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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 10, 1998
JLM INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-12333 06-1163710
(State or Other (Commission (I.R.S. Employer
Jurisdiction) File Number) Identification No.)
8675 Hidden River Parkway, Tampa, FL. 33637
- -------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
(813) 632-3300
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
On March 10, 1998, the Company executed a long-term supply contract
for phenol with Solutia, Inc. ("Solutia") to purchase on a take-or-pay
basis phenol to be produced at Solutia's proposed phenol plant to be
constructed in Pensacola, Florida (the "Supply Contract"). The proposed
phenol plant will attempt to utilize a new benzene-to-phenol technology
to produce phenol and is currently estimated to have a yearly capacity of
300 million pounds. Construction of the plant is anticipated to commence
in the beginning of 1999 and phenol production is anticipated to begin at
the plant in the fourth quarter of 2000. However, there can be no
assurance that construction of the plant will be completed as scheduled or
if completed that the plant can produce phenol at the currently estimated
level or be operated on a cost-efficient basis.
The Supply Contract requires the Company to advance $35 million to
Solutia as a partial prepayment for required future phenol purchases with
$5 million to be paid on or about December 31, 1998, $1.625 million to be
paid at the end of each quarter of 1999 and $5.875 million to be paid at
the end of each quarter of 2000. The Supply Contract also provides that
if the Company's available borrowing capacity under its aggregate credit
facilites is less than the total amount of the advance payments owed to
Solutia, Solutia may require the Company to deliver to Solutia an
executed, irrevocable bank guaranty equal to the amount of the advance
payment then owed to Solutia.
Under terms of the Supply Contract, the Company is required to
purchase, and Solutia is required to sell, a total of 1.875 billion pounds
of phenol as follows: 75 million pounds of phenol during the first year
following satisfactory startup of phenol production at the plant and 125
million pounds of phenol each year thereafter. The Supply Contract
provides for purchases to be made at a specified price that shall be
reduced on a pro rata per pound basis for the advance payment mentioned
above.
If the Company fails in any year to purchase the required yearly
amount of phenol, then the Company is obligated to pay Solutia the fixed
cost for such amount as defined under the terms of the Supply Contract.
If the Company fails to purchase less than 250 million pounds over any
three year period or shall have purchase less than the 1.875 billion
pounds during the term of the contract, then Solutia, as its sole and
exclusive remedy, may cancel the Supply Contract and receive liquidated
damages equal to the then remaining portion of the advance payment made by
JLM.
The Supply Contract will terminate upon the earlier of the Company
having purchased 1.875 billion pounds of phenol or 15 years from the
initial supply date as defined in the contract. The Supply Contract may
be terminated earlier by Solutia by written notice to the Company upon any
of the following: (i) independent project estimates on either of May 31,
1998 or December 31, 1998 for the cost of the construction of the phenol
plant exceed Solutia's current estimate; (ii) Solutia determines that the
technology premised for the phenol plant cannot meet certain technical and
project cost premises; (iii) the Company fails to make the required
advance payments or provide the bank guaranty discussed above or (iv) upon
180 days notice to the Company, if Solutia elects to abandon the project
due to technical, regulatory, cost or chronic operating problems.
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The Supply Contact may be terminated by the Company by written notice
if the initial supply date is later than June 1, 2002. Upon such
termination, the Company will be reimbursed for its advance payments plus
interest at 10%. In addition, should Solutia fail to supply the 1.875
billion pounds of phenol as required under the terms of the Supply
Contract, JLM shall be entitled to the pro rata portion of the advance
payments as defined in the Supply Contract together with actual damages
caused by the failure to supply the required phenol to JLM. JLM also has
the right to cancel the Supply Contract and receive a refund for the
remaining pro rata balance of the advance payment together with interest
at .8% per month from the default date and claim actual damages for such
default in the event (i) Solutia willfully fails or refuses to supply
phenol as required under the Supply Contract for a period of four
consecutive months, (ii) the amount of the phenol that should have been
suplied exceeds 45 million pounds and (iii) the failure or refusal is not
cured by Solutia.
Effective April 1, 1998, the Company acquired all of the assets of
Browning Chemical Corporation ("Browning"). The purchase price was $9.5
million, with $7.5 million paid in cash and $2 million in a promissory
note to be paid in equal installments over four years. Browning was
founded in 1948 and is a major markerter of inorganic chemicals, with a
diversified product range serving both industrial and food processing
markets throughout the United States. The acquisition will be accounted
for as a purchase.
Item 7. Financial Statements and Exhibits.
1. Exhibits filed herewith:
10.38** Supply Contract for Phenol between JLM Industries, Inc. and Solutia,
Inc.
10.39 Asset Purchase Agreement between Browning Chemical Corporation and
Browning Acquisition, Inc.
** Confidential treatment has been requested with respect to portions of this
Exhibit.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JLM INDUSTRIES, INC.
Dated: April 22, 1998
By: /s/ John L. Macdonald
--------------------------------
John L. Macdonald
President and Chief Executive Officer
By: /s/ Frank A. Musto
---------------------------------
Frank A. Musto
Vice President and Chief Financial
Officer (Principal Financial
and Accounting Officer)
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERICKS DENOTE SUCH OMISSIONS.
Exhibit 10.38
SUPPLY CONTRACT FOR PHENOL
This Supply Contract ("Contract") is made and entered into at St.
Louis, Missouri as of this 10th day of March, 1998, by and between Solutia
Inc., a Delaware corporation, having its principal place of business at 10300
Olive Street, St. Louis, Missouri, USA 63166 ("Solutia") and JLM Industries
Inc., a Delaware corporation, having its principal place of business at 8675
Hidden River Parkway, Tampa, Florida 33637 ("JLM").
WHEREAS, JLM desires to purchase a dependable, long-term supply of
phenol for use in its marketing business; and
WHEREAS, JLM is prepared to make advance payments for purchase of such
phenol in order to obtain firm drawing rights for such supply, as described in
this Contract; and
WHEREAS, Solutia is willing to accept such advance payments and commit
to a supply of such phenol provided JLM has firm purchase obligations, all as
described in this Contract; and
WHEREAS, Solutia is constructing a new phenol Plant, which will be the
first commercial Plant ever constructed utilizing Solutia's new, breakthrough
benzene-to-phenol technology, at Solutia's Pensacola, Florida Plant site.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. DEFINITIONS.
As used in this Contract, each of the following terms shall have the
following meaning:
A. "Phenol" shall mean phenol meeting the specifications
attached hereto as Exhibit 1A. As used in this contract "phenol" shall refer
to any phenol not meeting the specifications for Phenol.
B. "BTOP Plant" shall mean a new phenol Plant to be
located at Solutia's Plant, currently scheduled to begin commercial production
in the second half of 2000 with a currently estimated nominal yearly capacity
of three hundred million (300,000,000) pounds.
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C. "Auditors" shall mean United States third party,
certified public accountants retained by a party, and reasonably approved by
the other party, to perform any audits described in this Contract.
D. "Dollars" shall mean United States of America dollars
and "Cents" shall mean hundredths of a Dollar.
E. "Effective Date" shall mean the date on which this
Contract is duly executed by both parties.
F. "JLM's Books" shall mean JLM's accounting books and
records prepared by JLM, as consistent with JLM's accounting practices
currently used in its business and consistent with GAAP as JLM may prepare such
books and records in the ordinary course of JLM's business.
G. "Solutia's Books" shall mean Solutia's accounting
books and records prepared at or utilized for Solutia's Plant, as consistent
with Solutia's accounting practices currently used at Solutia's Plant and
consistent with GAAP as Solutia may from time to time prepare such books and
records in the due course of business conducted at or from such Plant. Such
accounting practices shall be consistent during the term hereof unless
accounting practice changes are mutually agreed upon, such agreement not to be
unreasonably withheld.
H. "Solutia's Plant" shall mean Solutia's entire
Pensacola, Florida Plant site (including, but not limited to, the BTOP Plant).
I. "Month" shall mean a calendar month during the term
of this Contract.
J. "Quarter" shall mean a calendar quarter during the
term of this Contract.
K. "Year" shall mean a calendar year, except that the
first such Year shall be from the date of this Contract to December 31, 1998
and the last Year shall be from January 1 to the last day of this Contract term
in the calendar year.
L. "Initial Supply Date" shall mean the date following
"Satisfactory Startup" when Solutia delivers commercial quantities of Phenol
produced in the BTOP Plant to JLM.
M. "Satisfactory Startup" shall have such meaning as
described in Exhibit 1M attached hereto.
N. "Current Estimate" shall mean Solutia's good faith
estimate of total cost for the BTOP Plant as approved by its Board of Directors
on October 21, 1997.
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2. TERM.
A. The term of this Contract shall commence on the date first
stated above and, unless earlier terminated or canceled as set forth in this
Contract or extended as set forth in Articles 2B or 2C, below, shall continue
until the earlier of (i) the date when an aggregate of one billion eight
hundred seventy five million (1,875,000,000) pounds of Phenol have been sold to
JLM by Solutia hereunder or (ii) 180 months from the Initial Supply Date. It
is understood and agreed that any phenol purchased or sold by JLM from Solutia
outside of this Contract (or as described in Section 3F below), shall not count
toward the volumes or prices hereunder.
B. Deliveries of Phenol suspended by reason of those Article 16
events impacting Solutia's ability to produce or deliver or JLM's ability to
consume or receive Phenol shall (except to the extent provided below) cause the
date specified in Section 2A(ii) to be extended by one Month (or portion
thereof) for each ten million four hundred sixteen thousand, six hundred
sixty-seven (10,416,667) pounds (or portion thereof) of Phenol suspended by
reason of such events, unless Solutia subsequent to such event and prior to the
expiration of this Contract has otherwise supplied such suspended deliveries.
Notwithstanding the above, following the conclusion of the Article 16 events
should Solutia have surplus Phenol (described in Article 18 as "Designated
Surplus"), such Designated Surplus may be applied to catch-up on a supply of
Phenol suspended during such Article 16 events.
C. This Contract shall be subject to early termination by Solutia
by written notice to JLM by the below specified dates and for the below
described events:
(1) Should Solutia's good faith first stage independent project
estimate currently estimated to be completed by May 31, 1998 for the total cost
of the BTOP Plant exceed Solutia's Current Estimate.
(2) Should Solutia's good faith second stage independent project
estimate currently estimated to be completed by December 31, 1998 for the total
cost of the BTOP Plant exceed Solutia's Current Estimate.
(3) By December 31, 1998 should Solutia determine in good faith
that the technology premised for the BTOP Plant cannot meet the key technical
and project cost premises (including, but not limited to, the ability to
economically produce phenol meeting the specifications attached as Appendix A).
(4) Upon seven (7) days notice of delinquency to JLM which
delinquency is not remedied during the seven (7) day period, at any time should
the bank guaranty described in Section 7E not be timely provided to Solutia or
should JLM not timely make the Advance Payments described in Article 7.
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(5) Upon one hundred eighty (180) days notice to JLM should
Solutia elect "Abandonment" of the BTOP Plant. "Abandonment" shall mean
Solutia's election to cease operating the BTOP Plant due to technical,
regulatory, cost or chronic operating problems.
D. Except to the extent delayed due to events described in
Article 16 hereof, in the event that the Initial Supply Date is later than June
1, 2001, then Solutia's only obligation to JLM shall be to pay to JLM daily
interest (computed at a ten percent (10%) simple annual interest basis) with
interest accruing starting June 1, 2001 on the amount of the Advance Payment
paid to Solutia by JLM as described in Article 7, hereof.
E. Except to the extent delayed due to events described in
Article 16 hereof, in the event that the Initial Supply Date is later than June
1, 2002, then JLM may elect to terminate this Contract by written notice to
Solutia (unless the Initial Supply Date has occurred prior to JLM's termination
notice). Solutia's only obligation to JLM shall be to refund to JLM the
Advance Payment previously made by JLM and to make the interest payments
described in Section 2D, above.
Excluding JLM's inability to purchase by reason of Article 16 events or
Solutia's wrongful failure to supply hereunder, should JLM fail to purchase the
full one billion eight hundred seventy five million (1,875,000,000) pounds of
Phenol described in Article 3 during the term of this Contract JLM may elect to
have the term hereof extended for six (6) months. Should JLM so elect to
extend the term, it shall so notify Solutia in writing with as much advance
notice prior to the end of the base term as then practicable, but not less than
sixty (60) days prior to the end of the base term. It is understood and agreed
that should Solutia during the base term have supplied, upon JLM's request, any
shortfall pounds then such volumes shall not be counted toward volumes eligible
for such extension. During such term extension the volume purchase/supply
obligations and limitations and pricing provisions hereunder shall continue to
apply.
This Contract is also subject to early termination by either party pursuant to
the provisions of Appendix 1A due to a failure to reach a mutually agreeable
specification for Phenol.
3. QUANTITIES AND QUALITY.
A. With deliveries to begin upon the Initial Supply Date, JLM
shall purchase, and Solutia shall sell, during the term of this Contract one
billion eight hundred seventy-five million (1,875,000,000) pounds of Phenol,
but not to exceed the one hundred twenty-five million (125,000,000) pounds of
Phenol during any Year (the "Yearly Volume") (prorated for the first and last
Year). Notwithstanding the above, Solutia's obligation to supply and JLM's
obligation to purchase Phenol for the first twelve (12) month period following
Satisfactory Startup shall be seventy five million (75,000,000) pounds.
B. Such Yearly Volume shall be taken and supplied in
approximately even monthly amounts. Without Solutia's prior consent, Solutia
shall not be obligated to supply
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more than eleven million five hundred thousand (11,500,000) pounds of Phenol in
a Month, more than thirty three million (33,000,000) pounds in a Quarter, or
more than sixty five million (65,000,000) pounds in any two (2) consecutive
Quarters.
C. Except to the extent caused by Solutia's breach of this
Contract or events described in Article 16, in the event JLM fails to purchase
the Yearly Volume of Phenol in a Year (pro rated for the first and last Years),
JLM's only obligation shall be to pay Solutia for the "fixed cost coverage" for
such volume shortfall and forfeit (except to the extent JLM is able to make
purchases during the term extension described in Section 2F, above), the pro
rata amount of the Advance Payment for the volume not taken. "Fixed Cost
Coverage" shall mean Solutia's then current budgeted fixed costs as described
in Appendix 3C, attached hereto. At the end of each Year, if it is JLM's
intent to purchase the full Yearly Volume of Phenol that Year (less any
deliveries suspended because of Solutia's inability to supply and has placed an
appropriate order with Solutia to that effect, Solutia's December invoice to
JLM will be for the Yearly Volume less JLM's purchases through November. If
actual deliveries to JLM in December are less than such invoiced amount, then
the shortfall shall become JLM's inventory and shipped to JLM as soon as
practical in January. If the reverse is true, the excess delivery shall be
invoiced in January of the following year. Such differences (inventory or
excess delivery) shall not exceed five million (5,000,000) pounds without
Solutia's consent.
D. Solutia shall provide JLM with a good faith estimate of the
Initial Supply Date ninety (90) days before such estimated date. During the
construction of the BTOP Plant, Solutia will provide to JLM an annual
technology review/update each December and also provide JLM a Quarterly update
as to construction progress and updated forecasts of targeted completion dates.
After Satisfactory Startup, Solutia shall permit JLM reasonable site visitation
to the BTOP Plant, subject to confidentiality obligations consistent with those
between the parties under the April 18, 1997 Confidentiality Agreement
(assigned to Solutia by Monsanto Company on October 23, 1997). Confidentiality
obligations shall continue for seven (7) years beyond the termination or
expiration of this Contract.
E. The volumes specified in Sections 3A and 3B above, shall be
pro rata reduced based on production lost during extended maintenance
turnarounds of the BTOP Plant. Unless Solutia is able to offer replacement
volumes to JLM within six (6) months following completion of the turnarounds,
this Contract shall be extended by the ratios and procedures described in
Section 2B.
F. It is understood and agreed between the parties that Solutia
shall not be obligated to reserve any manufacturing capacity for JLM except as
needed to fulfill Solutia's obligations described in Sections 3A, 3B and 3D
above.
G. Phenol shall meet the specifications as set forth in Exhibit
1A, attached hereto. Such specifications may be changed only by mutual consent
of the parties, which consent shall not be unreasonably withheld.
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4. POTENTIAL PHENOL SUPPLY FOLLOWING CONTRACT EXPIRATION.
Neither party shall have any obligation to the other with respect to
Phenol supply or purchase following expiration of this Contract.
5. DELIVERIES.
A. Phenol or phenol shall be made available to JLM at Solutia's
Plant (FOB Solutia's Plant), with title and risk of loss passing at Solutia's
Plant (unless a swap is agreed to by both parties) and with JLM bearing all
freight, insurance, duties, tariffs, container, packaging or other costs and
charges thereafter. JLM assumes all risk and liability for loss, destruction,
deterioration, contamination, or damage of or to the Phenol or phenol once
delivered to JLM at Solutia's Plant.
B. JLM shall provide Solutia Monthly with a good faith, rolling
forecast of its projected Phenol orders for at least each of the upcoming 12
Months. However, that portion of the forecast for the immediately upcoming one
(1) Month period shall be considered to be firm orders. Orders, forecasts and
delivery dates shall be provided at least thirty (30) days prior thereto.
However, it is understood that, in the case of suspension of deliveries due to
a force majeure event as provided in Article 16, JLM shall modify that portion
of its rolling forecast, and shall have the option to reduce or cancel the
quantities ordered for the immediately upcoming one (1) Month period.
C. Phenol or phenol shall be delivered into JLM supplied,
suitable and clean railcars or trucks at Solutia's Plant (unless a swap is
agreed to by the parties) provided that they shall be of a type that can be
practically and safely handled and loaded by Solutia. Solutia retains the
right to reject any non-compliant railcars or trucks.
D. Solutia's (or shipper's, in the case of a swap) weights shall
govern unless proved to be in error by more than one-half percent (1/2%). Any
survey charges requested by JLM shall be for JLM's account.
E. A sample from each railcar or truck (except in the case of a
swap) shall be taken by Solutia as evidence of Phenol or phenol quality and a
certificate of quality shall be provided to JLM for each such delivery as and
when requested by JLM. Samples and test results shall be maintained by Solutia
for ninety (90) days following each delivery. Special analysis shall be to
JLM's account on a Solutia actual time and materials basis.
6. PRICE AND PAYMENT.
A. For each pound of Phenol sold by Solutia to JLM hereunder, JLM
shall pay Solutia the "Contract Price" as described in Exhibit 6B, attached
hereto.
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B. Solutia shall invoice JLM for all sales upon delivery to JLM
at Solutia's Plant or delivery point of the swapped quantity and payment shall
be made by wire transfer within fifteen (15) days from date of invoice (date of
Solutia tenders shipment).
7. ADVANCE PAYMENTS.
A. Payments shall be made by wire transfer to Solutia's account
at:
Citibank N.A.
399 Park Avenue
New York, New York 10043
(Solutia shall advise JLM of Solutia's account number and the ABA routing
number prior to payment.)
B. JLM shall make non-refundable advance payments, totaling
Thirty Five Million Dollars ($35,000,000) ("Advance Payment") to Solutia. The
Advance Payment shall be paid to Solutia per the schedule listed in Exhibit 7B,
attached hereto.
C. For each pound of Phenol sold pursuant to Section 3A and 3B
hereunder, there shall be a prorata credit against the invoice until the
Advance Payment is exhausted. It is understood and agreed between the parties
that, consistent with JLM's firm drawing rights to and corresponding firm
obligations to purchase the full one billion eight hundred seventy-five million
(1,875,000,000) pounds of Phenol hereunder, Solutia shall be entitled to earn
the full Advance Payment by performing its obligations under this Contract.
This expectancy and right is understood to be one of the major considerations
under which Solutia entered into this Contract.
D. Except to the extent that part or all of the Advance Payment
may be returned as provided in Sections 2E, 13A and 13B, the Advance Payment
shall be retained by Solutia interest free and in no case shall JLM be entitled
to any interest, credit or allowance as a result of Solutia's retention or use
of the Advance Payment.
E. JLM shall provide Solutia Quarterly with a letter from its
lead bank or banks stating the total uncommitted line of credit available to
JLM. In the event that JLM's uncommitted bank line of credit is below the
trigger levels described in Exhibit 7E, attached hereto, Solutia may require
that JLM deliver to Solutia an executed, irrevocable bank guaranty from State
Street Bank and Trust, Boston (or comparable bank), covering the difference
between the then existing available credit line and the balance of the Advance
Payments guaranteeing the timely payment of any then uncovered portions of the
Advance Payment described in Section 7B, above. Such guaranty shall be
delivered to Solutia no later than seven (7) days from Solutia's request.
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8. VERIFICATION OF PRICE.
A. Solutia shall keep complete and accurate books, records and
accounts with respect to relevant matters with respect to the components of the
Contract Price. JLM shall keep complete and accurate books, records and
accounts with respect to relevant matters with respect to the pricing mechanism
described in Article 18.
B. As and when reasonably requested by a party, the other party
shall provide to the other's Auditors sufficient information and data (or at a
party's election, permit the Auditors to inspect Solutia's Books or JLM's
books, as the case may be) to support and verify the accuracy of the Contract
Price or the Article 18 price, as the case may be. Such inspections shall be
made at reasonable times and intervals and such inspections and the information
and data to be furnished shall be in such scope and detail as may be reasonably
necessary under the circumstances to support and verify the accuracy of such
prices. However, such audits shall not be permitted more than once per Year,
shall not extend back for a period greater than the immediately preceding
twenty four (24) Month period and shall not cover a time period covered by a
prior audit. The Auditors shall disclose to the requesting party only the fact
that the prices previously supplied by the other party are true, correct and
complete in all respects or provide the requesting party a corrected version of
such price. The fees and expenses of the Auditors shall be borne by the
requesting party.
9. JLM'S POTENTIAL RAW MATERIAL SUPPLY.
A. Solutia shall keep JLM reasonably informed of Solutia's supply
strategy, tactics, commitments, including pricing for benzene to be used in the
BTOP Plant. Solutia will have sole responsibility to negotiate and contract
for benzene to be used in the BTOP Plant. Solutia will consult with JLM before
making contractual commitments for supply of benzene greater than 21 million
gallons per year. Solutia will attempt to provide reasonable volume
flexibility in all benzene purchase contracts to allow for some spot purchases
or JLM-arranged benzene supply. Both parties recognize this depends on market
conditions and volume flexibility above contractual purchase obligations may or
may not be commercially available. If Solutia requests reasonable assistance
from JLM in helping to secure necessary benzene supplies for the BTOP Plant,
JLM shall provide such assistance. The price for Solutia-supplied benzene
shall be as described in Appendix 6B, attached hereto.
B. Beginning January 1, 2003, upon eighteen (18) months prior
written notice (or longer if based on remaining term of purchase contracts
advised to JLM under 9A above) to Solutia, JLM may elect to provide to Solutia
at Solutia's Plant the necessary benzene needed to provide JLM Phenol hereunder
over at least the succeeding twenty four (24) Month Period. Such benzene shall
be compatible with the benzene Solutia uses in the BTOP Plant. Once JLM elects
to provide its own benzene, Solutia shall have no further obligation to do so.
Following such election, failure of JLM to have suitable JLM-arranged benzene
timely provided (at least fifteen (15) days before Solutia's scheduled
manufacturing date) shall permit Solutia to either not deliver the
corresponding volume of
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Phenol to JLM or purchases benzene on the open market and include such purchase
cost in the Contract Price. JLM shall not have the above right to supply
benzene to the extent that Solutia has a contract(s) in place, approved by JLM,
to supply one hundred percent (100%) of the needs for the BTOP Plant or
otherwise earmarked for the BTOP Plant or earmarked for Phenol to be supplied
to JLM hereunder.
C. Unless otherwise specified by Solutia, the benzene described
in Section 9B above shall be sold to Solutia by JLM F.O.B. Solutia's Plant per
Solutia's then standard terms and conditions of purchase. Payment terms for
such benzene sales will be the same as then in effect for Solutia's other
benzene suppliers. Such benzene shall meet Solutia's then current
specifications used in Solutia's manufacture of Phenol in the BTOP Plant. The
price paid by Solutia for such JLM-supplied benzene shall be used in the
calculation of Price hereunder.
10. LIMITED WARRANTY.
Subject, to Article 9, Solutia warrants title to the Phenol and phenol
and that the Phenol shall conform to the specifications attached hereto as
Exhibit A at the time and place of delivery to JLM at Solutia's Plant. Any
phenol sold to JLM hereunder shall be sold on an "AS IS", no-warranty basis
(other than title) unless Solutia provides a written warranty to JLM on a
shipment by shipment basis. Subject to the preceding sentence and except as
otherwise expressly provided herein, SOLUTIA MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR
PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH RESPECT TO THE PHENOL or phenol,
whether used alone or in combination with any other material.
11. LIMITATION OF LIABILITY.
A. By a date no later than sixty (60) days after delivery of the
Phenol or phenol to JLM at Solutia's Plant, JLM shall examine such Phenol for
any damage, defect or shortage. However, it is understood that Solutia has no
liability or responsibility for any damage, destruction, defect, deterioration,
loss or shortage occurring after the Phenol or phenol is delivered to JLM at
Solutia's Plant or at the delivery point in the case of a swap. All claims for
any cause whatsoever (whether such cause be based in contract, negligence,
strict liability, other tort or otherwise) shall be deemed waived by JLM unless
made in writing and received by Solutia by a date no later than sixty (60) days
after the date the Phenol or phenol in respect to which such claim is made is
delivered to JLM at Solutia's Plant or, if such claim is for non-delivery,
within sixty (60) days after the date upon which such Phenol or phenol was to
be delivered. However, as to any such cause not reasonably discoverable within
such sixty (60) day period (including that discoverable only in processing or
further manufacture) any claim shall be made in writing and received by Solutia
within one hundred eighty (180) days after the Phenol or phenol in respect to
which such claim is made was delivered to JLM at Solutia's Plant, or within
thirty (30) days after JLM learns of the facts giving rise to such claim,
whichever shall first occur. Failure of
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Solutia to receive written notice of any such claim within the applicable time
period shall be deemed an absolute and unconditional waiver by JLM of such
claim irrespective of whether the facts giving rise to such claim shall have
then been discovered or of whether processing, further manufacture, other use
or disposition of the Phenol or phenol shall have then taken place.
B. EXCEPT TO THE EXTENT ADDITIONAL REMEDIES ARE PROVIDED IN
ARTICE 13, JLM'S EXCLUSIVE REMEDY SHALL BE FOR DAMAGES, AND SOLUTIA'S TOTAL
LIABILITY FOR ANY AND ALL LOSSES AND DAMAGES ARISING OUT OF ANY CAUSE
WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT
LIABILITY, OTHER TORT OR OTHERWISE) SHALL IN NO EVENT EXCEED THE CONTRACT PRICE
(WHICH INCLUDES THE AMORTIZATION OF THE UPFRONT PAYMENT) OF THE PHENOL or
phenol IN RESPECT TO WHICH SUCH CAUSE ARISES OR, AT SOLUTIA'S OPTION, THE
REPAIR OR REPLACEMENT OF SUCH PHENOL or phenol AND IN NO EVENT SHALL SOLUTIA BE
LIABLE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, INDIRECT OR PUNITIVE
DAMAGES RESULTING FROM ANY SUCH CAUSE. Solutia shall not be liable for, and
JLM assumes sole liability and responsibility for, all personal injury and
property damage connected with the handling, transportation, possession,
processing, further manufacture, other use or resale of the Phenol or phenol
following delivery of the Phenol or phenol to JLM whether the Phenol or phenol
is used alone or in combination with any other material. Transportation
charges for the return of the Phenol or phenol shall not be paid unless
authorized in advance by Solutia.
C. If Solutia furnishes technical or other advice to JLM, whether
or not at JLM's request, with respect to processing, further manufacture, other
use or resale of the Phenol or phenol (or any material made using the Phenol or
phenol), Solutia shall not be liable for, and JLM assumes all risk of, such
advice and the results thereof.
12. LIQUIDATED DAMAGES FOR JLM'S MAJOR PURCHASE DEFAULT.
A. In the event of "JLM's Major Purchase Default" described under
(i) below, Solutia shall be entitled (as its sole and exclusive remedy) to
cancel this Contract (including any contract provided for or otherwise then
existing under Article 18) and to then recover liquidated damages as described
herein ("Liquidated Damages"). In the event of "JLM's Major Purchase Default"
described in (ii) below, Solutia shall be entitled (as its sole and exclusive
remedy) to recover Liquidated Damages at the expiration of this Contract.
"JLM's Major Purchase Default" shall mean either (i) that JLM shall have
purchased less than two hundred fifty million (250,000,000) pounds of Phenol
from Solutia hereunder over any thirty-six (36) consecutive Month period
(unless otherwise excused by this Contract), or (ii) shall have purchased less
than a total of one billion eight hundred seventy five million (1,875,000,000)
pounds during the term of this Contract. The parties recognize that JLM's
failure to purchase the volumes described in (i) above may be tantamount to a
Contract abandonment and, in any event, deprives Solutia of revenue for such an
extended
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period as to render a cancellation and collection of Liquidated Damages as a
result due to JLM's Major Purchase Default fair and reasonable hereunder.
B. In the event that Solutia cancels this Contract due to JLM's
Major Purchase Default under (i) above, then this Contract shall be canceled
effective with its notice and Solutia shall collect Liquidated Damages from
JLM.
C. The amount of the Liquidated Damages to which Solutia shall be
entitled shall be equal to the then remaining portion of the Advance Payment
(which would be Thirty Five Million Dollars ($35,000,000) x (1 -
S/1,875,000,000).
"S" would be the pounds of Phenol previously delivered under this Contract
under Article 3.
D. The Liquidated Damages shall apply only to JLM's Major
Purchase Default, and any other contractual obligations or sums owed or owing
for other events, including but not limited to payment for Phenol sold and
delivered and the payments described in Article 3C and Article 13, shall be
unaffected thereby.
E. It is understood and agreed between the parties that in the
event of JLM's Major Purchase Default that substantial damages and injury would
be caused to Solutia. However, the specific amount of such damages or injury
would be difficult to quantify. The amount of Liquidated Damages provided
herein is understood and agreed between the parties to represent reasonable and
just compensation to Solutia for JLM's Major Purchase Default and would not
represent speculative, excess or punitive damages.
13. REMEDIES FOR SOLUTIA'S SUPPLY DEFAULT
A. In order for JLM to better assure itself of continuity in the
supply of Phenol for its purposes, JLM shall have available to it not only the
remedy of actual damages applying to Solutia's defaults hereunder but shall
also have available the remedy of specific performance (except for those
defaults described in Section B below) as such remedies are provided for under
the Uniform Commercial Code as adopted by the State of Missouri ("Missouri
Law"). Such remedies shall be JLM's sole and exclusive remedies (except as
provided for in Section C below) and JLM waives all other remedies including
but not limited to rescission, cancellation or other early termination
remedies.
B. If by the end of one hundred eighty (180) months from the
Initial Supply Date (plus any extensions in the term provided for in Article F
hereof) Solutia shall have failed or refused to supply to JLM an aggregate of
one billion eight hundred seventy-five million (1,875,000,000) pounds of Phenol
if required by this Contract and if such failure or refusal was in breach of,
and not excused under, this Contract, JLM shall (i) be entitled to a refund of
a portion of the Advance Payment and (ii) have the right to claim actual
damages under Missouri Law for such failure or refusal by Solutia (but such
damages shall
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not include return of all or any portion of the Advance Payment since it has
already been provided for in (i) above). Such portion of the Advance Payment
shall be determined per the following formula: Thirty Five Million Dollars
($35,000,000) x (X/1,875,000,000).
"X" would be the pounds of Phenol that Solutia failed or refused to supply to
JLM if required by and in breach of, and not excused under, this Contract.
It is understood and agreed that this Section B shall only apply to a normal
Contract expiration and shall not apply if the Contract is earlier terminated
or canceled (including, but not limited to, a cancellation as provided for in
Section C below).
C. In the event of "Solutia's Interim Major Supply Default", JLM
shall also have available to it the remedy of cancellation under Missouri Law.
"Solutia's Interim Major Supply Default" shall mean an event in which all four
(4) of the following have occurred: (i) that Solutia shall have willfully
failed or refused to supply the Phenol (as specified in (ii) and (iii) below)
if required by Article 3 of this Contract and such failure or refusal was in
breach of, and not excused under, this Contract; (ii) that such failure or
refusal shall have occurred throughout a four (4) consecutive Month period;
(iii) that the total amount which Solutia failed to supply under Article 3 of
this Contract shall have exceeded forty-five million (45,000,000) pounds, and
(iv) that such failure or refusal shall have not been "Substantially Cured" by
Solutia. As a condition of availing itself of this remedy of cancellation, JLM
shall, within ninety (90) days of the occurrence of such Default, give Solutia
sixty (60) days prior written notice of intent to cancel, providing in
particularity the details of the alleged failure or refusal to supply. If
within sixty (60) days from Solutia's receipt of JLM's notice, Solutia shall
have cured such failure or refusal to supply or has undertaken actions which
are reasonably calculated to cure such failure or refusal over a reasonable
period of time, the failure or refusal shall be deemed "Substantially Cured"
and JLM shall not be able to cancel this Contract. If, however, during said
sixty (60) day period Solutia has not cured or undertaken actions as aforesaid,
JLM may within ten (10) days thereafter cancel this Contract by giving Solutia
written notice of cancellation; provided that JLM shall only have this remedy
of cancellation if the supply with respect to which the failure or refusal is
claimed was required by Article 3A of this Contract and if the failure or
refusal was in breach of, and was not excused under, this Contract.
In the event JLM elects to cancel this Contract as provided above due to
Solutia's Interim Major Supply Default, JLM shall (1) be entitled to a refund
of the remaining balance of the Advance Payment (including interest accruing at
eight-tenths of one percent (0.8%) per Month beginning with the date of
Solutia's Interim Major Supply Default) and (2) have the right to claim actual
damages under Missouri Law for Solutia's Interim Major Supply Default (but such
damages shall not include return of all or any portion of the Advance Payment
since it has already been provided for in (1) above). It is understood and
agreed that should JLM elect to cancel and recover damages under this Section
C, it shall not also be permitted to recover under Section B above since such a
recovery would be, in effect, a
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<PAGE> 13
double recovery. It is further understood that the remedies described in this
Section C may not be exercised after normal Contract expiration.
14. PATENTS.
Subject to Article 11 and unless otherwise expressly provided herein,
Solutia warrants that the Phenol or phenol sold pursuant to this Contract does
not infringe any valid U.S. patent. This warranty is given upon condition that
JLM promptly notify Solutia of any claim or suit involving JLM in which such
infringement is alleged and that, if Solutia is affected, JLM permit Solutia to
control completely the defense or compromise of any such allegation of
infringement. Solutia does not warrant that the use of the Phenol or phenol or
any material made therefrom, whether the Phenol or phenol is used alone or in
combination with any other material, will not infringe a patent.
15. TAXES.
Any tax or governmental charge or increase in same (excluding any
franchise or income tax or other tax or charge based on income) (i) increasing
the cost to Solutia (except to the extent that such increased cost shall be
already included in the Contract Price, it being understood that as of the date
hereof Solutia has not included any taxes in its Formula Price) of producing,
storing, selling or delivering the Phenol or the raw materials or procuring the
raw materials used therein or (ii) payable by Solutia because of the
production, inventory, sale or delivery of the Phenol, such as Sales Tax, Use
Tax, Retailer's Occupational Tax, Gross Receipts Tax, CERCLA Tax, Value Added
Tax, may, at Solutia's option, be added to the price specified herein and
collected from JLM at the time Solutia incurs such tax or charge as a part of
the Phenol cost to be shared proportionally by JLM and Solutia based on the
nature of the tax (production-based, sales-based, etc.) and the respective
amounts sold or produced by Solutia at Solutia's Plant and that purchased by
JLM hereunder.
16. EXCUSE OF PERFORMANCE.
A. Deliveries (including delay of initial shipments hereunder)
may be suspended by either party in the event of: Act of God, war, riot, fire,
explosion, accident, flood, sabotage; lack of adequate fuel, power, raw
materials, labor, containers or transportation facilities, which are caused, in
whole or in part, by events or causes beyond the reasonable control of such
party; compliance with governmental requests, laws, regulations, orders or
actions; breakage or failure of machinery or apparatus;
misfeasance/malfeasance/nonperformance by a contractor; national defense
requirements or any other event, whether or not of the class or kind enumerated
herein, beyond the reasonable control of such party; or in the event of labor
trouble, strike, lockout or injunction (provided that neither party shall be
required to settle a labor dispute against its own best judgment); which event
makes impracticable the manufacture, transportation, acceptance or use of a
shipment of the phenol or of a material upon which the manufacture of the
phenol is dependent.
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<PAGE> 14
B. If Solutia determines that its ability to supply its total
demand (including its internal needs) for Phenol or obtain any or a sufficient
quantity of any material used directly or indirectly in the manufacture of the
Phenol, is hindered, limited or made impracticable, Solutia may allocate its
available supply of Phenol from or such material (without obligation to acquire
other supplies of any such Phenol or material) among itself and its purchasers
(including JLM) on such basis as is equitable without liability for any failure
of performance which may result therefrom; but Solutia agrees to allocate
Phenol to JLM on the pro rata basis as Solutia provides Phenol for its own
internal needs.
C. Deliveries suspended or not made by reason of this Article
shall be done so without liability, and unless such shortage quantities have
been subsequently made available to JLM, as provided in Section 2B, shall cause
the term of the Contract to be extended accordingly, but subject to quantity
and delivery limitations provided in Articles 3 and 5.
D. To the extent and for such duration that the parties are
unable to deliver or take deliveries of Phenol due to the occurrence of an
event described in Article 16A above, such affected volumes and time shall not
be included in determining a Major Purchase Default under Article 12, a
purchase or supply default under Article 2, or a supply default under Article
13.
17. ASSIGNMENT.
This Contract is binding upon and shall inure to the benefit of the
parties and their respective successors and assigns; provided that any transfer
or assignment, whether voluntarily or not and whether by operation of law or
otherwise, of this Contract or any rights hereunder, by either party without
the prior written consent of the other party or other than as expressly
permitted to this Contract, shall be void and of no effect. Either party may
assign and transfer its rights and obligations under this Contract to (a) any
corporation or partnership which succeeds by purchase, merger, de-merger,
spin-off, consolidation or otherwise, to all, or substantially all, of the
"Related Business and Assets" of such assigning party ("Related Business and
Assets") shall mean (i) in the case of JLM, all of its Phenol manufacturing and
marketing operations and (ii) in the case of Solutia, all of its Phenol
manufacturing operations), or (b) any subsidiary company in which more than
fifty percent (50%) of the outstanding capital stock entitled to vote for
directors is and continues to be owned and controlled, directly or indirectly,
by such assigning or transferring party or (c) any corporation which shall own
more than fifty percent (50%) of such assigning and transferring party's
outstanding capital stock entitled to vote for directors. Provided that any
such transferee or assignee as aforesaid shall be required to and shall assume
and be bound by the observance and performance of the transferring or assigning
party's duties and obligations under or in connection with this Contract.
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<PAGE> 15
18. JLM's MARKETING OF SURPLUS PHENOL.
If it is foreseen that Solutia will have a surplus of Phenol or phenol
produced in the BTOP Plant over its internal needs and contractual needs
hereunder, Solutia shall give notice to JLM to that effect specifying the
estimated duration and quantity, subject to the below limitations. JLM shall
then have the option to first purchase at the Contract Price hereunder such
"Designated Surplus" as catch-up volumes for any supply of Phenol suspended
during a previous Article 16 event and then if any volumes of "Designated
Surplus" remain to purchase the "Designated Surplus" Phenol from Solutia.
"Designated Surplus" shall be the excess Phenol or first quality resin grade
phenol of Solutia produced in the BTOP Plant (based on a three hundred million
(300,000,000) nominal yearly manufacturing capacity and a twenty five million
(25,000,000) monthly capacity) above Solutia's needs (internal manufacturing
use, swaps or for conversion) and Solutia's supply requirements to JLM
hereunder. Surplus generated due to the ability of the BTOP Plant to produce
more than three hundred million (300,000,000) pounds in a year or twenty five
million (25,000,000) pounds in a month are not includable in the "Designated
Surplus". For other than catch-up purchases, should JLM elect to purchase part
or all of such Designated Surplus, the price shall be **** of the volume
weighted average spot (excluding pricing from JLM's customers under contracts
of greater than a ninety (90) days term), netback price received by JLM from
sale of all of its Phenol or phenol (as the case may be) during the period that
such Designated Surplus has been sold to JLM hereunder. JLM shall have seven
(7) days to advise Solutia if JLM elects to purchase part or all of the
Designated Surplus which is available more than thirty five (35) days from
the date of Solutia's notice and two (2) days to elect to purchase for volumes
to be made available thirty five (35) days or less from Solutia's notice.
19. AUTHORIZATION BY BOARD OF DIRECTORS.
Each party represents and warrants to the other that the corporate
officer executing this Contract has the full authority of such party to execute
this Contract on behalf of such party and, upon the Execution Date, this
Contract is a binding obligation of such party. Within fourteen (14) days
following execution hereof, each party shall provide the other with a notice,
signed by its corporate secretary, that this Contract has been duly authorized
and approved by appropriate corporate action.
20. NOTICE.
Any notice required or permitted to be given under this Contract shall
be in writing, and shall be deemed sufficiently given when delivered in person
or transmitted by fax, or when deposited in the United States mail (registered
or certified) postage prepaid, to the addresses given below:
Solutia: Solutia Inc.
10300 Olive Boulevard
St. Louis, MO 63166
Attention: General Manager, Intermediates
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with copy to: Assistant General Counsel, Commercial
Solutia Inc.
10300 Olive Boulevard
St. Louis, Missouri 63166
JLM: W. J. Kimball
Vice President
JLM Industries, Inc.
8675 Hidden River Parkway
Tampa, FL 33637
with a copy to: John T. White
Vice President and General Counsel
JLM Industries, Inc.
8675 Hidden River Parkway
Tampa, FL 33637
or such other individual, address or answerback as shall be notified to the
other party.
21. MISCELLANEOUS.
A. As reasonably requested by Solutia, JLM shall provide advice
and counsel, utilizing JLM's then existing experience and knowledge, to Solutia
in matters relating to the start-up of the BTOP Plant, handling, storing,
shipping, applicable governmental regulations, testing and industry practices
relating to Phenol or phenol. Such advice and counsel shall be provided in
good faith by JLM but JLM shall not be liable for, and Solutia assumes all risk
of, such advice and counsel and the results thereof. Solutia shall reimburse
JLM for any of its out-of-pocket costs incurred in so assisting Solutia.
B. The validity, interpretation and performance of this Contract
and any dispute connected herewith shall be governed and construed in
accordance with the laws of the State of Missouri. Controversies shall be
judicially resolved in the United States District Court for the Eastern
District of Missouri.
C. This Contract constitutes the full understanding of the
parties, a complete allocation of the risks between them and a complete and
exclusive statement of their agreement. No conditions, usage of trade, course
of dealing or performance, understanding or agreement purporting to modify,
vary, explain or supplement the terms and conditions of this Contract shall be
binding unless hereafter made in writing and signed by the party to be bound,
and no modification shall be effected by the acknowledgment or acceptance of
purchase order or shipping instruction forms containing terms or conditions at
variance with or in addition to those set forth herein. No waiver by either
JLM or Solutia with respect to any breach of default or of any right or remedy
and no course of dealing, shall be deemed to constitute a continuing waiver of
any other breach or default or of any other
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right or remedy, unless such waiver be expressed in writing signed by the party
to be bound.
D. No waiver, modification or amendment of any term or condition
of this Contract shall be valid or of any effect unless made in writing, signed
by the party to be bound or its duly authorized representative and specifying
with particularity the nature and extent of such waiver, modification or
amendment. Any waiver by any party of any default of the other shall not
affect, or impair any right arising from, any subsequent default.
E. Headings as to the contents of particular sections are
included for convenience of reference only and are not to be construed as a
limitation of the scope of the particular sections to which they refer.
IN WITNESS WHEREOF, the parties have executed this Contract with the
date of execution to be the day and year first written above.
JLM INDUSTRIES, INC.
By:________________________________
Title:______________________________
SOLUTIA INC.
By:________________________________
Title:______________________________
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APPENDIX 1A
PHENOL SPECIFICATIONS
Specifications to be determined by the mutual agreement of the
parties. It is understood that the parties will cooperate in trying to get the
Phenol produced in the BTOP Plant pre-qualified with bis-phenol A customers.
In the event that the parties are unable to reach agreement on the appropriate
specifications hereunder by September 1, 1998, then either party may terminate
this Contract on thirty (30) days written notice.
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APPENDIX 1M
"SATISFACTORY STARTUP"
"Satisfactory Startup" shall mean the date, following mechanical completion,
when the BTOP Plant's operating rates are shown to be consistently producing
Phenol in sufficient volumes as to meet Solutia's currently forecasted internal
needs plus JLM's "Yearly Volume" as described in Article 3.
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APPENDIX 3C
"Fixed Costs" chargeable to JLM under Section 3C shall be ******** per
pound of Phenol. Such figure shall be subject to change Quarterly per the
following formula:
FC = *****
FC = Fixed Cost, per pound of Phenol
*****
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APPENDIX 6B
PRICING FORMULA
Phenol Contract Price
The contract price for Phenol sold to JLM in a calendar quarter (FOB Solutia's
Pensacola, FL plant,) shall be the price derived from the following formula:
P = ***********************************************************
Where:
P = Price for Phenol. ($/lb.)
*****************************
*****************************
*****************************
*****************************
*****************************
*****************************
*****************************
At least 10 days prior to the start of each calendar quarter, Solutia will
provide a good faith estimate of the price of Phenol to be shipped during such
quarter. Such estimated price shall be used on all invoices for Phenol sold to
JLM during such calendar quarter.
However, since such price will be based on estimated, rather than actual,
values for the factors listed in the formula above, within thirty (30) days
following the end of each calendar quarter, Solutia shall recalculate the price
for Phenol sold to JLM during such calendar quarter using the actual rather
than the estimated values.
Any difference in the price charged for Phenol sold hereunder to JLM during
such calendar quarter (by using the actual rather than the estimated values)
shall then be paid to Solutia or credited to JLM, as the case may be.
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APPENDIX 7B
SCHEDULE OF ADVANCED PAYMENTS
Payment Due Date Payment Amount
12/26/98--1/5/99 $ 5,000,000.00
3/31/99 1,625,000.00
6/30/99 1,625,000.00
9/30/99 1,625,000.00
12/31/99 1,625,000.00
3/31/00 5,875,000.00
6/30/00 5,875,000.00
9/30/00 5,875,000.00
12/31/00 5,875,000.00
---------------
TOTAL $ 35,000,000.00
*Solutia may use up to Five Million Dollars ($5,000,000) to
cover project expenses.
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APPENDIX 7E
The maximum amount of the uncommitted line of credit available to JLM
from its banks shall be not less than the amount of the Advance Payment then
remaining to be paid to Solutia by JLM. Should such uncommitted credit line
fall below such remaining Advance Payment commitment, JLM shall be obligated to
provide the bank guaranty covering the difference as described in Section 7E.
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Exhibit 10.39
Asset Purchase Agreement
This Asset Purchase Agreement ("Agreement") is made as of March 31, 1998,
by Browning Acquisition, Inc., a Delaware corporation with an address at 8675
Hidden River Parkway, Tampa, Florida ("Buyer"), Browning Chemical Corporation,
a New York Corporation with an address at 707 Westchester Avenue, White Plains,
New York 10604 ("Seller" or "Company"), and Frederick M. Browning, an
individual resident in Scarsdale, New York ("A"), Jean H. Browning, an
individual resident in Scarsdale, New York ("B"), Vivian Stone, an individual
resident in New City, New York ("C"), Renita Browning, an individual resident
in Rye Brook, New York ("D"), and Deborah Hardesty, an individual resident in
Upper Saddle River, New Jersey ("E"), (A-E are collectively "Seller's
Indemnifiers").
RECITALS
Seller desires to sell, and Buyer desires to purchase, substantially all
of the Seller's assets and assume certain liabilities of the Seller in return
for cash and Buyer's Secured Promissory Notes for the consideration and on the
terms set forth in this Agreement.
The Seller's Indemnifiers are the owners of all of the issued and
outstanding shares of Seller ("Shares") and the Seller's Indemnifiers (except
for D) have been engaged in its business as its principal officers, directors
and employees. Buyer's willingness to enter into the transactions herein
described is conditioned upon the agreement by the Seller's Indemnifiers to be
bound by the restrictive covenants and they are agreeable to same.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Adjustment Amount" - as defined in Section 2.6.
"Applicable Contract" any Contract: (a) under which the Company has or
may acquire any rights; (b) under which the Company has or may become subject
to any obligation or liability; or (c) by which the Company or any of the
assets owned or used by it is or may become bound.
"Acquired Assets" - means all right, title, and interest in and to all of
the assets of Seller, including all of its:
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<PAGE> 2
(a) real property, leaseholds and subleaseholds therein,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenants thereto (such as appurtenant rights in and to public
streets);
(b) tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles, trucks, tractors,
trailers, tools, jigs, and dies), as set forth on the face of the Closing
Financial Statement, except the furniture and office equipment owned or used by
Browning Metals Corporation listed in Exhibit A, and the furniture and art work
located in the office of Frederick M. Browning;
(c) Intellectual Property Assets, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, and the name "Browning
Chemical" and the goodwill associated therewith;
(d) leases, subleases, and rights thereunder;
(e) agreements, contracts, indentures, mortgages, instruments,
security interests, guaranties, other similar arrangements, and right
thereunder;
(f) accounts, notes, and other receivables as set forth on the face
of the Closing Financial Statement;
(g) claims, deposits, prepayments, refunds, causes of action, choses
in action, rights of recovery, rights of set off, and rights of recoupment
(excepting any such item relating to the payment of Taxes);
(h) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies;
(i) books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials, excepting books of account and other financial
records of Sellers. Buyer may copy and retain such financial and accounting
records of Sellers as relate to any of the Acquired Assets, and all records
relating to employee compensation, bonuses, and benefits, and all books,
records, and documents relating to the Assumed Liabilities; and
(j) rights in and with respect to the assets associated with its
employee benefit Plans, provided, however, that the Acquired Assets shall not
include: (i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other
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<PAGE> 3
documents relating to the organization, maintenance, and existence of the
Seller as a corporation; or (ii) any of the rights of the Seller under this
Agreement or under any other agreement between the Seller on the one hand and
the Buyer on the other hand entered into on or after the date of this
Agreement).
"Assumed Liabilities" - means
(a) all Liabilities of the Seller set forth on the Closing Financial
Statement;
(b) all obligations of the Seller under the agreements, contracts,
leases, licenses, and other arrangements referred to in the definition of
Acquired Assets either: (i) to furnish goods, services and other non-cash
benefits to another party after the Closing; or (ii) to pay for goods,
services, and other non-cash benefits that another party will furnish to it
after the Closing;
(c) all Liabilities and obligations of the Seller under its employee
benefit Plans,
(d) all liabilities and Damages of Seller arising from claims made
after the date hereof, resulting from, arising out of, relating to, or in the
nature of, or caused by Hazardous Activity, Hazardous Materials, Environmental
Law, Environmental, Health, and Safety Liabilities, the Occupational Safety and
Health Law, employment laws, Product Warranty, or Product Liability; and
(e) all other Liabilities and obligations of the Seller set forth in
the appendix to the Disclosure Schedule under an express statement (that the
Buyer has initialed) to the effect that the definition of Assumed Liabilities
will include the Liabilities and obligations so disclosed; provided, however,
that the Assumed Liabilities shall not include: (i) any Liability of the Seller
for income, transfer, sales, use, and other Taxes arising in connection with
the consummation of the transactions contemplated hereby; (ii) any Liability
or obligation of the Seller under this Agreement or any side agreement); (iii)
any obligation to stockholders, officers, or directors of Seller, or Related
Persons; or (iv) any Liability as to which Seller has actual knowkedge which is
not disclosed.
"Balance Sheet" - as defined in Section 3.4.
"Best Efforts" the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible.
"Breach" - a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been: (a) any
inaccuracy in or breach of, or any failure to perform or comply with the
representation, warranty, covenant, obligation, or other provision; or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or
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other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Buyer" - as defined in the first paragraph of this Agreement.
"Closing" - as defined in Section 2.3.
"Closing Date" - the date and time as of which the Closing actually takes
place.
"Closing Financial Statements -the financial statements of the Company as
of the Closing Date.
"Company - as defined in the Recitals of this Agreement.
"Consent" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" - all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Acquired Assets by Seller to Buyer;
(b) the execution, delivery, and performance of the Secured
Promissory Notes, the Employment Agreements, and the Noncompetition Agreements.
(c) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement;
(d) the assumption of the Assumed Liabilities by Buyer;
(e) Buyer's acquisition and ownership of the Acquired Assets and
exercise of control over the business of the Company; and
(f) Seller's obligation to remove the words "Browning Chemical" from
its name, and to consent to Buyer's use of the words "Browning Chemical" in its
name.
"Contract" - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages" - any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages").
"Disclosure Letter" - the disclosure letter delivered by Seller and
Seller's Indemnifiers to Buyer concurrently with the execution and delivery of
this Agreement.
"Employment Agreements" - as defined in Section 2.5(a)(iii).
"Encumbrance" - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
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"Environment" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
"Environmental Law" - any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
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(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities" - any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GAAP" - generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" - any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Hazardous Activity" - (a) the ownership, distribution, generation,
handling, importing, exporting, management, manufacturing, packaging,
processing, production, refinement, Release, storage, transfer, transportation,
treatment, sale, resale or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on,
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under, about, or from the Facilities or any part thereof into the Environment,
or (b) any other act, business, operation, or thing that (i) increases the
danger, or risk of danger, or (iii) poses an unreasonable risk of harm to
persons or property on or off the Facilities, or (iii) that may affect the
value of the Facilities or the Company.
"Hazardous Materials" - any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR Act" - the Hart-Scott Rodino Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Intellectual Property Assets" - as defined in Section 3.22.
"Interim Balance Sheet" - as defined in Section 3.4.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" - an individual will be deemed to "Know" and/or to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact in the Ordinary Course of Business.
A Person (other than an individual) will be deemed to "Know" or have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty of a
Governmental body.
"Noncompetition Agreements" - as defined in Section 2.5(a)(iv).
"Occupational Safety and Health Law" - any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated
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or sponsored by industry associations and insurance companies), designed to
provide safe and healthful working conditions.
"Order" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any lawfully
convened court, administrative agency, or other Governmental Body or by any
arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); or
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the
same line of business as such Person.
"Organizational Documents" - (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan" - as defined in Section 3.13.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Product Liability" - any liability or obligation arising from or related
to a claim for Damages caused to any claimant as the result of alleged contact
with any product owned, handled, distributed, imported, exported, transported,
manufactured, stored, packaged, processed, sold or resold by Seller.
"Product Warranty" - as defined by Section 3.26.
"Related Person" - with respect to a particular individual:
(a) each other member of such individual's Family;
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(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c). For purposes of this definition: (a) the "Family" of an individual
includes; (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual; and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule l3d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 25% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 25% of the outstanding equity
securities or equity interests in a Person.
"Release" - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Secured Promissory Notes" - as defined in Section 2.5(b)(ii).
"Securities Act" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
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"Subsidiary - with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax Return" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" - a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" - a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing),
that such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
2. SALE AND TRANSFER OF ASSETS; ASSUMPTIONS OF LIABILITIES CLOSING
2.1 ASSETS
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell, transfer, convey, assign and deliver to Buyer and Buyer
agrees to buy and receive from Seller good and marketable title to all of the
Acquired Assets, free of all liens, charges, or other encumbrances other than
the Assumed Liabilities.
2.2 ASSUMPTION OF LIABILITIES
Subject to the terms and conditions of this Agreement, at the Closing the
Buyer agrees to assume and become responsible for all of the Assumed
Liabilities. The Buyer
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will not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities.
2.3 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Acquired Asset will be
$9,500,000, plus or minus the Adjustment Amount by delivery of cash and
Secured Promissory Notes as provided for in Section 2.5(b).
2.4 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
take place at the offices of Buyer's counsel at 460 Park Avenue, New York, New
York at 10:00 a.m. (local time) on March 31, 1998, or at such other time and
place as the parties may agree. Subject to the provisions of Section 9, failure
to consummate the purchase and sale provided for in this Agreement on the date
and time and at the place determined pursuant to this Section 2.4 will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.5 CLOSING OBLIGATIONS
At the Closing:
(a) Seller and the Seller's Indemnifiers will deliver to Buyer:
(i) bills of sale and other certificates, instruments or
documents of transfer conveying title to the Acquired Assets;
(ii) employment agreements in the form of Exhibit 2.5(a)(iii),
executed by C and D (collectively, "Employment Agreements");
(iii) noncompetition agreements in the form of Exhibit
2.5(a)(iv), executed by each of the Seller's Indemnifiers (collectively, the
"Noncompetition Agreements"); and
(iv) a certificate executed by Seller and Seller's Indemnifiers
representing and warranting to Buyer that each of Seller's representations and
warranties in this Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any supplements to the
Disclosure Letter that were delivered by Sellers to Buyer prior to the Closing
Date in accordance with Section 5.5);
(v) Seller's landlord has given written consent to an
assumption of the lease for Seller's White Plains, N.Y.
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office space, and consented to a sublease of part of that space to Browning
Metals Corp.; and
(b) Buyer will deliver to Seller:
(i) $7,500,000 by bank cashier's or certified check payable to
the order of or by wire transfer to accounts specified by Seller;
(ii) secured promissory notes secured by an acceptable Letter of
Credit payable to Seller in the principal amounts of $1,250,000, and $750,000,
all in the form of Exhibit 2.5(b) (the "Promissory Notes and Letter of
Credit");
(iii) the Letter of Credit
(iv) a certificate executed by Buyer representing and warranting
that, each of Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date; and
(v) the Employment Agreements, executed by Buyer;
(vi) stock options entitling the holders thereof to purchase
shares of JLM in the future at the NASDAQ quoted trading value thereof as of
the close of business on the Closing Date as follows:
30,000 shares to Frederick M. Browning, pursuant to Exhibit B;
20,000 shares to Vivian Stone, pursuant to the Employment Agreement,
Exhibit C;
20,000 shares to Deborah Hardesty, pursuant to the Employment
Agreement, Exhibit D; and
10,000 shares to Renita Browning, pursuant to Exhibit E.
2.6 ADJUSTMENT AMOUNT
The Adjustment Amount will be equal to the difference between (a) book
value of all Acquired Assets reduced by all Assumed Liabilities as of the
Closing Date determined in accordance with GAAP, minus (b) $3,500,000.
2.7 ADJUSTMENT PROCEDURE
(a) Ernst & Young LLP ("E&Y") will audit the financial statements
("Closing Financial Statement") of the Company as of the Closing Date and for
the period from the date of the Balance Sheet through the Closing Date,
including a computation of the book value of all Acquired Assets and all
Assumed Liabilities as of the Closing Date. E&Y will deliver the audited
Closing Financial Statements to Buyer and Seller within sixty days after the
Closing Date. If within thirty days following delivery of the audited
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Closing Financial Statements, neither Buyer nor Seller has given notice to the
other of its objection to the audited Closing Financial Statements (such notice
must contain a statement of the basis of such objection), then the book value
of the Assumed Assets and Assumed Liabilities reflected in the audited Closing
Financial Statements will be used in computing the Adjustment Amount. If Buyer
or Seller gives such notice of objection, then the issues in dispute will be
submitted to Arthur Anderson & Co., certified public accountants (the
"Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution (i) each party will furnish to the Accountants such
workpapers and other documents and information relating to the disputed issues
as the Accountants may request and are available to that party (or its public
accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties and (iii) Buyer and Seller will each bear
50% of the fees of the Accountants for such determination.
(b) On the tenth business day following the final determination of the
Adjustment Amount, if the Adjustment Amount is negative, the Seller will pay
such difference to Buyer. If the Adjustment Amount is positive, Buyer within
the same ten business days will pay such difference to Seller. All payments
will be made together with interest at 7.5% compounded daily beginning on the
Closing Date and ending on the date of payment. Payments to Buyer or Seller
must be made by wire transfer to such bank account as the recipient will
specify. This Section does not affect Buyer's and JLM's duty to furnish the
stock options identified in Section 2.5.
2.8 ALLOCATION
The Parties agree to allocate the Purchase Price (and all other
capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit F.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller and Seller's Indemnifiers represent and warrant to Buyer as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the
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properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of the
states listed in part 3.1 of the Disclosure Letter.
(b) The Company has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
(c) The Company has no Subsidiaries.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Seller and Seller's Indemnifiers, enforceable against them in accordance
with its terms. Upon the execution and delivery by Seller and Seller's
Indemnifiers of the Employment Agreements, and the Noncompetition Agreements
(collectively, the "Sellers' Closing Documents"), the Seller's Closing
Documents will constitute the legal, valid, and binding obligations of Seller's
and Seller's Indemnifiers, enforceable against them in accordance with their
respective terms. Seller and Seller's Indemnifiers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time): (i) contravene, conflict with, or result in a
violation of; (A) any provision of the Organizational Documents of the Company;
or (B) any resolution adopted by the board of directors or the shareholders of
the Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or Seller's
Indemnifiers or any of the assets owned or used by any Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
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(iv) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract; or Except as set forth
in Part 3.2 of the Disclosure Letter, no Seller's Indemnifier nor the Company
is or will be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
INTENTIONALLY OMITTED
3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer: (a) unaudited balance sheets of the Company
as at June 30, in each of the years 1995 through 1997 ("Balance Sheet") and the
related unaudited consolidated statements of income, changes in stockholders'
equity, and cash flow for each of the fiscal years then ended, (b) an unaudited
balance sheet of the Company as at December 31, 1997 (the "Interim Balance
Sheet") and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for the nine months then ended, including
in each case the notes thereto. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates
of and for the periods referred to in such financial statements, all in
accordance with GAAP subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes (that, if presented, would not differ materially from those included in
the Balance Sheet); the financial statements referred to in this Section 3.4
reflect the consistent application of such accounting principles throughout the
periods involved except as disclosed in the notes to such financial statements.
No financial statements of any Person other than the Company are required by
GAAP to be included in the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, stock record books, and other records of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices.
The records of the Company
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contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Company.
3.6 LEASES
Part 3.6 of the Disclosure Letter contains an accurate description of the
terms of all leases pursuant to which the Company leases real or personal
property. All such leases are valid and in full force and effect.
3.7 TITLE TO PROPERTIES; CASH
The Company has good and marketable title to or a valid leasehold interest
in all properties and assets, real and personal, which it uses or which it
purports to own or which are shown on its Interim Balance Sheet and Balance
Sheet, free and clear of all security interests, liens, claims, encumbrances
and charges, except for liens, encumbrances and claims set forth in Part 3.7 of
the Disclosure Letter. The assets reflected on the Company's Balance Sheet and
Interim Balance Sheet are used in its Ordinary Course of Business and do not
contain any assets which are not so used. Part 3.7 of the Disclosure Letter
also sets forth the names and locations of all bank accounts in which the
Company has accounts and the names of all persons authorized to draw thereon.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
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Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred twenty
days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Part 3.8 of the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, reflected in the Balance Sheet or the
Interim Balance Sheet, consists of a quality usable and salable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or
net realizable value on a first in, first out basis.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, to Seller's
Knowledge the Company has no liabilities or obligations of any nature,
(whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 TAXES
(a) The Company has filed all required federal Tax Returns, and related
taxes or fees have been paid. The Company has made, with respect to all those
state jurisdictions in which it is authorized to do business, and which Seller
has determined that tax filings and taxes must be filed and paid, all required
Tax Returns, and the related taxes and fees have been paid.
(b) The Company has filed a valid election pursuant to section 1362 of
the IRC (or any predecessor statute) and similar state tax statutes, to be
taxed as an S Corporation. The Company has at all times since such election
been a validly electing S corporation
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and such status has never been terminated. All Tax Returns filed by the Company
are true, correct, and complete. There is no tax sharing agreement that will
require any payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Part 3.13 of the Disclosure Letter sets forth a description of, and the
annual amount payable pursuant to each bonus, deferred compensation, pension,
profit-sharing, retirement arrangement or other fringe benefit plan of the
Company (whether formal or informal) (the "Plan"). The aggregate of such
amounts will not exceed $100,000 for the fiscal year ended June 30, 1997 and
the Interim Balance Sheet referred to in Section 3.4 hereof reflects in the
aggregate an accrual of all amounts accrued but unpaid under the aforesaid
Plans as of December 31, 1997.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) To Seller's Knowledge, and except as set forth in Part 3.14 of the
Disclosure Letter:
(i) the Company is, and at all times since July 1, 1994 has been,
in full compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any
of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time): (A) may constitute or result in a violation
by the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement; or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) the Company has not received, at any time since July 1,
1994, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding: (A) actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement; or (B) actual, alleged, possible, or potential
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obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) To Seller's Knowledge, Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and in
full force and effect to Seller's Knowledge except as set forth in Part 3.14 of
the Disclosure Letter:
(i) The Company is, and at all times since July 1, 1994 has been, in
full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time); (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter; or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
(iii) The Company has not received, at any time since July 1,
1994, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding; (A) actual, alleged, possible,
or potential violation of or failure to comply with any term or requirement of
any Governmental Authorization; or (B) actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part 3.14 of
the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies. The Governmental
Authorizations listed in Part 3.14 of the Disclosure Letter collectively
constitute all of the Governmental Authorizations necessary to permit the
Company to lawfully conduct and operate their businesses in the manner they
currently conduct and operate such businesses and to permit the Company to own
and use their assets in the manner in which they currently own and use such
assets.
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3.15 LEGAL PROCEEDINGS; ORDERS
(a) To the Knowledge of Seller and except as set forth in Part 3.15 of
the Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such Proceeding. Seller has made
available for review by Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of the Company.
(b) To the Knowledge of Seller, and except as set forth in Part 3.15 of
the Disclosure Letter:
(i) there is no Order to which the Company, or any of the assets
owned or used by the Company, is subject;
(ii) Seller is not subject to any Order that relates to the business
of, or any of the assets owned or used by, the Company; and
(iii) to the Knowledge of Seller, no officer, director, agent, or
employee of the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) To the Knowledge of Seller, and except as set forth in Part 3.15 of
the Disclosure Letter:
(i) the Company is, and at all times since July 1, 1994 has been,
in full compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) The Company has not received, at any time since July 1,
1994, any notice or other communication (whether oral or written) from any
Governmental Body or any other
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Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the date
of the Balance Sheet and the Interim Balance Sheet, the Company has conducted
its business only in the Ordinary Course of Business and there has not been
any:
(a) change in the Company's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) except with respect to Seller's Indemnifiers, payment or increase by
the Company of any bonuses, salaries, or other compensation to any shareholder,
director, officer, or (except in the Ordinary Course of Business) employee or
entry into any employment, severance. or similar Contract with any director,
officer, or employee;
(d) except with respect to Seller's Indemnifiers, adoption of, or
increase in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of the Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $10,000;
(i) material change in the accounting methods used by the Company; or
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(j) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by the Company of an amount or value in
excess of $10,000;
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of the
Company in excess of $5,000;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $10,000 and with terms of one year or
less);
(iv) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the nondisclosure of any of the
Intellectual Property Assets;
(v) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(vi) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities
by the Company with any other Person;
(vii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or limit the
freedom of the Company to engage in any line of business or to compete with any
Person;
(viii) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments
for goods;
(ix) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by the
Company to be responsible for consequential damages;
(x) each Applicable Contract for capital expenditures in excess of
$10,000;
(xi) each written warranty, guaranty, and or other similar
undertaking with respect
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to contractual performance extended by the Company other than in the Ordinary
Course of Business; and
(xii) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Company under the Contracts, and the
Company's office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) except for sales of inventory in the Ordinary Course of
Business, Seller (and no Related Person of Seller) has not nor may acquire any
rights under, and Seller has not nor may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, the Company; and
(ii) to the Knowledge of Seller no officer, director, agent,
employee, consultant, or contractor of the Company is bound by any Contract
that purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct, activity,
or practice relating to the business of the Company, or (B) assign to the
Company or to any other Person any rights to any invention, improvement, or
discovery.
(c) To Seller's Knowledge Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in
Part 3.17(a) of the Disclosure Letter is in full force and effect and is valid
and enforceable in accordance with its terms, subject to force majeure
exceptions;
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times since January 1, 1992 has been,
in full compliance with all applicable terms and requirements of each Contract
under which the Company has or had any obligation or liability or by which the
Company or any of the assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which the Company has or had any rights is, and at all
times since January 1, 1992 has been, in full compliance with all applicable
terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under,
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or to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) The Company has not given to nor received from any other
Person, at any time since January 1, 1992, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, to the
Knowledge of Seller, no such Person has made written demand for such
renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been
paid or promised, that is or would be in violation of any Legal Requirement.
3.18 INSURANCE
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the three years preceding
the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the 3 preceding policy years:
(i) a summary of the loss experience under each policy;
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(ii) a statement describing each claim under an insurance policy for
an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or that provide
coverage to Seller or any director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) are sufficient for compliance with all Legal Requirements
and Contracts to which the Company is a party or by which any of them is bound;
and
(D) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(ii) The Seller has not received: (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights; or (B) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and have otherwise
performed all of its obligations, under each policy to which the Company is a
party or that provides coverage to the Company or director thereof.
(iv) The Company has given notice to the insurer of all claims that
may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) To the best of its Knowledge the Company is, and at all times
since July 1, 1994 has been, in full compliance with, and has not been and is
not in violation of or liable under, any Environmental Law. Seller has no basis
to expect, nor has it nor any other Person for whose conduct it is or may be
held to be responsible received, any actual or Threatened Order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of
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any Facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or Threatened obligation to undertake
or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller has had an interest, or with respect
to any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Seller or
any other Person for whose conduct it is or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received by Seller or any other Person for
whose conduct it is or may be held responsible.
(b) There are no pending or, to the Knowledge of Seller, Threatened
claims, Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or
any other properties and assets (whether real, personal, or mixed) in which
Seller has or had an interest.
(c) To the best of its Knowledge, Seller has no basis to expect, nor has
any other Person for whose conduct it is or may be held responsible, received,
any citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Seller had an interest, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by Sellers,
the Company, or any other Person for whose conduct it is or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) To the best of its Knowledge, neither Seller nor any other
Person for whose conduct it is or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities
or, to the Knowledge of Seller with respect to any other properties and assets
(whether real, personal, or mixed) in which Seller (or any predecessor), has or
had an interest, or at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
(e) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller pertaining to Hazardous Materials or
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Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Seller, or any other Person for whose conduct it is or may be held
responsible, with Environmental Laws.
(f) 3.19 of the Disclosure Letter contains a list of all locations where,
to Seller's best knowledge, inventory has been stored since January 1, 1988,
and a list of all products discontinued after January 1, 1988.
3.20 EMPLOYEES
(a) Except with respect to Seller's Indemnifiers, Part 3.20 of the
Disclosure Letter contains a complete and accurate list of the following
information for each employee or director of the Company, including each
employee on leave of absence or layoff status: name; job title; current
compensation paid or payable and any change in compensation since July 1, 1994;
vacation accrued; and service credited for purposes of vesting and eligibility
to participate under the Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, other
employee pension benefit plan or employee welfare benefit plan, or any other
employee benefit plan or any director plan.
(b) Except as disclosed in Part 3.20 of the Disclosure Letter, To
Seller's Knowledge, no employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties
as an employee or director of the Company, or (ii) the ability of the Company
to conduct its business, including any Proprietary Rights Agreement with Seller
by any such employee or director. To Seller's Knowledge, no director, officer,
or other key employee of the Company intends to terminate his employment with
the Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or
director of the Company, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since July 1, 1994 the Company has not been or is a party to any
collective bargaining or other labor Contract. Since July 1, 1994, there has
not been, there is not presently pending or existing, and there is not
Threatened: (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process; (b) any Proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee
or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting any of the
Company or their premises; or (c)
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any application for certification of a collective bargaining agent. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is not
liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets - The term "Intellectual Property Assets"
includes:
(i) the name Browning Chemical Corporation, all fictional business
names, trading names, registered and unregistered trademarks, service marks,
and applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask Works");
and
(v) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by the Company as licensee or licensor.
(b) Agreements. - Part 3.22(b) of the Disclosure Letter contains a
complete and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs with a value of less
than $5,000 under which the Company is the licensee. There are no outstanding
and, to Sellers' Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
(c) Know How Necessary for the Business.
The Intellectual Property Assets are all those necessary for the operation of
the Company's businesses as they are currently conducted. The Company is the
owner of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the right to use
without payment to a third party all of the Intellectual Property Assets.
(d) Trademarks.
(i) Part 3.22(d) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks. The Company is the owner of
all right, title, and interest in and to each of the Marks, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims.
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(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of
use and incontestability and renewal applications), are valid and enforceable,
and are not subject to any maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to Seller's Knowledge, no such action is
Threatened with the respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Mark is infringed or, to Seller's Knowledge, has been
challenged or threatened in any way. None of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark, or service mark
of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(e) Trade Secrets.
(i) With respect to each Trade Secret, the documentation relating to
such Trade Secret is current, accurate, and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance
on the knowledge or memory of any individual.
(ii) Seller has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of their Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to Seller's Knowledge,
have not been used, divulged, or appropriated either for the benefit of any
Person (other than the Company) or to the detriment of the Company. No Trade
Secret is subject to any adverse claim or has been challenged or threatened in
any way.
3.23 CERTAIN PAYMENTS
Since July 1, 1994, to Seller's Knowledge, neither the Company nor any
director, officer, agent, or employee of the Company, or to Seller's Knowledge
any other Person associated with or acting for or on behalf of the Company, has
directly or indirectly: (a) made any unlawful contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company
or any Affiliate of the Company, or (iv) in violation of any Legal Requirement;
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
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3.24 DISCLOSURE
(a) To Seller's Knowledge, no representation or warranty of Seller in
this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact known to Seller that has specific application to
either Seller or the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as either Seller
can reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Company (on a consolidated
basis) that has not been set forth in this Agreement or the Disclosure Letter.
3.25 BROKERS OR FINDERS
Seller and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
3.26 PRODUCT WARRANTY
Except as set forth in Part 3.26 of the Disclosure Letter, to Seller's
Knowledge, each product manufactured, sold, leased, or delivered by the Company
has been in conformity with all applicable contractual commitments and all
express and implied warranties, and the Company has no Liability (and there is
no basis for any present or future action, suit, proceedings, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company.
No product manufactured, sold, leased, or delivered by the Company is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease.
3.27 PRODUCT LIABILITY
Except as set forth in Part 3.27 of the Disclosure Letter, to Seller's
Knowledge, the Company has no Liability (and there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Company.
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3.28 ASSURANCE
Each of the representations and warranties made by Seller are also made on
behalf of Seller's Indemnifiers.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer and JLM are corporations duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Employment Agreements, and the Secured
Promissory Notes (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer and JLM (with respect to such documents executed by JLM), enforceable
against Buyer and JLM in accordance with their respective terms. Buyer and JLM
have the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer or JLM will give any Person the right
to prevent, delay, or otherwise interfere with any of the Contemplated
Transactions pursuant to:
(i) any provision of Buyer's or JLM's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of Buyer or JLM;
(iii) any Legal Requirement or Order to which Buyer or JLM may
be subject; or
(iv) any Contract to which Buyer or JLM is a party or by which Buyer
or JLM may be bound.
Except as set forth in Schedule 4.2, neither Buyer nor JLM is and will be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer or
JLM and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To Buyer's Knowledge, no such Proceeding has been Threatened.
4.4 BROKERS OR FINDERS
Buyer, JLM and their officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection
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with this Agreement and will indemnify and hold Seller harmless from any such
payment alleged to be due by or through Buyer or JLM as a result of the action
of Buyer, JLM or their officers or agents.
4.5 BUYER'S KNOWLEDGE OF SELLER
Buyer understands that Seller is involved in the purchase and resale of
various chemical products to distributors and end users, wherin Seller either
arranges for shipment directly to the purchaser of the products, or arranges
for warehousing of the products prior to final shipment.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will, and
will cause its Representatives to: (a) afford Buyer and its Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties, contracts, books and records, and other documents and
data; (b) furnish Buyer and Buyer's Advisors with copies of all such contracts,
books and records, and other existing documents and data as Buyer may
reasonably request; and (c) furnish Buyer and Buyer's Advisors with such
additional financial, operating, and other data and information as Buyer may
reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the Closing Date, Seller will:
(a) conduct the business of the Company only in the Ordinary Course of
Business;
(b) use its Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Seller will not without the prior
consent of Buyer, take any affirmative action, or fail to take any reasonable
action within its control, as a result of which any of the changes or events
listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller will
make all filings required by Legal Requirements to be made by it in order to
consummate the Contemplated Transactions (including
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all filings under the HSR Act). Between the date of this Agreement and the
Closing Date, Seller will: (a) cooperate with Buyer with respect to all filings
that Buyer reasonably elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions; and (b) cooperate with
Buyer in obtaining all consents identified in Schedule 4.2 (including taking
all actions requested by Buyer to cause early termination of any applicable
waiting period under the HSR Act).
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if it becomes aware of any fact or condition
that causes or constitutes a Breach of any of Seller's representations and
warranties as of the date of this Agreement, or if the Company becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Seller will promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
During the same period, Seller will promptly notify Buyer of the occurrence of
any Breach of any covenant of Seller in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller and Seller's Indemnifiers will not, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits
of any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of the Company, or any of the capital
stock of the Company, or any merger, consolidation, business combination, or
similar transaction involving the Company.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Seller and
Seller's Indemnifiers will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of
this
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Agreement and the Closing Date, Buyer will, and will cause each Related Person
to, cooperate with Seller with respect to all filings that Seller is required
by Legal Requirements to make in connection with the Contemplated Transactions,
and (ii) cooperate with Seller in obtaining all consents identified in Part 3.2
of the Disclosure Letter; provided that this Agreement will not require Buyer
to dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6. 1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Acquired Assets and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Letter.
(b) Each of Seller's representations and warranties in Sections 3.4,
3.12, and 3.24 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.5 must
have been delivered, and each of the other covenants and obligations in
Sections 5.4 and 5.7 must have been performed and complied with in all
respects.
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7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter, and
each Consent identified in Schedule 4.2, must have been obtained and must be in
full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Kamerman & Soniker, P.C. dated the Closing Date,
in the form of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the
purpose of: (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a)(ii) evidencing the accuracy of any of Seller's representations
and warranties; (iii) evidencing the performance by Seller of, or the
compliance by Seller with, any covenant or obligation required to be performed
or complied with by Seller; (iv) evidencing the satisfaction of any condition
referred to in this Section 7; or (v) otherwise facilitating the consummation
or performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions, or (b) that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
7.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under: (a) any applicable Legal Requirement or
Order; or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Acquired Assets and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material
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respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5 and must have made the cash payments
required to be made by Buyer pursuant to Section 2.5(b)(i) and delivered the
Secured Promissory Notes pursuant to Section 2.5(b)(ii).
8.3 CONSENTS
Each of the Consents identified Part 3.2 of the Disclosure Letter must
have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Mezan, Stolzberg & Schwartzman, P.C., dated the
Closing Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Seller may reasonably request for the
purpose of: (i) enabling their counsel to provide the opinion referred to in
Section 7.4(a); (ii) evidencing the accuracy of any representation or warranty
of Buyer; (iii) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied
with by Buyer,;(iv) evidencing the satisfaction of any condition referred to in
this Section 8; or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Acquired Assets by Sellers to
Buyer, and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
8.6 BROWNING METALS LEASE
Buyer shall have entered into a lease with Browning Metals Corporation
("BMC") concerning the office space that Seller and BMC currently share.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
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(a) by either Buyer or Seller if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has
not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or
(ii) by Seller, if any of the conditions in Section 8 has
not been satisfied of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Seller to comply
with their obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before April 7,
1998, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.5(a)(iv), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
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compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller and the Seller's Indemnifiers, severally pro rata to their
individual interests, will indemnify and hold harmless Buyer and its
Representatives, shareholders, controlling persons, and affiliates
(collectively, the "Buyer's Indemnified Persons") for, and will pay to the
Buyer's Indemnified Persons the amount of Damages arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in
this Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or
any other certificate or document delivered by Seller pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by Seller in
this Agreement as if such representation or warranty were made on and as of the
Closing Date (without giving effect to any supplement to the Disclosure Letter)
other than any such Breach that is disclosed in a supplement to the Disclosure
Letter and is expressly identified in the certificate delivered pursuant to
Section 2.5(a)(iv) as having caused the condition specified in Section 7.1 not
to be satisfied;
(c) any Breach by Seller of any covenant or obligation of Seller in
this Agreement; or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller (or any Person acting
on its behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 EXCLUSION OF INDEMNIFICATION FOR ASSUMED LIABILITIES.
It is expressly agreed that Seller and Seller's Indemnifiers shall have no
liability to Buyer's Indemnified Persons with respect to any claims made
growing out of, resulting from, caused by, or related to or based upon, any of
the Assumed Liabilities.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer and JLM (collectively Buyer's Indemnifiers") will indemnify and hold
harmless Seller, and its Representatives, shareholders, controlling persons,
and affiliates, as well as the Seller's Indemnifiers, (collectively, the
"Seller's Indemnified Persons"), and will pay to Seller's Indemnified Persons
the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any
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of the Contemplated Transactions, or (d) any and all claims, expenses,
judgments, awards, or other obligations, or legal fees, costs, and expenses,
incurred by Seller's Indemnified Persons as the result of, or growing out of,
or caused by, related to or based upon the Assumed Liabilities.
The remedies provided in this Section 10.4 will not be exclusive of or
limit any other remedies that may be available to Seller.
10.5 TIME LIMITATIONS
If the Closing occurs, Seller and the Seller's Indemnifiers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with by
Seller prior to the Closing Date, other than those in Sections 3.11 and 3.13,
unless on or before December 31, 2000 Buyer notifies Seller and the Seller's
Indemnifiers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. If the Closing occurs,
Buyer's Indemnifiers will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with by Buyer prior to the Closing Date, unless on or
before December 31, 2000, Seller notifies Buyer's Indemnifiers of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller.
The foregoing time limitations shall not apply to the obligation of
Buyer's Indemnifiers to indemnify set forth in Section 10.4(d), which time
period shall be indefinite.
10.6 LIMITATIONS ON AMOUNT - SELLERS
Seller and Seller's Indemnifiers will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) of Section 10.2 or, to the extent relating to any failure to
perform or comply prior to the Closing Date, clause (c) of Section 10.2
until the total of all Damages with respect to such matters exceeds $25,000
and then only for the amount by which such Damages exceed $15,000. Seller and
Seller's Indemnifiers will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (d) of Section 10.2
until the total of all Damages with respect to such matters exceeds $15,000,
and then only for the amount by which such Damages exceed $5,000. However,
this Section 10.6 will not apply to any Breach of any of Seller's
representations and warranties of which Seller had Knowledge at any time prior
to the date on which such representation and warranty is made or any
intentional Breach by Seller of any covenant or obligation, and Seller and
Seller's Indemnifiers will be severally pro rata to their individual interests
liable for all Damages with respect to such Breaches.
10.7 LIMITATIONS ON AMOUNT - BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), (b) or (d) of Section 10.4
until the total of all Damages with respect to such matters exceeds $25,000 and
then only for the amount by which such Damages exceed $15,000. Buyer's
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Indemnifiers will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 10.4(c) until the total of all
Damages with respect to such matters exceeds $15,000, and then only for the
amount by which such Damages exceed $5000. However, this Section 10.7 will not
apply to any Breach of any of Buyer's representations and warranties of which
Buyer had Knowledge of such Breach at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect
to such Breaches.
10.8 RIGHT OF SET-OFF
In the event that Buyer determines in good faith that it is entitled to
claim a sum from Sellers pursuant to the terms of this Section 10, it shall
forthwith notify Sellers of its claim. If Sellers, in writing, accept such
claim, the amount so claimed shall be set off by Buyer, against the next
installment of the Secured Promissory Notes then outstanding. If Sellers fail
to accept, within thirty days of receipt of the claim, Buyers shall file a
demand for arbitration of the claim with the American Arbitration Association
("AAA") in the City of New York, and the claim shall be resolved in such
arbitration, before a panel of three arbitrators selected pursuant to AAA
rules. In the event and to the extent an arbitration decision is awarded in
favor of Buyer, Buyer may set off the amount of the demand, against the next
installment or installments of the Secured Promissory Notes then outstanding.
In the event and to the extent an arbitration decision is awarded in favor of
Seller, and set off amounts are paid to Sellers thereafter, interest at the
prime rate plus two percent per annum, on any past due balances of the Secured
Promissory Notes shall be added to the sum so paid, and payment shall be made
within fifteen days after an arbitration award becomes final and non
appealable. Buyer's demand of setoff shall not modify Buyer's duty to maintain
the security for the Promissory Notes in accordance with this Agreement.
10.9 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.4 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement
of such claim, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.9(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified
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party and, after notice from the indemnifying party to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense
of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding: (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made in
such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
10.10 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.11 INDEMNIFIERS OBLIGATIONS
In the event the Buyer or Seller breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer or Seller has breached) any
of its representations, warranties, and covenants contained in this Agreement,
and, if there is an applicable survival period pursuant to Section 10.5 above,
provided that an indemnified party makes a written claim for indemnification
against any indemnifying party for such breach pursuant to Section 10.9 or
Section 10.10 within such survival period, then the indemnifying party agrees
to indemnify the indemnified party from and against the
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entirety of any damages the indemnified party may suffer through and after the
date of the claim for indemnification (including any damages the indemnified
party may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach
(or the alleged breach).
11. GENERAL PROVISIONS
11.1 EXPENSES
(a) Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Buyer will pay the HSR Act filing
fee. Seller will cause the Company not to incur any out-of-pocket expenses in
connection with this Agreement. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by another party.
In the event that within ninety days after the Closing Date, Buyer
purchases insurance to cover claims made after the Closing Date with respect to
Assumed Liabilities, all with respect to incidents occurring prior to the
Closing Date, then Seller will pay to Buyer one half of the cost of such
insurance, up to a maximum of $125,000. Buyer's purchase, or declination or
inability to purchase, any insurance policy (including the insurance referenced
in this Section) shall in no way modify, limit, waive or affect in any manner
the duties of Buyer's Indemnifiers to indemnify as set forth in this Agreement.
By way of non-exclusive example of the foregoing, the Buyer's ability or
inability to procure insurance coverage for any Assumed Liability, or the fact
that Seller or Seller's Indemnifiers have contributed toward the purchase of
insurance, shall not provide any defense to the obligations of Buyer's
Indemnifiers to indemnify.
In the event that Buyer incurs a fee with respect to the procurement
of the Bank Guaranties which secure the payment of the two Secured Promissory
Notes as provided for in Section 2.5(b), Seller will reimburse Buyer for such
cost as it is incurred, up to a maximum of $70,000.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer and Seller determines. Unless consented to by
Buyer and Seller in advance or required by Legal Requirements, prior to the
Closing Seller and Buyer shall keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Seller and Buyer
will consult with each other concerning the means by which the Company's
employees, customers, and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer will have the
right to be present for any such communication.
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11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Seller
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Company to maintain in confidence, and
not use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless: (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party; (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions; or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer's request cause the Company to waive, any cause of action,
right, or claim arising out of the access of Buyer or its representatives to
any trade secrets or other confidential information of the Company except for
the intentional competitive misuse by Buyer or its representatives of such
trade secrets or confidential information.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when:
(a) delivered by hand (with written confirmation of receipt); (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested; or (c) when received by
the addressee if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Browning Chemical Corporation
707 Westchester Avenue
White Plains, New York 10604
Attn.: Frederick M. Browning
Facsimile No. 914-686-0311:
with a copy to: Kamerman & Soniker, P.C.
500 Fifth Avenue,
New York, NY 10110
Attention: Jerome Kamerman
Facsimile No. 212-391-4238
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Buyer: Browning Acquisition, Inc.
8675 Hidden River Parkway
Tampa, FL 33637
Attention: John L. Macdonald
Facsimile No. 813-632-3301
with a copy to: Maxwell Stolzberg
Mezan, Stolzberg & Schwartzman, P.C.
460 Park Avenue,
New York, NY 10022
Facsimile No.: 212-836-4979
Seller's Indemnifiers: Frederick Browning
707 Westchester Avenue
White Plains, New York 10604
Facsimile No. 914-686-0311
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New York or
Westchester, or, if it has or can acquire jurisdiction, in the United States
District Court for the Southern District of New York, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information; (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law: (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (b)
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no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Seller's Indemnifiers dated December 1, 1997 and signed by Seller's
Indemnifiers December 5, 1997 and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body
of this Agreement and those in the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, which will not be unreasonably
withheld. This Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
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11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer: Sellers:
BROWNING ACQUISITION INC. BROWNING CHEMICAL CORPORATION
By: /s/ John L. Macdonald By: /s/ Frederick M. Browning
----------------------------- ----------------------------
John L. Macdonald, President Frederick M. Browning
Attest: /s/ Michael J. Molina Attest:
------------------------- ------------------------
Michael Molina, Secretary, Secretary
Seller's Indemnifiers:
Frederick H. Browning, Jean H. Browning, Vivian Stone, Renita Browning, Deborah
Hardesty
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