Exhibit 10.1
THIS DISTRIBUTION AGREEMENT is made and entered into as of the 17th day of
March 2003 by Earth Sciences, Inc., a Colorado corporation ("ESI") and ADA-ES,
Inc., a Colorado corporation ("ADA-ES").
RECITALS
WHEREAS, the Board of Directors of ESI has deemed it appropriate and
advisable, to:
(a) separate and divide the existing businesses of ESI so that the
ADA-ES Business (as defined below) shall be owned directly by ADA-ES, and
(b) distribute, following such separation and division, as a dividend
to the holders of shares of common stock, $.01 par value per share, of ESI
(the "ESI Common Stock") all of the outstanding shares of common stock, no
par value, of ADA-ES (the "ADA-ES Common Stock") held by ESI;
WHEREAS, ESI and ADA-ES have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect such
separation, division and distribution and to set forth other agreements that
will govern certain other matters prior to and following such separation,
division and distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. General. Unless otherwise defined herein or unless the
context otherwise requires, the following terms will have the following meanings
(such meanings to be equally applicable to the singular and plural forms of the
terms defined).
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority or any arbitration
tribunal.
"ADA-ES" means ADA-ES, Inc., a Colorado corporation, the ADA-ES
Subsidiaries and the corporations, partnerships, joint ventures, investments and
other entities that represent equity investments of ADA-ES or any of the ADA-ES
Subsidiaries following the consummation of the Corporate Restructuring
Transactions and the Distribution.
"ADA-ES Assets" means, collectively, all of the following rights and assets
that are owned by ESI and or any of its Subsidiaries as of the close of business
on the Distribution Date:
(i) the capital stock of the ADA-ES Subsidiaries;
(ii) all of the assets included on the ADA-ES Business Pro Forma
Balance Sheet that are owned by ESI or any of its Subsidiaries as of the
close of business on the Distribution Date;
(iii) all of the assets and rights expressly allocated to ADA-ES or
any of the ADA-ES Subsidiaries under this Agreement or any of the Ancillary
Agreements; and
(iv) any other asset acquired by ESI or any of its Subsidiaries from
the date of the ADA-ES Business Pro Forma Balance Sheet to the close of
business on the Distribution Date that is owned by ESI or any of its
Subsidiaries as of the close of business on the Distribution Date and that
is of a nature or type that would have resulted in such asset being
included as an asset on the ADA-ES Business Pro Forma Balance Sheet had it
been acquired on or prior to the date of the ADA-ES Business Pro Forma
Balance Sheet, determined on a basis consistent with the determination of
the assets included on the ADA-ES Business Pro Forma Balance Sheet.
"ADA-ES Business" means the businesses that, after giving effect to the
Corporate Restructuring Transactions, are conducted by:
(i) ADA-ES and its Subsidiaries or any of the other members of the
ADA-ES Group; and
(ii) any business entity acquired or established by or for ESI or
ADA-ES or any of their Subsidiaries between the date of this Agreement and
the close of business on the Distribution Date that is engaged in, or
intends to engage in, any business that is of a type or nature that would
have resulted in such business being included either as a Subsidiary or an
asset of ADA-ES on the ADA-ES Business Pro Forma Balance Sheet had it been
acquired or established on or prior to the date of the ADA-ES Business Pro
Forma Balance Sheet, determined on a basis consistent with the
determination of the Subsidiaries and assets included on the ADA-ES
Business Pro Forma Balance Sheet.
"ADA-ES Common Shares" means the shares of ADA-ES Common Stock owned by ESI
after giving effect to the stock dividend provided for in Section 2.02 hereof.
"ADA-ES Common Stock" has the meaning ascribed to such term in the Recitals
to this Agreement.
"ADA-ES Group" means ADA-ES, the ADA-ES Subsidiaries and the corporations,
partnerships, joint ventures, investments and other entities that represent
equity investments of ADA-ES or any of the ADA-ES Subsidiaries following the
consummation of the Corporate Restructuring Transactions and the Distribution.
"ADA-ES Indemnified Parties" means:
(i) ADA-ES and each Affiliate thereof after giving effect to the
Corporate Restructuring Transactions and the Distribution; and
(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of any of such directors, officers, employees and
agents.
"ADA-ES Information Statement" means the Information Statement or
Registration Statement relating to ADA-ES and the transactions contemplated
hereby to be distributed to holders of ESI Common Stock pursuant to the terms of
this Agreement.
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"ADA-ES Liabilities" means, collectively, all of the Liabilities of ADA-ES,
the ADA-ES Subsidiaries and each of the other members of the ADA-ES Group after
giving effect to the Corporate Restructuring Transactions, the Distribution and
the transactions contemplated under the Debt and Cash Allocation Agreement,
including, without limitation:
(i) all of the Liabilities included on the ADA-ES Business Pro Forma
Balance Sheet that remain outstanding as of the close of business on the
Distribution Date;
(ii) all other Liabilities that are incurred or which accrue or are
accrued at any time on, prior to or after the date of the ADA-ES Business
Pro Forma Balance Sheet and that arise or arose out of, or in connection
with, the ADA-ES Assets, the ADA-ES Business or the Prior ADA-ES
Businesses, determined on a basis consistent with the determination of
Liabilities of ADA-ES on the ADA-ES Business Pro Forma Balance Sheet;
(iii) all of the Liabilities of ADA-ES, the ADA-ES Subsidiaries or any
of the other members of the ADA-ES Group under, or to be retained or
assumed by ADA-ES, any ADA-ES Subsidiary or any of the other members of the
ADA-ES Group pursuant to this Agreement or any of the Ancillary Agreements;
(iv) all the Liabilities of the parties hereto or their respective
Subsidiaries (whenever arising whether prior to, on or following the
Distribution Date) arising out of or in connection with or otherwise
relating to the management or conduct before or after the Distribution Date
of the ADA-ES Business;
(v) ADA-ES Securities Liabilities; and
(vi) Securities Liabilities arising out of events occurring after the
Distribution Date and relating to the ADA-ES Business.
"ADA-ES Pro Forma Balance Sheet" means the Pro Forma Consolidated Balance
Sheet for ADA-ES and the ADA-ES Subsidiaries as of December 31, 2002 attached
hereto as Exhibit G.
"ADA-ES Records" has the meaning ascribed to such term in Section 6.01(a)
hereof.
"ADA-ES Registration Statement" or "Registration Statement" means the
Registration Statement on Form 10-SB to be filed with the Commission pursuant to
the requirements of Section 12 of the Exchange Act and the rules and regulations
thereunder in order to register the ADA-ES Common Stock under Section 12(b) of
the Exchange Act.
"ADA-ES Securities Liabilities" means any and all Securities Liabilities
arising out of, or in connection with, or relating in whole or in part to any of
the following: (i) the ADA-ES Registration Statement; (ii) the ADA-ES
Information Statement; (iii) any of the information, data (financial or
otherwise) or disclosures in (or any alleged failure to set forth certain
information, data or disclosures) in the ADA-ES Registration Statement or ADA-ES
Information Statement irrespective of (A) who authored, prepared or provided
such information, data or disclosures (or, as the case may be, the section or
discussion in which certain information, data or disclosure is alleged to have
been omitted), or (B) the form in which, or medium through which (e.g.,
verbally, in writing, etc.), such information, data, disclosures, discussion or
section were provided.
"ADA-ES Subsidiaries" means the Subsidiaries listed in Exhibit H hereto.
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"Affiliate" means, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with the Person specified.
"Agent" means Computershare Trust Company, Inc., or such other trust
company or bank designated by ESI, who shall act as agent for the holders of ESI
Common Stock in connection with the Distribution.
"Agreement" means this Distribution Agreement by and between ESI and
ADA-ES, including any amendments hereto and each Schedule and Exhibit attached
hereto.
"Ancillary Agreement" means all of the written agreements, instruments,
understandings, assignments or other arrangements (other than this Agreement)
entered into by the parties hereto or any other member of their respective
Groups in connection with the Corporate Restructuring Transactions, the
Distribution and the other transactions contemplated hereby or thereby,
including, without limitation, the following:
(i) the Debt and Cash Allocation Agreement;
(ii) the Insurance Agreement;
(iii) the Conveyancing and Assumption Instruments;
(iv) the Benefits and Pension Plan Agreement;
(v) the Tax Sharing Agreement;
(vi) the Transition Services Agreement; and
(vii) the Transition Trademark License.
"Benefits and Pension Plan Agreement" means the Benefits and Pension Plan
Agreement by and between ESI and ADA-ES, which agreement shall be entered into
on or prior to the Distribution Date in the form attached hereto as Exhibit A.
"Books and Records" means all books, records, manuals, agreements and other
materials (in any form or medium), including without limitation, all mortgages,
licenses, indentures, contracts, financial data, customer lists, marketing
materials and studies, advertising materials, price lists, correspondence,
distribution lists, supplier lists, production data, sales and promotional
materials and records, purchasing materials and records, personnel records,
manufacturing and quality control records and procedures, blue prints, research
and development files, records, data and laboratory books, accounts records,
sales order files, litigation files, computer files, microfiche, tape recordings
and photographs.
"CBCA" means the Colorado Business Corporations Act.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law.
"Commission" means the United States Securities and Exchange Commission.
"Consents" has the meaning ascribed to such term in Section 2.07 hereof.
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"Conveyancing and Assumption Transactions" means, collectively, the various
written agreements, instruments and other documents to be entered into to effect
the Corporate Restructuring Transactions or to otherwise effect the transfer of
assets and the assumption of Liabilities in the manner contemplated by this
Agreement, the Ancillary Agreements and the Corporate Restructuring
Transactions.
"Corporate Restructuring Transactions" means, collectively, (a) each of the
distribution, transfers, conveyances, contributions, assignments and other
transactions described and set forth in Exhibit B attached hereto, and (b) such
other distribution, transfers, conveyances, contributions, assignments and other
transactions (so long as such other distribution, transfers, conveyances,
contributions, assignments and other transactions do not, individually or in the
aggregate, adversely affect the ESI Business (other than to a de minimis extent)
that may be required to be accomplished, effected or consummated by ESI, ADA-ES
or any of their respective Subsidiaries and Affiliates in order to separate and
divide, in a series of transactions that, to the extent intended to qualify for
tax-free transactions under the Code, shall qualify for tax-free treatment under
the Code, the existing businesses of ESI so that, except as otherwise expressly
set forth in Exhibit B hereto:
(i) assets, liabilities and business necessary for the continuing
operation of the ADA-ES Business shall be owned, directly and indirectly,
by ADA-ES:
(ii) the businesses, assets and liabilities of ESI that remain after
the separations and divisions described in clause (i) above, including,
without limitation, the assets, liabilities and business necessary for the
continuing operation of the ESI Business, are, after giving effect to the
Distribution, owned, directly and indirectly, by ESI.
"Debt and Cash Allocation Agreement" means the Debt and Cash Allocation
Agreement by and between ESI and ADA-ES, which agreement shall be entered into
on or prior to the Distribution Date in the form attached hereto as Exhibit C,
except for such changes or modifications thereto that do not, individually or in
the aggregate, adversely affect the ESI Business (other than to a de minimis
extent).
"Distribution" means the distribution on the Distribution Date as a
dividend to holders of record of shares of ESI Common Stock as of the
Distribution Record Date of all of the outstanding ADA-ES Common Shares owned by
ESI on the basis provided in Section 3.02 hereof.
"Distribution Date" means such date as may hereafter be determined by ESI's
Board of Directors as the date on which the Distribution shall be effected.
"Distribution Record Date" means the close of business on the date
determined by the Board of Directors of ESI for the purpose of determining the
holders of record of ESI Common Stock entitled to participate in the
Distribution.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions (including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. xx.xx. 9601,
et seq.), whether now or hereafter in existence, relating to the environment,
natural resources or human health and safety or endangered or threatened species
of fish, wildlife and plants or to emissions, discharges or releases of
pollutants, contaminants, petroleum a petroleum products, chemicals or toxic or
hazardous substances or waste into the environment, including, without
limitation, ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
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disposal, transport or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or toxic or hazardous substances or waste or the
cleanup or other remediation thereof.
"ESI" means Earth Sciences, Inc., a Colorado corporation.
"ESI Assets" means, collectively, all the rights and assets owned by ESI or
any of its Subsidiaries as of the close of business on the Distribution Date
other than the ADA-ES Assets and the capital stock of ADA-ES, including without
limitation:
(i) the capital stock of the ESI Subsidiaries;
(ii) all of the assets included on the ESI Business Pro Forma Balance
Sheet that are owned by ESI and its Subsidiaries as of the close of
business on the Distribution Date and any other asset acquired by ESI or
any of its Subsidiaries from the date of the ESI Business Pro Forma Balance
Sheet to the close of business on the Distribution Date that is owned by
ESI and its Subsidiaries as of the close of business on the Distribution
Date and that is of a type or nature that would have resulted in such asset
being included as an asset on the ESI Business Pro Forma Balance Sheet had
it been acquired on or prior to the date of the ESI Business Pro Forma
Balance Sheet, determined on a basis consistent with the determination of
assets included on the ESI Business Pro Forma Balance Sheet; and
(iii) all of the assets and rights expressly allocated to ESI or any
of the Subsidiaries under this Agreement or any of the Ancillary
Agreements.
"ESI Business" means the businesses (other than the ADA-ES Business) that,
after giving effect to the Corporate Restructuring Transactions, are or were
conducted by:
(i) ESI, the ESI Subsidiaries or any of the other members of the ESI
Group;
(ii) any other division, Subsidiary or investment of ESI, or any ESI
Subsidiary or any of the other members of the ESI Group managed or operated
or in existence as of the date of this Agreement or any prior time, unless
such other division, Subsidiary or investment is expressly included in the
ADA-ES Group immediately after giving effect to the Corporate Restructuring
Transactions; and
(iii) any business entity acquired or established by or for ESI or any
of the ESI Subsidiaries between the date of this Agreement and the close of
business on the Distribution Date that is engaged in, or intends to engage
in, any business that is of a type or nature that would have resulted in
such business being included either as a ESI Subsidiary or an asset of ESI
on the ESI Business Pro Forma Balance Sheet had it been acquired or
established on or prior to the date of the ESI Business Pro Forma Balance
Sheet, determined on a basis consistent with the determination of the
Subsidiaries and assets included on the ESI Business Pro Forma Balance
Sheet.
"ESI Pro Forma Balance Sheet" means the Pro Forma Consolidated Balance
Sheet for ESI and the ESI Subsidiaries as of December 31, 2002 attached hereto
as Exhibit E.
"ESI Common Stock" has the meaning ascribed to such term in the Recitals to
this Agreement.
"ESI Corporate Records" has the meaning ascribed to such term in Section
6.01(a) hereof.
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"ESI Group" means ESI, the ESI Subsidiaries and the corporations,
partnerships, joint ventures, investments and other entities that represent
equity investments of ESI or any of the ESI Subsidiaries following consummation
of the Corporate Restructuring Transactions and the Distribution.
"ESI Holders" means the holders of record of ESI Common Stock as of the
Distribution Record Date.
"ESI Indemnified Parties" means:
(i) ESI, the ESI Subsidiaries and each Affiliate thereof after giving
effect to the Corporate Restructuring Transactions and the Distribution;
and
(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of such directors, officers, employees and agents.
"ESI Liabilities" means, collectively, all of the Liabilities of ESI and
the ESI Subsidiaries and each of the other members of the ESI Group remaining
after giving effect to the Corporate Restructuring Transactions, the
Distribution and the transactions contemplated under the Debt and Cash
Allocation Agreement, including without limitation:
(i) all of the Liabilities included on the ESI Business Pro Forma
Balance Sheet that remain outstanding as of the close of business on the
Distribution Date;
(ii) all Liabilities that are incurred or that otherwise accrue or are
accrued at any time on, prior to or after the date of the ESI Business Pro
Forma Balance Sheet and that arise or arose out of, or in connection with,
the ESI Assets or the ESI Business, determined on a basis consistent with
the determination of Liabilities of ESI included on the ESI Business Pro
Forma Balance Sheet;
(iii) all of the Liabilities of ESI, the ESI Subsidiaries or any of
the other members of the ESI Group or to be retained or assumed by ESI, any
ESI Subsidiary or any of the other members of the ESI Group pursuant to the
Corporate Restructuring Transactions, this Agreement or any of the
Ancillary Agreements;
(iv) all of the Liabilities of the parties hereto or their respective
Subsidiaries (whenever arising whether prior to, on or following the
Distribution Date) arising out of or in connection with or otherwise
relating to the management or conduct before or after the Distribution Date
of the ESI Business;
(v) all other Liabilities of ESI, the ESI Subsidiaries or any of the
other members of the ESI Group (that do not constitute ADA-ES Liabilities),
which other Liabilities of ESI, the ESI Subsidiaries or any of the other
members of the ESI Group shall include, without limitation, any and all
Liabilities arising out of or relating to any Action or Third Party Claim
by any Governmental Authority or any other Person that is based on any
alleged breach of fiduciary duty by the Board of Directors of ESI or any
member thereof, or any ESI stockholder derivative suit or other similar
Actions;
(vi) Securities Liabilities arising out of events occurring prior to
the Distribution Date, and Securities Liabilities arising out of events
occurring after the Distribution Date and relating to the ESI.
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"ESI Records" has the meaning ascribed to such term in Section 6.01(b)
hereof.
"ESI Subsidiaries" means the Subsidiaries of ESI set forth in Exhibit F
hereto and all other Subsidiaries of ESI other than ADA-ES or its Subsidiaries.
"ESI Trademarks and Trade Names" means all trademarks, service marks, and
trade names containing "ESI" or variations thereof, along with their respective
applications and registrations wherever used or registered.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act File Material" means the Registration Statement, as amended
at the time it was declared effective under the Exchange Act, the related
Information Statement or any amendment or supplement thereto, the related letter
of transmittal, any related stockholder communication, any other exhibits to any
of the foregoing and any amendment or supplement thereto, in each case including
all information incorporated by reference therein.
"GAAP" means United States generally accepted accounting principles and
practices, as in effect on the date of this Agreement, as promulgated by the
Financial Accounting Standards Board and its predecessors.
"Governmental Authority" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Indemnifiable Losses" means, with respect to any Person, any and all
losses, liabilities, penalties, claims, damages, demands, costs and expenses
(including, without limitation, reasonable attorneys' fees, investigation
expenses and any and all other out-of-pocket expenses, but excluding any
punitive or consequential damages) or other Liabilities whatsoever that are
assessed, imposed, awarded against, incurred or accrued by such Person either
(a) in investigating, preparing for, defending against or otherwise arising out
of or in connection with any Actions, any potential or threatened Actions or any
Third Party Claims for which such Person would be entitled to indemnification
under Article VII hereof, or (b) in respect of any other event, occurrence or
matter for which such Person would be entitled to indemnification under Article
VII hereof, in each case whether accrued or incurred on, before or after the
date of this Agreement.
"Indemnifying Party" has the meaning ascribed to such term in Section
7.03(a) hereof.
"Indemnified Party" has the meaning ascribed to such tern in Section
7.03(a) hereof.
"Information Statement" means the ADA-ES Information Statement.
"Insurance Agreement" means the Insurance Agreement by and between ESI and
ADA-ES, which agreement shall be entered into on or prior to the Distribution
Date in the form attached hereto as Exhibit D except for such changes or
modifications thereto that do not, individually or in the aggregate, adversely
affect the ESI Business other than to a de minimis extent.
"Insurance Proceeds" means, with respect to any insured party, those
monies, net of any applicable premium adjustment, retrospectively-rated premium,
deductible, retention, or cost of reserve paid or held by or for the benefit of
such insured, which are either.
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(i) received by an insured from an insurance carrier, or
(ii) paid by an insurance carrier on behalf of an insured.
"Law" means all laws, statutes and ordinances and all regulations, rules
and other pronouncements of Governmental Authorities having the effect of law of
the United States, any foreign country, or any domestic or foreign state,
province, commonwealth, city, country, municipality, territory, protectorate,
possession or similar instrumentality, or any Governmental Authority thereof.
"Liabilities" means any and all debts, liabilities, obligations,
responsibilities, response actions, losses, damages (whether compensatory,
punitive or treble), fines, penalties and sanctions, absolute or contingent,
matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint,
several or individual, asserted or unasserted, accrued or unaccrued, known or
unknown, whenever arising, including, without limitation, those arising under or
in connection with any Law (including any Environmental Law), Action, threatened
Action, order or consent decree of any Governmental Authority or any award of
any arbitration tribunal, and those arising under any contract, guarantee,
commitment or undertaking, whether sought to be imposed by a Governmental
Authority, private party, or party to this Agreement, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
or otherwise, and including any costs, expenses, interest, attorneys' fees,
disbursements and expense of counsel, expert and consulting fees and costs
related thereto or to the investigation or defense thereof.
"OTCBB" means the OTC Bulletin Board exchange.
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company or other
entity, or any government, or any agency or political subdivision thereof.
"Prior ADA-ES Businesses" means, collectively, all divisions, Subsidiaries,
other business entities or investments of ESI (or one of its Subsidiaries) that,
at any time prior to the date of the ADA-ES Business Pro Forma Balance Sheet,
were included in the ADA-ES segments for purposes of segment reporting in any of
ESI's Annual Reports on Form 10-KSB, and were sold, transferred, otherwise
disposed of or discontinued prior to such date.
"Privilege" has the meaning ascribed to such term in Section 6.07(a)
hereof.
"Privileged Information" has the meaning ascribed to such term in Section
6.07(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Liabilities" means any and all losses, liabilities, penalties,
claims, damages, demands, costs or expenses or other Liabilities whatsoever that
are assessed, imposed, awarded against, incurred or accrued by a Person arising
out of or relating in whole or in part to any Action, any potential or
threatened Action or any Third Party Claim (or potential or threatened Third
Party Claim) by any Governmental Authority or any other Person that is based on
any violations or alleged violations of the Securities Act, Exchange Act, any of
the rules or regulations of the Commission promulgated under the Securities Act
or Exchange Act, or any other securities or other similar Law.
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"Subsidiary" means, with respect to any Person:
(i) any corporation of which at least a majority in interest of the
outstanding voting stock (having by the terms thereof voting power under
ordinary circumstances to elect a majority of the directors of such
corporation, irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of a contingency) is at the time, directly or
indirectly, owned or controlled by such Person or by such Person and one or
more of its Subsidiaries; or
(ii) any noncorporate entity in which such Person or such Person and
one or more Subsidiaries of such Person either (a) directly or indirectly,
as of the date of determination thereof, has at least a majority ownership
interest, or (b) as of the date of determination is a general partner or an
entity performing similar functions (e.g., manager of a Limited Liability
Company or a trustee or a trust).
"Tax" or "Taxes" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
occupation, services, sales, use, license, lease, transfer, import, export,
value added, alternative minimum, estimated or other similar tax (including any
fee, assessment or other charge in the nature of or in lieu of any tax) imposed
by any governmental entity or political subdivision thereof, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.
"Tax Sharing Agreement" means the Tax Sharing Agreement by and between ESI
and ADA-ES which agreement shall be entered into on or prior to the Distribution
Date in the form attached hereto as Exhibit I, except for such changes or
modifications thereto that do not, individually or in the aggregate, adversely
affect the ESI Business other than to a de minimis extent.
"Termination Date" means the date on which this Agreement is terminated
pursuant to and in accordance with the provisions of Section 8.10 of this
Agreement.
"Third Party Claim" has the meaning as defined in Section 7.04(a) hereof.
"Transition Services Agreement" means the Transition Services Agreement by
and between ESI and ADA-ES, which agreement shall be entered into on or prior to
the Distribution Date in the form attached hereto as Exhibit J.
"Transition Trademark License" has the meaning ascribed to such term in
Section 5.02 hereof.
SECTION 1.02. References. References to an "Exhibit" or to a "Schedule"
are, unless otherwise specified, to one of the Exhibits or Schedules attached to
this Agreement, and references to a "Section" are, unless otherwise specified,
to one of the Sections of this Agreement.
ARTICLE II
PRE-DISTRIBUTION TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.01. Corporate Restructuring Transactions. On or prior to the
Distribution Date and otherwise in accordance with the terms and provisions set
forth in Exhibit B hereto, ESI and ADA-ES shall, and shall cause each of their
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respective Subsidiaries to, as applicable, take such actions as are necessary to
cause, effect and consummate the Corporate Restructuring Transactions. ESI and
ADA-ES hereby agree that any one or more of the Corporate Restructuring
Transactions may be modified, supplemented or eliminated; provided such
modification, supplement or elimination (a) is necessary or appropriate to
divide the existing businesses of ESI so that the ADA-ES Business shall be
owned, directly and indirectly, by ADA-ES, and (b) does not, individually or in
the aggregate, adversely affect the ESI Business (other than to a de minimis
extent).
SECTION 2.02. Pre-Distribution Stock Dividends to ESI. On or prior to the
Distribution Date, ADA-ES shall issue to ESI, as a stock dividend, the number of
shares of ADA-ES Common Stock as is required to effect the Distribution, as
certified by the Agent. In connection therewith, ESI shall deliver to ADA-ES for
cancellation the share certificate (or certificates) currently held by it
representing all ADA-ES Common Stock.
SECTION 2.03. Articles of Incorporation and Bylaws of ADA-ES. On or prior
to the Distribution Date, ESI and ADA-ES shall take all necessary actions so
that, as of the Distribution Date, the Amended and Restated Articles of
Incorporation and Bylaws of ADA-ES will be substantially in the forms set forth
in Exhibits K and L, respectively.
SECTION 2.04. Election of Directors of ADA-ES. On or prior to the
Distribution Date, ESI, as the sole or majority stockholder of ADA-ES, shall
take all necessary action so that as of the Distribution Date the directors of
ADA-ES will be as set forth in the ADA-ES Information Statement.
SECTION 2.05. Transfer and Assignment of Certain Licenses and Permits.
(a) Licenses and Permits Relating to the ADA-ES Business. On or prior
to the Distribution Date, or as soon as reasonably practicable thereafter,
ESI shall (and, if applicable, shall cause any other Person over which it
has legal or effective direct or indirect control to), duly and validly
transfer or cause to be duly and validly transferred to the appropriate
member of the ADA-ES Group (as directed by ADA-ES) all transferable
licenses, permits and authorizations issued by any Governmental Authority
that relate to the ADA-ES Business but which are held in the name of any
member of the ESI Group, or any of their respective employees, officers,
directors, stockholders or agents.
(b) Licenses and Permits Relating to the ESI Business. On or prior to
the Distribution Date, or as soon as reasonably practicable thereafter,
ADA-ES shall (and, if applicable, shall cause any other Person over which
it has legal or effective direct or indirect control to), duly and validly
transfer or cause to be duly and validly transferred to the appropriate
member of the ESI Group (as directed by ESI) all transferable licenses,
permits and authorizations issued by any Governmental Authority that relate
to the ESI Business but which are held in the name of any member of the
ADA-ES Group, or any of their respective employees, officers, directors,
stockholders or agents.
SECTION 2.06. Transfer and Assignment of Certain Agreements:
(a) Transfer and Assignment of ESI Business Agreements. On or prior to
the Distribution Date, or as soon as reasonably practicable thereafter, and
subject to the limitations set forth in this Section 2.06, ADA-ES shall
(and, if applicable, shall cause any of the other members of its Group over
which it has legal or effective direct or indirect control to), assign,
transfer and convey to ESI (or such other member of the ESI Group as ESI
shall direct) all of its (or such other member of its Group's) right, title
and interest in and to any and all agreements that relate exclusively to
the ESI Business or any member of the ESI Group.
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(b) Transfer and Assignment of ADA-ES Business Agreements. On or prior
to the Distribution Date, or as soon as reasonably practicable thereafter,
and subject to the limitations set forth in this Section 2.06, ESI shall
(and, if applicable, shall cause any of the other members of its Group over
which it has legal or effective direct or indirect control to), assign,
transfer and convey to ADA-ES (or such other member of the ADA-ES Group as
ADA-ES shall direct) all of its (or such other member of its Group's)
right, title and interest in and to any and all agreements that relate
exclusively to the ADA-ES Business or any member of the ADA-ES Group.
(c) Joint Agreements. Subject to the provisions of Section 2.06(e)
below, any agreement to which any party hereto (or any other member of such
party's Group) is a party that inures to the benefit of both the ESI
Business and the ADA-ES Business shall be assigned in part, at the expense
and risk of the assignee, on or prior to the Distribution Date or as soon
as reasonably practicable thereafter, so that each party (or such other
member of such party's Group) shall be entitled to the rights and benefits
inuring to its business under such agreement.
(d) Obligations of Assignees. The assignee of any agreement assigned,
in whole or in part, hereunder (an "Assigned") shall, as a condition to
such assignment, assume and agree to pay, perform, and fully discharge all
obligations of the assignor under such agreement (whether such obligations
arose or were incurred prior to, on or subsequent to the Distribution Date
and irrespective of whether such obligations have been asserted as of the
Distribution Date) or, in the case of a partial assignment under Section
2.06(c) above, such Assignee's related portion of such obligations as
determined in accordance with the terms of the relevant agreement, where
determinable on the face thereof, and otherwise as determined in accordance
with the practice of the parties prior to the Distribution. Furthermore,
the Assignee shall use its commercially reasonable efforts to cause the
assignor of such agreement to be released from its obligations under the
assigned agreements.
(e) No Assignment of Certain Agreements. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any agreement, in whole or in part, or any rights
thereunder if the agreement to assign or attempt to assign, without the
consent of a third party, would constitute a breach thereof or in any way
adversely affect the rights of the Assignee thereof until such consent is
obtained. If an attempted assignment thereof would be ineffective or would
adversely affect the rights of any party hereto so that the Assignee would
not, in fact, receive all such rights, the parties hereto will cooperate
with each other to effect any arrangement designed reasonably to provide
for the Assignee the benefits of, and to permit the Assignee to assume
liabilities under, any such agreement, subject to the remaining sentences
of this Section 2.06(e). There are certain software license agreements held
in the name of a member of the ADA-ES Group that presently inure to the
benefit of the ESI Business and the ADA-ES Business. Notwithstanding any
other provision of this Agreement, each such license agreement shall
continue to be held by that member of the ADA-ES Group without any
obligation of any party to cause the assignment of such license agreement,
or to effect any arrangement to provide such benefit, to the ESI Business
or the ADA-ES Business, except where the license agreement expressly
permits the benefits and obligations to be divided among the Businesses or
as may be negotiated with the licensor by that member of the ADA-ES Group
and such other parties and the ADA-ES Business shall use commercially
reasonable efforts to do so.
SECTION 2.07. Consents. The parties hereto shall use their reasonable
efforts to obtain any third-party consents or approvals that are required to
consummate the Corporate Restructuring Transactions, the Distribution and the
other transactions contemplated herein (the "Consents").
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SECTION 2.08. Other Transactions. On or prior to the Distribution Date (but
in all events prior to the Distribution, ESI and ADA-ES shall have consummated
those other transactions in connection with the Corporate Restructuring
Transactions and the Distribution that are contemplated by the ADA-ES
Information Statement, and not specifically referred to in Sections 2.01 through
2.07 above, subject, however, to the limitations set forth in subparagraph (b)
of Section 2.01 above.
SECTION 2.09. Election of Officers. On or prior to the Distribution Date,
ESI and ADA-ES shall, as applicable, take all actions necessary and desirable so
that as of the Distribution Date the officers of ADA-ES will be as set forth in
the ADA-ES Information Statement.
SECTION 2.10. Preparation and Filing of ADA-ES Registration Statement. ESI
and ADA-ES shall prepare or cause to be prepared, and ADA-ES shall file or cause
to be filed with the Commission, the ADA-ES Registration Statement. The ADA-ES
Registration Statement shall include or incorporate by reference the ADA-ES
Information Statement setting forth appropriate disclosure concerning ESI,
ADA-ES, the Distribution and such other matter: as may be required to be
disclosed therein by the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. ESI and ADA-ES shall take all such actions
as may be reasonably necessary or appropriate in order to cause the ADA-ES
Registration Statement to become effective by order of the Commission pursuant
to the Exchange Act.
SECTION 2.11. State Securities Laws. Prior to the Distribution Date, ESI
and ADA-ES shall take all such action as may be necessary or appropriate under
the securities or Blue Sky laws of states or other political subdivisions of the
United States in order to effect the Distribution.
SECTION 2.12. Listing Application. Prior to the Distribution Date, ESI and
ADA-ES shall prepare and file with the OTCBB listing applications and related
documents and shall take all such other actions with respect thereto as shall be
necessary or desirable in order to cause the OTCBB to list on or prior to the
Distribution Date, subject to official notice of issuance, the ADA-ES Common
Shares.
SECTION 2.13. Certain Financial and Other Arrangements.
(a) Settlement of Intercompany Accounts Between ADA-ES Group and ESI
Group. All intercompany receivables, payables and loans (other than
receivables, payables and loans otherwise specifically provided for in any
of the Ancillary Agreements or hereunder), including, without limitation,
in respect of any cash balances, any cash balances representing deposited
checks or drafts for which only a provisional credit has been allowed or
any cash held in any centralized cash management system, between any member
of the ADA-ES Group and any member of the ESI Group shall, as of the close
of business on the Distribution Date, be settled, capitalized or converted
into ordinary trade accounts, in each case as may be agreed in writing
prior to the Distribution Date by duly authorized representatives of ESI
and ADA-ES.
(b) Operations in Ordinary Course. Except as otherwise provided in
this Agreement or any Ancillary Agreement, during the period from the date
of this Agreement through the Distribution Date, ESI and ADA-ES shall, and
shall cause any entity that is a Subsidiary of such party at any time
during such period to, conduct its business in a manner substantially
consistent with current and past operating practices and in the ordinary
course, including, without limitation, with respect to the payment and
administration of accounts payable and the collection and administration of
accounts receivable, the purchase of capital assets and equipment and the
management of inventories.
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SECTION 2.14. Director, Officer and Employee Resignations. Subject to the
provisions of Section 2.04 and Section 2.09 above:
(a) Resignations by Directors and Employees of the ESI Group. ESI
shall cause all of its directors and all employees of the ESI Group to
resign, effective as of the close of business on the Distribution Date,
from all boards of directors or similar governing bodies of each member of
the ADA-ES Group on which they serve, and from all positions as officers or
employees of any member of the ADA-ES Group, except as otherwise set forth
in the ADA-ES Information Statement or mutually agreed to in writing on or
prior to the Distribution Date by ESI and ADA-ES.
(b) Resignations by Directors and Employees of the ADA-ES Group.
ADA-ES shall cause all of its directors and all employees of the ADA-ES
Group to resign, effective as of the close of business on the Distribution
Date, from all boards of directors or similar governing bodies of each
member of the ESI Group on which they serve, and from all positions as
officers or employees of any member of the ESI Group, except as otherwise
set forth in the ADA-ES Information Statement or mutually agreed to in
writing on or prior to the Distribution Date by ADA-ES and ESI.
SECTION 2.15. Transfers Not Effected Prior to the Distribution; Transfers
Deemed Effective as of the Distribution Date. To the extent that any transfers
contemplated by this Article II shall not have been consummated on or prior to
the Distribution Date, the parties hereto shall cooperate (and shall cause each
of their respective Affiliates and each member of their respective Groups over
which they have legal or effective direct or indirect control to cooperate) to
effect such transfers as promptly following the Distribution Date as shall be
practicable. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities, which by their terms or operation
of Law cannot be transferred or assumed; provided, however, that the parties
hereto shall cooperate (and shall cause each of their respective Affiliates and
each member of their respective Groups over which they have legal or effective
direct or indirect control to cooperate) to seek to obtain any necessary
consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Article II. In the event that
any such transfer of assets or Liabilities has not been consummated, from and
after the Distribution Date the party retaining such asset or Liability (or, as
applicable, such other member or members of such party's Group) shall hold such
asset in trust for the use and benefit of the party entitled thereto (at the
expense of the party entitled thereto) or retain such Liability for the account
of the party by whom such Liability is to be assumed pursuant hereto, as the
case may be, and take such other action as may be reasonably requested by the
party to whom such asset is to be transferred, or by whom such Liability is to
be assumed, as the case may be, in order to place such party, insofar as is
reasonably possible, in the same position as would have existed had such asset
or Liability been transferred or assumed as contemplated hereby. As and when any
such asset or Liability becomes transferable or assumable, such transfer shall
be effected forthwith. As of the Distribution Date, each party hereto (or, if
applicable, such other members of such party's Group) shall be deemed to have
acquired (or, as applicable, retained) complete and sole beneficial ownership
over all of the assets, together with all rights, powers and privileges incident
thereto, and shall be deemed to have assumed in accordance with the terms of
this Agreement all of the Liabilities, and all duties, obligations and
responsibilities incident thereto, which such party (or any other member of such
party's Group) is entitled to acquire or required to assume pursuant to the
terms of this Agreement.
SECTION 2.16. Ancillary Agreements. Prior to the Distribution Date, ESI and
ADA-ES shall enter into, and/or where applicable shall cause such other members
of their restive Groups to enter into, (a) the Ancillary Agreements and (b) any
other agreements in respect of the Corporate Restructuring Transactions and the
Distribution as are reasonably necessary or appropriate in connection with the
transactions contemplated hereby and thereby so long as such agreements do not
adversely affect the ESI Business other than to a de minimis extent.
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ARTICLE III
THE DISTRIBUTION
SECTION 3.01. ESI Action Prior to the Distribution. Subject to the terms
and conditions set forth herein, ESI shall take, or cause to be taken, the
following acts or actions in connection with, and to otherwise effect in
accordance with the terms of this Agreement, the Distribution.
(a) Declaration of Distribution and Establishment of Distribution
Date. The Board of Directors of ESI shall, in its sole discretion and
subject to and in accordance with the applicable rules of the OTCBB and
provisions of the CBCA, declare the Distribution and establish the
Distribution Record Date, the Distribution Date, the date on which ADA-ES
Common Shares and any cash in lieu of fractional shares shall be mailed to
the ESI Holders and all appropriate procedures in connection with the
Distribution to the extent not provided for herein; provided, however, that
no such action shall create any obligation on the part of ESI to effect the
Distribution or in any way limit ESI's power of termination as set forth in
Section 8.10 hereof or alter the consequences of any such termination from
those specified in such Section.
(b) Notice to OTCBB. ESI shall, to the extent possible, give the OTCBB
or other appropriate authority not less than ten days advance notice of the
Distribution Record Date in compliance with Rule 10b-17 under the Exchange
Act, as required.
(c) Mailing of ADA-ES Information Statement. ESI shall, as soon as
practicable after the ADA-ES Registration Statement shall have been
declared effective under the Exchange Act, cause the ADA-ES Information
Statement to be mailed to the ESI Holders.
SECTION 3.02. The Distribution.
(a) Duties and Obligations of ESI. Subject to the conditions contained
herein, on the Distribution Date, but effective immediately following the
close of business on the Distribution Date, ESI shall:
(i) deliver to the Agent the share certificates representing the
ADA-ES Common Shares issued to ESI by ADA-ES pursuant to Section 2.02
hereof, endorsed by ESI in blank, for the benefit of the ESI Holders;
and
(ii) instruct the Agent to distribute, as soon as practicable
following consummation of the Distribution, to the ESI Holders one
share of ADA-ES Common Stock rounded up to the next whole share for
every ten shares of ESI Common Stock.
(b) Duties and Responsibilities of ADA-ES. ADA-ES shall provide, or
cause to be provided, to the Agent sufficient certificates representing
ADA-ES Common Stock in such denominations as the Agent may request in order
to effect the Distribution. All shares of ADA-ES Common Stock issued
pursuant to the Distribution will be validly issued, fully paid and
nonassessable and free of any preemptive (or similar) rights.
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SECTION 3.03. Fractional Shares
(a) No Fractional Shares. Notwithstanding anything herein to the
contrary, no certificate or scrip evidencing a fractional share of ADA-ES
Common Stock shall be issued in connection with the Distribution, and any
such fractional share interests to which a ESI Holder would otherwise be
entitled will not entitle such ESI Holder to vote or to any rights of a
stockholder of ADA-ES. In lieu of any such fractional shares, each ESI
Holder who, but for the provisions of this Section 3.03, would be entitled
to receive a fractional share interest of ADA-ES Common Stock pursuant to
the Distribution shall be issued an additional whole share of ADA-ES Common
Stock.
(b) Unclaimed Stock or Cash. Any ADA-ES Common Stock or cash in lieu
of fractional shares and dividends or distribution with respect to ADA-ES
Common Stock that remain unclaimed by any ESI Holder 180 days after the
Distribution Date shall be returned to ESI and any such ESI Holders shall
look only to ESI for the ADA-ES Common Stock, cash, if any, in lieu of
fractional share interests and any such dividends or distribution to which
they are entitled, subject in each case to applicable escheat or other
abandoned property laws.
(c) Beneficial Owners. Solely for purposes of computing fractional
share interests pursuant to Section 3.03(a), the beneficial owner of shares
of ESI Common Stock held of record in the name of a nominee will be treated
as the holder of record of such shares.
ARTICLE IV
CONDITIONS TO THE DISTRIBUTION
SECTION 4.01. Conditions Precedent to the Distribution. The obligation of
ESI to cause the Distribution to be consummated shall be subject, at the option
of ESI, to the fulfillment or waiver, on or prior to the Termination Date, of
each of the following conditions:
(a) Tax Sharing Agreement. ESI and ADA-ES shall have executed and
delivered the Tax Sharing Agreement and such agreement shall be in full
force and effect.
(b) Benefits and Pension Plan Agreement. ESI and ADA-ES shall have
executed and delivered the Benefits and Pension Plan Agreement and such
agreement shall be in full force and effect.
(c) Insurance Agreement. ESI and ADA-ES shall have executed and
delivered the Insurance Agreement and such agreement shall be in full force
and effect.
(d) Debt and Cash Allocation Agreement. ESI and ADA-ES shall have
executed and delivered the Debt and Cash Allocation Agreement and such
agreement shall be in full force and effect.
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(e) Effective Date of Registration Statement. The Registration
Statement shall have been declared effective by order of the Commission and
no stop order shall have been entered, and no proceeding for that purpose
shall have been initiated or threatened by the Commission with respect
thereto.
(f) OTCBB Listing. The ADA-ES Common Shares shall have been approved
for listing on the OTCBB, subject to official notice of issuance.
(g) Pre-Distribution Transactions. Each of the transactions and other
matters contemplated by Article II and Section 3.01 hereof (including,
without limitation, each of the distribution, transfers, conveyances,
contributions, assignments or other transactions included in, or otherwise
necessary to consummate, the Corporate Restructuring Transactions) shall
have been fully effected, consummated and accomplished.
(h) Covenants. The covenants contained in Article V of this Agreement
that are required to be performed on or before the Distribution Date shall
have been fully performed.
(i) No Prohibitions. Consummation of the transactions contemplated
hereby shall not be prohibited by Law and no Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation
of the Distribution or any transaction contemplated by this Agreement, it
being understood that the parties hereto hereby agree to use their
reasonable best efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted as promptly as possible.
(j) Consents. ESI, ADA-ES and the other members of their respective
Groups shall have obtained all Consents the failure of which to obtain
would, in the determination of the Board of Directors of ESI, have a
material adverse effect on the ESI Group or the ADA-ES Group, each taken as
a whole, and such Consents shall be in full force and effect.
SECTION 4.02. No Constraint. Notwithstanding the provisions of Section 4.01
above, the fulfillment or waiver of any or all of the conditions precedent to
the Distribution set forth therein shall not:
(a) create any obligation on the part of ESI or any other party hereto
to effect the Distribution;
(b) in any way limit ESI's right and power under Section 8.10 hereof
to terminate this Agreement and the process leading to the Distribution and
to abandon the Distribution; or
(c) alter the consequences of any such termination under Section 8.10
hereof from those specified in such Section.
SECTION 4.03. Deferral of Distribution Date. If the Distribution Date shall
have been established by the Board of Directors of ESI but all the conditions
precedent to the Distribution set forth in this Agreement have not theretofore
been fulfilled or waived, or ESI does not reasonably anticipate that they will
be fulfilled or waived, on or prior to the date established as the Distribution
Date, ESI may, by resolution of its Board of Directors (or a committee thereof,
so authorized), defer the Distribution Date to a later date.
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SECTION 4.04. Public Notice of Deferred Distribution Date. If the Board of
Directors (or a committee thereof, so authorized) of ESI shall defer the
Distribution Date in accordance with Section 4.03 above and public announcement
of the prior Distribution Date has theretofore been made, ESI shall promptly
thereafter issue, in accordance with the advice of legal counsel, a public
announcement with respect to such deferment and shall, with the advice of legal
counsel, take such other actions as may be deemed necessary or desirable with
respect to the dissemination of such information.
ARTICLE V
COVENANTS
SECTION 5.01. Further Assurances. ESI and ADA-ES shall use all reasonable
efforts to:
(a) take or cause to be taken all actions, and do or cause to be done
all things reasonably necessary, proper or advisable under applicable Law
and agreements or otherwise to consummate and make effective the
transactions contemplated hereby, including without limitation using
commercially reasonable efforts to obtain any consents and approvals from,
enter into any amendatory agreements with and make any applications,
registrations or filings with, any third Person or any Governmental
Authority necessary or desirable in order to consummate the transactions
contemplated hereby or to carry out the purposes of this Agreement; and
(b) execute and deliver such further instruments and documents and
take such other actions as the other party may reasonably request in order
to consummate the transactions contemplated hereby and effectuate the
purposes of this Agreement.
SECTION 5.02. ESI Name. ESI shall xxxxx XXX-ES transition licenses, in the
forms of Exhibit M (the "Transition Trademark License"), to use the ESI
Trademarks and Trade Names for the limited use as more fully described below in
this Section 5.02 and in Section 5.03. ADA-ES shall, and shall cause each of the
other members of its Group over which it has legal or effective direct or
indirect control to, at its own expense:
(a) Within thirty (30) days following the Distribution Date, change,
if necessary, its corporate name to delete therefrom the word "ESI" or any
other word that is confusingly similar to the word "ESI;" and
(b) Within one year following the Distribution Date, remove any and
all references to the ESI Trademark and Trade Names from any and all signs,
displays or other identification or advertising material (excluding any
such material that is the subject of Section 5.03 below). After the
conclusion of such period, ADA-ES and each other member of its respective
Group or over which it has legal or effective direct or indirect control
shall not use or display any of the ESI Trademarks and Trade Names without
the prior written consent of ESI, which consent may be withheld for any
reason or no reason whatsoever. After the Distribution date, no party
hereto shall represent or permit to be represented to any third Person that
it or any member of its Group has a business affiliation with any other
party hereto or any member of such other party's Group, except as expressly
permitted by any of the Ancillary Agreements.
SECTION 5.03. Supplies and Documents. Notwithstanding the provisions of
Section 5.02 above, for a period of six (6) months following the Distribution
Date, the Transition Trademark License shall license (on a nonexclusive basis)
to the ADA-ES Group the right to use existing supplies and documents which have
imprinted thereon any of the ESI Trademarks and Trade Names to the extent that
such supplies and documents were existing in the inventory of such member of the
ADA-ES Group as of the Distribution Date.
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SECTION 5.04. Assumption and Satisfaction of Liabilities. Except as
otherwise specifically set forth in any Ancillary Agreement, from and after the
Distribution Date:
(a) ESI shall, and shall cause each of the other members of the ESI
Group over which it has legal or effective direct or indirect control to,
assume, pay, perform and discharge all ESI Liabilities in accordance with
their terms, when determinable, and otherwise as determined in accordance
with the practice of the parties prior to the Distribution; and
(b) ADA-ES shall, and shall cause each of the other members of the
ADA-ES Group over which it has legal or effective direct or indirect
control to, assume, pay, perform and discharge all ADA-ES Liabilities in
accordance with their terms, when determinable, and otherwise as determined
in accordance with the practice of the parties prior to the Distribution.
SECTION 5.05. No Representations or Warranties; Consents.
(a) General. Each of the parties hereto understands and agrees that no
party hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement (including the Ancillary Agreements) or
otherwise, making any representation or warranty whatsoever, including
without limitation, any representation or warranty:
(i) as to the value or freedom from encumbrance of, or any other
matter concerning, any assets of such party; or
(ii) as to the legal sufficiency to convey title to any asset as
of the execution, delivery and filing of this Agreement or any
Ancillary Agreement, including, without limitation, any Conveyancing
and Assumption Instrument.
(b) Disclaimer of Merchantability or Fitness of Assets. Each party
hereto further understands and agrees that there are no warranties, express
or implied, as to the merchantability or fitness of any of the assets
either transferred to or retained by the ESI Group or the ADA-ES Group,
pursuant to Corporate Restructuring Transactions and the other terms and
provisions of this Agreement, any Conveyancing and Assumption Agreement or
any Ancillary Agreement, and all such assets that are so transferred will
be transferred on an "AS IS, WHERE IS" basis, and the party to which any
such assets are transferred hereunder, or which retains assets hereunder,
shall bear the economic and legal risk that any conveyances of such assets
shall prove to be insufficient or that the title of such party or any other
member of its respective Group to any such assets shall be other than good
and marketable and free from encumbrances.
(c) Acknowledgement of Disclosure and Waiver. ADA-ES acknowledges, for
itself and on behalf of each other member of its Group, that:
(i) ESI and the other members of the ESI Group have disclosed,
and ADA-ES have knowledge of, all matters pertaining to the assets and
properties to be conveyed to ADA-ES or any member of its Group
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pursuant to the Corporate Restructuring Transactions or otherwise
pursuant to the other term of this Agreement to the same extent that
ESI and the other members of the ESI Group have knowledge of such
matters; and
(ii) such knowledge constitutes notice and disclosure of such
matters. ADA-ES waives, to the fullest extent permitted by Law, for
itself and for each other member of its Group, any and all claims or
causes of action which any of them may have arising out of such
matters or the failure of any Conveyancing and Assumption Instrument
to describe or refer to, or provide notice of, any such matters.
(d) No Representations or Warranties Regarding Consents. Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement or any Ancillary Agreement or in any other agreement or document
contemplated by this Agreement or any Ancillary Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any amendatory agreements and the
making of any filings or applications contemplated by this Agreement will
satisfy the provisions of any or all applicable agreements or the
requirements of any or all applicable Law. Each of the parties hereto
further agrees and understands that the party to which any assets are
transferred as contemplated by the Corporate Restructuring Transactions or
the other provisions of this Agreement shall bear the economic and legal
risk that any necessary consents or approvals are not obtained, that any
necessary amendatory agreements are not executed and delivered or that any
requirements of Law are not complied with.
(e) Covenant to Use Reasonable Efforts to Obtain Consents.
Notwithstanding the provisions of Section 5.05(d) above, each of the
parties hereto shall (and shall cause each other member of its respective
Group over which it has direct or indirect legal or effective control to)
use reasonable efforts to obtain all consents and approvals, to enter into
all amendatory agreements and to make all filings and applications that may
be reasonably required for the consummation of the transactions
contemplated by this Agreement and shall take all such further reasonable
actions as shall be reasonably necessary to preserve for each of the ESI
Group and the ADA-ES Group, to the greatest extent feasible, the economic
and operational benefits of the allocation of assets and Liabilities
contemplated by this Agreement. In case at any time after the Distribution
Date any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary or desirable action.
SECTION 5.06. Removal of Certain Guarantees.
(a) Removal of ESI Group as Guarantor of ADA-ES and ADA-ES
Liabilities. Except as otherwise contemplated in the Corporate
Restructuring Transactions or otherwise specified in any Ancillary
Agreement ESI, and ADA-ES shall use commercially reasonable efforts to
have, on or prior to the Distribution Date, or as soon as practicable
thereafter, ESI and any other member of the ESI Group removed as a
guarantor of, or obligor under or for, any ADA-ES Liability.
(b) Removal of ADA-ES Group as Guarantor of ESI Liabilities. Except as
otherwise contemplated in the Corporate Restructuring Transactions or
otherwise specified in any Ancillary Agreement, ESI and ADA-ES shall use
commercially reasonable efforts to have, on or prior to the Distribution
Date, or as soon as practicable thereafter, ADA-ES and any other member of
the ADA-ES Group removed as a guarantor of, or obligor under or for, any
ESI Liability.
SECTION 5.07. Public Announcements. Each party hereto shall consult with
each other before issuing any press release or otherwise issuing any other
similar written public statement with respect to this Agreement or the
Distribution and shall not issue any such press release or make any such public
statement without the prior consent of each other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
20
consent of any other party, issue such press release or other similar written
public statement as may be required by Law or any listing agreement with a
national securities exchange to which any party hereto (or any member of such
party's Group) is a party if it has used all reasonable efforts to consult with
such other party and to obtain such party's consent but has been unable to do so
in a timely manner.
SECTION 5.08. Intercompany Agreements. Effective as of the consummation of
the Distribution, ADA-ES and ESI shall (and shall cause each other member of its
respective Group over which it has legal or effective direct or indirect
control) to terminate each and every agreement between it and any member of the
other Group other than this Agreement, any of the Ancillary Agreements and any
of the license agreements referred to in Section 2.06(e) above; provided,
however, that such termination shall not have any effect whatsoever on any of
its rights and/or obligations that accrued or were incurred prior to the
Distribution Date (subject to the terms of Section 2.13 above).
SECTION 5.09. Tax Matters. ESI and the ADA-ES intend the Distribution to be
treated as tax-free distribution under Code Section 355 and each such party
shall use its reasonable efforts to cause the Distribution to so qualify.
Neither ESI nor ADA-ES shall take any action that might cause:
(i) the Distribution to fail to qualify as tax-free distribution
under Code Section 355;
(ii) any other transfer described in the Corporate Restructuring
Transaction that is intended to qualify as a tax-free transfer under
Code Section 332, 351, 355 or 368 to fail to so qualify; or
(iii) ESI or any ESI Subsidiary to recognize any gains relating
to deferred intercompany transactions or excess loss accounts between
or among any members of affiliated groups of corporations of which ESI
is the common parent.
ARTICLE VI
ACCESS TO INFORMATION
SECTION 6.01. Provision, Transfer and Delivery of Applicable Corporate
Records.
(a) Provision, Transfer and Delivery of ADA-ES Records. Each of ESI
and ADA-ES shall (and shall cause each other member of its respective Group
over which it has legal or effective direct or indirect control to) arrange
as soon as practicable following the Distribution Date for the
transportation (at ADA-ES' cost) to ADA-ES of the Books and Records in its
possession (i) that relate primarily to the ADA-ES Business or are
necessary to operate the ADA-ES Business (collectively, the "ADA-ES
Records") and (ii) that consist of the corporate minutes of the Board of
Directors (or committees thereof) of ESI or that otherwise relate to the
business, administrative and management operations of ESI as the parent
holding company of the ESI Business and ADA-ES Business (collectively, the
"ESI Corporate Records") except to the extent such items are already in the
possession of any member of the ADA-ES Group. The ADA-ES Records and the
ESI Corporate Records shall be the property of ADA-ES, but shall be
available to ESI for review and duplication, at its cost, pursuant to the
terms of this Agreement.
(b) Provision, Transfer and Delivery of ESI Records. ADA-ES shall (and
shall cause each other member of its respective Group over which it has
legal or effective direct or indirect control to) arrange as soon as
practicable following the Distribution Date for the transportation (at
21
ESI's cost) to ESI of the Books and Records in its possession that relate
primarily to the ESI Business or are necessary to operate the ESI Business
(collectively, the "ESI Records"), except to the extent such items are
already in the possession of any member of the ESI Group. The ESI Records
shall be the property of ESI, but shall be available to ADA-ES for review
and duplication, at its cost, pursuant to the terms of this Agreement.
SECTION 6.02. Access to Information.
(a) Access to Books and Records. Unless otherwise contemplated by
Section 6.06 hereof, from and after the Distribution Date, ESI and ADA-ES
shall (and shall cause each of the other members of its respective Group
over which it has legal or effective direct or indirect control to) afford
to each other party and its authorized accountants, counsel and other
designated representatives reasonable access and duplicating rights (all
such duplicating costs to be borne by the requesting party) during normal
business hours, subject to appropriate restrictions for classified,
privileged or confidential information, to the personnel, properties, Books
and Records and other data and information of such party and each other
member of such party's Group relating to operations prior to the
Distribution insofar as such access is reasonably required by the other
requesting party for the conduct of the requesting party's business (but
not for competitive purposes).
(b) Provision of Post-Distribution Commission Fillings. For a period
of five years following the Distribution Date, ESI and ADA-ES shall (and
shall cause each of the other members of its respective Group over which it
has legal or effective direct or indirect control to) provide to the other,
promptly following such time at which such documents are filed with the
Commission, all documents (other than documents or portions thereof for
which confidential treatment has been granted or a request for confidential
treatment is pending) filed by it and by each other member of such party's
Group with the Commission pursuant to the Securities Act or the periodic
and interim reporting requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
SECTION 6.03. Reimbursement: Other Matters. Except to the extent otherwise
contemplated hereby or by any Ancillary Agreement, a party providing Books and
Records or access to information to any other party (or such party's
representatives) under this Article VI shall be entitled to receive from such
other party, upon the presentation of invoices therefore, payments for such
amounts, relating to supplies, disbursements and other out-of pocket expenses,
as may be reasonably incurred in providing such Books and Records or access to
information.
SECTION 6.04. Confidentiality.
(a) General Restriction on Disclosure. ESI and ADA-ES shall not (and
shall not permit any other member of its respective Group over which it has
legal or effective direct or indirect control to) use or permit the use of
(without the prior written consent of the other) and shall hold, and shall
cause its consultants, advisors and otter representatives and any other
member of its respective Group (over which it has legal or effective direct
or indirect control) to hold, in strict confidence, all information
concerning each other party hereto and the other members of such other
party's Group in its possession, custody or control to the extent such
information either
(i) relates to the period up to the Distribution Date,
(ii) relates to any Ancillary Agreement, or
22
(iii) is obtained in the course of performing services for the
other party pursuant to any Ancillary Agreement, and each party hereto
shall not (and shall cause each other member of its respective Group
over which it has legal or effective direct or indirect control not
to) otherwise release or disclose such information to any other
Person, except its auditors, attorneys, financial advisors, bankers
and other consultants and advisors, without the prior written consent
of the other affected party or parties, unless compelled to disclose
such information by judicial or administrative process or unless such
disclosure is required by Law and such party has used reasonable
efforts to consult with the other affected party or parties prior to
such disclosure.
(b) Compelled Disclosure. To the extent that a party hereto is
compelled by judicial or administrative process to disclose such
information under circumstances in which any evidentiary privilege would be
available, such party agrees to assert such privilege in good faith prior
to making such disclosure. Each of the parties shall consult with the other
party in connection with any such judicial or administrative process,
including, without limitation, in determining whether any privilege is
available, and shall not object to each such relevant party and its counsel
participating in any hearing or other proceeding (including, without
limitation, any appeal of an initial order to disclose) in respect of such
disclosure and assertion of privilege.
(c) Exceptions to Confidential Treatment. Anything herein to the
contrary notwithstanding, no party hereto shall be prohibited from using or
permitting the use of, or required to hold in confidence, any information
to the extent that (i) such information has been or is in the public domain
through no fault of such party, (ii) such information is, after the
Distribution Date, lawfully acquired from other sources by such party, or
(iii) this Agreement, any Ancillary Agreement or any other agreement
entered into pursuant hereto permits the use or disclosure of such
information by such party.
SECTION 6.05. Witness Services. At all times from and after the
Distribution Date, ESI and ADA-ES shall use its reasonable efforts to make
available to each other party hereto, upon reasonable written request, the
officers, directors, employees and agents of each member of its respective Group
for fact finding, consultation or interviews and as witnesses to the extent
that:
(a) such persons may reasonably be required in connection with the
prosecution or defense of any Action in which the requesting party or any
member of its respective Group may from time to time be involved; and
(b) there is no conflict in the Action between the requesting party or
any member of its respective Group and the party to which a request is made
pursuant to this Section 6.05 or any member of such party's Group. Except
as otherwise agreed by the parties, a party providing witness services to
any other party under this Section shall be entitled to receive from the
recipient of such services, upon the presentation of invoices therefore,
payments for such amounts, relating to supplies, disbursements and other
out-of-pocket expenses (but not salary expenses) and direct and indirect
costs of employees who participate in fact finding, consultation or
interviews or are witnesses, as are actually and reasonably incurred in
providing such fact finding, consulting, interviews or witness services by
the party providing such services.
SECTION 6.06. Retention of Records. Except when a longer period is required
by Law or is specifically provided for herein or in any Ancillary Agreement,
each party hereto shall cause the members of its Group over which it has legal
or effective direct or indirect control, to retain, for a period of at least
seven years following the Distribution Date, all material information (including
without limitation all material Books and Records) relating to such Group and
23
its operations prior to the Distribution Date. Notwithstanding the foregoing,
any party hereto may offer in writing to deliver to the other party all or a
portion of such information as it relates to members of the offering party's
Group and, if such offer is accepted in writing within ninety (90) days after
receipt thereof, the offering party shall promptly arrange for the delivery of
such information (or copies thereof) to the accepting party (at the expense of
such accepting party). If such offer is not so accepted, the offered information
may be destroyed or otherwise disposed of by the offering party at any time
thereafter.
SECTION 6.07. Privileged Matters.
(a) Privileged Information. The parties hereto shall, and shall cause
the members of its Group over which it has legal or effective direct or
indirect control to, use its reasonable efforts to maintain, preserve,
protect and assert all privileges including, without limitation, all
privileges arising under or relating to the attorney-client relationship
(including without limitation the attorney-client and attorney work product
privileges) that relate directly or indirectly to any member of any other
Group for any period prior to the Distribution Date ("Privilege" or
"Privileges"). The parties hereto shall use reasonable efforts not to
waive, or permit any member of its Group over which it has legal or
effective direct or indirect control to waive, any such Privilege that
could be asserted under applicable Law without the prior written consent of
the other parties. With respect to each party, the rights and obligations
created by this Section 6.07 shall apply to all information as to which a
member of any Group did assert or, but for the Distribution, would have
been entitled to assert the protection of a Privilege ("Privileged
Information") including, but not limited to, any and all information that
either:
(i) was generated or received prior to the Distribution Date but
which, after the Distribution, is in the possession of a member of
another Group; or
(ii) is generated or received after the Distribution Date but
refers to or relates to Privileged Information that was generated or
received prior to the Distribution Date.
(b) Production of Privileged Information. Upon receipt by a party or
any member of its Group of any subpoena, discovery or other request that
arguably calls for the production or disclosure of Privileged Information,
or if a party or any member of its Group obtains knowledge that any current
or former employee of such party or any member of its Group has received
any subpoena, discovery or other request that arguably calls for the
production or disclosure of Privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the information
and to assert any rights it may have under this Section 6.07 or otherwise
to prevent the production or disclosure of Privileged Information. No party
will, or will permit any member of its Group over which it has direct or
indirect legal or effective control to. produce or disclose any information
arguably covered by a Privilege under this Section 6.07 unless:
(i) the party has provided its express written consent to such
production a disclosure; or
(ii) a court of competent jurisdiction has entered an order,
which is not then appealable or a final, nonappealable order finding
that the information is not entitled to protection under any
applicable privilege.
(c) No Waiver. The parties hereto understand and agree that the
transfer of any Books and Records or other information between any members
of the ESI Group or the ADA-ES Group shall be made in reliance on the
24
agreements of ESI and ADA-ES, as set forth in Section 6.04 and Section 6.07
hereof, to maintain the confidentiality of Privileged Information and to
assert and maintain all applicable Privileges. The Books and Records being
transferred pursuant to Section 6.01 hereof, the access to information
being granted pursuant to Section 6.01 hereof, the agreement to provide
witnesses and individuals pursuant to Section 6.05 hereof and the transfer
of Privileged Information to either party pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted
under this Section or otherwise.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnification by ESI. Except as otherwise specifically set
forth in any provision of this Agreement or of any Ancillary Agreement, ESI
shall, to the fullest extent permitted by Law, indemnify, defend and hold
harmless the ADA-ES Indemnified Parties from and against any and all
Indemnifiable Losses of the ADA-ES Indemnified Parties arising out of, by reason
of or otherwise in connection with either (i) the ESI Liabilities, or (ii) the
breach by ESI of any provision of this Agreement or any Ancillary Agreement.
SECTION 7.02. Indemnification by ADA-ES. Except as otherwise specifically
set forth in any provision of this Agreement or of any Ancillary Agreement,
ADA-ES shall. to the fullest extent permitted by Law, indemnify, defend and hold
harmless the ESI Indemnified Parties from and against any and all Indemnifable
Losses of the ESI Indemnified Parties arising out of, by reason of or otherwise
in connection with either (i) the ADA-ES Liabilities, or (ii) the breach by
ADA-ES of any provision of this Agreement or any Ancillary Agreement.
SECTION 7.03. Limitation on Indemnification Obligations.
(a) Reductions for Insurance Proceeds and Other Recoveries. The amount
that any party (an "Indemnifying Party") is or may be required to pay to
any other Person (an "Indemnified Party") pursuant-to Section 7.01 or
Section 7.02, as applicable, shall be reduced (retroactively or
prospectively) by any Insurance Proceeds or other amounts actually
recovered from third parties by or on behalf of such Indemnified Party in
respect of the related Indemnifiable Losses (except that nothing herein
shall be construed as requiring any Indemnified Party in respect of any
ADA-ES Securities Liability to file any claim for insurance). The existence
of a claim by an Indemnified Party for insurance or against a third party
in respect of any Indemnifiable Loss shall not, however, delay any payment
pursuant to the indemnification provisions contained herein and otherwise
determined to be due and owing by an Indemnifying Party. Rather the
Indemnifying Party shall make payment in full of such amount so determined
to be due and owing by it against an assignment by the Indemnified Party to
the Indemnifying Party of the entire claim of the Indemnified Party for
such insurance or against such third party. Notwithstanding any other
provisions of this Agreement, it is the intention of the parties hereto
that no insurer or any other third party shall be (i) entitled to a benefit
it would not be entitled to receive in the absence of the foregoing
indemnification provisions or (ii) relieved of the responsibility to pay
any claims for which it is obligated. If an Indemnified Party shall have
received the payment required by this Agreement from an Indemnifying Party
in respect of any Indemnifiable Losses and shall subsequently actually
receive Insurance Proceeds or other amounts in respect of such
indemnifiable Losses, then such Indemnified Party shall hold such Insurance
Proceeds in trust for the benefit of such Indemnifying Party and shall pay
to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received, up to the aggregate amount of
any payments received from such Indemnifying Party pursuant to this
Agreement in respect of such lndemnifiable Losses.
25
(b) Foreign Currency Adjustments. In the event that any
indemnification payment required to be made hereunder or under any
Ancillary Agreement shall be denominated in a currency other than U.S.
Dollars, the amount of such payment shall be translated into U.S. Dollars
using the foreign exchange rate for such currency determined in accordance
with the following rules:
(i) with respect to any Indemnifiable Losses arising from the
payment by a financial institution under a guarantee, comfort letter,
letter of credit, foreign exchange contract or similar instrument, the
foreign exchange rate for such currency shall be determined as of the
date on which such financial institution shall have been reimbursed;
(ii) with respect to any Indemnifiable Losses covered by
insurance, the foreign exchange rate for such currency shall be the
foreign exchange rate employed by the insurance company providing such
insurance in settling such Indemnifiable Losses with the Indemnifying
Party; and
(iii) with respect to any Indemnifiable Losses not covered by
either clause (i) or (ii) above, the foreign exchange rate for such
currency shall be determined as of the date that notice of the claim
with respect to such Indemnifiable Losses shall be given to the
Indemnified Party.
SECTION 7.04. Procedures for Indemnification. Except as otherwise
specifically provided in any Ancillary Agreement, including, without limitation,
the Tax Sharing Agreement and the Benefits Agreement:
(a) Notice of Third Party Claims. If a claim or demand is made against
an Indemnified Party by any Person who is not a member of the ESI Group or
ADA-ES Group (a "Third Party Claim") as to which such Indemnified Party is
entitled to indemnification pursuant to this Agreement, such Indemnified
Party shall notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim promptly (and in any event within fifteen
(15) business days) after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the Indemnified Party's right to
indemnification hereunder except to the extent the Indemnifying Party shall
have been actually prejudiced as a result of such failure (except that the
Indemnifying Party shall not be liable for any expenses incurred during the
period in which the Indemnified Party failed to give such notice).
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
promptly (and in any event within fifteen (15) business days) after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third Party Claim.
(b) Legal Defense of Third Party Claims. If a Third Party Claim is
made against an Indemnified Party, the Indemnifying Party shall be entitled
to participate in the defense thereof and, if it so chooses, to assume the
defense thereof with counsel selected by the Indemnifying Party, which
counsel shall be reasonably satisfactory to the Indemnified Party. Should
the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party
for legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof. If the Indemnifying Party assumes
26
such defense, the Indemnified Party shall have the right to participate in
the defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by the Indemnifying Party, it being understood
that the Indemnifying Party shall control such defense. The Indemnifying
Party shall be liable for the reasonable fees and expenses of counsel
employed by the Indemnified Party for any period during which the
Indemnifying Party has failed to assume the defense of the Third Party
Claim (other than during the period prior to the time the Indemnified Party
shall have given notice of the Third Party Claim as provided above). If the
Indemnifying Party so elects to assume the defense of any Third Party
Claim, all of the Indemnified Parties shall cooperate with the Indemnifying
Party in the defense or prosecution thereof. Notwithstanding the foregoing:
(i) the Indemnifying Party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable to the
Indemnified Party for the reasonable fees and expenses of counsel
incurred by the Indemnified Party in defending such Third Party Claim)
if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnified
Party which the Indemnified Party reasonably determines, after
conferring with its counsel, cannot be separated from any related
claim for money damages; provided, however, that if such equitable
relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the Indemnifying Party shall be
entitled to assume the defense of the portion relating to money
damages;
(ii) an Indemnifying Party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable for reasonable
fees and expenses of counsel incurred by Indemnified Party in
defending such Third Party Claim) if, in the Indemnified Party's
reasonable judgment, a conflict of interest between such Indemnified
Party and such Indemnifying Party exists in respect of such Third
Party Claim; and
(iii) if at any time after assuming the defense of a Third Party
Claim an Indemnifying Party shall fail to prosecute or shall withdraw
from the defense of such Third Party Claim, the Indemnified Party
shall be entitled to resume the defense thereof and the indemnifying
Party shall be liable for the reasonable fees and expenses of counsel
incurred by the Indemnified Party in such defense.
(c) Settlement of Third Party Claims. Except as otherwise provided
below in this Section 7.04(c), or as otherwise specifically provided in any
Ancillary Agreement, including without limitation, the Tax Sharing
Agreement and the Benefits and Pension Plan Agreement, if the Indemnifying
Party has assumed the defense of any Third Party Claim, then
(i) in no event will the Indemnified Party admit any liability
with respect to, or settle, compromise or discharge, any Third Party
Claim without the Indemnifying Party's prior written consent;
provided, however, that the Indemnified Party shall have the right to
settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Xxxxx if the Indemnified Party releases
the Indemnifying Party from its indemnification obligation hereunder
with respect to such Third Party Claim and such settlement, compromise
or discharge would not otherwise adversely affect the Indemnifying
Party, and
(ii) the Indemnified Party will agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying
Party may recommend and that by its terms obligates the Indemnifying
Party to pay the full amount of the liability in connection with such
Third Party Claim and releases the Indemnified Party completely in
connection with such Third Party Claim and would not otherwise
adversely affect the Indemnified Party
27
provided, however, that the Indemnified Party may refuse to agree to
any such settlement, compromise or discharge if the Indemnified Party
agrees that the Indemnifying Party's indemnification obligation with
respect to such Third Party Claim shall not exceed the amount that
would be required to be paid by or on behalf of the Indemnifying Party
in connection with such settlement, compromise or discharge. If the
Indemnifying Party has not assumed the defense of a Third Party Claim
then in no event shall the Indemnified Party settle, compromise or
discharge such Third Party Claim without providing prior written
notice to the Indemnifying Party, which shall have the option within
fifteen (15) business days following the receipt of such notice to:
(i) approve and agree to pay the settlement,
(ii) approve the amount of the settlement, reserving the right to
contest the Indemnified Party's right to indemnity pursuant to this
Agreement,
(iii) disapprove the settlement and assume in writing all past
and future responsibility for such Third Party Claim (including all of
Indemnified Patty's prior expenditures in connection therewith), or
(iv) disapprove the settlement and continue to refrain from
participation in the defense of such Third Party Claim, in which event
the Indemnifying Party shall have no further right to contest the
amount or reasonableness of the settlement if the Indemnified Party
elects to proceed therewith.
In the event the Indemnifying Party does not respond to such
written notice from the Indemnified Party within such fifteen (15)
business-day period, the Indemnifying Party shall be deemed to have
elected option (i).
(d) Other Claims. Any claim on account of an Indemnifiable Loss that
does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnified Party to the applicable Indemnifying Party.
Such Indemnifying Party shall have a period of fifteen (15) business days
after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such fifteen (15) business-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such fifteen (15) business-day period or rejects such claim in whole
or in part, such Indemnified Party shall be free to pursue such remedies as
may be available to such party under applicable Law or under this
Agreement.
SECTION 7.05. Indemnification Payments. Indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or loss,
liability, claim, damage or expense is incurred.
SECTION 7.06. Other Adjustments. In addition to any adjustments required
pursuant to Section 7.04 hereof, if the amount of any Indemnifiable Losses
shall, at any time subsequent to any indemnification payment made by the
Indemnifying Xxxxx pursuant to this Article VII, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnified
Party to the Indemnifying Party, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this Agreement in respect of
such Indemnifiable Losses.
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SECTION 7.07. Obligations Absolute. The foregoing contractual obligations
of indemnification set forth in this Article VII shall:
(a) also apply to any and all Third Party Claims that allege that any
Indemnified Xxxxx is independently, directly, vicariously or jointly and
severally liable to such third party;
(b) to the extent permitted by applicable law, apply even if the
Indemnified Party is partially negligent or otherwise partially culpable or
at fault, whether or not such liability arises under any doctrine of strict
liability; and
(c) be in addition to any liability or obligation that an Indemnifying
Party may have other than pursuant to this Agreement.
SECTION 7.08. Survival of Indemnities. The obligations of ESI and ADA-ES
under this Article VII shall survive the sale or other transfer by any of them
of any assets or businesses or the assignment by any of them of any Liabilities,
with respect to any Indemnifiable Loss of any Indemnified Party related to such
assets, businesses or Liabilities.
SECTION 7.9. Remedies Cumulative. The remedies provided in this Article VII
shall be cumulative and shall not preclude assertion by any Indemnified Party of
any other rights or the seeking of any and all other remedies against any
Indemnifying Party.
SECTION 7.10. Cooperation of the Parties with Respect to Actions and Third
Party Claims.
(a) Identification of Party In Interest. Any party to this Agreement
that has responsibility for an Action or Third Party Claim shall identify
itself as the true party in interest with respect to such Action or Third
Party Claim and shall use its reasonable efforts to obtain the dismissal of
any other party to this Agreement from such Action or Third Party Claim.
(b) Disputes Regarding Responsibility for Actions and Third Party
Claims. If there is uncertainty or disagreement concerning which party to
this Agreement has responsibility for any Action or Third Party Claim, the
following procedure shall be followed in an effort to reach agreement
concerning responsibility for such Action or Third Party Claim:
(i) The parties in disagreement over the responsibility for an
Action or Third Party Claim shall exchange brief written statements
setting forth their position concerning which party has responsibility
for the Action or Third Party Claim in accordance with the provisions
of this Article VII. These statements shall be exchanged within five
(5) days of a party putting another party on written notice that the
other party is or may be responsible for the Action or Third Party
Claim.
(ii) If within five (5) days of the exchange of the written
statement of each party's position agreement is not reached on
responsibility for the Action or Third Party Claim, the General
Counsel for each of the parties in disagreement over responsibility
for the Action or Third Party Claim shall speak either by telephone or
in person to attempt to reach agreement on responsibility for the
Action or Third Party Claim.
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(c) Effect of Failure to Follow Procedure. Failure to follow the
procedure set forth in clause (b) above shall not affect the rights
and responsibilities of the parties as established by the other
provisions of this Article VII.
(d) Exchange of Information. In connection with the handling of
current or future Actions or Third Party Claims, the parties may
determine that it is in their mutual interest to exchange privileged
or confidential information. If so, the parties agree to discuss
whether it is in their mutual interest to enter into a joint defense
agreement or information exchange agreement to maintain the
confidentiality of their communications and to permit them to maintain
the confidentiality of proprietary information or information that is
otherwise confidential or subject to an applicable privilege,
including but not limited to the attorney-client, work product,
executive, deliberative process, or self-evaluation privileges.
SECTION 7.11. Contribution. To the extent that any indemnification provided
for under Section 7.01 or Section 7.02 is unavailable to an Indemnified Party,
then the Indemnifying Party under such Section, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Indemnifiable Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other hand
from the transaction or other matter that resulted in the Indemnifiable Losses
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the action, inaction, statements or omissions that
resulted in such Indemnifiable Losses as well as any other relevant equitable
considerations.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Complete Agreement; Construction. This Agreement, including
the Exhibits and Schedules hereto, and the Ancillary Agreements shall constitute
the entire agreement between the parties with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. In the event of any inconsistency between
this Agreement and any Schedule or Exhibit hereto, the Schedule or Exhibit, as
the case may be, shall prevail. Notwithstanding any other provisions in this
Agreement to the contrary, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, such Ancillary Agreement shall control.
SECTION 8.02. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.03. Survival of Agreements. Except as otherwise expressly
provided herein, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 8.04. Responsibility for Expenses.
(a) Expenses Incurred on or Prior to Distribution Date. Subject to the
provisions of Section 8.05(c) below and except as otherwise set forth in
this Agreement or any Ancillary Agreement, all costs and expenses incurred
on or prior to the Distribution Date (whether or not paid on or prior to
the Distribution Date) in connection with the preparation, execution,
30
delivery and implementation of this Agreement and any Ancillary Agreement,
the Information Statements and the Distribution, and the consummation of
the transactions contemplated hereby and thereby shall be charged to and
paid by ADA-ES; and, ADA-ES shall be solely responsible and liable for any
expenses, fees, or other costs that it separately and directly incurs in
connection with any of the transactions contemplated under this Agreement
or any of the Ancillary Agreements.
(b) Expenses Incurred or Accrued After Distribution Date. Subject to
the provisions of Section 8.05(c) below and except as otherwise set forth
in this Agreement or any Ancillary Agreement, each party shall bear its own
costs and expenses first incurred or accrued after the Distribution Date.
(c) Environmental Expenses. Notwithstanding the provisions of Section
8.05(a) and Section 8.05(b) above, expenses and other costs incurred in
connection with compliance with any Environmental Laws applicable to the
transactions contemplated hereby shall be paid by the party that after the
Distribution Date will, or that this Agreement contemplates will, own the
assets or operate the business subject to such Environmental Laws.
SECTION 8.05. Notices. All notices and other communications to a party
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to such
party (and will be deemed given on the date on which the notice is received by
such party) at the address for such party set forth below (or at such other
address for the party as the party shall, from time to time, specify by like
notice to the other parties):
If to ESI, at: 0000 XxxxxXxxx Xxx, X-0
Xxxxxxxxx, XX 00000
Fax - 000-000-0000
Attention: President
If to ADA-ES, at: 0000 XxxxxXxxx Xxx, X-0
Xxxxxxxxx, XX 00000
Fax - 000-000-0000
Attention: President
SECTION 8.06. Waivers. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 8.07. Amendments. Subject to the terms of Section 8.10 hereof, this
Agreement may not be modified or amended except by an agreement in writing
signed by the parties hereto.
SECTION 8.08. Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
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SECTION 8.09. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and permitted assigns.
SECTION 8.10. Termination. This Agreement may be terminated and the
Distribution may be amended, modified or abandoned at any time prior to the
Distribution by and in the sole discretion of ESI without the approval of ADA-ES
or the stockholders of ESI. In the event of such termination, no party shall
have any liability of any kind to any other party. After the Distribution, this
Agreement may not be terminated except by an agreement in writing signed by the
parties hereto; provided, however, that Article VIII shall not be terminated or
amended after the Distribution in respect of the third party beneficiaries
thereto without the consent of such persons.
SECTION 8.11. Third Party Beneficiaries. Except as provided in Article VII
hereof (relating to Indemnified Parties), this Agreement is solely for the
benefit of the parties hereto, and the members of their respective Groups and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, liability, right of reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
SECTION 8.12. Attorney Fees. A party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, reasonable legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in addition to any
other relief to which such other party may be entitled hereunder or otherwise.
SECTION 8.13. Title and Headings. Titles and headings to Sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
SECTION 8.14. Exhibits and Schedules. The Exhibits and Schedules attached
hereto shall be construed with and as an integral part of this Agreement to the
same extent as if the same had been set forth verbatim herein.
SECTION 8.15. Governing Law. All questions and/or disputes concerning the
construction, validity and interpretation of this agreement and the schedules
and exhibits hereto shall be governed by the internal laws, and not the law of
conflicts, of the state of Colorado. Each of the parties to this agreement
hereby irrevocably and unconditionally agrees to be subject to, and hereby
consents and submits to, the jurisdiction of the courts of the state of Colorado
and of the federal courts sitting in the state of Colorado.
SECTION 8.16. Severability. In the event any one or more of the provisions
or part thereof contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 8.17. Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantee the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
EARTH SCIENCES, INC.
By: /s/ Xxxx X. XxXxxxxxx
-------------------------
Name: Xxxx X. XxXxxxxxx
Title: President
ADA-ES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
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