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): February 19, 1998
American Pacific Corporation
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(Exact name of registrant as specified in its charter)
DELAWARE 1-8137 59-6490478
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3770 Howard Hughes Parkway, Suite 300, Las Vegas, Nevada 89109
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Address of principal executive offices
Registrant's telephone number, including area code: (702) 735-2200
N/A
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(Former name or former address, if changed since last report.)
<PAGE>
Item 5. OTHER EVENTS.
As announced on February 19, 1998, American Pacific Corporation (the
"Company") intends to effect an offering (the "Offering") of $75.0 million
principal amount of Senior Notes (the "Notes") pursuant to Rule 144A under the
Securities Act of 1933 during March 1998. The Company intends to use the net
proceeds of the Offering primarily to fund its acquisition (the "Acquisition")
of certain intangible assets and rights of Kerr-McGee Chemical Corporation
("Kerr-McGee") related to the production of ammonium perchlorate ("AP") and to
repurchase or defease the Company's outstanding 11% noncallable subordinated
secured term notes (the "Azide Notes"). There can be no assurance that the
Offering or the Acquisition will be consummated.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the consolidated financial statements of the
Company included as part of the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1997 (the "Consolidated Financial Statements")
and the Company's unaudited consolidated financial statements included as part
of the Company's Quarterly Report on Form 10-Q for the three months ended
December 31, 1997 (the "Unaudited Consolidated Financial Statements"), adjusted
to give effect to (i) the Acquisition, (ii) the repurchase of the Azide Notes,
(iii) the Offering and (iv) certain other adjustments (collectively, the "Pro
Forma Adjustments"). The Unaudited Consolidated Financial Statements have been
prepared by the company on a basis consistent with the audited financial
statements and include, in the opinion of the Company, all normal recurring
adjustments necessary for a fair presentation of the information. Operating
results for the three months ended December 31, 1997 are not necessarily
indicative of the results that will be achieved for future periods, including
for the fiscal year ending September 30, 1998.
The Pro Forma Statements of Operations and other data give effect to
the Pro Forma Adjustments as if the events giving rise thereto had occurred (i)
for the twelve months ended December 31, 1997, as of January 1, 1997, (ii) for
the fiscal year ended September 30, 1997, as of October 1, 1996, and (iii) for
the three months ended December 31, 1997, as of October 1, 1997. The Pro Forma
Balance Sheet gives effect to the Pro Forma Adjustments as if the events giving
rise thereto had occurred as of December 31, 1997. The Pro Forma Adjustments are
described in the accompanying notes. The Pro Forma Adjustments are based upon
available information and certain assumptions and estimates that the Company
believes are reasonable, including estimates as to the additional expenses that
the Company would have incurred and revenues that the Company would have
received in the applicable periods if the Company had produced the additional
volumes of AP actually produced by Kerr-McGee. These assumptions and estimates
are based on management's judgments, including judgments as to the allocation of
fixed and variable costs. These allocations are subject to material variances,
are inherently imprecise and are not subject to verification. There can be no
assurance that future operating results will be consistent with these
assumptions or estimates. In addition, the Pro Forma Financial Information does
not purport to represent what the Company's results of operations or financial
condition would actually have been had the events giving rise to the Pro Forma
Adjustments in fact occurred on such dates or to project the Company's results
of operations or financial condition for any future period or date. The Company
does not issue forecasts of future results of operations or financial condition
and the Pro Forma Financial Information should not be deemed such a forecast.
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<PAGE>
The Pro Forma Financial Information should be read in conjunction with the
Consolidated Financial Statements and Unaudited Consolidated Financial
Statements.
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<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS AND OTHER DATA
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT PRO FORMA
------------- ------------- -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Sales and operating revenues........................................... $ 46,922 $ 28,962(a) $72,169
(3,715)(b)
Cost of sales.......................................................... 37,443 6,127(c) 47,470
3,900(d)
------------ ------------- -------------
Gross profit........................................................... 9,479 15,220 24,699
Operating expenses..................................................... 9,329 --(e) 9,329
Fixed asset impairment charge (f)...................................... 52,605 -- 52,605
Employee separation and management reorganization costs (g)............ 3,616 -- 3,616
Equity in earnings of real estate venture.............................. 500 -- 500
------------- ------------- -------------
Operating income (loss)................................................ (55,571) 15,220 (40,351)
Interest and other income.............................................. 1,046 -- 1,046
Interest and other expense............................................. 2,405 5,711(h) 8,116
------------- ------------- -------------
Income (loss) before credit for income taxes........................... (56,930) 9,509 (47,421)
Credit for income taxes................................................ (9,661) --(i) (9,661)
------------- ------------- -------------
Net income (loss)...................................................... $(47,269) $9,509 $(37,760)
============= ============= =============
Basic net income (loss) per share...................................... $(5.83) $1.18 $(4.65)
============= ============= =============
Diluted net income (loss) per share.................................... $(5.83) $1.18 $(4.65)
============= ============= =============
OTHER DATA:
EBITDA (j)............................................................. $9,855 $19,120 $28,975
Depreciation and amortization.......................................... 6,622 3,705(k) 10,327
Capital expenditures................................................... 1,164 -- 1,614
Cash interest expense.................................................. 3,378 4,309(l) 7,687
Ratio of EBITDA to cash interest expense............................... 2.9x 3.8x
Ratio of earnings to fixed charges (m)................................. (n) (n)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
HISTORICAL ADJUSTMENT PRO FORMA
------------- ------------- -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Sales and operating revenues........................................... $ 44,050 $ 28,962(a) $70,299
(2,713)(b)
Cost of sales.......................................................... 36,420 6,053(c) 46,373
3,900(d)
------------ ------------- -------------
Gross profit........................................................... 7,630 16,296 23,926
Operating expenses..................................................... 9,509 --(e) 9,509
Fixed asset impairment charge (f)...................................... 52,605 -- 52,605
Employee separation and management reorganization costs (g)............ 3,616 -- 3,616
Equity in earnings of real estate venture.............................. 200 -- 200
------------- ------------- -------------
Operating income (loss)................................................ (57,900) 16,296 (41,604)
Interest and other income.............................................. 1,115 -- 1,115
Interest and other expense............................................. 2,001 6,115(h) 8,116
------------- ------------- -------------
Income (loss) before credit for income taxes........................... (58,786) 10,181 (48,605)
Credit for income taxes................................................ (10,101) --(i) (10,101)
------------- ------------- -------------
Net income (loss)...................................................... $(48,685) $10,181 $(38,504)
============= ============= =============
Basic net income (loss) per share...................................... $(6.01) $1.26 $(4.75)
============= ============ ============
Diluted net income (loss) per share.................................... $(6.01) $1.26 $(4.75)
============= ============ =============
OTHER DATA:
EBITDA (j)............................................................. $8,009 $20,196 $28,205
Depreciation and amortization.......................................... 7,685 3,719(k) 11,404
Capital expenditures................................................... 1,557 -- 1,557
Cash interest expense.................................................. 3,515 4,172(l) 7,687
Ratio of EBITDA to cash interest expense............................... 2.3x 3.7x
Ratio of earnings to fixed charges (m)................................. (n) (n)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1997
HISTORICAL ADJUSTMENT PRO FORMA
------------- ------------- -------------
(dollars in thousands, except per share amounts)
(dollars in thousands)
<S> <C> <C> <C>
Sales and operating revenues........................................... $ 11,268 $ 10,891(a) $21,073
(1,086)(b)
Cost of sales.......................................................... 8,106 2,147(c) 11,228
975(d)
------------- ------------- -------------
Gross profit........................................................... 3,162 6,683 9,845
Operating expenses..................................................... 2,183 --(e) 2,183
Equity in earnings of real estate venture.............................. 300 -- 300
------------- ------------- -------------
Operating income (loss)................................................ 1,279 6,683 7,962
Interest and other income.............................................. 270 -- 270
Interest and other expense............................................. 983 1,046(h) 2,029
------------- ------------- -------------
Income (loss) before credit for income taxes........................... 566 5,637 6,203
Credit for income taxes................................................ -- --(i) --
------------- ------------- -------------
Net income (loss)...................................................... $ 566 $ 5,637 $ 6,203
============= ============= =============
Basic net income (loss) per share...................................... $.07 $.69 $.76
============= ============= =============
Diluted net income (loss) per share.................................... $.07 $.69 $.76
============= ============= =============
OTHER DATA:
EBITDA (j)............................................................. $2,890 $7,658 $10,548
Depreciation and amortization.......................................... 837 923(k) 1,760
Capital expenditures................................................... 969 -- 969
Cash interest expense.................................................. 825 1,097(l) 1,922
Ratio of EBITDA to cash interest expense............................... 3.5x 5.5x
Ratio of earnings to fixed charges (m)................................. 1.5x 4.0x
</TABLE>
NOTES TO THE PRO FORMA STATEMENTS OF OPERATIONS AND OTHER DATA
(a) If the Acquisition is consummated, the Company will effectively
acquire the AP market share of Kerr-McGee. For the twelve months ended December
31, 1997 and the Company's fiscal year 1997, revenues have been adjusted to give
effect to the sale by the Company of the volumes of AP actually sold by
Kerr-McGee during Kerr-McGee's fiscal year ended December 31, 1997 at the prices
received by Kerr-McGee. For the three months ended December 31, 1997, revenues
have been adjusted to give effect to the sale by the Company of the volumes of
AP actually sold by Kerr-McGee during the three months ended December 31, 1997
at the prices received by Kerr-McGee.
(b) In connection with the Acquisition, the Company entered into a new
agreement with Thiokol Corporation ("Thiokol") and extended its existing
agreement with Alliant Techsystems, Inc. ("Alliant"). Revenues have been
adjusted to give effect to those agreements as follows:
(1) Revenues related to AP sold to Thiokol have been adjusted
to reflect the applicable volumes referred to in note (a) above, by
both the Company and Kerr-McGee at the price provided for under the
Company's agreement with Thiokol during the initial year of such
agreement, i.e., 1999. This price is less than the actual price paid by
Thiokol for AP to either the Company or Kerr-McGee during 1997.
(2) Revenues related to AP sold to Alliant have been adjusted
to reflect the applicable AP volumes referred to in note (a) above, by
both the Company and Kerr-McGee at the price provided for under the
Company's agreement with Alliant during the relevant period.
(c) Cost of sales has been adjusted to give effect to the additional
volumes of AP assumed to have been sold by the Company as described in note (a)
above. Management has estimated the additional costs of producing those volumes
based on certain judgments as to the Company's fixed and variable costs
associated with the production and sale of such incremental volumes. These
estimates are subject to material variance and are inherently imprecise. There
can be no assurance that future operating costs will be consistent with these
estimates.
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<PAGE>
(d) Cost of sales has been adjusted to include additional amortization
of $3.9 million for the twelve months ended December 31, 1997 and the fiscal
year ended September 30, 1997 and $975,000 for the three months ended December
31, 1997 related to the $39.0 million consideration to be paid to Kerr-McGee in
connection with the Acquisition (the "Acquisition Consideration") amortized on a
straight line basis over a 10-year period.
(e) The Company estimates that it would not have incurred any material
additional selling, general, administrative or other operating expenses related
to the additional volumes of AP assumed to have been sold by the Company as
described in note (a) above.
(f) During the fourth quarter of fiscal 1997, the Company concluded
that the cash flows associated with sodium azide operations would not be
sufficient to recover the Company's investment in sodium azide related fixed
assets and, accordingly, a non-cash impairment charge of $52.6 million was
recognized in such quarter. See Note 13 to the Consolidated Financial
Statements.
(g) During the fourth quarter of fiscal 1997, the Company recognized a
charge of $3.6 million to account for the costs associated with employee
separations and management reorganizations. See Note 16 to the Consolidated
Financial Statements.
(h) Represents (i) interest expense associated with the Notes (at an
assumed interest rate of 10.25% per annum), (ii) the amortization of debt issue
costs of the Notes (estimated to be $3.0 million) on a straight line basis over
seven years and (iii) the elimination of the historical interest expense related
to the Azide Notes as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1997
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Interest on the Notes........................... $7,687 $7,687 $1,922
Amortization of the Notes debt issue costs...... 429 429 107
Interest on the Azide Notes..................... (2,405) (2,001) (983)
------ ------ ------
Totals........................ $5,711 $6,115 $1,046
====== ====== ======
</TABLE>
A change in the interest rate of one-half percent (0.5%) with respect
to the Notes would change pro forma interest expense and pro forma net income
(loss) by $375,000, $375,000 and $94,000, for the twelve months ended December
31, 1997, the fiscal year ended September 30, 1997 and the three months ended
December 31, 1997, respectively.
(i) No provision for income taxes is recognized because the Company has
a deferred tax asset valuation allowance.
(j) "EBITDA" as used herein means net income plus interest expense,
taxes, depreciation, amortization, the basis for real estate related to real
property sales, which is non-cash expense, and, for the relevant periods, the
non-recurring charges consisting of fixed asset impairment charges and employee
separation and management reorganization costs. EBITDA is presented because the
Company believes that it is a widely accepted indicator of a company's ability
to incur and service indebtedness. However, EBITDA should not be considered as
an alternative to net income, as defined by U.S. generally accepted accounting
principles ("GAAP"), as a measure of operating performance or as an alternative
to cash flows from operations (as measured by GAAP) as a measure of liquidity.
(k) Represents (i) amortization related to the Acquisition
Consideration of $39.0 million on a straight line basis over ten years, (ii)
amortization of debt issue costs of the Notes (estimated to be $3.0 million) on
a straight line basis over seven years and (iii) elimination of amortization
expense related to the Azide Notes, as follows:
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<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Amortization of the Acquisition
Consideration................................... $3,900 $3,900 $975
Amortization of the Notes debt issue costs...... 429 429 107
Elimination of amortization associated with
the Azide Notes.............................. (624) (610) (159)
------ ------ ------
Totals........................ $3,705 $3,719 $923
====== ====== ====
</TABLE>
(l) Pro forma cash interest expense is calculated assuming an interest
rate of 10.25% on the Notes and excluding non-cash amortization of debt issue
costs.
(m) The ratio of earnings to fixed charges is computed by dividing
pretax income from continuing operations before fixed charges (other than
capitalized interest) by fixed charges. Fixed charges consist of interest
expense, amortization of debt expense and discount or premium related to
indebtedness, capitalized interest and such portion of rental expense as can be
demonstrated to be representative of the interest factor in a particular case.
(n) The ratios for the twelve months ended December 31, 1997 and the
fiscal year ended September 30, 1997 and the pro forma ratios for the twelve
months ended December 31, 1997 and the fiscal year ended September 30, 1997 have
been omitted because the earnings were not sufficient to cover fixed charges.
The deficiency was $58.7 million and $61.1 million for the twelve months ended
December 31, 1997 and the fiscal year ended September 30, 1997, respectively,
and $49.2 million and $50.8 million pro forma for the twelve months ended
December 31, 1997 and the fiscal year ended September 30, 1997, respectively.
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<PAGE>
PRO FORMA BALANCE SHEET
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT PRO FORMA
------------- ------------- -------------
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C>
Cash................................................................... $ 12,989 $ 6,994(a) $19,983
Accounts and notes receivable.......................................... 10,517 -- 10,517
Inventories............................................................ 10,880 -- 10,880
Prepaid expenses....................................................... 1,511 -- 1,511
------------- ------------- -------------
Current assets..................................................... 35,897 6,994 42,891
Property, plant and equipment, net..................................... 19,632 -- 19,632
Development property................................................... 7,053 -- 7,053
Real estate equity investments......................................... 18,535 -- 18,535
Other assets........................................................... 88 -- 88
Restricted cash........................................................ 6,408 (5,244)(b) 1,164
Azide Notes issue costs................................................ 728 (728)(c) --
Notes issue costs...................................................... -- 3,000(d) 3,000
Acquisition intangibles................................................ -- 39,000(e) 39,000
Intangible assets..................................................... 1,513 -- 1,513
------------- ------------- -------------
Total assets....................................................... $89,854 $43,022 $132,876
============= ============= =============
LIABILITIES
Accounts payable and accrued liabilities............................... $ 7,229 $ -- $ 7,229
The Notes.............................................................. -- 75,000(f) 75,000
Azide Notes............................................................ 28,842 (28,842)(g) --
Indemnity obligation................................................... 1,164 -- 1,164
Long-term payables..................................................... 2,933 -- 2,933
------------- ------------- -------------
Total liabilities.................................................. 40,168 46,158 86,326
------------- ------------- -------------
Common Stock warrants.................................................. 3,569 -- 3,569
------------- ------------- -------------
SHAREHOLDERS' EQUITY
Common stock and capital in excess of par.............................. 79,293 -- 79,293
Treasury stock......................................................... (1,035) -- (1,035)
Accumulated deficit.................................................... (32,141) (3,136)(h) (35,277)
------------- ------------- -------------
Total shareholders' equity......................................... 46,117 (3,136) 42,981
------------- ------------- -------------
Total liabilities and shareholders' equity..................... $ 89,854 $ 43,022 $132,876
============= ============= =============
</TABLE>
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<PAGE>
Notes to the Pro Forma Balance Sheet
(a) Represents the sum of (i) the difference between the net proceeds
of the Offering (estimated to be $72.0 million) and the portion of such proceeds
expected to be applied to pay the Acquisition Consideration ($39.0 million) and
to repurchase the Azide Notes at an assumed price of 105% of the principal
amount thereof ($26.2 million after giving effect to the scheduled principal
payment thereon made on February 21, 1998) and (ii) the amount of restricted
cash ($244,000) released upon repurchase of the Azide Notes. To the extent that
the Azide Notes are not repurchased, the Company intends to defease the Azide
Notes in accordance with their terms. In the event that the Company defeases all
of the Azide Notes, the Company estimates that the additional cost to the
Company to acquire the securities to be deposited in the defeasance trust for
the benefit of the holders of the Azide Notes will be approximately $1.1
million.
(b) Represents the sum of (i) a $5.0 million scheduled principal
payment the Company made on February 21, 1998 with respect to the Azide Notes
and (ii) the amount of restricted cash ($244,000) released upon the repurchase
of the Azide Notes.
(c) Represents the write-off of the remaining unamortized amount of
debt issue costs associated with the issuance of the Azide Notes.
(d) Represents debt issue costs related to the Notes, estimated to be
$3.0 million.
(e) Represents the recognition of an intangible asset of $39.0 million
related to the Acquisition Consideration.
(f) Represents the issuance of the Notes.
(g) Represents (i) the scheduled principal payment of $5.0 million on
the Azide Notes made on February 21, 1998 and (ii) the repurchase of the
remaining outstanding principal balance of the Azide Notes.
(h) Represents a reduction in shareholders' equity for the debt
extinguishment extraordinary item consisting of (i) the cost to repurchase the
Azide Notes at 105% of the principal amount thereof (approximately $1.25
million), (ii) the write-off of the remaining unamortized discount related to
certain warrants issued in conjunction with the Azide Notes (approximately $1.16
million) and (iii) the write-off of the remaining unamortized debt issue costs
associated with the issuance of the Azide Notes ($728,000).
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<PAGE>
EXHIBIT NO. EXHIBITS
99.1 Asset Purchase Agreement dated as of October 10, 1997 between
AMPAC, Inc. and Kerr-McGee Chemical Corporation.
181744.
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<PAGE>
SIGNATURE
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.
American Pacific Corporation
Dated: March 2, 1998 By: /s/ David N. Keys
---------------------------------------
Name: David N. Keys
Title: Senior Vice President and
Chief Financial Officer
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ASSET PURCHASE AGREEMENT
KERR-McGEE CHEMICAL CORPORATION
AND
AMPAC, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE NO.
I DEFINITIONS 1
II TRANSFERS 6
III PURCHASE PRICE 7
IV SELLER'S REPRESENTATIONS 9
V PURCHASER'S REPRESENTATIONS 12
VI CONDITION OF ASSETS AND WARRANTIES 15
VII INDEMNIFICATION 16
VIII TAXES 21
IX EMPLOYEES 21
X PRECLOSING ACTIVITY AND CONTINUATION OF BUSINESS 22
XI RISK OF LOSS 27
XII CLOSING 27
XIII THE STATUS OF REPRESENTATIONS AT AND CONDITIONS 29
TO CLOSING
XIV RETAINED RIGHTS 34
XV CONTINUING OBLIGATIONS 37
XVI TERMINATION AND DEFAULT 41
XVII POST CLOSING NON-COMPETITION 43
XVIII MISCELLANEOUS 44
<PAGE>
EXHIBITS
Attached hereto and made a part hereof are the following Exhibits:
Exhibit Exhibit Caption
- ------- ---------------
A COMPUTER SOFTWARE AND FILES
A-1 EXCLUDED ITEMS
B CONTRACTS
C PROCESS DESCRIPTION
D TECHNICAL INFORMATION
E WIRE INSTRUCTIONS
F PURCHASE PRICE ALLOCATION
G SCHEDULE OF SELLER'S EXCEPTIONS
H SCHEDULE OF PURCHASER'S EXCEPTIONS
I KEY EMPLOYEES
J BILL OF SALE
K FORM OF ASSIGNMENT - CONTRACTS
L FORM OF PARENT COMPANY GUARANTEE
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and effective as of this day
10th day of October, 1997, by and between Kerr-McGee Chemical Corporation, a
Delaware corporation; (hereinafter sometimes referred to as "Seller"), and
AMPAC, INC., a Nevada corporation (hereinafter sometimes referred to as
"Purchaser").
WITNESSETH:
WHEREAS, Seller owns those "Assets" described more fully in Article I relating
to manufacture and sale of Ammonium Perchlorate; and
WHEREAS, Purchaser desires to acquire Seller's interest in the Assets pursuant
to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "AFFILIATE" shall mean any person, firm, corporation or other legal entity
controlling controlled by or under common control with the party in question. A
person shall be presumed to control any corporation of which he, she or it owns
more than fifty percent (50%) of the voting securities or any partnership of
which he, she or it is a general partner.
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<PAGE>
1.02 "AP" means ammonium perchlorate, but excludes Reclaimed Product.
1.03 "AP BUSINESS" means the business of Seller relating to the Assets and to
the manufacture and sale of AP.
1.04 "ASSETS" shall mean the Process, the Technical Information, the Contracts,
the Option, the Records and all other assets of Seller used primarily in the AP
Business, such as good will, customer lists and contacts, marketing expertise
and assistance, and the computer software and data files described on Exhibit A,
but excluding the Production Facilities and excluding those items (if any)
described in Exhibit "A-1".
1.05 "ASSUMED OBLIGATIONS" shall mean all unfulfilled written obligations
arising under or in connection with the Contracts, but excluding costs,
expenses, obligations, losses, claims and liabilities to the extent based on (i)
the performance or nonperformance of Seller prior to Closing, or (ii) any and
all obligations of Seller under such Contracts which are not set forth in the
written instruments evidencing the Contracts.
1.06 "CLOSING" shall have the meaning given at Section 12.01.
1.07 "CLOSING DATE" shall mean the date specified in Section 12.01.
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<PAGE>
1.08 "CLOSING PAYMENT" shall have the meaning given at Section 3.01.
1.09 "CONTRACTS" shall mean all of Seller's right, title and interest in and to,
and duties and obligations under, any and all of the contracts and agreements
described on Exhibit B, including all related amendments.
1.10 "EMPLOYEE BENEFIT PLAN" shall mean (i) any plan, program or arrangement as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") including, but not limited to, employee benefit plans, such
as foreign plans, which are not subject to the provisions of ERISA and any
multiemployer plan as defined in Section 4001(a)(3) of ERISA or Section 414(f)
of the United States Internal Revenue Code of 1986, as amended ("Code"); and
(ii) any personnel policy, stock option plan, collective bargaining agreement
(or work agreement), bonus plan or arrangement, incentive award plan or
arrangement, change in control plan or arrangement, vacation policy, severance
pay plan, policy or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, retiree benefit plan
or arrangement, fringe benefit program or practice (whether or not taxable),
employee loan, consulting agreement, employment agreement (oral or written) and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Subsection (i) above.
1.11 "FIRM ORDER" shall mean an order for AP existing on the date hereof that
Seller is contractually obligated to honor, but only to the extent such order
is, as of such date, scheduled for delivery after the Closing but on or before
March 31, 1998; provided that delay in actual delivery
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<PAGE>
beyond March 31, 1998 on account of unavailability of customer furnished bins
shall not change the character of what otherwise would be a Firm Order. Firm
Orders shall not exceed a cumulative total maximum of 1,400,000 pounds of AP.
1.12 "H-S-R Act" shall mean the Hart-Scott-Rodino Anti-trust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
1.13 "INVENTORY" shall mean all Seller-owned AP finished and stored, or in the
process of being cross-blended, at Seller's Henderson and/or Apex, Nevada
facilities, on the Closing Date, other than any such AP that has been identified
to a Firm Order or to a New Order. (For purpose of clarification, neither
Reclaimed Product nor customer-owned product stored at Seller's Apex facility
shall be deemed to be Inventory.)
1.14 "INVENTORY VALUE" shall mean the value of the Inventory, as determined in
accordance with Section 3.02 to be paid to Seller as provided in that Section.
1.15 "NEW ORDER" shall mean any order for AP that becomes binding on Seller
after the date hereof, that is not assignable to Purchaser and that is filled by
delivery after the Closing Date.
1.16 "OPTION" shall have the meaning given at Section 2.02.
1.17 "OPTION PERIOD" shall have the meaning given at Section 2.02.
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1.18 "PROCESS" shall mean the processes (and all Seller-owned technology related
primarily thereto), used by Seller at its Henderson and Apex, Nevada facilities
to manufacture AP, as more particularly described on Exhibit C.
1.19 "Production Facilities" shall mean all of Seller's plant, equipment, real
property and fixed assets used in the production of AP, comprised primarily of
its manufacturing and cross blending facilities in Henderson and Apex, Nevada,
together with its water and power supply agreements therefor and its interest in
Basic Investments Inc. associated/herewith.
1.20 "PURCHASER'S INVENTORY" shall mean that Inventory with respect to which
Purchaser has given notice of exercise of the Option in a timely manner, all as
herein provided.
1.21 "RECLAIMED PRODUCT" shall have the meaning given at Section 14.02.
1.22 "RECORDS" shall mean all of Sellers' right, title and interest in and to
all price lists, customer correspondence, mailing lists, sales records, customer
lists and other commercial data, in the actual possession of Seller, primarily
related to the Assets, but specifically excluding any information that Seller is
under a contractual or legal obligation not to disclose.
1.23 "RESERVED LICENSE" shall mean a perpetual, royalty free, nonexclusive,
irrevocable right and license in favor of Seller, its parent Kerr-McGee
Corporation, and their successors and assigns, to practice and use any
inventions, technology or intellectual property forming part of the Assets as
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may necessary or useful to use, repair, have repaired or sell, in whole or in
part, the Production Facilities.
1.24 "RESERVED RIGHT" shall have the meaning given at Section 14.03.
1.25 "TECHNICAL INFORMATION" shall mean all the technical data, proprietary
information, unpatented inventions, trade secrets, processes, formulae, designs
and know-how relating primarily to the Process owned by Seller on the date
hereof including, without limitation, those items on Exhibit D.
ARTICLE II
TRANSFERS
2.01 TRANSFER. Effective as of 12:01 a.m. Central Time on the Closing Date and
subject to the terms and conditions contained in this Agreement, Seller agrees
to sell and transfer the Assets and substantially all its AP Business to
Purchaser, and Purchaser agrees to buy and take the Assets and substantially all
the AP Business from Seller. From and after such time, Seller will terminate
substantially all AP production operations, and (except as may be provided in
limited circumstances identified in Article XIV and Section 15.05 and except
with regard to Reclaimed Product) shall not thereafter manufacture, sell, or
deliver any AP of any kind or type to any person, firm, or corporation, or to
any government or governmental entity or agency, directly or indirectly.
However, the Production Facilities will not be transferred and Seller reserves
the Reserved License and Reserved Rights.
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2.02 OPTION Rights. Included in the Assets to be transferred as above provided
shall be the right and option for Purchaser to purchase at the Inventory Value
all or such portion of the Inventory as Purchaser may elect, exercisable on
notice to Seller from time to time anytime within the 12 month period commencing
at the Closing. Such right to purchase shall hereinafter sometimes be referred
to as the "Option" and such 12 month exercise period shall hereinafter sometimes
be referred to as the "Option Period". Purchaser shall be entitled to exercise
the Option as to various quantities of Inventory at various times during the
Option Period. Each notice of exercise shall specify the quantity and any other
relevant terms.
ARTICLE III
PURCHASE PRICE
3.01 PAYMENT OF PURCHASE PRICE. As full payment and consideration for the
transfers by Seller to Purchaser, and Purchaser's acceptance thereof, pursuant
to the terms and conditions of this Agreement, Purchaser shall pay to Seller the
sum of Thirty Nine Million Dollars ($39,000,000) (the "Purchase Price") plus the
Inventory Value of Purchaser's Inventory. The Purchase Price shall be paid to
Seller at Closing. The Inventory Value will be paid in accordance with Section
3.02. Unless otherwise instructed in writing by Seller, the Purchase Price shall
be paid to Seller by wire transfer of immediately available funds to the Seller
account designated in Exhibit E. The Purchase Price for the Assets shall be
allocated hereunder in accordance with Section 1060 of the Internal Revenue Code
of 1986, as reflected on Exhibit G hereto, and IRS form 8594 and all tax returns
and reports
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filed by Seller and Purchaser with respect to the transactions contemplated by
this Agreement shall be consistent with such allocation.
3.02 INVENTORY VALUE. For purposes of this Agreement, "Inventory Value" shall
mean One and 50/100 Dollars ($1.50) per pound. It is understood and agreed
Purchaser is acquiring Purchaser's Inventory solely and exclusively for resale
and for no other purpose. No later than 30 days after each exercise of its
Option, Purchaser shall pay to Seller by wire transfer of immediately available
funds to the account designated at Exhibit E a sum equal to the Inventory Value
multiplied times the number of pounds of Inventory covered by that exercise of
the Option.
3.03 PURCHASER FINANCING. Purchaser's obligation to close is contingent on it
being able to secure financing for not less than the Purchase Price, to be
funded no later than the Closing Date. Purchaser agrees to use reasonable
commercial efforts in good faith in an attempt to secure such financing and, in
association therewith, will investigate obtaining private placement of debt with
or without the possibility of senior bank financing, and public "high yield"
debt financing. Purchaser agrees to keep Seller fully informed of its efforts to
secure financing and its progress in association therewith. Furthermore, it
shall immediately notify Seller of the date it has confirmed the securing of
such financing. For purposes of this Agreement, such financing shall be deemed
to have been "secured" (a) if a private placement is used, when the lender(s)
issue a commitment, in customary commercial form, subject to customary
conditions; and (b) if a public debt financing is used, when the investment
banking firm selected to manage the issue delivers its Underwriting Agreement in
customary commercial form, subject to customary conditions.
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ARTICLE IV
SELLER'S REPRESENTATIONS
Seller hereby makes the following representations as of the date of this
Agreement, each of which is material and is relied upon by Purchaser:
4.01 EXISTENCE. It is duly organized, validly existing and in good standing
under the laws of the jurisdictions where incorporated and qualified to do
business, and it is so qualified in all jurisdictions where ownership of the
Assets or the nature of its business requires it to be so qualified.
4.02 AUTHORIZATION. It has the power to enter into and perform this Agreement
and the transactions contemplated hereby; except as authorization to consummate
the transactions contemplated by this Agreement requires further approvals as
stated in Section 13.03(c), the execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on its part; this Agreement has
been duly executed and delivered on its behalf; and this Agreement constitutes
the valid, legal and binding obligation of it and is enforceable in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
in general or general principles of equity.
4.03 BROKERS. It has incurred no obligation or liability, contingent or
otherwise, for brokers' or finders' fees with respect to the transfer provided
for in this Agreement which will be the
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responsibility of Purchaser. Any such brokers' or finders' fee, obligation or
liability that might exist shall be the sole obligation of the party creating
the same.
4.04 NO CONFLICTS. Except as may be disclosed on Exhibit G, the consummation of
the transactions contemplated by this Agreement will not be in conflict with or
constitute an event of default or give rise to any valid claim, demand or cause
of action under:
(a) Seller's Articles of Incorporation, Seller's Bylaws, or any agreement or
instruments to which it is subject or by which either Seller or the
Assets are bound, or
(b) any order, writ, judgment or decree applicable to it, or
(c) any covenants imposed upon it by any bank or other financial institution.
4.05 LEGAL ACTIONS. To its knowledge, there is (i) no suit, action or claim,
(ii) no investigation or inquiry by any administrative agency or governmental
body, and (iii) no legal, administrative or arbitration proceeding pending or
threatened against the Seller or any of the property, assets, business or
prospects of it or to which it is or might reasonably be expected to become a
party relating to the Assets being purchased by Purchaser pursuant to this
Agreement, or that seeks to prevent or prohibit, or would have the effect, if
successful, of preventing or prohibiting, any of the transactions contemplated
by this Agreement except as may be specifically set forth on Exhibit G. To its
knowledge, there is no outstanding order, writ, injunction or decree of any
court, administrative agency or governmental body or arbitration tribunal
against or affecting it which could materially affect the Assets being purchased
by Purchaser pursuant to this Agreement, except as may be specified in Exhibit
G.
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4.06 COMPLIANCE WITH LAWS AND AGREEMENTS. To the best of its information and
belief, it is not in violation of any law, rule, regulation, ordinance, code,
order, license, concession or permit of any federal, state or local entities
which have jurisdiction over Seller, relating to the Assets and the AP Business,
except as may be disclosed on Exhibit G. Seller has performed in all material
respects all obligations required to be performed by it and is not in default,
nor in receipt of any claim or notice of default, defense, setoff, counterclaim,
termination, cancellation or acceleration, under any of the Contracts, except as
may be disclosed in Exhibit G.
4.07 CONSENTS. Except under the H-S-R Act and as may be disclosed on Exhibit G,
no third party must consent to Seller's transfer of the Assets and, to the best
of its information and belief, no filing with any governmental entity is
required relating to any of the transactions or asset transfers contemplated by
this Agreement. Except as reflected on Exhibit G, each Contract is freely
assignable, and will be validly assigned and transferred as of the Closing Date,
by Seller without requiring any payment to, or consent from, any person or
entity.
4.08 RIGHTS TO PURCHASE. Except as may be disclosed on Exhibit G, no third party
holds any right to purchase any of Seller's interest in the Assets.
4.09 AP BUSINESS AGREEMENTS. Except as may otherwise be noted thereon, Exhibit B
hereto lists specifically each of the following contracts, agreements,
commitments or other documents relating to the AP Business presently in effect
(and no others are necessary for the conduct of the AP Business of Seller as now
conducted):
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(a) Each material contract, agreement or commitment relating to any
invention, process, know how, formulae, design or trade secret relating
primarily to the AP Business.
(b) Each partnership, joint venture, joint operating or similar agreement (if
any) relating to the ownership, operation and use of the AP Business.
4.10 To the best of its information and belief, Seller has conducted its AP
Business, and as of the Closing Date will have conducted its AP Business, in
such manner that the transactions and asset transfers contemplated by this
Agreement will not subject Purchaser to any valid claim, demand, or cause of
action, or any liability, under any environmental laws or regulations, or under
any permits or licenses to which Seller's conduct of its AP Business is or has
been subject.
4.11 FULL DISCLOSURE. Except as may be disclosed on Exhibit G hereto, (i) to the
best of its knowledge, it has disclosed to Purchaser all material information
regarding the condition and operation of the AP Business and the Assets; and
(ii) the representations and warranties by it in this Agreement and the
statements contained in those documents, certificates and other writings
furnished to Purchaser pursuant to this Agreement, when considered as a whole,
to its knowledge, do not contain any untrue statement of a material fact and do
not omit to state any material fact necessary to make the statements herein and
therein not misleading.
ARTICLE V
PURCHASER'S REPRESENTATIONS
Purchaser hereby makes the following representations as of the date of this
Agreement, each of which is material and is relied upon by Seller:
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5.01 EXISTENCE. It is duly organized, validly existing and in good standing
under the laws of the jurisdictions where incorporated and qualified to do
business, and it is so qualified in all jurisdictions where ownership of the
Assets or the nature of its business requires it to be so qualified.
5.02 AUTHORIZATION. It has the corporate power to enter into and perform this
Agreement and the transactions contemplated hereby; except as authorization to
consummate the transactions contemplated by this Agreement requires further
approvals as stated in Section 13.03(c), the execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on its part; this Agreement
has been duly executed and delivered on its behalf; and this Agreement
constitutes the valid, legal and binding obligation of it and is enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general or general principles of equity.
5.03 BROKERS. It has incurred no obligation or liability, contingent or
otherwise, for brokers' or finders' fees with respect to the Transfer provided
for in this Agreement which will be the responsibility of the Seller and any
such brokers' or finders' fee, obligation or liability that might exist shall be
the sole obligation of the party creating the same.
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5.04 NO CONFLICTS. Except as may be disclosed on Exhibit H, the consummation of
the transactions contemplated by this Agreement are not in conflict with or
constitute an event of default or give rise to any valid claim, demand or cause
of action under:
(a) Purchaser's Articles of Incorporation, Purchaser's Bylaws, or any
agreement or instruments to which it is subject or by which it is bound
or
(b) any order, writ, judgment or decree applicable to it, or
(c) any covenants imposed upon it by any bank or other financial institution.
5.05 CONSENTS. Except under the H-S-R Act and as may be disclosed on Exhibit H,
no third party must consent to Purchaser's purchase of the Assets and, to the
best of its information and belief, no filing with any governmental entity is
required relating to any of the transactions or asset transfers contemplated by
this Agreement.
5.06 PURCHASER'S FINANCIAL CAPACITY. It has, subject to securing the financing
described in Section 3.04, the financial capacity and resources to proceed to
the Closing and to meet all its obligations as set forth herein.
5.07 INVESTIGATION. It will, by tendering the Purchase Price at Closing, signify
it has conducted such investigation and due diligence review with respect to the
Assets and AP Business as it deems prudent.
5.08 FULL DISCLOSURE. Except as may be disclosed on Exhibit H hereto the
representations and warranties of it in this Agreement, when considered as a
whole, to its knowledge, do not contain
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any untrue statement of a material fact and do not omit to state any material
fact necessary to make the statements herein and therein not misleading.
ARTICLE VI
CONDITION OF ASSETS AND WARRANTIES
6.01 TITLE. Seller warrants that it owns the Inventory, Records and the
Technical Information; and has valid and subsisting rights in, to and under the
Process and the Contracts -- all free and clear of any lien, charge, security
interest, adverse claim or encumbrance. Upon the Closing, Purchaser shall
receive good title in the Assets including, without limitation, the Option, the
Records, and the Technical Information, and valid and subsisting rights in, to
and under the Process and the Contracts -- all free and clear of any lien,
charge, security interest, adverse claim or encumbrance.
6.02 CONDITION. The Purchaser's Inventory and other personal property described
on Exhibit A, is sold in an "AS IS, WHERE IS" condition. EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED IN THIS ARTICLE, SELLER MAKES NO WARRANTY OF ANY KIND
WHATSOEVER WITH RESPECT TO THE ASSETS. ANY IMPLIED WARRANTY OF MERCHANTABILITY
AND/OR FITNESS FOR PURPOSE ARE EXPRESSLY DISCLAIMED. IN NO EVENT SHALL SELLER BE
RESPONSIBLE, OR HAVE ANY LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES ASSOCIATED IN ANY WAY WITH THE PURCHASER'S INVENTORY OR OTHER
PERSONAL PROPERTY TO BE TRANSFERRED HEREUNDER. With respect to Purchaser's
Inventory in bins stored at Seller's Apex facility that will be delivered to
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customers after Closing with no further finishing or cross blending, Seller
will, at Purchaser's request furnish directly to the customer its standard
warranty as to specification, grade, particle size etc., provided that damages
for any breach of such warranty would be limited to the Inventory Value received
by Seller for the material in question and that no special, indirect,
consequential or punitive damages would be available. With respect to
Purchaser's Inventory in lined drums that would be further finished or
cross-blended by or on behalf Purchaser after Closing, Seller is prepared to
certify to Purchaser the specification, grade, particle size etc., provided that
damages for any breach of such certification would be limited to the Inventory
Value received by Seller for the material in question and that no special,
indirect, consequential or punitive damages would be available.
ARTICLE VII
INDEMNIFICATION
7.01 SELLER'S INDEMNITY. Seller shall indemnify and hold Purchaser, its parent
corporation and their directors, officers, employees and agents harmless from
and against all liability, loss, damage or expense (including reasonable
attorney fees but excluding special, indirect or consequent damages) sustained
by the Purchaser:
(a) arising out of or resulting from any breach of any of the
representations, warranties or covenants or made by Seller herein; or
(b) arising out of or resulting from legal actions, lawsuits, claims,
proceedings, arbitration or investigations associated with ownership
and/or use of the Assets (including, by way of example and not
limitation, the Inventory) prior to the Closing Date and, with respect to
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Inventory only, after the Closing Date, except to the extent, and from and after
the time, the same becomes Purchaser's Inventory.
7.02 PURCHASER'S INDEMNITY. Purchaser shall indemnify and hold Seller, its
parent corporation, and all their directors, officers, employees and agents
harmless from and against all liability, loss, damage or expense (including
reasonable attorney fees but excluding special, indirect or consequential
damages) sustained by the Seller:
(a) arising out of or resulting from any breach of any of the
representations, warranties or covenants made by Purchaser herein; or
(b) arising out of or resulting from legal actions, lawsuits, claims,
proceedings, arbitration or investigations associated with ownership
and/or use of the Assets (excluding Inventory) on or after the Closing
Date, or of the Inventory to the extent, and from and after the time, the
same becomes Purchaser's Inventory.
7.03 LIMITATIONS. The indemnity obligations in Sections 7.01 and 7.02 shall
expire and be of no further force and effect from and after the fifth
anniversary of the Closing Date except for claims with respect to which written
notice was given hereunder prior to such fifth anniversary.
7.04 INDEMNIFICATION PROCEDURES.
(a) A party claiming indemnification under this Agreement ("Indemnified
Party") shall promptly (i) notify the party from whom indemnification is
sought ("Indemnifying Party") of any claim or claims ("Claim") asserted
against the Indemnified Party which it believes
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could give rise to a right of indemnification under this Agreement and
(ii) transmit to the Indemnifying Party a written notice describing in
reasonable detail the nature of the Claim, a copy of all papers served
with respect to such claim (if any), an estimate of the amount of damages
attributable to the Claim, if reasonably possible, and the basis of the
Indemnified Party's request for indemnification under this Agreement;
provided however, the omission so to notify the Indemnifying Party (x)
will not relieve it from any liability that it may have to any
Indemnified Party under this Article VII unless the Indemnifying Party
has been prejudiced in any material respect by such omission and (y) will
not relieve the Indemnifying Party from any liability that it may have to
any Indemnified Party other the under this Article VII. Within twenty
days after receipt of notice of the Claim ("Election Period"), the
Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified
Party under this Agreement with respect to such Claim and (ii) whether
the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Claim.
(b) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Agreement and
that the Indemnifying Party elects to assume the defense of the Claim
then the Indemnifying Party shall have the right to defend, at its sole
cost and expense, such Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a
final conclusion or settled at the discretion of the Indemnifying Party
in accordance with this Section 7.04(b). Subject to the restrictions set
forth in Section 7.04(d) below, the Indemnifying Party shall have full
control of such defense and
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proceedings including any compromise or settlement thereof. If requested by the
Indemnifying Party, the Indemnified Party shall at the sole cost and expense of
the Indemnifying Party, reasonably cooperate with the Indemnifying Party and its
counsel in contesting any Claim which the Indemnifying Party elects to contest.
The Indemnified Part may participate in, but not control, any defense or
settlement of any third party Claim controlled by the Indemnifying Party
pursuant to this Section 7.04(b) and, except as permitted above or pursuant to
Section 7.04(c), shall bear its own costs and expenses with respect to such
participation.
(c) If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 7.04(b), or if the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 7.04(b)
but fails to diligently and promptly prosecute and defend or settle the
Claim, then the Indemnified Party shall have the right to defend, at the
sole cost and expense of the Indemnifying Party, the Claim by all
appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or
settled. The Indemnified Party shall have full control of such defense
and proceedings and may enter into any compromise or settlement of such
Claim without the Indemnifying Party's consent. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to
the Indemnified Party to the effect that the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Agreement and
if such dispute is resolved in favor of the Indemnifying Party by final,
non appealable order of a court of competent jurisdiction, the
Indemnifying Party shall not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this Section 7.04(c) or of
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the Indemnifying Party's participation therein at the Indemnified Party's
request and the Indemnified Party shall reimburse the Indemnifying Party
in full or for all costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
7.04(c) and the Indemnifying Party shall bear its own costs and expenses
with respect to such participation.
(d) Except as otherwise provided in Section 7.04(c), neither an Indemnifying
Party nor an Indemnified Party shall be liable for any settlement of any
litigation or proceeding effected without its written consent (which
consent shall not be unreasonably withheld); provided, however, without
the Indemnified Party's written consent (at its sole discretion), an
Indemnifying Party shall not settle or compromise any action or
proceeding or consent to entry of any judgment (i) that would impose an
injunction or other equitable relief upon the Indemnified Party or (ii)
that would impose or require the modification of any contractual
obligations under the Contracts. In any negotiations with third parties
or any litigation relating to claims of patent infringement or the
infringement of other intellectual property rights, which claims relate
to the AP Business or the Assets, both Seller and Purchaser shall be
entitled to participate, and no agreement, license or settlement shall be
entered into with respect to any such claims without the written consent
of Purchaser and Seller, which consent shall not be unreasonably
withheld.
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ARTICLE VIII
TAXES
8.01 TAXES. All taxes on the ownership of the Assets, if any, (other than those
based on income) for the tax period in which the Closing Date occurs shall be
apportioned and prorated as of the Closing Date between Seller and Purchaser. If
either party pays any such tax which is the responsibility of the other party,
it shall be entitled to prompt reimbursement within thirty (30) days after
issuance to the responsible party of evidence of such payment.
8.02 STATE SALES TAXES. At Closing or, if applicable, with each payment of
Inventory Value, Purchaser shall deliver to Seller, as agent for the State of
Nevada, an amount equal to the Nevada state sales or use tax payment applicable,
if any, to the transaction contemplated hereby. Seller agrees to promptly
forward such payment to the appropriate authorities in the State of Nevada as
required by applicable law.
ARTICLE IX
EMPLOYEES
9.01 EMPLOYEES. Seller has certain employees identified on Exhibit H hereto
assigned to the AP Business. Upon request, Seller shall provide Purchaser with
information as to job title and compensation level of each such employee. Seller
will give the Purchaser reasonable access during normal business hours to
interview any such employee that Purchaser desires to interview. It is clearly
understood that Purchaser has no obligation to employ or offer to employ any
such employee.
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9.02 NOTICE. Purchaser shall promptly notify Seller in writing the name of those
employees of Seller to which it makes an offer of employment and a second
identifying notice promptly upon receipt of acceptance of such offer. Purchaser
shall not enter into an employment arrangement with any such employee that will
become effective prior to the second anniversary of the Closing.
9.03 ERISA. Seller and its Affiliates shall be responsible for (i) the payment
of all wages and other remuneration due to their current or former employees
with respect to their services as employees of Seller or its Affiliates, (ii)
the provision of health plan continuation coverage in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and Sections 601 through 608 of ERISA, due to or with respect to the
employees of Seller whose employment with Seller is terminated in connection
with Seller's sale of the Assets, and (iii) any liability or other obligation of
Seller or any of its Affiliates which in any way relate to or are attributable
to any Employee Benefit Plan sponsored, maintained or contributed to, for the
benefit of any employee with respect to their services as employees of Seller or
its Affiliates. Neither Seller nor its Affiliates will make any transfer of
pension or other Employee Benefit Plan assets to the Purchaser.
ARTICLE X
PRECLOSING ACTIVITY AND
CONTINUATION OF BUSINESS
10.01 ANTITRUST NOTIFICATION. The parties hereby acknowledge it is their
understanding and belief that the transaction contemplated hereby is of the type
and magnitude requiring submission of premerger notification to the Federal
Trade Commission and the Department of Justice under the
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H-S-R Act. The parties therefore each agree to prepare and file premerger
notification in accordance with the H-S-R Act. However, the parties agree such
filing shall be made no earlier than the date Purchaser has confirmed (and
advised Seller of) the securing of the financing described at Section 3.04 and
further agree such filing shall be made no later than ten (10) days after such
date or the date of this Agreement, whichever is later. Both parties agree to
not request early termination of any applicable waiting period under the H-S-R
Act and to comply with agency requests for additional information concerning the
contemplated transaction. The parties (including their outside counsel and
consultants where appropriate) agree to cooperate in the preparation, and
coordinate the filing, of such notifications. Each party hereby acknowledges
that, as of the date hereof, it has made no filing pursuant to the H-S-R Act
regarding the transactions contemplated hereby, and the waiting period specified
in the H-S-R Act has not yet expired.
10.02 ACCESS. Until Closing, Seller shall, during normal business hours and upon
prior written request, afford Purchaser reasonable access to its Henderson and
Apex, Nevada facilities to view the Process and to examine the documentary
portion of the Assets (but with the right in Seller to first excise market
sensitive, competitive or confidential data) so as to enable Purchaser to
conduct such "due diligence" review as it deems desirable. Purchaser agrees to
comply with Seller's health, safety and other rules applicable to such
facilities of which it has been advised while at such facilities.
10.03 CONDUCT OF BUSINESS. During the period from the date hereof to the
Closing, Seller shall continue to conduct its business and operations with
regard to the Assets in the same manner as they have been conducted heretofore,
and shall maintain the books of account in accordance with
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generally accepted accounting principles consistently applied and in a manner
that fairly and accurately reflects its income, expenses, assets and
liabilities. Notwithstanding anything which may be to the contrary in the
preceding sentence, with respect to quotations it may make during such period,
Seller may vary its ordinary practice and bid in the alternative, dependent upon
whether or not the transaction contemplated hereby closes and, furthermore,
Seller agrees to use reasonable efforts to obtain the right to assign to
Purchaser any orders that result where Seller is the successful bidder;
provided, however, it shall not be obligated to take any action, or condition
any bid, in a way that Seller, in its sole discretion, determines would be
nonresponsive or otherwise lessen it chance of securing an award. To the extent
Seller is the successful bidder, the order is assignable and it has not
commenced production of AP to fill such order as of the Closing, Seller will
assign to Purchaser, and Purchaser shall assume from Seller, such order at
Closing. Also during such period unless Purchaser shall have given its prior
written consent thereto (which consent shall not be unreasonably withheld),
Seller will not do any of the following with respect to the Assets:
(a) incur any indebtedness for borrowed money, make any loans or advances to
any individual, firm, or corporation, or assume, guarantee, endorse, or
otherwise become responsible for the obligations of any other individual,
firm or corporation;
(b) subject the Assets to a mortgage, pledge, lien or any other encumbrance;
(c) sell, lease or transfer any of the Assets (except this shall not prohibit
sales of AP made in the regular, ordinary manner consistent with prior
practice for sale of AP; );
(d) modify or amend in any material respect, or cancel or terminate, any of
the Contracts; or
(e) make any purchase or sale contract (except AP sales contracts made in the
ordinary course) or any other commitments that would be assumed by the
Purchaser upon Closing, without the Purchaser's consent.
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10.04 ADDITIONAL INVENTORY. The parties recognize one or more customers may,
after the date hereof, request that Seller make additional quantities of AP
available as Inventory. Seller agrees to consider any such request in good
faith, but shall have no obligation to produce additional AP for Inventory
unless mutually acceptable terms and conditions relating thereto have been
agreed in writing by Seller and Purchaser.
10.05 PUBLICITY. For a period beginning upon the execution of this Agreement and
running through and including the Closing Date, (or date of termination if this
Agreement earlier terminates), Purchaser and Seller shall consult with each
other with regard to all publicity and other releases concerning this Agreement
and the transactions contemplated hereby and, except as required by applicable
law or the applicable rules or regulations of any governmental body or stock
exchange, no party shall issue any publicity directly related to the subject
matter of this Agreement or other release without first giving the other party
an opportunity to comment thereon and receiving the approval of that party,
which approval shall not be unreasonably withheld.
10.06 PRE-CLOSING CUSTOMER CONTACTS. Before the Closing, the parties contemplate
that, individually or jointly, they will desire to contact AP customers to
advise them of, and explain the rationale behind, the transactions contemplated
hereby, in an effort to address and alleviate whatever concerns such customers
may have and to seek their active support for (or at least their assurance to
not actively object to) the transactions contemplated hereby. The parties
acknowledge it to be their mutual understanding and belief that customer support
- -- or at least the absence of active customer objection -- will be critical to
the successful completion of the transactions
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contemplated hereby and that cooperation in conducting such customer contacts
will be in their mutual interest. The parties therefore agree to cooperate in
contacting customers about the transactions contemplated hereby and shall
coordinate their contacts to the maximum extent reasonable under the
circumstances. Purchaser and Seller mutually agree that, from the date of this
Agreement through the Closing Date, they shall not directly or indirectly
discuss the transactions contemplated hereby with any AP customer without giving
the other prior notice of and an opportunity to comment upon such discussion.
Furthermore, from the date hereof until such time as it has confirmed securing
of the financing described as Section 3.03 and advised Seller of the same,
Purchaser shall not directly or indirectly discuss this transaction with any AP
Customer without Seller's prior consent.
10.07 ANNOUNCEMENT. Both parties recognize that execution of this Agreement will
be an event of sufficient magnitude and materiality that Purchaser's parent
company, American Pacific Corporation, will have to make an announcement
regarding the same and file a Form 8K Current Report. The parties agree to
cooperate in preparation of such announcement and Seller shall be given a
reasonable opportunity for prior review and comment upon such announcement and
report. The making of such announcement and report, and confirmation to
customers thereafter that the transaction is proceeding in a satisfactory matter
shall not be deemed a violation of any prohibition contained in the final two
sentences of Section 10.05.
10.08 REASONABLE COMMERCIAL EFFORTS. Each of the parties hereto shall use
reasonable commercial efforts in good faith to fulfill all of the conditions set
forth in this Agreement over which it has control or influence (including
obtaining any authorizations, consents, approvals or
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waivers necessary to the performance of such party's obligations hereunder) and
to consummate the transactions contemplated hereby.
ARTICLE XI
RISK OF LOSS
The risk of loss to any of the Assets being purchased shall remain with Seller
until the Closing. In the event of fire or other casualty as would be insured
against by a standard extended coverage policy of property insurance (without
regard to associated deductibles) shall result in any loss, destruction, or
damage to AP prior to the time such material becomes Purchaser's Inventory, such
material shall be excluded herefrom and not deemed Inventory subject to the
Option and, hence, capable of becoming Purchaser's Inventory, nor part of the
Assets. From and after the Closing, the risk of loss to any of the Assets shall
reside with Purchaser. Risk of loss to Inventory shall pass to Purchaser at the
time Inventory becomes Purchaser's Inventory by giving notice of Option exercise
with respect thereto.
ARTICLE XII
CLOSING
12.01 DATE AND PLACE OF CLOSING. The delivery of the Assets, including executed
originals of bills of sale, assignments and related documents, and payment of
the Purchase Price (the "Closing") shall take place at the Oklahoma City offices
of Seller at 10:00 a.m. on December 17, 1997 (the "Closing Date") unless the
parties mutually agree to another date in writing, which mutually agreed
substitute date shall then become the Closing Date.
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12.02 TRANSACTIONS AT CLOSING.
At the Closing:
(a) Seller shall execute, acknowledge and deliver to Purchaser conveyance
documents in substantially the form of those documents as set forth in
Exhibits J and K to this Agreement and such other instruments of transfer
and assignment as are reasonably necessary to transfer to Purchaser the
Assets in the manner contemplated by this Agreement;
(b) Purchaser shall execute, acknowledge and deliver to Seller a written
assumption of the Assumed Obligations in a form mutually acceptable to
Purchaser and Seller;
(c) Seller shall deliver to Purchaser possession of the Assets; and
(d) Purchaser and Seller shall execute, acknowledge and deliver such other
instruments and take such other action as may be necessary to carry out
their respective obligations under this Agreement.
12.03 FILES. Seller shall at or as promptly as reasonably possible after the
Closing provide to Purchaser at Seller's offices the originals of the Contracts,
the Records and all other documents comprising part of the Assets including
those computer programs and computer data files set forth on Exhibit A hereto.
It shall be the responsibility of Purchaser to arrange for the delivery or
shipping of such originals. Seller shall be entitled to make and retain, at its
own expense, such copies of the documents as it may desire.
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ARTICLE XIII
THE STATUS OF REPRESENTATIONS AT AND CONDITIONS TO CLOSING
13.01 PURCHASER. Purchaser's obligation hereunder are conditioned upon and
subject to the satisfaction of each of the following conditions, any one or more
which may be waived by Purchaser:
(a) All of Seller's representations and warranties contained in this
Agreement shall be true and correct as of the Closing in all material
respects with the same effect as if the same had been made or given on
and as of the Closing;
(b) Seller shall have performed and complied with all of its obligations
under this Agreement which are to be performed and complied with by it
prior to, at or contemporaneously with the Closing.
(c) Between the date hereof and the Closing, there shall not have occurred
any material adverse change which impairs the Assets or AP Business of
Seller;
(d) It shall have closed, prior to the Closing or substantially
contemporaneously therewith the financing described at Section 3.03;
(e) It shall have concluded a long term supply agreement with Thiokol
Corporation for the sale and purchase of AP to provide comfort to such
customer as to the future price of A after the Closing of the
transactions contemplated herein IF the existence of such an Agreement is
determined by Purchaser in good faith to be a condition to the
transactions contemplated hereunder not being objected to by such
customers; and
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(f) It shall have received from Russell G. Horner, Jr., the General Counsel
of Seller, a letter, dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser to the effect that in his opinion:
(i) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has
full corporate power and authority to carry on its business as it is now
being conducted and to own or hold the Assets, is duly qualified to do
business and in good standing in all jurisdictions in which the ownership
or operation of the Assets necessitates such qualification and that the
transfer of the Assets and consummation of the transactions contemplated
hereby, including execution and delivery of documents at Closing, will
not and shall have not violated the Articles of Incorporation or Bylaws
of Seller;
(ii) All corporate action required to be taken by Seller to authorize it
to execute, deliver and carry out this Agreement has been properly taken.
This Agreement has been duly and validly executed and delivered by Seller
and constitutes the valid and binding obligation of Seller enforceable in
accordance with its terms, subject to bankruptcy and other laws affecting
creditors' rights generally and to general principles of equity; and
(iii) All consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any governmental authority
which are legally required on the part of Seller, for the consummation of
the transactions contemplated by this Agreement have been obtained or
made.
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In rendering the foregoing opinions, such counsel may rely, as to matters of
fact, on certificates of public officials of officers of Seller and on such
other opinions of counsel as are reasonably satisfactory to Purchaser.
13.02 SELLER. Seller's obligation hereunder are conditioned upon and subject to
the satisfaction of each of the following conditions, any one or more which may
be waived by Seller:
(a) All of Purchaser's representations and warranties contained in this
Agreement shall be true and correct as of the Closing in all material
respects with the same effect as if the same had been made or given on
and as of the Closing;
(b) Purchaser shall have performed and complied with all of its obligations
under this Agreement which are to be performed and complied with by it
prior to, at or contemporaneously with the Closing.
(c) Seller shall have received from American Pacific Corporation, Purchaser's
parent, a full executed parent company Guaranty of Purchaser's
obligations hereunder, as provided for at Section 18.10, in the form
attached hereto as Exhibit M;
(d) It shall have concluded an agreement with NASA and/or Thiokol Corporation
to hold the Production Facilities in a standby, back-up or "mothball"
status for production of AP to provide comfort to such customers as to
the future availability of AP after the Closing of the transactions
contemplated herein under one or more of the situations listed at Section
14.03 (a) through (d) IF the existence of such an agreement is determined
by Seller in good faith to be (i) a condition for the transactions
contemplated hereunder not being objected to by such customer(s) and/or
(ii) reasonably necessary to facilitate a favorable
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review by the Federal Trade Commission or Department of Justice of the
transactions contemplated hereby under the H-S-R Act or other applicable
law; and
(e) It shall have received from Rooker & Gibson, counsel for Purchaser, a
letter, dated the Closing Date, in form and substance reasonably
satisfactory to Seller, to the effect that in their opinion:
(i) Purchaser is a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation and has full corporate
power and authority to own the properties and to conduct the business it
presently conducts and that consummation of the transactions contemplated
hereby will not and shall have not violated the Articles of Incorporation
or Bylaws of Purchaser;
(ii) All corporate action required to be taken by Purchaser to authorize
it to execute, deliver and carry out this Agreement has been properly
taken. This Agreement has been duly executed and delivered by Purchaser
and constitutes the valid and binding obligation of Purchaser,
enforceable in accordance with its terms, subject to bankruptcy and other
laws affecting creditors' rights generally and to general principles of
equality;
(iii) All corporate action required to be taken by American Pacific
Corporation to authorize it to execute, deliver and carry out the
Guaranty described at Section 18.10 has been properly taken. The Guaranty
has been duly executed and delivered by American Pacific Corporation and
constitutes the valid and binding obligation of American Pacific
Corporation, enforceable in accordance with its terms, subject to
bankruptcy and other laws affecting creditors' rights generally and to
general principles of equity; and
(iv) All consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any governmental authority
which are legally required on the part of
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Purchaser for the consummation of the transactions contemplated by this
Agreement have been obtained or made, as the case may be.
In rendering the foregoing opinions, such counsel may rely, as to matters of
fact, on certificates of public officials and of officers of Purchaser and on
such other opinions of counsel as are reasonably satisfactory to Seller.
13.03 ADDITIONAL CONDITIONS. The obligation of the parties hereunder to Close is
further conditioned upon the following matters, any one or more of which may be
waived by the parties:
(a) Both parties have submitted notification under the H-S-R Act and either
(i) the waiting period under the Act shall have expired with no adverse
action or requests having been taken for further information having been
received or (ii) action on the notification deemed satisfactory by each
of Purchaser and Seller in its sole discretion, reasonably exercised in
good faith, shall have been received;
(b) Closing of the transaction contemplated hereby will not constitute or
cause a violation of any applicable covenant or condition contained in
any contract to which a party hereto is bound;
(c) The Closing and all related actions contemplated by this Agreement shall
have been approved in all respects by the board of directors of each
party, and by the respective managements and boards of directors of the
parent companies of Purchaser and Seller;
(d) There shall have been concluded a long term supply agreement between the
parties whereby Seller would provide sodium chlorate as a raw material to
Purchaser, IF Purchaser and Seller have mutually agreed by separate
writing prior to Closing such long
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term supply agreement is necessary for successful completion of the transaction
contemplated hereby;
(e) There shall be no suit or proceeding threatened or pending which seeks to
restrain, prohibit, challenge or obtain damages or other relief in
connection with this Agreement or consummation of the transactions
contemplated hereby; and
(f) Each party shall have received such opinions from its counsel deemed
satisfactory to it in its sole discretion, reasonably exercised in good
faith, that consummation of the transactions contemplated hereby will not
result in violation of any applicable law.
ARTICLE XIV
RETAINED RIGHTS
14.01 USE AND MAINTENANCE OF PRODUCTION FACILITIES. It is understood and agreed
the Production Facilities are reserved by Seller and will not be transferred
hereunder to Purchaser. Together with the Reserved License, Seller shall be
freely entitled, in its sole and absolute discretion, to:
(a) lease, sell, dismantle, demolish and/or scrap all or any portion of the
Production Facilities;
(b) retain the Production Facilities for manufacture of Reclaimed Product in
accordance with Section 14.02 and/or
(c) maintain the Production Facilities in a "standby" or "mothballed"
condition so they will be capable of being used to produce AP under the
limited circumstances described at Section 14.03.
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14.02 RECLAIMED PRODUCT. Seller reclaims and reprocesses sludges and other
materials at its Henderson, Nevada facility to produce a product (herein
"Reclaimed Product") which, while technically and chemically AP, has
historically been treated by Seller as a product separate and distinct from the
AP intended for use in solid rocket motors. Such Reclaimed Product is suitable
for, and has, some commercial uses, but is not considered by Seller suitable for
solid rocket motors. Reclaimed Product shall not, for purposes of this
Agreement, be deemed to be AP and the manufacture and sale thereof shall not be
deemed to be part of the AP Business. Seller reserves the right for itself, its
successors and assigns, to continue to produce and sell Reclaimed Product after
the Closing, and to use the Production Facilities and Reserved License in
association therewith; provided that Reclaimed Product may not be produced or
sold for use in solid rocket propellants or for any solid rocket motor
application.
14.03 RESERVED RIGHT. Though Seller agrees herein to terminate from and after
Closing substantially all its AP production and sales operations, Seller
nevertheless reserves the right and ability unto itself, its successors and
assigns, to produce and sell AP after Closing to anyone it may choose (herein
sometimes referred to as the "Reserved Right") in the following limited
circumstances:
(a) If total AP demand shall exceed seventy million pounds (70,000,000 lbs.)
in any 12-month period (but only for so long as such condition persists);
or
(b) If Purchaser is unable for any reason to produce a quantity of AP at
least equal to the total AP requirements during any 3-month period (but
only for so long as such condition persists) provided, however, that the
limited right of Seller to produce and sell AP during the persistence of
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this condition shall be limited to the production and sale of that
quantity of AP that Purchaser is unable to supply; or
(c) If Purchaser, in its sole and exclusive discretion, determines to
terminate its AP Business; or
(d) If Purchaser shall have been determined by a final judgment of a court of
competent jurisdiction not subject to further review or modification (i)
to have failed to pay the Inventory Value as provided in Section 3.02, or
(ii) to have breached any other term, provision, or obligation of this
Agreement that is specifically herein stated to survive the Closing or,
if not so specifically stated, is nevertheless a duty or obligation
intended, under an objective interpretation of this Agreement, to be
performed by Purchaser after Closing, and if, but only if, such failure
or breach shall have continued for at least thirty (30) days following
the entering of such final judgment; or
(e) If Purchaser shall fail to exercise the Option with respect to all the
Inventory within the Option Period; provided, however, the right to
freely sell AP in such instance shall be limited to an amount of
Inventory no greater than the difference between 1,200,000 pounds of
Inventory and the amount of Inventory for which the Option was timely
exercised hereunder. (Inventory greater than the difference between
1,200,000 pounds and the amount for which the Option was timely
exercised, if any, shall become, and shall be sold only as, Reclaimed
Product;) or
(f) If undertaken to fulfill any Firm Order or any New Order, provided that,
in regard to sales made to fulfill any such Order, Seller shall remit to
Purchaser, within thirty (30) days after Seller receives payment there
for, an amount equal to the net sales price received on account thereof
less, with respect to a Firm Order, the sum of One dollar ($ 1.00) per
pound sold and less, with respect to a New Order, the sum of one and
50/100 dollars ($1.50) per pound sold, such payment to be made by Seller
to Purchaser at the latter's address set out in Section 18.04 below, or
in such other manner as Purchaser may reasonably request.
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Seller, its successors and assigns, shall be freely entitled to use the Reserved
License and the Production Facilities in the exercise of the Reserved Right. It
is understood and agreed, however, the Reserved Right shall be exercised only
if, and for so long as, one or more of the conditions set forth at clauses (a)
through (f) above exists.
ARTICLE XV
CONTINUING OBLIGATIONS
15.01 FURTHER ASSURANCES. After the Closing Date, the parties agree to execute
and deliver to each other all such instruments, notices, and other documents,
and to do all such other acts not inconsistent with this Agreement, as may
reasonably be necessary or advisable to carry out their obligations under this
Agreement.
15.02 MUTUAL COOPERATION WITH RESPECT TO TAXES AND OTHER FINANCIAL MATTERS. Each
of Purchaser and Seller will provide the other with such assistance as may
reasonably be requested by either of them in connection with the preparation of
any tax return, any audit or other examination by any taxing or other
governmental authority, or any judicial or administrative proceedings relating
to liability for taxes relating to the transactions contemplated by this
Agreement. Each party will provide the other with any records or information
which may be relevant to such return, audit or examination, proceedings or
determination. Such assistance shall include making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder and shall include providing copies of any
relevant tax returns and supporting work schedules.
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15.03 COOPERATION IN LITIGATION. In the event that, after the Closing Date,
Seller or Purchaser shall require the participation of officers and employees
employed by each other to aid in the defense or prosecution of litigation or
claims, and so long as there exists no conflict of interest between the parties,
each of Seller and Purchaser shall make such officers and employees reasonably
available to participate in such defense or prosecution, provided that the party
requiring the participation of such officers or employees shall pay all
reasonable out-of-pocket costs, charges, and expenses arising from such
participation.
15.04 ASSIGNMENTS AND RECORDING. At its sole discretion and cost, Purchaser may
record the Assignments and Bill of Sale in all appropriate offices and Seller
shall cooperate with Purchaser by executing such documentation as is reasonably
necessary to effect such recordations.
15.05 POST-CLOSING STORAGE OF INVENTORY. The parties acknowledge that Purchaser
may deem it necessary and/or desirable to store Purchaser's Inventory at
Seller's Apex, Nevada facility for a period of time after Option exercise. As an
accommodation, Seller will, upon Purchaser's request, store such Purchaser's
Inventory until (but in no event later than) ninety (90) days after expiration
of the Option Period. The storage of Purchaser's Inventory during this time
shall be in accordance with Seller's standard practices, though (a) Seller will
attempt to accommodate reasonable requests of Purchaser regarding storage
practices and (b) risk of loss from any cause will lie with Purchaser.
In accordance with a schedule to be mutually agreed upon, Purchaser shall
proceed to remove from Seller's Apex, Nevada facility all Purchaser's Inventory
and relocate the same to a site of
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Purchaser's choice. Such Purchaser's Inventory removal and relocation shall be
performed at Purchaser's sole risk and expense. Seller will afford reasonable
access over its premises to Purchaser for such removal and relocation; provided,
Purchaser agrees to give Seller at least 72 hours prior written notice of
desired access time(s), complies with the health, safety and other rules of
Seller applicable to the Apex, Nevada facility (including those relating to
indemnity and liability insurance requirements for contractors) and agrees to
work with Seller to coordinate activities and minimize disruption to Seller's
other activities. All or any part of Purchaser's Inventory remaining on Seller's
premises after said date falling ninety days after expiration of the Option
Period shall be deemed abandoned by Purchaser and Seller may, without being
obligated so to do, and without waiving any other remedy it may have, thereafter
sell to anyone for any purpose, reclaim or otherwise dispose of the same at
Purchaser's risk and expense without any liability to Purchaser.
15.06 POST CLOSING ASSISTANCE. From and after Closing, upon Purchaser's request,
at reasonable times and upon reasonable prior notice, Seller agrees to:
(a) introduce Purchaser to customers of Seller which were not previously also
customers of Purchaser, such introductions to include accompanying
Purchaser on an initial visit to such customers and use of Seller's good
offices in encouraging such customers to become customers of Purchaser;
(b) consult with Purchaser regarding the Process, the Technical Information
and such other areas of AP production where Seller has expertise which
may be of assistance to Purchaser; and
(c) consult with Purchaser regarding AP marketing.
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15.07 MARKETING RECLAIMED PRODUCT. Seller presently uses the same marketing
department for its sales of both AP and Reclaimed Product. After Closing, the
possibility exists Seller's AP marketing group will be reduced in size or
reassigned. Such result could interfere with Seller's sale of Reclaimed Product.
Purchaser however, contemplates a continued and even expanded role for its
marketing group. Purchaser agrees, upon request of Seller in the event it
produces Reclaimed Product after Closing and desires marketing assistance in
association therewith, to use reasonable efforts to market Reclaimed Product on
behalf of, and in accordance with the reasonable instructions of, Seller. Seller
will, unless otherwise mutually agreed, designate the customers and establish
the sales price for Reclaimed Product and be responsible for any and all
warranties regarding quality and performance thereof. Title to Reclaimed Product
shall pass directly from Seller to its customers and never reside in Purchaser.
Purchaser shall perform such marketing services with respect to Reclaimed
Product as an accommodation to Seller and for no additional consideration. The
gross proceeds of Reclaimed Product sales shall be for Seller's account without
set off, deduction, commission, or any fee whatsoever -- howsoever the same may
be denominated. Upon the earlier to occur of three (3) years after the Closing
Date or the date Purchaser has remitted to Seller gross proceeds from sales of
nine hundred (900) short tons of Reclaimed Product, Purchaser's obligation under
this Section 15.07 shall cease.
15.08 PRESERVATION OF BOOKS AND RECORDS. For seven (7) years after the Closing
Date, the party in possession of the originals will retain the original books,
records and files (including, without limitation, the Contracts, the Licenses,
the Records and documentary portions of the Assets), relating to the period of
time prior to the Closing and will make such books, records and files
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(including, without limitation, the Contracts, the Licenses, the Records and
documentary portions of the assets), available to the other party upon
reasonable notice at the headquarters of the party in possession (or at a
mutually agreed upon location in the United States) at reasonable times and
during regular office hours.
15.09 SURVIVAL OF INDEMNITIES, REPRESENTATIONS AND WARRANTIES.
(a) Except as to Sections 4.04, 4.05, 4.06, 4.07, 4.09 and 6.01, the
representation and warranty provisions of this Agreement shall survive
the Closing and expire on the first anniversary of the Closing Date.
Representations and warranties contained in Sections 4.04, 4.05, 4.06,
4.07, 4.09 and 6.01 shall survive the Closing and expire on the third
anniversary of the Closing Date.
(b) Obligations which by their terms are to be performed after the Closing
and the indemnity provisions of this Agreement shall survive the Closing.
ARTICLE XVI
TERMINATION AND DEFAULT
This Agreement may, by written notice given at or prior to the Closing, be
terminated at or prior to Closing:
(a) by either Purchaser or Seller if a material default or breach shall be
made by the other party hereto with respect to the due and timely
performance of any of its covenants and agreements contained herein, or
with respect to the due compliance with any of its representations,
warranties or covenants, and such default cannot be cured and has not
been waived;
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(b) (i) by Purchaser if all of the conditions set forth in Section 13.01 and
13.03 shall not have been satisfied at the time the Closing would
otherwise occur or if satisfaction of such a condition is or becomes
impossible, other than through failure of Purchaser to fully comply with
its obligations hereunder, and shall not have been waived by Purchaser on
or before such date; or (ii) by Seller, if all of the conditions set
forth in Section 13.02 and 13.03 shall not have been satisfied at the
time the Closing would otherwise occur or if satisfaction of such a
condition is or becomes impossible, other than through failure of Seller
to fully comply with its obligations hereunder, and shall not have been
waived by Seller on or before such date;
(c) by mutual consent of Purchaser and Seller; or
(d) by either Purchaser or Seller if the Closing shall not have occurred,
other than through failure of any such party to fulfill its obligations
hereunder, by March 31, 1998, or such later date as may be agreed upon in
writing by the parties. Each party's right of termination hereunder is in
addition to any other rights it may have hereunder or otherwise and the
exercise of a right to termination shall not be an election of or waiver
of any remedies.
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ARTICLE XVII
POST CLOSING NON-COMPETITION
17.01 NON-COMPETITION. Except with respect to the Reserved Right or as otherwise
permitted at Sections 15.05 and 15.06, Seller agrees that from the Closing Date,
it shall not engage directly or indirectly in any business involving licensing,
using, selling or promoting the AP Business nor engage directly or indirectly in
the AP Business which Seller has sold to Purchaser pursuant to this Agreement.
17.02 REASONABLENESS. Seller and Purchaser acknowledge and agree that the
provisions of this Article XVII are reasonable and, specifically, that
the provisions with respect to the duration and scope of the obligations
of non-competition are reasonable. The obligations of non-competition are
included as a part of the purchase of the Assets (which includes the
Process) and the AP Business which are currently owned by Seller. It is
the intent of the parties, pursuant to this Agreement, that Seller shall
retain the Reserved License, the Reserved Rights, the Production
Facilities and its businesses and assets other than the AP Business and
the Assets and that Purchaser will acquire the AP Business and the
Assets. Because of the nature of the transactions contemplated by this
Agreement and the mutuality of the obligations set forth herein and the
intent of the parties, all parties agree that these obligations of
non-competition are reasonable in scope and duration. In the event any
court of competent jurisdiction shall determine that the provisions of
this Article XVI are unreasonable and therefore unenforceable in any
respect, such provisions shall not be invalidated thereby, but shall be
reformed to conform to such court's determination of reasonableness. It
is the intent of the parties that the provisions of this Article XVII
shall have the permanent duration and full scope stated in this Article
XVII, but that if such duration and/or scope
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shall be determined to be unreasonable, the provisions of this Article
XVII shall have the maximum duration and scope permissible under
applicable law.
ARTICLE XVIII
MISCELLANEOUS
18.01 INTEGRATIONS; AMENDMENT AND MODIFICATION. Except as expressly set forth
herein, neither party makes to the other any warranty or representation, whether
expressed or implied, of any kind whatsoever. This Agreement may not be
modified, supplemented or changed in any respect except by a writing duly
executed by Purchaser and Seller.
18.02 DESCRIPTIVE HEADINGS. The headings of the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and shall not constitute a part
hereof.
18.03 BINDING EFFECT; ASSIGNMENT. This Agreement and the duties and obligations
hereunder (including by way of example and not limitation, those under Article
XVII) shall be binding upon and shall inure to the benefit of and be enforceable
by each of the parties, their successors and permitted assigns. This Agreement
shall not be assigned in whole or in part by Seller without the prior written
consent of Purchaser nor by Purchaser without the prior written consent of the
Seller, which consent shall not unreasonably be withheld. Notwithstanding the
immediately preceding sentence, either party shall be entitled to transfer its
rights hereunder to an Affiliate upon written notice to such effect to the
other, but without the necessity of securing its consent. Furthermore, Seller
shall be entitled to assign its rights hereunder on notice, but without
Purchaser's consent, to (i) any purchaser or lessee of the Production Facilities
(ii) any purchaser of all or substantially all
-44-
<PAGE>
Seller's remaining operations at its Henderson, Nevada facility or (iii) any
purchaser of all or substantially all of Seller; and Purchaser shall be entitled
to assign its rights hereunder on notice to but without Seller's consent if
required as security for the financing contemplated at Section 3.04. Delegation
of duties under the immediately preceding sentence shall be made only with the
prior written consent of the other party, which consent shall not unreasonably
be withheld.
18.04 NOTICES. All notices, demands, requests, or other instruments which may be
or are required to be given hereunder shall be delivered in person or sent by
United States Mail, postage prepaid or by FedEx or other recognized expedited
delivery service, to the address referenced below, or by telecopy to the number
listed below with a confirming phone call. Each party shall have the right to
change its address at any time, and from time to time, by giving written notice
thereof to the other.
If to Seller: If to Purchaser:
Kerr-McGee Chemical Corporation AMPAC, INC.
Kerr-McGee Center c/o American Pacific Corporation
Oklahoma City, OK 73102 3770 Howard Hughes Parkway, Suite 300
Attn: Mr. W.P. Woodward Las Vegas, NV, 89109
Attn: Mr. John R. Gibson, President and CEO
Fax No.: (405) 270-3977 Fax No.: (702) 735-2200
Phone No.: (405)270-3826 Phone No.: (702)794-0714
with a copy to: with a copy to:
Kerr-McGee Corporation C. Keith Rooker, Esq.
Kerr-McGee Center Rooker & Gibson
Oklahoma City, OK 73102 3770 Howard Hughes Parkway Suite 360
Attention: Mr. Roger G. Addison Las Vegas, Nevada 89108
Fax No. (405) 270-4101 Fax No. (702) 794-4463
Phone No. (405) 270-2869 Phone No. (702) 794-4504
Notices shall be deemed given upon delivery when delivered in person; when sent
by United States Mail, five (5) business days after deposit; when by expedited
delivery service, two (2) business
-45-
<PAGE>
days after deposit for delivery; and, when telecopied, 24 hours after receipt of
facsimile transmission confirmation.
18.05 EXHIBITS. The exhibits attached to this Agreement are made a part of this
Agreement as if they were fully set forth herein.
18.06 COUNTERPARTS. This Agreement may be executed in duplicate, both such
duplicates hereof shall be deemed to be an original, and both of which together
shall constitute one and the same instrument.
18.07 CONFIDENTIALITY. In addition to the provisions dealing with publicity made
at Section 13.08 above, the terms of this Agreement shall not be disclosed to
any person or party except when the disclosure is (i) required by law or the
rules of any recognized stock exchange, (ii) requested by Seller's or
Purchaser's independent public accountants; (iii) required pursuant to a loan
agreement; (iv) required to be disclosed in connection with the prosecution or
defense of any litigation; or (v) is otherwise consented to in writing. To the
extent a disclosure is permitted by exception (i) above, a party will endeavor
to give the other at least five (5) days prior notice of, and an opportunity to
comment on, such disclosure.
18.08 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
-46-
<PAGE>
18.09 EXPENSES. Each party will pay all expenses incurred by or on behalf of it
in connection with the authorization, preparation, execution, and performance of
this Agreement including, but not limited to, all filing fees and expenses of
agents, representatives, counsel, consultants and economists.
18.10 PARENT GUARANTY. Contemporaneously with execution of this Agreement,
Purchaser shall secure and deliver to Seller a guaranty of Purchaser's
obligations under this Agreement from its parent, American Pacific Corporation,
in the form attached hereto as Exhibit L.
18.11 ENTIRE AGREEMENT. The terms and provisions contained herein constitute the
entire agreement of the parties with respect to the transactions contemplated
hereby and, other than that certain confidentiality agreement dated August 28,
1997 which survives in accordance with its terms, there are no agreements,
understandings, warranties, representations, covenants, obligations, promises,
assurances or conditions precedent or subsequent or otherwise, except those
expressly set out in this Agreement. The parties covenant and agree that this
Agreement shall be deemed and considered for all purposes as prepared through
the joint efforts of the parties and shall not be construed against one party or
the other as a result of the preparation, submittal or other event or
negotiation, drafting or execution hereof.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
AMPAC, INC. KERR-McGEE CHEMICAL CORPORATION
By: /s/ John R. Gibson By: /s/ William D. Woodward
---------------------- ---------------------------
Name: John R. Gibson Name: William D. Woodward
Title: President & CEO Title: Senior VP Chemical Operations
Kerr-McGee Corp.
-48-
<PAGE>
EXHIBIT "A"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC. and
KERR-McGEE CHEMICAL CORPORATION
"Computer Software and Files"
1. Those relating to the Technical Information described in Exhibit D.
<PAGE>
EXHIBIT "A-1"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Excepted Items"
To the extent they are or could be deemed covered by the defined term "Assets,"
there is excepted the Reclaimed Product, the Reserved License, the Retained
Rights and sodium perchlorate.
<PAGE>
EXHIBIT "B"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Contracts"
None as of the date hereof: (though the Agreement contemplates that certain
additional orders for AP may be secured by Seller prior to Closing and assigned
to Purchaser at Closing).
<PAGE>
EXHIBIT "C"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Process Description"
See attached
<PAGE>
AMMONIUM PERCHLORATE
PROCESS DESCRIPTION
Ammonium perchlorate, NH4C1O4 is produced from sodium perchlorate, anhydrous
ammonia, and hydrochloric acid, according to the double decomposition reaction:
NaClO4 + NH3 NH4C1O4 + NaC1
NaC1 is produced as a byproduct.
The hydrochloric acid and anhydrous ammonia used in this process are of high
purity and need no further treatment before entering the system. However, the
sodium perchlorate solution contains some impurities in low concentrations which
are removed prior to use.
One impurity in the sodium perchlorate solution is sodium dichromate which is
used as an additive in the electrolytic cells. The chromate impurity is reduced
with SO2 and NaOH according to the reaction:
Na2Cr2O7 + 3SO2 + 4NaOH + H2O 2Cr(OH)3 + 3Na2SO4
The chromic hydroxide is then removed from the treated solution by pressure
filtration.
Another impurity to be removed from the NaClO4 solution is sodium chlorate.
Chromate-free NaClO4 solution is pumped from storage to the acid destruction
vessel where the sodium chlorate impurity is removed by reaction with HCl in the
presence of ammonium chloride, according to the following basic reaction:
NaClO3 + 6HC1 3C12 + NaC1 + 3H2O Main Rx
NaClO3 + 2NH3 HC1 NaC1 + 3H2O + N2 Side Rx
The reaction gases are exhausted through a wet scrubber where reaction with
sodium hydroxide solution absorbs and neutralizes any acid gases. The inert
gases are vented to the atmosphere.
Feed streams of purified NaCl04, HC1, and ammonia are carefully metered to a
glass-lined reactor where ammonium perchlorate and byproduct salt are produced.
Subsequently, this reaction mixture passes to a large crystallizer where, under
vacuum, the solution cools, permitting ammonium perchlorate to crystallize while
the sodium chloride remains in solution. The crystallizer is designed and
operated to produce the proper particle size distribution among the ammonium
perchlorate crystals. A centrifuge separates the crystals from the saturated
solution, or mother liquor, and washes them.
The mother liquor proceeds to the salt crystallizer where steam is used to
evaporate water under reduced pressure, thus causing salt to precipitate. The
ammonium perchlorate which is present remains in solution because of its greatly
increased solubility at elevated temperatures. The sodium
<PAGE>
chloride crystals are separated from the mother liquor by centrifuging and
washed with water. The NaCl, thus separated, is dried in a direct-fired, rotary
dryer and ultimately returned to the Sodium Chlorate Plant. The mother liquor is
recycled to the reactor.
The ammonium perchlorate (AP) crystals which had been separated from the mother
liquor are reslurried in a water carrier saturated with AP and pumped to a
remote dryer building. Here, the crystals, again, are separated by a centrifuge
and dried in a hot air stream.
The AP crystals then pass through a screening system where those crystals which
are too coarse, or too fine, are separated and returned to the crystallization
step.
The AP discharging from the screening operation passes into double cone blenders
from which it is packed in lots of 20,000 pounds. It can be packed directly in
drums for shipment, or it can be packed in drums as blend-transit material for
subsequent cross-blending. Anti caking agents may be added to the blended lots
to customer specification. All material packed in drums is packed inside a
plastic liner with silica gel bags added for moisture and caking control.
Nearly all of the ammonium perchlorate shipped is cross-blended. In the process
of cross-blending, several 20,000-pound blend-transit lots are combined and
reblended to produce one large finished lot having uniform chemical and physical
characteristics.
Certain customers desire AP which is rounded, i.e., is not made up of crystals
having sharp or jagged edges. Such material is produced by specially handling
the AP leaving the crystallizer in "rounding tanks" and by gently drying in a
rotary dryer. Screening and blending operations are similar to those for regular
AP.
<PAGE>
EXHIBIT "D"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Technical Information"
Descriptions of and know how for the following:
I. SODIUM PERCHLORATE
cell design and operating parameters (precious metal anode vs. lead
dioxide)
II. AMMONIUM PERCHLORATE
precipitation end filtration of impurities in purification
one-step chemical process (raw material directly to AP-no
intermediates)
particle size control (seed mill directs crystallizer particle size
control)
screen efficiency (limit amount of recycle)
mathematical model for lot selection
flash drying equipment and technology
finished material storage design
waste treatment technology
quality engineering support services (to help qualify for current KM
sole source customers)
<PAGE>
EXHIBIT "E"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Wire Instructions"
Morgan Guaranty Trust Company
New York, New York
ABA No. 021000238
For Account of Kerr-McGee Corporation
Account No. 03419860
<PAGE>
EXHIBIT "F"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Purchase Price Allocation"
TANGIBLE PROPERTY $3,900,000
INTANGIBLE PROPERTY $35,100,000
Total Purchase Price $39,000,000
(excludes Inventory value)
<PAGE>
EXHIBIT "G"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Schedule of Seller's Exceptions"
1. Seller, Thiokol and 56 other entities have been named as co-defendants in the
lawsuit styled Scott et al. v. Thiokol et al., No. 97-0823, 71st Judicial
District, Harrison County, Texas which was filed in Marshall, Texas, in late
August, 1997. Generally, the lawsuit claims that exposure to various chemicals
allegedly used in connection with the operation of the Longhorn Army Ammunition
Plant in Karnack, Texas caused personal injuries and property damage to the
plaintiffs.
2. Numerous investigations and inquiries have been announced or threatened
regarding perchlorate contamination of water in the Las Vegas, Nevada area of
which both Purchaser and Seller are well acquainted.
3. Seller, along with others who now or in the past held an interest in or about
the Basic Management, Inc. industrial complex at Henderson, Nevada, is a party
to that certain "Consent Agreement" dated April 25, 1991, as amended, with the
State of Nevada, Division of Environmental Protection, dealing with
investigation, testing an remediation of possible contamination on or about its
Henderson plant site.
<PAGE>
EXHIBIT "H"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Schedule of Purchaser's Exceptions"
American Pacific Corporation is a party to that certain Indenture dated as of
February 21, 1992 among American Pacific Corporation, American Azide Corporation
(a wholly-owned subsidiary of American Pacific Corporation), and Security
Pacific National Bank, as Trustee (the "Azide Indenture"). The Azide Indenture
contains certain negative covenants that, in the absence of either (a) waiver
and consent or, (b) retirement or defeasance of the notes that are the subject
of the Azide Indenture, may be violated by the financing described at Section
3.03 of the Asset Purchase Agreement of which this Exhibit is a part. Purchaser
anticipates that, effective contemporaneously with the Closing, the notes will
be retired or defeased, or alternatively that the requisite waiver and consent
will be obtained.
<PAGE>
EXHIBIT "I"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Key Employees"
Superintendent AP Operations
General Supervisor
Maintenance Supervisor
Coordinator Maintenance
Production Supervisor
Production Supervisor
Production Supervisor
Maintenance Supervisor
General Supervisor
Quality Assurance Specialist
Staff Process Engineer
Sr. Process Engineer
<PAGE>
EXHIBIT "J"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Bill of Sale"
See attached
<PAGE>
BILL OF SALE
TO
BE IT KNOWN that KERR-McGEE CHEMICAL CORPORATION, a Delaware
corporation, (hereinafter referred to as "Seller") for the consideration and
upon the terms and conditions hereinafter expressed, has sold and delivered and
does by these presents, grant, bargain, sell assign, transfer, set over and
deliver unto _________________, a Nevada corporation, (hereinafter referred to
as "Purchaser") all of its right, title and interest in and to the property
described and identified on Exhibit "A", attached hereto and made a part hereof
for all purposes ("Property").
This sale is made for good cause and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged by Seller and Purchaser.
This Bill of Sale is made subject to the terms and conditions of the
Asset Purchase Agreement entered into between Seller and Purchaser dated
__________, 1997 ("Asset Purchase Agreement"), which terms and conditions shall
survive and not merge herein, and in the event of a conflict between said Asset
Purchase Agreement shall control. All the agreements and stipulations herein
contained, and all the obligations herein assessed shall inure to the benefit of
and be binding upon the representatives, successors, and assigns of the
respective parties hereto. This Bill of Sale may be executed in counterpart, and
each such counterpart hereof shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Bill of Sale the
_____ day of ____________, 1997.
_____________________________ KERR-McGEE CHEMICAL CORPORATION
By___________________________ By______________________________
Name_________________________ Name____________________________
Title________________________ Title___________________________
<PAGE>
EXHIBIT "K"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
"Form of Assignment - Contracts"
See attached
<PAGE>
ASSIGNMENT OF CONTRACTS
THIS ASSIGNMENT OF CONTRACTS ("Assignment") is made and effective as of
this ____ day of __________, 1997, by and between KERR-McGEE CHEMICAL
CORPORATION, a Delaware corporation (hereinafter referred to as "Assignor") and
_______________, a Nevada corporation (hereinafter referred to as "Assignee").
W I T N E S S E T H:
WHEREAS, Assignor has, in association with its ammonium perchlorate
manufacturing and sales business, entered into the various agreements listed on
Exhibit "A" hereto (hereinafter collectively referred to as the "Contracts");
and
WHEREAS, Assignor desires to assign its right, title, interest, duties
and obligations under the Contracts and Assignee desires to assume such right,
title, interest, duties, and obligations of Assignor under the Contracts.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. ASSIGNMENT. Subject to the provisions of Section 2 below, Assignor
hereby assigns all of its right, title, interest, duties and obligations under
the Contracts, more particularly described on Exhibit "A", which is attached
hereto and made a party hereof, to Assignee and Assignee assumes such right,
title, interest, duties and obligations effective as of the date hereof.
2. TERMS AND CONDITIONS. This Assignment is made subject to the terms
and conditions of the Asset Purchase Agreement entered into between Assignor and
Assignee dated ___________, 1997, which terms and conditions shall survive and
not merge herein, and in the event of a conflict between said Asset Purchase
Agreement and this Assignment, such Asset Purchase Agreement shall control. All
the agreements and stipulations herein contained, and all the obligations herein
assessed shall inure to the benefit of and be binding upon the representatives,
successors, and assigns of all of the respective parties hereto.
<PAGE>
3. Counterparts This Assignment may be executed in counterpart, and
each such counterpart hereof shall be deemed to be original and which together
shall constitute one and the same instrument.
EXECUTED effective the date first above written.
ASSIGNOR: ASSIGNEE:
KERR-McGEE CHEMICAL CORPORATION ________________________________________
By:____________________________ By______________________________________
Name___________________________ Name____________________________________
Title__________________________ Title___________________________________
<PAGE>
EXHIBIT "L"
to
ASSET PURCHASE AGREEMENT
BETWEEN
AMPAC, INC.
and
KERR-McGEE CHEMICAL CORPORATION
GUARANTY
--------
AMERICAN PACIFIC CORPORATION hereby unconditionally and irrevocably
guarantees the due and punctual performance of each and every obligation of
AMPAC, INC. set forth in the ASSET PURCHASE AGREEMENT to which this Guaranty is
attached. In the event any action is taken to enforce this Guaranty in any
respect, it is understood and agreed that AMERICAN PACIFIC CORPORATION shall be
entitled to assert, and to have the full benefit of, any and all defenses,
claims, demands, or causes of action that would be available to AMPAC, INC. with
respect to any enforcement or attempted enforcement of any obligation under the
ASSET PURCHASE AGREEMENT. This Guaranty shall survive the Closing and the
dissolution, merger, acquisition, bankruptcy, liquidation or reorganization of
AMPAC, INC.
AMERICAN PACIFIC CORPORATION
By /s/ John R. Gibson
----------------------------------
Name: John R. Gibson
Title: President & CEO
ATTACHED TO AND MADE A PART OF THAT ASSET PURCHASE AGREEMENT BY AND BETWEEN
KERR-McGEE CHEMICAL CORPORATION AND AMPAC, INC. DATED OCTOBER 10, 1997.
