or available under Requirement
of Law shall be deemed concurrent and cumulative, and not alternative or
exclusive remedies, to the full extent permitted by law and this Agreement. Any
Party may proceed with any number of remedies at the same time or in any order.
The exercise of any one right or remedy shall not be deemed a waiver or release
of any other right or remedy. The Parties waive any right they may have to
require, or any obligation on the part of, another Party to post a bond in
connection with any equitable remedies.
10.9. Governing Law. All questions with respect to the formation and
construction of this Agreement, and the rights and obligations of the Parties
hereto, shall be governed by and determined in accordance with the laws of the
State of Delaware applicable to agreements entered into and performed entirely
within the State of Delaware, without giving effect to the choice or conflicts
of law provisions thereof.
10.10. Attorneys Fees. In any suit or proceeding (including arbitration,
insolvency, bankruptcy, investigative, administrative and regulatory
proceedings) arising in connection with this Agreement, the prevailing Party
shall have the right to receive an award of the reasonable attorneys fees and
disbursements actually incurred by it in connection therewith. Each reference to
attorneys fees or attorneys fees and disbursements in this Agreement shall
include attorneys and paralegal fees, expert fees, court costs, expenses and
other disbursements, whether or not suit is brought (and, if suit is brought,
during all trial and appellate phases of litigation) and in any arbitration,
administrative, regulatory, investigative, insolvency or bankruptcy proceedings.
10.11. Severability. If any Section (or part thereof) of this Agreement is
found by an arbitrator or court of competent jurisdiction to be contrary to,
prohibited by or invalid under any Requirement of Law, such arbitrator or court
may modify such Section (or part thereof) so, as modified, such Section (or part
thereof) will be enforceable and will to the maximum extent possible comply with
the apparent intent of the Parties in drafting such Section (or part thereof).
If no such modification is possible, such Section (or part thereof) shall be
deemed omitted, without invalidating the remaining provisions hereof. No such
modification or omission of a Section (or part thereof) shall in any way affect
or impair such Section (or part thereof) in any other jurisdiction.
35
10.12. Captions. The captions, headings or titles of the various Sections
of this Agreement are for convenience of reference only, and shall not be deemed
or construed to limit or expand the substantive provisions of such Sections.
10.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement. Each signature page of this
Agreement or any other Transaction Document may be executed and delivered in
original or by a facsimile of such signature page thereto.
[signature page next]
36
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
BUYER: SELLER:
INSITUFORM TECHNOLOGIES, INC., INSITUFORM EAST, INCORPORATED,
a Delaware corporation a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx Xx. Xxxxxxx
------------------------------- ---------------------------------
Xxxxxx X. Xxxxx, Vice President Name: Xxxxxx Xx. Xxxxxxx
and Chief Financial Officer -------------------------------
Title: Chairman
------------------------------
SUBSIDIARIES:
INSITUFORM OHIO, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: X.X. Xxxxxxx
-------------------------------
Title: President
------------------------------
INSITUFORM OF PENNSYLVANIA, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: X.X. Xxxxxxx
-------------------------------
Title: President
------------------------------
INSITUFORM OF DELAWARE, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: X.X. Xxxxxxx
-------------------------------
Title: President
------------------------------
INSITU, INC.,
a Delaware corporation
By: /s/ Xxxxxx Xx. Xxxxxxx
---------------------------------
Name: Xxxxxx Xx. Xxxxxxx
-------------------------------
Title: Chairman
------------------------------
MIDSOUTH, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx Xx. Xxxxxxx
---------------------------------
Name: Xxxxxx Xx. Xxxxxxx
-------------------------------
Title: Chairman
------------------------------
MIDSOUTH PARTNERS,
a Tennessee general partnership
By: /s/ Xxxxxx Xx. Xxxxxxx
---------------------------------
Name: Xxxxxx Xx. Xxxxxxx
-------------------------------
Title: Chairman
------------------------------
TRY TEK MACHINE WORKS, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxx Xx. Xxxxxxx
---------------------------------
Name: Xxxxxx Xx. Xxxxxxx
-------------------------------
Title: Chairman
------------------------------
GLOSSARY
--------
"Accounting Firm" shall have the meaning ascribed to it in Section
2.4(a)(ii) hereof.
"Acquired Assets" shall have the meaning ascribed to it in Section 2.1
hereof.
"Acquired Equipment" shall have the meaning ascribed to it in Section
2.1(a) hereof.
"Acquired Intellectual Property" shall have the meaning ascribed to it in
Section 2.1(e) hereof.
"Acquired Inventory" shall have the meaning ascribed to it in Section
2.1(b) hereof.
"Acquired Permits" shall have the meaning ascribed to it in Section 2.1(f)
hereof.
"Affiliate" shall mean, with respect to a specified Person, any other
Person controlling, controlled by, or under common control with the Person
specified. Without limiting the generality of the foregoing, (i) an Affiliate of
an individual Person shall include all members of such Person's family within
the second degree of affinity or consanguinity and (ii) an Affiliate of any
Person shall include any other Person with respect to which either such Person,
directly or indirectly, (A) has the power to appoint or direct management of the
other Person or (B) owns an interest in the equity or profits or the other
Person of 25% or more.
"Agreement" shall mean this Agreement, together with any modifications or
amendments hereto as provided herein, and shall include any exhibits or
schedules attached hereto.
"Alternative Transaction" shall have the meaning ascribed to it in Section
5.3 hereof.
"Assumed Contracts" shall have the meaning ascribed to it in Section 2.1(c)
hereof.
"Assumed Liabilities" shall have the meaning ascribed to it in Section 2.6
hereof.
"Backlog" shall mean future releases to be released over time under
"cured-in-place pipe" customer contracts which are considered term contracts.
"Benefit Plan" shall mean any pension, profit-sharing, savings, bonus,
incentive, insurance, welfare or other employee benefit plan within the meaning
of Section 3(3) of ERISA in which any of Seller's employees participate.
"Burn Period" means the period between May 4, 2003 and the Closing Date,
inclusive.
"Burn Rate" shall have the meaning ascribed to it in Section 2.4(a) hereof.
"Burn Rate Adjustment" shall have the meaning ascribed to it in Section
2.4(a) hereof.
"Burn Rate Notice of Disagreement" shall have the meaning ascribed to it in
Section 2.4(a)(ii) hereof.
"Burn Rate Statement" shall have the meaning ascribed to it in Section
2.4(a)(i) hereof.
"Business" shall have the meaning ascribed to it in the recitals hereof.
"Buyer" shall have the meaning ascribed to it in the first paragraph
hereof.
"Buyer Disclosure Schedule" shall have the meaning ascribed to it in
Section 4 hereof.
"Buyer Released Parties" shall have the meaning ascribed to it in Section
5.15 hereof.
"Certificate of Incorporation Amendment" shall have the meaning ascribed to
it in Section 5.13(b) hereof.
"Claim Notice" shall have the meaning ascribed to it in Section 7.4 hereof.
"Closing" shall mean the closing of the Transaction in accordance with this
Agreement.
"Closing Date" shall have the meaning ascribed to it in Section 2.8 hereof.
"Closing Inventory Value" shall have the meaning ascribed to it in Section
2.4(c)(i) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Common Stock, par value $.04 per share, of
the Seller.
"Class B Common Stock" shall mean the Class B Common Stock, par value $.04
per share, of the Seller.
"Confidentiality Agreement" shall mean the Confidentiality Agreement
between Buyer and Seller dated December 9, 2002.
"Contracts" shall mean contracts, agreements, binding bids or proposals,
leases, purchase orders, life insurance policies, commitments, arrangements,
understandings and options, written or oral, of Seller or any of its
Subsidiaries or of any joint venture or partnership of which Seller or any of
its Subsidiaries is a venturer or partner. The term "Contract" shall include (i)
"cured-in-place pipe" customer contracts relating to the Business (including
project contracts and term contracts), and (ii) with respect to such contracts,
all related files and documentation, including exhibits, conditions (general,
specific and any others), specifications, drawings or other addenda related
thereto.
"Damages" shall mean any and all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, amounts paid in
settlement, suits, proceedings, costs, disbursements or expenses (including
reasonable attorneys' fees and experts' fees and disbursements as provided
below) of any kind or of any nature whatsoever (whether based on common law,
statute or contract; fixed or contingent; known or unknown) suffered or
incurred; provided, however, that in no event shall Damages include any
indirect, consequential, incidental
or punitive damages, damage to goodwill or loss of business (other than any of
the foregoing constituting part of a third-party claim).
"Delaware Act" shall mean the General Corporation Law of the State of
Delaware.
"Direct Gross Profit" shall have the meaning ascribed to it in Section
2.4(b) hereof.
"Direct Gross Profit Percentage" shall have the meaning ascribed to it in
Section 2.4(b) hereof.
"Encumbrance" shall mean any mortgage, deed of trust (or other trust),
pledge, hypothecation, assignment, deposit arrangement, restriction, lease,
claim, liability, debt, lien (statutory or otherwise), security interest,
encumbrance, encroachment, boundary dispute, covenant, easement, right of way,
title objection, preferential arrangement of any kind or nature whatsoever,
conditional sale or other title retention agreement or any other matter
affecting title to or possession of property other than (i) encumbrances for
Taxes and other governmental charges not due and that may thereafter be paid
without penalty ("Encumbrance Taxes and Charges"); and (ii) other imperfections
of title, licenses or encumbrances that do not, individually or in the
aggregate, materially impair the continued use and operation of the assets or
resale of the assets to which they relate in the Business as currently
conducted.
"Encumbrance Taxes and Charges" shall have the meaning ascribed to it in
the definition of Encumbrance.
"Environmental Laws" shall mean any applicable federal, state, local or
foreign statutory or common law, and any regulation, code, plan, order, decree,
judgment, permit, license, grant, franchise, concession, restriction, agreement,
requirement, and injunction issued, entered, promulgated, or approved
thereunder, relating to the environment, or human health or safety relating to
occupational or environmental matters, including, without limitation, any law
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation, air, surface
water, groundwater and land), relating to the presence, manufacture, generation,
refining, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation, treatment or
disposal, or handling of Hazardous Materials, including, but not limited to,
CERCLA, RCRA, FIFRA, CAA, CWA (as those terms are defined in the definition of
"Hazardous Material"), the Hazardous Material Transportation Act, as amended
from time to time, the Toxic Substances Control Act, as amended from time to
time, and the Occupational Safety and Health Act of 1970, as amended from time
to time, or relating to the disposal of Nonhazardous Solid Waste.
"Environmental Permit" shall mean any license, permit, authorization,
approval, qualification, franchise, registration, concession, manifest, or
filing required by or pursuant to any applicable Environmental Law.
"Equipment" shall mean office, construction, warehouse and other equipment,
machinery, vehicles, fixtures, office materials and supplies, spare parts and
other tangible personal property of every kind and description, including the
benefit of and the right to enforce any warranties with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rules or regulations issued pursuant thereto.
"Escrow Account" shall have the meaning ascribed to it in Section 2.3
hereof.
"Escrow Agent" shall mean a banking institution agreed to by the parties.
"Escrow Agreement" shall have the meaning ascribed to it in Section 2.3
hereof.
"Escrow Amount" shall have the meaning ascribed to it in Section 2.3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excess JV Profit" Shall have the meaning ascribed to it in Section 2.4 (b)
hereof.
"Facilities" shall mean any real property leased or otherwise used in
connection with the Business.
"G&A" shall have the meaning ascribed to it in Section 2.4(b) hereof.
"Governmental Authority" shall mean any (domestic or foreign) federal,
state, county, provincial, municipal, governmental department, commission,
board, bureau, agency or instrumentality, or other political subdivision
exercising executive, legislative, judicial, regulatory or administrative
functions or pertaining to government.
"Gross Profit" shall have the meaning ascribed to it in Section 2.4 (b)
hereof.
"Gross Profit Percentage" shall have the meaning ascribed to it in Section
2.4 (b) hereof.
"Guaranteed Direct Gross Profit" shall have the meaning ascribed to it in
Section 2.4 (b) hereof.
"Hazardous Material" shall mean (i) any "hazardous substance," as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time ("CERCLA"), (ii) any "hazardous waste," as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time ("RCRA"), (iii) any "pesticides" or "defoliant," as defined in the
Federal Insecticide, Fungicide and Rodenticide Act, as amended from time to time
("FIFRA"), (iv) any "hazardous air pollutant," as defined by the Clean Air Act,
as amended from time to time ("CAA"), (v) any "pollutant" or "toxic pollutant,"
as defined by the Clean Water Act, as amended from time to time ("CWA"), (vi)
any asbestos, polychlorinated biphenyls, infectious wastes, urea formaldehyde or
petroleum product, or (vii) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of any other
applicable Federal, state or local law, regulation, ordinance or requirement
(including consent decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, all as amended from time to time.
"Indemnified Party" shall mean a Person claiming indemnification to which
such Person is entitled pursuant to the provisions of Section 7 hereof.
"Indemnifying Party" shall mean a Person against whom a valid claim for
indemnification is asserted pursuant to the provisions of Section 7 hereof.
"Intellectual Property" shall mean intangible intellectual property, assets
and rights of every kind and description used by Seller and its Subsidiaries,
including (and shall include the goodwill associated therewith) the Acquired
Intellectual Property, inventions, discoveries, trade secrets, processes,
formulas, know-how, United States and foreign patents and patent applications,
trademarks, trademark registrations, applications for trademark registrations,
trade names, trade dress, service marks, service names, copyrights and copyright
registrations.
"Intellectual Property Licenses" shall mean licenses, consents, covenants
not to xxx and other authorizations issued or granted to a Person by another
Person with respect to intangible personal property of such other Person.
"JV Contracts" shall have the meaning ascribed to it in Section 5.1 hereof.
"knowledge" or "to the best knowledge" or any similar reference shall mean
the actual knowledge of such Person to whom such "knowledge" qualifier applies,
after reasonable investigation and due inquiry.
"Law" shall have the same meaning as Requirement of Law.
"License" shall have the meaning set forth in Section 8.2 (g) hereof.
"Licensee" shall have the meaning set forth in Section 8.2 (g) hereof.
"Marks" shall mean the names "Insituform", "Insituform East", "MidSouth"
and "insitu", including any derivations thereof and any registered and
unregistered trademarks and trade dress related thereto (which are part of the
Acquired Intellectual Property).
"Material Adverse Effect" shall mean a material adverse change in Buyer's
ability to own or use the Acquired Assets after the Closing (in substantially
the same manner as owned, used or operated by prior to the Closing).
"Maximum Monthly Burn Rate" shall have the meaning ascribed to it in
Section 2.4(a) hereof.
"Minimum Residual Backlog" shall have the meaning ascribed to it in Section
2.4(a) hereof.
"Non-Assumed Liabilities" shall have the meaning ascribed to it in Section
2.7 hereof.
"Nonsolicitation Period " shall have the meaning ascribed to it in Section
8.2 (c) hereof.
"Notice Period" shall have the meaning ascribed to it in Section 7.4
hereof.
"Ordinary Course of Business" shall mean the operation of the Business in a
manner substantially consistent with the normal, usual, regular and ordinary
course of its previous operation during the 24-month period preceding the date
of this Agreement.
"Outside Date" shall have the meaning ascribed to it in Section 5.1 hereof.
"Party or Parties" has the meaning as defined in the first paragraph
hereof.
"Permits" shall mean permits, licenses (except Intellectual Property
Licenses), consents, registrations, certificates, accreditations, approvals,
authorizations, rights and franchises held or used (pursuant to a Contract) by
Seller or any of its Subsidiaries in connection with the Business or otherwise
necessary for the operation of the Business, including those issued by any
Governmental Authority.
"Person" shall mean an individual (natural person), a corporation, a
partnership (general or limited), a joint venture, an association, a joint-stock
company, a limited liability company, a bank, a trust company, a land trust, a
vehicle trust, a business trust, a real estate investment trust, an estate, a
trust, an unincorporated organization, a Governmental Authority or any other
type of entity.
"Personal Property Taxes and Charges" shall have the meaning ascribed to it
in Section 8.2(d) hereof.
"Purchase Price" shall have the meaning ascribed to it in Section 2.2
hereof.
"Requirement of Law" shall mean any (domestic or foreign) applicable
constitution, treaty, statute, law, ordinance, rule, regulation, policy,
standard, guideline, official interpretation, permit, order, award, decree,
judgment, injunction, ruling, judicial or administrative decision, opinion or
directive, or other requirement having the force of law and, where applicable,
any interpretation thereof by any authority having jurisdiction with respect
thereto or charged with the administration thereof.
"Requisite Approvals" shall mean any necessary consent, permit, approval,
waiver, order or authorization of, notice to or registration, qualification,
designation, declaration or filing with any Governmental Authority or other
Person.
"SEC" shall mean the Securities and Exchange Commission.
"Seller" shall have the meaning ascribed to it in the first paragraph
hereof.
"Seller Disclosure Schedule" shall have the meaning ascribed to it in
Section 3 hereof.
"Seller Proxy Materials" shall have the meaning ascribed to it in Section
5.13(a) hereof.
"Seller Released Parties" shall have the meaning ascribed to it in Section
5.15 hereof.
"Seller Stockholders Meeting" shall have the meaning ascribed to it in
Section 5.13(b) hereof.
"Starting Backlog" shall have the meaning ascribed to it in Section 2.4(a)
hereof.
"Stockholders' Written Consent" shall have the meaning ascribed to it in
Section 5.13(b) hereof.
"Subsidiaries" shall mean (i) Insituform Ohio, Inc., a Delaware
corporation, (ii) Insituform of Pennsylvania, Inc., a Pennsylvania corporation,
(iii) Insituform of Delaware, Inc., a Delaware corporation, (iv) Insitu, Inc., a
Delaware corporation, (v) Midsouth, LLC, a Delaware limited liability company,
(vi) Midsouth Partners, a Tennessee general partnership, and (vii) TRY TEK
Machine Works, Inc., a Pennsylvania corporation.
"Superior Proposal" shall mean a bona fide written proposal made by a
Person other than Buyer or an Affiliate which is (i) for a merger,
consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving, or any purchase or acquisition of, (A) more than fifteen percent
(15%) of the combined voting power of Seller's capital stock, or (B) all or
substantially all of the consolidated assets of Seller and its Subsidiaries, and
(ii) otherwise on terms which the Board of Directors of Seller determines in
good faith (based on the advice of a financial advisor of nationally recognized
reputation) to be materially more favorable to the respective stockholders from
a financial point of view (which determination of the respective Board of
Directors shall take into account, among other things, the legal, financial,
regulatory and other aspects of the proposal, including conditions to
consummation, the likelihood of timely consummation and the financial
commitments, if any) than the Transaction.
"Taxes" shall mean any and all federal, state, county, local and foreign
income, gross receipts, excise, real and personal property, ad valorem,
transfer, gains and other taxes (including franchise, license, social security,
withholding, payroll, unemployment insurance and sales and use taxes),
assessments and charges (including interest and penalties).
"Transaction" shall have the meaning ascribed to it in the recitals hereof.
"Transaction Documents" shall mean this Agreement and all documents,
instruments and agreements to be signed by any of the parties hereto and
delivered in connection with the Closing of the Transaction hereunder, including
without limitation, the Assignment and Assumption Agreement and the Escrow
Agreement.
"Transferred Employees" shall have the meaning ascribed to it in Section
8.1(a) hereof.
"Unbilled WIP" shall mean revenues earned in excess of xxxxxxxx.
"Unbilled Work" shall have the meaning set forth in Section 8.2 (f).
"WIP Schedule" shall mean the work in progress schedule customarily
prepared by Seller detailing relevant price, cost, revenue, profit, billing and
percentage complete information (actual and estimates) with respect to its
customer contracts.
EXHIBIT AND SCHEDULE LIST
-------------------------
Exhibits Description
-------- -----------
Exhibit 2.3 Escrow Agreement
Schedules Description
--------- -----------
Schedule 2.1(a) Acquired Equipment
Schedule 2.1(b) Acquired Inventory
Schedule 2.1(c) Assumed Contracts
Schedule 2.1(e) Acquired Intellectual Property
Schedule 3 Seller Disclosure Schedule
Schedule 4 Buyer Disclosure Schedule
Schedule 8.1 Certain Employees
June 18, 2003
Insituform Technologies, Inc.
000 Xxxxxx 00 Xxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Insituform East, Incorporated
0000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
This letter agreement will confirm the understanding of Insituform
Technologies, Inc. ("Buyer") and Insituform East, Incorporated ("Seller") as
parties to the Asset Purchase Agreement dated June 18, 2003 by and among Buyer
and Seller and its Subsidiaries (the "Agreement") with respect to the following
matters. All capitalized words have the meanings set forth in the Agreement,
unless the context indicates otherwise.
. Section 2.4(c) of the Agreement provides that Buyer may select
additional Equipment at Closing to replace missing Acquired
Assets. Buyer and Seller agree that Buyer may select pieces of
Equipment set forth on Exhibit A attached hereto to replace
missing Acquired Assets.
. Buyer and Seller also agree that, in settlement and satisfaction
of Buyer's claim against Seller for certain accrued and unpaid
minimum royalties under licenses agreements between them, Buyer
shall receive at the Closing under the Agreement the pieces of
Equipment set forth on Exhibit B attached hereto with an
aggregate scheduled value of $200,000. Such equipment shall be
deemed to be "Acquired Equipment" under the Agreement.
INSITUFORM EAST, INCORPORATED INSITUFORM TECHNOLGOIES, INC.
By: /s/ Xxxxxx Xx. Xxxxxxx By: /s/ Xxxxxx X. X. Xxxx
-------------------------- ------------------------------------
Xxxxxx X. X. Xxxx, Vice President
Name: Xxxxxx Xx. Xxxxxxx and General Counsel
------------------------
Title: Chairman
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