<PAGE>1
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): April 20, 1995
PIONEER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9859 06-1215192
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
165 Mason Street, Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-629-3088
GEV Corporation
(Former name or former address, if changed from last report)
<PAGE>2
Item 2. Acquisition or Disposition of Assets.
A. The Acquisition
On April 20, 1995 (the "Closing Date"), pursuant to a Stock Purchase
Agreement, dated as of March 24, 1995 (the "Purchase Agreement"), by and among
Pioneer Companies, Inc., a Delaware corporation (formerly known as GEV
Corporation, the "Registrant" or "PCI"), Pioneer Americas Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of the Registrant (the
"Purchaser"), and the holders (the "Sellers") of the outstanding common stock
and other common equity interests of Pioneer Americas, Inc., a Delaware
corporation ("Pioneer"), the Purchaser acquired all of such stock and
interests (the "Acquisition") for a purchase price, subject to provision for
certain post-closing adjustments under the terms of the Purchase Agreement,
equal to the sum of approximately (i) $102 million, paid in cash, (ii) $10
million aggregate principal amount of subordinated promissory notes of the
Registrant (the "Seller Notes"), and (iii) certain amounts payable after the
Closing Date pursuant to the terms of that certain Contingent Payment
Agreement, dated as of April 20, 1995 (the "Contingent Payment Agreement"), by
and among the Registrant, the Purchaser and the Sellers, based upon earnings
or proceeds attributable to certain of Pioneer's direct and indirect real
estate holdings (as more fully described below) which are not necessary for
Pioneer's chlor-alkali business. In addition, as further consideration for
the Acquisition, the Purchaser paid approximately $45.5 million to retire all
outstanding indebtedness (net of available cash) of Pioneer and $5 million to
redeem Pioneer's outstanding preferred stock. The Purchase Agreement and the
Contingent Payment Agreement are attached hereto as Exhibits 2 and 10.2,
respectively, and are incorporated by reference herein.
In the Purchase Agreement, the Sellers have agreed to indemnify the
Registrant and the Purchaser for certain losses arising from a breach of the
Sellers' representations and warranties and from certain discharges of
hazardous materials or violations of environmental laws which may have
occurred before and, in certain cases, which may occur after the Closing Date.
Amounts payable pursuant to this indemnity will generally be payable as
follows: (i) out of certain reserves established on Pioneer's balance sheet at
December 31, 1994; (ii) either by offset against amounts payable under the
Seller Notes or the Contingent Payment Agreement; and (iii) in certain
circumstances and subject to specified limitations, out of the personal assets
of the Sellers. In addition, the Registrant and the Purchaser have agreed to
indemnify the Sellers for certain losses arising from a breach of the
Registrant's and the Purchaser's representations and warranties and from
certain discharges of hazardous materials or violations of environmental laws
which may occur after the Closing Date.
<PAGE>3
Pioneer owns and operates, through a wholly owned subsidiary, two chlor-
alkali production facilities which produce chlorine and caustic soda for sale
in the merchant markets and for use as raw materials in Pioneer's downstream
operations. In addition, Pioneer owns and operates, through other wholly
owned subsidiaries, nine production facilities at which it produces downstream
products from chlorine and caustic soda, such as bleach and iron chlorides.
The Registrant intends to continue to utilize the equipment and other physical
property owned by Pioneer in a substantially similar manner as utilized in the
conduct of such businesses prior to the Acquisition.
Pioneer owns an equity interest of approximately 32% in Basic Investments
Inc. ("Basic Investments"), which, through subsidiaries, owns certain
undeveloped land in the Las Vegas/Clark County, Nevada area and is, through a
subsidiary, the general partner of Victory Valley Land Company, L.P., a
limited partnership ("Victory Valley") that owns additional undeveloped land
in such area as well as an option to acquire the remainder of the undeveloped
land owned by Basic Investments. Basic Investments also owns and maintains
the water and power distribution network within the Henderson, Nevada
industrial complex that is the site of one of Pioneer's principal chlor-alkali
plants. Pioneer, directly (as a limited partner) and through its interest in
Basic Investments, has a combined interest in Victory Valley of approximately
37%. Pioneer also owns certain real property adjoining the sites of its
Henderson, Nevada, St. Gabriel, Louisiana and Mojave, California plants that
is not used in the businesses conducted at such sites. Such property,
comprising approximately 900 acres in the aggregate, is referred to herein as
the "Excess Land." Pursuant to the Contingent Payment Agreement, Pioneer's
interest in Basic Investments, Victory Valley and the Excess Land will be held
for the benefit of the Sellers for a period of 20 years following the
Acquisition. Pioneer will not receive any of the economic benefits from these
investments, except that certain environmental and other indemnification
obligations of the Sellers to Pioneer may be satisfied from proceeds of or
payments on account of such investments and except to the extent that such
investments are owned by Pioneer at the end of such 20-year period. Amounts
paid to the Sellers pursuant to the Contingent Payment Agreement constitute
the portion of the purchase price of the Acquisition referred to in clause
(iii) of the first paragraph of this Report.
On the Closing Date, the Registrant changed its name from "GEV
Corporation" to "Pioneer Companies, Inc."
B. Sources of Funds
In connection with the consummation of the Acquisition, (i) the Purchaser
issued and sold (the "Note Offering") $135 million aggregate principal amount
of 13-3/8% Senior Notes due 2005 (the
<PAGE>4
"Senior Notes"), (ii) PCI issued and sold the Seller Notes in exchange for
certain outstanding shares of Pioneer, which PCI contributed to the Purchaser,
(iii) PCI issued and sold to Interlaken Investment Partners L.P., a Delaware
limited partnership (the "Interlaken Partnership"), Class A Common Stock, par
value $.01 per share, of PCI (the "Common Stock") for an aggregate purchase
price of $15 million (the "Interlaken Partnership Purchase"), the proceeds of
which were contributed to the Purchaser, (iv) PCI issued and sold to Richard
C. Kellogg, Jr., the Chairman of the Board of Pioneer ("Kellogg"), and Frans
G.J. Speets, who was a director and officer of Pioneer ("Speets"), and to
certain other directors, executive officers and employees of Pioneer, Common
Stock of PCI for an aggregate purchase price of $6 million (the "Management
Purchase"), the proceeds of which were contributed to the Purchaser, and (v)
Pioneer and its subsidiaries entered into a new bank revolving credit facility
(the "Bank Credit Facility") with Bank of America Illinois, providing for
borrowings of up to $30 million. The net proceeds of the Note Offering, the
Interlaken Partnership Purchase, the Management Purchase and a borrowing under
the Bank Credit Facility were used to pay the cash portion of the purchase
price of the Acquisition, to retire the outstanding Pioneer indebtedness and
to redeem Pioneer's outstanding preferred stock.
The Seller Notes are subordinated promissory notes issued by PCI, bear
interest at a rate of 8% per annum payable quarterly in arrears and will be
payable in five equal annual installments commencing on April 20, 2001. A
form of Seller Note is attached hereto as Exhibit 4.1 and is incorporated by
reference herein.
The Interlaken Partnership is a privately held limited partnership of
which an entity controlled by William R. Berkley, the Chairman of the Board of
the Registrant ("Berkley"), is the sole general partner and of which Berkley
owns approximately 32.2% of the limited partnership interests. After giving
effect to the Interlaken Partnership Purchase and the Management Purchase, the
Interlaken Partnership beneficially owned approximately 36.2% of the
outstanding voting power of PCI, and Berkley and the Interlaken Partnership
together beneficially owned approximately 61.9% of such outstanding voting
power.
C. Certain Related Matters
In connection with the Acquisition, the Registrant entered into a
registration rights agreement with Kellogg, Speets and certain other holders
of Common Stock pursuant to which the Registrant granted to Kellogg, Speets
and such other stockholders certain rights to have shares of Common Stock
included in registration statements that may be filed by the Registrant with
respect to its equity securities.
In connection with the Acquisition, Berkley and Kellogg entered into a
shareholders' agreement which provides that
<PAGE>5
Kellogg will vote any shares of Common Stock owned by him or over which he
exercises voting control for Berkley's designees for election to the
Registrant's Board of Directors and that Berkley will vote any shares of
Common Stock owned by him or over which he exercises voting control for the
election of Kellogg as a director of the Registrant, in each case for so long
as Kellogg is employed by the Registrant pursuant to his employment agreement
with the Registrant. In connection with the Acquisition, Kellogg became
President and a director of the Registrant on April 20, 1995.
In connection with the Acquisition, the Registrant entered into
employment agreements with certain officers of Pioneer, some of whom were also
Sellers.
The registration rights agreement and the shareholders' agreement
referred to above are attached hereto as Exhibits 4.2 and 10.1, respectively,
and are incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Independent Auditors' Reports
Consolidated Balance Sheets at
December 31, 1994 and 1993
Consolidated Statements of Operations
for the Years Ended December 31, 1994,
1993 and 1992
Consolidated Statements of Stockholders'
Equity for the Years Ended December 31,
1994, 1993 and 1992
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1994, 1993
and 1992
Notes to Consolidated Financial Statements
for the Years Ended December 31, 1994,
1993 and 1992
<PAGE>6
(b) Pro Forma Financial Information*
(c) Exhibits
2 Stock Purchase Agreement, dated as of March 24, 1995, by
and among the Registrant, the Purchaser and the Sellers.
4.1 Form of Seller Note.
4.2 Registration Rights Agreement, dated as of April 20, 1995,
by and among the Registrant, Kellogg and Speets.
10.1 Shareholders' Agreement, dated as of April 20, 1995, by
and between Berkley and Kellogg.
10.2 Contingent Payment Agreement, dated as of April 20, 1995,
by and among the Registrant, the Purchaser and the
Sellers.
* As it is presently impracticable for the Registrant to provide the
pro forma financial information required by Item 7(b)(1) of Form 8-
K, the Registrant will file such information as an amendment to this
Report (as permitted by Item 7(b)(2)) as soon as practicable, which
the Registrant expects will not be later than May 31, 1995.
<PAGE>7
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pioneer Americas, Inc.
We have audited the accompanying consolidated balance sheets of Pioneer
Americas, Inc. (the "Company"), as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule II. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. The financial statements of certain of the
Company's investments (as described in Note 3) have been audited by other
auditors whose reports have been furnished to us; insofar as our opinion on the
consolidated financial statements relates to data included for these
investments, it is based solely on their reports.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Pioneer Americas,
Inc., at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects, the information set forth therein.
Ernst & Young LLP
Houston, Texas
February 28, 1995
(except for Note 14, as to which the
date is April 20, 1995)
<PAGE>8
INDEPENDENT AUDITORS' REPORT
Board of Directors
Basic Investments, Inc.
Henderson, Nevada
We have audited the accompanying combined balance sheets of Basic Investments,
Inc. and affiliates (the Company) as of December 31, 1994 and 1993, and the
related combined statements of income, equity and cash flows for the years then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Basic
Investments, Inc. and affiliates as of December 31, 1994 and 1993, and the
results of its combined operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Piercy, Bowler, Taylor & Kern
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS ADVISORS
A PROFESSIONAL CORPORATION
Las Vegas, Nevada
January 30, 1995
<PAGE>9
INDEPENDENT AUDITORS' REPORT
Board of Directors
Basic Investments, Inc.
Henderson, Nevada
We have audited the accompanying combined balance sheets of Basic Investments,
Inc. (the Company) and affiliates as of December 31, 1993 and 1992, and the
related combined statements of income, equity and cash flows for the year and
seven months then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Basic Investments, Inc. and
affiliates as of December 31, 1993 and 1992, and the results of its operations
and cash flows for the year and seven months then ended, in conformity with
generally accepted accounting principles.
Piercy, Bowler, Taylor & Kern
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS ADVISORS
A PROFESSIONAL CORPORATION
Las Vegas, Nevada
February 28, 1994
<PAGE>10
PIONEER AMERICAS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash........................................... $ 3,310,156 $ 1,768,983
Accounts receivable, less allowance for doubt-
ful accounts of $2,037,451 and $520,703 at De-
cember 31, 1994 and 1993 (Note 7)............. 26,169,548 20,141,727
Inventories (Notes 2 and 6).................... 12,236,534 8,146,545
Due from affiliates (Notes 3 and 10)........... -- 181,435
Income taxes receivable (Note 8)............... -- 2,738,037
Prepaid expenses............................... 1,845,165 1,832,350
------------- -------------
Total current assets......................... 43,561,403 34,809,077
Property, plant, and equipment, at cost (Note 6):
Land........................................... 11,203,341 11,662,341
Buildings and improvements..................... 13,890,455 13,177,599
Machinery and equipment........................ 107,856,712 103,440,833
Cylinders and tanks............................ 4,337,038 4,186,309
Construction in progress....................... 3,392,132 2,541,029
------------- -------------
140,679,678 135,008,111
Less accumulated depreciation.................. (56,267,113) (45,709,157)
------------- -------------
84,412,565 89,298,954
Investment in Victory Valley Land Company, L.P.
(VVLC)
(Notes 3 and 6)................................. 1,611,642 1,581,859
Investment in Basic Investments, Inc. (BII)
(Notes 3 and 6)................................. 15,704,620 15,551,126
Other assets, net of accumulated amortization of
$11,301,753 and $9,692,711 at December 31, 1994
and 1993 (Notes 6 and 9)........................ 9,196,765 6,879,162
Goodwill, net of accumulated amortization of
$2,722,117 and $2,090,004 at December 31, 1994
and 1993........................................ 10,044,164 10,518,233
------------- -------------
Total assets................................. $ 164,531,159 $ 158,638,411
============= =============
</TABLE>
See accompanying notes.
<PAGE>11
PIONEER AMERICAS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 13,103,491 $ 9,641,249
Accrued liabilities (Note 4)................... 16,547,849 13,086,689
Returnable deposits............................ 3,422,938 1,189,203
Future tax effects (Note 8).................... 2,781,438 2,846,726
Current maturities of long-term debt (Note 6).. 12,056,377 13,565,820
------------- -------------
Total current liabilities.................... 47,912,093 40,329,687
Long-term debt, less current maturities (Note 6). 36,757,350 47,016,144
Returnable deposits.............................. 3,788,013 3,788,013
Accrued pension and other employee benefits (Note
5).............................................. 10,794,336 10,007,493
Future tax effects (Note 8)...................... 19,798,852 21,560,590
Other long-term liabilities (Note 9)............. 13,327,071 9,088,266
Commitments and contingencies (Note 7)
Redeemable preferred stock (Note 11):
Redeemable cumulative preferred stock, $100 par
value:
Authorized shares--100,000
Issued and outstanding shares--50,000.......... 6,600,000 6,200,000
Less amount assigned to common stock warrant
less accretion of $622,225 and $522,669, re-
spectively, in 1994 and 1993.................. (373,330) (472,886)
------------- -------------
Total redeemable preferred stock............. 6,226,670 5,727,114
Redeemable stock put warrants (Notes 6 and 12)... 2,824,571 1,400,000
Stockholders' equity (Note 13):
Common stock, $.01 par value:
Authorized shares--3,000,000
Issued and outstanding shares--1,509,343 and
1,452,716, respectively, in 1994 and 1993..... 15,093 14,527
Additional paid-in capital..................... 4,186,348 4,027,788
Retained earnings.............................. 18,900,762 15,678,789
------------- -------------
Total stockholders' equity................... 23,102,203 19,721,104
------------- -------------
Total liabilities and stockholders' equity... $ 164,531,159 $ 158,638,411
============= =============
</TABLE>
See accompanying notes.
<PAGE>12
PIONEER AMERICAS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Net sales....................... $ 167,216,665 $ 151,190,621 $ 157,400,608
Cost and expenses:
Cost of sales................... 134,556,395 131,711,353 126,149,235
Selling, general, and adminis-
trative........................ 22,528,789 21,849,833 22,601,756
Interest........................ 6,406,600 7,551,027 8,188,722
------------- ------------- -------------
Total cost and expenses....... 163,491,784 161,112,213 156,939,713
Other income from settlement of
litigation and insurance claims,
net (Note 7)..................... 3,325,730 8,360,468 2,754,869
Other income, net (Notes 3 and
10).............................. 1,337,465 2,102,631 1,130,337
------------- ------------- -------------
Income before income taxes........ 8,388,076 541,507 4,346,101
Provision (benefit) for income
taxes (Note 8):
Current......................... 4,497,976 (1,237,371) 1,793,112
Future effects.................. (1,256,000) 1,723,070 (28,500)
------------- ------------- -------------
3,241,976 485,699 1,764,612
------------- ------------- -------------
Net income........................ 5,146,100 55,808 2,581,489
Accretion of dividends on Pre-
ferred Stock and adjustment to
redeemable stock put warrants
(Note 11)........................ (1,824,571) (400,000) (400,000)
------------- ------------- -------------
Net income (loss) applicable to
Common Stock..................... $ 3,321,529 $ (344,192) $ 2,181,489
============= ============= =============
</TABLE>
See accompanying notes.
<PAGE>13
PIONEER AMERICAS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF
COMMON ADDITIONAL
SHARES COMMON PAID-IN RETAINED
OUTSTANDING STOCK CAPITAL EARNINGS TOTAL
----------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1991................... 1,444,444 $14,444 $3,985,555 $14,040,604 $18,040,603
Common stock issuance. 8,272 83 42,233 -- 42,316
Accretion of excess
redemption value of
redeemable preferred
stock over carrying
value and amount of
dividends not
declared or paid..... -- -- -- (499,556) (499,556)
Net income for the
year ended December
31, 1992............. -- -- -- 2,581,489 2,581,489
--------- ------- ---------- ----------- -----------
Balance at December 31,
1992................... 1,452,716 14,527 4,027,788 16,122,537 20,164,852
Accretion of excess
redemption value of
redeemable preferred
stock over carrying
value and amount of
dividends not
declared or paid..... -- -- -- (499,556) (499,556)
Net income for the
year ended December
31, 1993............. -- -- -- 55,808 55,808
--------- ------- ---------- ----------- -----------
Balance at December 31,
1993................... 1,452,716 14,527 4,027,788 15,678,789 19,721,104
Common stock issuance
(Note 13)............ 56,627 566 158,560 -- 159,126
Adjust carrying value
of stock warrants
(Note 12)............ -- -- -- (1,424,571) (1,424,571)
Accretion of excess
redemption value of
redeemable preferred
stock over carrying
value and amount of
dividends not
declared or paid..... -- -- -- (499,556) (499,556)
Net income for the
year ended December
31, 1994............. -- -- -- 5,146,100 5,146,100
--------- ------- ---------- ----------- -----------
Balance at December 31,
1994................... 1,509,343 $15,093 $4,186,348 $18,900,762 $23,102,203
========= ======= ========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>14
PIONEER AMERICAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 5,146,100 $ 55,808 $ 2,581,489
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization......... 13,594,903 13,446,297 12,992,123
Provision for bad debts............... 1,234,545 1,100,106 1,364,515
(Gain)/loss on disposal of property,
plant, and equipment................. (4,107) (45,888) 72,440
Provision for SARS.................... 968,400 -- --
Equity in (earnings) of BII and VVLC.. (183,277) (1,148,669) (26,330)
Future tax effects.................... (1,256,000) 1,723,070 (28,500)
Changes in operating assets and
liabilities:
Accounts receivable................. (4,888,955) 4,032,334 2,855,596
Due from affiliates................. 535,098 613,482 (716,060)
Receivable from insurance carriers
and agents......................... (101,238) 101,320 (197,908)
Income taxes receivable............. 2,738,037 (1,299,351) (919,398)
Inventories......................... (876,233) 743,658 (276,202)
Prepaid expenses.................... (370,541) 446,679 1,052,918
Other assets........................ (305,425) (397,878) 139,791
Accounts payable.................... 861,932 (3,138,402) 142,128
Accrued liabilities................. 3,783,455 1,155,461 518,930
Returnable deposits................. (323,458) 208,360 (298,192)
Other long-term liabilities......... 1,078,805 (93,108) (1,322,798)
Accrued pension and other employee
benefits........................... 786,843 674,359 870,055
----------- ----------- -----------
Total adjustments................. 17,272,784 18,121,830 16,223,108
----------- ----------- -----------
Net cash provided by operating
activities....................... 22,418,884 18,177,638 18,804,597
INVESTING ACTIVITIES
Capital expenditures.................... (5,680,851) (5,888,487) (6,651,680)
Proceeds from sale of property, plant,
and equipment.......................... 693,936 204,149 24,564
Additions to other assets............... -- -- (558,267)
----------- ----------- -----------
Net cash used in investing activities... (4,986,915) (5,684,338) (7,185,383)
</TABLE>
See accompanying notes.
<PAGE>15
PIONEER AMERICAS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net (payments) on long-term debt..... $(16,060,677) $(11,843,988) $(12,043,815)
Proceeds from issuance of common
stock............................... 169,881 -- 42,316
------------ ------------ ------------
Net cash used in financing activi-
ties................................ (15,890,796) (11,843,988) (12,001,499)
------------ ------------ ------------
Net increase/(decrease) in cash...... 1,541,173 649,312 (382,285)
Cash at beginning of period.......... 1,768,983 1,119,671 1,501,956
------------ ------------ ------------
Cash at end of period................ $ 3,310,156 $ 1,768,983 $ 1,119,671
============ ============ ============
Supplemental disclosures:
Cash paid during the year for:
Interest......................... $ 4,482,452 $ 5,870,957 $ 7,773,715
============ ============ ============
Income taxes..................... $ 3,730,432 $ -- $ 2,712,510
============ ============ ============
</TABLE>
<TABLE>
<S> <C>
Supplemental schedule of noncash investing and financing activi-
ties:
The Company purchased all of the issued and outstanding stock of
GPS
Pool Supply, Inc., for $3,492,339:
Fair value of net assets acquired............................. $ 3,336,339
Goodwill...................................................... 156,000
Cash paid for capital stock................................... (238,000)
-----------
Note balance.................................................... $ 3,254,339
===========
</TABLE>
See accompanying notes.
<PAGE>16
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
On October 25, 1988, Pioneer Americas, Inc. (the "Company"), formerly Pioneer
Chlor Alkali Investments, Inc., through its subsidiary, Pioneer Chlor Alkali
Holdings, Inc. ("Holdings"), acquired 100% of the issued and outstanding common
stock of Stauffer Chlor Alkali Company ("Stauffer") in a purchase transaction.
Concurrent with the purchase, the name of Stauffer was changed to Pioneer Chlor
Alkali Company, Inc. ("PCAC"), and Holdings was merged into PCAC. PCAC is a
Delaware corporation and is wholly owned by the Company. PCAC operates two
chlor alkali plants in Henderson, Nevada, and St. Gabriel, Louisiana. Primary
products manufactured are chlorine, caustic soda and hydrochloric acid.
In March 1990, the Company acquired All-Pure Chemical Co., Inc. (All-Pure), a
California corporation which operates plants in California and Washington. The
primary business is the blending and distribution of chlorine and caustic-based
products.
In October 1990, the Company acquired 100% of the issued and outstanding
common stock of Imperial West Chemical Co. (Imperial West) in a purchase
transaction. Imperial West operates six plants in California, Washington, and
Oregon which primarily manufacture bleach and ferrous/ferric chloride. Imperial
West is a Nevada corporation and is wholly owned by the Company.
In May 1994, the Company acquired GPS Pool Supply, Inc. (GPS), a California
corporation which manufactures and distributes bleach for pool water treatment.
The acquisition has been accounted for as a purchase at a purchase price of
approximately $3.5 million which has been assigned to the net assets acquired
based on the fair value of such assets and liabilities at the date of
acquisition. As a result of the purchase, goodwill of approximately $156,000
was recorded by the Company. Accordingly, the consolidated results of
operations for 1994 include GPS since the date of acquisition. The pro forma
unaudited results of operations for the years ended December 31, 1994 and 1993
assume the acquisition of GPS had been consummated as of January 1 of the
respective years, and are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
(in 000's)
Net sales.................................................... $170,454 $161,487
Income (loss) before taxes................................... 7,792 (303)
Net income (loss)............................................ 4,661 (619)
</TABLE>
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation. Additionally, redeemable preferred stock and redeemable
stock put warrants have been reclassified from stockholders' equity to a
separate component of the balance sheet.
INVENTORIES
Inventories are valued at the lower of cost or market. Finished goods and
work-in-process costs are calculated under the average cost method, which
includes appropriate elements of material, labor, and manufacturing overhead
costs, while the first-in, first-out method is utilized for raw materials,
supplies, and parts.
PROPERTY, PLANT, AND EQUIPMENT
Depreciation for financial reporting purposes is computed primarily under the
straight-line method over the estimated remaining useful lives of the assets.
<PAGE>17
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets include amounts for organization costs, deferred financing
costs, noncompete agreements, permits, licenses, and customer lists obtained in
conjunction with the All-Pure/GPS and Imperial West acquisitions which are
being amortized on a straight-line basis over their estimated useful lives. The
PCAC deferred financing costs are being amortized on a straight-line basis over
the term of the related debt. Amortization expense for other assets was
$1,690,000, $2,120,000, and $1,857,000 for the years ending December 31, 1994,
1993, and 1992, respectively.
GOODWILL
Excess cost over the fair value of net assets acquired (or goodwill) related
to the All-Pure, Imperial West, and GPS acquisitions of approximately
$12,766,000 is amortized on a straight-line basis over 20 years. The carrying
value of goodwill is reviewed if the facts and circumstances suggest that it
may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value
of the goodwill would be reduced by the estimated shortfall of cash flows.
Amortization expense for goodwill was approximately $632,000, $637,000, and
$644,000 for the years ending December 31, 1994, 1993, and 1992, respectively.
PENSION PLANS
PCAC has two defined-benefit plans covering substantially all PCAC salaried
and union employees. Plan assets are comprised of investments in short-term
securities funds. Annual pension costs are actuarially determined. The funding
policy is to fund pension costs as accrued for all plans. Benefits are based on
years of service and the employees' compensation during the last five years of
employment.
The Company's subsidiaries also sponsor defined-contribution savings plans
covering substantially all employees. Employees may contribute certain
percentages of their base pay based upon the plan, with subsidiaries providing
a discretionary contribution not to exceed the limits established by the
Internal Revenue Service.
CONCENTRATION OF CREDIT RISK
The Company manufactures and sells chlorine and caustic-based products to
companies in diverse industries. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. The Company's sales are primarily to customers in the
Western and Southeastern regions of the United States. Credit losses relating
to these customers have been within management's expectations.
Net sales of Pioneer include sales to a major customer of approximately
$18,728,000, $19,287,000, and $17,654,220 in 1994, 1993, and 1992,
respectively.
ENVIRONMENTAL EXPENDITURES
Environmental related restoration and remediation costs are recorded as
liabilities and expensed when site restoration and environmental remediation
and clean-up obligations are either known or considered probable and the
related costs can be reasonably estimated. Other environmental expenditures,
that are principally maintenance or preventative in nature, are recorded when
expended and are expensed or capitalized as appropriate.
INCOME TAXES
The Company and its subsidiaries file a consolidated tax return. State income
taxes are included in income taxes payable.
<PAGE>18
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FUTURE TAX EFFECTS
Future tax effects are computed under the provisions of SFAS No. 109
("Accounting for Income Taxes") and result from temporary differences in the
recognition of expenses for financial reporting and tax purposes, differences
in methods of computing depreciation for financial statement and tax purposes,
and differences in the financial statement basis and tax basis of assets and
liabilities acquired.
RETURNABLE DEPOSITS
Customers are required to pay a security deposit on All-Pure and GPS
cylinders, tanks, and containers. These deposits are refunded to the customer
upon the termination of service and return of cylinders, tanks, and containers.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993
----------- ----------
<S> <C> <C>
Raw materials, supplies, and parts...................... $ 9,111,306 $5,749,725
Finished goods and work-in-process...................... 3,125,228 2,396,820
----------- ----------
$12,236,534 $8,146,545
=========== ==========
</TABLE>
3. INVESTMENT IN BASIC INVESTMENTS, INC. (BII) AND VICTORY VALLEY LAND COMPANY,
L.P. (VVLC)
The Company, through its subsidiary PCAC, owns approximately 32% of the
common stock of BII, which owns and maintains the water and power distribution
network within the Henderson, Nevada industrial complex and which is a large
landowner in Clark County, Nevada. The remainder of the common stock of BII is
owned by other companies located in the industrial complex. The investment in
BII is accounted for under the equity method after adjustment to reflect PCAC's
basis.
VVLC was formed on September 30, 1992 as a limited partnership under the laws
of the state of Delaware. The purpose of the business is to receive and hold
the lands, water rights, and other assets contributed by the partners for
investment. A wholly owned subsidiary of BII, acting as general partner with a
50% interest in VVLC, contributed all rights, title, and interest in and to
certain land to VVLC. PCAC, with an approximately 21.0% limited partnership
interest, has assigned certain water rights to VVLC. The investment in VVLC is
accounted for under the equity method.
<PAGE>19
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENT IN BASIC INVESTMENTS, INC. (BII) AND VICTORY VALLEY LAND COMPANY,
L.P. (VVLC) (CONTINUED)
The BII financial information includes the accounts of VVLC. The following is
a summary of financial information pertaining to BII and VVLC:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1993
BII ----------- -----------
<S> <C> <C>
Current assets........................................ $ 4,921,809 $ 5,877,716
Land development costs and water rights............... 2,745,631 1,770,446
Property and equipment................................ 5,869,226 3,895,466
Notes receivable...................................... 6,224,995 6,152,601
Other assets.......................................... 8,296,247 565,211
----------- -----------
Total assets...................................... $28,057,908 $18,261,440
=========== ===========
Liabilities........................................... $15,384,623 $ 6,139,366
Shareholders' equity:
Common stock........................................ 1,070 1,070
Limited partner's capital........................... 3,873,571 3,803,398
Retained earnings................................... 8,798,644 8,317,606
----------- -----------
Total shareholders' equity........................ 12,673,285 12,122,074
----------- -----------
Total liabilities and shareholders' equity........ $28,057,908 $18,261,440
=========== ===========
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1994 1993
BII ----------- -----------
<S> <C> <C>
Revenues.............................................. $ 5,658,763 $17,347,124
Costs and expenses.................................... 4,833,883 4,611,428
----------- -----------
Income before taxes................................... 824,880 12,735,696
Income tax expense.................................... (273,669) (2,951,842)
----------- -----------
Net income.......................................... $ 551,211 $ 9,783,854
=========== ===========
</TABLE>
The following is a summary of the impact of the investments on the Company's
statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
-------- ----------- ---------
<S> <C> <C> <C>
Equity in earnings............................. $183,277 $ 3,320,053 $ 150,166
Adjustment to reflect PCAC's basis............. -- (2,171,384) (123,836)
-------- ----------- ---------
Net impact on Statements of Operations....... $183,277 $ 1,148,669 $ 26,330
======== =========== =========
</TABLE>
The Company's retained earnings balances at December 31, 1994 and 1993
include, before effect of PCAC's basis adjustment, approximately $3,313,000 and
$3,140,000, respectively, of undistributed earnings of BII and VVLC. The
difference between the recorded investment amounts of BII and VVLC and PCAC's
share of net assets is due to PCAC's basis differences of the land and water
rights at the purchase date.
PCAC is a party to an agreement negotiated on an arms-length basis with BII
for the delivery of water to the Henderson production facility. The agreement
provides for the delivery of a minimum of eight million gallons of water per
day. The agreement expires on December 31, 2014, unless terminated earlier in
accordance with the provisions of the agreement. For the years ended December
31, 1994, 1993, and 1992, BII charged expenses to PCAC of approximately
$511,000, $601,000, and $344,000, respectively. At December 31, 1994 and 1993,
net receivables from BII were $374,000 and $200,000, respectively.
<PAGE>20
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1994 1993
----------- -----------
<S> <C> <C>
Exchanges payable...................................... $ 1,492,081 $ 3,716,081
Payroll, benefits, and pension......................... 4,298,741 2,031,640
Interest and bank fees................................. 2,453,971 1,683,116
Other accrued liabilities.............................. 8,303,056 5,655,852
----------- -----------
$16,547,849 $13,086,689
=========== ===========
</TABLE>
5. PENSION AND OTHER EMPLOYEE BENEFITS
Annual pension costs and liabilities for PCAC under its two defined-benefit
plans are determined by actuaries using various methods and assumptions. For
purposes of determining annual expenses and funding contributions, the
following assumptions were used for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Rate of return on plan assets................................. 8.0% 8.0% 8.0%
Discount rate................................................. 7.5% 8.0% 8.0%
Annual compensation increase.................................. 5.0% 5.0% 5.0%
</TABLE>
Pension expense was comprised of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Service cost............ $ 570,734 $ 665,368 $ 671,625
Interest cost........... 770,441 700,259 616,222
Return on plan assets... (537,433) (429,589) (334,939)
Amortization of prior
service cost and other. 225,240 32,179 33,183
---------- --------- ---------
$1,028,982 $ 968,217 $ 986,091
========== ========= =========
</TABLE>
The actuarial present value of accumulated benefit obligations is:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1993
---------- ----------
<S> <C> <C>
Vested.................................................... $7,919,404 $5,558,337
Nonvested................................................. 1,443,498 1,349,637
---------- ----------
$9,362,902 $6,907,974
========== ==========
</TABLE>
The reconciliation of the funded status of the plans is:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Projected benefit obligation......................... $11,420,092 $10,070,089
Plan assets at fair value............................ 7,339,718 6,332,461
----------- -----------
Projected benefit obligation in excess of plan as-
sets................................................ 4,080,374 3,737,628
Unrecognized gain.................................... 592,454 1,532,408
Unrecognized prior service cost...................... (16,573) (817,764)
----------- -----------
Pension obligation................................... 4,656,255 4,452,272
Long-term portion of pension obligation.............. 4,303,134 4,303,134
----------- -----------
Current accrued pension cost....................... $ 353,121 $ 149,138
=========== ===========
</TABLE>
<PAGE>21
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
PCAC also contributed approximately $-0-, $-0-, and $185,000 to the defined-
contribution savings plans for the years ended December 31, 1994, 1993, and
1992, respectively. All-Pure and Imperial West established defined-contribution
plans during 1992 with employer contributions charged against income of
approximately $-0- and $-0-, respectively, in 1994; $11,000 and $-0-,
respectively, in 1993; and $86,000 and $45,000, respectively, in 1992.
In addition to providing pension benefits, PCAC provides certain health care
and life insurance benefits for retired employees. Substantially all of PCAC's
employees may become eligible for those benefits if they reach normal
retirement age while working for PCAC.
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's statement of financial position:
<TABLE>
<CAPTION>
DECEMBER
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................ $ (1,843,353) $ (700,835)
Fully eligible active plan participants......... (2,102,718) (2,241,999)
Other active plan participants.................. (3,757,943) (3,127,473)
------------ ------------
(7,704,014) (6,070,307)
Unrecognized net (gain) or loss................... 827,762 (41,752)
Unrecognized transition obligation................ 385,050 407,700
------------ ------------
Accrued postretirement benefit cost............... $ (6,491,202) $ (5,704,359)
============ ============
Net periodic postretirement benefit cost include
the following components:
Service cost.................................... $ 323,999 $ 256,033
Interest cost................................... 518,392 432,034
Amortization of transition obligation over 20
years.......................................... 32,356 22,650
------------ ------------
Net periodic postretirement benefit cost.......... $ 874,747 $ 710,717
============ ============
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) is 10.5% for 1995 (same
as the rate previously assumed for in 1993) and is assumed to decrease
gradually to 6% for 2010 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
For example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1994 and 1993 by $633,000 and $535,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost for 1994 and 1993 by $82,000 and
$72,000, respectively.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 8.0% at December 31, 1994 and
1993, respectively.
<PAGE>22
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Long-term debt with a bank, due in quarterly
installments with additional principal
reductions, due semiannually in reverse order of
maturities, equal to 70% of net cash flows, as
defined, with a final payment due September 30,
1996, interest due quarterly at the bank's base
rate plus 2%. The additional principal reductions
were approximately $9,918,938 and $6,418,731
during 1994 and 1993, respectively............... $ 16,887,161 $ 26,806,099
Revolving credit loan with a bank with principal
reductions at 50% of net cash flows, as defined,
after repayment of the long-term debt, with a
final amount due September 30, 1996, limited to a
borrowing base as defined, less outstanding
letters of credit, interest due quarterly at the
bank's base rate plus 1.5%....................... 7,600,000 11,200,000
Subordinated debt with a financial institution,
due in installments of $122,847 on the fifth day
of each April and October, which started in
October 1994, through October 1996 and
installments of $4,147,743 starting in April 1997
with a final payment due October 19, 1998,
interest due quarterly at a rate of 14.5%,
secured by receivables, inventory, property,
plant, and equipment, and other assets........... 18,059,768 17,205,208
Unsecured note payable, original face value of
$8,825,055, with a contract interest rate at the
average 30-59 GMAC rate, due in eight
installments of $1,000,000, due each August 29,
with the remaining balance due on August 29,
1996, with an effective interest rate of 15%, net
of unamortized discount of $417,000 and $702,002
at December 31, 1994 and 1993, respectively...... 3,407,507 4,123,019
Unsecured noninterest-bearing, long-term debt,
original face value of $6,500,000, payable in six
annual installments of $1,000,000 and a final
payment of $500,000 subject to certain reductions
as provided in the purchase agreement with the
prior owner of PCAC, beginning October 26, 1989,
with an effective interest rate of 15%, net of
unamortized discount of $65,218 and $252,363 at
December 31, 1994 and 1993, respectively......... 434,782 1,247,638
Promissory note, original face value of
$3,254,339, with a contractual interest rate of
7% per annum. Principal and interest payments are
due quarterly which began September 20, 1994 and
will continue until May 27, 1996................. 2,424,509 --
------------ ------------
48,813,727 60,581,964
Less current maturities........................... (12,056,377) (13,565,820)
------------ ------------
$ 36,757,350 $ 47,016,144
============ ============
</TABLE>
The amended loan agreements with the above financial institutions include
restrictions regarding capital expenditures, the borrowing of additional money,
the formation or acquisition of subsidiaries, the signing of long-term leases,
the maintenance of certain financial ratios, and other reporting and disclosure
requirements regarding monthly operating results of the Company's subsidiaries.
Also, unless otherwise consented in writing by the lender, the Company may not
declare or pay any dividends other than subsidiary dividends to the parent in
order to cover certain expenditures at specified maximum amounts, as defined.
The Company's subsidiaries were in compliance with all the above requirements
after obtaining amendments.
<PAGE>23
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
The amended loan agreement relating to the long-term debt with a bank
requires the Company within ten calendar days after receipt to make a mandatory
prepayment equal to 95% of any extraordinary income received by the Company on
or after January 1, 1993. Such payments shall be applied first to accrued and
unpaid interest due and payable as of the date of payment, then to the
differential between principal payments under the former loan agreement and the
amended loan agreement through September 30, 1994, then to scheduled principal
installments under the amended loan agreement in inverse order of their
maturity. Extraordinary income is defined as income which does not constitute
operating income derived from normal and customary operations of the Company,
such as settlements or jury awards in litigation proceedings and settlements or
judges' awards in any arbitration proceedings (described in Note 7), sale of
assets other than inventory, and insurance proceeds which are treated as income
under generally accepted accounting principles. In determining extraordinary
income, provisions for taxes and offsets for amounts owed to the source of
payment are to be deducted from the cash received.
The long-term debt and revolving credit loan are secured by receivables,
inventory, property, plant, and equipment, other assets, and PCAC stock. At
December 31, 1994 and 1993, the borrowing base, as defined, under the revolving
credit loan was approximately $17,500,000 and $11,300,000, respectively.
Effective December 20, 1990, the Company entered into an interest rate swap
agreement with a bank. Under the terms of the agreement, which expired on
December 20, 1993, the Company converted the variable rate related to the term
loan to a fixed rate of 9.85%. The effect of this agreement was to increase
interest expense by approximately $586,000 and $711,000 for the years ended
December 31, 1993 and 1992.
In a separate agreement, a group of banks receive additional bank fees
totaling 5.0% of adjusted net income, as defined. The fee is payable annually
through September 30, 1996.
The five-year debt maturity, excluding the additional principal reductions
equal to 70% of available cash flows, and any mandatory prepayments related to
extraordinary income received by the Company is as follows:
<TABLE>
<S> <C>
1995....................................... $12,056,377
1996....................................... 19,677,674
1997....................................... 8,539,838
1998....................................... 8,539,838
1999....................................... --
-----------
$48,813,727
===========
</TABLE>
The Company issued warrants to a financial institution that financed previous
acquisitions. The instruments are detachable from the debt and contain puts
that require redemption for cash or conversion into common stock under certain
conditions. See Note 12 for additional disclosure.
During 1993, $2,205,208 of interest on the subordinated debt was not paid and
is reflected as additional principal due to a financial institution in
accordance with the terms of the related debt agreement.
The Company's debt instruments outstanding at December 31, 1994 do not have
readily ascertainable market values; however, the carrying values are
considered to approximate their respective fair values.
<PAGE>24
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
LETTERS OF CREDIT
At December 31, 1994 and 1993, net letters of credit and performance bonds
outstanding were approximately $8,790,088 and $3,875,000, respectively. These
letters of credit and performance bonds were issued for the benefit of
customers under sales agreements securing delivery of products sold, a power
company as a deposit for the supply of electricity, and a state environmental
agency as required for manufacturers in the state. The letters of credit expire
at various dates in 1995 and 1996. No amounts were drawn on the letters of
credit at December 31, 1994 and 1993.
PURCHASE COMMITMENTS
PCAC has committed to purchase electrical power and transmission services for
its chlor alkali plants through September 30, 2017. At the current base price,
allocated capacity, and allocated energy per the contract terms, this
commitment would approximate $10,040,000 for the year ending December 31, 1995;
$2,546,322 for each of the years 1996 through 2000; $1,260,690 for each of the
years 2001 through 2008; and $1,016,531 for each of the years 2009 through
2017. The allocated capacity is subject to adjustment for other priority users.
PCAC purchased approximately $27,200,000, $27,000,000, and $23,200,000 in
electrical power and transmission services for the years ended December 31,
1994, 1993, and 1992, respectively.
In addition, PCAC has committed to purchase salt used in the production
process under contracts which continue through December 31, 1998. Based on the
contracts terms, a minimum of 555,000 tons of salt are to be purchased in 1995;
442,000 tons in 1996 and 1997; 442,000 tons in 1998; and 279,000 tons in 1999.
The future minimum salt commitments are as follows:
<TABLE>
<S> <C>
1995...................................... $ 5,588,000
1996...................................... 4,172,000
1997...................................... 4,305,000
1998...................................... 2,377,000
1999...................................... 1,753,000
------------
$ 18,195,000
============
</TABLE>
PCAC purchased approximately $8,600,000, $9,100,000, and $9,000,000 of salt
for the years ended December 31, 1994, 1993, and 1992, respectively. These
amounts are included in cost of sales.
OPERATING LEASES
The Company and its subsidiaries lease certain of its manufacturing and
distribution facilities, computer equipment, and administrative offices under
noncancelable leases. Minimum future rental payments on such leases with terms
in excess of one year in effect at December 31, 1994 are:
<TABLE>
<S> <C>
1995...................................... $ 7,416,000
1996...................................... 6,291,000
1997...................................... 5,589,000
1998...................................... 4,556,000
1999...................................... 3,906,000
Thereafter................................ 1,712,000
------------
Total minimum obligations................. $ 29,470,000
============
</TABLE>
<PAGE>25
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Lease expense charged to operations for the years ended December 31, 1994,
1993, and 1992 was approximately $8,400,000, $8,400,000, and $8,200,000,
respectively.
SALES COMMITMENTS
PCAC has sales contracts with Customers which require PCAC to sell and the
Customers to purchase amounts of chlorine and caustic soda of not less than the
percentage of the Customers' use of chlorine and caustic soda supplied by PCAC
in the 12-month period ended July 31, 1987 (base period). PCAC supplied
approximately 91,000 tons of chlorine and 21,000 tons of caustic soda in the
base period. The contracts, which expire from July 31, 1993 through December
31, 1997, state that the sales price will not be less than PCAC's standard cost
as calculated based on 1987 amounts and adjusted thereafter for price changes
for raw materials and changes in other costs as reflected in the producer price
index.
PCAC also has numerous other long-term sales commitments with customers which
will expire at various dates from 1995 through 1999. Under the terms of all
sales commitments, PCAC is committed to providing chlorine, caustic soda, and
hydrochloric acid. Based upon current operating rates of the customers, it is
estimated that PCAC will provide the following amounts:
<TABLE>
<CAPTION>
TONS
-------
<S> <C>
1995........................................... 185,000
1996........................................... 182,000
1997........................................... 163,000
1998........................................... 93,000
1999........................................... --
-------
623,000
=======
</TABLE>
LITIGATION
PCAC was a party to arbitration proceedings regarding claims against the
entity from which Holdings acquired Stauffer in 1988. The arbitration resulted
from pricing differences related to subsequent product purchases from PCAC.
Arbitration of this claim was finalized on April 20, 1993 for $7,830,468 in
favor of PCAC and is reflected in the consolidated statement of operations for
1993.
During the year ended December 31, 1991, PCAC incurred $6.8 million in claims
and expenses in connection with a chlorine release which occurred at one of its
plants. PCAC believed the losses related to the release were covered under the
insurance policies that were in effect at the time of the release. However,
PCAC's primary carrier denied liability on the basis of policy exclusions. PCAC
believed the positions of its insurers were contrary to coverage provided by
the policies. As a result of the release and the aforesaid, a number of
potentially significant lawsuits resulted and settlements have arisen:
PCAC filed suit in 1991 against the insurance agents involved in the
acquisition of the insurance policy from the primary carrier as well as for
fraudulent representations made as to the terms of the insurance policy.
PCAC settled its claims against the insurance agents for $1,600,000 in
December 1992 and $50,000 in March 1993. PCAC took a nonsuit, without
prejudice, of its remaining claims against the primary insurance carrier.
The primary carrier filed a counterclaim against PCAC alleging PCAC acted
in bad faith in filing suit against it. In December 1994, PCAC agreed to
pay the primary insurance carrier $200,000 in settlement of the
counterclaim.
<PAGE>26
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
PCAC filed suit during 1991 against the first-level excess carrier
responsible for secondary comprehensive general liability coverage to
recover under the policy in effect at the date of the release. This
litigation was settled in December 1992. In accordance with the settlement,
the insurance company paid PCAC $2,050,000 relating to claims paid by PCAC
prior to November 1, 1992 and agreed to pay PCAC (a) upon proof of same
$100,000 relative to claims and expenses incurred after July 31, 1992 but
prior to November 1, 1992 and (b) all claims after November 1, 1992 until
an aggregate total of $3,800,000 has been paid. As of February 28, 1995,
approximately $610,000 of the $3,800,000 is available to pay claims which
are still outstanding. It is not known at this time whether or not this
amount will be sufficient to pay all claims. It is the opinion of
management, based on advice of counsel, that the ultimate resolution of
this contingency, to the extent not previously provided for, will not have
a material effect on the financial condition of the Company.
PCAC was involved in a lawsuit against an insurance company to recover
under its policy for both property damage and business interruption losses.
The insurance company denied coverage on the grounds that PCAC's damages
were not caused by an accident. In September 1994, this suit was settled in
consideration of payment to PCAC of approximately $5.9 million, which
amount is included in 1994 earnings, net of legal costs and $500,000 for
liabilities incurred which will be paid at a future date. As part of this
settlement, PCAC agreed to assign to the insurance company the claims PCAC
had against another insurer as well as agreed to forego any further claims
resulting from the 1991 chlorine release.
PCAC filed suit in 1991 against an insurance company for failure to
provide coverage under a boiler and machinery policy of insurance. By
judgment signed March 1, 1993, the trial court ruled that PCAC did not have
a valid claim against the insurance company. However, on March 31, 1994,
the Court of Civil Appeals entered an order which (1) reversed the trial
court and rendered a decision that the insurance policy provided coverage
for the chlorine release; (2) remanded the case for a determination of
PCAC's damages and certain other claims asserted by PCAC relating to
alleged violations of the Texas Insurance Code; and (3) affirmed the trial
court's ruling that PCAC had no basis to recover its investigative costs.
As part of the September 1994 settlement agreement discussed in the
paragraph above, the Company assigned all rights and claims PCAC may have
against the insurance company with respect to recovery of any and all
losses or damages PCAC suffered as a result of the May 6, 1991 chlorine
leak.
PCAC and Imperial West were also involved in a personal injury suit filed by
a former employee. The former employee was seeking damages in excess of
$6,250,000. By mutual release entered into by and between the former employee
and the Company, this suit was settled in consideration of the payment of
$1,000 to the former employee.
During 1993, Imperial West was awarded $1.38 million as the result of a
breach of contract claim it asserted against the lessor of one of Imperial
West's plants. The judgment has been appealed and the financial statements do
not include any receivables for the gain that could result from the judgment.
The lessor subsequently filed suit alleging that Imperial West is required to
remediate alleged contamination prior to the termination of the lease in July
1995. The parties have agreed to settle that action under terms which will
require Imperial West to pay the lessor $900,000 upon the termination of the
lease, and the lessor will transfer title to the property to Imperial West. In
addition, Imperial West has agreed to indemnify the lessor against any future
environmental liability with respect to the property. The settlement did not
affect the appeal pending with respect to the breach of contract judgment.
Certain insurers have agreed to pay a portion of Imperial West's defense costs
in connection with the lawsuit. Imperial West is pursuing a claim for
contribution from the insurers with respect to the cost incurred in settling
the action.
<PAGE>27
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 1994, the trustee in the bankruptcy of a company which was a
customer of PCAC filed suit against PCAC, seeking the recovery of up to $2.2
million in payments made to PCAC on a basis which the trustee alleges were
preferential to other creditors' claims. Management has been advised by counsel
that the range of any loss which may be incurred as the result of the suit will
be substantially below the amount claimed, and PCAC is vigorously contesting
the action.
The Company and its subsidiaries are parties to other legal proceedings and
potential claims arising in the ordinary course of their businesses. In the
opinion of management, the Company and its subsidiaries have adequate legal
defense and/or insurance coverage with respect to these matters and management
does not believe that they will materially affect the Company's operations or
financial position.
8. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1994 1993
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation........................... $19,964,000 $20,858,000
Investment in BII and VVLC........................... 6,509,000 6,200,000
Other--net........................................... 5,585,000 6,514,000
----------- -----------
Total deferred tax liabilities......................... 32,058,000 33,572,000
----------- -----------
Deferred tax assets:
OPEB obligation...................................... 2,499,000 2,161,000
Pension liability.................................... 1,885,000 1,626,000
Bad debt provision................................... 784,000 193,000
Other accrued liabilities............................ 4,310,000 4,011,000
Alternative minimum tax credit....................... -- 1,174,000
----------- -----------
Total deferred tax assets.............................. 9,478,000 9,165,000
Valuation allowance for deferred tax assets............ -- --
----------- -----------
Net deferred tax assets................................ 9,478,000 9,165,000
----------- -----------
Net deferred tax liabilities........................... $22,580,000 $24,407,000
=========== ===========
</TABLE>
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal................................. $ 3,930,000 $(1,152,000) $1,697,000
State................................... 568,000 (85,000) 96,000
----------- ----------- ----------
Total current............................. 4,498,000 (1,237,000) 1,793,000
----------- ----------- ----------
Deferred:
Federal................................. (1,010,000) 1,592,000 (84,000)
State................................... (246,000) 131,000 56,000
----------- ----------- ----------
Total deferred............................ (1,256,000) 1,723,000 (28,000)
----------- ----------- ----------
$ 3,242,000 $ 486,000 $1,765,000
=========== =========== ==========
</TABLE>
<PAGE>28
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is presented below. Other--net increase to income
tax expense is primarily due to amortization of goodwill, which is not
deductible for income tax purposes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------------
1994 1993 1992
------------------- ---------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- -------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory
rates.................. $2,936,000 35% $184,000 34% $1,478,000 34%
State income taxes, net
of
federal tax benefit.... 321,000 4 46,000 9 152,000 4
Foreign sales
corporation benefit.... -- -- -- -- (145,000) (3)
Adjustment of previously
provided taxes......... (285,000) (3) -- -- -- --
Other--net.............. 270,000 3 256,000 47 280,000 6
---------- --- -------- --- ---------- ---
$3,242,000 39% $486,000 90% $1,765,000 41%
========== === ======== === ========== ===
</TABLE>
9. OTHER LONG-TERM LIABILITIES--ENVIRONMENTAL
The Company's operations are subject to extensive environmental laws and
regulations related to protection of the environment, including those
applicable to waste management, discharge of pollutants into the air and water,
clean-up liability from historical waste disposal practices, and employee
health and safety. The Company believes that it is in substantial compliance
with existing governmental regulations.
In connection with the acquisition of the chlor alkali business in October
1988, ICI and ICI Americas (the seller) agreed to indemnify the Company for
certain environmental liabilities associated with operations at the Henderson
plant (the "ZENECA Indemnity"). In general, ICI and ICI Americas agreed to
indemnify the Company from environmental costs which arise from or relate to
pre-closing actions which involved disposal, discharge, or release of materials
resulting from non-chlor alkali manufacturing operations at the Henderson plant
and at other properties within the same industrial complex owned by Basic
Investments, Inc. ("BII"). The ZENECA Indemnity will terminate if (i) certain
existing stockholders of the Company cease to own more than 50% of the voting
capital stock of the Company, (ii) the Company ceases to own, directly or
indirectly, any voting capital stock of BII, or (iii) with respect to all or
part of the Henderson plant site, at such time as the Company stockholders do
not own the majority of voting capital stock of an entity that owns such
property. If the stockholders cease to own more than 50% of the common stock,
the ZENECA Indemnity will expire four years after such change in control but no
later than April 2001, or on the date of such change in control if it occurs
after April 2001. If the Company ceases to own directly or indirectly any of
the voting capital stock of BII, the indemnity terminates with respect to
property owned by BII. The ZENECA Indemnity will continue to cover claims after
expiration of the indemnity provided that proper notice is given prior to such
expiration, and either the successors to ICI and ICI Americas have assumed
control of such claims or the Company, unless it is contesting the legal
requirements that gave rise to the claims, has commenced removal, remedial or
maintenance work in accordance with the terms of the agreement. Payments under
the indemnity cannot exceed approximately $65 million.
Liabilities are recorded when site restoration and environmental remediation
and clean-up obligations are either known or considered probable and are
reasonably determinable. The liabilities are based upon all available facts,
existing technology, past experience, and cost-sharing arrangements, including
the viability of other parties. Charges made against income for recurring
environmental matters, included in "cost of sales" on the statements of
operations, totaled approximately $1,781,000, $2,329,000, and $1,848,000 in
1994, 1993,
<PAGE>29
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. OTHER LONG-TERM LIABILITIES--ENVIRONMENTAL (CONTINUED)
and 1992, respectively. Capital expenditures for environmental related matters
at existing facilities approximated $543,000, $1,073,000, and $874,000 in 1994,
1993, and 1992, respectively. Future environmental related capital expenditures
will depend upon regulatory requirements, as well as timing related to
obtaining necessary permits and approvals.
Estimates of future environmental restoration and remediation costs are
inherently imprecise due to currently unknown factors such as the magnitude of
possible contamination, the timing and extent of such restoration and
remediation, the extent to which such costs are recoverable from third parties,
and the extent to which environmental laws and regulations may change in the
future. The Company established a reserve of approximately $9 million at the
time of the acquisition of the Henderson and St. Gabriel facilities with
respect to potential remediation costs relating to matters not covered by the
ZENECA Indemnity, consisting primarily of remediation costs that may be
incurred by Pioneer for chlor alkali-related remediation of the Henderson and
St. Gabriel facilities. The recorded accrual includes certain amounts related
to anticipated closure and post closure actions that may be required when
operation of the present chlor-alkali plants cease. However, a complete
analysis and study have not been completed and therefore additional future
charges may be recorded at the time a decision for closure is made.
In 1994, the Company recorded an additional $3,200,000 environmental reserve
related to preclosing actions at sites that are the responsibility of ZENECA.
Other assets include an account receivable of the same amount from ZENECA.
Certain other environmental matters exist for which the Company has not
determined the specific strategy for or cost of remediation. It is possible
that additional costs, depending on the final choice of remediation strategies,
may be incurred in the future. As additional information becomes available,
changes in the estimates of liabilities will be recorded. If such costs are
incurred, additional annual operating and maintenance costs may also be
required. The Company believes it will be reimbursed by ZENECA for
substantially all of such costs. Additionally, certain other environmental
matters exist which have been assumed directly by ZENECA. No assurance can be
given that actual costs will not exceed accrued amounts or the amounts
currently estimated. The imposition of more stringent standards or requirements
under environmental laws or regulations, new developments or changes respecting
site cleanup costs, or a determination that the Company is potentially
responsible for the release of hazardous substances at other sites could result
in expenditures in excess of amounts currently estimated by the Company to be
required for such matters. Further, there can be no assurance that additional
environmental matters will not arise in the future.
10. RELATED PARTY TRANSACTIONS
During 1992, PCAC acquired a 15% partnership interest in Saguaro Power
Company, a cogeneration plant located in Henderson, Nevada, through its wholly
owned subsidiary, Black Mountain Power Company. PCAC sells certain services to
and purchases steam from Saguaro Power Company at market prices. Balances with
this affiliate are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Sales to Saguaro............................... $1,285,552 $1,154,115 $ 641,190
Purchases from Saguaro......................... 2,096,735 1,454,797 1,343,945
Due from Saguaro............................... 116,089 212,237 230,745
Due to Saguaro................................. 186,038 296,768 515,737
</TABLE>
<PAGE>30
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
PCAC received distributions of partnership income from this affiliate of
$1,290,000, $655,950, and $915,000 in 1994, 1993, and 1992 which are included
in other income. Also, reimbursable expenses of $650,000 and $90,000 were
received for 1993 and 1992, respectively.
PCAC was committed to sell liquid caustic soda to a related entity. During
the years ended December 31, 1993 and 1992, such sales totaled approximately $2
million and $6 million, respectively. This related entity filed for bankruptcy
in April 1993 and, subsequent to the filing, is no longer doing business with
PCAC. In addition to the $1,300,000 written off during 1992, the Company
charged an additional $1,100,000 against income in 1993 related to 1993 sales
as the receivable was deemed uncollectible. The Company received certain
transfers from this related entity that have been challenged as preferences
(see Note 7).
11. REDEEMABLE PREFERRED STOCK
In the event of any liquidation, dissolution or winding up of the affairs of
the Company, the holders of redeemable preferred stock shall be entitled to be
paid first out of the assets of the Company available for distribution to
holders of the Company's capital stock. No dividends or distributions shall be
paid to holders of any class of equity security which has rights junior to the
redeemable preferred stock except upon consent of the holder of redeemable
preferred stock. The holder of redeemable preferred stock is also entitled to
receive cumulative dividends, if and when declared by the Company, at an annual
rate of 8% per annum. No dividends were paid during 1994 and 1993 and future
dividends will not be made until permitted by the lenders. The carrying value
of the redeemable preferred stock, which includes the accretion of accumulated
and unpaid dividends as of December 31, 1994 and 1993, is $6,600,000 and
$6,200,000, respectively. The preferred stockholder has no voting rights except
for the right to elect one director of the Company. In the event that the
Company defaults upon its acquisition debt and such debt is accelerated, then
the preferred stockholder would be entitled to elect a majority of the Board of
Directors. The Company has the right and option to redeem any and all of the
redeemable preferred stock at a redemption price of $100 per share plus any
dividends declared or accrued but unpaid by October 31, 1998. In the event that
the Company has not redeemed the preferred stock by October 31, 1998, a
majority of the shares of preferred stock then outstanding shall have the right
to elect a majority of the Board of Directors of the Company. The redeemable
preferred stock was recorded at a value on the date of issuance which was
estimated by allocating the proceeds from issuance between the preferred stock
and the detachable common stock warrants. The excess of the redemption value
over the carrying value is being accreted by periodic charges to retained
earnings over the life of the issue.
12. STOCK WARRANTS AND APPRECIATION RIGHTS
The Company has issued 111,111 warrants to a bank which are detachable from
the related debt. Each warrant entitles the lender to purchase a share of
common stock at $.01 par value and may be exercised at any time until the
expiration date of October 31, 1998. No warrants have been exercised at
December 31, 1994.
The Company has also granted the holder of these warrants the right and
option to sell to the Company and to require the Company to purchase all or any
part of the warrants or the common stock acquired pursuant to the exercise of
the warrants. This option may be exercised any time prior to November 1, 1998
at an exercise price equal to the greatest of the current market value, the net
book value, or a computation based on net income. In the event the Company does
not have available cash to purchase the warrants or common stock, the Company
shall give a promissory note in the amount of the obligation owed. Such
<PAGE>31
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK WARRANTS AND APPRECIATION RIGHTS (CONTINUED)
promissory note shall mature on October 25, 1996. Any excess of the redemption
value over the carrying value is being accreted by periodic charges to retained
earnings over the term of the option.
During 1990, the Company issued to debtholder an additional 187,359 warrants
which are detachable from the related debt. The warrant entitles the
subordinated debtholder to purchase a share of nonvoting common stock any time
beginning after October 19, 1994, but before the expiration date of October 19,
2000. The exercise price at the time the agreement was entered into was $12 per
warrant. These warrants include a put option which requires the Company to
purchase any or all warrants or the common stock acquired pursuant to the
exercise of the warrants at an amount equal to the greater of the net book
value, current market value, or the net book value less the price of the
warrants. No warrants have been exercised at December 31, 1994.
During 1990, the Company issued to subordinated debtholder Stock Appreciation
Rights (SAR's). The SAR's entitle the holder of the SARS to the right and
option to receive the benefits of any appreciation in the value of 93,680
shares of the Company's common stock calculated on a fully diluted basis over a
Base Share Value. The Base Share Value was originally valued at $12 per share.
The exercise period for the SARS commenced on October 19, 1994 and expires on
October 19, 2000. During 1993, the Company issued additional SAR's equivalent
to 100,000 common shares with exercise rights commencing on October 19, 1994
and expiring on October 19, 2000.
In September 1994, the Company's debtholder amended and modified the warrant
and SAR's Agreement, whereas the Company has the right and option at any time
during the terms of these Agreements to prepay the debt held by the debtholder.
In addition, if this prepayment option is exercised, the Company will have the
right and option to purchase from the debtholder 128,199 of the warrants for
total consideration of $640,995 and the SAR's for $968,400. Based upon such
Agreement in 1994, the Company has adjusted the carrying value of the warrants
and SAR's to $17 per share, resulting in an increase to redeemable stock put
warrants of $1,424,571, through a reduction to retained earnings and a charge
to other expense of $968,400 related to the SAR's.
13. STOCK OPTIONS
The Company has a stock option plan in effect for key employees which allowed
the Company to grant options for 100,000 shares of common stock.
The following table summarizes the activity relating to the Company's stock
option plan:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Outstanding at beginning of period................... 92,352 80,808 92,352
Granted.............................................. -- 11,544 --
Exercised............................................ (56,627) -- (5,772)
Expired.............................................. (12,637) -- (5,772)
-------- ------- -------
Outstanding at end of period......................... 23,088 92,352 80,808
======== ======= =======
</TABLE>
Options exercised during 1994 and 1992 were exercised at $3 per share. The
remaining options outstanding are exercisable at prices of either $6 or $9 per
share.
<PAGE>32
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
On March 20, 1995, the Company entered into a new credit agreement (the
"agreement") with The Bank of Nova Scotia as agent (the "Bank") to borrow funds
that were used to pay off certain existing debt totaling approximately $46.4
million, including the long-term debt with a bank, the revolving credit loan
with a bank, the subordinated debt with a financial institution, and a
promissory note. The new term loan and revolving loan were funded on March 22,
1995 in the amount of approximately $38.0 million and approximately $14.9
million, respectively. The agreement had a final maturity date of August 31,
1995 with a continuation option available to extend the final maturity date to
March 20, 2000. Costs and expenses incurred in connection with the refinancing
were approximately $7.3 million, including a write-off of $1.6 million in
existing financing costs.
On April 20, 1995, the holders of the outstanding common stock and other
common equity interests of the Company consummated a transaction under a Stock
Purchase Agreement dated as of March 24, 1995 with Pioneer Americas Acquisition
Corp. ("New Pioneer"), a wholly owned subsidiary of Pioneer Companies, Inc.
("PCI"). Subject to the terms and conditions set forth therein, New Pioneer
acquired all of such stock and interests of the Company. Fees and expenses
incurred with respect to the sale of the Company were approximately $3.9
million. Concurrently with the acquisition, New Pioneer issued and sold $135.0
million of Senior Notes guaranteed by the Company. In addition, the Company
entered into a new bank revolving credit facility (the "Bank Credit Facility")
with Bank of America Illinois, providing for borrowings up to $30 million. The
proceeds from the Senior Notes and the borrowing under the Bank Credit Facility
were partially used to retire indebtedness entered into on March 20, 1995 in
the amount of approximately $51 million and redeem preferred stock totaling $5
million. Fees and expenses paid with respect to the issuance of the Senior
Notes and obtaining the Bank Credit Facility were approximately $4.6 million
and $200,000, respectively.
<PAGE>33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER COMPANIES, INC.
By:/s/ Joshua A. Polan
Name: Joshua A. Polan
Title: Vice President
Date: May 5, 1995
<PAGE>34
EXHIBIT INDEX
Exhibit
2 Stock Purchase Agreement, dated as of March 24, 1995, by and among
the Registrant, the Purchaser and the Sellers.
4.1 Form of Seller Note.
4.2 Registration Rights Agreement, dated as of April 20, 1995, by and
among the Registrant, Kellogg and Speets.
10.1 Shareholders' Agreement, dated as of April 20, 1995, by and between
Berkley and Kellogg.
10.2 Contingent Payment Agreement, dated as of April 20, 1995, by and
among the Registrant, the Purchaser and the Sellers.
<PAGE>1
CONFORMED COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
PIONEER AMERICAS ACQUISITION CORP. AND
GEV CORPORATION
AND
RICHARD C. KELLOGG, JR., FRANS G.J. SPEETS,
D.A. HUCKABAY AND ALL COMMON SHAREHOLDERS,
THE WARRANT HOLDER AND THE OPTION HOLDERS
OF PIONEER AMERICAS, INC.
FOR THE PURCHASE AND SALE
OF
THE OUTSTANDING CAPITAL STOCK
OF
PIONEER AMERICAS, INC.
DATED AS OF
MARCH 24, 1995
<PAGE>2
TABLE OF CONTENTS
Page
ARTICLE I
SALE AND PURCHASE
SECTION 1.1 Agreement to Sell and to Purchase . . . . . . . . . . 2
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Purchase Price . . . . . . . . . . . . . . . . . . . 3
SECTION 1.4 Final Determination of Closing Date
Financials . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
SECTION 2.1 Corporate Organization . . . . . . . . . . . . . . . 5
SECTION 2.2 Capitalization of Pioneer; Title to
Pioneer Securities; Refinancing Costs . . . . . . . . 6
SECTION 2.3 Subsidiaries and Equity Investments . . . . . . . . . 6
SECTION 2.4 Authorization and Validity of
Agreements . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.5 No Conflict or Violation . . . . . . . . . . . . . . 8
SECTION 2.6 Consents and Approvals . . . . . . . . . . . . . . . 9
SECTION 2.7 Financial Statements . . . . . . . . . . . . . . . . 9
SECTION 2.8 Absence of Certain Changes or Events . . . . . . . . 10
SECTION 2.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.10 Post-1994 Charges . . . . . . . . . . . . . . . . . . 11
SECTION 2.11 Absence of Undisclosed Liabilities . . . . . . . . . 11
SECTION 2.12 Interests in Real Property . . . . . . . . . . . . . 12
SECTION 2.13 Real Property Leases . . . . . . . . . . . . . . . . 13
SECTION 2.14 Personal Property . . . . . . . . . . . . . . . . . . 14
SECTION 2.15 Trademarks, Trade Names and Know-How . . . . . . . . 15
SECTION 2.16 Licenses, Permits and Governmental
Approvals . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.17 Compliance with Law . . . . . . . . . . . . . . . . . 16
SECTION 2.18 Litigation . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.19 Contracts . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.20 Accounts Receivable . . . . . . . . . . . . . . . . . 18
SECTION 2.21 Inventories . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.22 Employee Plans . . . . . . . . . . . . . . . . . . . 19
SECTION 2.23 Customers and Suppliers . . . . . . . . . . . . . . . 23
SECTION 2.24 Insurance . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.25 Transactions with Directors, Officers
and Affiliates . . . . . . . . . . . . . . . . . . . 25
SECTION 2.26 Propriety of Past Payments . . . . . . . . . . . . . 25
SECTION 2.27 Projections . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>3
SECTION 2.28 Environmental Matters . . . . . . . . . . . . . . . . 26
SECTION 2.29 Labor Matters . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.30 Products Liability . . . . . . . . . . . . . . . . . 27
SECTION 2.31 Representations Relating to Notes . . . . . . . . . . 28
SECTION 2.32 Survival . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 3.1 Corporate Organization . . . . . . . . . . . . . . . 29
SECTION 3.2 Capitalization of the Buyer and GEV . . . . . . . . . 30
SECTION 3.3 GEV Subsidiaries and Equity Investments . . . . . . . 30
SECTION 3.4 Authorization and Validity of
Agreements . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.5 No Conflict or Violation . . . . . . . . . . . . . . 32
SECTION 3.6 Consents and Approvals . . . . . . . . . . . . . . . 32
SECTION 3.7 Financial Statements . . . . . . . . . . . . . . . . 32
SECTION 3.8 Absence of Certain Changes or Events . . . . . . . . 33
SECTION 3.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.10 Post-1994 Charges . . . . . . . . . . . . . . . . . . 34
SECTION 3.11 Absence of Undisclosed Liabilities. . . . . . . . . . 35
SECTION 3.12 Compliance with Law. . . . . . . . . . . . . . . . . 35
SECTION 3.13 Litigation . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.14 Transactions with Directors, Officers
and Affiliates. . . . . . . . . . . . . . . . . . . . 36
SECTION 3.15 Representations and Warranties Relating
to the Pioneer Securities. . . . . . . . . . . . . . 36
SECTION 3.16 SEC Documents. . . . . . . . . . . . . . . . . . . . 37
SECTION 3.17 Survival . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV
ADDITIONAL COVENANTS
SECTION 4.1 Certain Changes and Conduct of Business . . . . . . . 38
SECTION 4.2 Access to Properties and Records . . . . . . . . . . 44
SECTION 4.3 Discharge of Indebtedness . . . . . . . . . . . . . . 45
SECTION 4.4 Negotiations . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.5 Consents and Approvals . . . . . . . . . . . . . . . 46
SECTION 4.6 Further Assurances . . . . . . . . . . . . . . . . . 46
SECTION 4.7 Commercially Reasonable Efforts . . . . . . . . . . . 47
SECTION 4.8 Purchase of the GEV Shares . . . . . . . . . . . . . 47
SECTION 4.9 Adoption by Buyer of Stock Incentive
Plan . . . . . . . . . . . . . . . . . . . . . . . . 47
<PAGE>4
SECTION 4.10 Notice of Breach . . . . . . . . . . . . . . . . . . 48
SECTION 4.11 Legends . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.12 Certain Agreements with Respect to
Warrants and Options . . . . . . . . . . . . . . . . 49
SECTION 4.13 Payment of Dividends on Preferred Stock;
Redemption of Preferred Stock . . . . . . . . . . . . 49
SECTION 4.14 Maintenance of Insurance . . . . . . . . . . . . . . 49
SECTION 4.15 Acceptance of Financing Terms . . . . . . . . . . . . 50
SECTION 4.16 Preservation of NOL . . . . . . . . . . . . . . . . . 50
SECTION 4.17 Exacerbation of Environmental Liability . . . . . . . 50
ARTICLE V
CONDITIONS TO OBLIGATIONS OF BUYER
SECTION 5.1 Receipt of Documents . . . . . . . . . . . . . . . . 52
SECTION 5.2 Representations and Warranties of
Sellers . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.3 Performance of Sellers' Obligations . . . . . . . . . 52
SECTION 5.4 Consents and Approvals . . . . . . . . . . . . . . . 53
SECTION 5.5 No Violation of Orders . . . . . . . . . . . . . . . 53
SECTION 5.6 No Material Adverse Change . . . . . . . . . . . . . 53
SECTION 5.7 Financing . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.8 Opinions of Counsel . . . . . . . . . . . . . . . . . 54
SECTION 5.9 Release by Paribas . . . . . . . . . . . . . . . . . 54
SECTION 5.10 Certain Trust Matters . . . . . . . . . . . . . . . . 54
SECTION 5.11 Certain Other Matters . . . . . . . . . . . . . . . . 55
SECTION 5.12 Other Closing Documents . . . . . . . . . . . . . . . 55
SECTION 5.13 Legal Matters . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.14 Purchase of Class A Common Stock by the
Investors. . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS
SECTION 6.1 Receipt of Documents . . . . . . . . . . . . . . . . 55
SECTION 6.2 Representations and Warranties of Buyer
and GEV . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.3 Performance of Buyer's and GEV's
Obligations . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.4 Consents and Approvals . . . . . . . . . . . . . . . 57
SECTION 6.5 No Violation of Orders . . . . . . . . . . . . . . . 57
SECTION 6.6 Opinion of Counsel . . . . . . . . . . . . . . . . . 57
SECTION 6.7 Other Closing Documents . . . . . . . . . . . . . . . 57
<PAGE>5
SECTION 6.8 Legal Matters . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.9 No Material Adverse Change . . . . . . . . . . . . . 58
SECTION 6.10 Purchase of Class A Common Stock by the
Interlaken Partnership. . . . . . . . . . . . . . . . 58
ARTICLE VII
TERMINATION AND ABANDONMENT
SECTION 7.1 Methods of Termination; Upset Date . . . . . . . . . 58
SECTION 7.2 Procedure Upon Termination . . . . . . . . . . . . . 59
ARTICLE VIII
GENERAL INDEMNIFICATION
SECTION 8.1 Coverage . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.2 Procedures . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.3 Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.4 Payment of Losses; Limitations . . . . . . . . . . . 63
ARTICLE IX
INDEMNIFICATION FOR ENVIRONMENTAL MATTERS
SECTION 9.1 Environmental Indemnities . . . . . . . . . . . . . . 65
SECTION 9.2 Payment of Environmental Losses;
Limitations . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.3 Limited Recourse Against Sellers . . . . . . . . . . 68
SECTION 9.4 Termination of Certain Indemnification
Obligations . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.5 Disbursements from Contingent Payment
Account; Escrow Account . . . . . . . . . . . . . . . 70
SECTION 9.6 Loss Estimates . . . . . . . . . . . . . . . . . . . 72
SECTION 9.7 Environmental Indemnification
Procedures . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.8 Certain Covenants Relating to the
Pioneer Sites . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.9 Sellers' Representative . . . . . . . . . . . . . . . 78
SECTION 9.10 Exclusive Remedy for Losses Relating to
Environmental Matters . . . . . . . . . . . . . . . . 79
<PAGE>6
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Survival of Provisions . . . . . . . . . . . . . . . 80
SECTION 10.2 Publicity . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 10.3 Successors and Assigns; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . . . . . . 80
SECTION 10.4 Investment Bankers, Financial Advisors,
Brokers and Finders . . . . . . . . . . . . . . . . . 81
SECTION 10.5 Fees and Expenses . . . . . . . . . . . . . . . . . . 81
SECTION 10.6 Notices . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.7 Entire Agreement . . . . . . . . . . . . . . . . . . 83
SECTION 10.8 Waivers and Amendments . . . . . . . . . . . . . . . 83
SECTION 10.9 Severability . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.10 Titles and Headings . . . . . . . . . . . . . . . . . 84
SECTION 10.11 Counterparts . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.12 Convenience of Forum; Consent to
Jurisdiction . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.13 Enforcement of the Agreement . . . . . . . . . . . . 84
SECTION 10.14 Governing Law . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.15 Knowledge of Sellers; Knowledge of
Buyer . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.16 Certain Beneficially Owned Shares . . . . . . . . . . 85
EXHIBITS
EXHIBIT A-1 Current Shareholders of Pioneer
EXHIBIT A-2 Preferred Stock Holders
EXHIBIT A-3 Allocation of Pioneer Securities
EXHIBIT A-4 Allocation of Purchase Price
EXHIBIT A-5 Adjustments to Cash Portion of Purchase Price
EXHIBIT A-6 Addresses of Sellers
EXHIBIT B Certain Defined Terms
EXHIBIT C Form of Notes
EXHIBIT D Persons Executing Employment Agreements
EXHIBIT E Form of Shareholders' Agreement
EXHIBIT F Form of Contingent Payment Agreement
EXHIBIT G Form of Investor Subscription Agreement
EXHIBIT H Form of Interlaken Partnership Subscription Agreement
EXHIBIT I Form of Registration Rights Agreement
DISCLOSURE SCHEDULE
<PAGE>7
INDEX TO DEFINED TERMS
Defined Term Page
1994 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 9
Accepted Remediation Method . . . . . . . . . . . . . . . . . . . . . . . B-1
Acquisition Financing . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Additional Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Adjustment Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
All Pure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
All Pure Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Allocated Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Available Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Bart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Basic Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Basic/VVLC Distributions . . . . . . . . . . . . . . . . . . . . . . . . B-2
best of Buyer's knowledge . . . . . . . . . . . . . . . . . . . . . . . . 85
best of Sellers' knowledge . . . . . . . . . . . . . . . . . . . . . . . 85
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Break Funding Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer CPA Property Environmental Matter . . . . . . . . . . . . . . . . . B-2
Buyer Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . B-2
Buyer Environmental Matter . . . . . . . . . . . . . . . . . . . . . . . B-3
Buyer Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Buyer Production Site Environmental Matter . . . . . . . . . . . . . . . B-3
Buyer Waste Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Buyer's Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 75
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Change of Control and Severance Arrangement . . . . . . . . . . . . . . . 23
Chevron Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date Financials . . . . . . . . . . . . . . . . . . . . . . . . . 4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Contingent Bank Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Contingent Payment Account . . . . . . . . . . . . . . . . . . . . . . . B-3
Contingent Payment Agreement . . . . . . . . . . . . . . . . . . . . . . 52
Contingent Payment Amount . . . . . . . . . . . . . . . . . . . . . . . . B-3
corporate acquisition indebtedness . . . . . . . . . . . . . . . . . . . 11
CPA Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
<PAGE>8
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Employment and Labor Agreements . . . . . . . . . . . . . . . . . . . . . 27
Environmental Investigation . . . . . . . . . . . . . . . . . . . . . . . B-4
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Environmental Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Environmental Permit . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Environmental Work . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Escrow Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Estimated Environmental Losses . . . . . . . . . . . . . . . . . . . . . 72
Event of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Exclusionary Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fifth Year Loss Estimate . . . . . . . . . . . . . . . . . . . . . . . . 68
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
GEV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GEV Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 32
GEV Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
GEV Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
GEV Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . B-5
GPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
GPS Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
GPS Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Grantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Hazardous Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Henderson Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Henderson Site Agreements . . . . . . . . . . . . . . . . . . . . . . . . B-6
Huckabay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ICIDH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
Imperial West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Imperial West Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Incentive Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Indemnification Contract . . . . . . . . . . . . . . . . . . . . . . . . B-7
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Independent Consultant . . . . . . . . . . . . . . . . . . . . . . . . . B-7
<PAGE>9
ING Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
ING Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Interlaken Partnership . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Interlaken Partnership Subscription Agreement . . . . . . . . . . . . . . 56
Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Investor Subscription Agreement . . . . . . . . . . . . . . . . . . . . . 52
Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Kellogg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
knowledge of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
knowledge of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Loss Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Loss Estimate Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Majority Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . 1
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Montrose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
New Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
NLRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Nonvoting Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 6
Norwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Occurrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Old Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Option Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Owned Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Ownership Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PCAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . 12
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Personal Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Personal Indemnity Limit . . . . . . . . . . . . . . . . . . . . . . . . 68
Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pioneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pioneer Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pioneer Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Pioneer Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>10
Pioneer Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Preferred Dividend Amount . . . . . . . . . . . . . . . . . . . . . . . . B-9
Preferred Redemption Amount . . . . . . . . . . . . . . . . . . . . . . . B-9
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Preferred Stock Holders . . . . . . . . . . . . . . . . . . . . . . . . . 1
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Production Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Property Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proxy Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Recalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Refinancing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Registered Intangible Assets . . . . . . . . . . . . . . . . . . . . . . 15
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . 56
Related Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Released Basic Parcels . . . . . . . . . . . . . . . . . . . . . . . . . B-10
remedial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
reportable event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Reserve Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . 66
Saguaro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
Scotia Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Seller CPA Property Environmental Matter . . . . . . . . . . . . . . . . B-10
Seller Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . B-10
Seller Environmental Matter . . . . . . . . . . . . . . . . . . . . . . . B-10
Seller Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Seller Production Site Environmental Matter . . . . . . . . . . . . . . . B-10
Seller Waste Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Sellers' Representative . . . . . . . . . . . . . . . . . . . . . . . . . 78
Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 52
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Speets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
St. Gabriel Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Steering Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Subject Parcel Disposition Proceeds . . . . . . . . . . . . . . . . . . . B-11
Subject Parcels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Subordinated Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . B-11
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Substitute Option Payments . . . . . . . . . . . . . . . . . . . . . . . 40
Success Fee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
<PAGE>11
tax exempt use property . . . . . . . . . . . . . . . . . . . . . . . . . 11
Tenth Year Loss Estimate . . . . . . . . . . . . . . . . . . . . . . . . 69
Term Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Terminal Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Unallocated Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Victory Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Warrant Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Year End Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
Zeneca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
Zeneca Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Zeneca Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . B-12
Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
<PAGE>12
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of March 24, 1995 (the
"Agreement"), by and among Mr. Richard C. Kellogg, Jr. ("Kellogg"), Mr. Frans
G.J. Speets ("Speets"), Mr. D.A. Huckabay ("Huckabay" and, together with
Kellogg and Speets, the "Majority Selling Shareholders"), the shareholders of
Pioneer Americas, Inc., a Delaware corporation ("Pioneer") listed on Exhibit
A-1 hereto, Mr. Verrill Norwood ("Norwood"), Mr. Raymond Bart ("Bart" and,
together with Norwood, the "Option Holders"), International Nederlanden (U.S.)
Capital Corporation, a Delaware corporation, or its Affiliate named on the
signature page hereof (the "Warrant Holder"), GEV Corporation, a Delaware
corporation ("GEV"), and Pioneer Americas Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of GEV (the "Buyer"),
W I T N E S S E T H:
WHEREAS, Pioneer and its Subsidiaries (as defined herein)
(collectively, the "Companies") own and operate businesses engaged in the
manufacture, processing, marketing, sale, storage and transport of chlorine,
caustic soda, muriatic acid, bleach, iron chlorides, aluminum sulfate,
hydrogen and steam and certain other products relating thereto, the management
thereof and all activities necessary therefor or incidental thereto
(collectively, the "Pioneer Business"); and
WHEREAS, as of the date hereof, the Persons listed on Exhibit A-1
hereto own all of the issued and outstanding shares of voting common stock,
par value $.01 per share, of Pioneer (the "Common Stock");
WHEREAS, as of the date hereof, the Persons listed on Exhibit A-2
hereto (the "Preferred Stock Holders") own all of the issued and outstanding
shares of Series A preferred stock, par value $100 per share, of Pioneer (the
"Preferred Stock"), which Preferred Stock shall be redeemed by Pioneer on the
Closing Date;
WHEREAS, as of the date hereof, the Option Holders hold options (the
"Options") to acquire an aggregate of 23,088 shares of Common Stock, which
Options will be transferred, conveyed and assigned to Buyer on the Closing
Date;
WHEREAS, as of the date hereof, the Warrant Holder holds Warrants to
acquire a certain number of shares of Pioneer's capital stock (the "Warrant
Shares"), which Warrants are to be exercised in full on or prior to the
Closing Date;
<PAGE>13
WHEREAS, upon redemption of all of the Preferred Stock and exercise
in full of the Warrants on or prior to the Closing Date, the Sellers shall
own, as of the Closing Date, all of the outstanding capital stock of Pioneer
(the "Shares") and all of the outstanding options, warrants, including,
without limit, the Options, or other securities or rights convertible into or
exchangeable for any capital stock of Pioneer (together with the Shares, the
"Pioneer Securities");
WHEREAS, the Buyer and GEV desire to purchase the Pioneer Securities
from the Sellers, and the Sellers desire to sell the Pioneer Securities to the
Buyer and GEV, in each case upon the terms and subject to the conditions set
forth in this Agreement (capitalized terms used but not defined herein have
the meanings set forth in Exhibit B hereto);
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE
Section 1.1 Agreement to Sell and to Purchase. On the Closing
Date and upon the terms and subject to the conditions set forth in this
Agreement, the Sellers shall sell, assign, transfer, convey and deliver the
Pioneer Securities to the Buyer and GEV, free and clear of all liens, claims,
charges, security interests and other legal or equitable encumbrances,
limitations or restrictions (collectively, "Liens"), and the Buyer and GEV
shall purchase and accept the Pioneer Securities from the Sellers.
Section 1.2 Closing. The closing of such sale and purchase (the
"Closing") shall take place at 10:00 A.M., New York City time, on April 10,
1995, or at such other time and date as the Majority Selling Shareholders and
the Buyer shall agree in writing (the "Closing Date"), at the offices of
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022-4669,
or at such other place as the Majority Selling Shareholders and the Buyer
shall agree in writing. At the Closing, the Sellers shall deliver to the
Buyer and GEV, in accordance with Exhibit A-3 hereto, a release of rights
under the Options, and stock certificates representing the Shares, duly
endorsed in blank for transfer or accompanied by appropriate transfer
instruments duly executed in blank, with all taxes, direct or indirect,
attributable to the transfer of the Pioneer Securities paid or provided for,
provided that the Buyer shall pay on behalf of the Sellers any New York State
stock transfer taxes payable with respect to the sale of the Shares hereunder
and will be entitled
<PAGE>14
to all rebates with respect to such taxes. In full consideration and
exchange for the Pioneer Securities, the Buyer and GEV shall thereupon pay to
the Sellers the Purchase Price (as defined herein) as provided in Section 1.3
hereof.
Section 1.3 Purchase Price. (a) The aggregate purchase price
for the Pioneer Securities (the "Purchase Price") shall be the sum of
(1) $162,500,000, subject to adjustment as provided below, and (2) the
Contingent Payment Amount. The Purchase Price shall be allocated among the
Sellers in accordance with Exhibit A-4 hereto and shall be paid as follows:
(i) on the Closing Date, the Buyer shall deliver a cash
payment equal to $152,500,000 less (A) cash adjustments set forth on
Exhibit A-5 hereto and (B) an amount equal to 50% of Refinancing Costs,
which payment shall be made by certified check or by bank wire transfer
of immediately available funds to such accounts at banks in the United
States of America as may be identified to the Buyer by each Seller in
writing not less than three business days before the Closing Date;
(ii) on the Closing Date, GEV shall deliver $10,000,000
aggregate principal amount of subordinated installment notes of GEV, in
substantially the form of Exhibit C hereto (the "Notes"); and
(iii) the Contingent Payment Amount shall be payable as provided
in the Contingent Payment Agreement (as defined herein).
(b) Upon final determination of the Closing Date Financials
pursuant to Section 1.4 hereof, the aggregate principal amount of Notes shall
be, to the extent applicable, automatically (i) increased by (A) one-half the
amount of any Net Earnings, (B) the total amount of any Basic/VVLC
Distributions, (C) the total amount of any Additional Capital, and (D) the
total amount of any Subject Parcel Disposition Proceeds and (ii) decreased by
(E) the total amount of any Net Loss, (F) an amount equal to 50% of the
Refinancing Costs and (G) an amount equal to 50% of audit costs incurred in
connection with preparation of Closing Date Financials pursuant to Section
1.4(a). In the event that the aggregate principal amount of the Notes is
subject to adjustment hereunder, GEV shall promptly deliver to each Seller
written notice of the nature and amount of such adjustment. Promptly upon
receipt of such notice, each Seller shall deliver its Note to GEV in exchange
for a new Note which shall be identical in all respects to the Note previously
held by such Seller except with respect to the principal amount thereof.
<PAGE>15
(c) The net amount of any adjustments to the aggregate principal
amount of Notes shall be applied pro rata to the Notes based on the principal
amount of the Notes initially issued to the Sellers. Interest on the Notes
shall be deemed to have accrued from the Closing Date with respect to any net
increases in principal hereunder, and no interest shall be deemed to have
accrued with respect to any principal amounts of the Notes that have been
decreased hereunder. In the event that net decreases in principal exceed the
aggregate principal amount of Notes initially issued, each Seller shall
promptly upon notice of such deficiency deliver to the Buyer a check equal to
the amount of such Seller's pro rata portion of such deficiency.
Section 1.4 Final Determination of Closing Date Financials. (a)
As soon as practicable, but not later than 60 days, following the Closing
Date, Pioneer shall cause Ernst & Young to prepare and audit a consolidated
balance sheet of the Companies as of the Closing Date and consolidated
statements of operations, cash flows and changes in stockholders' equity of
the Companies for the period from January 1, 1995 through the Closing Date
(collectively, the "Closing Date Financials"). Except as otherwise provided
in this Section, the Closing Date Financials shall be prepared in accordance
with generally accepted accounting principles applied on a consistent basis
("GAAP") with the 1994 Financial Statements and shall include separate line
items (even if not in conformity with GAAP) for each of the following: (i) Net
Earnings (Net Loss); (ii) Basic/VVLC Distributions; (iii) Refinancing Costs;
(iv) Subject Parcel Disposition Proceeds; (v) Contingent Bank Fee; (vi)
Substitute Option Payments; and (vii) Additional Capital (collectively, the
"Adjustment Items"). If inclusion in the Closing Date Financials of any of
the Adjustment Items conflicts with GAAP, such conflict shall be explained in
a note thereto. The Buyer shall provide the Sellers and Ernst & Young full
access to all relevant books and records and employees of the Companies to the
extent necessary for Ernst & Young to prepare the Closing Date Financials.
The fees and expenses of Ernst & Young in preparing and auditing the Closing
Date Financials shall be paid 50% by the Buyer and 50% by the Sellers provided
that the Sellers' portion of such fees and expenses shall be paid by the
Sellers through a decrease in the principal amount of the Notes, applied pro
rata to the Notes based on the initial principal amounts of the Notes issued
to the Sellers.
(b) Immediately upon completion of the audit referred to in Section
1.4(a), Pioneer shall deliver to the Buyer and the Sellers the audit prepared
by Ernst & Young, together with a copy of the Closing Date Financials. The
Closing Date Financials shall be deemed finally determined for purposes of
this Agreement unless (i) the Buyer gives the Sellers a written notice
objecting
<PAGE>16
to the Closing Date Financials within sixty (60) days or (ii) the Sellers give
the Buyer a written notice objecting to the Closing Date Financials within
sixty (60) days. Such notice shall specify in reasonable detail the specific
objections of Buyers or the Sellers as the case may be, to the Closing Date
Financials. In the event of such notice, the parties shall negotiate in good
faith to resolve any dispute regarding the Closing Date Financials. If the
parties have not resolved such dispute within thirty (30) days from the date
of the notice first delivered by Buyer or Sellers, Deloitte & Touche and Ernst
& Young shall appoint a third accounting firm of recognized national standing,
whose fees and expenses shall be paid for 50% by the Sellers and 50% by the
Buyer, which firm shall resolve the dispute, and the decision of such firm
shall be final and binding.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Subject to all of the terms, conditions and provisions of this
Agreement, the Sellers, severally in proportion to their Ownership Percentage,
hereby make the following representations, warranties and agreements to the
Buyer, except with respect to Sections 2.2(a) and (b), 2.4, 2.5(a), 2.6(a),
2.18(a), 2.19(b) and 2.31 hereof, for which each Seller represents, warrants
and agrees only with respect to itself:
Section 2.1 Corporate Organization. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite corporate
power and authority to own its properties and assets and to conduct its
business as now conducted. Each of the Companies is duly qualified to do
business as a foreign corporation and is in good standing in every
jurisdiction where the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not,
when taken together with all other such failures, have a Material Adverse
Effect on the Companies, taken as whole. Section 2.1 of the Disclosure
Schedule sets forth, with respect to each Company, its jurisdiction of
incorporation and the jurisdictions in which it is qualified to do business as
a foreign corporation. Copies of the Certificate or Articles of Incorporation
and Bylaws of each of the Companies, with all amendments thereto to the date
hereof, have been furnished to the Buyer or its representatives, and such
copies are accurate and complete as of the date hereof.
Section 2.2 Capitalization of Pioneer; Title to Pioneer
Securities; Refinancing Costs. (a) The authorized
<PAGE>17
capital stock of Pioneer consists of (i) 2,500,000 shares of Common Stock, of
which 1,509,343 shares are issued and outstanding, (ii) 500,000 shares of non-
voting common stock, par value $.01 per share (the "Nonvoting Common Stock"),
none of which is issued or outstanding, and (iii) 100,000 shares of Preferred
Stock, of which 50,000 shares are issued and outstanding; the capital stock
listed on Exhibit A-1 and Exhibit A-2 hereto constitutes all of the issued and
outstanding capital stock of Pioneer as of the date hereof and, upon exercise
of the Warrants, shall constitute all of the issued and outstanding capital
stock of Pioneer as of the Closing Date. The Pioneer Securities (other than
the Warrant Shares) and the outstanding shares of Preferred Stock have been
duly authorized and validly issued, and are fully paid and nonassessable, and
no personal liability attaches to the ownership thereof as a result of the
issuance of such shares under Delaware law. The Warrant Shares have been duly
reserved for issuance upon exercise of the Warrants, and upon payment for the
Warrant Shares pursuant to the terms of the Warrants, the Warrant Shares shall
be duly authorized and, when issued, validly issued and will be fully paid and
nonassessable, and no personal liability will attach to the ownership thereof.
(b) Except for this Agreement, the Options and the Warrants, and as
set forth in Section 2.2 of the Disclosure Schedule, (i) there are no
outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any of
the Pioneer Securities or any unissued or treasury shares of the capital stock
of Pioneer, and (ii) each Seller has, and will have at the Closing, valid and
indefeasible title to all of its Pioneer Securities, free and clear of any
Liens or any interest on the part of any other Person. The Shares (other than
the Option Shares) and the outstanding shares of Preferred Stock are held of
record and beneficially by the Persons identified on Exhibit A-1 and Exhibit
A-2.
(c) The Refinancing Costs, shall not exceed in the aggregate
$4,000,000. The Refinancing Costs represent all of the costs, fees and
expenses paid or payable in connection with the consummation of the
transactions contemplated by the New Credit Agreement, including, without
limit, the payment, prepayment or refinancing of the Old Credit Agreement, the
Subordinated Loan Agreement, the Preferred Dividend Amount and the GPS Note.
Section 2.3 Subsidiaries and Equity Investments. (a) Section
2.3(a) of the Disclosure Schedule sets forth (i) the name of each corporation
of which Pioneer owns, directly or indirectly, shares of capital stock having
in the aggregate 50% or more of the total combined voting power of the issued
and
<PAGE>18
outstanding shares of capital stock entitled to vote generally in the election
of directors of such corporation (each, a "Subsidiary"); (ii) the name of any
other corporation, partnership, joint venture or other entity (other than
those disclosed pursuant to clause (i)) in which Pioneer has, or pursuant to
any agreement has the right to acquire at any time by any means, directly or
indirectly, an equity interest or investment (each, a "Joint Venture"); (iii)
in the case of each corporation described in clauses (i) and (ii) above, (A)
the capitalization thereof, the percentage of each class of capital voting
stock owned by any of the Companies, (B) a description of any contractual
limitations on the ability of any of the Companies to vote or alienate such
securities and (C) a description of any other contractual charge or impediment
which would materially limit or impair any of the Companies' ownership of such
entity or interest or its ability effectively to exercise the full rights of
ownership of such entity or interest; and (iv) in the case of each
unincorporated entity described in clause (ii) above, to the Sellers'
knowledge, information substantially equivalent to that provided pursuant to
clause (iii) above with regard to corporate entities.
(b) All the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, are fully paid and
non-assessable, and, except as specified in Section 2.3 of the Disclosure
Schedule, are owned of record and beneficially, directly or indirectly, by
Pioneer, free and clear of any Liens. Except as specified in Section 2.3 of
the Disclosure Schedule, all outstanding shares of capital stock or other
equity interests of each Joint Venture held of record or beneficially,
directly or indirectly, by Pioneer are held free and clear of any Liens.
Except as specified in Section 2.3 of the Disclosure Schedule, there are no
outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any
issued or unissued shares of capital stock or other equity interests of any
such Subsidiary or, to the Seller's knowledge, of any such Joint Venture, in
each case issued by any of the Companies.
Section 2.4 Authorization and Validity of Agreements. Each
Seller has the power and authority (corporate or otherwise) to enter into this
Agreement and, to the extent a party thereto, any other agreement executed and
delivered in connection with the transactions contemplated herein (a "Related
Agreement") and, except as specified in Section 2.4 of the Disclosure
Schedule, to carry out its obligations hereunder or thereunder. To the extent
applicable, the execution and delivery of this Agreement and the Related
Agreements by each Seller a party thereto and the performance of each such
Seller's
<PAGE>19
obligations hereunder and thereunder have been duly authorized by all
necessary corporate action by the Board of Directors and stockholders of a
Seller, by all necessary partnership action by the general partner or partners
of a Seller or by such other necessary action as may be required by such
Seller's form of organization, and, except as specified in Section 2.4 of the
Disclosure Schedule, no other corporate, partnership or other proceedings on
the part of such Seller is necessary to authorize such execution, delivery and
performance. This Agreement and the Related Agreements have been duly
executed by each Seller a party thereto and, assuming the due authorization,
execution and delivery by GEV, the Buyer and each of the other Sellers,
constitute the valid and binding obligation of each such Seller enforceable
against each Seller in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally, and (ii) general equitable principles.
Section 2.5 No Conflict or Violation. Except as set forth in
Section 2.5 of the Disclosure Schedule (a) to the extent applicable, the
execution, delivery and performance by each Seller of this Agreement and any
Related Agreement to which such Seller is a party does not: (i) violate or
conflict with any provision of the charter documents, bylaws or other
organizational documents of such Seller; (ii) violate any provision of law
typically applicable to the transactions contemplated herein, or any order,
judgment or decree of any court or other governmental or regulatory authority
to which such Seller is subject; (iii) violate or result in a material breach
of or constitute (with due notice or lapse of time or both) a material default
under any material contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other material agreement or instrument to which
such Seller is a party or by which it is bound or to which any of the Pioneer
Securities is subject; or (iv) result in the creation or imposition of any
Lien upon any of the Pioneer Securities.
(b) Except as set forth in Section 2.5 of the Disclosure Schedule
the execution, delivery and performance by the Sellers of this Agreement and
each Related Agreement (to the extent such Person is a party hereto or
thereto) does not: (i) violate or conflict with any provision of the charter
documents or bylaws of any of the Companies; (ii) violate any provision of
law, or any order, judgment or decree of any court or other governmental or
regulatory authority to which any of the Companies are subject; (iii) violate
or result in a material breach of or constitute (with due notice or lapse of
time or both) a material default under any material contract, lease, loan
agreement, mortgage, security agreement, trust indenture or other
<PAGE>20
material agreement or instrument to which any Company is a party or by which
any of them is bound or to which any of their respective material properties
or assets is subject; or (iv) result in the creation or imposition of any Lien
upon any material properties or assets of the Companies.
Section 2.6 Consents and Approvals. (a) Section 2.6 of the
Disclosure Schedule sets forth a true and complete list of each consent,
waiver, authorization or approval of any governmental or regulatory authority,
domestic or foreign, or of any other Person, and each declaration to or filing
or registration with any such governmental or regulatory authority, that is
required of any Seller in connection with the execution and delivery of this
Agreement or any Related Agreement by any Seller or the performance by any
Seller of its obligations hereunder or thereunder.
(b) Section 2.6 of the Disclosure Schedule sets forth a true and
complete list of each consent, waiver, authorization or approval of any
governmental or regulatory authority, domestic or foreign, or of any other
Person, and each declaration to or filing or registration with any such
governmental or regulatory authority, that is required of any Company in
connection with the execution and delivery of this Agreement or the
performance by the Sellers of any action contemplated hereunder.
Section 2.7 Financial Statements. The Sellers have heretofore
furnished to the Buyer copies of the audited consolidated balance sheets of
the Companies as of December 31, 1994, 1993 and 1992 audited by Ernst & Young,
together with the related audited consolidated statements of income,
stockholders' equity and cash flow for such fiscal years and the notes
thereto, accompanied by the reports thereon of such public accountants (such
audited financial statements as of December 31, 1994, the "1994 Financial
Statements" and, together with all such financial statements, the "Financial
Statements"). The Financial Statements, including the notes thereto, except
as set forth in Section 2.7 of the Disclosure Schedule, (i) were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby, (ii) present fairly
the consolidated financial position, results of operations and changes in
financial position of Pioneer and its consolidated Subsidiaries as of such
dates and for the periods then ended and (iii) are, in all material respects,
complete, correct and in accordance with the books of account and records of
the Company.
Section 2.8 Absence of Certain Changes or Events. (a) Since
December 31, 1994, each of the Companies has operated in the ordinary course
of business consistent with past practice
<PAGE>21
and there has not been any Material Adverse Effect on the Companies, taken as
a whole. Except as set forth in Section 2.8 of the Disclosure Schedule, none
of the Sellers or the Companies knows of any event, condition, circumstance or
prospective development which threatens to have a Material Adverse Effect on
the Companies, taken as a whole.
(b) Since December 31, 1994, none of the Companies has taken any
actions of a type referred to in Section 4.2 that would have required the
consent of the Buyer if such action were to have been taken during the period
between the date hereof and the Closing Date.
(c) Since December 31, 1994, the Companies have not incurred any
Indebtedness other than (i) borrowings under the New Credit Agreement (A) to
pay, prepay or otherwise discharge all outstanding Indebtedness under the Old
Credit Agreement, the Subordinated Loan Agreement and the GPS Note and (B) to
pay all Refinancing Costs and (ii) borrowings in the ordinary course of
business under the revolving line of credit established pursuant to the Old
Credit Agreement and the New Credit Agreement.
Section 2.9 Tax Matters. (a) Except as set forth in Section 2.9
of the Disclosure Schedule, all tax and information returns required to have
been filed by each of the Companies (either separately or as part of a
consolidated group) with the United States, any state and local governmental
authority and any foreign jurisdiction have been duly filed and each such
return correctly reflects, in all material respects, the income, franchise,
property, sales, use, value-added, withholding, excise, capital or other tax
liabilities and all other information required to be reported thereon. True
and complete copies of all federal tax returns since October 26, 1988 (or such
later date on which such Company was acquired by Pioneer) have been made
available to the Buyer or its representatives; the Sellers have also made
available to the Buyer true and complete copies of all material notices and
correspondence in the possession of any of the Sellers or any of the Companies
sent or received since October 26, 1988 (or such later date on which such
Company was acquired by Pioneer) by any of the Companies to or from any
federal authorities. Each of the Companies has paid all income, franchise,
business, property, sales, use, value-added, withholding, excise, capital and
other taxes shown to be due and payable on said returns, and all penalties,
assessments or deficiencies of every nature and description incurred or
accrued before the Closing Date, except to the extent that such amounts are
reserved for in the 1994 Financial Statements. The United States federal
income tax returns of the Companies have been audited, and the audits thereof
completed or the statute of limitations has run, for all
<PAGE>22
years through December 31, 1991, and all deficiencies, penalties and interest
resulting from such audits have been paid. No consent extending such statute
of limitations has been filed by any of the Companies with respect to any tax
liability for any year that remains outstanding. None of the Companies is a
party to any agreement with respect to the sharing or allocation of taxes or
tax costs.
(b) Since the date of its acquisition by Pioneer, none of the
Companies has filed a consent to the application of Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) No material property of the Companies is "tax exempt use
property" within the meaning of Section 168(h) of the Code or property that
the Companies will be required to treat as being owned by another person
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, in effect immediately before the enactment of the Tax Reform Act of
1986.
(d) The Companies are not and have not been United States real
property holding companies (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(ii) of the Code.
(e) No indebtedness of any of the Companies is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code.
(f) No Seller is a foreign corporation, foreign partnership,
foreign trust or foreign estate as such terms are defined for purposes of
Section 1445 of the Code.
(g) None of the Companies is liable for the taxes of any other
person under Treasury Regulation Section 1.1502-6 or a similar provision of
state, local or foreign law.
Section 2.10 Post-1994 Charges. Section 2.10 of the Disclosure
Schedule sets forth a true and complete list of each dividend or other
distribution to its shareholders that has been declared or paid since December
31, 1994 by any of the Companies.
Section 2.11 Absence of Undisclosed Liabilities. Except as set
forth in the 1994 Financial Statements or in Section 2.11 of the Disclosure
Schedule, to the knowledge of the Sellers none of the Companies has any
indebtedness or liability, absolute or contingent other than liabilities
incurred or accrued in the ordinary course of business consistent with past
practice since December 31, 1994 and such indebtedness and liabilities which
would not in the aggregate have a Material Adverse Effect
<PAGE>23
on the Companies, taken as a whole. Except as set forth in the 1994 Financial
Statements or in Section 2.11 of the Disclosure Schedule, to the knowledge of
the Sellers none of the Companies is directly or indirectly liable upon or
with respect to (by discount, repurchase agreements or otherwise), or
obligated in any other way to provide funds in respect of, or to guarantee or
assume, any debt, obligation or dividend of any Person, except endorsements in
the ordinary course of business in connection with the deposit of items for
collection.
Section 2.12 Interests in Real Property. (a) Section 2.12 of the
Disclosure Schedule sets forth a true and complete list, of all real
properties owned by any of the Companies (collectively, the "Owned
Properties"). Except as set forth in Section 2.12 of the Disclosure Schedule,
the Companies have good and indefeasible title in fee simple to all Owned
Properties. Except as disclosed in Section 2.12 of the Disclosure Schedule,
none of the Owned Properties is subject to any material Liens, mortgages,
encumbrances, easements, rights of way, licenses, grants, building or
use restrictions, exceptions, reservations, limitations or other impediments
(collectively, the "Property Liens") other than (i) Property Liens for taxes
and assessments not yet due, (ii) mechanic's and materialmen's Property Liens
arising under operation of law for amounts not yet due or which are being
contested in good faith by appropriate proceedings diligently pursued and
(iii) easements, rights of way, encroachments or other restrictions or matters
affecting title which do not prevent the properties from being used for the
purpose for which they are currently being used or otherwise materially impair
the current operations of any of the Companies, (collectively, "Permitted
Encumbrances"), which Permitted Encumbrances and matters set forth in the
specified exceptions to title (other than the bank and financing liens
disclosed to Buyer and GEV) set forth in Section 2.12 of the Disclosure
Schedule do not in the aggregate have a Material Adverse Effect on the
Companies, taken as a whole or materially adversely impair the use of the
Owned Property in the conduct of the business of the Companies as currently
conducted. Except as set forth in Section 2.12 of the Disclosure Schedule,
all improvements on the Owned Properties and the operations therein conducted
conform in all material respects to all applicable health, fire, safety,
zoning and building laws, ordinances and administrative regulations, except
for possible nonconforming uses or violations which do not and will not
materially interfere with the present use, operation or maintenance thereof by
any of the Companies as now used, operated or maintained or access thereto.
The operating condition and state of repair of all buildings, structures,
improvements and fixtures on the Owned Properties are sufficient to permit the
use and operation of all such buildings, structures, improvements and fixtures
as now used or operated.
<PAGE>24
(b) Except as set forth on Section 2.12 of the Disclosure Schedule,
the buildings, driveways and all other structures and improvements upon the
Owned Properties are all within the boundary lines of such Owned Property or
have the benefit of valid easements, and there are no encroachments thereon
that would materially affect the use thereof. To the Sellers' knowledge,
there are no outstanding requirements by any insurance company which has
issued a policy covering any such property which is a condition to continued
coverage under such policy at the current insurance premium.
(c) Except as set forth on Section 2.12 of the Disclosure Schedule,
all public utilities required for the operation of such properties either
enter such properties through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with valid public or
private easements which inure to the benefit of the Companies. Except as set
forth on Section 2.12 of the Disclosure Schedule, to the knowledge of the
Sellers all of the public utilities mentioned above are installed and
operating, and all installation and connection charges are paid in full.
(d) Each Owned Property has unrestricted access to and from public
roads and streets and each Owned Property is designated with one or more
separate and exclusive tax lots.
Section 2.13 Real Property Leases. (a) Section 2.13 of the
Disclosure Schedule sets forth a list of all leases, subleases and occupancy
agreements, together with any amendment thereto (each, a "Lease") with respect
to all real properties in which any of the Companies has a leasehold,
subleasehold, or other occupancy interest (the "Leased Properties"). True,
complete and correct copies of all Leases and all amendments thereto have been
made available to the Buyer. Except as set forth in Section 2.13 of the
Disclosure Schedule, all of the Leases are valid and effective in accordance
with their respective terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles.
(b) None of the Companies is in material breach of or default (and
no event has occurred, including, without limitation, consummation of the
transactions contemplated herein, which, with due notice or lapse of time or
both, may constitute such a breach or default) under any Lease, and no party
to any Lease has given any of the Companies written notice of or made a claim
with respect to any breach or default, the consequences of which, individually
or in the aggregate, would result in the
<PAGE>25
termination of such Lease or have a Material Adverse Effect on the Companies,
taken as a whole.
(c) No Leased Property is subject to any sublease, license or other
agreement granting to any Person any right to the use, occupancy or enjoyment
of such Leased Property or any portion thereof through any of the Companies,
except where such sublease, license or other agreement would not materially
and adversely affect the use, occupancy or enjoyment of such Leased Property
as it is currently being used, occupied or enjoyed by the Companies or except
as set forth in Section 2.13 of the Disclosure Schedule.
Section 2.14 Personal Property. Except as set forth in Section
2.14 of the Disclosure Schedule, the Companies have good and indefeasible
title to all machinery, equipment, furniture, fixtures, and other tangible and
intangible personal property reflected on the 1994 Financial Statements
(except for sales and dispositions in the ordinary course of business since
such date) and all such property acquired since December 31, 1994 (except for
sales and dispositions in the ordinary course of business since such date)
(the "Personal Property"), free and clear of all Liens other than (i) Liens
for taxes and assessments not yet due or otherwise being contested in good
faith or (ii) mechanic's and materialmen's Liens arising under operation of
law for amounts not yet due, or otherwise being contested in good faith and
(iii) imperfections in title which do not prevent the assets from being used
for the purpose for which they are currently being used or otherwise
materially impair the current operations of any of the Companies. Except as
set forth in Section 2.14 of the Disclosure Schedule, the Companies hold valid
leaseholds in all of the Personal Property leased by them which leases are
effective in accordance with their respective terms, except that the
enforcement thereof may be subject to (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally, and (B) general equitable
principles. Except as set forth in Section 2.14 of the Disclosure Schedule,
none of the Companies is in material breach of or material default (and no
event has occurred, including, without limitation, consummation of the
transactions contemplated herein which, with due notice or lapse of time or
both, may constitute such a lapse or default) under any lease of any item of
Personal Property purported to be leased by them. Except as set forth in
Section 2.14 of the Disclosure Schedule, the Personal Property now owned,
leased or used by the Companies is sufficient and adequate to carry on their
respective businesses as presently conducted and the operating condition and
the state of repair thereof is sufficient to permit the Companies to carry on
their respective businesses as presently conducted. Except as set forth in
<PAGE>26
Section 2.14 of the Disclosure Schedule, none of the Companies holds any
personal property of any other Person pursuant to any consignment or similar
arrangement.
Section 2.15 Trademarks, Trade Names and Know-How. Section 2.15
of the Disclosure Schedule sets forth a true and complete list of all United
States and foreign patents, patent rights, copyrights, trademarks, service
marks and trade names (either registered or applied for) owned by, registered
in the name of, licensed to, or used in the business of any of the Companies
(the "Registered Intangible Assets"). Except as set forth in Section 2.15 of
the Disclosure Schedule, there is no restriction affecting the Companies' use
of any of the Registered Intangible Assets or any other trade secret, know how
or proprietary information which any Company owns or has the right to use in
connection with its business (together with the Registered Intangible Assets,
the "Intangible Assets"), and no license has been granted by any of the
Companies with respect to any Intangible Assets. Each of the Registered
Intangible Assets is valid and in good standing, is not currently being
challenged, is not involved in any pending or, to the knowledge of the
Sellers, threatened administrative or judicial proceeding. Except as set
forth in Section 2.15 of the Disclosure Schedule, the Companies' respective
rights in and to the Intangible Assets are sufficient and adequate to permit
the Companies to carry on their respective businesses as presently conducted.
To the knowledge of the Sellers, (i) none of the Intangible Assets infringes
upon or unlawfully or wrongfully uses any intellectual property or other
proprietary right owned or claimed by another, and (ii) no intellectual
property or other proprietary right owned or claimed by another infringes upon
or unlawfully or wrongfully uses any Intangible Asset.
Section 2.16 Licenses, Permits and Governmental Approvals.
Section 2.16 of the Disclosure Schedule sets forth a true and complete list of
all material licenses, registrations, permits (other than Environmental
Permits), franchises, authorizations and approvals issued or granted to any of
the Companies by the United States, any state or local government, any foreign
national or local government, or any department, agency, board, commission,
bureau or instrumentality of any of the foregoing (the "Licenses"), and all
pending applications therefor. Each License has been duly obtained, is valid
and in full force and effect, and is not, subject to any actual or, to the
Sellers' knowledge, threatened administrative or judicial proceeding to
suspend, revoke, cancel or declare such License invalid in any respect. The
Licenses are sufficient and adequate to permit the lawful conduct of each of
the Companies' respective businesses in the manner now conducted, and none of
the Companies' operations are being conducted in a manner that
<PAGE>27
violates in any material respect the terms or conditions under which any
License was granted.
Section 2.17 Compliance with Law. Except as set forth in Section
2.17 of the Disclosure Schedule and other than in respect of Environmental
Laws, the operations of the Companies have been conducted in all material
respects in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other governmental or regulatory authorities
having jurisdiction over the Companies and their respective assets, properties
and operations, including, without limitation, all such laws, regulations,
orders and requirements promulgated by or relating to consumer protection,
currency exchange, equal opportunity, fire, zoning and building, occupational
safety, pension, securities and trading-with-the-enemy matters. Except as set
forth in Section 2.17 of the Disclosure Schedule and other than in respect of
Environmental Laws, neither the Sellers nor any of the Companies have received
notice of any violation of any such law, regulation, order or other legal
requirement, or is in default with respect to any order, writ, judgment,
award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
related thereto and applicable to the Companies or any of their respective
assets, properties or operations. Neither the Sellers nor any of the
Companies has knowledge of any proposed change in any such laws, rules or
regulations (other than laws of general applicability) that would materially
adversely affect the transactions contemplated by this Agreement or that would
have a Material Adverse Effect on the Companies, taken as a whole.
Section 2.18 Litigation. (a) Except as set forth in Section 2.18
of the Disclosure Schedule, there are no claims, actions, suits, proceedings,
or investigations pending or, to the knowledge of the Sellers, threatened
before any federal, state or local court or governmental or regulatory
authority, domestic or foreign, or before any arbitrator, brought by or
against a Seller or, to the extent applicable, any of its officers, directors,
employees, agents or Affiliates involving, affecting or relating to the
Pioneer Securities or the transactions contemplated by this Agreement.
(b) Except as set forth in Section 2.18 of the Disclosure Schedule,
there are no claims, actions, suits, proceedings, labor disputes or
investigations pending or, to the Sellers' knowledge, threatened before any
federal, state or local court or governmental or regulatory authority,
domestic or foreign, or before any arbitrator, brought by or against any
Seller, any of the Companies or any of their respective officers, directors,
employees, agents or Affiliates involving, affecting
<PAGE>28
or relating to any assets, properties or operations of any of the Companies
which, if adversely determined against any of the Companies, would have a
Material Adverse Effect on the Companies, taken as a whole, or the
transactions contemplated by this Agreement. The matters listed on Section
2.18 of the Disclosure Schedule, if adversely determined against any of the
Companies, would not, taking into consideration applicable reserves for such
matters established on the consolidated balance sheet of the Companies
included in the 1994 Financial Statements and any recoveries under any
Policies or from proceedings (including, without limitation, the USS Posco
judgment now on appeal) in which a Company is plaintiff, have a Material
Adverse Effect on the Companies, taken as a whole. Except as disclosed on
Section 2.18 of the Disclosure Schedule, none of the Companies nor any of
their respective assets or properties is subject to any order, writ, judgment,
award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator that affects or might
affect in any material respect their respective assets, properties or
operations or which would or might interfere with the transactions
contemplated by this Agreement.
Section 2.19 Contracts. Section 2.19 of the Disclosure Schedule
sets forth a true and complete list of all contracts in the categories set
forth below to which any of the Companies is a party or otherwise relating to
or affecting any of their respective assets, properties or operations,
including, without limitation, all written or oral, express or implied,
(a) contracts, agreements and commitments not made in the ordinary course of
business involving an amount in excess of $50,000; (b) purchase contracts and
supply contracts involving an amount in excess of $750,000 on an annual basis;
(c) contracts, loan agreements, repurchase agreements, mortgages, security
agreements, trust indentures, promissory notes and other documents or
arrangements relating to the borrowing of money or for lines of credit;
(d) agreements and other arrangements for the sale of any assets other than in
the ordinary course of business or for the grant of any options or
preferential rights to purchase any assets, property or rights involving an
amount in excess of $50,000; (e) documents granting any power of attorney with
respect to the material affairs of any of the Companies; (f) suretyship
contracts, working capital maintenance or other forms of guaranty agreements
other than bonds and letters of credit executed or obtained in connection with
the submission of bids to governmental entities and other contracting parties;
(g) contracts or commitments limiting or restraining any of the Companies from
engaging or competing in any lines of business or with any Person; (h)
partnership and joint venture agreements; (i) shareholder agreements or
agreements relating to the sale, issuance or other transfer of any securities
of the Companies or
<PAGE>29
the granting of any registrations rights with respect thereto; and (j) all
amendments, modifications, extensions or renewals of any of the foregoing (the
foregoing contracts, agreements and documents are hereinafter referred to
collectively as the "Commitments"). Each Commitment is valid, binding and
enforceable against the parties thereto in accordance with its terms and,
unless otherwise expired or terminated in accordance with its terms, is in
full force and effect on the date hereof, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles.Except as set forth on
Section 2.19 of the Disclosure Schedule, none of the Commitments nor any of
the proceeds therefrom is subject to any Lien arising from financings or any
other Lien which would materially and adversely impact the rights of the
Companies thereunder. Except as set forth in Section 2.19 of the Disclosure
Schedule, each of the Companies has performed all material obligations
required to be performed by it to date under, and is not in default in any
material respect of, any Commitment, and to the Sellers' knowledge no event
has occurred which, with due notice or lapse of time or both, would constitute
such a default. To the Sellers' knowledge, (i) no other party to any
Commitment is in default in any material respect thereof, and (ii) no event
has occurred which, with due notice or lapse of time or both, would constitute
such a default. The Sellers have made available to the Buyer or its
representatives true and complete copies of all the Commitments.
(b) Section 2.19 of the Disclosure Schedule sets forth a true and
complete list of all contracts, agreements and other instruments to which any
Seller or its Affiliates (as defined herein), is a party which relate to or
otherwise affect the Pioneer Securities owned by such Seller or any other
securities of the Companies or any of the Companies' assets, properties,
Commitments or operations, including, without limitation, any non-competition
or non-solicitation agreement, shareholders' agreement, pledge agreement or
guarantee. Each Seller has made available to the Buyer or its representatives
true and complete copies of all such contracts, agreements and other
instruments.
Section 2.20 Accounts Receivable. All notes and accounts
receivable payable to or for the benefit of any of the Companies reflected on
the balance sheet included in the 1994 Financial Statements, or acquired by
any of the Companies after the date thereof and before the Closing Date arose
out of arms' length transactions made in the ordinary course of business. The
reserves for notes and accounts receivable reflected on the balance sheet to
be included in the Closing Date Financials shall
<PAGE>30
be prepared in a manner consistent with such reserves reflected on the balance
sheet included in the 1994 Financial Statements.
Section 2.21 Inventories. The inventories of each of the
Companies reflected on the balance sheet included in the 1994 Financial
Statements, or acquired by any of the Companies after the date thereof and
before the Closing Date, are carried at not in excess of the lower of cost or
net realizable value.
Section 2.22 Employee Plans. (a) Section 2.22 of the Disclosure
Schedule sets forth a true and complete list of all bonus, pension, stock
option, stock purchase, welfare, profit-sharing, retirement, disability,
vacation, severance, hospitalization, insurance, incentive, deferred
compensation and other similar material fringe or employee benefit plans,
funds, programs or arrangements, whether written or oral, which in each of the
foregoing cases cover, are maintained for the benefit of, or relate to any or
all current or former employees of any of the Companies, and any other entity
("ERISA Affiliate") related to the Companies under Section 414(b), (c), (m)
and (o) of the Code (the "Employee Plans"). With respect to each Employee
Plan, the Sellers have furnished to the Buyer true and complete copies of (i)
all plan documents, (ii) the most recent determination letter received from
the Internal Revenue Service, (iii) the most recent application for
determination filed with the Internal Revenue Service, (iv) the latest
actuarial valuations, (v) the latest financial statements, (vi) the latest
Form 5500 Annual Report, including Schedule A and Schedule B thereto, (vii)
all related trust agreements, insurance contracts or other funding
arrangements which implement any of such Employee Plans, (viii) all Summary
Plan Descriptions and summaries of material modifications and all
modifications thereto communicated to employees, and (ix) in the case of stock
options or stock appreciation rights issued under any Employee Plan which is a
stock option or stock appreciation rights plan, a list of holders, dates of
grant, number of shares, exercise price per share and dates exercisable.
(b) Except as set forth in Section 2.22 of the Disclosure Schedule,
each of the Employee Plans is in compliance in all material respects with the
requirements provided by any and all applicable statutes, orders or
governmental rules or regulations currently in effect, including, but not
limited to, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code. Except as set forth in Section 2.22 of the
Disclosure Schedule, each Employee Plan and its related trust intended to
qualify under Section 401(a) and Section 501(a) of the Code is so qualified
and has heretofore been determined by the Internal Revenue Service so to
qualify, and nothing has occurred to cause the loss of such qualification.
Except as set
<PAGE>31
forth in Section 2.22 of the Disclosure Schedule, each Employee Plan intended
to be exempt under Section 501(c)(9) or 501(c)(17) of the Code satisfies the
requirements for such exemption in form and in operation and meets the
requirements of Section 505(c) of the Code and the regulations thereunder.
Except as set forth in Section 2.22 of the Disclosure Schedule, all required
reports and descriptions of the Employee Plans (including but not limited to
Form 5500 Annual Reports, Form 1024 Application for Recognition of Exemption
Under Section 501(a), Form 990 Return of Organization Exempt From Tax, Summary
Annual Reports and Summary Plan Descriptions) have been timely filed and
distributed. Except as set forth in Section 2.22 of the Disclosure Schedule,
any notices required by ERISA or the Code or any other state or federal law or
any ruling or regulation of any state or federal administrative agency with
respect to the Employee Plans, including but not limited to any notices
required by Section 204(h), Section 606 or Section 4043 of ERISA or Section
4980B of the Code, have been appropriately given.
(c) Except as set forth in Section 2.22 of the Disclosure Schedule,
with respect to the Employee Plans, (i) all applicable contributions for all
periods ending before the Closing Date have been made in full, (ii) subject
only to normal retrospective adjustments in the ordinary course, all insurance
premiums, including premiums to the Pension Benefit Guaranty Corporation (the
"PBGC"), have been paid in full with regard to such Employee Plans for policy
years or other applicable policy periods ending on or before the Closing Date,
(iii) as of the Closing Date, none of the Employee Plans has unfunded benefit
liabilities, as defined in Section 4001(16) of ERISA, (iv) none of the
Companies nor any ERISA Affiliate has an accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of ERISA, or any
liability under Section 4971 of the Code, and (v) no waivers of the minimum
funding requirements of Section 412 of the Code or Section 302 of ERISA have
been requested or obtained by the Companies or any ERISA Affiliate.
(d) Except as set forth in Section 2.22 of the Disclosure Schedule,
with respect to each Employee Plan (i) no prohibited transactions as defined
in Section 406 of ERISA or Section 4975 of the Code have occurred or are
expected to occur as a result of the transactions contemplated by this
Agreement, (ii) no action, suit, grievance, arbitration or other manner of
litigation, or material claim with respect to the assets of any Employee Plan
(other than routine claims for benefits made in the ordinary course of plan
administration for which plan administrative review procedures have not been
exhausted) is pending or, to the knowledge of Sellers threatened or imminent
against or with respect to any of the Employee Plans, any of the Companies,
any ERISA Affiliate or, to the knowledge of the
<PAGE>32
Sellers, any fiduciary as such term is defined in Section 3(21) of ERISA (a
"Fiduciary"), including but not limited to any action, suit, grievance,
arbitration or other manner of litigation, or claim regarding conduct that
allegedly interferes with the attainment of rights under any Employee Plan,
and (iii) none of the Sellers has any knowledge of any facts which could
reasonably be expected to give rise to any such actions, suits, grievances,
arbitration or other manner of litigation, or claims with respect to any
Employee Plan. Except as set forth in Section 2.22 of the Disclosure
Schedule, none of the Companies, the Sellers or their directors, officers, or
employees or, to the knowledge of the Sellers, any Fiduciary has any material
liability for failure to comply with ERISA or Code for any action or failure
to act in connection with the administration or investment of such plans.
(e) Except as set forth in Section 2.22 of the Disclosure Schedule,
(i) none of the Employee Plans that are subject to Title IV of ERISA has been
completely or partially terminated and none has been the subject of a
"reportable event" as that term is defined in Section 4043 of ERISA (other
than events for which the 30-day notice to the PBGC has been waived), (ii) no
proceeding by the PBGC to terminate any Employee Plan pursuant to Title IV of
ERISA has been instituted or, to the knowledge of the Sellers, threatened,
(iii) there is no material pending or, to the knowledge of the Sellers,
threatened legal action, proceeding or investigation against or involving any
Employee Plan, (iv) no amendment has been adopted which would require the
Companies or any ERISA Affiliate to provide security pursuant to Section 307
of ERISA or Section 401(a)(29) of the Code, (iv) none of the Companies nor any
ERISA Affiliate has any liability for (A) any lien imposed under Section
302(f) of ERISA or Section 412(n) of the Code, or (B) for any interest
payments required under Section 302(e) of ERISA or Section 412(m) of the Code,
and (v) none of the Employee Plans provides for any unpredictable contingent
event benefit (as that term is defined in Section 302(d)(7)(B) of ERISA or
Section 412(1)(7)(B) of the Code).
(f) Except as set forth in Section 2.22 of the Disclosure Schedule,
none of the Companies has incurred or expects to incur any withdrawal
liability (either as a contributing employer or as part of a controlled group
which includes a contributing employer) to any multiemployer plan, as defined
in Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code
("Multiemployer Plan"), in connection with any complete or partial withdrawal
from such plan occurring on or before the Closing Date. Except as set forth
in Section 2.22 of the Disclosure Schedule, no condition exists and no event
has occurred with respect to any Multiemployer Plan that presents
<PAGE>33
a material risk of a complete or partial withdrawal under Title IV of ERISA.
Except as set forth in Section 2.22 of the Disclosure Schedule, the Companies
have made all required contributions to all Multiemployer Plans. The
Companies have not incurred any reduction in contribution base units which, if
continued, would result in a partial withdrawal within the next three (3)
years. If the Companies and each member of a controlled group which includes
any of the Companies were to completely withdraw as of the date hereof from
all Multiemployer Plans to which it contributes, the aggregate withdrawal
liability thereunder would be no greater than $50,000.
(g) Sellers have made available to Buyer all currently effective
manuals, brochures or publications or similar documents of each of the
Companies regarding office administration, personnel matters and hiring,
evaluation, supervision, training, termination and promotion of employees of
each of the Companies, including but not limited to each of the Companies'
affirmative action plan, if any and all material written communications to
employees concerning such matters.
(h) The excess of the present value of the projected liability in
respect of post-retirement health, medical and other welfare benefits for
retired employees of the Companies determined using assumptions that are
reasonable in the aggregate over the fair market value of any fund, reserve or
other asset segregated for the purposes of satisfying such liability, does not
exceed $8,000,000. None of the Companies are obligated to continue post-
retirement welfare benefits to any person, and each Company has properly
reserved the right to amend or terminate any such benefits at any time;
provided, however, that this sentence shall not apply to post-retirement
welfare benefits provided solely on account of compliance with Section 601 et
seq. of ERISA or pursuant to any collective bargaining agreement.
(i) Sellers have made available to Buyer the names of all employees
who during the last fiscal year received, or in the current fiscal year are
expected to receive, compensation (including commissions and bonuses) in
excess of $50,000, including the full amount paid to each such employee for
services rendered during the last fiscal year and the current aggregate base
salary rate for each such person. Sellers have made available to Buyer the
full amount paid or payable to all other employees, by job category, for
services rendered during the last and current fiscal year, including the
current aggregate base wage and salary rate for each such category, and the
aggregate cost of all fringe benefits granted during the last fiscal year.
None of the Companies has agreed to increase the compensation payable in
fiscal year 1995 to any employee other than in the ordinary course of business
consistent with past practice.
<PAGE>34
(j) All contracts, agreements, plans or arrangements covering any
employee or former employee of the Company with "change of control" or similar
provisions and all severance agreements, policies or plans which provide for
the payment of severance or similar benefits in excess of thirty (30) days'
salary and benefits to any employee upon termination of such employee's
employment (each, a "Change of Control and Severance Arrangement") are listed
on Section 2.22 of the Disclosure Schedule. The total amount of all payments
which may be payable under the Change of Control and Severance Arrangements is
set forth in the Disclosure Schedule. True and complete copies of all Change
of Control and Severance Arrangements have previously been provided to the
Buyer. Except as set forth in Section 2.22 of the Disclosure Schedule, (i)
there is no contract, agreement, plan or arrangement covering any employee or
former employee of the Company that individually or collectively could give
rise to the payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the Code, and (ii) none of the Companies nor any
ERISA Affiliate has any material liability under the Worker Adjustment and
Retraining Act or any similar state law relating to employment termination in
connection with a mass layoff, plant closing or similar event.
(k) Except as disclosed in Section 2.22 of the Disclosure Schedule,
there has been no amendment to and no written interpretation or announcement
(whether or not written) by any of the Companies or any ERISA Affiliates
relating to a change in employee participation or coverage benefits under any
Employee Plan which would increase materially the expense of maintaining such
Employee Plan above the level of expense incurred in respect thereof for the
fiscal year ended December 31, 1994.
Section 2.23 Customers and Suppliers. Section 2.23 of the
Disclosure Schedule sets forth a complete and correct list of (a) all
customers whose purchases exceeded 5% of the aggregate net sales of each
Company during such Company's last full fiscal year, (b) the 10 largest
suppliers by dollar volume of each of the Companies and the aggregate dollar
volume of purchases by each of the Companies from such suppliers for such
fiscal year and (c) all customers or suppliers who have terminated, or
delivered a formal notice or written allegation of a default with respect to,
any agreement, contract or other arrangement with any of the Companies since
January 1, 1995 involving an amount in excess of $750,000 or with whom any of
the Companies have terminated, or delivered a formal notice or written
allegation of a default with respect to, any agreement, contract or other
arrangement since January 1, 1995 involving an amount in excess of $750,000,
in each case with or without cause, prior to the stated expiration thereof.
<PAGE>35
Section 2.24 Insurance. (a) Section 2.24(a) of the Disclosure
Schedule sets forth a true and complete list of all policies of title
insurance, liability and casualty insurance, property insurance, auto
insurance, business interruption insurance, tenant's insurance, workers'
compensation, life insurance, disability insurance, excess or umbrella
insurance and any other type of insurance insuring the properties, assets,
employees and/or operations of the Companies (collectively, the "Policies")
and all fidelity bonds, letters of credit or performance bonds issued to or in
respect of, or any other instrument securing an obligation of or performance
by, any of the Companies (collectively, the "Bonds"). The Sellers have made
available to the Buyer and GEV a true, complete and accurate copy of all such
Policies and Bonds.
(b) All such Policies and Bonds are in full force and effect,
underwritten, to the Sellers' knowledge, by financially sound and reputable
insurers and will not be terminated or lapse by reason of the consummation of
the transactions contemplated by this Agreement. The Sellers shall use
commercially reasonable efforts to cause the Companies to maintain the
coverage under all Policies and Bonds in full force and effect through the
Closing Date. Except as set forth in Section 2.24 of the Disclosure Schedule,
the Companies are not in material default under any provisions of the Policies
or Bonds and, there is no claim by any of the Companies or any other person,
corporation or firm pending under any of the Policies or Bonds as to which
coverage has been denied or disputed by the underwriters or issuers of such
Policies or Bonds (other than the reservation of rights by insurers in certain
instances). Except as set forth in Section 2.24 of the Disclosure Schedule,
the Companies have not since January 1, 1995 received any written notice from
or on behalf of any insurance carrier or other issuer issuing such Policies or
Bonds that insurance rates or other annual premium or fee in effect as of the
date hereof will hereafter be materially increased, that there will be a non-
renewal, cancellation or increase in a deductible (or a material increase in
premiums in order to maintain an existing deductible) of any of the Policies
or Bonds in effect as of the date hereof, or that material alteration of any
equipment or any improvements to real estate occupied by or leased to or by
the Companies, purchase of additional material equipment, or material
modification of any of the methods of doing business of the Companies, will be
required after the date hereof. Except as set forth in Section 2.24 of the
Disclosure Schedule, the Policies and Bonds maintained by the Companies are
adequate in all material respects in accordance with (i) to the Seller's
knowledge, industry standards, (ii) the requirements of any applicable leases
or other Commitment and (iii) any currently applicable law, rule or regulation
of any federal, state or local government, agency or authority.
<PAGE>36
Section 2.25 Transactions with Directors, Officers and Affiliates.
Except as disclosed on Section 2.25 of the Disclosure Schedule or in the
Financial Statements, since January 1994, there have been no transactions
between any of the Companies and (a) any Seller, or (b) any director, officer,
employee, stockholder, immediate family member or known relative or other
affiliate (an "Affiliate"), as defined in Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"), of any Seller or any of the
Companies; and, except as disclosed on Section 2.25 of the Disclosure Schedule
or in the Financial Statements, all such transactions occurring during the
three (3) year period prior to such date were conducted on an arms' length
basis. To the best of each Seller's knowledge, and except as set forth in
Section 2.25 of the Disclosure Schedule, during the past three (3) years none
of the officers or directors of any of the Companies, or any spouse or
relative of any of such Person, has been a director or officer of, or has had
any direct or indirect interest, excluding any interests of less than two
percent (2%) of the issued and outstanding voting securities of any public
company, in, any firm, corporation, association or business enterprise (other
than the Companies) which during such period has been a supplier, customer or
sales agent of any of the Companies or has competed with or been engaged in
any business of the kind being conducted by the Companies. Neither the
Sellers nor any of their respective Affiliates (other than the Companies) owns
or has any rights in or to any of the assets, properties or rights, including,
without limit, the Intangible Assets, used by the Companies in the ordinary
course of their business.
Section 2.26 Propriety of Past Payments. Except as set forth in
Section 2.26 of the Disclosure Schedule, no finder's fee or other payment has
been, or will be, made by or on behalf of any of the Companies in respect of,
or in connection with, any Commitment to any Person which is not a party to
such Commitment. Except as set forth in Section 2.26 of the Disclosure
Schedule, no funds or assets of any of the Companies have been used for
illegal purposes; no unrecorded funds or assets of any of the Companies have
been established for any purpose; no accumulation or use of the Companies'
corporate funds or assets has been made without being properly accounted for
in the books and records of such Company; all payments by or on behalf of each
of the Companies have been duly and properly recorded and accounted for in
their respective books and records; no fraudulent entry has been made in the
books and records of any of the Companies for any reason; no payment has been
made by or on behalf of any of the Companies with the understanding that any
part of such payment is to be used for any purpose other than that described
in the documents supporting such payment; and none of the Companies has made,
directly or indirectly, any illegal
<PAGE>37
contributions to any political party or candidate, either domestic or foreign.
Section 2.27 Projections. The projections contained in the 1995
Pioneer 5 Year Plan, a copy of which is attached hereto as Section 2.27 of the
Disclosure Schedule, were prepared in good faith and on the basis of
assumptions that the Sellers believe were reasonable at such time but not with
a view to complying with the published guidelines of the Securities and
Exchange Commission or with the American Institute of Certified Public
Accountants Guide for Prospective Financial Statements; notwithstanding the
foregoing, the projections involve numerous subjective determinations, and no
representation or warranty can be or is made as to the ultimate accuracy or
attainability of such projections.
Section 2.28 Environmental Matters. (a) Except as set forth in
Section 2.28 of the Disclosure Schedule, (i) the Companies hold any
Environmental Permits required to permit such Companies to conduct their
respective businesses in the manner now conducted and none of the Companies'
operations are being conducted in a manner that violates in any material
respect the terms and conditions under which any such Environmental Permit was
granted; (ii) all such Environmental Permits are valid and in full force and
effect; and (iii) to the knowledge of the Sellers, no suspension,
cancellation, revocation or termination of any such Environmental Permit is
threatened. Section 2.28 of the Disclosure Schedule includes a true and
complete list of all material Environmental Permits held by the Companies in
connection with the conduct of the Companies' business.
(b) Except as set forth in Section 2.28 of the Disclosure Schedule,
there are no material claims, actions, suits, proceedings, or investigations
pending, or to the knowledge of the Sellers, threatened, before any federal,
state or local court or governmental or regulatory authority, or before any
arbitrator brought by or against a Seller or any of the Companies or with
respect to any of the Companies' properties or assets, the basis of which is
Environmental Losses.
Section 2.29 Labor Matters. (a) Set forth on Section 2.29 of the
Disclosure Schedule is a list of all (i) outstanding employment, consulting or
management agreements or contracts with officers, directors or employees of
the Companies that are not terminable at will, or that provide for the payment
of any bonus or commission, (ii) agreements, policies or practices that
require the Companies to pay termination or severance pay to salaried,
non-exempt or hourly employees in excess of thirty (30) days' salary and
benefits to any employee upon termination of such employee's employment (other
than as
<PAGE>38
required by law); (iii) collective bargaining agreements or other labor union
contracts applicable to persons employed by the Companies (collectively, the
"Employment and Labor Agreements"). To the Seller's knowledge, there are
currently not any activities or proceedings of any labor union to organize any
such employees. The Sellers have made available to the Buyer complete and
correct copies of all Employment and Labor Agreements. Except as set forth in
Section 2.29 of the Disclosure Schedule, none of the Companies has breached or
otherwise failed to comply in any material respect with any provisions of any
Employment and Labor Agreement, and there are no material grievances
outstanding thereunder.
(b) Except as set forth in Section 2.29 of the Disclosure Schedule:
(i) each of the Companies is in compliance in all material respects with all
applicable laws relating to employment and employment practices, wages, hours,
and terms and conditions of employment; (ii) there is no unfair labor practice
charge or complaint pending before the National Labor Relations Board
("NLRB"); (iii) there is no labor strike, material slowdown or material work
stoppage or lockout actually pending or, to the Sellers' knowledge, threatened
against or affecting the Companies; (iv) none of the Companies has experienced
any strike, material slow down or material work stoppage, lockout or other
collective labor action by or with respect to employees of any of the
Companies since October 26, 1988 (or such later date as of which such Company
was acquired by Pioneer); (v) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and (vi) there are no
charges with respect to or relating to the Companies pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices; and (vii)
none of the Companies has formal notice from any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of the Companies and, to the
knowledge of the Sellers, no such investigation is in progress.
Section 2.30 Products Liability. (a) Except as disclosed in
Section 2.30 of the Disclosure Schedule, (i) there is no notice, demand,
claim, action, suit, inquiry, hearing, proceeding, notice of violation or
investigation of a civil, criminal or administrative nature before any court
or governmental or other regulatory or administrative agency, commission or
authority against or involving any product, substance or material
(collectively, a "Product"), or class of claims or lawsuits involving the same
or similar Product manufactured, produced, distributed or sold by or on behalf
of any of the Companies which is pending or, to the knowledge of the Sellers,
threatened, resulting from an alleged defect in design,
<PAGE>39
manufacture, materials or workmanship of any Product manufactured, produced,
distributed or sold by or on behalf of any of the Companies, or any alleged
failure to warn, or from any breach of implied warranties or representations
which could reasonably be expected to result in a Material Adverse Effect on
the Companies, taken as a whole, (ii) to the Sellers' knowledge, there has not
been any Occurrence (as defined below), and (iii) there has not been, nor is
there under consideration or investigation by the Companies, any Product
recall, rework, retrofit or post-sale warning (collectively "Recalls")
conducted by or on behalf of the Companies concerning any products
manufactured, produced, distributed or sold by or on behalf of the Companies
or, to the knowledge of the Sellers, any product recall conducted by or on
behalf of any entity as a result of any alleged defect in any Product supplied
by the Companies which could reasonably be expected to result in a Material
Adverse Effect on the Companies, taken as a whole.
(b) For purposes of this Section 2.30, the term "Occurrence" shall
mean any accident, happening or event which is caused or allegedly caused by
any alleged hazard or alleged defect in manufacture, design, materials or
workmanship, including, without limitation, any alleged failure to warn or
breach of express or implied warranties or representations, with respect to,
or any such accident, happening or event otherwise involving, a Product
(including any parts or components) manufactured, produced, distributed or
sold by or on behalf of the Companies which could reasonably be expected to
result in a Material Adverse Effect on the Companies, taken as a whole.
Section 2.31 Representations Relating to Notes. (a) Each Seller
understands that the Notes have not been registered under the Securities Act
nor qualified under any state securities laws, and that such securities are
being offered and sold pursuant to an exemption from such registration and
qualification based in part upon the representations of the Investor contained
herein.
(b) Each Seller, together with Seller's purchaser representative, if
any, has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment
contemplated by this Agreement. The Investor is able to bear the economic
risk of its investment in GEV, including, but not limited to, a complete loss
of its investment. Each Seller acknowledges receipt of GEV's Information
Memorandum, dated March 17, 1995, and the documents referred to therein as
constituting a part thereof, in connection with such Seller's acquisition of
Notes.
(c) Each Seller understands: (i) that the Seller must bear the
economic risk of this investment indefinitely unless the
<PAGE>40
Notes then held by it are registered pursuant to the Securities Act or, in the
opinion of counsel reasonably satisfactory to GEV, an exemption from such
registration is available, and unless the disposition of such securities is
qualified under applicable state securities laws or, in the opinion of counsel
reasonably satisfactory to GEV, an exemption from such qualification is
available; and (ii) that GEV has no obligation or present intention of so
registering or qualifying any of the Notes. Each Seller further understands
that there is no assurance that any exemption from the Securities Act will be
available, or, if available, that such exemption will allow the Seller to
sell, assign, pledge, hypothecate, encumber or otherwise transfer or dispose
of (each, a "Transfer") any or all of the Notes then held by it in the amounts
or at the times the Seller might propose.
(d) Each Seller is acquiring the Notes solely for its own account
for investment and not with a view toward the resale, Transfer, or
distribution thereof, nor with any present intention of distributing the
Notes. Except as provided in this Agreement, the Seller has not granted to
another Person any right with respect to or interest in the Notes, nor has the
Seller agreed to give any Person any such interest or right in the future.
Section 2.32 Survival. Each of the representations and warranties
set forth in this Article II shall be deemed represented and made by the
Seller at the Closing as if made at such time and shall survive the Closing as
provided in Section 8.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer and GEV, jointly and severally, hereby make the following
representations, warranties and agreements to the Sellers:
Section 3.1 Corporate Organization. Each of the Buyer and GEV is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite power and authority to own
its properties and assets and to conduct its business as now conducted. Each
of the Buyer and GEV is duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction where the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing will not, when taken together with all other
such failures, have a Material Adverse Effect on the Buyer and GEV, taken as
whole. Section 3.1 of the Disclosure Schedule sets forth, with respect to
each of the Buyer and GEV, the jurisdictions in which it is qualified to do
business as a
<PAGE>41
foreign corporation. Complete and correct copies of the Buyer's and GEV's
Certificate of Incorporation and Bylaws, with all amendments thereto to the
date hereof, have been furnished to the Majority Selling Shareholders or their
representatives, and such copies are accurate and complete as of the date
hereof.
Section 3.2 Capitalization of the Buyer and GEV. (a) The
authorized capital stock of the Buyer consists of (i) 1,000 shares of common
stock, par value $.01 per share, all of which are issued and outstanding as of
the date hereof and owned of record and beneficially by GEV.
(b) The authorized capital stock of GEV consists of (i) 46,000,000
shares of Class A common stock, par value $.01 per share ("Class A Common
Stock"), of which 15,010,000 shares are issued and outstanding as of the date
hereof, (ii) 4,000,000 shares of Class B common stock, par value $.01 per
share, of which 3,077,419 shares are issued and outstanding as of the date
hereof and (iii) 10,000,000 shares of preferred stock, par value $.01 per
share, none of which is issued or outstanding as of the date hereof; the
capital stock listed on Section 3.2 of the Disclosure Schedule constitutes all
of the issued and outstanding capital stock of GEV as of the Closing Date and
the record holders which each own in excess of 5% are Persons identified
thereon. All of the issued and outstanding shares of capital stock of GEV
have been duly authorized and validly issued and are fully paid and
nonassessable and no personal liability attaches to the ownership thereof as a
result of the issuance of such shares under Delaware law. Except for this
Agreement and as set forth in Section 3.2 of the Disclosure Schedule, neither
the Buyer nor GEV has issued or granted any options, warrants, agreements,
conversion rights, preemptive rights or other rights to subscribe for,
purchase or otherwise acquire any capital stock of the Buyer or GEV,
respectively, or any unissued or treasury shares of the capital stock of the
Buyer or GEV, respectively.
Section 3.3 GEV Subsidiaries and Equity Investments. (a) Section
3.3(a) of the Disclosure Schedule sets forth (i) the name of each corporation
of which the Buyer or GEV owns, directly or indirectly, shares of capital
stock having in the aggregate 50% or more of the total combined voting power
of the issued and outstanding shares of capital stock entitled to vote
generally in the election of directors of such corporation (each, a "GEV
Subsidiary"); (ii) the name of any other corporation, partnership, joint
venture or other entity (other than those disclosed pursuant to clause (i)) in
which the Buyer or GEV has, or pursuant to any agreement has the right to
acquire at any time by any means, directly or indirectly, an equity interest
or investment; (iii) in the case of each corporation described in clauses (i)
and (ii) above, (A) the capitalization thereof, the
<PAGE>42
percentage of each class of capital voting stock owned by the Buyer or GEV
and, to the knowledge of the Buyer, the names and ownership percentages of any
other Person holding voting capital stock of such corporations, (B) a
description of any contractual limitations on the ability of any of the Buyer
or GEV to vote or alienate such securities, (C) a description of any
outstanding options or other rights to acquire securities of such corporation,
and (D) a description of any other contractual charge or impediment which
would materially limit or impair the Buyer's or GEV's ownership of such entity
or interest or its ability effectively to exercise the full rights of
ownership of such entity or interest; and (iv) in the case of each
unincorporated entity described in clause (ii) above, to the Buyer's
knowledge, information substantially equivalent to that provided pursuant to
clause (iii) above with regard to corporate entities.
(b) All the outstanding shares of capital stock of each GEV
Subsidiary owned by the Buyer or GEV have been duly authorized and validly
issued, are fully paid and non-assessable, and, except as specified in Section
3.3 of the Disclosure Schedule, are owned of record and beneficially, directly
or indirectly, by GEV, free and clear of any Liens. There are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to subscribe for, purchase or otherwise acquire any issued or unissued
shares of capital stock of any GEV Subsidiary issued by the Buyer, GEV or any
GEV Subsidiary.
Section 3.4 Authorization and Validity of Agreements. Each of
the Buyer and GEV has the power and authority to enter into this Agreement and
each Related Agreement to which it is a party and, except as set forth on
Section 3.4 of the Disclosure Schedule, to carry out its obligation hereunder
or thereunder. To the extent applicable, the execution and delivery by each
of the Buyer and GEV of this Agreement and the Related Agreements to which it
is a party and the performance of its obligations hereunder and thereunder
have been duly authorized by all necessary corporate action by the respective
Board of Directors and stockholders of the Buyer and GEV and, except as
specified in Section 3.4 of the Disclosure Schedule, no other corporate or
other proceedings on the part of the Buyer or GEV is necessary to authorize
such execution, delivery and performance. This Agreement and the Related
Agreements to which each of the Buyer and GEV is a party have been duly
executed by each such party and, assuming due authorization, execution and
delivery by each of the Sellers, constitute the valid and binding obligation
of each such party enforceable against each such party in accordance with its
terms, except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization,
<PAGE>43
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally, and (ii) general equitable principles.
Section 3.5 No Conflict or Violation. The execution, delivery and
performance by the Buyer and GEV of this Agreement and any Related Agreement
to which it is a party does not: (i) violate or conflict with any provision of
their respective charter documents or Bylaws; (ii) violate any provision of
law typically applicable to the transactions contemplated herein, or any
order, judgment or decree of any court or other governmental or regulatory
authority to which either the Buyer or GEV is subject; (iii) violate or result
in a material breach of or constitute (with due notice or lapse of time or
both) a material default under any material contract, lease, loan agreement,
mortgage, security agreement, trust indenture or other material agreement or
instrument to which either the Buyer or GEV is a party or by which either of
them is bound or to which any of its shares of capital stock is subject or
(iv) result in the creation or imposition of any Lien upon any of the GEV
Shares, the Notes or properties or assets of the Buyer or GEV.
Section 3.6 Consents and Approvals. Section 3.6 of the
Disclosure Schedule sets forth a true and complete list of each consent,
waiver, authorization or approval of any governmental or regulatory authority,
domestic or foreign, or of any other Person, and each declaration to or filing
or registration with any such governmental or regulatory authority, that is
required of the Buyer or GEV in connection with the execution and delivery of
this Agreement or any Related Agreement or the performance by either of them
of their respective obligations hereunder or thereunder.
Section 3.7 Financial Statements. GEV has heretofore furnished
to the Majority Selling Shareholders or their representatives copies of the
audited consolidated balance sheets of GEV as of December 31, 1994, 1993 and
1992 audited by Deloitte & Touche, together with the related audited
consolidated statements of income, stockholders' equity and cash flow for such
fiscal years and the notes thereto, accompanied by the reports thereon of such
public accountants (collectively, the "GEV Financial Statements"). The GEV
Financial Statements, including the notes thereto: (i) were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby; (ii) present fairly
the consolidated financial position, results of operations and changes in
financial position of GEV and its consolidated subsidiaries, if any, as of
such dates and for the periods then ended; and (iii) are, in all material
respects, complete, correct and in accordance with the books of account and
records of GEV.
<PAGE>44
Section 3.8 Absence of Certain Changes or Events. (a) Since
December 31, 1994, each of the Buyer and GEV has operated in the ordinary
course of business consistent with past practice and there has not been any
Material Adverse Effect on the Buyer and GEV, taken as a whole. Except as set
forth in Section 3.8 of the Disclosure Schedule, neither the Buyer nor GEV
knows of any event, condition, circumstance or prospective development which
threatens to have a Material Adverse Effect on the Buyer and GEV, taken as a
whole.
(b) Except as disclosed on Section 3.8 of the Disclosure Schedule,
since December 31, 1994, neither the Buyer nor GEV has taken any actions of a
type referred to in Section 4.2 that would have required the consent of the
Majority Selling Stockholders if such action were to have been taken during
the period between the date hereof and the Closing Date.
(c) Since December 31, 1994, neither the Buyer nor GEV have
incurred any Indebtedness other than Indebtedness incurred in the ordinary
course of business or in connection with the transactions contemplated by this
Agreement and the Acquisition Financing.
Section 3.9 Tax Matters. (a) All tax and information returns
required to have been filed by each of the Buyer and GEV (either separately or
as part of a consolidated group) with the United States, any state and local
governmental authority and any foreign jurisdiction have been duly filed, and
each such return correctly reflects, in all material respects, the income,
franchise, property, sales, use, value-added, withholding, excise, capital or
other tax liabilities and all other information required to be reported
thereon. True and complete copies of all tax returns filed by GEV since April
1, 1988 have been made available to the Majority Selling Shareholders or their
representatives; the Buyer and GEV have also furnished to the Majority Selling
Shareholders or their representatives true and complete copies of all material
notices and correspondence in the possession of the Buyer or GEV sent or
received since April 1, 1988 by the Buyer or GEV to or from any federal tax
authorities. Each of the Buyer and GEV has paid all material income,
franchise, business, property, sales, use, value-added, withholding, excise,
capital and other taxes shown to be due and payable on said returns, and all
penalties, assessments or deficiencies of every nature and description
incurred or accrued before the Closing Date, except to the extent that such
amounts are reserved for in the most recent GEV Financial Statements. The
United States federal income tax returns of GEV have not been audited. No
consent extending such statute of limitations has been filed by the Buyer or
GEV with
<PAGE>45
respect to any tax liability for any year that remains outstanding.
(a) Neither the Buyer nor GEV is a party to any agreement with
respect to the sharing or allocation of taxes or tax costs, other than a tax
sharing agreement between GEV and the Buyer.
(b) Neither the Buyer nor GEV has filed a consent to the
application of Section 341(f) of the Code.
(c) No property of GEV or the Buyer is "tax exempt use property"
within the meaning of Section 168(h) of the Code or property that GEV or the
Buyer will be required to treat as being owned by another Person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, in effect
immediately before the enactment of the Tax Reform Act of 1986.
(d) Neither the Buyer nor GEV is or has been an United States real
property holding company (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in Section 897(c)(1)(ii) of the Code.
(e) No indebtedness of the Buyer or GEV is "corporate acquisition
indebtedness" within the meaning of Section 279(b) of the Code.
(f) Neither the Buyer nor GEV is a foreign corporation, foreign
partnership, foreign trust or foreign estate as such terms are defined for
purposes of Section 1445 of the Code.
(g) Neither the Buyer nor GEV is liable for the taxes of any other
Person under Treasury Regulation Section 1.1502-6 or a similar provision of
state, local or foreign law.
Section 3.10 Post-1994 Charges. Section 3.10 of the Disclosure
Schedule sets forth a true and complete list of each dividend or other
distribution to its shareholders that has been declared or paid since December
31, 1994 by the Buyer or GEV.
Section 3.11 Absence of Undisclosed Liabilities. Except as
specified in Section 3.11 of the Disclosure Schedule, the GEV Financial
Statements or the SEC Documents, to the knowledge of the Buyer or GEV, neither
the Buyer nor GEV has any indebtedness or liability, absolute or contingent,
other than liabilities incurred or accrued in the ordinary course of business
consistent with past practice since December 31, 1994 and such indebtedness
and liabilities which would not in the aggregate have a Material Adverse
Effect on the Buyer and GEV,
<PAGE>46
taken as a whole. Except as set forth in the GEV Financial Statements or the
SEC Documents, to the knowledge of the Buyer or GEV, neither the Buyer nor GEV
is directly or indirectly liable upon or with respect to (by discount,
repurchase agreements or otherwise), or obligated in any other way to provide
funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any Person, except endorsements in the ordinary course of business
in connection with the deposit of items for collection.
Section 3.12 Compliance with Law. Except as set forth in Section
3.12 of the Disclosure Schedule, the operations of the Buyer and GEV have been
conducted in all material respects in accordance with all applicable laws,
regulations, orders and other requirements of all courts and other
governmental or regulatory authorities having jurisdiction over the Buyer or
GEV or their respective assets, properties and operations, including, without
limitation, all such laws, regulations, orders and other requirements
promulgated by or relating to consumer protection, currency exchange, equal
opportunity, fire, zoning and building, occupational safety, pension,
securities and trading with the enemy matters. Except as set forth in Section
3.12 of the Disclosure Schedule, neither the Buyer nor GEV has received notice
of any violation of any such law, regulation, order or other legal
requirement, or is in default with respect to any order, writ, judgment,
award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
related thereto and applicable to the Buyer or GEV or any of their respective
assets, properties or operations. Neither the Buyer nor GEV has knowledge of
any proposed change in any such laws, rules or regulations (other than laws of
general applicability) that would materially adversely affect the transactions
contemplated by this Agreement or that would have a Material Adverse Effect on
the Buyer and GEV, taken as a whole.
Section 3.13 Litigation. Except as set forth in Section 3.13 of
the Disclosure Schedule, there are no claims, actions, suits, proceedings,
labor disputes or investigations pending or, to the Buyer's or GEV's
knowledge, threatened before any federal, state or local court or governmental
or regulatory authority, domestic or foreign, or before any arbitrator,
brought by or against the Buyer or GEV, or any of their respective agents or
Affiliates involving, affecting or relating to the GEV Securities or any
assets, properties or operations of the Buyer or GEV which, if adversely
determined against the Buyer or GEV, would have a Material Adverse Effect on
the Buyer and GEV, taken as a whole, or the transactions contemplated by this
Agreement. Except as disclosed on Section 3.13 of the Disclosure Schedule,
neither the Buyer nor GEV nor any of their respective assets or
<PAGE>47
properties is subject to any order, writ, judgment, award, injunction or
decree of any federal, state or local court or governmental or regulatory
authority or arbitrator that affects or might affect in any material respect
their respective assets, properties or operations, or which would or might
interfere with the transactions contemplated by this Agreement.
Section 3.14 Transactions with Directors, Officers and Affiliates.
Except as set forth in Section 3.14 of the Disclosure Schedule, the GEV
Financial Statements or the SEC Documents, since January 1, 1994, there have
been no transactions between the Buyer or GEV and any Affiliate of the Buyer
or GEV; and, except as disclosed on Section 3.14 of the Disclosure Schedule,
the GEV Financial Statements or the SEC Documents, all such transactions
occurring during the three (3) year period prior to such date were conducted
on an arms' length basis. To the best of Buyer's and GEV's knowledge, and
except as set forth in Section 3.14 of the Disclosure Schedule and the SEC
Documents, during the past three (3) years none of the officers or directors
of the Buyer or GEV, or any spouse or relative of any of such Person, has been
a director or officer of, or has had any direct or indirect interest,
excluding any interests of less than two percent (2%) of the issued and
outstanding voting securities of any public company, in, any firm,
corporation, association or business enterprise (other than GEV or the GEV
Subsidiaries) which during such period has been a supplier, customer or sales
agent of the Buyer or GEV or has competed with or been engaged in any business
of the kind being conducted by the Buyer or GEV. No Affiliate of the Buyer or
GEV owns or has any right in or to any of the assets, properties or rights,
including without limit, any intangible assets or intellectual property
rights, used by the Buyer or GEV in the ordinary course of their businesses,
except by virtue of ownership of common stock of GEV or as set forth in the
GEV Proxy Statement.
Section 3.15 Representations and Warranties Relating to the
Pioneer Securities. (a) The Buyer and GEV understand that the Pioneer
Securities have not been registered under the Securities Act nor qualified
under any state securities laws, and that such securities are being offered
and sold pursuant to an exemption from such registration and qualification
based in part upon the representations and warranties of the Buyer and GEV
contained herein.
(b) The Buyer and GEV have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the investment contemplated by this Agreement.
<PAGE>48
(c) The Buyer and GEV understand that they must bear the economic
risk of this investment indefinitely unless the Pioneer Securities then held
by them are registered pursuant to the Securities Act or an exemption from
such registration is available, and unless the disposition of such securities
is qualified under applicable state securities laws or an exemption from such
qualification is available. The Buyer and GEV further understand that there
is no assurance that any exemption from the Securities Act will be available,
or, if available, that such exemption will allow the Buyer and GEV to Transfer
any or all of the Pioneer Securities then held by them in the amounts or at
the times they might propose. The Buyer and GEV covenant and agree that they
will not sell or otherwise Transfer any of the Pioneer Securities except in
compliance with applicable federal and state securities laws.
(d) The Buyer and GEV are acquiring the Pioneer Securities solely
for their own account for investment and not with a view toward the resale,
Transfer or distribution thereof, nor with any present intention of
distributing the Pioneer Securities. Except as provided in this Agreement,
neither the Buyer nor GEV has granted to another Person any right with respect
to or interest in the Pioneer Securities, nor has the Buyer or GEV agreed to
give any Person any such interest or right in the future.
Section 3.16 SEC Documents. GEV: (a) has filed all material
forms, statements, reports and documents (including all exhibits, amendments
and supplements thereto) with the United States Securities and Exchange
Commission (the "SEC") that it is required to make under the Securities Act,
and the rules and regulations thereunder, and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder; and (b) will make all filings as are required in connection with
this Agreement and the consummation of transactions contemplated hereby. GEV
has made available to the Sellers its (i) Annual Reports on Form 10-K for the
fiscal year ended December 31, 1994 and for each of the two (2) immediately
preceding fiscal years, as filed with the SEC, (ii) proxy and information
statements relating to (A) all meetings of its stockholders (whether annual or
special) and (B) actions by written consent in lieu of a stockholders' meeting
from December 31, 1990, until the date hereof, and (C) all other reports,
including quarterly reports, or registration statements filed by GEV with the
SEC since December 31, 1990 (collectively, the "SEC Documents"). Each of the
SEC Documents, as amended, if applicable, has complied with the Securities Act
and the Exchange Act, and the rules and regulations promulgated thereunder, in
all material respects.
<PAGE>49
Section 3.17 Survival. Each of the representations and warranties
set forth in this Article III shall be deemed represented and made by the
Buyer and GEV at the Closing as if made at such time and shall survive the
Closing as provided in Section 8.3.
ARTICLE IV
ADDITIONAL COVENANTS
Section 4.1 Certain Changes and Conduct of Business. (a) From
and after the date of this Agreement and until the Closing Date, the Majority
Selling Shareholders shall use commercially reasonable efforts to cause the
Companies to conduct their respective businesses solely in the ordinary course
consistent with past practices and, without the prior written consent of the
Buyer, the Majority Selling Shareholders will use commercially reasonable
efforts to not, except as required or permitted pursuant to the terms hereof,
permit any Company to:
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other than in the ordinary
course of business consistent with past practices, except in connection
with the New Credit Agreement;
(ii) make any change in its Certificate of Incorporation or
Bylaws; issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity securities; issue any security convertible into or exchangeable
for its capital stock; alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock
or other ownership interests or its capitalization, whether by reason of
a reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise other
than: (A) the exercise of outstanding options and warrants in accordance
with their terms or as otherwise contemplated by this Agreement, and (B)
the acquisition of warrants from ING, and the redemption of Preferred
Stock, as contemplated by the New Credit Agreement;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
other than in connection with the payments contemplated in Section 4.3
(a) hereof, or borrowings in the ordinary course of business under the
revolving line of credit established under the Old
<PAGE>50
Credit Agreement or the New Credit Agreement, (B) issue any securities
convertible or exchangeable for debt securities of the Companies, or (C) issue
any options or other rights to acquire from the Companies, directly or
indirectly, debt securities of the Companies or any security convertible into
or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its material assets or any part thereof, except
transactions pursuant to existing contracts set forth in the Disclosure
Schedule and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of business
consistent with past practices; or
(v) subject any of its assets, or any part thereof, to any
Lien or suffer such to be imposed other than in connection with the New
Credit Agreement or such other Liens as may arise in the ordinary course
of business which will not, individually or in the aggregate, have a
Material Adverse Effect on the Companies, taken as a whole;
(vi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or declare, set aside or pay
any dividends or other distribution in respect of such shares other than
in connection with the payment of accrued dividends on, and the
redemption of, Preferred Stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of
business;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to
become payable to any employee, except in accordance with pre-existing
contractual provisions or consistent with past practices other than the
making of (i) cash bonus payments to certain employees of the Companies
who do not currently hold any capital stock of Pioneer or options to
acquire any capital stock of Pioneer in lieu of the issuance of stock
options pursuant to an Employee Plan, on or prior to the Closing (the
"Substitute Option Payments"), (ii) bonus payments under Pioneer's Shared
Earnings Plan but only to the extent that such payments have
<PAGE>51
been reserved for in the 1994 Financial Statements, and (iii) cash incentive
bonus payments to certain key employees of the Companies, which cash incentive
bonus payments shall not exceed in the aggregate $500,000 and shall be paid on
or prior to Closing (the "Incentive Payments");
(ix) make or commit to make any material capital expenditure
(except as contemplated by the 1995 Pioneer 5 Year Plan referenced in
Section 2.27);
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates other than to another Company
made in the ordinary course of business;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person other than in connection with the New
Credit Agreement or in the ordinary course of business;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf
of it) on the date hereof;
(xiii) take any other action that would cause any of the
representations and warranties made by the Sellers in this Agreement not
to remain true and correct;
(xiv) make any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in Basic or Saguaro pursuant to pre-
existing commitments or the wholly owned Subsidiaries of the Company made
in the ordinary course of business consistent with past practices;
(xv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in generally accepted
accounting principles or write-down the value of any inventory or
write-off as uncollectible any accounts receivable except in the ordinary
course of business consistent with past practices;
(xvi) settle, release or forgive any material claim or
litigation or waive any material right except for matters reserved
against in the 1994 Financial Statements and other matters not to exceed
$500,000 in the aggregate; or
(xvii) commit itself to do any of the foregoing.
<PAGE>52
(b) From and after the date hereof and until the Closing Date, the
Majority Selling Shareholders will use commercially reasonable efforts to
cause the Companies to use commercially reasonable efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use;
(ii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or
assessed against them, unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iii) continue to conduct their businesses in the ordinary
course consistent with past practices except as otherwise may be
permitted pursuant to Section 4.1(a) hereof;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) continue to maintain existing business relationships with
suppliers and customers to the extent that such relationships are, at
the same time, judged to be economically beneficial to such Company; and
(vi) comply in all material respects with all applicable laws.
(c) From and after the date of this Agreement and until the Closing
Date, the Buyer and GEV shall conduct their respective businesses solely in
the ordinary course consistent with past practices and, without the prior
written consent of the Majority Selling Stockholders, neither the Buyer nor
GEV will, except in connection with the Acquisition Financing and the Proxy
Actions or as required or permitted pursuant to the terms hereof:
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other than in the ordinary
course of business consistent with past practices;
(ii) make any change in its Certificate of Incorporation or
Bylaws; issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity
<PAGE>53
securities; issue any security convertible into or exchangeable for its
capital stock; alter any material term of any of its outstanding securities or
make any change in its outstanding shares of capital stock or other ownership
interests or its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise other than in connection with the issuance
of options pursuant to the Stock Plan (as defined herein);
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Buyer or GEV, or (C) issue any
options or other rights to acquire from the Buyer or GEV, directly or
indirectly, debt securities of the Buyer or GEV or any security
convertible into or exchangeable for such debt securities;
(iv) subject any of its assets, or any part thereof, to any
Lien or suffer such to be imposed other than such Liens as may arise in
the ordinary course of business by operation of law which will not,
individually or in the aggregate, have a Material Adverse Effect on the
Buyer and GEV, taken as a whole;
(v) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or declare, set aside or pay
any dividends or other distribution in respect of such shares;
(vi) take any action that would cause any of the
representations and warranties made by the Buyer and GEV in this
Agreement not to remain true and correct;
(vii) make any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in wholly owned subsidiaries of the Buyer
or GEV made in the ordinary course of business;
(viii) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in generally accepted
accounting principles; or
<PAGE>54
(ix) commit itself to do any of the foregoing.
(d) From and after the date hereof and until the Closing Date, the
Buyer and GEV will use commercially reasonable efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use;
(ii) file, when due or required, federal, state, foreign, and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or
assessed against them, unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iii) continue to conduct their businesses in the ordinary
course except as otherwise may be permitted pursuant to Section 4.1(c)
hereof;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices; and
(v) comply in all material respects with all applicable laws.
(e) Nothing contained in this Agreement shall give the Sellers or
any of the Companies, directly or indirectly, rights to control or direct the
operations of the Buyer or GEV or shall give the Buyer or GEV, directly or
indirectly, rights to control or direct the operations of any of the Sellers
or any of the Companies. Each of the Sellers, each of the Companies, the
Buyer and GEV shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision of their respective operations.
Section 4.2 Access to Properties and Records. (a) The Majority
Selling Shareholders shall afford, and shall cause the Companies to continue
to afford, to the Buyer and GEV and their accountants, counsel and
representatives full access during normal business hours throughout the period
prior to the Closing Date (or the earlier termination of this Agreement
pursuant to Article VII) to all the Companies' properties, books, contracts,
commitments and records (including, but not limited to, tax returns and
accountants' work papers) and, during such period, shall furnish promptly to
the Buyer and GEV (a) a copy of each report, schedule and other document filed
or received by the Sellers or any of the Companies pursuant to the
requirements of
<PAGE>55
federal or state securities laws, and (b) all other information concerning the
Companies' business, properties and personnel as the Buyer or GEV may
reasonably request. Any inspection, review or discussions by the Buyer or GEV
or their accountants, counsel or representatives shall be conducted (i) in a
manner that does not unreasonably interfere with normal business operations of
the Companies and (ii) at times and places approved in advance by the Majority
Selling Shareholders.
(b) The Buyer and GEV shall afford to the Majority Selling
Shareholders, and such of the other Sellers who shall request, and such
Sellers' accountants, counsel and representatives full access during normal
business hours throughout the period prior to the Closing Date (or the earlier
termination of this Agreement pursuant to Article VII) to all the Buyer's and
GEV's properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, shall furnish promptly
to Sellers (a) a copy of each report, schedule and other document filed or
received by the Buyer or GEV pursuant to the requirements of federal or state
securities laws, and (b) all other information concerning the Buyer's or GEV's
business, properties and personnel as Sellers may reasonably request. Any
inspections, review or discussions by Sellers or their accountants, counsel or
representatives shall be conducted (i) in a manner that does not unreasonably
interfere with normal business operations of the Buyer or GEV and (ii) at such
times and places as GEV shall approve in advance.
(c) In connection with the transactions contemplated by this
Agreement, the parties agree that all information furnished to a party will be
kept confidential by such party and its associates, Affiliates, agents,
employees, consultants and advisors for a period of three years from the date
hereof, and such information will not at any time be used in any manner
adverse to the furnishing party; provided, however, that the obligations
hereunder of the Buyer and GEV with respect to information regarding the
Companies shall terminate and be of no further force and effect immediately
following the Closing. In the event the Closing does not occur, such
information will be promptly returned to the furnishing party. During such
time, each party will hold and will cause its associates, Affiliates, agents,
employees, consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all documents and information
concerning another party furnished to it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement, except to the extent that such information can be shown to have
been (i) previously available to the party to which it was furnished on a non-
confidential basis
<PAGE>56
prior to its disclosure, (ii) in the public domain, or (iii) available on a
non-confidential basis from a Person not bound by any confidentiality
agreement. Notwithstanding the foregoing, if a party has been requested or is
required (by interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any information,
the party so required will promptly notify the other parties so that such
other parties may seek an appropriate protective order. Each party warrants
that it will cooperate fully with the other parties in seeking such a
protective order.
Section 4.3 Discharge of Indebtedness. (a) On or prior to the
Closing Date, the Majority Selling Shareholders shall use all commercially
reasonable efforts to cause the Companies to enter into the New Credit
Agreement on substantially the terms and conditions set forth in Section 4.3
of the Disclosure Schedule. Immediately upon consummation of the transactions
contemplated by the New Credit Agreement, the Majority Selling Shareholders
shall cause the Companies to perform all actions necessary (A) to pay, prepay
or otherwise discharge all outstanding Indebtedness under the Old Credit
Agreement, the Subordinated Loan Agreement and the GPS Note, (B) to terminate
and to release any Lien on any asset, real or personal, tangible or
intangible, of any of the Companies relating to such Old Credit Agreement,
Subordinated Loan Agreement and GPS Note provided that new Liens or a
continuation of the Liens may be made in favor of the lender under the New
Credit Agreement and (C) to pay all Refinancing Costs.
(b) On the Closing Date, the Buyer shall pay or prepay that portion
of the Year End Debt allocable to the ICI Purchase Agreement and the Chevron
Note.
Section 4.4 Negotiations. From and after the date hereof and
prior to termination of this Agreement pursuant to Article VII hereof, none of
the Sellers, the Companies or any of their officers or directors or any Person
acting on behalf of the Sellers or such other Persons shall, directly or
indirectly, encourage, solicit, engage in discussions or negotiations with, or
provide any information to, any Person (other than the Buyer or GEV or their
representatives) concerning any merger, sale of substantial assets, purchase
or sale of shares of common stock or similar transaction involving any of the
Companies or any division thereof or any other securities of the Companies,
provided that the foregoing provisions shall not be deemed to require that the
directors of any of the Companies, as such, take any action or fail to take
any action that would be, based upon advice of counsel, inconsistent with
their fiduciary obligations as directors under applicable law. Each Seller
shall promptly communicate to the Buyer and GEV any inquiries or
communications
<PAGE>57
concerning any such transaction which it may receive or of which it may become
aware.
Section 4.5 Consents and Approvals. Each party hereto (a) shall
use commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all governmental and regulatory authorities,
domestic and foreign, and of all other Persons required in connection with the
execution, delivery and performance by it of this Agreement, and (b) shall
diligently assist and cooperate with the other parties hereto in preparing and
filing all documents required to be submitted by such parties to any
governmental or regulatory authority, domestic or foreign, in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained by such
parties in connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing of all information
concerning a party which counsel determines is required to be included in such
documents or would be helpful in obtaining any such required consent, waiver,
authorization or approval).
Section 4.6 Further Assurances. (a) Upon the request of the
Buyer or GEV at any time after the Closing Date, each Seller will (i)
forthwith execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization, title
affidavits, certificates and other documents as the Buyer or GEV or their
counsel may reasonably request in order to perfect title of the Buyer or GEV
and their respective successors and assigns to the Pioneer Securities or
otherwise to effectuate the purposes of this Agreement and (ii) reasonably
cooperate with the Buyer to take all actions necessary for the Buyer or the
Companies to comply with any notice or filing requirements in connection with
any License held by any Company.
(b) Upon the request of the Majority Selling Shareholders at any
time after the Closing Date, Buyer and GEV will forthwith execute and deliver
such further instruments or documents as the Sellers or their counsel may
reasonably request in order to effectuate the purposes of this Agreement.
Section 4.7 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto will
use commercially reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable
consistent with applicable law to consummate and make effective in the most
expeditious manner practicable the transactions contemplated hereby.
<PAGE>58
Section 4.8 Purchase of the GEV Shares. (a) On the Closing
Date, and upon the terms and subject to the conditions set forth in this
Section, GEV shall issue and sell to each of the Persons named in the Investor
Subscription Agreement (as defined in Section 5.1(d)) (each, an "Investor")
the number of shares of GEV's Class A Common Stock set forth therein (the "GEV
Shares"), free and clear of any Liens, and each Investor shall purchase and
accept the GEV Shares from GEV. The Investors' obligation to purchase the GEV
Shares is conditioned upon the purchase of shares of Class A Common Stock by
the Interlaken Partnership as contemplated by Section 6.10 hereof.
(b) The aggregate purchase price for the GEV Shares shall be
payable in immediately available funds on the Closing Date. Notwithstanding
any provision of Section 1.3 to the contrary, payment of the purchase price
for the GEV Shares by each Investor that is a Seller may be effected by way of
a set-off by the Buyer or GEV against the cash payment payable to such
Investor pursuant to Section 1.3. The purchase price per share of the GEV
Shares shall be based on the discounted present value of the benefit of GEV's
net operating loss and not be in excess of the price per share paid by the
Interlaken Partnership for the Class A Common Stock purchased by it prior to
the Closing.
(c) The Buyer and GEV represent and warrant that GEV and Interlaken
Partnership have entered into the Interlaken Partnership Subscription
Agreement (as defined herein) providing for the purchase of certain shares of
Class A Common Stock.
Section 4.9 Adoption by Buyer of Stock Incentive Plan. The Board
of Directors of GEV has adopted the stock incentive plan (the "Stock Plan"),
having terms and conditions substantially as described in the GEV Proxy
Statement. The Stock Plan shall, among other terms and conditions, provide
for the issuance by GEV of awards representing up to three million shares of
Class A Common Stock which will represent approximately 10% of all of the
Class A Common Stock issued and outstanding as of the Closing Date, after
giving effect to the issuances of shares of Class A Common Stock to the
Investors and the Interlaken Partnership contemplated by Section 4.8. GEV
represents that within thirty (30) days following the Closing Date, stock
options under the Stock Plan covering not less than approximately 2,000,000
shares of Class A Common Stock shall be granted and issued to officers,
directors and employees of Pioneer, subject to (i) approval of the Stock Plan
by the stockholders of GEV and (ii) the grant of such options by the
Compensation and Stock Option Committee of the Board of Directors of GEV.
Section 4.10 Notice of Breach. (a) Through the Closing Date, the
Sellers shall promptly give the Buyer and GEV
<PAGE>59
written notice with particularity upon having knowledge of any matter that may
constitute a breach of any representation, warranty, agreement or covenant of
any of the Sellers contained in this Agreement. Through the Closing Date, the
Sellers shall promptly supplement the Disclosure Schedule (a "Supplement")
after the occurrence of any event which changes or is likely to change in any
material respect any statement made by the Sellers in this Agreement or in the
Disclosure Schedule. Within a seven (7) day period after receipt of such
notice, the Buyer and GEV may and shall inform the Sellers of their election
to either (a) waive such breach and consummate the transactions contemplated
by the Agreement, (b) terminate the Agreement or (c) amend the Agreement (with
the concurrence of the Sellers) or to enter into such other arrangements as
may be mutually satisfactory to the parties hereto.
(b) Through the Closing Date, the Buyer and GEV shall promptly give
the Sellers written notice with particularity upon having knowledge of any
matter that may constitute a breach of any representation, warranty, agreement
or covenant of the Buyer, GEV or any Seller contained in this Agreement.
Through the Closing Date, the Buyer and GEV shall promptly supplement the
Disclosure Schedule (a "Buyer Supplement") after the occurrence of any event
which changes or is likely to change in any material respect any statement
made by the Buyer or GEV in this Agreement or in the Disclosure Schedule.
Within a seven (7) day period after receipt of such notice, the Sellers may
and shall inform the Buyer and GEV of their election to either (a) waive such
breach and consummate the transactions contemplated by the Agreement, (b)
terminate the Agreement or (c) amend the Agreement (with the concurrence of
the Buyer and GEV) or to enter into such other arrangements as may be mutually
satisfactory to the parties hereto.
Section 4.11 Legends. The Notes issued pursuant hereto shall bear
the following legends reflecting the restrictions on the transfer of such
securities imposed by law:
"This Note has not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be transferred or sold
except pursuant to an effective registration statement under the Act
or in a transaction which, in the opinion of counsel reasonably
satisfactory to GEV Corporation, qualifies as an exempt transaction
under the Act and the rules and regulations promulgated thereunder."
Section 4.12 Certain Agreements with Respect to Warrants and
Options. From the date hereof through the Closing Date, the Majority Selling
Shareholders shall use commercially
<PAGE>60
reasonable efforts to not permit the Companies to issue any options, warrants,
agreements or other instruments, or grant any rights, to subscribe for,
purchase or otherwise acquire any capital stock of any Company. In the event
that a Person other than a Seller acquires shares of the capital stock of
Pioneer, whether or not through the exercise of any options, warrants,
agreements, instruments, or other rights to acquire Pioneer capital stock, the
Sellers shall immediately notify the Buyer in writing and shall use
commercially reasonable efforts to cause such Person to execute a counterpart
signature page to this Agreement.
Section 4.13 Payment of Dividends on Preferred Stock; Redemption
of Preferred Stock. (a) On or prior to the Closing Date, the Majority
Selling Shareholders shall cause Pioneer to pay, the Preferred Dividend Amount
to the Preferred Stock Holders in accordance with the terms set forth in
Pioneer's Certificate of Incorporation, as amended. In addition, the Majority
Selling Shareholders shall cause Pioneer to take all steps necessary to effect
the redemption of the Preferred Stock on the Closing Date.
(b) On the Closing Date, the Buyer shall cause Pioneer to redeem in
full the Preferred Stock and shall cause the Companies to pay to the Preferred
Stock Holders the Preferred Redemption Amount.
Section 4.14 Maintenance of Insurance. Buyer agrees that,
following the Closing, Buyer shall use commercially reasonable efforts to
cause the Companies to maintain, for a period of at least four years following
the Closing, insurance with respect to the Companies and their operations and
assets in amounts and with coverage limits, premiums and deductibles which the
Buyer, in its discretion, deems adequate for the Companies, including, without
limitation, liability and casualty insurance, property insurance, products
liability insurance, auto insurance, business interruption insurance, tenant's
insurance, workers' compensation, disability insurance, pollution insurance,
and excess and umbrella insurance and directors and officers liability
insurance with run-off coverage applying for three years after the Closing
Date.
Section 4.15 Acceptance of Financing Terms. Buyer and GEV
acknowledge and agree that (i) they have delivered to the Majority Selling
Shareholders a commitment letter dated March 10, 1995 in connection with a
proposed bank credit facility and a Preliminary Offering Memorandum dated
March 17, 1995 relating to the proposed placement of Senior Notes of GEV due
2005 (the "Term Sheets"); (ii) the financing terms as set forth in the Term
Sheets are satisfactory in all material respects to the Buyer and GEV; and
(iii) the Buyer and GEV intend to close and will use all
<PAGE>61
commercially reasonable efforts to close such financings if terms not
materially less favorable to Buyer or GEV as available on the terms set forth
in the Term Sheets and the rate per annum for such notes does not exceed the
rate approved by GEV s Board of Directors.
Section 4.16 Preservation of NOL. From and after the date of this
Agreement, neither Buyer nor GEV shall enter into any transaction for the
acquisition or disposition of units, or any other material transactions, that
would in and of itself materially limit the availability of its Net Operating
Loss Carryforward deductions under Section 172 of the Code and its Alternative
Tax Net Operating Loss deductions under Section 56 of the Code unless it is
determined by a resolution of the Board of Directors of Buyer or GEV, as the
case may be, that such transaction is in the best interests of the
shareholders of GEV.
Section 4.17 Exacerbation of Environmental Liability. From and
after the date hereof, neither the Buyer nor GEV shall, or shall permit any of
their respective Affiliates to, take any action the effect of which action
would reasonably be expected to impose any additional material obligation on,
or materially increase any obligation of, the Sellers under Section 9.1,
except that the following actions shall be permitted if undertaken in a manner
reasonably calculated to minimize to the extent practical the risk of imposing
any additional obligation on, or increasing any obligation of, the Sellers
under Section 9.1:
(i) the maintenance, renovation, construction,expansion,
closure or removal (but not the operation) by any Buyer Indemnitee
of any building, improvement or structure (and the real property
relating thereto) located on any Owned Property or Leased Property,
provided that any such action is taken in furtherance of the Pioneer
Business as conducted on the Closing Date;
(ii) any action required of any Buyer Indemnitee or any other
Company to comply with any applicable Law or Governmental Approval
(provided that in determining whether any Environmental Work falls
within this clause, the Buyer or GEV shall be entitled to rely on
the opinion of counsel reasonably acceptable to the Sellers'
Representative, which opinion shall be delivered to the Sellers'
Representative prior to the taking of such action);
(iii) any action required to be taken by emergency conditions
not occasioned by actions or omissions of the Buyer or GEV or any
Buyer Indemnitee;
<PAGE>62
(iv) any activity conducted or practice employed by any Buyer
Indemnitee in the conduct of any Pioneer Business, which activity or
practice (A) had been conducted or employed by any Company in the period
between the date such Company was acquired, indirectly or directly, by
Pioneer and the Closing Date, (B) is consistent with good industry
practice, as modified from time to time and (C) complies with all
Environmental Laws as in effect from time to time; or
(v) any Environmental Investigation relating to the disposal,
discharge or release on any Pioneer Site of Hazardous Materials, the
discovery of which is made in the ordinary course of operation of
any Pioneer Business (and not from the performance of environmental
audits, tests or surveys not conducted in the ordinary course of
operation of any Pioneer Business in response to the requirements of
Environmental Laws or any Governmental Approval) or in connection
with the taking of any of the actions contemplated in the foregoing
clauses (i) - (iv), inclusive.
The Buyer shall use commercially reasonable efforts to cause Basic and its
Subsidiaries, Victory Valley and Saguaro to agree not to take any action or
omit to take any action other than those set forth in the foregoing clauses
(i) - (v), inclusive, the effect of which action or omission would reasonably
be expected to impose any additional material obligation on, or materially
increase any obligation of, the Sellers under Section 9.1.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before
the Closing Date, of the following conditions, any one or more of which may be
waived by the Buyer in its sole discretion:
Section 5.1 Receipt of Documents. The Sellers shall have
delivered to the Buyer all of the following, each duly executed by the parties
thereto (other than the Buyer) and dated the Closing Date (or an earlier date
satisfactory to the Buyer), in form and substance satisfactory to the Buyer:
(a) Employment Agreements. The Employment Agreements between each
of the Persons listed on Exhibit D hereto and the Buyer, in form and
substance mutually acceptable to the Buyer and the Persons listed on
Exhibit D (each, an
<PAGE>63
"Employment Agreement"), which Employment Agreements shall contain non-
competition provisions only with respect to the Persons denoted on
Exhibit D hereto;
(b) Shareholders' Agreement. The Shareholders' Agreement between
Kellogg and William R. Berkley, substantially in the form of Exhibit E
hereto (the "Shareholders' Agreement");
(c) Contingent Payment Agreement. The Contingent Payment Agreement
among GEV, the Buyer and the Sellers, substantially in the form of
Exhibit F hereto (the "Contingent Payment Agreement");
(d) Investor Subscription Agreement. The Subscription Agreement
between the Investors and GEV, substantially in the form of Exhibit G
hereto (the "Investor Subscription Agreement"); and
(e) Resignations. The resignation, effective as of the Closing
Date, of all directors of Pioneer whose resignations have been requested
by the Buyer prior to the Closing Date.
Section 5.2 Representations and Warranties of Sellers. All
representations and warranties made by the Sellers in this Agreement shall be
true and correct on and as of the Closing Date as if again made by the Sellers
on and as of such date, and the Buyer shall have received a certificate dated
the Closing Date and signed by each of the Sellers.
Section 5.3 Performance of Sellers' Obligations. The Sellers
shall have performed in all respects all obligations required under this
Agreement to be performed by them on or before the Closing Date, and the Buyer
shall have received a certificate, in form and substance reasonably
satisfactory to the Buyer, dated the Closing Date and signed by each of the
Sellers to that effect, provided that, for purposes of this Section 5.3,
performance of the obligations of the Sellers under Sections 4.1 and 4.12
shall be determined as if such obligations were obligations of the Sellers to
cause the Companies to take, or not to take, the actions referred to in such
Sections rather than obligations to use commercially reasonable efforts to
cause the Companies to take, or not to take (or to use commercially reasonable
efforts to take or not to take), such actions.
Section 5.4 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any other Person required in connection with the
execution, delivery and
<PAGE>64
performance of this Agreement shall have been duly obtained and shall be in
full force and effect on the Closing Date.
Section 5.5 No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or governmental or
regulatory authority, which declares this Agreement invalid in any respect or
prevents the consummation of the transactions contemplated hereby, shall be in
effect; and no action or proceeding before any court or governmental or
regulatory authority, domestic or foreign, shall have been instituted or
threatened by any government or governmental or regulatory authority, domestic
or foreign, or by any other Person, which seeks to prevent or delay the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement.
Section 5.6 No Material Adverse Change. (a) During the period
from December 31, 1994 through the Closing Date, there shall not have been any
change in the assets, properties, business, operations, prospects, net income
or financial condition of any of the Companies which would have a Material
Adverse Effect on the Companies taken as a whole.
(b) Since December 31, 1994, the Companies shall not have incurred
any Indebtedness other than (i) the borrowings under the New Credit Agreement
(A) to pay, prepay or otherwise discharge all outstanding Indebtedness under
the Old Credit Agreement, the Subordinated Loan Agreement, the Preferred
Dividend Amount and the GPS Note and (B) to pay all Refinancing Costs and (ii)
borrowings in the ordinary course of business under the revolving line of
credit established pursuant to the Old Credit Agreement and the New Credit
Agreement.
Section 5.7 Financing. The Buyer and GEV shall have obtained
financing for the transactions contemplated hereby upon terms and conditions
not materially less favorable to the Buyer and GEV than the term and
conditions contemplated in Section 4.15 hereof or upon terms otherwise
satisfactory to them.
Section 5.8 Opinions of Counsel. (a) The Buyer and GEV shall
have received a favorable opinion, dated as of the Closing Date, from Andrews
& Kurth L.L.P., counsel to the Sellers and Pioneer, in form and substance
reasonably satisfactory to the Buyer and GEV and their counsel. In giving
such opinion, such counsel may rely upon certificates of public officials,
upon opinions of local counsel and, as to matters of fact, upon certificates
of the Sellers or officers of the Companies, and
<PAGE>65
such counsel may assume that this Agreement and any Related Agreement has been
duly authorized, executed and delivered by the Buyer.
(b) The Buyer and GEV shall have received favorable opinions, dated
as of the Closing Date, from counsel to each of the Sellers which are entities
(other than the R.J. Shopf Keogh Plan), in form and substance reasonably
satisfactory to the Buyer and GEV. Such opinions shall include, in the case
of the Kiowa Estate Trust and the Sonora Trust (together, the "Trusts"),
opinions of Sinex & Stephenson, and of counsel qualified to pass upon matters
arising under the laws of the Cook Islands.
Section 5.9 Release by Paribas. The Buyer and GEV shall have
received an instrument, in form and substance reasonably satisfactory to the
Buyer and GEV, executed by Banque Paribas (Texas), Inc., releasing all liens
and claims that it or its Affiliates may have with respect to Shares owned by
Kellogg and Speets and terminating all options that it may have to acquire
Shares or other securities of Pioneer.
Section 5.10 Certain Trust Matters. The Buyer and GEV shall have
received instruments, in form and substance reasonably satisfactory to the
Buyer and GEV, executed by or on behalf of each beneficiary of a Trust and
consenting to the sale by the Trust of its Shares to the Buyer and GEV and
agreeing that such beneficiary will not have any claim against GEV or the
Buyer with respect to such Shares. The Buyer and GEV shall also have received
an instrument, in form and substance reasonably satisfactory to the Buyer and
GEV, executed by the duly appointed Trust Protector of each Trust and (i)
waiving any notice or other procedure required to be made or taken by the
Trust in connection with the sale by the Trust of its Shares to the Buyer and
GEV, (ii) consenting to such sale by the Trust, and (iii) agreeing that such
Trust Protector will not have any claim against GEV or the Buyer with respect
to such Shares.
Section 5.11 Certain Other Matters. (a) The Buyer and GEV shall be
reasonably satisfied that the locations of the Subject Parcels and the
Released Basic Parcels can be properly ascertained.
(b) The Buyer and GEV shall have concluded to their reasonable
satisfaction that all material operating permits of the Companies, subject to
any applicable preclosing or postclosing filing or notice requirements, will
remain in effect after the Closing Date.
Section 5.12 Other Closing Documents. (a) The Buyer and GEV
shall have received a certificate, in form and substance acceptable to the
Buyer, executed by the Chief Financial Officer
<PAGE>66
of Pioneer and dated as of the Closing Date, setting forth the amount of the
Refinancing Costs.
(b) The Buyer and GEV shall have received such other certificates,
instruments and documents in confirmation of the representations and
warranties of the Sellers or in furtherance of the transactions contemplated
by this Agreement as the Buyer and GEV or their counsel may reasonably
request.
Section 5.13 Legal Matters. All certificates, instruments,
opinions and other documents required to be executed or delivered by or on
behalf of the Sellers or the Companies under the provisions of this Agreement,
and all other actions and proceedings required to be taken by or on behalf of
the Sellers or the Companies in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Buyer and GEV.
Section 5.14 Purchase of Class A Common Stock by the Investors.
The purchase of 4,545,455 shares of GEV's Class A Common Stock by the
Investors, as contemplated by Investor Subscription Agreement shall have been
consummated in full on the Closing.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before
the Closing Date, of the following conditions, any one or more of which may be
waived by the Majority Selling Shareholders in their sole discretion:
Section 6.1 Receipt of Documents. The Buyer and GEV (as the case
may be) shall have delivered all of the following, each duly executed by the
parties thereto (other than the Sellers and the Companies) and dated the
Closing Date (or an earlier date satisfactory to the Sellers), in form and
substance satisfactory to the Majority Selling Shareholders:
(a) Employment Agreements. Each Employment Agreement contemplated
by Section 5.1(a);
(b) Shareholders' Agreement. The Shareholders' Agreement
contemplated by Section 5.1(b);
(c) Contingent Payment Agreement. The Contingent Payment Agreement
contemplated by Section 5.1(c);
<PAGE>67
(d) Interlaken Partnership Subscription Agreement. The
Subscription Agreement between the Interlaken Partnership and GEV,
substantially in the form of Exhibit H hereto (the "Interlaken
Partnership Subscription Agreement"); and
(e) Registration Rights Agreement. The Registration Rights
Agreement between the Investors, the Interlaken Partnership and GEV,
substantially in the form of Exhibit I hereto (the "Registration Rights
Agreement").
Section 6.2 Representations and Warranties of Buyer and GEV. All
representations and warranties made by the Buyer and GEV in this Agreement
shall be true and correct on and as of the Closing Date as if again made by
the Buyer and GEV on and as of such date, and the Sellers shall have received
a certificate dated the Closing Date and signed by the Chairman of the Board,
the President or any Vice President of the Buyer and GEV to that effect.
Section 6.3 Performance of Buyer's and GEV's Obligations. The
Buyer and GEV shall have performed in all respects all obligations required
under this Agreement to be performed by them on or before the Closing Date,
and the Sellers' representatives shall have received a certificate, in form
and substance reasonably satisfactory to the Sellers dated the Closing Date
and signed by the Chairman of the Board, the President or any Vice President
of the Buyer and GEV to that effect, provided that, for purposes of this
Section 6.3, performance of the obligations of the Buyer and GEV under Section
4.1 shall be determined as if such obligations were obligations of the Buyer
and GEV to take, or not to take, the actions referred to in such Section
rather than obligations to use commercially reasonable efforts to take, or not
to take, such actions.
Section 6.4 Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any other Person, required in connection with the
execution, delivery and performance of this Agreement, shall have been duly
obtained and shall be in full force and effect on the Closing Date.
Section 6.5 No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares this
Agreement invalid or unenforceable in any respect or which
<PAGE>68
prevents the consummation of the transactions contemplated hereby shall be in
effect; and no action or proceeding before any court or regulatory authority,
domestic or foreign, shall have been instituted or threatened by any
government or governmental or regulatory authority, domestic or foreign, or by
any other Person which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity
or enforceability of this Agreement.
Section 6.6 Opinion of Counsel. The Sellers shall have received
a favorable opinion, dated as of the Closing Date, from Willkie Farr &
Gallagher, counsel for the Buyer and GEV, in form and substance reasonably
satisfactory to the Majority Selling Shareholders and their counsel. In
giving such opinion, such counsel may rely upon certificates of public
officials, upon opinions of local counsel and, as to matters of fact, upon
certificates of officers of the Buyer and GEV, and such counsel may assume
that this Agreement and any Related Agreement has been duly authorized,
executed and delivered by the Sellers.
Section 6.7 Other Closing Documents. The Sellers shall have
received such other certificates, instruments and documents in confirmation of
the representations and warranties of the Buyer and GEV or in furtherance of
the transactions contemplated by this Agreement as the Majority Selling
Shareholders and their counsel may reasonably request.
Section 6.8 Legal Matters. All certificates, instruments,
opinions and other documents required to be executed or delivered by or on
behalf of the Buyer and GEV under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Buyer and GEV in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for the Sellers.
Section 6.9 No Material Adverse Change. During the period from
December 31, 1994 through the Closing Date, there shall not have been any
adverse change in the assets, properties, business, operations, prospects, net
income or financial condition of the Buyer or GEV which would have a Material
Adverse Effect on Buyer and GEV, taken as a whole.
Section 6.10 Purchase of Class A Common Stock by the Interlaken
Partnership. The purchase of 11,363,636 shares of GEV's Class A Common Stock
by the Interlaken Partnership, as contemplated by the Interlaken Partnership
Subscription Agreement shall have been consummated in full prior to the
Closing.
<PAGE>69
ARTICLE VII
TERMINATION AND ABANDONMENT
Section 7.1 Methods of Termination; Upset Date. This Agreement
may be terminated and the transactions contemplated hereby may be abandoned at
any time before the Closing:
(a) By the mutual written consent of the Majority Selling
Shareholders and the Buyer or GEV;
(b) By the Buyer or GEV, if all the conditions set forth in Article
V of this Agreement shall not have been satisfied or waived on or before the
Closing Date;
(c) By the Majority Selling Shareholders, if all the conditions set
forth in Article VI of this Agreement shall not have been satisfied or waived
on or before the Closing Date;
(d) By either the Majority Selling Shareholders or the Buyer or GEV
if the Buyer, GEV or the Sellers, as the case may be, fails to comply in any
material respect with any of its or their covenants or agreements contained
herein, or breaches its or their representations and warranties in any
material way;
(e) By either the Majority Selling Shareholders or the Buyer or GEV
if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action (which order, decree or ruling the parties
hereto shall use their best efforts to lift), which permanently restrains,
enjoins or otherwise prohibits the transactions contemplated by this
Agreement; or
(f) By either the Majority Selling Shareholders or the Buyer or GEV
at any time after April 28, 1995.
Section 7.2 Procedure Upon Termination. In the event of
termination and abandonment of this Agreement by the Sellers or the Buyer or
GEV pursuant to Section 7.1, written notice thereof shall forthwith be given
to the other party and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by the Sellers
or the Buyer or GEV. If this Agreement is terminated as provided herein, no
party to this Agreement shall have any liability or further obligation to any
other party to this Agreement except as provided in Sections 4.2(c), 10.2,
10.4 and 10.5 hereof; provided, however, that no termination of this Agreement
pursuant to this Article VII shall relieve any party of liability for a breach
of any provision of this Agreement occurring before such termination.
<PAGE>70
ARTICLE VIII
GENERAL INDEMNIFICATION
Section 8.1 Coverage. (a) Subject to the limitations and
conditions set forth in this Agreement and notwithstanding the Closing or the
delivery of the Pioneer Securities and regardless of any investigation at any
time made by or on behalf of the Buyer or GEV or of any knowledge or
information that the Buyer or GEV may have, the Sellers, severally and based
upon their Ownership Percentages, indemnify and agree to fully defend, save
and hold the Buyer and GEV and their respective Affiliates (each, a "Buyer
Indemnitee") harmless if any such party shall at any time or from time to time
suffer any Loss (as defined below) arising out of or resulting from, or shall
pay or become obligated to pay any sum on account of, any and all Events of
Breach (as defined below) of the Sellers.
(b) Subject to the limitations and conditions set forth in this
Agreement and notwithstanding the Closing or the payment of the Purchase Price
and regardless of any investigation at any time made by or on behalf of the
Sellers or of any knowledge or information that the Sellers may have, the
Buyer and GEV, jointly and severally, indemnify and agree to fully defend,
save and hold each Seller and their respective Affiliates (each, a "Seller
Indemnitee") harmless if such party shall at any time or from time to time
suffer any Loss arising out of or resulting from, or shall pay or become
obligated to pay any sum on account of, any and all Events of Breach of the
Buyer or GEV.
(c) As used herein, "Event of Breach" shall be and mean any one or
more of the following:
(i) any untruth or inaccuracy in any representation by a party
hereto or the breach of any warranty by a party contained in this
Agreement or in any certificate, schedule, exhibit or annex to this
Agreement or in any certificate or other document executed and delivered
to another party at the time of Closing of the transactions contemplated
by this Agreement; or
(ii) any failure by a party hereto duly to perform or observe
any term, provision, covenant, agreement or condition on the part of such
party to be performed or observed under this Agreement; provided,
however, that the exercise by the Buyer of its right of offset pursuant
to Sections 8.4(b), 9.2(c), 9.5(d) and 9.6(e) hereof shall in no event be
deemed an Event of Breach.
<PAGE>71
(d) As used in this Agreement, the term "Loss" means any damage,
liability, loss, cost or expense (including all reasonable fees of attorneys,
consultants and experts), determined on an after-tax basis, but only to the
extent that the tax benefit of any Loss, in the reasonable opinion of the
independent public accounting firm then serving the Person incurring such Loss
taking into account all deductions, losses, credits and loss carryforwards or
carrybacks available to such Person, will reduce the total tax liability of
such Person for the tax year in which such Loss was incurred or in prior
years.
(e) In the event that an Indemnified Party shall receive a payment
pursuant to the terms of an Indemnification Contract or otherwise with respect
to any Loss paid pursuant to this Article VIII, (i) in the case of a Buyer
Indemnitee, the Buyer Indemnitee shall promptly to the extent of any such
payment, net of any taxes payable by the Indemnified Party thereon, (A)
reimburse the Indemnifying Party to the extent such Indemnifying Party made a
cash payment to the Buyer Indemnitee in respect of such Loss, (B) deposit cash
into the Contingent Payment Account or the Escrow Account (as defined in
Section 9.6(e) hereof), to the extent applicable, to the extent the Buyer
Indemnitee withdrew funds therefrom in respect of such Loss and (C) credit the
Notes to the extent a setoff against the Notes in respect of such Loss was
taken (or make a payment to the holders of the Notes in the event the Notes
have matured and such payments would otherwise have been made to the Sellers)
and (ii) in the case of a Seller Indemnitee, each Seller Indemnitee shall
promptly reimburse the Indemnifying Party to the extent such Indemnifying
Party made a cash payment to such Seller Indemnitee.
Section 8.2 Procedures. If a Loss occurs or is alleged and an
Indemnified Party asserts that an Indemnifying Party has become obligated to
the Indemnified Party pursuant to Section 8.1 hereof, or if any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which the Indemnifying Party may become obligated to the Indemnified Party
hereunder, the Indemnified Party shall give written notice to the Indemnifying
Party. Upon receipt of such notice, the Indemnifying Party shall, subject to
and in accordance with Section 8.4 hereof, and if the Indemnifying Party shall
challenge its responsibility for indemnification hereunder, subject to any
reservation of rights on the part of the Indemnifying Party, promptly
reimburse the Indemnified Party the full amount of any such Loss actually
suffered by such party and defend, contest or otherwise protect the
Indemnified Party against any such suit, action, investigation, claim or
proceeding with counsel, reasonably acceptable to the Indemnified Party, of
the Indemnifying Party's choice; provided, however, that the Indemnifying
Party shall not make any settlement or compromise
<PAGE>72
without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld; provided, further, that the Indemnified
Party shall consent to any settlement, compromise or discharge of such claim
that the Indemnifying Party may recommend that by its terms fully releases,
indemnifies and holds harmless the Indemnified Party from any further claims
with respect to the matters giving rise to such claim. If the Indemnifying
Party recommends a settlement which satisfies the requirements of the
preceding sentence but such settlement is not approved by the Indemnified
Party (and the Indemnifying Party elects not to contest whether such approval
was unreasonably withheld), then all losses incurred in excess of the proposed
settlement amount shall be for the account of the Indemnified Party, which
shall, as to such excess amount, indemnify and hold harmless the Indemnifying
Party with respect thereto. The Indemnified Party shall have the right, but
not the obligation, to participate at its own expense in the defense of any
suit, action, investigation, claim or proceeding referred to above using
counsel of the Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible
including making its officers, directors, employees and books and records
available for use in such claim or action. If the Indemnifying Party fails
timely to defend, contest or protect against such suit, action, investigation,
claim or proceeding, and, in any event, fails to deliver a written undertaking
to the Buyer Indemnitee to do so, the Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, (provided that if the Indemnifying Party shall notify the
Indemnified Party that it is not liable hereunder for indemnification of such
matter, any right to recovery of any Loss shall be subject to a reservation of
rights therefor), and the Indemnified Party shall be entitled, subject to and
in accordance with Section 8.4 hereof, to recover any cost or expense thereof
from the Indemnifying Party, including, without limitation, reasonable
attorneys' fees, disbursements and amounts paid as the result of such suit,
action, investigation, claim or proceeding. Notwithstanding anything
contained herein or in the Contingent Payment Agreement to the contrary, in
the event that the Sellers assume the defense of any pending or threatened
action, claim or proceeding, the Sellers shall be entitled to be paid funds
from the Contingent Payment Account and the Escrow Account in reimbursement of
reasonable costs and expenses (including reasonable counsel fees) incurred in
connection with investigating, preparing or defending any pending or
threatened claim or proceeding, as and when such costs and expenses are
incurred. Unless otherwise expressly provided in this Agreement (including,
without limitation, Section 9.7(f)), the foregoing procedures shall not be
applicable with respect to Environmental Losses, responsibility for which
shall be resolved
<PAGE>73
pursuant to the provisions and procedures set forth in Article IX hereof.
Section 8.3 Survival of Representations and Warranties. (a) The
obligation of Sellers to indemnify the Buyer Indemnitees pursuant to Section
8.1(a) with respect to Events of Breach set forth in Section 8.1(c)(i) shall
survive the consummation of the transactions contemplated by this Agreement,
as follows:
(i) with respect to the representations and warranties in
Sections 2.2(a) and (b), 2.3(b) (but only with respect to the
Subsidiaries), 2.4, 2.5 and 2.31, indefinitely;
(ii) with respect to the representations and warranties in
Section 2.9, until the expiration of the applicable statute of
limitations period; and
(iii) with respect to all other representations and warranties
of Sellers and any other matters covered by Section 8.1(c)(i), until
December 31, 1996.
(b) The obligation of Buyer and GEV to indemnify the Seller
Indemnitees pursuant to Section 8.1(b) with respect to Events of Breach set
forth in Section 8.1(c)(i) shall survive the consummation of the transactions
contemplated by this Agreement, as follows:
(i) with respect to the representations and warranties in
Sections 3.2, 3.3(b)(but only with respect to the GEV Subsidiaries),
3.4, 3.5 and 3.15 indefinitely; and
(ii) with respect to the representations and warranties in
Section 3.9, until the expiration of the applicable statute of
limitations period; and
(iii) with respect to all other representations and warranties
of Buyer or GEV and any other matters covered by Section 8.1(c)(i),
until December 31, 1996.
(c) The obligations of the parties for indemnification under this
Article VIII shall terminate after the expiration of the periods indicated in
subsections (a) and (b) of this Section 8.3, except with respect to (i) any
Loss which has been the subject of written notice to the party against whom
such claim of Loss is asserted prior to the expiration of such period, which
notice will preserve such claim until it is liquidated or otherwise finally
resolved pursuant to the procedures set forth
<PAGE>74
in Sections 8.2 and 8.4 of this Agreement and (ii) any Loss contemplated by
Section 8.1(c)(ii), which shall survive in accordance with Section 10.1.
(d) The provisions of this Article VIII shall apply to any claim of
Loss resulting or arising from any untruth or inaccuracy of any representation
or warranty of any party to this Agreement which gives rise to an indemnity to
one party from another party or parties, with the intent that all such claims
shall be subject to the procedures, limitations and other provisions contained
in Article VIII and, to the extent applicable, Article IX. The
indemnification provided by Section 8.1 shall be the sole and exclusive remedy
available to the parties hereto for any breach or inaccuracy of any of the
representations or warranties by a party set forth in this Agreement.
Notwithstanding the foregoing, the provisions of this Article VIII shall not
be deemed to preclude an action by any party for, or a recovery pursuant to a
final decision of a court of competent jurisdiction against any party for,
actual, and not negligent or unintentional, fraud.
Section 8.4 Payment of Losses; Limitations. (a) No Indemnified
Party shall be entitled to any indemnification from an Indemnifying Party
pursuant to Section 8.1 hereof until such time as (i) the Loss in respect of a
particular matter exceeds $125,000 or (ii) (A) the Loss in respect of a
particular matter exceeds $20,000 and (B) cumulative aggregate Losses exceed
$1,600,000 (each, an "Exclusionary Amount") and then, in the case of clause
(i) and clause (ii)(B), only to the extent that such Losses exceed the
applicable Exclusionary Amount. Each Indemnified Party agrees promptly to
notify the Indemnifying Party in writing of all Losses which are claimed by
the Indemnified Party to be chargeable against an Exclusionary Amount.
Notwithstanding the foregoing, there shall be no Exclusionary Amount with
respect to Losses arising from any breach of or inaccuracy in the
representations and warranties set forth in Sections 2.2, 2.3(b)(but only with
respect to the Subsidiaries), 2.4 or 2.5 or Sections 3.2, 3.3(b) (but only
with respect to the GEV Subsidiaries), 3.4 or 3.5, as the case may be.
(b) Whenever the amount of the Buyer Indemnitees' Loss or Losses
shall exceed the applicable Exclusionary Amount, if any, any recovery by the
Buyer Indemnitees shall be effected as follows:
(i) with respect to the representations and warranties set
forth in Section 8.3(a)(i), out of Available Cash, if any, in
accordance with each Seller s Ownership Percentage; provided,
however, to the extent Available Cash is insufficient to cover such
<PAGE>75
Losses, each Seller shall be personally liable to the Buyer
Indemnitee for such Losses up to such Seller's proportionate share
of the Purchase Price (including with respect to the Contingent
Payment Account, only payments theretofore made to such Seller
under the Contingent Payment Agreement), based on such Seller's
Ownership Percentage; and
(ii) with respect to the representations and warranties set
forth in Sections 8.3(a)(ii) and 8.3(a)(iii), out of Available Cash,
if any, in accordance with each Seller's Ownership Percentage;
provided, however, in the event Available Cash is insufficient to
cover such Losses, the unpaid portion of such Losses shall be
included in each Loss Estimate delivered to the Sellers during the
period for which such Losses remain unpaid and shall be recoverable
(insofar as personal liability is concerned, solely) against the
Personal Indemnity (as defined in Section 9.3 hereof) to the extent,
and at such times, as the Personal Indemnity may be available
therefor in accordance with the provisions of Sections 9.3(a) and
(c).
(c) Whenever the amount of the Seller Indemnitees' Loss or Losses
shall exceed the applicable Exclusionary Amount, any recovery by the Seller
Indemnitees may, at GEV's option, be effected, with respect to the
representations and warranties set forth in Section 8.3(b), by either a
payment in cash or a prepayment of each Seller's Notes, in accordance with
each Seller's Ownership Percentage. In no event shall the Buyer's or GEV's
liability in respect of the representations and warranties set forth in
Section 8.3(b) exceed the unpaid principal amount of the Notes, except in the
event that the Loss relates to or affects a CPA Property, GEV and the Buyer
shall be jointly and severally liable to the Sellers for any Loss, together
with any Environmental Loss contemplated by the last sentence of Section
9.2(d), up to the Fair Market Value of such CPA Property determined
immediately prior to such Loss.
(d) For all purposes under this Agreement for which a Buyer
Indemnitee is entitled to draw against Available Cash, the Buyer Indemnitee
shall be entitled, in its sole discretion, to draw such amount from any source
of Available Cash then available therefor. In the event that both a Buyer
Indemnitee and a Seller Indemnitee shall be entitled to draw against Available
Cash, the Buyer Indemnitee s claim, regardless of when arising (but only to
the extent of Losses or Environmental Losses), shall in all instances be
satisfied in full prior to any such claim by a Seller Indemnitee.
<PAGE>76
ARTICLE IX
INDEMNIFICATION FOR ENVIRONMENTAL MATTERS
Section 9.1 Environmental Indemnities. (a) Subject to the
conditions, covenants and limitations set forth in this Agreement, the
Sellers, severally in accordance with their Ownership Percentages, agree to
and shall indemnify the Buyer Indemnitees against and hold the Buyer
Indemnitees harmless from any Environmental Loss (as defined below) arising
from or relating to any Seller Environmental Matter.
(b) Subject to the conditions, covenants and limitations set forth
in this Agreement, the Buyer and GEV, jointly and severally, agree to and
shall indemnify the Seller Indemnitees against and hold the Seller Indemnitees
harmless from any Environmental Loss arising from or relating to any Buyer
Environmental Matter.
(c) As used in this Agreement, the term "Environmental Loss" means
any Loss arising from or relating to any Seller Environmental Matter or any
Buyer Environmental Matter, as the case may be; provided, however, that the
costs and expenses of Environmental Work shall be deemed an Environmental Loss
only to the extent such Environmental Work arises from or relates to a
Hazardous Discharge and (i) is (A) required to comply with any Environmental
Law or (B) required by any Governmental Authority or (C) reasonably required
to prevent any material interruption of, or material reduction in, the
operations of any Company and (ii) with respect to Environmental Work other
than Environmental Investigation, is performed pursuant to an Accepted
Remediation Method. The term Environmental Loss shall not include (x) the
diminution in value of any real or personal property, or any business, of the
Buyer, any Company or any of their Affiliates and (y) any Loss arising out of
or relating to any interruption of, interference with or change in the conduct
of the business of the Buyer, any Company or any of their Affiliates, in each
case, arising from or relating to any Seller Environmental Matter. The term
Environmental Loss shall not include (x) the diminution in value of any real
or personal property constituting, or any business located on, any CPA
Property and (y) any Loss arising out of or relating to any interruption of,
interference with or change in the conduct of any such business, in each case,
arising from or relating to any Buyer Environmental Matter.
Section 9.2 Payment of Environmental Losses; Limitations. (a)
Buyer and GEV agree that, prior to any Buyer Indemnitee being entitled to
receive indemnification for Environmental Losses subject to the Allocated
Reserves and any Unallocated Reserves set forth in Section 9.2 of the
Disclosure
<PAGE>77
Schedule (the "Reserve Disclosure Schedule") arising from or relating to any
Seller Production Site Environmental Matter: (i) with respect to any
Environmental Loss subject to an Allocated Reserve, the Buyer Indemnitees
shall first have incurred and paid aggregate costs and expenses relating to
the specific matter covered by such Allocated Reserve equal to the amount of
the applicable Allocated Reserve; (ii) with respect to any Environmental Loss
arising from or relating to the Henderson Site, the Basic Site or the St.
Gabriel Site that is not covered by an Allocated Reserve (or that exceeds the
amount of any applicable Allocated Reserve, but only to the extent of such
excess amount), the Buyer Indemnitees shall first have incurred and paid
aggregate costs and expenses equal to the amount of the Unallocated Reserve
for PCAC set forth in the Reserve Disclosure Schedule, (iii) with respect to
any Environmental Loss arising from or relating to the All Pure Sites, the
Buyer Indemnitees shall first have incurred and paid aggregate costs and
expenses equal to the amount of the Allocated Reserve for All Pure set forth
in the Reserve Disclosure Schedule; (iv) with respect to any Environmental
Loss arising from or relating to the Imperial West Sites, the Buyer
Indemnitees shall first have incurred and paid aggregate costs and expenses
equal to the amount of the Allocated Reserve for Imperial West set forth in
the Reserve Disclosure Schedule; and (v) with respect to the legal costs and
expenses incurred and paid in connection with any Environmental Loss arising
from or relating to any Seller Production Site Environmental Matter arising
from or relating to the Henderson Site, the St. Gabriel Site or the Basic
Site, the Buyer Indemnitees shall first have incurred and paid aggregate legal
costs and expenses equal to the amount of the reserve for "Legal Costs
Associated with Environmental Matters" set forth in the Reserve Disclosure
Schedule. The Sellers Representative shall be notified promptly of all
losses which are charged against the Pioneer Reserves.
(b) Buyer and GEV agree that, in connection with any Environmental
Loss arising from or relating to any Seller Environmental Matter which may be
covered, in whole or in part, by any Indemnification Contract, Buyer shall use
best efforts to comply with the notice and other provisions relating to, and
timely and diligently pursue to a reasonable conclusion in consultation with
the Sellers Representative, any remedies under any Indemnification Contract
with respect to such Seller Environmental Matter.
(c) In the event that any Environmental Loss subject to the Seller
Environmental Indemnity remains outstanding after payment by the Buyer
Indemnitees of the amounts referred to in Section 9.2(a), if applicable, and
any recoveries in respect of such Environmental Loss under Section 9.2(b)
theretofore
<PAGE>78
received, the Buyer Indemnitees shall be entitled to recover the amount of
such Environmental Loss out of Available Cash, if any in accordance with each
Seller s Ownership Percentage; provided, however, to the extent Available Cash
is insufficient to cover Environmental Losses arising from or relating to any
Seller CPA Property Environmental Matter, each Seller shall be personally
liable to the Buyer Indemnitee for such Environmental Losses to the extent of
such Seller s pro rata portion, based on such Seller s Ownership Percentage,
of such Environmental Losses; and, provided further, that the Buyer and GEV
agree that the Buyer Indemnitees shall have no recourse against the Sellers or
any assets of the Sellers (including, without limitation, the cash portion of
the Purchase Price) for Environmental Losses arising from or relating to any
Seller Production Site Environmental Matter other than the recourse against
Available Cash as provided in this Section 9.2(c) and the limited recourse
against the Sellers personally as provided in Section 9.3 hereof.
(d) In the event of any Environmental Loss subject to the Buyer
Environmental Indemnity, any recovery by the Seller Indemnitees may, at GEV's
option, be effected by either a payment in cash or a prepayment of each
Seller's Notes, in accordance with each Seller's Ownership Percentage. In no
event shall the Buyer's and GEV's liability in respect of the Buyer
Environmental Indemnity exceed the unpaid principal amount of the Notes,
except that, if and to the extent, the Environmental Loss arises from or
relates to a Buyer CPA Property Environmental Matter, GEV and the Buyer shall
be jointly and severally liable to the Sellers for any such Environmental
Loss, together with any Loss contemplated by the last sentence of Section
8.4(c), up to the Fair Market Value of such CPA Property determined
immediately prior to such Environmental Loss.
(e) In the event that an Indemnified Party shall receive a payment
pursuant to the terms of an Indemnification Contract or otherwise with respect
to any Environmental Loss paid pursuant to this Article IX, (i) in the case of
a Buyer Indemnitee, the Buyer Indemnitee shall promptly, to the extent of any
such payment, net of any taxes payable by the Indemnified Party thereon, (A)
reimburse the Indemnifying Party to the extent such Indemnifying Party made a
cash payment to the Buyer Indemnitee in respect of such Loss, (B) deposit cash
into the Contingent Payment Account or the Escrow Account (to the extent
applicable) to the extent the Buyer Indemnitee withdrew funds therefrom in
respect of such Loss and (C) credit the Notes to the extent a setoff against
the Notes in respect of such Loss was taken (or make a payment to the holders
of the Notes in the event the Notes have matured and such payment would
otherwise have been made to the Sellers), and (ii) in the case of a Seller
Indemnitee, each Seller Indemnitee shall promptly reimburse the
<PAGE>79
Indemnifying Party to the extent such Indemnifying Party theretofore made a
cash payment to such Seller Indemnitee.
Section 9.3 Limited Recourse Against Sellers. (a) Upon final
determination pursuant to Section 9.6 of the Loss Estimate as of the fifth
Determination Date (the "Fifth Year Loss Estimate"), each Seller's maximum
personal liability for any Environmental Loss arising from or relating to any
Seller Production Site Environmental Matter and any Losses recoverable under
Section 8.4(b)(ii) (the "Personal Indemnity") for amounts which may become
payable to the Buyer Indemnitees pursuant to Section 9.3(c) shall be fixed at
such Seller's pro rata portion, based on such Seller's Ownership Percentage,
of the lesser of (i) $10,000,000 and (ii) the amount by which the Fifth Year
Loss Estimate exceeds Available Cash as of the fifth Determination Date (such
amount, as adjusted from time to time, being each Seller's "Personal Indemnity
Limit") it being understood that the Personal Indemnity Limit is the maximum
personal liability for any breaches of Sellers' representations and warranties
pursuant to Section 8.4(b)(ii) hereof and for any Environmental Loss arising
from or relating to any Seller Production Site Environmental Matter pursuant
to Section 9.1(a) hereof, and that in no event shall any Seller be personally
liable for any such Losses and Environmental Losses arising pursuant to such
sections exceeding such Seller's pro rata portion, based on such Seller s
Ownership Percentage, of $10,000,000, or such lesser aggregate amount as may
be determined pursuant to this Section 9.3. On each Determination Date
subsequent to the fifth Determination Date and subject to the provisions of
this Section 9.3, the Personal Indemnity Limit shall be decreased (but in no
event increased) by the amount by which (i) the lesser of (a) $10,000,000, and
(b) the Fifth Year Loss Estimate less the amount of Available Cash on the
fifth Determination Date exceeds (ii) the Loss Estimate for such subsequent
Determination Date less the amount of Available Cash on such subsequent
Determination Date.
(b) Upon final determination pursuant to Section 9.6 of the Loss
Estimate as of the tenth Determination Date (the "Tenth Year Loss Estimate"),
the Sellers' maximum liability (but not personal liability, which shall in all
cases be limited to the Personal Indemnity Limit) to the Buyer Indemnitees
under Section 8.4(b)(ii) for any Loss and under the Seller Environmental
Indemnity for any Environmental Loss arising from or relating to any Seller
Production Site Environmental Matter shall be fixed at the sum of the Tenth
Year Loss Estimate (exclusive of any expected payment pursuant to the Personal
Indemnity) plus, subject to Section 9.5(a), $25,000,000 (the "Maximum
Production Site Indemnity").
<PAGE>80
(c) Subject to the limitations and procedures set forth herein, in
the event that any Loss contemplated by Section 8.4(b)(ii) or any
Environmental Loss subject to the Seller Environmental Indemnity remains
unpaid, in whole or in part, on the tenth Determination Date, each Seller
shall promptly upon delivery of the Loss Estimate Notice (as defined in
Section 9.6(a)) for the tenth Determination Date pay to the Buyer Indemnitees,
severally in accordance with each Seller s respective Ownership Percentage,
the aggregate amount of any unpaid Loss and any unpaid Environmental Loss up
to the Personal Indemnity Limit; provided, however, that in no event shall
Sellers be required to make any payments of Environmental Losses unless and
until Environmental Losses have been incurred in excess of Available Cash. In
no event shall any Seller's liability under this Section 9.3 exceed such
Seller's Personal Indemnity Limit.
Section 9.4 Termination of Certain Indemnification Obligations.
(a) Notwithstanding any other provision of this Agreement to the contrary
(other than Article VII hereof), the obligations of the parties for
indemnification under Section 9.1 for any Environmental Loss arising from or
relating to any Production Site shall terminate at 5:00 p.m., New York City
time, on the fifteenth Determination Date, except, in the case of the Seller
Environmental Indemnity, with respect to any unpaid Loss, unpaid Environmental
Loss or Estimated Environmental Loss described in the Loss Estimate Notice
delivered for the fifteenth Determination Date in accordance with the
procedures set forth in Section 9.6 hereof, which Loss Estimate Notice will
preserve any claim in respect of Losses and Environmental Losses which have
occurred and are set forth therein until such claims are liquidated or
otherwise finally resolved. The Sellers shall not be obligated to indemnify
any Buyer Indemnitee or any other Person for any Seller Production Site
Environmental Matter arising on or after the fifteenth Determination Date or
for any matter which would have been a Seller Production Site Environmental
Matter if such matter had been found or determined to exist on or after the
fifteenth Determination Date (and irrespective of when such Seller Production
Site Environmental Matter first arose), and no such Seller Production Site
Environmental Matter shall be included in any Loss Estimate Notice delivered
to the Seller s Representative subsequent to the fifteenth Determination Date.
The Buyer shall not be obligated to indemnify any Seller Indemnitee or any
other Person for any Buyer Production Site Environmental Matter arising on or
after the fifteenth Determination Date or for any matter which would have been
a Buyer Production Site Environmental Matter which is found or determined to
exist on or after the fifteenth Determination Date (and irrespective of when
such Buyer Production Site Environmental Matter first arose).
<PAGE>81
(b) Notwithstanding anything contained in this Agreement to the
contrary, the obligations of the parties for indemnification under Section 9.1
for any Environmental Loss arising out of or relating to any CPA Property
shall terminate immediately upon termination of the Contingent Payment
Agreement, except, in the case of the Seller Environmental Indemnity, with
respect to any unpaid Loss, unpaid Environmental Loss or Estimated
Environmental Loss described in the Loss Estimate Notice delivered upon
termination of the CPA Agreement in accordance with the procedures set forth
in Section 9.6 hereof, which Loss Estimate Notice will preserve any claim in
respect of Seller CPA Property Environmental Matters arising out of or
relating to the CPA Properties which have accrued and are set forth therein
until such claims are liquidated or otherwise finally resolved. The Sellers
shall not be obligated to indemnify any Buyer Indemnitee or any other Person
for any Seller CPA Property Environmental Matter with respect to any of the
CPA Properties owned by GEV or any of its Subsidiaries at the time of the
termination of the Contingent Payment Agreement arising on or after the time
of such termination or for any Seller CPA Property Environmental Matter with
respect to the CPA Properties which is found or determined to exist on or
after the time of such termination (and irrespective of when such Seller CPA
Property Environmental Matter first arose).
Section 9.5 Disbursements from Contingent Payment Account; Escrow
Account. (a) At any time and from time to time following the tenth
Determination Date, the Buyer shall promptly disburse to each Seller, in
accordance with its Ownership Percentage, Available Cash in excess of the most
current Loss Estimate to the extent necessary to reimburse each such Seller
for any payments made by such Seller to any Buyer Indemnitee (i) pursuant to
Section 8.4(b) or (ii) pursuant to the Seller's Personal Indemnity. The
payments to Sellers required in this Section 9.5(a) shall be made prior to the
establishment of the $25,000,000 reserve referenced in Section 9.3(b).
(b) In the event no payments are due to the Buyer Indemnitee
pursuant to Section 9.3(c), on the fifteenth day following the tenth
Determination Date, the Buyer shall disburse to the Sellers, in accordance
with their respective Ownership Percentages: (i) funds equal to the sum of
(A) the amount of any funds in the Escrow Account, (B) the amount of any funds
theretofore withdrawn from the Escrow Account and (C) the amount of any Notes
theretofore offset and not paid into the Escrow Account, but only to the
extent Available Cash exceeds the Loss Estimate as of the tenth Determination
Date and (ii) any Available Cash (exclusive of amounts disbursed pursuant to
clause (i)) to the extent Available Cash exceeds the Maximum Production Site
Indemnity. On the fifteenth (15th) day following each of
<PAGE>82
the eleventh through the fourteenth Determination Dates, the Buyer shall
disburse to the Sellers, in accordance with their respective Ownership
Percentages, any Available Cash to the extent such Available Cash exceeds the
Maximum Production Site Indemnity. On the fifteenth (15th) day following each
Determination Date commencing with the fifteenth Determination Date and until
the provisions of this Article IX are terminated, the Buyer shall disburse to
the Sellers, in accordance with their Ownership Percentages, Available Cash to
the extent Available Cash exceeds the Loss Estimate as of such Determination
Date.
(c) The Buyer shall also promptly disburse Available Cash to the
Sellers Representative or any Seller (i) in the event that such Seller or the
Sellers' Representative participates in or assumes the defense (or shares in
the control of the defense) of any pending or threatened action, claim or
proceeding pursuant to Section 9.7, in reimbursement of reasonable costs and
expenses incurred by such Seller or the Sellers' Representative in connection
with investigating, preparing for or defending any such pending or threatened
action, claim or proceeding, as and when such costs and expenses are incurred,
and (ii) in reimbursement of any reasonable costs and expenses incurred by any
such Seller or the Sellers' Representative in connection with the engagement
of any Independent Consultant pursuant to Section 9.6(c), and in any case
described in this Section 9.5(c), irrespective of any Loss Estimate
outstanding at such time and irrespective of the Maximum Production Site
Indemnity; provided, that, in the case of a claim for reimbursement by any
individual Seller, Sellers having a majority of the Ownership Percentage shall
have approved in writing the incurrence of such costs and expenses by such
Seller.
(d) Notwithstanding anything contained in this Agreement or the
Contingent Payment Agreement to the contrary, upon termination of the
Contingent Payment Agreement, GEV and the Buyer shall thereafter, and shall
cause each of their respective Subsidiaries to thereafter, promptly pay to the
Sellers in accordance with their respective Ownership Percentages an amount
equal to the amount of any Revenues (as defined in the Contingent Payment
Agreement but excluding Revenues referred to in Section 5.02(a) of the
Contingent Payment Agreement) received by GEV or any of its Subsidiaries in
excess of the most recent Loss Estimate, as and when received; provided,
however, that to the extent any Seller owes any amount to GEV or the Buyer on
account of such Seller s Personal Indemnity or otherwise under Section 8.1(a)
or 9.1(a), GEV shall be entitled to offset any payment otherwise owing to such
Seller pursuant to this Section 9.5(d) against such amount and remit the
excess (and less the balance of the Loss Estimate referred to above), if any,
to such Seller.
<PAGE>83
Section 9.6 Loss Estimates. (a) Until the provisions of this
Article IX are terminated, within fifteen days after each Determination Date
commencing with the first Determination Date and upon termination of the
Contingent Payment Agreement, the Buyer shall deliver a written notice (each,
a "Loss Estimate Notice") to the Sellers' Representative setting forth (i) the
Loss Estimate as of such Determination Date, (ii) the amount and a brief
description of each element constituting the Loss Estimate, (iii) the
aggregate outstanding principal amount under the Notes (other than portions of
the Notes included in Available Cash), and (iv) the amount of Available Cash.
The Loss Estimate shall be accompanied by checks (when applicable) payable to
the order of each Seller, in accordance with such Seller's Ownership
Percentage, which checks shall be in the aggregate amount of any Available
Cash payable to the Sellers pursuant to the terms and conditions of
Section 9.5 hereof.
(b) As used in this Agreement, the term "Estimated Environmental
Losses" shall mean, as of any Determination Date, the reasonable and good
faith estimate of the Buyer's Board of Directors, based on Seller
Environmental Matters then actually existing (and not speculative in nature)
known to such Board and taking into account the probability and magnitude of
Loss, of the present discounted value of all Environmental Losses for which
the Buyer Indemnitees will be entitled to indemnification under the Seller
Environmental Indemnity with respect to such Seller Environmental Matter, less
all amounts recoverable in respect of such Environmental Losses pursuant to
any Indemnification Contract with respect to which the other party thereto has
begun to perform such obligations, has acknowledged to the Buyer its
obligation to perform or, in the reasonable and good faith judgement of the
Buyer's Board of Directors, is likely to perform; and provided, however, that
costs and expenses relating to Environmental Work may be included in the
calculation of Estimated Environmental Losses only if such Environmental Work
(i) is an Environmental Investigation, or (ii) if other than Environmental
Investigation, (A) has been commenced or (B) is scheduled to commence in
accordance with any Governmental Approval or Environmental Law, or (C) is the
subject of an active Environmental Investigation which has proceeded to a
point that the Buyer has obtained results from sampling or analysis which
allow the Board of Directors of the Buyer to reasonably conclude that
corrective measures are likely to be required, in which event, and subject to
the standards set forth above, the Environmental Work contemplated by such
corrective measures may be included in Estimated Environmental Losses,
regardless of whether specific corrective measures have been selected; and
provided further, that any costs and expenses relating to Environmental Work
arising from or relating to any Seller Production Site Environmental Matter
arising from or relating to
<PAGE>84
any portion of the Henderson Site or the Basic Site which are subject to the
environmental conditions assessment process currently pursued by the Henderson
Industrial Site Steering Committee (the "Steering Committee") and which have
been disclosed by the Sellers to the Buyer may be included in the calculation
of Estimated Environmental Losses only if and to the extent that such
Environmental Work (A) is an Environmental Investigation or (B) if other than
Environmental Investigation, is the subject of an active Environmental
Investigation which has proceeded to a point that the Buyer has obtained
results from sampling or analysis which allow the Board of Directors of the
Buyer to reasonably conclude that corrective measures are likely to be
required, in which event, and subject to the standards set forth above, the
Environmental Work contemplated by such corrective measures may be included in
Estimated Environmental Losses, regardless of whether specific corrective
measures have been selected. It is not the intent of the parties that the
process for determining Estimated Environmental Losses necessarily be the same
as the process for determining any reserves for environmental matters that the
Company may need to maintain for financial statement purposes. Accordingly,
the Company shall not be limited as a result of the amount of any such
financial statement reserves in determining Estimated Environmental Losses.
(c) If the Sellers' Representative disagrees, in whole or in part,
with the Loss Estimate set forth in any Loss Estimate Notice, the Sellers'
Representative shall provide written notice to Buyer of such objection within
thirty (30) days of the date of such Loss Estimate Notice. The Buyer and the
Sellers' Representative shall thereupon negotiate in good faith for the next
thirty (30) days in order to resolve any dispute. If the parties are unable
to resolve such dispute within the thirty-day period and the dispute involves
the determination of an Environmental Loss, an Estimated Environmental Loss,
an Accepted Remediation Method, or other technical (non-legal) environmental
matter, the parties shall hire an Independent Consultant mutually acceptable
to both parties who shall be charged with resolving such dispute and whose
decision shall be final and binding on all parties to this Agreement. All
costs and expenses of such Independent Consultant shall be borne 50% by the
Sellers and 50% by the Buyer Indemnitee. If the parties cannot mutually agree
on the choice of an Independent Consultant, each party shall retain separate
Independent Consultants, at such party's sole cost and expense, who shall
select a third Independent Consultant, whose costs and expenses shall be borne
50% by the Sellers and 50% by the Buyer Indemnitee, and whose decision shall
be final and binding on the parties.
<PAGE>85
(d) Both parties shall cooperate with and assist the Independent
Consultant selected pursuant to the provisions of Section 9.6(c) to the extent
reasonably possible. The Independent Consultant shall be entitled to conduct
such investigations and to base his or her decision on such matters as he or
she deems necessary, desirable or appropriate, provided that such Independent
Consultant's conclusions shall be controlled by the provisions and definitions
set forth in this Agreement including without limitation, the definitions of
Environmental Loss, Estimated Environmental Loss and Accepted Remediation
Method, as such may be amended from time to time.
(e) Until the fifteenth day following the tenth Determination Date,
all principal payments and any interest payments on the Notes, but only to the
extent such interest payments together with Available Cash do not exceed the
most recent Loss Estimate (but not including any payments as to which offset
has been effected as referred to in the penultimate sentence of this
paragraph), shall be paid by GEV into a segregated interest-bearing account
(the "Escrow Account") at a bank or other financial institution mutually
acceptable to Buyer and Sellers' Representative and pursuant to an Escrow
Agreement in a form mutually and reasonably acceptable to Buyer and Sellers'
Representative and neither the Buyer nor GEV shall be deemed in default with
respect to any such payments (the amount so deposited into such account being
referred to as the "Escrow Amount"). Interest on any funds so deposited shall
be treated as any other funds in the Escrow Account. Interest payments under
the Notes not included in the Escrow Amount and deposited into the Escrow
Account shall be paid to the Sellers as required by the Notes. An election of
setoff against the Notes or the Escrow Account shall not occur or be deemed to
have occurred until and unless the setoff is actually consummated to effect
payment of a Loss or an Environmental Loss and payment of amounts due on the
Notes into an interest-bearing account shall not constitute such consummation.
Any funds deposited in lieu of payment shall be paid over to the Sellers,
together with any interest earned on such funds, in accordance with the
provisions of Section 9.5 hereof.
Section 9.7 Environmental Indemnification Procedures. (a) If an
Environmental Loss occurs and the Buyer Indemnitee asserts that the Sellers
have become obligated to the Buyer Indemnitees pursuant to the Seller
Environmental Indemnity, the Buyer Indemnitee shall give the Sellers'
Representative written notice of such Environmental Loss (the "Buyer's Claim
Notice"), which notice shall briefly describe the amount and nature of the
Environmental Loss. Upon delivery of the Buyer's Claim Notice, the Buyer
shall be entitled to effect recovery of such Environmental Losses in
accordance with the procedures set
<PAGE>86
forth in Sections 9.2 and 9.3 hereof. Without limiting the Buyer Indemnitee s
right to payment pursuant to Section 9.2 and 9.3 hereof (regardless of the
existence of any dispute), if the Sellers desire to dispute the amount of,
Sellers responsibility for, or any other matter relating to any Environmental
Loss described in the Buyer's Claim Notice, the Sellers' Representative shall,
within thirty (30) days of the date of the Buyer's Claim Notice, deliver to
the Buyer a written notice setting forth the nature of such objection in
reasonable detail and the amount (if known) at issue. The Sellers'
Representative and the Buyer shall thereupon engage in good faith negotiations
for the next thirty (30) days in order to resolve such dispute. If the
parties are not able to resolve such dispute within such period, the parties
shall either resort to the procedures set forth in Section 9.6 hereof,
commencing with the mutual selection of an Independent Consultant if the
matter is one contemplated by Section 9.6, or otherwise have recourse under
Section 10.12 hereof to resolve such dispute.
(b) In the event that an Environmental Loss shall involve any suit,
action, claim, demand, investigation or proceeding (other than any such matter
involving Zeneca or any Henderson Site Agreement), the Buyer or any Affiliate
shall be entitled to assume sole and exclusive control over such matter by
counsel experienced in environmental matters of its choice which counsel is
reasonably satisfactory to the Sellers' Representative and shall be reimbursed
for any Losses incurred in connection therewith in accordance with Sections
9.2 and 9.3 hereof; provided, however, that the Buyer or any Affiliate shall
not make any settlement or compromise without the prior written consent of the
Sellers' Representative, which consent shall not be unreasonably withheld.
Subject to the Buyer's exclusive control of such matters, the Sellers'
Representative shall have the right, at its own cost and expense, to
participate in such matter, and the Buyer shall provide to the Sellers'
Representative copies of all notices and filings made or received by the Buyer
in connection with such matters. The Buyer Indemnitee shall, during the
course of such matter, consult with the Sellers Representative on a regular
basis to discuss the status of all ongoing matters and future options and
strategy with respect thereto. In addition, the Buyer shall meet with the
Sellers' Representative on a regular basis, and as may otherwise reasonably be
requested by the Sellers' Representative, during the course of such matter for
the purpose of permitting the Sellers' Representative to review the costs
(incurred and projected) of all such matters.
(c) Until the earlier of the termination of this Article IX or such
time as Kellogg is no longer an employee or director of GEV, any Company or
any of their respective
<PAGE>87
Affiliates, the Buyer and Kellogg, who shall be deemed to be the Sellers'
Representative for such purpose, shall share equally the control of any suit,
action, claim, demand, or proceeding by or against Zeneca or any Affiliate
thereof or against parties to any Henderson Site Agreement with respect to
Zeneca's or such other Person's indemnification obligations under the Zeneca
Purchase Agreement or any Henderson Site Agreement (the "Zeneca Litigation").
All costs, fees and expenses incurred in connection with the Zeneca Litigation
shall be borne 50% by the Buyer and 50% by the Sellers. The Buyer and Kellogg
shall consult frequently as to all aspects of the Zeneca Litigation, and shall
jointly make all decisions concerning the Zeneca Litigation, including,
without limitation, retention of counsel, experts and consultants, legal and
other strategy, costs and expenses and settlement. In the event that Kellogg
is no longer an employee or director of GEV, any Company or any of their
respective Affiliates, or unless otherwise mutually agreed by the Buyer and
Kellogg, the Buyer shall assume sole and exclusive control of the Zeneca
Litigation to the same extent as if such matter was subject to Section 9.7(b)
hereof.
(d) Subject to the terms and conditions of this Section 9.7(d), the
Buyer shall have sole and exclusive control over any Environmental Work which
forms the basis of any Environmental Loss. Prior to undertaking any
Environmental Work, or as soon as practical after undertaking any
Environmental Work on an emergency basis, for which a claim has been or (in
the case of any emergency condition) may be made against the Sellers under the
Sellers' Environmental Indemnity, the Buyer shall deliver to the Sellers a
written notice describing such Environmental Work in reasonable detail,
including estimated costs to be incurred. After the delivery of such notice,
the Buyer and the Sellers' Representative shall consult as to the choice of an
Accepted Remediation Method, if applicable, to accomplish such Environmental
Work. The Buyer shall at all times exercise reasonable efforts to perform any
Environmental Work which is or which it believes to be the responsibility of
the Sellers under the Seller Environmental Indemnity in the most efficient and
cost effective manner to accomplish the Environmental Work required. Not less
often than quarterly during the progress or more frequently if reasonably
requested by the Sellers' Representative and upon completion of such
Environmental Work, the Buyer shall provide in writing a report of the status
of such work, including all costs incurred through the date of such report,
and such other information regarding the work as may from time to time be
reasonably requested by the Sellers. The Sellers or their designated
representatives shall have the right upon request to review and audit
supporting documentation for all such costs. Buyer shall keep the Sellers'
Representative informed of all notices and correspondence given or received
and all actions
<PAGE>88
taken or proposed to be taken with respect to Seller Environmental Matters.
(e) Until the provisions of this Article IX terminate, the Buyer
agrees to meet with and cause the appropriate officers and representatives of
the Companies to meet with the Sellers' Representative from time to time upon
written request to consider and implement such notice or action as may be
requested by the Sellers for reasonable purposes relating to Environmental
Losses subject to the Seller Environmental Indemnity; provided that nothing
set forth herein shall obligate the Sellers, Buyer or any of the Companies to
reach agreement with respect to such matters or shall otherwise diminish the
Buyer's exclusive right to control described hereinabove and nothing set forth
in this section shall limit the Buyer from taking any action which the Buyer
deems necessary to comply with Environmental Laws or to minimize Environmental
Losses; provided, however, Sellers shall not be liable for any actions taken
by Buyer (other than those relating to an emergency condition) which are not
in substantial compliance with the notice, consultation and other requirements
set forth in this Agreement for the benefit and protection of Sellers, or for
any Environmental Losses which do not arise from or relate to a Seller
Environmental Matter.
(f) The notice and claim procedures to be followed by a Seller
Indemnitee with respect to a claim against the Buyer or GEV under Section
9.1(a) hereof shall be the same notice and claim procedures as set forth in
Section 8.2 with respect to general indemnification claims. Notwithstanding
anything contained in this Agreement to the contrary, if the Buyer fails to
timely and diligently pursue, defend, contest or protect against any suit,
action, claim or proceeding relating to a Seller Environmental Matter, and in
any event, fails to deliver a written undertaking to the Sellers'
Representative to do so, the Sellers' Representative shall have the right to
pursue, defend, contest or protect against any suit, action, claim or
proceeding, including, without limitation, the right to make any compromise or
settlement thereof.
Section 9.8 Certain Covenants Relating to the Pioneer Sites. (a)
Following the Closing, the Buyer will comply, and cause each of the Companies
to comply, with (i) the terms of the Henderson Site Agreements and (ii) the
covenants set forth in the Zeneca Purchase Agreement, including, without
limitation, the covenants and obligations set forth in Sections 5.14, 5.15,
5.16, 5.17 and 5.19 thereof.
(b) The Buyer shall permit the Sellers' Representative or his
designee, to attend and participate in (i) any meeting of the Steering
Committee (unless, after good faith efforts by Buyer
<PAGE>89
to secure such attendance and participation, precluded by vote of the members
of the Steering Committee) or with any environmental agency or local, state or
federal governmental body asserting authority over the Henderson Site or the
Basic Site, and (ii) any arbitration or similar proceeding with respect to a
Pioneer Site for which Sellers are claimed to be responsible under the Seller
Environmental Indemnity.
(c) In the event that Buyer or any of the Companies shall, after
the Closing Date, desire to undertake any maintenance, renovation,
construction, expansion, closure or related activities at or affecting any of
the Pioneer Sites, such activity shall be conducted in such manner so to
avoid, if possible, and in any event to minimize, to the extent practical, any
indemnification obligation of Sellers under Section 9.1 which may arise,
directly or indirectly, from such activity, taking into consideration and
balancing potential environmental costs to Sellers and economic considerations
to the Buyer of the proposed activity. Buyer further agrees to and shall
cause each Company (i) to use all commercially reasonable efforts to conduct
construction activities or expansion of plant facilities (including, without
limitation, buildings, plants, structures, ponds, detention areas, pipelines
and tanks) only on sites within the subject Pioneer Site which, to the
knowledge of the Buyer and the Company, do not or are unlikely to contain
Hazardous Materials for which an indemnification obligation of the Sellers
under Section 9.1 might arise, and (ii) not to conduct any construction
activities or expansion of plant facilities on any of the sites specified in
Section 9.8 of the Disclosure Schedule.
Section 9.9 Sellers' Representative. On or prior to Closing,
Sellers shall select a Person as the representative of the Sellers (the
"Sellers' Representative") for purposes of this Article IX. Any notices
required to be given by the Buyer, GEV or any other Buyer Indemnitee to the
Sellers under this Article IX shall be effective if given in the manner
prescribed in this Section 9.9 to the Sellers' Representative at the address
provided to the Buyer and GEV by notice pursuant to Section 10.6, or, in the
absence of such Seller s Representative, to each Seller at the address set
forth in Exhibit A-6 hereto or such other address as may be provided pursuant
to Section 10.6. Any approval or consent provided by the Sellers'
Representative to any Buyer Indemnitee in writing pursuant to this Article IX
shall be deemed to be approval or consent of the Sellers. In the event that
the specified Sellers' Representative is unable or unavailable to serve in
such capacity on behalf of the Sellers or if the Sellers elect in writing to
remove and replace the designated Sellers' Representative, the Sellers may
elect a new representative to serve in such capacity and perform any actions
required hereunder by a majority vote of the Sellers based on
<PAGE>90
their respective Ownership Percentages. The appointment of a successor or
replacement Sellers' Representative shall be effective upon receipt by the
Buyer of notice to such effect from the existing Sellers' Representative or
from the Sellers holding the interest necessary to select the successor or
replacement the Sellers' Representative, provided that no such removal or
replacement of Sellers Representative shall alter or affect any action taken
by the Buyer or any Buyer Affiliate with the approval of the Sellers'
Representative and prior to any notice of removal or replacement. In the
event that there shall not be a Sellers' Representative hereunder, Sellers
representing a majority of the Ownership Percentages shall be entitled to act
for the Sellers hereunder until the Sellers notify the Buyer or GEV of the
election of a replacement Sellers' Representative.
Section 9.10 Exclusive Remedy for Losses Relating to Environmental
Matters. Except as set forth in this Section 9.10, the Seller Environmental
Indemnity shall be the exclusive remedy of the Buyer and any Buyer Indemnitees
against the Sellers for any Environmental Loss affecting the Companies, the
Buyer or any Buyer Affiliates. Except as set forth in this Section 9.10, the
Buyer Environmental Indemnity shall be the exclusive remedy of the Sellers and
any Seller Indemnitees against the Buyer and any of its Affiliates for any
Environmental Loss affecting the CPA Properties, the Sellers or any Sellers'
Affiliates. It is the intention of the parties hereto that the
representations and warranties of the parties contained in Articles II and III
and elsewhere in this Agreement shall not be construed to address or cover
Environmental Losses and that liabilities or indemnification obligations of
the parties respecting Environmental Losses shall be covered solely by this
Article IX, except that breaches of the representations and warranties
contained in Sections 2.18 and 2.28 shall be subject to the provisions of
Article VIII. Accordingly and notwithstanding any provision in this Agreement
(except the foregoing and the next sentence) to the contrary, no claim for
Environmental Losses shall be made by any party to this Agreement under any of
the representations and warranties set forth in Articles II and III of this
Agreement or under or pursuant to any other provision of this Agreement other
than this Article IX. Notwithstanding the foregoing, the provisions of this
Article IX shall not be deemed to preclude an action by any party for, or a
recovery pursuant to a final decision of a court of competent jurisdiction
against any party for, actual (not negligent or unintentional) fraud.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Survival of Provisions. The respective covenants and
agreements of each of the parties to this Agreement
<PAGE>91
(except covenants and agreements which are expressly required to be performed
and are performed in full on or before the Closing Date) shall survive the
Closing Date and the consummation of the transactions contemplated by this
Agreement. In the event of a breach of any of such covenants and agreements,
the party to whom such covenants and agreements have been made shall have all
rights and remedies for such breach available to it under the provisions of
this Agreement or otherwise, whether at law or in equity.
Section 10.2 Publicity. None of the Sellers, the Companies, the
Buyer or GEV shall issue any press release or otherwise make any public
announcement or disclosure regarding this Agreement or the transactions
contemplated hereby. Notwithstanding any of the foregoing to the contrary,
the Sellers, the Companies, GEV and the Buyer shall be entitled to make such
disclosures to the extent required by any applicable law, rule or regulation,
including, without limitation, rules and regulations of stock exchanges or
other trading systems, whether in connection with obtaining the consents and
approvals contemplated by Section 4.5 hereof or otherwise, provided that, in
the case of the Sellers or the Companies, such persons shall first notify the
Buyer and GEV in writing and shall consult in good faith with the Buyer and
GEV regarding the necessity and scope of such disclosure and that, in the case
of the Buyer and GEV, the Buyer and GEV shall first notify the Majority
Selling Shareholders in writing and shall consult in good faith with the
Majority Selling Shareholders regarding the necessity and scope of such
disclosure.
Section 10.3 Successors and Assigns; No Third-Party
Beneficiaries. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and assigns;
provided, however, that no party shall assign or delegate any of the
obligations created under this Agreement without the prior written consent of
the Buyer and GEV, in the case of the Sellers, and the Sellers
Representative, in the case of the Buyer and GEV. Nothing in this Agreement
shall confer upon any Person not a party to this Agreement, or the legal
representatives of such Person, any rights or remedies of any nature or kind
whatsoever under or by reason of this Agreement.
Section 10.4 Investment Bankers, Financial Advisors, Brokers and
Finders. (a) Each Seller represents and warrants to the Buyer that, except
for Schnitzius & Vaughan and Wertheim Schroder & Co. Incorporated, such Seller
has not employed the services of a broker or finder in connection with this
Agreement or any of the transactions contemplated hereby. Each Seller
indemnifies and agrees to defend and hold the Buyer and each of
<PAGE>92
the Companies harmless against and in respect of all claims, losses,
liabilities and expenses which may be asserted against the Buyer (or any
Affiliate of the Buyer) by any broker or other person who claims to be
entitled to an investment banker's, financial advisor's, broker's, finder's or
similar fee or commission in respect of the execution of this Agreement, or
the consummation of the transactions contemplated hereby, by reason of his
acting at the request of such Seller, except that the parties agree that the
fees and expenses of the firms specified above shall be borne by Pioneer.
(b) The Buyer and GEV represent and warrant to the Sellers that
neither of them has employed the services of an investment banker, financial
advisor, broker or finder in connection with this Agreement or any of the
transactions contemplated hereby. The Buyer and GEV, jointly and severally
indemnify and agree to save and hold the Sellers harmless against and in
respect of all claims, losses, liabilities, fees, costs and expenses which may
be asserted against them by any broker or other person who claims to be
entitled to an investment banker's, financial advisor's, broker's, finder's or
similar fee or commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby, by reason of his acting
at the request of the Buyer or GEV.
Section 10.5 Fees and Expenses. Except as otherwise expressly
provided in this Agreement, all legal and other fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby ("Transaction Costs") shall be paid by the party incurring such
Transaction Costs except that all reasonable Transaction Costs, including,
without limitation, the costs of the directors and officers insurance
contemplated by Section 4.14, incurred by the Companies and the Sellers up to
a maximum amount of $4,000,000 (excluding from such amount the referenced
directors and officers insurance) shall be borne by Pioneer. In addition,
notwithstanding any of the foregoing to the contrary, in the event that the
transactions contemplated by this Agreement are consummated, all Transaction
Costs incurred by the Buyer or GEV shall be paid by Pioneer, but such
Transaction Costs shall not be taken into account in determining Net Earnings.
Section 10.6 Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
given or made if in writing and delivered personally or sent by registered or
certified mail (postage prepaid, return receipt requested) or by facsimile
transmission or overnight courier service to the parties at the following
addresses or facsimile numbers:
<PAGE>93
(a) If to the Buyer, to:
GEV Corporation
165 Mason Street
Greenwich, Connecticut 06830
Fax: (203) 629-8554
Attention: Chairman of the Board
with copies to:
Interlaken Capital, Inc.
165 Mason Street
Greenwich, Connecticut 06830
Fax: (203) 629-8554
Attention: William L. Mahone, Esq.
- and -
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Fax: (212) 821-8111
Attention: Cornelius T. Finnegan, III, Esq.
(b) If to the Sellers, to:
Richard C. Kellogg, Jr.
c/o Pioneer Chlor Alkali Company, Inc.
700 Louisiana, 42nd Floor
Houston, Texas 77002
- and -
Frans G.J. Speets
c/o All-Pure Chemical Company
1660 West Linne Road
Tracy, California 95376
- and -
D.A. Huckabay
2531 Lakeridge Shores Circle
Reno, Nevada 89509
<PAGE>94
with a copy to:
Andrews & Kurth L.L.P.
Texas Commerce Tower
600 Travis, Suite 4200
Houston, Texas 77002
Fax: (713) 220-4285
Attention: John T. Cabaniss, Esq.
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication
shall be deemed to have been given or made as of the date so delivered or
mailed. No change in any of such addresses shall be effective insofar as
notices under this Section 10.6 are concerned unless such changed address is
located in the United States of America and notice of such change shall have
been given to such other party hereto as provided in this Section 10.6.
Section 10.7 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, represents the entire agreement and
understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein or in the exhibits,
schedules or certificates delivered in accordance herewith. This Agreement
supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter of this Agreement, all of which are merged into this
Agreement.
Section 10.8 Waivers and Amendments. Each of the Majority Selling
Shareholders or, upon his selection, the Sellers' Representative and the Buyer
may by written notice to the other (a) extend the time for the performance of
any of the obligations or other actions of the other; (b) waive any
inaccuracies in the representations or warranties of the other contained in
this Agreement; (c) waive compliance with any of the covenants of the other
contained in this Agreement; (d) waive performance of any of the obligations
of the other created under this Agreement; or (e) waive fulfillment of any of
the conditions to its own obligations under this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by the parties hereto.
Section 10.9 Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any
<PAGE>95
term or provision hereof shall not affect the validity or enforceability of
this Agreement or of any other term or provision hereof.
Section 10.10 Titles and Headings. The Article and Section
headings and the Table of Contents contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 10.11 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
Section 10.12 Convenience of Forum; Consent to Jurisdiction.
SUBJECT TO THE PROVISIONS OF SECTION 9.6(c), THE PARTIES TO THIS AGREEMENT,
ACTING FOR THEMSELVES AND FOR THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, WITHOUT
REGARD TO DOMICILE, CITIZENSHIP OR RESIDENCE, HEREBY CONSENT AND SUBJECT
THEMSELVES TO THE NON-EXCLUSIVE JURISDICTION OF, THE COURTS OF THE STATE OF
DELAWARE LOCATED IN WILMINGTON DELAWARE, AND/OR THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF DELAWARE, IN RESPECT OF ANY MATTER ARISING UNDER
THIS AGREEMENT OR ANY RELATED AGREEMENT. SERVICE OF PROCESS, NOTICES AND
DEMANDS OF SUCH COURTS MAY BE MADE UPON ANY PARTY TO THIS AGREEMENT BY
PERSONAL SERVICE AT ANY PLACE WHERE IT MAY BE FOUND OR GIVING NOTICE TO SUCH
PARTY AS PROVIDED IN SECTION 10.6.
Section 10.13 Enforcement of the Agreement. The parties hereto
agree that irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 10.14 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF.
Section 10.15 Knowledge of Sellers; Knowledge of Buyer. As used in
this Agreement, (i) the terms "knowledge of Sellers" and "best of Sellers'
knowledge," or words to that effect, shall refer to all facts of which a
Seller, individually, or any officer or director of any of the Companies shall
have actual knowledge; and (ii) the terms "knowledge of Buyer" and
<PAGE>96
"best of Buyer's knowledge", or words to that effect, shall refer to all facts
of which any officer or director of the Buyer or GEV shall have notice or
actual knowledge.
Section 10.16 Certain Beneficially Owned Shares. In recognition of
the fact that, for estate planning and other personal reasons, the Shares
owned of record by the Kiowa Estate Trust, the Sonora Trust, the Huckabay 1987
Trust and the April 26, 1988 Clawson Living Trust were transferred thereto by
or at the direction of Kellogg, Speets, Huckabay and Clawson, respectively,
(each, a "Grantor"), each Grantor agrees to be jointly and severally liable
with the trust established by or at the direction of such Grantor for all
purposes for which a Seller may be liable pursuant to the terms of this
Agreement, including, without limitation, Articles VIII and IX hereof.
Notwithstanding any of the foregoing to the contrary, nothing contained in
this Section shall alter or effect in any way the rights and obligations of
Kellogg, Speets or Huckabay as the Majority Selling Shareholders hereunder.
<PAGE>97
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
/s/ Richard C. Kellogg, Jr. /s/ Frans G.J. Speets
Richard C. Kellogg, Jr., Frans G.J. Speets,
individually, as a Majority individually, as a Majority
Selling Shareholder, and as Selling Shareholder and as
provided in Section 10.16 provided in Section 10.16
/s/ D. A. Huckabay /s/ Carl F. Clawson
D. A. Huckabay, Carl F. Clawson,
as a Majority Selling as provided in Section 10.16
Shareholder and as
provided in Section 10.16
<PAGE>98
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
PIONEER AMERICAS ACQUISITION GEV CORPORATION
CORP.
By:/s/ Catherine B. James By:/s/ Catherine B. James
Name: Catherine B. James Name: Catherine B. James
Title: President Title: President
HUCKABAY 1987 TRUST 1988 CLAWSON LIVING TRUST
By:/s/ Durward Huckabay By:/s/ Carl F. Clawson
Durward Huckabay, as Carl F. Clawson, as
Trustee Trustee
R.J. SHOPF KEOGH PLAN
By:/s/ R. J. Shopf /s/ Paul J. Kienholz
Paul J. Kienholz,
individually
/s/ Benny L. Bennett /s/ James E. Glattly
Benny L. Bennett, James E. Glattly,
individually individually
/s/ Deborah N. Adams /s/ George T. Henning, Jr.
Deborah N. Adams, George T. Henning, Jr.,
individually individually
/s/ Verrill Norwood /s/ Raymond Bart
Verrill Norwood, Raymond Bart,
individually individually
/s/ Julie Johnson
Julie Johnson,
individually
<PAGE>99
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 24th
day of March 1995.
KIOWA ESTATE TRUST
By: Southpac Trust International Inc.,
as trustee
By:/s/ Leanne Corvette
Leanne Corvette
<PAGE>101
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 24th
day of March 1995.
SONORA TRUST
By: Southpac Trust International Inc.,
as trustee
By:/s/ Leanne Corvette
Leanne Corvette
<PAGE>101
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 30th day
of March, 1995.
/s/ Kennith C. Hewitt
Kennith C. Hewitt,
individually
<PAGE>102
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 28th day
of March, 1995.
/s/ William M. Ashman
William M. Ashman,
individually
<PAGE>103
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 25th day
of March, 1995.
/s/ Joan Gaines
Joan Gaines,
individually
<PAGE>104
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the 24th day
of March, 1995.
BOARD OF REGENTS OF THE
UNIVERSITY OF WASHINGTON
By:/s/ Tallman Trask III
Name: Tallman Trask III
Title: Executive Vice President
<PAGE>105
IN WITNESS WHEREOF, the undersigned has executed this Stock Purchase
Agreement among GEV, the Buyer, the Majority Selling Shareholders, the
shareholders of Pioneer and the other persons named herein as of the ______
day of _____, 1995.
ING (U.S.) INVESTMENT CORPORATION
By:/s/ Barry A. Iseley
Name: Barry A. Iseley
Title:
<PAGE>106
EXHIBIT A-1
Current Shareholders of Pioneer
Name of Number of Shares Beneficially
Selling Shareholder Owned by such Selling Shareholder
- ------------------- ---------------------------------
Southpac Trust International,
Inc., as trustee of the Kiowa
Estate Trust 450,000
Southpac Trust International,
Inc., as trustee of the Sonora
Trust 450,000
Durward Huckabay and Susan
Huckabay, as trustees of
the Huckabay 1987 Trust
dated November 6, 1987 319,975
Richard C. Kellogg, Jr. 50,000
Frans G.J. Speets 50,000
Paul J. Kienholz 23,088
William M. Ashman 22,222
James E. Glattly 11,544
George T. Henning, Jr. 11,544
Carl F. Clawson and Betty
Fowler Clawson, as
trustees of the April 26,
1988 Clawson Living Trust 10,222
Julie Johnson 6,000
Joan Gaines 6,000
Kennith C. Hewitt 5,772
Benny L. Bennett 5,772
Deborah N. Adams 4,679
R.J. Shopf Keogh Plan 2,500
Board of Regents of the
University of Washington 80,025
---------
Total 1,509,343
<PAGE>107
EXHIBIT A-2
Preferred Stock Holders
Number of Shares
Beneficially owned by
Name of such Preferred
Preferred Stock Holder Stock Holder**
- ---------------------- ---------------------
D.A. Huckabay 15,748
The Roy H. Weaver and Bernadette
M. Weaver Trust dated April 13, 1993 7,817
John H. Huckabay 6,164
George Ewart 5,137
Katherine Williams 5,000
Richard Williams 5,000
Frank B. Belliss 2,567
Kathleen S. Claycomb 2,567
------
Total (Series A Preferred Stock) 50,000 *
______________________
* All shares of the Series A Preferred Stock are held of record by D.A.
Huckabay and are subject to that certain Voting Trust Agreement pursuant to
which D.A. Huckabay serves as Voting Trustee.
** The numbers presented may be subject to adjustment due to rounding.
<PAGE>108
EXHIBIT A-3
Allocation of Pioneer Securities
Number of shares of Common Stock to be purchased by GEV: 145,536.
All other shares of Common Stock and the Options will be purchased by
the Buyer.
<PAGE>109
EXHIBIT A-4
PIONEER AMERICAS, INC.
(Allocation of Purchase Price)
<TABLE>
<CAPTION>
Amounts to Shareholders (in 000s)**
Shareholders # of Shares % Ownership Cash Notes Total
<S> <C> <C> <C> <C> <C>
Southpac Trust International, Inc., as trustee of the
Kiowa Estate Trust 450,000 26.43% 25,542 2,893 28,435
Richard C. Kellogg, Jr. 50,000 2.94% 2,838 321 3,159
Southpac Trust International, Inc., as trustee of the
Sonora Trust 450,000 26.43% 25,542 2,893 28,435
Frans G.J. Speets 50,000 2.94% 2,838 321 3,159
Durward Huckabay and Susan Huckabay, as trustees of
the Huckabay 1987 Trust dated November 6, 1987 319,975 18.79% 18,162 2,057 20,219
University of Washington 80,025 4.70% 4,542 514 5,057
ING (to be named) 170,271 10.00% 9,665 1,095 10,759
Paul J. Kienholz 23,088 1.36% 1,310 148 1,459
William M. Ashman 22,222 1.31% 1,261 143 1,404
James E. Glattly 11,544 0.68% 655 74 729
George T. Henning, Jr. 11,544 0.68% 655 74 729
Carl F. Clawson and Betty Fowler Clawson, as trustees
of the April 26, 1988 Clawson Living Trust 10,222 0.60% 580 66 646
Julie Johnson 6,000 0.35% 341 39 379
Joan Gaines 6,000 0.35% 341 39 379
Kennith C. Hewitt 5,772 0.34% 328 37 365
Benny L. Bennett 5,772 0.34% 328 37 365
Deborah N. Adams 4,679 0.27% 266 30 296
R.J. Shopf Keogh Plan 2,500 0.15% 142 16 158
Option Holders
Raymond A. Bart* 11,544 0.68% 551 74 626
Verrill M. Norwood* 11,544 0.68% 586 74 660
Total 1,702,702 100.00% 96,474 10,945 107,419
</TABLE>
(1) The proportionate cash portions of the Amounts to Shareholders for R.A.
Bart and V. Norwood have been reduced for the exercise cost of their ISOs
in the amount of 104 and 69, respectively. The total amount, 173, is
shared by all recipients, including Bart and Norwood, proportionate to
their interests.
(2) For purposes of this Exhibit, Refinancing Costs have been estimated and
further adjustments in cash and notes may be required when the actual
amount of Refinancing Costs has been determined. Further adjustments may
also be required pursuant to Section 1.4 of the Agreement.
<PAGE>110
EXHIBIT A-5
Adjustments to Cash Portion of Purchase Price
Year End Debt $45,505,000
Preferred Dividend Amount 1,700,000
Preferred Stock Redemption 5,000,000
Substitute Option Payments 720,000
Contingent Bank Fee 1,770,000
----------
Total $54,695,000
<PAGE>111
EXHIBIT B
CERTAIN DEFINED TERMS
Capitalized terms used but not defined in the Agreement shall have
the meanings set forth below on this Exhibit B.
"Accepted Remediation Method" means the most cost-effective method
utilizing demonstrated technology for remediation of the environmental matter
which (i) is acceptable to environmental agencies having jurisdiction, (ii) is
limited to only such procedures as are required to bring the property affected
into compliance with applicable Environmental Laws and (iii) does not
unreasonably interfere, or, among all available alternatives which satisfy the
requirements of clauses (i) and (ii), results in the least interference, with
the operations relating to the production and sale of Products by any of the
Companies.
"Acquisition Financing" means the financing arranged on behalf of
the Buyer for the purpose of consummating the transactions contemplated herein
and the Companies thereafter, including, without limitation, (i) a credit
facility of approximately $30,000,000, (ii) the issuance of approximately
$135,000,000 aggregate principal amount of Senior Notes due 2005, (iii) the
issuance of approximately 11,363,636 shares of Class A Common Stock to the
Interlaken Partnership and (iv) the issuance of approximately 4,545,455 shares
of Class A Common Stock to the Investors.
"Additional Capital" means the total amount of any cash proceeds
received by Pioneer on or after January 1, 1995 upon the exercise of any
warrant or option for, or any other right to purchase, any capital stock of
Pioneer, provided that such warrant, option or right was outstanding as of
January 1, 1995.
"All Pure" means All Pure Chemical Co., a California corporation.
"All Pure Sites" means that certain real property, and all
buildings, structures and improvements thereon, leased by All Pure, or any of
its subsidiaries as of the Closing Date in the States of California and
Washington, comprised of (i) the leased site at Tracy, California, which
contains the bleach plant facility and its ancillary buildings and offices;
(ii) the leased site at Santa Fe Springs, California, which contains the
bleach plant facility and its ancillary buildings and offices; (iii) the
leased site at Marysville, California, which contains the bleach plant
facility and its ancillary buildings and offices; and (iv) the leased site at
Kalama, Washington, which contains the bleach plant facility and its ancillary
buildings and offices; such sites being more particularly described in Section
2.13 of the Disclosure Schedule.
<PAGE>112
"Allocated Reserve" means that portion of the reserve for certain
contingent liabilities established on the consolidated balance sheet of the
Companies included in the 1994 Financial Statements allocated to the specific
matters and in the amounts set forth on Section 9.2 of the Disclosure
Schedule. For the purpose of calculating the amount of such reserves
available for future periods, the amount shall be as set forth on the
Disclosure Schedule without regard to present value discount calculations.
"Available Cash" means any funds in the Contingent Payment Account
or the Escrow Account; provided, however, (A) that for purposes of (x) any
indemnification obligation pursuant to Section 8.4(b) hereof and (y)
determination of the Personal Indemnity Limit on the fifth Determination Date
and the Personal Indemnity Limit on each subsequent Determination Date
pursuant to Section 9.3(a) hereof, a Buyer Indemnitee shall treat any amounts
payable under the Notes as Available Cash, and (B) that for purposes of
Environmental Losses (but not Estimated Environmental Losses) subject to the
Seller Environmental Indemnity, GEV may, at its sole discretion, treat any
amounts payable under the Notes as Available Cash.
"Basic" means Basic Investments, Inc., a Nevada corporation.
"Basic Site" means that certain real property, and all buildings,
structures and improvements thereon, owned as of the Closing Date by Basic,
Basic Management, Inc., a Nevada corporation, Basic Land Company, a Nevada
corporation, Basic Water Company, a Nevada corporation, and Victory Valley, in
Clark County, Nevada.
"Basic/VVLC Distributions" means any dividends, distributions or
other payments paid by Basic or Victory Valley on or after January 1, 1995 on
any equity interests of Basic or Victory Valley held by a Company, net of all
taxes paid or payable by Pioneer with respect to such dividends, distributions
or other payments.
"Buyer CPA Property Environmental Matter" means (i) any Hazardous
Discharge by the Buyer, a Company or any of their respective Affiliates or
other violation of Environmental Law by the Buyer, a Company or any of their
respective Affiliates arising after the Closing Date with respect to a CPA
Property or (ii) any claim, demand or proceeding commenced after the Closing
Date by any Person (including, without limitation, the Sellers) under any
Environmental Law or pursuant to any Indemnification Contract arising from or
relating to the matters referenced in clause (i) above.
"Buyer Environmental Indemnity" means the obligations of the Buyer
and GEV pursuant to Section 9.1(b) of the Agreement.
<PAGE>113
"Buyer Environmental Matter" means (i) any Buyer Production Site
Environmental Matter and (ii) any Buyer CPA Property Environmental Matter.
"Buyer Production Site Environmental Matter" means (i) any Hazardous
Discharge or other violation of Environmental Law arising after the Closing
Date arising from or relating to a Production Site or a Buyer Waste Site or
(ii) any claim, demand or proceeding commenced at any time by any Person
(including, without limitation, the Sellers) under any Environmental Law or
pursuant to any Indemnification Contract arising from or relating to the
matters referenced in clause (i) above.
"Buyer Waste Sites" means any real property or facility to which the
Buyer, any Company or any of their respective Affiliates shall have shipped or
arranged for the shipment of Hazardous Materials for treatment, storage or
disposal (as defined in RCRA) after the Closing Date.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq., as amended
by the Superfund Amendment and Reauthorization Act of 1986 and as further
amended from time to time; provided that when used in the context of
responsibility of Sellers for a Seller Production Site Environmental Matter or
respecting compliance by any Company on or prior to the Closing Date, CERCLA
shall be such Law as in effect on or prior to the Closing Date, except that
this proviso shall not apply to Government Approvals issued after the Closing
Date to the extent based on Laws in effect as of the Closing Date.
"Chevron Note" means that certain promissory note from PCAC to
Zeneca or a Zeneca Affiliate referred to in the Zeneca Purchase Agreement.
"Contingent Bank Fee" shall mean the fees payable to certain lenders
of PCAC pursuant to six separate Contingent Fee Agreements, each dated as of
December 31, 1992, which fee payment as tax effected by agreement of the
parties is $1,770,000 in accordance with and as reflected in Exhibit A-5.
"Contingent Payment Account" has the meaning given such term in the
Contingent Payment Agreement.
"Contingent Payment Amount" means any funds which exist from time to
time in the Contingent Payment Account.
"CPA Properties" means the Released Basic Parcels and the Subject
Parcels.
"Determination Date" means each annual anniversary date of the
Closing Date.
<PAGE>114
"Environmental Investigation" means with respect to any site, any
investigation, feasibility study, or report, which is required by applicable
Environmental Laws or by any Governmental Authority and does not include
investigations, studies or reports otherwise prepared by or on behalf of Buyer
or any Company.
"Environmental Laws" means any and all Laws or Governmental
Approvals pertaining to protection or conservation of the environment in
effect from time to time, including, without limitation, CERCLA, the Federal
Water Pollution Control Act, 33 U.S.C. 1251 et seq., as amended, the Solid
Waste Disposal Act of 1976, 42 U.S.C. 6901 et seq., as amended, the Clean
Air Act, 42 U.S.C. 7401 et seq., as amended, the Safe Drinking Water Act, 42
U.S.C. 300f et seq., as amended, the Toxic Substances Control Act, 15 U.S.C.
2601 et seq., as amended, the Hazardous Materials Transportation Act, 49
U.S.C.A. 1801 et seq., as amended, the Federal Insecticide, Fungicide and
Rodenticide Act, as amended 7 U.S.C. 136-136y, as amended, Emergency
Planning and Community Right to Know Act of 1986, as amended, 42 USC 11001
et seq. and comparable state and local Laws and Governmental Approvals, as
such Laws and Governmental Approvals are in effect from time to time; provided
that when used with respect to Sellers, in the context of responsibility of
Sellers for a Seller Production Site Environmental Matter or respecting
compliance by a Company on or prior to the Closing Date, Environmental Law
shall be only such Laws as in effect on or prior to the Closing Date except
that this proviso shall not apply to Government Approvals issued after the
Closing Date to the extent based on Laws in effect as of the Closing Date.
"Environmental Permit" means any Governmental Approval required to
be issued by any Governmental Authority pursuant to any Environmental Law.
"Environmental Work" means, with reference to any particular site,
any removal, remedial or maintenance work arising from Hazardous Materials
disposed, discharged or released at such site, including, without limitation,
any Environmental Investigation relating thereto.
"Expense" has the meaning given to such term in the Contingent
Payment Agreement.
"Fair Market Value" means, with respect to any real property, the
price for which such real property may be sold in an arms' length transaction
(i) as agreed upon in writing between the Buyer and the Sellers'
Representative or (ii) if such parties fail to agree, as determined by an
independent appraiser mutually acceptable to both the Buyer and the Sellers'
Representative or (iii) if such parties cannot agree upon a mutually
acceptable independent appraiser, then each party shall select an independent
appraiser and the two independent appraisers shall
<PAGE>115
select a third whose decision as to Fair Market Value shall be final and
binding between the parties.
"GEV Proxy Statement" means the definitive proxy statement and
related proxy materials filed by GEV with the SEC on March 13, 1995.
"Governmental Approval" means any judgment, order, letter of
understanding, binding determination, decree (including a binding consent
order, consent decree or consent agreement), finding of violation,
authorization, ruling, permit, certificate or exemption issued by, or filing
or registration with, or approved by, any Governmental Authority or any
extension, modification, amendment or waiver of any of the foregoing by any
Governmental Authority.
"Governmental Authority" means any nation or government, any
federal, state, province, county, city, town, municipality, local or other
political subdivision thereof or thereto and any court, tribunal, department,
commission, board, bureau, instrumentality, agency or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other, governmental entity with authority
over the applicable subject matter.
"GPS" means GPS Pool Supply, Inc., a California corporation.
"GPS Note" means that certain promissory note in the original
aggregate principal amount of $3,254,339 issued to AMG Holdings, Inc.
"GPS Site" means that certain real property, and all buildings,
structures and improvements thereon, leased by GPS as of the Closing Date in
the State of California at City of Industry, California, which contain the
bleach plant facility and its ancillary buildings and offices, such site being
more particularly described in Section 2.13 of the Disclosure Schedule.
"Hazardous Discharge" means any disposal (as such term is defined in
the Resource Conservation and Recovery Act of 1976, as amended), or release
(as such term is defined in CERCLA) of a Hazardous Material into the
environment that is in violation of, or requires Environmental Work under, any
Environmental Law or Environmental Permit.
"Hazardous Material" means any and all wastes, pollutants, chemicals
or contaminants including asbestos and petroleum products and fractions of
petroleum products, which are defined by applicable Law as hazardous or toxic
or which are regulated or governed by any applicable Law.
<PAGE>116
"Henderson Site" means that certain real property, and all
buildings, structures, and improvements thereon, owned by PCAC as of the
Closing Date in and around Henderson, Nevada site, which includes a total of
approximately 439 acres in three separate plots at Henderson, Nevada,
comprised of (i) the main plant site area of approximately 367 acres, which
contains the chlor alkali plant facility, its ancillary buildings and offices,
the Saguaro cogeneration facility and the muriatic acid facility owned by
Montrose; (ii) an area of approximately 7.4 acres north of, but not contiguous
to, the main area, which contains a groundwater intercept facility; and (iii)
a plot of approximately 65 acres adjoining the main site on the west side of
the main area, which plot is separated from the main area by Highway 95.
"Henderson Site Agreements" means the Agreement Regarding Consent
Order, the Agreement Regarding Payment of Consent Order and the Montrose Lease
(each as referenced in the Zeneca Purchase Agreement) and the Ground Lease
between PCAC and Saguaro Power Company dated November 3, 1989, as amended, and
all ancillary agreements thereto.
"Imperial West" means Imperial West Chemical Company, a Nevada
corporation.
"Imperial West Sites" means that certain real property, and all
buildings, structures, and improvements thereon, owned or leased by Imperial
West as of the Closing Date in the States of California and Washington
comprised of (i) approximately 22 acres at Antioch, California which contain
the aluminum sulphite plant facility and its ancillary buildings and offices;
(ii) approximately 10 acres at Pittsburg, California, which contain the iron
chlorides plant facility and its ancillary buildings and offices; (iii)
approximately 474 acres at Mojave, California, which contain the iron
chlorides plant facility and its ancillary buildings and offices; and (iv)
approximately 4 acres at Spokane, Washington which contain the aluminum
sulphite plant facility and its ancillary buildings and offices.
"Indebtedness" of any Person, means, without duplication, (i) any
obligation of such Person for borrowed money, including, without limitation,
any obligation of such Person evidenced by bonds, debentures, notes or other
similar debt instruments and any obligation for borrowed money which is non-
recourse to the credit of such Person but which is secured by a Lien on any
asset of such Person, (ii) any obligation of such Person on account of
advances and deposits, other than advances and deposits arising in the
ordinary course of such Person's business, (iii) any obligation of such Person
for the deferred purchase price of any property or services, except trade
accounts payable incurred in the ordinary course of such Person's business,
and (iv) any of the foregoing obligations of another Person (1) secured by a
Lien on any asset of such first Person, whether or not such obligations are
assumed by such first Person,
<PAGE>117
or (2) guaranteed by such first Person. For all purposes of this Agreement,
the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or
joint venturer unless recourse is expressly limited to the assets of the
applicable partnership or joint venture.
"Indemnification Contract" means any insurance policy, fidelity
bond, or other executory contract, including, without limitation, the Zeneca
Purchase Agreement and the Henderson Site Agreements, pursuant to which a
party may be entitled to receive payment from a Person other than a party
hereto for any Loss or Environmental Loss.
"Indemnified Party" means the party or parties entitled to receive
the benefits of the indemnification provisions under Articles VIII and IX
hereof.
"Indemnifying Party" means the party or parties against whom an
Indemnified Party asserts a claim for indemnification under the provisions of
Articles VIII and IX hereof.
"Independent Consultant" means an independent environmental
professional experienced in environmental matters of the type reasonably
likely to be involved in any dispute under Section 9.6 of the Agreement.
"ING Agreement" means that certain Agreement, dated September 8,
1994, among ING, Pioneer and PCAC.
"ING Note" means the Note as such term is defined in the ING
Agreement.
"Interlaken Partnership" means Interlaken Investment Partners, L.P.,
a Delaware limited partnership.
"Law" means any and all laws, statutes, ordinances, rules,
regulations, common law, orders, writs, injunctions and decrees of any
governmental or regulatory authority and any judicial, arbitral or
administrative interpretations thereof.
"Loss Estimate" means, as of any Determination Date, an amount equal
to the sum of all Estimated Environmental Losses, all unpaid Losses under
Section 8.4(b)(ii) and all unpaid Environmental Losses (other than to the
extent included in Estimated Environmental Losses) under the Seller
Environmental Indemnity.
"Material Adverse Effect" means, as to any Person, asset or
property, a material adverse effect on the business, assets, properties,
condition (financial or other), operations or results of operations of such
Person, asset or property, which effect is not adequately and effectively
insured or indemnified
<PAGE>118
against by a financially sound insurance company, by Zeneca pursuant to the
Zeneca Agreement, or by third parties pursuant to the Henderson Site
Agreements, and excepting effects arising solely out of general national
economic conditions and/or effects arising solely out of matters affecting the
industry in which such Person, asset or property conducts business as a whole.
"Montrose" means Montrose Chemical Corporation of California and its
Affiliates.
"Net Earnings" means, for the period from January 1, 1995 through
March 31, 1995, the net income of Pioneer and its Subsidiaries for such
period, determined in accordance with GAAP, adjusted so as (i) to include all
Transaction Costs incurred by the Companies and the Sellers (but not including
Transaction Costs incurred by the Buyer, even if such Transaction Costs are
ultimately borne by Pioneer) and (ii) to exclude (A) any Basic/VVLC
Distributions, (B) the Refinancing Costs, (C) $1,448,000 of capitalized
financing costs written off in connection with closing of the New Credit
Agreement, (D) the Substitute Option Payments, (E) the payment of the
Contingent Bank Fees and (F) any Subject Parcel Disposition Proceeds.
"Net Loss" means, for the period from January 1, 1995 through the
Closing Date, the net loss of Pioneer and its Subsidiaries for such period,
determined in accordance with GAAP, adjusted so as (i) to include all
Transaction Costs incurred by the Companies and the Sellers and (ii) to
exclude (A) any Basic/VVLC Distributions, (B) the Refinancing Costs (C)
$1,448,000 of capitalized financing costs written off in connection with
closing of the New Credit Agreement (D) the Substitute Option Payments (E) the
payment of the Contingent Bank Fee and (F) any Subject Parcel Disposition
Proceeds.
"New Credit Agreement" means that certain Credit Agreement dated as
of March 20, 1995 among Pioneer, the Bank of Nova Scotia, as Agent, and the
other lenders party thereto (including the other Loan Documents, as defined
therein).
"Old Credit Agreement" means that certain Loan Agreement dated as of
October 25, 1988, as amended, among PCAC, Texas Commerce Bank National
Association, as Agent, the Bank of Nova Scotia, as Co-Agent, and the other
lenders party thereto.
"Ownership Percentage" means the percentage of Common Stock,
including shares of Common Stock issued or issuable upon exercise of the
Warrants and the Options, held by each Seller as of the Closing Date based on
the total number of shares of Common Stock outstanding as of the Closing Date,
determined on a fully-diluted basis (i.e. the Warrants and the Options shall
be deemed to have been exercised in full), provided that, for the purpose of
determining the Ownership Percentage of Persons subject to Section 10.16
hereof, Persons jointly and severally liable
<PAGE>119
pursuant to Section 10.16 shall be deemed to hold jointly all shares of Common
Stock held by each such Person.
"PCAC" means Pioneer Chlor Alkali Company, Inc. a Delaware
corporation.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, or government (whether
national, federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body, or department
thereof).
"Pioneer Reserves" means the Allocated Reserves and the Unallocated
Reserves.
"Pioneer Sites" means the Henderson Site, the St. Gabriel Site, the
Basic Site, the Imperial West Sites, the All Pure Sites, the GPS Site, and the
Terminal Sites.
"Preferred Dividend Amount" means $1,700,000, which represents the
aggregate amount of accrued and unpaid dividends on the Preferred Stock which
has been agreed between Pioneer and the holders of the Preferred Stock to be
paid on or prior to the Closing Date.
"Preferred Redemption Amount" means $5,000,000, which represents the
aggregate amount payable (other than the Preferred Dividend Amount) to the
holders of the Preferred Stock upon redemption of the Preferred Stock.
"Production Sites" means the Pioneer Sites, other than the CPA
Properties.
"Proxy Actions" means the actions upon which GEV's shareholders will
be voting at the Annual Meeting of Stockholders, as set forth in the GEV Proxy
Statement.
"Refinancing Costs" shall mean all costs, fees and expenses incurred
by the Companies in connection with refinancing or payment of the Old Credit
Agreement, the Subordinated Loan Agreement and the Preferred Dividend Amount
(excluding principal and interest of any such indebtedness and the Preferred
Dividend Amount and Preferred Redemption Amount), including, without
limitation, (i) fees payable to The Bank of Nova Scotia ("Scotia Bank") in
connection with the New Credit Agreement, (ii) fees and expenses of legal
counsel for Scotia Bank and the Companies in connection with the New Credit
Agreement; (iii) fees and expenses to Schnitzius & Vaughan in connection with
the New Credit Agreement; (iv) the "Break Funding Costs" as paid pursuant to
Section 1(a) of the ING Agreement; (v) costs in the amount of $968,400 for
prepayment of sums due under the Success Fee Agreements as provided in Section
4 of the ING Agreement; and
<PAGE>120
(vi) costs in the amount of $640,995 for purchase of a portion of the Warrants
pursuant to Section 2 of the ING Agreement; in each case net of any tax
benefit to the Pioneer Companies, taking into account any deductions, losses,
credits and loss carryforwards and carrybacks that will reduce the total tax
liability of the Pioneer Companies for the period through the Closing Date or
any prior years arising therefrom.
"Released Basic Parcels" means those certain parcels of real
property which are owned by Victory Valley as of the Closing Date and have
been released from the NDEP Consent Order affecting Victory Valley s
properties.
"remedial" or "removal" have the meanings ascribed to such terms in
CERCLA, as such terms would be applied to any Hazardous Material covered by
this Agreement.
"Saguaro" means SAGUARO Power Company, L.P., a California limited
partnership.
"Seller CPA Property Environmental Matter" means (i) any Hazardous
Discharge or other violation of Environmental Law at any time arising from or
relating to a CPA Property or (ii) any claim, demand or proceeding commenced
at any time by any Person, (including, without limitation, the Companies)
under any Environmental Law or pursuant to any Indemnification Contract
arising from or relating to the matters referenced in clause (i).
"Seller Environmental Indemnity" means the obligations of the
Sellers pursuant to Section 9.1(a) of the Agreement.
"Seller Environmental Matter" means (i) any Seller Production Site
Environmental Matter and (ii) any Seller CPA Property Environmental Matter.
"Seller Production Site Environmental Matter" means (i) any
Hazardous Discharge or other violation of Environmental Law arising on or
prior to the Closing Date arising from or relating to a Production Site or a
Seller Waste Site or (ii) any claim, demand or proceeding commenced by any
Person (including, without limitation, the Companies), under any Environmental
Law or pursuant to any Indemnification Contract arising from or relating to
the matters referenced in clause (i).
"Seller Waste Sites" means any real property or facility (i)
previously owned or occupied by any Company, Basic or any of its subsidiaries,
including Victory Valley, that are not owned or occupied by any such Person as
of, and on which a Hazardous Discharge occurred prior to, the Closing Date or
(ii) to which any Company, Basic or any of its subsidiaries, including Victory
Valley, shipped or arranged for the shipment of Hazardous Materials for
treatment, storage or disposal (as defined in RCRA) prior to the Closing Date.
<PAGE>121
"Sellers" means each Person listed on Exhibit A-1 hereto, the
Warrant Holder and the Option Holders.
"St. Gabriel Site" means that certain real property, and all
buildings, structures, and improvements thereon, owned as of the Closing Date
by PCAC in and around St. Gabriel, Louisiana site, which includes a total of
approximately 728 acres at St. Gabriel, Louisiana, comprised of (i) the main
plant site area of approximately 100 acres which contain the chlor alkali
plant facility and its ancillary buildings and offices; and (ii) an additional
approximately 628 acres of surrounding acreage.
"Subject Parcel Disposition Proceeds" means the aggregate amount of
any proceeds (net of all taxes, and of the selling commissions, fees and
expenses, paid or payable in connection therewith) attributable to a
disposition of any Subject Parcel on or prior to the Closing Date.
"Subject Parcels" has the meaning given to such term in the
Contingent Payment Agreement.
"Subordinated Loan Agreement" means that certain Amended and
Restated Loan Agreement, dated as of October 19, 1990, as amended, among PCAC,
ING and the other lenders a party thereto.
"Success Fee Agreements" means 1990 Success Fee Agreement and the
1993 Success Fee Agreement as such terms are defined in the ING Agreement.
"Terminal Sites" means the terminal sites leased by the Companies as
of the Closing Date which terminal sites are more particularly described in
Section 2.13 to the Disclosure Schedule.
"Unallocated Reserves" means with respect to any Company, the
general reserves for environmental matters established on the consolidated
balance sheet of the Companies included in the 1994 Financial Statements, as
more fully set forth in the Reserve Disclosure Schedule. Unallocated Reserves
shall not be deemed to include any unused portion of an Allocated Reserve.
"Victory Valley" means Victory Valley Land Company, L.P., a Delaware
limited partnership.
"Warrants" means the First Warrant Agreement and the Second Warrant
Agreement as such terms are defined in the ING Agreement, and in the event
that Pioneer exercises its option pursuant to Section 2 of the ING Agreement,
the term "Warrants" shall mean the Amended and Restated First Warrant
Agreement and the Amended and Restated Second Warrant Agreement as such terms
are defined in the ING Agreement.
<PAGE>122
"Year End Debt" means $45,505,000, which represents the following
Indebtedness of the Companies (net of cash balances) as of December 31, 1994:
(i) $16,887,000 in term loans and $7,600,000 in revolving credit loans under
the Old Credit Agreement; (ii) $18,060,000 under the Subordinated Loan
Agreement; (iii) $435,000 under the Zeneca Purchase Agreement; (iv) $3,408,000
under the Chevron Note; and (v) $2,425,000 under the GPS Note.
"Zeneca" means Zeneca, Inc., the successor to ICI Americas, Inc.
"Zeneca Purchase Agreement" means that certain Purchase Agreement
between ICI Delaware Holdings, Inc. ("ICIDH") and Pioneer Chlor Alkali
Holdings, Inc. ("Holdings") dated August 29, 1988, as amended by the First
Amendment to Purchase Agreement, dated as of October 25, 1988 among ICIDH,
Holdings and Pioneer.
<PAGE>1
THIS NOTE IS SUBJECT TO CERTAIN RIGHTS OF OFFSET AND ADJUSTMENT SET FORTH IN
THAT CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF MARCH 24, 1995, AMONG GEV
CORPORATION, THE HOLDER HEREOF AND CERTAIN OTHER PERSONS. A COPY OF SUCH
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY AT 165 MASON STREET,
GREENWICH, CONNECTICUT 06830 AND WILL BE FURNISHED TO THE HOLDER OF THIS NOTE
UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY AT SUCH ADDRESS.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE TRANSFERRED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO GEV CORPORATION, QUALIFIES
AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
SUBORDINATED NOTE DUE 2005
$ New York, New York
April 20, 1995
FOR VALUE RECEIVED, the undersigned, GEV CORPORATION, a Delaware
corporation (the "Maker"), does hereby promise to pay to , or
assigns (the "Payee"), in lawful money of the United States of America, the
aggregate principal sum of
($ ), payable in five equal annual installments of
($ ) commencing on April 20, 2001, subject to the terms and conditions
set forth or referred to herein.
Subject to the terms and conditions set forth or referred to herein,
the Maker further agrees to pay interest on the unpaid principal amount hereof
from time to time from the date hereof at a rate of eight percent (8%) per
annum. Interest payments shall be made, in arrears, on, or on the first
business day following, each July 1, October 1, January 1 and April 1,
commencing July 1, 1995. In no event shall the interest payable on this Note
exceed the lesser of the stated rate of interest herein or the maximum rate of
interest permitted by law.
THIS NOTE IS ONE OF THE PROMISSORY NOTES REFERRED TO IN AND ISSUED
PURSUANT TO THAT CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF MARCH 24, 1995,
AMONG THE MAKER, THE PAYEE AND CERTAIN OTHER PERSONS NAMED THEREIN (THE
"AGREEMENT"). THIS NOTE CONSTITUTES PART OF THE PURCHASE PRICE PROVIDED FOR
IN SECTION 1.3 OF THE AGREEMENT. THIS NOTE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THE AGREEMENT, AND PAYMENTS OF PRINCIPAL OF AND INTEREST ON THIS
NOTE ARE SUBJECT TO ADJUSTMENT AND OFFSET IN THE MANNER AND ON THE TERMS SET
FORTH IN THE AGREEMENT. A COPY OF THE AGREEMENT IS ON FILE WITH THE SECRETARY
OF THE MAKER AT 165 MASON STREET, GREENWICH, CONNECTICUT 06830 AND WILL BE
FURNISHED TO THE PAYEE UPON WRITTEN REQUEST TO THE SECRETARY OF THE MAKER AT
SUCH ADDRESS.
<PAGE>2
Payments of principal and interest are to be made by check delivered
to the Payee at its address set forth in, or otherwise provided in accordance
with, the Agreement.
1. The Maker may prepay this Note as a whole at any time or in
part from time to time at the principal amount hereof plus accrued interest
hereon to the date fixed for prepayment but without premium or penalty.
2. The Payee may at its option declare the entire principal
balance of this Note, together with all accrued but unpaid interest thereon,
to be immediately due and payable without presentment, demand, notice or
protest (each of which is hereby waived) upon the occurrence of any one or
more of the following events:
(a) the Maker shall default in the payment of the principal of, or
interest on, this Note and such failure shall continue for a period of
five days, provided, however, that (i) if such default shall have been
caused by the failure of subsidiaries of the Maker to pay dividends or
other amounts to the Maker sufficient to allow the Maker to pay such
principal or interest and (ii) such payment of dividends or other amounts
shall have been prohibited by the terms ("Dividend Restrictions") of any
indenture or financing agreement to which any such subsidiaries are
party, then such failure by the Maker to pay such principal or interest
shall not constitute a default hereunder until the earlier of (x) one
year after the date of such failure or (y) five days after the date as of
which the Dividend Restrictions shall no longer be applicable;
(b) the filing of a petition by the Maker for relief under the
United States Bankruptcy Code or other insolvency law;
(c) the filing of a petition against the Maker, which remains
unstayed for a period of at least sixty (60) days, for adjudication of
the Maker as a bankrupt under the United States Bankruptcy Code or other
insolvency law;
(d) the appointment of a receiver for all or any substantial part
of the assets of the Maker, and such receiver shall not have been
dismissed within ninety (90) days;
(e) the making by the Maker of a general assignment for the benefit
of its creditors;
(f) the Maker admitting in writing its inability to pay its debts
as they mature; or
<PAGE>3
(g) the liquidation, dissolution or winding up of the Maker or the
taking by the Maker of any action in furtherance of liquidation,
dissolution or winding up;
provided, however, that no such declaration shall occur unless and until there
shall have been an acceleration of any outstanding Senior Debt (as defined
below). In the event that any payment hereunder is made after its due date,
such defaulted payment shall bear interest at the rate of 10% per annum until
such payment is made.
3. Presentment for payment, demand, notice of dishonor, protest,
notice of protest and all other demands and notices in connection with the
delivery, performance and enforcement of this Note are hereby waived, except
as otherwise provided for in the Agreement.
4. This Note may be amended only by an instrument in writing
executed by the Maker and the Majority Selling Shareholders (as defined in the
Agreement), provided, however, that no such amendment shall: (a) reduce the
principal amount hereof, any charges payable hereunder or the interest rate
hereof; or (b) extend the maturity date hereof, in any such case without the
consent of the holder hereof.
5. No delay or omission on the part of the Payee in exercising any
right hereunder shall operate as a waiver of such right or any other right,
and a waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion. All of the Payee's rights and
remedies, whether evidenced hereby or by any other agreement, instrument or
paper, including, but not limited to, the Agreement, shall be cumulative and
may be exercised separately or concurrently.
6. The Payee by its acceptance thereof agrees that all payments on
or in respect of this Note shall be subordinate and subject in right of
payment, to the extent set forth in this Paragraph 6, to the prior payment in
full in cash of all Senior Debt (as defined below). The provisions of this
Paragraph 6 are made for the benefit of all present and future holders of
Senior Debt and their successors and assigns (irrespective of whether such
Senior Debt was created or acquired before or after the effectiveness of this
Note or the Agreement), and shall be enforceable by each of them directly
against the Payee or any holder of this Note from time to time. This
Paragraph 6 may not be amended without the written consent of the holders of
Senior Debt (given in accordance with the provisions of the agreements or
instruments relating to such Senior Debt), and any purported amendment without
such consent shall be void. Notwithstanding anything to the contrary
contained herein, the provisions of this Paragraph 6 shall not apply to any
adjustments to or offsets against this Note pursuant to the terms and
conditions of the Agreement.
<PAGE>4
6.1 (a) Upon any payment or distribution of assets or securities
of the Maker or any subsidiary thereof of any kind or character (whether in
cash, property or securities) upon any dissolution, winding up or total or
partial liquidation or reorganization of the Maker, whether voluntary or
involuntary or in a bankruptcy, insolvency, receivership or other proceeding
(an "Insolvency Event"), all Senior Debt shall first be paid in full in cash
before the Payee shall be entitled to receive, directly or indirectly, any
payment of the principal of, or interest on, or any other amount due with
respect to, this Note or to receive any distribution of any assets or
securities. Before any payment of the principal of, or interest on, or any
other amount due with respect to, this Note upon any such Insolvency Event,
any payment or distribution of assets or securities of the Maker or any
subsidiary thereof of any kind or character (whether in cash, property or
securities) to which the Payee would be entitled but for the provisions of
this Paragraph 6 shall be made by the Maker or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution directly to the holders of Senior Debt to the extent necessary to
pay the Senior Debt in full in cash after giving effect to any concurrent
payment or distribution to the holders of Senior Debt.
(b) No direct or indirect payment by or on behalf of the Maker of
the principal of, or interest on, or any other amount due with respect to,
this Note (whether upon acceleration or otherwise) shall be made if, at the
time of such payment, there exists any default or event of default under any
provision of any agreement relating to Senior Debt which has been declared by
the lender under such Senior Debt, or in respect of which the lender has given
notice to the Maker, and for which any applicable cure period has expired
without such default or event of default having been cured or waived by the
lender (a "Blocking Event").
(c) The Payee shall not declare this Note to be due and payable,
and this Note shall not otherwise become due and payable, prior to its stated
due date upon the occurrence of any default hereunder unless and until there
shall previously or concurrently have been an acceleration of the Senior Debt
provided, however, that nothing contained in this Section 6(c) shall prohibit
the payment of installments of principal or interest hereunder to the holder
hereof at any time during which no Blocking Event shall have occurred and be
continuing.
(d) If, notwithstanding the foregoing provisions prohibiting such
payment or distribution, the Payee shall have received any payment on account
of this Note at any time following the occurrence of an Insolvency Event or
following receipt by such party from any holder of Senior Debt, or a trustee
or agent therefor, of written notice to the effect that a Blocking Event has
occurred, and before all Senior Debt is paid in full in cash, then such
payment or distribution shall be
<PAGE>5
received and held in trust for the holders of Senior Debt and shall be paid
over or delivered to the holders of Senior Debt remaining unpaid to the extent
necessary to pay in full all Senior Debt in cash.
6.2 If the Senior Debt has not been paid in full in cash at a time
at which the Maker is subject to an Insolvency Event, (a) the holders of the
Senior Debt are hereby irrevocably authorized, but shall have no obligation,
to demand, sue for, collect and receive every payment or distribution received
in respect of any such Insolvency Event and give acquittance therefor and to
file claims and proofs of claim, as their interests may appear, and (b) the
Maker shall duly and promptly take, for the account of the holders of Senior
Debt as their interests may appear, such actions as the holders of Senior Debt
may request to collect and receive all amounts payable by the Maker in respect
of this Note and to file appropriate claims or proofs of claim in respect of
this Note.
6.3 No right of the holders of Senior Debt nor any other present or
future holder of the Senior Debt to enforce these subordination provisions
shall at any time or in any way be prejudiced or impaired by any failure to
act by the holders of Senior Debt or by any noncompliance by the Maker with
the terms and provisions and covenants herein or in the Agreement, regardless
of any knowledge thereof that a holder of Senior Debt may have or otherwise be
charged with. The provisions of this Paragraph 6 are intended to be for the
benefit of, and shall be enforceable directly by, any present or future holder
of the Senior Debt.
6.4 Upon the payment in full, in cash, of all Senior Debt, the
Payee shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the Maker
applicable to Senior Debt until this Note shall have been paid in full.
6.5 The Payee of this Note agrees to forbear and not take any
action the purpose or effect of which would give them a preference or priority
over the Senior Debt, provided, however, that the holder hereof shall be
entitled to receive payments of installments of principal and interest
hereunder pursuant to the terms hereof, but subject to the provisions of this
Paragraph 6, and, upon such payment, the holder hereof shall thereafter be
entitled to retain any and all such payments irrespective of any default or
event of default under the Senior Debt occurring subsequent thereto.
6.6 For purposes of this Paragraph 6, the term "Senior Debt" means
the principal of (and premium, if any) and interest on (a) all indebtedness of
the Maker (including indebtedness of others guaranteed by the Maker), which is
for money borrowed or which is evidenced by a note or similar instrument given
in
<PAGE>6
connection with the acquisition of any businesses, properties or assets of any
kind (other than trade payables incurred in the ordinary course of business),
(b) obligations of the Maker to banks, trust companies or other financial
institutions, (c) obligations of the Maker in respect of reimbursement
obligations for letters or lines of credit, (d) obligations of the Maker as
lessee under leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles, and (e) amendments,
renewals, extensions, modifications and refundings of any such indebtedness or
obligation, whether any such indebtedness or obligation described in any of
the preceding clauses is outstanding on the date hereof or hereafter created,
incurred or assumed, unless the instrument creating or evidencing any such
indebtedness or obligation pursuant to which the same is outstanding expressly
provides that such indebtedness or obligation is not superior in right of
payment to this Note.
7. So long as any payment of principal of, or interest on, this
Note has not been paid when due and irrespective of the reason for such non-
payment (other than adjustment pursuant to and in accordance with Section 1.3,
and offset or escrow pursuant to and in accordance with Article VIII or
Article IX, of the Agreement), Maker agrees that no cash dividends or other
distributions of any kind or nature (other than dividends payable in shares of
common stock) shall be declared, paid or distributed to any holder of equity
securities of the Maker.
8. The Maker hereby agrees to pay on demand all reasonable costs
and expenses incurred by the Payee including, without limitation, attorneys'
fees and expenses in connection with the enforcement of the Payee's rights
hereunder, whether or not suit is instituted against the Maker or any person
on account thereof.
9. THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CHOICE-OF-LAW PROVISIONS THEREOF.
GEV CORPORATION
By:________________________
Name:
Title:
<PAGE>1
,
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT ( Agreement ) is entered into as of the 20th day of
April, 1995 among GEV Corporation, a Delaware corporation (the Company ), and
the persons listed under the caption Shareholders on the signature pages
hereof (the Shareholders ), and such term including any Designee of a
Shareholder from among certain members of management of Pioneer Americas, Inc.
( Pioneer ), or its subsidiaries as permitted pursuant to Section 11 hereof.
W I T N E S S E T H:
WHEREAS, the Company has offered and sold 4,545,455 shares of its
Class A Common Stock, par value $0.01 per share ( Common Stock ) to the
Shareholders simultaneous with execution of this Agreement; and
WHEREAS, the Company has granted and will grant certain stock options
to the Shareholders pursuant to the Company s stock option plan; and
WHEREAS, as a material inducement to the Shareholders to purchase
such Common Stock, the Company has agreed to enter into this Agreement and to
grant the registration and other rights to such Shareholders contained in this
Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION I. CERTAIN DEFINITIONS AND TERMS.
The following terms have the meanings indicated:
Common Stock shall mean the Class A common stock, par value $0.01
per share, of the Company.
Exchange Act means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Holder means any Person holding Registrable Shares, including
transferees of such Holder who satisfy the requirements of Section 11 of this
Agreement.
Participation Notice means a written notice by a Holder of his
desire to sell Registrable Shares in a registration by the Company.
<PAGE>2
Person means any individual, firm, corporation, trust, association,
partnership, joint venture or other entity.
Registrable Shares means all shares of Common Stock of the Company
now owned by a Shareholder or hereafter acquired by a Shareholder upon
exercise of options owned by such Shareholder on the date hereof and permitted
transferees of a Shareholder and any securities issued or issuable with
respect to any such Common Stock by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Shares, once issued such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with the plan of
distribution set forth in such registration statement, (ii) such securities
shall have been distributed in accordance with Rule 144, (iii) such securities
shall have been otherwise transferred, new certificates therefor not bearing a
legend restricting further transfer shall have been delivered in exchange
therefor by the Company and subsequent disposition of such securities shall
not require registration or qualification under the Securities Act or any
similar state law then in force, or (iv) the Company and the Holder shall have
received an opinion of counsel experienced in securities laws matters
reasonably acceptable to the Company and the Holder to the effect that the
Holder of such Registrable Shares has no further obligation to comply with the
registration requirements of the Securities Act or to deliver a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act in
connection with further sales by such Holder of such Registrable Shares.
Register , registered and registration refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act and the declaration or ordering of effectiveness of such
registration statement.
Registration Notice means a written notice by the Company to the
Holders of its intent to file a registration statement with the SEC.
SEC means the Securities and Exchange Commission or any successor
thereof.
Securities Act means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
SECTION 2. REGISTRATION RIGHTS.
(a) If, at any time, the Company proposes to file a registration
statement in connection with the public offering of any of its equity
securities to be sold by the Company for its own account or for the account of
any other Person, prior to such filing, the Company shall give each Holder a
Registration Notice.
<PAGE>3
Within ten business days after receipt by any Holder of a Registration Notice,
such Holder shall deliver to the Company a Participation Notice if such Holder
desires to sell Registrable Shares under such registration. The Participation
Notice shall state the number of Registrable Shares to be disposed of in such
registration; provided, however, such holder s right to registration of such
Registrable Shares shall be subject to any limitations in the number thereof
required by the underwriters pursuant to Section 5; provided further, that
(i) the Company shall not be required to give notice or include such
Registrable Shares in any such registration if the proposed registration is
primarily (x) a registration of a stock option or other employee incentive
compensation plan or of securities issued or issuable pursuant to any such
plan, (y) securities issued or issuable pursuant to a dividend or interest
reinvestment plan, or other similar plan, or (z) a registration of securities
proposed to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation; (ii) the
Company shall not be required to include the Registrable Shares of a Holder in
any such registration if the Holder fails to timely provide the Company with
all information which is in the possession of and relates to such Holder and
which is necessary in connection with registration of the Registrable Shares
of such Holder and takes all such action as may be reasonably required in
order not to delay the registration and offering of the securities by the
Company; (iii) the Company shall not be required to include Registrable Shares
of any Holders in any such registration unless the Registrable Shares
requested to be so included by all Holders are reasonably believed to have a
market value of at least $1 Million; and (iv) the Company may, in its sole
discretion and without the consent of the Holders, determine not to file such
registration statement or withdraw such registration statement, if filed, and
abandon any such proposed offering, notwithstanding any Holder s request to
participate therein in accordance with this provision.
(b) If, at any time after the date hereof and for so long as any
Common Stock constitutes Registrable Shares, the Company shall grant to any
Person ( Other Holder ) any right to demand or require that the Company
undertake to effect the registration for sale of any debt or equity securities
of the Company (excluding so-called piggyback registration rights (provided
such piggyback registration rights do not limit the rights of Holders to
participate in any registration of securities by the Company) and excluding
any registration rights or undertaking ( Permitted Registration ) granted by
the Company with respect to (i) debt securities being issued by the Company in
connection with acquisition by the Company of the capital stock of Pioneer
Americas, Inc., a Delaware corporation, consummated on or about the date
hereof and (ii) debt securities (which may be convertible into or exchangeable
for equity securities) of the Company issued after the date hereof to banks or
other institutional investors which are not Affiliates of the Company or any
stockholder owning more than ten percent (10%) of the voting equity securities
of the Company), the Company agrees and shall execute and deliver to the
Holders an
<PAGE>4
agreement in writing providing for demand registration rights in favor of the
Holders substantially equivalent in all material respects to the rights so
granted to such Other Holder (except that the Holders shall be granted two
demand registration rights for all Holders, each of which demand registration
rights may only be initiated by a Holder or Holders owning at least 1,750,000
Registrable Shares) provided that no Permitted Registration shall include any
restriction or limitation on the right of Holders to include Registrable
Shares in any offering effected pursuant to such Permitted Registration which
does not apply equally to all other holders of securities of the Company
(other than holders who are beneficiaries of the Permitted Registration).
Except for Permitted Registrations, no other demand or other
registration rights shall be granted by the Company to any Person that would
limit or restrict in any manner (x) the number of Registrable Shares that can
be included in any registration of securities by the Company (other than
proportional cut-back limitations because of market conditions applicable
equally to all holders of securities to be included in any such registration),
or (y) the time at which any demand registration right to which Holders may
become entitled pursuant to this Section 2(b) may be exercised, unless the
prior written consent of Holders of not less than a majority of Registrable
Shares is obtained with respect to such limitation or restriction.
(c) The Company shall use its best efforts to promptly cause all such
Registrable Shares to be registered along with the other equity securities to
be registered, if any, pursuant to Section 2(a). The Company may, at its
option, require that Registrable Shares to be included in a registration
statement under Section 2(a) or 2(b) hereof be sold in accordance with the
plan of distribution of the securities being registered on behalf of the
Company or on behalf of other security holders as a result of their exercise
of demand registration rights. Subject to the foregoing, the Registrable
Shares proposed to be registered under any registration statement under
Section 2(a) hereof will be offered for sale upon the same terms as the shares
of Common Stock offered for sale by the Company.
SECTION 3. OBLIGATIONS OF THE COMPANY.
Whenever required under Section 2 to use its best efforts to effect
the registration of any Registrable Shares, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare as soon as practicable and file with the SEC a
registration statement with respect to such Registrable Shares and use
its best efforts to cause such registration statement to become and
remain effective for the period necessary for the distribution of such
Registrable Shares in accordance with the intended plan of distribution
thereof; provided, however, that the Company shall have no obligation
<PAGE>5
to maintain the effectiveness of any registration statement filed hereunder or
to cause the information therein to remain current for more than six months
following such registration statement s effective date.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to keep such registration
statement effective in order to dispose of the shares registered
thereunder in the manner described in the underwriting agreement executed
in connection therewith and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement; provided, however, that the Company shall
have no obligation to maintain the effectiveness of any registration
statement filed hereunder or to cause the information therein to remain
current for more than six months following such registration statement s
effective date.
(c) Furnish to the Holders registering securities in such
registration such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Shares owned by the
Holders.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by
Holders registering securities in such registration for the distribution
of the securities covered by the registration statement; provided that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any such jurisdictions or otherwise subjects
itself to general taxation in any state and provided further that the
Company reserves the right, in its sole discretion, not to register or
qualify Registrable Shares in any jurisdiction where such Registrable
Shares do not meet the requirements of such jurisdiction and such failure
to meet requirements cannot be cured without unreasonable effort or
expense.
(e) Furnish to each Holder of Registrable Shares covered by such
registration statement a signed counterpart, addressed to such Holder
(and underwriter or agent, if any) of:
(A) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), and
<PAGE>6
(B) unless otherwise precluded under applicable accounting rules,
a comfort letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have
certified the Company s financial statements included in such
registration statement,
in each case, reasonably satisfactory in form and substance to Holders
owning or holding a majority of Registrable Shares included in such
registration (and to the underwriter or agent and their respective
counsel) and covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer s counsel and in accountants letters delivered to the
underwriter or agent in underwritten public offerings of securities.
(f) Promptly notify each Holder and any underwriter or agent
participating in the disposition of Registrable Shares covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that,
or upon the happening of any event known to the Company as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made, and promptly prepare and furnish to such Holder (or
underwriter or agent, if any) a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances under which they were made.
SECTION 4. EXPENSES OF REGISTRATION.
Except as provided in the following paragraph, all fees and expenses
incurred in connection with a registration pursuant to Section 2 and in which
a Holder participates shall be borne by the Company, including without
limitation all registration, filing, securities exchange listing and
qualification (including blue sky qualification) fees, printing fees, and fees
and disbursements of counsel and independent public accountants for and other
consultants or Persons employed by, the Company in connection with any such
offering (collectively, Registration Expenses ).
<PAGE>7
Each Holder of Registrable Shares shall pay the underwriters
discounts and commissions and any transfer taxes applicable to the securities
sold by such Holder in any such offering. In addition, each selling Holder
shall pay its own legal fees and expenses of separate counsel, and costs of
any experts or professionals employed by it or on its behalf in connection
with the registration of Registrable Shares.
SECTION 5. UNDERWRITING REQUIREMENTS.
In connection with any offering involving an underwriting of shares
being issued by the Company or an underwriting of shares on behalf of other
security holders as a result of the exercise of demand registration rights,
the Company shall not be required to include the Registrable Shares of a
Holder in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by the Company.
Additionally, the Company shall be required to include in any piggy-
back registration under Section 2(a) only such quantity of the Registrable
Shares as will not, in the written opinion of the underwriters, interfere with
the orderly sale, price and/or distribution of any securities being offered by
the Company or on behalf of other security holders as a result of the exercise
of demand registration rights pursuant to a Permitted Registration. If,
however, subject to Section 10 hereof the underwriters have consented to
inclusion in any such offering of securities of any Person other than the
Company, then the Holders shall be entitled to include such number of their
Registrable Shares in such underwriting pro rata to the total number of shares
of Common Stock owned by all Holders and other Persons who have requested
participation and are entitled to sell securities in such offering (such
apportionment not to include securities offered by the Company for its own
account or securities offered by Persons who have exercised demand
registration rights pursuant to a Permitted Registration).
SECTION 6. INDEMNIFICATION.
(a) In the event of registration of any of the Registrable Shares
under the Securities Act, the Company will indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such Registrable
Shares, and each other Person, if any, who controls such seller or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which such
seller, underwriter or controlling Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any
<PAGE>8
registration statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the registration statement, or any amendment or supplement to
such registration statement, or arise out of or are based upon the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse such seller, underwriter, and each such controlling Person for any
legal or any other expenses reasonably incurred by such seller, underwriter,
or controlling Person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
omission made in such registration statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such seller, underwriter or
controlling Person specifically for use in preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act, each seller of the Registrable Shares, severally and
not jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any), each Person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling Person may become subject under the
Securities Act, Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to the registration statement, or arise out of or are based upon
any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by or on behalf of such seller specifically for use in connection
with the preparation of such registration statement, prospectus, amendment or
supplement.
(c) Each party entitled to indemnification under this Section 6 (the
Indemnified Party ) shall give notice to the party required to provide
indemnification (the Indemnifying Party ) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
<PAGE>9
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the
extent that the Indemnifying Party has been materially prejudiced as a result
of such failure. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or litigation, the
Indemnifying Party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the Indemnifying Party abandons the defense of such
claim or litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
SECTION 7. LOCKUP AGREEMENT.
In connection with any registration of Registrable Shares pursuant to
this Agreement, upon the request of the Company or the underwriters managing
any underwritten offering of equity securities of the Company, each Holder
agrees not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed 90 days) from the effective date of such registration as the Company or
the underwriters may specify.
SECTION 8. RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees that he will not sell, dispose of or otherwise
transfer any of the Registrable Shares except (i) upon registration of such
shares under the Securities Act, (ii) pursuant to Rule 144 under the
Securities Act or such comparable rules as shall from time to time be in
effect, or (iii) in a transaction exempt from the registration requirements of
the Securities Act.
(b) Each certificate representing the Registrable Shares shall bear a
conspicuous legend reflecting in substance that such shares have been acquired
for investment and have not been registered under the Securities Act and may
be transferred without registration only upon receipt by the issuer of an
opinion of counsel, which opinion of counsel shall be reasonably acceptable to
the issuer, that the transfer will not violate the Securities Act.
<PAGE>10
SECTION 9. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934.
With a view to making available to the Holders the benefits of Rule
144 promulgated under the Securities Act and any successor rule or regulation
of the SEC that may at any time permit a Holder to sell securities of a
company to the public without registration, the Company agrees to use its best
efforts to:
(a) At all times make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) Furnish to the Holders, so long as the Holders own any
Registrable Shares, forthwith upon request, a written statement by the
Company that it has complied with the reporting requirements of Rule 144
and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in
availing Holders of any rule or regulation of the SEC permitting the
selling of any such securities without registration.
SECTION 10. REPRESENTATIONS AND COVENANTS IN CONNECTION WITH GRANTS OF
REGISTRATION RIGHTS.
The Company represents to the Shareholders that on the date hereof
there are no agreements or commitments between the Company and any Person
providing for registration rights with respect to equity securities of the
Company. From and after the date of this Agreement, the Company shall not,
without the prior written consent of Holders of not less than a majority of
Registrable Shares, enter into any agreement with any holder or prospective
holder of any securities of the Company which provides for the granting to
such holder of any registration rights that would be inconsistent with the
rights granted to the Holders hereunder or with the terms and conditions of
this Agreement.
SECTION 11. TRANSFER OF REGISTRATION RIGHTS.
Subject to the restrictions on transfer in Section 8(a) hereof, the
registration rights of Holders under this Agreement may be assigned and
transferred to any transferee purchasing Registrable Shares from a Shareholder
or any assignee of a Shareholder; provided, however, that the Company is given
written notice by the Holder at the time of such transfer stating the name and
address of the transferee and identifying the Registrable Shares with respect
to which the rights under this Agreement are
<PAGE>11
being assigned. The registration rights so assigned and transferred shall
apply only to the Registrable Shares purchased from a Shareholder or any
assignee of a Shareholder and only upon execution of an agreement by the
transferee binding such transferee to the obligations of the transferor
hereunder. Notwithstanding anything contained herein to the contrary, either
Shareholder may assign or otherwise transfer his rights and obligations
hereunder to any person who is in management of Pioneer or any of its
subsidiaries and who is named on Exhibit A to this Agreement and such person
shall be treated for all purposes hereof as if such person originally executed
this Agreement as a Shareholder; provided, however, that such person: (a)
purchases securities of the Company from the Company pursuant to the terms of
that certain Subscription Agreement of even date herewith among the Company
and the Shareholders (whether as an original party or as an assignee); and (b)
executes a counterpart of this Agreement or a writing pursuant to which he
assumes all of the obligations of the assigning Shareholder hereunder with
respect to the rights so assigned.
SECTION 12. MISCELLANEOUS.
(a) Relationships and Rights of the Holders. The Holders agree that,
notwithstanding that certain rights of each Holder herein may be affected by
similar rights of other Holders, the Holders shall, in respect of the
ownership of the Registrable Shares, not be related as, or deemed to be, a
partnership, joint venture, or other group for the purpose of acquiring,
holding, voting, or disposing of capital stock of the Company.
(b) Headings. The headings, captions, and arrangements used herein
are, unless specified otherwise, for convenience only and shall not be deemed
to limit, amplify, or modify the terms hereof, nor affect the meaning thereof.
(c) Notices. Unless otherwise specifically provided, whenever this
agreement requires or permits any consent, approval, notice, request or demand
from one party to another, such communication must be in writing and shall be
deemed to have been duly given if (i) hand delivered; (ii) mailed, United
States mail, postage prepaid, registered or certified, return receipt
requested; (iii) delivered by a nationally recognized overnight courier
service, or (iv) given by facsimile transmission, in each case to the address
or number hereafter stated, any such notice so given to be effective on
receipt at the location stated. For purposes hereof, until changed by written
notice pursuant hereto, the address for the Company is as follows, and the
address for each Shareholder is set forth opposite the name of such
Shareholder on the signature page hereof:
<PAGE>12
GEV Corporation
165 Mason Street
Greenwich, Connecticut 06830
Attention: William L. Mahone
Telephone: (203) 629-8750
(d) Binding Effect. This Agreement shall be binding upon and
enforceable by the heirs, executors, or other personal representatives of the
Shareholders and any transferees of its Shareholders, and the successors and
assigns of the Company.
(e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
(f) Invalid Provisions. If any provision hereof is held to be
illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision by its severance
herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, the parties hereto agree to add as a part hereof a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may
be possible and be legal, valid, and enforceable which preserves the same
economic benefits to the parties hereto.
(g) Amendments and Consents. This Agreement may be amended, or any
matter may be consented to, only by an instrument in writing executed by
authorized officers of the Company and Holders owning two-thirds (2/3) of the
Registrable Shares outstanding as of the date of such amendment or consent,
and supplemented only by documents delivered or to be delivered in accordance
with the express terms hereof except that no modification providing one or
more Holders priority in registering such Holder s or Holders Registrable
Shares or providing for the elimination of registration rights shall be made
without the consent of all Holders.
(h) Counterpart Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and it shall not
be deemed necessary in making proof of this Agreement to produce or account
for more than one counterpart signed by the party to be charged thereby.
(i) Termination of Rights and Obligations. The rights and
obligations hereunder of the Shareholders hereunder shall terminate at such
time as neither any Shareholder or any transferee of any Shareholder holds
Registrable Securities, provided that the provisions of Section 6, the rights
of any party hereto with respect to the breach of any provision hereof and any
obligation
<PAGE>13
accrued as of the date of termination shall survive termination of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered to be effective as of the date first above written.
GEV CORPORATION
By: /s/ Joshua A. Polan
Name: Joshua A. Polan
Title:
Address:
4200 NationsBank Center /s/ Richard C. Kellogg, Jr.
700 Louisiana Richard C. Kellogg, Jr.
Houston, Texas 77002
Telecopier: (713) 225-4426
1600 W. Linne Road /s/ Frans G. J. Speets
Tracy, California 95376 Frans G.J. Speets
Telecopier: (209) 835-0414
<PAGE>14
EXHIBIT A
Management Investors
1. Paul J. Kienholz
2. George T. Henning, Jr.
3. Verrill Norwood
4. James E. Glattly
5. Benny Bennet
6. Frank Belliss
7. Samuel K. Fletcher
8. Walt McCollam
9. Andrew Smith
10. Kent R. Stephenson
11. Raymond A. Bart
12. Terry K. Graves
<PAGE>1
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT, dated as of April 20, 1995 (the
"Agreement"), by and between William R. Berkley ("Berkley") and Richard C.
Kellogg, Jr. ("Kellogg"),
W I T N E S S E T H:
WHEREAS, GEV Corporation, a Delaware corporation (the "Company") and
Pioneer Americas Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of the Company (the "Buyer"), have agreed to acquire all of the
issued and outstanding capital stock of Pioneer Americas, Inc., a Delaware
corporation ("Pioneer"), pursuant to that certain Stock Purchase Agreement,
dated March 24, 1995, by and among the Company, the Buyer and the stockholders
of Pioneer and certain other Persons named therein (the "Purchase Agreement");
and
WHEREAS, the Company has agreed to issue, and the Kellogg has agreed
to purchase, 1,925,303 shares (the "Shares") of the Company's Class A common
stock, par value $.01 per share (the "Class A Common Stock"), pursuant to the
terms of the Purchase Agreement and that certain Subscription Agreement, dated
even date herewith, between the Company and Kellogg (the "Subscription
Agreement");
WHEREAS, pursuant to certain provisions of the Purchase Agreement
and the Subscription Agreement, it is a condition precedent to the obligations
of the respective parties thereto that this Agreement be entered into on or
prior to the closing of the transactions contemplated by such agreements;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Purchase
Agreement. Whenever used in this Agreement, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders.
SECTION 2. Nomination of Directors. (a) For so long as Kellogg is
employed by the Company pursuant to the terms of that certain Employment
Agreement, dated of even date herewith, between the Company and Kellogg (the
"Kellogg Employment Agreement"), Berkley agrees to nominate Kellogg as a
director of the Company and to vote, or provide written consents with respect
to, all shares of Class A Common Stock and any other shares of the capital
stock of the Company entitled to vote in the election of directors owned of
record or beneficially, directly or indirectly, by him, or over which he
exercises voting control, (i) for the election of Kellogg as a director of the
Company and
<PAGE>2
(ii) against any removal or replacement of Kellogg as a director (except for
removal for cause), whether at an annual or special meeting or otherwise.
(b) For so long as Kellogg is employed by the Company pursuant to
the terms of the Kellogg Employment Agreement, Kellogg agrees to join with
Berkley in the nomination of such Persons as Berkley may designate (the
"Berkley Nominees") to stand for election as directors of the Company and to
vote, or provide written consents with respect to, all shares of Class A
Common Stock and any other shares of the capital stock of the Company entitled
to vote in the election of directors owned of record or beneficially, directly
or indirectly, by Kellogg, or over which Kellogg exercises voting control, (i)
for the election of the Berkley Nominees as directors of the Company and (ii)
against any removal or replacement of any Berkley Nominee as a director
(except for removal for cause or any removal or replacement action initiated
by Berkley), whether at an annual or special meeting or otherwise.
SECTION 3. Other Covenants. As soon as practicable, but in any
event within 30 days after the Closing Date, Berkley shall take any and all
actions reasonably necessary or desirable to cause the Board of Directors of
the Company to be expanded and to install Kellogg as a director thereon.
SECTION 4. Termination. This Agreement shall terminate on the
earlier of: (a) the execution by Berkley and Kellogg of a writing providing
for the termination of this Agreement; and (b) the date as of which Berkley
and his Affiliates own less than 5% of the outstanding shares of Common Stock
of the Company and (c) the date as of which Kellogg is no longer employed by
the Company pursuant to the terms of the Kellogg Employment Agreement.
SECTION 5. No Fiduciary Duty. Notwithstanding any other provision
of this Agreement to the contrary, nothing contained herein shall be deemed to
create any fiduciary duty or other express or implied duty between or among
Berkley and Kellogg except as expressly set forth herein.
SECTION 6. Notices. (a) All communications under this Agreement
shall be in writing and shall be delivered by hand, by facsimile or mailed by
overnight courier or by registered or certified mail, postage prepaid: (i) if
to Berkley, at 165 Mason Street, Greenwich, Connecticut 06830, facsimile
number 203-629-8554 or at such other address as Berkley may have furnished to
Kellogg in writing; and (ii) if to Kellogg at Pioneer Chlor Alkali Company,
Inc., 700 Louisiana, 42nd Floor,
<PAGE>3
Houston, Texas 77002, or at such other address as Kellogg may have furnished
to Berkley in writing.
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the
date of such mailing.
SECTION 7. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person (provided that the provisions
shall not apply to any actions taken or not taken by Interlaken Investment
Partners, L.P., a Delaware limited partnership.
SECTION 8. Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, represents the entire agreement and
understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein. This Agreement
supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter of this Agreement, all of which are merged into this
Agreement.
SECTION 9. Waivers and Amendments. Kellogg and Berkley may by
written notice to the other extend the time for the performance of any of the
obligations or other actions of the other or waive performance of any of the
obligations of the other created under this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by Kellogg and Berkley.
SECTION 10. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or of
any other term or provision hereof.
SECTION 11. Titles and Headings. The titles and headings contained
in this Agreement are solely for convenience of reference and shall not affect
the meaning or interpretation of this Agreement or of any term or provision
hereof.
<PAGE>4
SECTION 12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 13. Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur if any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF.
SECTION 15. Conflicts. The parties intend that in the case of any
conflict or inconsistency between this Agreement and the Bylaws of the
Company, that this Agreement shall control, and therefore in the event that
any term or provision of this Agreement is rendered invalid, illegal or
unenforceable by the Bylaws of the Company, the parties agree to seek to amend
the Bylaws of the Company so as to render such term or provision valid, legal
and enforceable, to the extent legally permitted, and to take any and all
actions necessary or desirable to accomplish such amendment.
SECTION 16. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon each of the parties hereto and their respective
successors, heirs, executors, personal representatives, administrators,
distributees, devisees, legatees and assigns.
<PAGE>5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
/s/ William R. Berkley
William R. Berkley
/s/ Richard C. Kellogg, Jr.
Richard C. Kellogg, Jr.
<PAGE>1
CONTINGENT PAYMENT AGREEMENT
THIS CONTINGENT PAYMENT AGREEMENT dated as of April 20, 1995 is by
and among GEV CORPORATION, a Delaware corporation ( GEV ), PIONEER AMERICAS
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of GEV
(the Purchaser ), and the persons and entities whose signatures appear on the
signature pages hereof (the Sellers ).
PRELIMINARY STATEMENTS
1. Pursuant to the terms of that certain Stock Purchase Agreement
dated as of March 24, 1995 among GEV, the Purchaser and the Sellers (such
Stock Purchase Agreement, as it may hereafter be amended or modified from time
to time, the Purchase Agreement ), the Sellers have sold, assigned,
transferred and conveyed all of their rights, title and interests in and to
the capital stock and rights to acquire capital stock (the Stock ) of Pioneer
Americas, Inc., a Delaware corporation ( Pioneer ), to GEV and the Purchaser.
2. Pursuant to the terms of the Purchase Agreement, a portion of
the purchase price payable by the Purchaser to the Sellers in connection with
the sale of the Stock has been deferred and is to be paid by the Purchaser to
the Sellers in accordance with the terms of this Agreement.
3. Pursuant to the terms of the Purchase Agreement, amounts held
by the Purchaser pursuant to this Agreement are to be available to satisfy
certain obligations of the Sellers to GEV, the Purchaser and certain other
Persons, upon the terms and subject to the conditions set forth herein and in
the Purchase Agreement.
4. This Agreement and the Purchase Agreement are inter-related and
non-severable and, although separate documents, together form a group of
agreements which document a single transaction, and the parties would not have
executed the Stock Purchase Agreement if this Agreement were not executed and
vice versa.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and in the Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>2
ARTICLE I
Definitions, Etc.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement shall have the following respective meanings:
Additional Consideration has the meaning specified in Section
2.01.
Affiliate means, with respect to any Person, any other Person
directly or indirectly controlling (including all directors and officers of
such Person), controlled by or under direct or indirect common control with
such Person, and any other Person in which such Person s direct or indirect
equity interest is ten percent (10%) or more of the total outstanding equity
interests of such Person.
Agreement means this Contingent Payment Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
Authorized Officer means, as to any Person, the President, any
Vice President, the Secretary or any Treasurer of such Person.
Basic Investments means Basic Investments, Inc., a Nevada
corporation.
Business Day means any day excluding Saturday, Sunday and any
other day on which banks are required or authorized to close in Houston,
Texas.
California Parcel means that certain tract of land located in
Mojave, California, as more particularly described on Exhibit A attached
hereto and incorporated herein for all purposes.
Capital Expenditure means any expenditure for fixed or capital
assets which, in accordance with GAAP, should be classified as a capital
expenditure.
Code means the Internal Revenue Code of 1986, and any successor
statute of similar import, together with the regulations thereunder, as the
same may be amended or supplemented and in effect from time to time.
Consensual Lien means any Lien created by an express mortgage,
pledge or other grant of a security interest or other Lien pursuant to an
agreement or commitment made by the Person owning the property or assets that
are the subject of such mortgage, pledge or grant. Without affecting the
specificity of the foregoing, Consensual Liens shall not include (i) Liens
arising by operation of Law, including Liens for taxes, assessments,
governmental charges or levies, (ii) carriers warehousemen s, materialmen s
and mechanic s Liens and other similar Liens arising in the ordinary course of
business, (iii) easements, zoning restrictions or other restrictions on the
use of real property, unless constituting an express easement, restriction,
mortgage, pledge or grant created by such Person, and (iv) judgment Liens;
provided, however, that upon any officer or director of GEV or any of its
Subsidiaries receiving notice from any Governmental Authority of the taking
of, or proposal
<PAGE>3
to take, any action with respect to a material Lien referred to in subclause
(i) of this definition with respect to any of the Subject Parcels or any of
the Subject Interests, or obtaining actual knowledge of the creation or
incurrence of any material Lien described in subclause (iv) of this definition
with respect to any of the Subject Parcels or any of the Subject Interests,
such officer or director shall promptly, but in any event within five (5)
Business Days thereafter, provide the Sellers Representative with written
notice of such notice, creation or incurrence, in reasonable detail, and, upon
receipt of such notice, the Sellers may take, or to the extent that funds are
available in the Contingent Payment Account or are otherwise provided by the
Sellers, may direct GEV and its Subsidiaries (to the extent that such
Subsidiaries own any of the Subject Parcels or Subject Interests) to take, any
and all actions which the Sellers reasonably deem reasonably necessary or
appropriate to address such taking of action or to remove such Lien.
Contingent Payment Account has the meaning specified in
Section 2.02(a).
Debtor Relief Laws means the Bankruptcy Code of the United States,
and any successor statute of similar import, as the same may be amended or
supplemented and in effect from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
fraudulent transfer or conveyance, reorganization or similar debtor relief
Laws from time to time in effect affecting the rights of creditors generally.
Default Rate means the rate announced by Texas Commerce Bank
National Association from time to time as its prime lending rate, plus four
percent (4%).
Dispute has the meaning specified in Section 6.08.
Distributions means any and all rights, title and interests of GEV
and its Subsidiaries in and to: (a) with respect to Basic Investments, any
and all dividends, payments (including sinking fund payments) and
distributions on shares of any class of its capital stock or any other equity
interests (other than dividends, payments and distributions payable in capital
stock or other equity interests, or rights to acquire capital stock or other
equity interests); and (b) with respect to Victory Valley, any and all
payments (including sinking fund payments) and distributions to any holders,
as such, of any of its partnership interests or other equity interests (other
than distributions payable in partnership interests or other equity interests,
or rights to acquire partnership interests or other equity interests).
Dollar and the sign $ mean lawful money of the United States.
Environmental Laws means any and all Laws, including any judgment,
permit, approval, decision or determination, pertaining to the environment now
or hereafter in effect and applicable to the Subject Parcels or the Subject
Interests, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. 9601 et seq., as amended by the
Superfund Amendment and Reauthorization Act
<PAGE>4
of 1986 and as further amended, the Federal Water Pollution Control Act, 33
U.S.C. 1251 et seq., as amended, the Solid Waste Disposal Act of 1976, 42
U.S.C. 6901 et seq., as amended, the Clean Air Act, 42 U.S.C. 7401 et
seq., as amended, the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,
as amended, the Hazardous Materials Transportation Act, 49 Ap. U.S.C.A. 1801
et seq., as amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. 136 et seq., as amended, and comparable state and local Laws, and
other environmental conservation and protection Laws, as such Laws may be
amended, supplemented or superseded and in effect from time to time.
Expenses means:
(a) any and all expenses paid by GEV or any of its Subsidiaries with
respect to the Transfer of any of the Subject Parcels or any of the
Subject Interests, including real estate commissions, legal fees and
title costs;
(b) any and all income, sales, franchise, licensing, property and
other taxes incurred and due or paid by GEV or any of its Subsidiaries
with respect to any of the Subject Parcels, any of the Subject Interests,
any Revenues or any Distributions and any and all taxes incurred and due
or paid by GEV or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the creation of the
Contingent Payment Account and the other arrangements established hereby
or in connection with the performance by GEV or any of its Subsidiaries
of any of its obligations hereunder, including the making of any payment
or Transfer hereunder; provided, however, that the amount of any income
tax liability of GEV or any of its Subsidiaries which is attributable to
any of the Subject Parcels, any of the Subject Interests, any Revenues or
any Distributions shall be determined (and said income tax liability, as
so determined, shall be treated as incurred and due or paid for purposes
of this paragraph (b) to the extent, but only to the extent, that such
income tax liability will not in fact be payable by GEV or any of its
Subsidiaries) without giving effect to any reduction thereof resulting
from (i) any tax loss carry-forward in existence on the date of this
Agreement which is unrelated to any of the Subject Parcels, any of the
Subject Interests, any Revenues or any Distributions and which is
available to GEV or any of its Subsidiaries or (ii) any net operating
loss occurring after the date of this Agreement which is unrelated to any
of the Subject Parcels, any of the Subject Interests, any Revenues or any
Distributions to the extent that giving effect to such reduction would
reduce any tax loss carry-forward which would otherwise be available to
GEV or any of its Subsidiaries in any subsequent tax year (any such
reduction in net operating losses or tax loss carry-forwards to be offset
by any item described in clause (ii) of the last proviso of this
definition in a manner that avoids duplication of the benefit of such
item);
(c) any and all costs for Capital Expenditures (if any), insurance
premiums, labor, supplies, utilities and other services, infrastructure,
amenities, improvements and enhancements (if any, and whether on-site,
off-site or regional) not reimbursed by
<PAGE>5
the purchaser of any of the Subject Parcels or otherwise, including costs in
connection with installing utilities, roadways and landscaping, which costs
are allocable to any of the Subject Parcels in accordance with GAAP, paid by
GEV or any of its Subsidiaries with respect to any of the Subject Parcels for
the period commencing on the date hereof and ending, with respect to each
Subject Parcel, on the date of the Transfer of such Subject Parcel;
(d) any and all direct costs and expenses attributable (i) to any of
the Subject Parcels or any of the Subject Interests or (ii) to the
performance by GEV or any of its Subsidiaries of this Agreement,
including brokers fees and other costs and expenses incurred by GEV or
any of its Subsidiaries in connection with compliance with the provisions
of Section 2.02(c);
(e) in reimbursement of general overhead costs allocable to the
administration of this Agreement, an annual amount, which amount shall be
$50,000 for the annual period beginning on the date hereof and, for
subsequent annual periods, shall be an amount (which may be greater or
less than the prior annual amount) to be negotiated in good faith by the
Purchaser and the Sellers Representative and to be determined with
reference to the actual work required (including any additional work
required in connection with any Transfers or proposed Transfers) and
costs incurred in the prior annual period, such annual amount to be
payable on April 1 of each year;
(f) the reasonable fees and expenses of attorneys, consultants,
appraisers and other consultants or experts incurred by GEV or any of its
Subsidiaries as a result of its execution and delivery of this Agreement
or in connection with the performance of its obligations hereunder (but
not any fees, costs and expenses incurred by GEV or any of its
Subsidiaries for services rendered prior to the date of this Agreement),
including fees and expenses incurred by GEV or any of its Subsidiaries in
connection with or as a result of any action or proceeding brought, or
any claim made, by any Governmental Authority or other Person other than
the Sellers (including Basic, Victory Valley or Persons having interests
in either thereof) relating to any of the Subject Parcels or any of the
Subject Interests, unless the incurrence by GEV or any of its
Subsidiaries resulted from actions taken by GEV or any of its
Subsidiaries constituting a material breach by GEV or any of its
Subsidiaries of its obligations under this Agreement or constituting
gross negligence or wilful misconduct on the part of GEV or any of its
Subsidiaries; provided, however, that (without affecting the provisions
of Section 6.02) the foregoing shall not include any fees and expenses
incurred by GEV or any of its Subsidiaries in connection with any claims
made by GEV or any of its Subsidiaries against any of the Sellers or any
claims made by any of the Sellers against GEV or any of its Subsidiaries;
(g) any and all other reasonable costs, fees and expenses otherwise
paid by GEV or any of its Subsidiaries in connection with the ownership,
maintenance (to the extent required hereunder) or Transfer of any of the
Subject Parcels or any of the
<PAGE>6
Subject Interests for the period commencing on the date hereof and ending,
with respect to each Subject Parcel and each Subject Interest, on the date of
the Transfer of such Subject Parcel or Subject Interest, or in connection with
the performance by GEV or any of its Subsidiaries of its obligations
hereunder; and
(h) any and all amounts due and payable (i) to any GEV Purchase
Agreement Indemnified Person pursuant to Article VIII or Article IX of
the Purchase Agreement, or (ii) to any GEV Indemnified Person pursuant to
Section 4.05 of this Agreement, in each case to the extent then payable
from the Contingent Payment Account pursuant to either such Article or
such Section;
provided, however, that, (i) except to the extent reflected in the fee
provided for in paragraph (e) above, the term Expenses shall not include any
allocation of any expense of GEV or any of its Subsidiaries for general
overhead or non-operating items such as financial, personnel and legal and
other general administrative services; (ii) the aggregate Expenses incurred by
GEV and its Subsidiaries hereunder shall be reduced for all purposes thereof
by an amount equal to the aggregate amount of any reduction in the cash tax
liability of GEV or any of its Subsidiaries from the payment of any Expenses
and/or (A) the payment to the Sellers pursuant to the terms of this Agreement
of any interest or (B) any other amount deemed interest under the Code; and
(iii) for purposes of determining Expenses hereunder, to the extent that GEV
or any of its Subsidiaries incurs costs, expenses or other amounts of a kind
described in any of paragraphs (a), (b), (c), (d), (f) and (g) above, such as
the cost of blanket insurance policies, that relate both to the Subject
Parcels or the Subject Interests and to other assets or properties of GEV or
any of its Subsidiaries, such costs, expenses and other amounts shall be
allocated to the Subject Parcels or the Subject Interests and to such other
assets or properties on a reasonable and equitable basis and, to the extent
applicable, in accordance with GAAP. For purposes of clause (ii) above, items
described in clause (ii) above which do not result in an offset described in
the parenthetical at the end of paragraph (b) of this definition and which
increase a net operating loss carry-forward of GEV or any of its Subsidiaries
(an NOL Increase ) shall be treated as reducing the cash tax liability of GEV
and its Subsidiaries to the extent that such cash tax liability would have
been greater but for the existence of such NOL Increase.
GAAP means generally accepted United States accounting principles,
applied on a consistent basis (except for changes in which the independent
auditors of the Person in question concur), which are applicable in the
circumstances as of the date in question.
GEV has the meaning specified in the introductory paragraph of this
Agreement.
GEV Indemnified Persons has the meaning specified in Section 4.05.
GEV Purchase Agreement Indemnified Person means GEV and each other
Person indemnified pursuant to Section 8.1(a) or 9.1(a) of the Purchase
Agreement.
<PAGE>7
Governmental Approval has the meaning specified in the Purchase
Agreement.
Governmental Authority means any nation or government, any federal,
state, province, county, city, town, municipality, local or other political
subdivision thereof or thereto and any court, tribunal, department,
commission, board, bureau, instrumentality, agency or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other governmental entity with authority over
the applicable subject matter.
Hazardous Materials has the meaning specified in the Purchase
Agreement.
Highest Lawful Rate means, with respect to any indebtedness,
liability or obligation, including the Obligations, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received by the Person to whom such
indebtedness, liability or obligation is owed under Law applicable to such
Person.
Indemnified Person has the meaning specified in Section 4.07.
Indemnifying Person has the meaning specified in Section 4.07.
Interim Expense Statement has the meaning specified in Section
2.02(b)(ii).
Laws means any and all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions and decrees of any Governmental
Authority, and any judicial, arbitral or administrative interpretations
thereof.
Liens means any and all mortgages, liens, charges, pledges,
hypothecations, assignments, deposit arrangements, encumbrances, security
interests or preferences, priorities or other security agreements of any kind
or nature whatsoever (whether voluntary or involuntary, affirmative or
negative, and whether imposed or created by operation of Law or otherwise)
upon, or pledge of, any property or assets, including any and all conditional
sales or other title retention agreements and any and all financing leases
having substantially the same effect as any of the foregoing.
Losses has the meaning specified in Section 4.05.
Louisiana Parcel means that certain tract of land located in St.
Gabriel, Louisiana, as more particularly described on Exhibit B attached
hereto and incorporated herein for all purposes.
Majority Interest means a majority of the Ownership Interests of
the Sellers.
<PAGE>8
Material Adverse Effect means, as to any asset or property, a
material adverse effect on the value or condition of such asset or property.
Monthly Expense Statement has the meaning specified in Section
2.02(b)(i).
Nevada Parcels means those certain tracts of land located in
Henderson, Nevada, as more particularly described on Exhibit C attached
hereto and incorporated herein for all purposes.
Non-Cash Revenues means Revenues other than cash, promissory notes
and other evidences of indebtedness.
Obligations means any and all obligations, covenants, indebtedness
and liabilities of GEV or the Purchaser to any of the Sellers now existing or
hereafter arising under this Agreement and all interest, if any, accruing
thereon (including any interest that accrues after the commencement of any
proceeding by or against GEV or the Purchaser under any Debtor Relief Law) and
all reasonable attorneys fees and other expenses incurred in the collection
or enforcement thereof.
Ownership Interests means the respective rights, title and
interests of the Sellers in and to the Obligations, being in the percentages
provided on Schedule 2 attached hereto and incorporated herein for all
purposes.
Person means any individual, partnership, firm, corporation,
limited liability company, joint stock company, unincorporated association,
joint venture, trust or other entity or enterprise, or any Governmental
Authority.
Pioneer has the meaning specified in the recitals of this
Agreement.
Permitted Investments means any of the following investments:
(a) securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof) having a maturity not exceeding thirty (30) days from the
date of acquisition; (b) time deposits and certificates of deposit of any
commercial bank having capital and surplus in excess of $500,000,000, provided
that the long term senior unsecured debt of such bank is rated at least A+ or
the equivalent thereof by Standard & Poor s Corporation or at least A1 or the
equivalent thereof by Moody s Investors Service, having a maturity not
exceeding thirty (30) days from the date of acquisition; and (c) commercial
paper issued by the parent corporation of any commercial bank or by any
domestic corporation, provided that such commercial paper is rated at least
A 1 or the equivalent thereof by Standard & Poor s Corporation or at least P-1
or the equivalent thereof by Moody s Investors Service, having a maturity not
exceeding thirty (30) days from the date of acquisition.
<PAGE>9
Proceeds means any and all assets and properties, real or personal,
into which any of the Subject Parcels or any of the Subject Interests, or the
proceeds thereof, have been converted, and the proceeds, in whatever form,
including cash, promissory notes and other evidences of indebtedness, of any
Transfer of any of the Subject Parcels or any of the Subject Interests or any
proceeds thereof.
Purchase Agreement has the meaning specified in the recitals of
this Agreement.
Purchaser has the meaning specified in the introductory paragraph
of the Agreement.
Release means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles).
Revenues means:
(a) any and all Proceeds paid to GEV or any of its Subsidiaries from
the purchaser of any of the Subject Parcels or any of the Subject
Interests (including any purchaser pursuant to an agreement that was
entered into prior to the date hereof); provided, however, that in the
event that any such Proceeds consist of a promissory note or other
evidence of indebtedness, each payment due or to become due under such
promissory note or other evidence of indebtedness shall not constitute
Revenues until such payment is received by GEV or any of its
Subsidiaries;
(b) any and all insurance proceeds paid to GEV or any of its
Subsidiaries in respect of a casualty or other insured loss to or
affecting any of the Subject Parcels or any of the assets or properties
of any of the Subject Interests;
(c) any and all Proceeds paid to GEV or any of its Subsidiaries in
respect of any taking of any of the Subject Parcels or any of the assets
or properties of any of the Subject Interests, or of any rights
appurtenant thereto, by condemnation, eminent domain or transfer in lieu
thereof for public or quasi-public use under any Law or arising out of
any damage or diminution in value to the Subject Parcels or any of the
assets or properties of any of the Subject Interests in connection
therewith;
(d) any and all Distributions paid to GEV or any of its Subsidiaries;
(e) interest on any sums paid or payable by GEV or any of its
Subsidiaries hereunder that are not paid when due at a rate per annum
equal to the lesser of the Highest Lawful Rate and the Default Rate; and
<PAGE>10
(f) any and all other cash, property (tangible or intangible) or
other amounts or consideration of any type otherwise paid to GEV or any
of its Subsidiaries with respect to the ownership, operation or Transfer
of any of the Subject Parcels or any of the Subject Interests, other than
payments made to GEV or any of its Subsidiaries (i) which are entitled to
be made out of the Contingent Payment Account, or other payments made to
GEV or any of its Subsidiaries, in each case pursuant to Article VIII or
Article IX of the Purchase Agreement, or (ii) which are entitled to be
made out of the Contingent Payment Account pursuant to this Agreement, or
other payments made to GEV or any of its Subsidiaries pursuant to Section
4.05 and 4.07;
provided, however, that for purposes of determining Revenues hereunder, to the
extent that GEV or any of its Subsidiaries receives Proceeds, proceeds, cash,
property or other amounts of a kind described in any of paragraphs (a), (b),
(c) and (f) above that relate both to the Subject Parcels or the Subject
Interests and to other assets or properties of GEV or any of its Subsidiaries,
such Proceeds, proceeds, cash, property and other amounts shall be allocated
to the Subject Parcels or the Subject Interests and to such other assets or
properties on a reasonable and equitable basis and, to the extent applicable,
in accordance with GAAP. Any Revenues that consist of assets or property
other than cash shall be held by the Purchaser and shall be subject to the
provisions of this Agreement.
Seller Indemnified Persons has the meaning specified in Section
4.06.
Sellers has the meaning specified in the introductory paragraph of
this Agreement.
Sellers Representative means initially L. M. Vaughan, Jr. and
thereafter any other Person as shall be specified in a writing or writings
executed by Sellers holding a Majority Interest and delivered to the
Purchaser; provided, however, that in the event that there shall not be a
Sellers Representative hereunder, Sellers representing a majority of the
Ownership Interests shall be entitled to act for the Sellers hereunder as the
Sellers Representative until Sellers representing a majority of the Ownership
Interests notify GEV and the Purchaser of the election of a replacement
Sellers Representative.
Stock has the meaning specified in the recitals of this Agreement.
Subject Interests means any and all of the rights, title and
interests of GEV and its Subsidiaries in and to any capital stock, partnership
interest or other equity interest in Basic Investments and/or Victory Valley.
Subject Parcels means the California Parcel, the Louisiana Parcel
and the Nevada Parcels, collectively.
Subsidiary means, with respect to any Person, each other Person of
which or in which such Person and its other Subsidiaries own, hold or control,
directly or indirectly,
<PAGE>11
securities or other ownership interests having ordinary voting power, in the
absence of contingencies, to elect a majority of the board of directors of
such other Person, or other Persons performing similar functions for such
other Person, or, if there are no such directors or Persons, having a majority
of the general voting power with respect to the activities of such other
Person.
Transfer means, with respect to any property or assets, any sale,
Lien, pledge, assignment or other disposition of such property or asset, and
such term, when used as a verb, shall have correlative meanings.
Transfer Direction has the meaning specified in Section 4.03.
Transfer Opinion means, with respect to any Transfer, an opinion of
independent counsel, selected by the Sellers Representative and reasonably
acceptable to the Purchaser, addressed to GEV and the Purchaser, to the effect
that: (a) such Transfer will not violate any Laws of a kind that would
typically be applicable to like Transfers, including, if so applicable,
securities Laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (or any similar or successor Law), or any Governmental Approval
applicable to the asset or property being Transferred; and (b) such Transfer
will not violate in any material respect the provisions of the governing
documents of any Person, or any agreement, in each case as identified by the
Purchaser and relating to the asset or property being Transferred. In
rendering such opinion, such counsel may rely, as to factual matters, upon
certifications of officers of GEV, the Purchaser and the Sellers
Representative and, with respect to matters governed by the laws of
jurisdictions other than the jurisdiction in which such counsel is qualified
to provide such opinion, upon opinions of counsel so qualified in such other
jurisdictions.
Victory Valley means Victory Valley Land Company, L.P., a Delaware
limited partnership.
Zeneca Purchase Agreement means that certain Purchase Agreement
dated as of August 29, 1988 between ICI Delaware Holdings, Inc., a Delaware
corporation ( ICI ), and Pioneer Chlor Alkali Holdings, Inc., a Texas
corporation ( PCAH ), as amended by that certain First Amendment to the
Purchase Agreement dated as of October 25, 1988 among ICI, PCAH and Pioneer.
Section 1.02. Computation of Time Periods. In this Agreement, in
the computation of periods of time from a specified date to a later specified
date, the word from means from and including and the words to and
until each means to but excluding.
Section 1.03. References, Etc. The words hereof, herein and
hereunder and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this
<PAGE>12
Agreement in the singular shall have the same meanings in the plural and vice
versa. All references herein to Articles, Sections, Schedules and Exhibits
shall, unless the context requires a different construction, be deemed to be
references to the Articles and Sections of this Agreement and the Schedules
and Exhibits attached hereto which are made a part hereof. In this Agreement,
unless a clear contrary intention appears, the word including (and with
correlative meaning include ) means including, without limiting the
generality of any description preceding such term. No provision of this
Agreement shall be interpreted or construed against any Person solely because
that Person or its legal representative drafted such provision.
ARTICLE II
Additional Consideration
Section 2.01. The Additional Consideration. As part of the
consideration for the sale of the Stock, the Purchaser shall pay the Sellers
the amounts and other consideration set forth in this Agreement (the
Additional Consideration ).
Section 2.02. Payment of Additional Consideration. The Purchaser
shall pay the Additional Consideration to the Sellers in accordance with the
following provisions:
(a) Within five Business Days after the receipt by GEV or any of its
Subsidiaries of any Revenues, the Purchaser shall deposit, or shall cause
to be deposited, an amount equal to such Revenues (net of any Expenses
theretofore paid out of such Revenues) into a segregated account of the
Purchaser (the Contingent Payment Account ), as described in
Section 2.02(c).
(b) Amounts held in the Contingent Payment Account shall be disbursed
by the Purchaser as follows:
(i) The Purchaser shall disburse to its own account, or to such
Person or Persons as the Purchaser shall specify in the Monthly
Expense Statement hereinafter referred to, on the last Business Day
of each month, all Expenses not theretofore paid (including any and
all Expenses incurred at any time prior to such month that were not
paid as a result of the insufficiency of funds in the Contingent
Payment Account). Such Expenses shall be specified in a statement
prepared by the Purchaser and certified by an Authorized Officer of
the Purchaser for each month during which Expenses are incurred and
for each month in respect of which prior Expenses, as referred to in
the parenthetical clause of this paragraph, are to be paid out of the
Contingent Payment Account (a Monthly Expense Statement ).
<PAGE>13
(ii) The Purchaser may also disburse to its own account, or to
such other Person or Persons as the Purchaser shall specify in an
Interim Expense Statement hereinafter referred to, at any time, any
Expense paid, or payable within five (5) Business Days, by GEV or any
of its Subsidiaries in an amount exceeding $100,000, to the extent
not theretofore paid (including any and all Expenses incurred at any
time prior to such month that were not paid as a result of the
insufficiency of funds in the Contingent Payment Account). Such
Expenses shall be specified in a statement prepared by the Purchaser
and certified by an Authorized Officer of the Purchaser for each
Expense paid pursuant to this paragraph (ii) (an Interim Expense
Statement ).
(iii) The Purchaser shall disburse, (A) to the Sellers in
accordance with their respective Ownership Interests, the amounts
payable from the Contingent Payment Account pursuant to Article VIII
or Article IX of the Purchase Agreement, at the times required by
such Section, (B) to the Sellers in accordance with their respective
Ownership Interests, in reimbursement of any reasonable costs and
expenses incurred by any Seller or the Sellers Representative in
connection with investigating, preparing for or defending any pending
or threatened action, claim or proceeding pursuant to Section 4.07,
as and when such costs and expenses are incurred, irrespective of any
Loss Estimate (as defined in the Purchase Agreement) outstanding at
such time and irrespective of the Maximum Production Site Indemnity
(as defined in the Purchase Agreement); (C) to the Sellers in the
proportions specified by the Sellers Representative, amounts payable
to the Sellers pursuant to Section 3.13; and (D) to the Sellers
Representative, to the extent that funds are available in the
Contingent Payment Account, the fees of the Sellers Representative
and costs and expenses incurred by the Sellers Representative in
connection with the administration of this Agreement and the Purchase
Agreement, as and when incurred or due, irrespective of any Loss
Estimate outstanding at such time and irrespective of the Maximum
Production Site Indemnity; provided, however, that, without the prior
written consent of the Purchaser, the fees, costs and expenses
payable to the Sellers Representative pursuant to this clause (D)
shall not exceed an aggregate of Twenty Thousand Dollars ($20,000)
during each year after the date hereof, cumulated to the extent not
fully used in any year.
(iv) In the event that the Sellers or the Sellers
Representative dispute any matter contained in any Monthly Expense
Statement or any Interim Expense Statement, the Sellers or the
Sellers Representative shall, within thirty (30) days of the receipt
of such Monthly Expense Statement or Interim Expense Statement,
notify the Purchaser in writing of such dispute and, if the parties
cannot resolve such dispute within thirty (30) days of the receipt by
the Purchaser of such notice, the Sellers shall be entitled to submit
such matter to binding arbitration in accordance with the provisions
of Section 6.08.
<PAGE>14
(c) Amounts held in the Contingent Payment Account shall be invested
by the Purchaser in Permitted Investments, and the Purchaser will use
reasonable commercial efforts to cause such amounts to be so invested.
If the Purchaser believes that compliance with this Section 2.02(c) would
be impracticable or could otherwise not be effected at any time or for
any reason, the Purchaser will promptly advise the Sellers
Representative thereof in writing and shall, in any such event, follow
the directions of the Sellers Representative with respect to such matter
and, in the absence of such directions, shall invest amounts in the
Contingent Payment Account in investments described in clause (a) of the
definition of the term Permitted Investments herein, to the extent that
such investments are available. The Purchaser shall not commingle
amounts in the Contingent Payment Account with any other funds or assets
of the Purchaser, and amounts held in the Contingent Payment Account
shall be used only for the purposes and in the manner provided herein.
The Purchaser shall not have any liability for any loss from Permitted
Investments made, or other actions taken or not taken, in accordance with
this Section 2.02(c) other than for actions taken or not taken which
constitute a material breach of this Agreement or gross negligence or
wilful misconduct on the part of GEV or any of its Subsidiaries.
(d) If the Purchaser shall fail to make any payment to the Sellers
required hereunder and such default shall have continued for five days,
the Purchaser shall pay interest on the balance of such defaulted payment
from day to day outstanding at a varying rate per annum equal to the
lesser of (i) the Default Rate and (ii) the Highest Lawful Rate.
(e) On or before June 30 of each year, an Authorized Officer of the
Purchaser shall submit a written report to the Sellers Representative
indicating the actual taxes, tax reductions and net operating losses
incurred and/or realized by GEV and its Subsidiaries (utilizing the
assumptions contained in the definition of Expenses herein) in connection
with the payment of Expenses made during the prior calendar year. From
time to time during regular business hours upon reasonable prior notice,
GEV shall permit, and shall cause each of its Subsidiaries to permit,
agents or representatives of the Sellers Representative to examine,
audit and make copies of and abstracts from its records and books of
account insofar as they relate to such taxes, tax reductions and net
operating losses and discuss matters relating thereto with its
independent public accountants, officers and directors, all at the
expense of the Sellers; provided, however, that the Sellers shall not be
obligated to reimburse GEV or any of its Subsidiaries for any cost or
expense, including any salary or other wages, arising out of or connected
with discussions between the Sellers Representative or any agent or
representative thereof and any officers, directors or employees of GEV or
any of its Subsidiaries and, provided further, that in the event that
such audit provides that any adjustment in favor of the Sellers to such
amounts is required in an amount in excess of $5,000, the Sellers shall
be entitled to be reimbursed by GEV for any and all reasonable costs and
expenses incurred in connection with the conduct of such audit and GEV
shall pay such amount to the
<PAGE>15
Sellers within five (5) Business Days of the submission of the results of such
audit to GEV or, if such adjustment or any matter related thereto shall be
submitted to arbitration pursuant to Section 6.08, within five (5) Business
Days after the determination of the arbitrator or arbitrators.
ARTICLE III
Covenants
So long as any Obligation shall remain unpaid, unperformed or
outstanding:
Section 3.01. Information. The Purchaser shall furnish to the
Sellers Representative all of the following:
(a) not later than January 31 and July 31 of each year commencing
with July 31, 1995, a report prepared and certified by an Authorized
Officer of the Purchaser, prepared as of the last day of the immediately
preceding six (6) calendar month period, which report shall set forth:
(i) any and all Revenues received by GEV or any of its Subsidiaries
during such six (6) month period, specifying in reasonable detail the
amount and source of each item of Revenue, and the aggregate amount of
any and all Revenues received by GEV or any of its Subsidiaries during
the period from the date hereof to and including the last day of such six
(6) month period; and (ii) any and all Expenses incurred by GEV or any of
its Subsidiaries during such six (6) month period, specifying in
reasonable detail the amount and payee, if any, of each item of Expense,
and the aggregate amount of any and all Expenses incurred by GEV or any
of its Subsidiaries during the period from the date hereof to and
including the last day of such six (6) month period; and which report
shall be accompanied by copies of all Monthly Expense Statements and
Interim Expense Statements prepared during such six (6) month period;
(b) promptly upon receipt thereof by any officer or director of GEV
or any of its Subsidiaries, notice of any written offer or letter of
intent received from a prospective purchaser of all or any portion of any
of the Subject Parcels or any of the Subject Interests, which notice
shall include a copy of such offer or letter of intent and such
information as GEV or any of its Subsidiaries may have with respect to
such prospective purchaser and its interest in any of the Subject Parcels
or any of the Subject Interests;
(c) promptly upon any officer or director of GEV or any of its
Subsidiaries obtaining actual knowledge thereof, notice of (i) any
violation of, noncompliance with or remedial obligations under any
Governmental Approval or Environmental Law involving or directly
affecting any of the Subject Parcels, any of the Subject Interests or any
of the assets or properties of any of the Subject Interests, (ii) any
Release or
<PAGE>16
threatened Release involving or directly affecting in any material respect any
of the Subject Parcels, any of the Subject Interests or any of the assets or
properties of any of the Subject Interests and (iii) the amendment or
revocation of any Governmental Approval with respect to any of the Subject
Parcels, any of the Subject Interests or any of the assets or properties of
any of the Subject Interests that, in any such case referred to in this
paragraph (c), could reasonably be expected to have a Material Adverse Effect
on any of the Subject Parcels, any of the Subject Interests or any of the
assets or properties of any of the Subject Interests;
(d) promptly upon receipt thereof by any officer or director of GEV
or any of its Subsidiaries, and in any event within ten (10) days after
such receipt, a copy of (i) any notice or claim involving or directly
affecting any of the Subject Parcels, any of the Subject Interests or any
of the assets or properties of any of the Subject Interests to the effect
that GEV, any of its Subsidiaries, any of the Subject Interests or any
other Person is or may be liable to any Person as a result of the Release
by GEV, any of its Subsidiaries or any other Person of any Hazardous
Material into the environment and (ii) any notice involving or directly
affecting any of the Subject Parcels, any of the Subject Interests or any
of the assets or properties of any of the Subject Interests alleging any
violation of any Governmental Approval or Environmental Law by GEV, any
of its Subsidiaries, any of the Subject Interests or any other Person,
which, in any case referred to in this paragraph (d), could reasonably be
expected to have a Material Adverse Effect on any of the Subject Parcels
or any of the Subject Interests;
(e) promptly upon any officer or director of GEV or any of its
Subsidiaries obtaining actual knowledge thereof, and in any event within
ten (10) days thereafter, written notice of the institution of, or threat
of, any action, suit, proceeding, governmental investigation or
arbitration involving or directly affecting any of the Subject Parcels,
any of the Subject Interests or any of the assets or properties of any of
the Subject Interests by any Governmental Authority or other Person
against or affecting GEV, any of its Subsidiaries or any of the Subject
Interests, or any other matter involving or directly affecting any of the
Subject Parcels, any of the Subject Interests or any of the assets or
properties of any of the Subject Interests (other than matters of general
applicability, such as economic, regulatory, tax or other matters of
general applicability, or matters generally affecting real estate or real
estate markets), that could reasonably be expected to have a Material
Adverse Effect on any of the Subject Parcels, any of the Subject
Interests or any of the assets or properties of any of the Subject
Interests and that has not previously been disclosed in writing to the
Sellers Representative pursuant to this Agreement, and, upon request of
the Sellers Representative, such information with respect to any
material developments in any such action, suit, proceeding, governmental
investigation or arbitration as the Sellers Representative may
reasonably request from time to time; and
<PAGE>17
(f) promptly after the sending or filing thereof, copies of all proxy
statements which GEV sends to any holders of any of its securities, and
copies of all regular and periodic reports and all registration
statements which GEV files with the Securities and Exchange Commission or
any national securities exchange;
(g) in the event that the Sellers have requested that GEV or any of
its Subsidiaries take any action with respect to any of the Subject
Parcels pursuant to the provisions of Section 3.07, not later than March
31 of each year, a report prepared by the broker, agent or intermediary
engaged pursuant to such Section (to the extent that the provision of
such a report has been arranged by the Sellers or the Sellers
Representative with such broker, agent or intermediary, with the
assistance of GEV and its Subsidiaries to the extent reasonably necessary
if such assistance is reasonably requested by the Sellers or the Sellers
Representative), prepared as of December 31 of the prior year, covering
all of such Subject Parcels, which report shall set forth the status of
the marketing of each such Subject Parcel and such information as GEV or
any of its Subsidiaries may have as the Sellers or the Sellers
Representative may reasonably request; provided, however, that neither
GEV nor any of its Subsidiaries shall be responsible for the contents of
any such report; and
(h) promptly, such other information in the possession of GEV or any
of its Subsidiaries as the Sellers Representative may from time to time
reasonably request respecting the Subject Parcels, the Subject Interests
or the assets and properties of any of the Subject Interests.
Each of the Sellers agrees that all documents and other information
provided by GEV or any of its Subsidiaries to any Seller or to the Sellers
Representative pursuant to this Agreement will be kept confidential by such
Seller and its associates, Affiliates, agents, employees, consultants and
advisors and will be used only for the purposes contemplated by this
Agreement; provided, however, that such Seller or its associates, Affiliates,
agents, employees, consultants and advisors may disclose any such information
(i) to the extent compelled to do so by judicial or administrative process,
or, in the opinion of its counsel, by other requirements of Law or (ii) to the
extent that such information can be shown to have been (A) previously
available to the Person to which it was furnished on a non-confidential basis
prior to its disclosure, (B) in the public domain or (C) available on a non-
confidential basis from a Person not bound by any confidentiality agreement.
Notwithstanding the foregoing, if a Seller or the Sellers Representative has
been requested or is required (by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to
disclose any such information, the Person so required will promptly notify the
Purchaser so that the Purchaser may seek an appropriate protective order.
Each Seller agrees that it will cooperate fully with the Purchaser in seeking
any such protective order.
Section 3.02. Taxes; Claims. The Purchaser shall use reasonable
commercial efforts to pay and discharge, and shall cause each of its
Subsidiaries (to the extent that any
<PAGE>18
such Subsidiary owns any of the Subject Parcels or Subject Interests) to use
reasonable commercial efforts to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon the Subject Parcels or the Subject
Interests and all lawful claims which, if unpaid, might become a Lien upon any
of the Subject Parcels or the Subject Interests, other than any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and with
respect to which adequate reserves are set aside on its books in accordance
with GAAP.
Section 3.03. Compliance with Laws. The Purchaser shall use
reasonable commercial efforts to comply, and shall cause each of its
Subsidiaries (to the extent that any such Subsidiary owns any of the Subject
Parcels or Subject Interests) to use reasonable commercial efforts to comply,
with all applicable Laws (including Environmental Laws) and Governmental
Approvals applicable to any of the Subject Parcels or any of the Subject
Interests, non-compliance with which could be reasonably be expected to have a
Material Adverse Effect on any of the Subject Parcels, any of the Subject
Interests or any of the assets or properties of any of the Subject Interests;
provided, however, that notwithstanding anything contained in this sentence to
the contrary, neither GEV nor any of its Subsidiaries shall be required to
take any action (except to the extent required by any Law or Governmental
Approval or by order of any Governmental Authority) that would violate any
covenant or obligation on the part of GEV or any of its Subsidiaries (whether
as a party, by assumption or otherwise) under the Zeneca Purchase Agreement.
The Purchaser shall use reasonable commercial efforts to obtain and maintain,
and shall cause each of its Subsidiaries (to the extent that any such
Subsidiary owns any of the Subject Parcels or Subject Interests) to use
reasonable commercial efforts to obtain and maintain, as and when required by
applicable Law, all Governmental Approvals necessary for its ownership of the
Subject Interest or its ownership and use, if any, of the Subject Parcels.
The provisions of this Section 3.03 shall not affect the obligations of the
Sellers pursuant to Article IX of the Stock Purchase Agreement with respect to
environmental matters first arising prior to the date hereof.
Section 3.04. Insurance. To the extent funds are available in the
Contingent Payment Account or are otherwise provided to the Purchaser or any
of its Subsidiaries by the Sellers for such purpose, the Purchaser shall use
reasonable commercial efforts to maintain, and shall cause each of its
Subsidiaries (to the extent that any such Subsidiary owns any of the Subject
Parcels or Subject Interests) to use reasonable commercial efforts to
maintain, insurance with financially sound, responsible and reputable
insurance companies or associations (as specified by the Sellers
Representative) with respect to the Subject Parcels against such risks and in
such amounts as (and with co-insurance and deductibles), and otherwise
comparable in all material respects to, the insurance maintained on such
Subject Parcels immediately prior to the execution of this Agreement. In the
event that such funds are not so available or provided, the Purchaser shall
use reasonable commercial efforts to maintain, and cause each of its
Subsidiaries (to the extent that any such Subsidiary owns any of the Subject
Parcels or Subject Interests) to use reasonable
<PAGE>19
commercial efforts to maintain, such insurance with respect to the Subject
Parcels that the Purchaser reasonably believes to be adequate.
Section 3.05. Corporate Existence; Etc. Except as provided in
Section 3.10, each of GEV and the Purchaser shall, and shall cause each of its
Subsidiaries (to the extent that any such Subsidiary owns any of the Subject
Parcels) to, preserve and maintain its corporate existence, and the Purchaser
shall, and shall cause each of such Subsidiaries to, qualify and remain
qualified as a foreign Person in each jurisdiction in which any of the Subject
Parcels is located for so long as the Purchaser or such Subsidiary is the
owner of such Subject Parcel.
Section 3.06. Inspections; Etc. From time to time during regular
business hours upon reasonable prior notice, each of GEV and the Purchaser
shall permit, and shall cause each of its Subsidiaries to permit, agents or
representatives of the Sellers Representative to: (a) examine, audit and
make copies of and abstracts from its records and books of account insofar as
they relate to the Subject Parcels, the Subject Interests, Revenues or
Expenses or any Monthly Expense Statement or Interim Expense Statement; (b)
visit the Subject Parcels; and (c) discuss matters relating to the Subject
Parcels, the Subject Interests, Revenues or Expenses with its independent
public accountants, officers and directors, all at the expense of the Sellers;
provided, however, that (i) the Sellers shall not be obligated to reimburse
GEV or the Purchaser or any of their respective Subsidiaries for any cost or
expense, including any salary or other wages, incurred in connection with
discussions between the Sellers Representative and any officers, directors or
employees of GEV or the Purchaser or any of their respective Subsidiaries, and
(ii) no such cost or expense shall be deemed an Expense hereunder.
Section 3.07. Marketing of Subject Parcels and Subject Interests.
Upon the direction of the Sellers Representative, and to the extent that
funds are available in the Contingent Payment Account or are otherwise
provided to the Purchaser or any of its Subsidiaries by the Sellers for such
purpose, the Purchaser shall use reasonable commercial efforts to, and shall
cause each of its Subsidiaries (to the extent that any such Subsidiary owns
any of the Subject Parcels or Subject Interests) to use reasonable commercial
efforts to, follow the directions of, and cooperate with, the Sellers
Representative, or any broker, agent or other intermediary designated by the
Sellers Representative, with respect to the marketing for Transfer of all or
any portion of the Subject Parcels or the Subject Interests; provided,
however, that neither the Purchaser nor any such Subsidiary shall be required
to take any action that it reasonably and in good faith believes may involve a
violation of Law or of the rights of any third party. The obligations of the
Purchaser under this Section 3.07 shall be subject to the provisions of
Article IV.
Section 3.08. Records and Books of Account. In order to enable GEV
and its Subsidiaries to calculate the amounts required under Section 2.02(e),
GEV shall keep, and shall cause each of its Subsidiaries to keep, adequate
records and books of account in which complete entries will be made in
accordance with GAAP (subject to year-end adjustments),
<PAGE>20
reflecting all financial transactions of such Person. GEV shall maintain, and
shall cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. The
Purchaser shall maintain separate records and books of account on a cash basis
and record therein any and all Revenues and Expenses and any and all debits
and credits to the Contingent Payment Account.
Section 3.09. Liens. GEV shall not, and shall cause each of its
Subsidiaries to not, create (or with respect to any Consensual Lien created
after the date hereof, permit to exist, other than at the direction of the
Sellers Representative) any Consensual Lien upon any of the Subject Parcels
or any of the Subject Interests. Promptly upon any officer or director of GEV
or any of its Subsidiaries obtaining actual knowledge thereof, and in any
event within five (5) Business Days thereafter, the Purchaser shall furnish to
the Sellers Representative written notice that any Person proposes to
exercise any remedies in respect of any Lien on any of the Subject Parcels or
the Subject Interests.
Section 3.10. Mergers, Acquisitions, Etc. Neither GEV nor the
Purchaser shall, directly or indirectly: (a) consolidate with or merge into
any Person or permit any Person to consolidate with or merge into it unless
the successor to such merger, if other than GEV or the Purchaser, as the case
may be, assumes all of its Obligations in writing; (b) sell all or
substantially all of its assets unless the purchaser thereof assumes all of
its Obligations in writing; provided, however, that any assumption pursuant to
clause (a) or (b) shall not relieve GEV or the Purchaser of any liability for
any of its Obligations unless such successor, if other than GEV or the
Purchaser, or such purchaser, as the case may be, has a consolidated net
worth, determined in accordance with GAAP and as set forth in an audited
balance sheet as of a date not more than one (1) year prior to the effective
date of such transaction, at least equal to the consolidated net worth of GEV
determined in accordance with GAAP and as set forth in an audited balance
sheet as of a date not more than one (1) year prior to the effective date of
such transactions; or (c) dissolve or liquidate.
Section 3.11. Conflicting Agreements. GEV shall not, and shall
cause each of its Subsidiaries to not, enter into any agreement or
arrangement, including any financing agreement or arrangement, which precludes
or places any material conditions or restrictions on the right of GEV or any
of its Subsidiaries to make any payment or Transfer required under the terms
of this Agreement.
Section 3.12. Transactions with Affiliates. GEV shall not, and
shall cause each of its Subsidiaries to not, enter into any transaction with
any of its Subsidiaries or Affiliates involving any of the Subject Parcels or
any of the Subject Interests other than transactions provided for in this
Agreement or transactions entered into in the ordinary course of business and
upon terms no less favorable than those that GEV or such Subsidiary could
obtain in an arms length transaction with a Person that is not a Subsidiary
or an Affiliate; provided, however, that for purposes of this Section 3.12,
neither Basic
<PAGE>21
Investments (or its Subsidiaries) nor Victory Valley shall be considered an
Affiliate of GEV or any of its Subsidiaries.
Section 3.13. Notification Regarding Compliance with Covenants. If
GEV or any of its Subsidiaries determines that it will be unable to comply
with any of the covenants set forth in any of Sections 3.02, 3.03, 3.04, 3.07
and 3.09, because of the insufficiency of funds necessary for such compliance,
taking into account the amounts then held in the Contingent Payment Account,
or otherwise, GEV or such Subsidiary shall give the Sellers Representative
prompt notice thereof, and, in such event, Sellers shall have the right to
either pay directly or provide to GEV or such Subsidiary the funds necessary
for such compliance. Notwithstanding anything contained in this Agreement or
the Purchase Agreement to the contrary, any such funds shall be payable to the
Sellers out of the first Revenues thereafter deposited into the Contingent
Payment Account.
Section 3.14. Guaranty. If the Purchaser or any of its
Subsidiaries shall default in the due and punctual performance of any of the
Obligations or in the full and timely payment of any amounts owed to the
Sellers pursuant to this Agreement, GEV shall forthwith perform or cause to be
performed such Obligations and shall forthwith make full payment of any amount
due with respect thereto at its sole cost and expense. The obligations of GEV
under this Section 3.14 shall not be conditioned or contingent upon the
pursuit of any remedies against the Purchaser or any of its Subsidiaries or
any other Person. To the maximum extent permitted by Law, GEV hereby waives
any right, whether legal, equitable, statutory or non-statutory, to require
the Sellers to proceed or take any action against, or pursue any remedy with
respect to, the Purchaser or any of its Subsidiaries or any other Person
before the Sellers may enforce rights against GEV under this Section 3.14;
provided, however, that the foregoing shall not be deemed a waiver of any
actions, claims or defenses available to GEV, which shall include any actions,
claims or defenses that are available to the Purchaser or any of its
Subsidiaries in respect of the matter as to which the Sellers seek to enforce
rights against GEV under this Section 3.14. Subject to the preceding
sentence, the guaranty provided in this Section 3.14 is an absolute,
continuing, irrevocable and unconditional guaranty of payment and performance
in full of the Obligations. With respect to any of the Obligations to pay
money, the guaranty provided in this Section 3.14 shall be a guarantee of
payment and not of collection. The Sellers may exercise any and all rights
granted to them in this Agreement and the Purchase Agreement without affecting
the validity or enforceability of the guaranty provided in this Section 3.14
and the obligations and liabilities of GEV hereunder will not be affected,
impaired or released by any extension, waiver or amendment of this Agreement
or the Purchase Agreement or any other action which would otherwise release a
guarantor from its obligations or liabilities under a guaranty. GEV
recognizes that the Sellers are relying upon the guaranty provided in this
Section 3.14 in entering into this Agreement and the Purchase Agreement and
further recognizes that such guaranty is a material inducement to the Sellers
entering into this Agreement and the Purchase Agreement.
<PAGE>22
ARTICLE IV
Certain Matters Relating to Subject
Parcels and Subject Interests
Section 4.01. Limitations on Obligations. Neither GEV nor any of
its Subsidiaries shall have any obligations or duties in respect of the
Subject Parcels or the Subject Interests, or in respect of the rights of any
Seller therein, other than those obligations expressly set forth in this
Agreement, and no implied obligations or duties shall be read into this
Agreement or otherwise deemed applicable hereto. Without limiting the
generality of the foregoing, neither GEV nor any of its Subsidiaries shall
have any obligation or duty (i) to seek to maintain or enhance the value of
the Subject Parcels or the Subject Interests, (ii) to improve the Subject
Parcels, (iii) except as set forth in Section 3.07, to seek potential
purchasers, developers, lessees or other users of any of the Subject Parcels
or Subject Interests or to seek to effect any such sale, development, lease or
use, (iv) except as set forth in Section 4.03, to effect any Transfer of any
of the Subject Parcels or any of the Subject Interests, or (v) to monitor the
markets, if any, for any such potential sales, developments, leases or uses or
to advise any of the Sellers with respect to such markets, if any.
Section 4.02. Losses. Except as otherwise provided in this
Agreement or the Purchase Agreement, neither GEV nor any of its Subsidiaries
shall be liable to any of the Sellers, or to any Person claiming through or
under any of the Sellers, on account of any loss to, or diminution or
impairment of value of, any of the Subject Parcels, the Subject Interests or
the assets or properties of any of the Subject Interests, whether such loss,
diminution or impairment arises out of damage to or destruction of any
property or assets, actions of any Governmental Authority or any other Person,
changes in markets for any of the Subject Parcels or Subject Interests or
losses of opportunity with respect to any such markets, or for any other
reason, other than any such loss, diminution or impairment that (and only to
the extent that) resulted from a material breach by GEV or the Purchaser of
any of its obligations under this Agreement or from the gross negligence or
wilful misconduct of GEV or any of its Subsidiaries.
Section 4.03 Transfers of Subject Parcels and Subject Interests.
Neither GEV nor the Purchaser shall, and shall cause each of its Subsidiaries
to not, Transfer any of the Subject Parcels, any of the Subject Interests or
any Non-Cash Proceeds except upon receipt of a written direction of the
Sellers Representative (a Transfer Direction ), which shall be in form and
scope reasonably satisfactory to the Purchaser. The Purchaser may rely,
without any obligation of inquiry of any kind, upon the instructions and
information set forth in any Transfer Direction, including information as to
the consideration for such Transfer, the Person or Persons to whom such
Transfer is to be made and the other terms of such Transfer. Notwithstanding
the foregoing provisions, neither GEV nor the Purchaser shall be required to
effect a Transfer:
<PAGE>23
(i) unless such Transfer constitutes a bona fide sale for fair
consideration of Subject Parcels, Subject Interests or Non-Cash Proceeds
to a Person or Persons who are not Affiliates of any of the Sellers
(unless such Transfer is upon terms no less favorable than those that the
Sellers could obtain in an arms length transaction with a Person that is
not an Affiliate);
(ii) if the terms of such Transfer, or of any agreement relating
thereto, require that GEV or any of its Subsidiaries assume or undertake
any liability or obligation to the Person or Persons to whom such
Transfer is to be made (including liabilities relating to environmental
matters), other than (A) liabilities that may arise from representations
made by the Purchaser with respect to its compliance in all material
respects with provisions of this Agreement and (B) warranties as to
title, corporate power and authority and other representations and
warranties of a legal nature customarily given in similar transactions,
but not including (C) representations or warranties as to financial
matters, environmental matters or value of assets or properties, it being
understood that any such liabilities or obligations in favor of a
transferee shall, except for those described in subclauses (A) and (B),
be undertaken by or otherwise be the responsibility of the Sellers,
except as may be otherwise agreed by GEV, the Purchaser and the Sellers
Representative; if the Sellers Representative shall request that GEV or
any of its Subsidiaries effect any Transfer on terms which include any
liability or obligation in favor of a transferee in addition to those
referenced in subclauses (A) and (B), GEV shall, and shall cause each of
its Subsidiaries to, negotiate in good faith with the Sellers
Representative with respect to appropriate agreements or arrangements
with respect thereto, taking into account the facts and conditions
existing at such time and the purposes of this Agreement;
(iii) if the Transfer of such Subject Parcel, or any portion
thereof, would leave any parcel of real estate owned by GEV or any of its
Subsidiaries as of the date of this Agreement without any means of
ingress or egress to such parcel of real estate, or without the benefit
of any other right of access, right to pass through or over or similar
right (including any utility easement) in respect of the Subject Parcel,
or portion thereof, being Transferred, which right in any such case
existed as of the date of this Agreement by virtue of the common
ownership of such Subject Parcel and such parcel of real estate, unless
the terms of the Transfer provide GEV and its Subsidiaries with an
express easement for ingress and egress to such parcel of real estate, or
for the exercise of any such other right, in substantially the same
manner and for substantially the same uses as GEV and its Subsidiaries
use such Subject Parcel as of the date of this Agreement, the costs and
expenses incurred in connection with the grant of such easement to
constitute an Expense;
(iv) unless, if an Authorized Officer of the Purchaser shall have
determined that a Transfer Opinion (or portions of a Transfer Opinion) is
necessary or appropriate with respect to such Transfer, the Purchaser
shall receive such Transfer Opinion; or
<PAGE>24
(v) if the Purchaser shall have determined, acting in good faith and
in consultation with counsel and, if appropriate, financial advisors,
that such Transfer may constitute a fraudulent conveyance or result in
personal liability to the directors of GEV or any of its Subsidiaries
under Laws relating to solvency, capital adequacy or dividends.
Section 4.04. Voting and Actions with Respect to Subject Interests.
The Sellers Representative or his designee shall have the right to vote, and
the Purchaser hereby grants the Sellers Representative or his designee an
irrevocable proxy, coupled with an interest, to vote, on behalf of the
Purchaser, on all matters on which stockholders of Basic Investments, or
partners of Victory Valley, as the case may be, are entitled to vote, provided
that (i) the Sellers Representative or his designee shall consult with the
Purchaser prior to casting any such vote, (ii) the right to vote granted
pursuant to this Section 4.04 shall not apply to any matter that could
reasonably be expected to have a material adverse effect on access of the
Purchaser or any of its Subsidiaries to water or power distribution or
transmission and (iii) the Sellers Representative or his designee shall not
cast any such vote that would adversely affect the Purchaser or any of its
Subsidiaries or the transactions contemplated by this Agreement; provided,
however, that nothing contained in this Section 4.04 shall prohibit or
restrict the ability of the Sellers Representative or his designee to vote
the stock of Basic Investments in favor of or otherwise support any sale of
the assets, properties and rights of the water transportation systems owned by
Basic Water Company, a Nevada corporation. Each of the Sellers further agrees
that such Seller will not enter into any agreement or arrangement with Basic
Investments or Victory Valley or the Affiliates of either, or with holders of
interests in any thereof, that would be inconsistent with the terms of this
Agreement and the rights of GEV and its Subsidiaries hereunder.
Section 4.05. Indemnification by Sellers. Subject to Section
4.05(b), the Sellers, severally in proportion to their respective Ownership
Interests, hereby agree to indemnify, defend and hold harmless GEV, the
Purchaser and each of their Subsidiaries, Affiliates, agents, successors,
executors, personal representatives and assigns (collectively the GEV
Indemnified Persons ) from and against any and all losses, costs, liabilities,
expenses (including reasonable attorneys and experts fees), judgments,
claims or damages (collectively Losses ) arising out of or resulting from:
(i) the execution and delivery of this Agreement and any documents
delivered pursuant hereto, the creation of the Contingent Payment Account
and the other arrangements established hereby, the performance by the
parties hereto of their respective obligations hereunder or the
consummation of the transactions contemplated hereby (including taxes (as
provided for and subject to any limitations provided for in paragraph (b)
of the definition of the term Expenses ) and any payment or Transfer
hereunder); provided, however, that such Losses were incurred in
connection with the execution and delivery of this Agreement or in
connection with the performance by GEV or any of its Subsidiaries of any
of its obligations hereunder and, provided further, that the indemnity
provided pursuant to this Section 4.05 shall
<PAGE>25
not apply to any Losses which constitute fees, costs and expenses incurred by
GEV or any of its Subsidiaries for services rendered prior to the date of this
Agreement;
(ii) ownership by the Purchaser or any of its Subsidiaries of any
of the Subject Parcels or any of the Subject Interests, excluding Losses
arising out of or resulting from violations of Environmental Laws or from
the presence or Release of any Hazardous Materials in, on or under any of
the Subject Parcels or any of the property or assets of the Subject
Interests; or
(iii) any claim, litigation, investigation or other proceeding
(including any threatened investigation or proceeding) relating to any of
the foregoing, whether or not any GEV Indemnified Person is a party
thereto, but only to the extent that the Sellers have indemnification
obligations in respect of the matter in question pursuant to clause (i)
or (ii) above;
provided, however, that such indemnity shall not apply to any Losses that
resulted from a material breach by GEV or the Purchaser of its obligations
under this Agreement or from the gross negligence or willful misconduct of any
GEV Indemnified Person.
(b) Notwithstanding anything contained in this Agreement or the
Purchase Agreement to the contrary, the Subject Parcels, the Subject Interests
and the balance, if any, in the Contingent Payment Account shall be utilized
to satisfy any and all Losses then payable for which (i) the GEV Indemnified
Persons are entitled to indemnification hereunder or (ii) the GEV Purchase
Agreement Indemnified Persons are entitled to indemnification for any Seller
CPA Property Environmental Matter pursuant to Section 9.1(a) of the Purchase
Agreement, prior to being utilized to satisfy any other indemnification
obligations of the Sellers then payable under the Purchase Agreement;
provided, however, that the foregoing shall not restrict in any way the right
of the Sellers to have withdrawals from the Contingent Payment Account made
and disbursed to them in reimbursement of any costs or expenses incurred by
the Sellers for which the Sellers are entitled to be reimbursed from funds in
the Contingent Payment Account pursuant to the terms of this Agreement or the
Purchase Agreement.
Section 4.06. Indemnification by GEV and the Purchaser. GEV and
the Purchaser, jointly and severally, agree to indemnify, defend and hold
harmless the Sellers and each of their respective Affiliates, agents,
successors, executors, personal representatives and assigns (collectively the
Seller Indemnified Persons ) from and against any and all losses arising out
of, or resulting from:
(i) a material breach by GEV or the Purchaser of its obligations
under this Agreement;
(ii) the gross negligence or wilful misconduct of any GEV
Indemnified Person in respect of its obligations under this Agreement; or
<PAGE>26
(iii) any claim, litigation, investigation or other proceeding
(including any threatened investigation or proceeding) relating to any of
the foregoing, whether or not any Seller Indemnified Persons is a party
thereto, but only to the extent that GEV or the Purchaser has
indemnification obligations in respect of the matter in question pursuant
to clause (i) or (ii) above.
Section 4.07. Procedures in Respect of Indemnification. Within a
reasonable period of time after a GEV Indemnified Person or a Seller
Indemnified Person receives actual notice of any claim or the commencement of
any action covered by Section 4.05 or 4.06, as the case may be (such GEV
Indemnified Person or Seller Indemnified Person, as the case may be, being
referred to in this Section 4.07 as the Indemnified Person ), the Indemnified
Person shall, if a claim in respect thereof is to be made against the Sellers
or against GEV and the Purchaser pursuant to Section 4.05 or 4.06, as the case
may be (the Sellers or GEV and the Purchaser, as the case may be, being
referred to in this Section 4.07 as the Indemnifying Person ), notify the
Indemnified Person in writing of such claim or action; provided however, that
the failure so to notify the Indemnified Person shall not relive the
Indemnifying Person from any liability which it may have to the Indemnified
Person pursuant to Section 4.05 or 4.06, as the case may be, except to the
extent of material detriment suffered by the Indemnifying Person as a result
of such failure. With respect to any claim or action brought against the
Indemnified Person, and for which a claim in respect thereof is to be made
against the Indemnifying Person pursuant to Section 4.05 or 4.06, the
Indemnifying Person shall be entitled to be consulted by the Indemnified
Person, to the extent it reasonably requests, in respect of the defense of
such claim or action. The Indemnifying Person and the Indemnified Person
shall cooperate in the defense of any such claim or action, including making
its officers, directors, employees and books and records available for use in
such claim or action, and shall take those actions reasonably within their
power which are reasonably necessary to preserve any legal defenses to such
matters. If any such claim or action shall be brought against the Indemnified
Person, the Indemnifying Person shall be entitled to participate in or assume,
within a reasonable period of time, the defense thereof with counsel
reasonably satisfactory to the Indemnified Person. If the Indemnifying Person
shall assume the defense of such claim or action, the Indemnified Person shall
nonetheless have the right to employ counsel to represent it; provided,
however, that the fees and expenses of such counsel shall be paid by the
Indemnified Person. Notwithstanding any provision hereof to the contrary, no
consent order shall be entered into or claim or action settled unless the
Indemnified Person has given its prior written consent thereto, which consent
shall not be unreasonably withheld or delayed; provided, however, that the
Indemnified Person shall consent to any settlement, compromise or discharge of
such claim that the Indemnifying Person may recommend that by its terms fully
releases, indemnifies and holds harmless the Indemnified Person from any
further claims with respect to the matters giving rise to such claim. If the
Indemnifying Person recommends a settlement which satisfies the requirements
of the preceding sentence but which settlement is not approved by the
Indemnified Person (and the Indemnifying Person elects not to contest whether
such approval was unreasonably withheld), then all Losses incurred in excess
of the proposed settlement amount shall be for the account of the
<PAGE>27
Indemnified Person, which shall, as to such excess amount, indemnify and hold
harmless the Indemnifying Person with respect thereto. The Indemnifying
Person agrees that it will reimburse each Indemnified Person for all
reasonable expenses (including reasonable counsel fees) for which the
Indemnified Person is entitled to be indemnified hereunder as they are
incurred by such Indemnified Person. Notwithstanding anything contained
herein or in the Purchase Agreement to the contrary: (a) in the event that,
pursuant to this Section 4.07, the Sellers assume the defense of any pending
or threatened action, claim or proceeding, the Sellers shall be entitled to be
paid funds from the Contingent Payment Account in reimbursement of reasonable
costs and expenses (including reasonable counsel fees) incurred in connection
with investigating, preparing or defending any pending or threatened claim or
proceeding, as and when such costs and expenses are incurred; and (b) the
indemnification obligations of the parties pursuant to this Agreement shall be
for Losses determined (i) on an after tax basis to the extent that such taxes
are accrued in the same quarter as such Losses are incurred, (ii) an after
insurance basis (to the extent of actual claims paid) and (iii) net of all
amounts received from any other third party responsible in whole or in part
for the indemnified Losses. With respect to any Loss paid pursuant to the
terms of this Agreement for which the Indemnified Person subsequently receives
payments of the nature contemplated in the foregoing clause (ii) and (iii),
such Indemnified Person shall promptly pay to the Indemnifying Person an
amount equal to the amount of any such payments.
Section 4.08. Environmental Matters. Notwithstanding any of the
provisions of this Agreement to the contrary, Sections 4.05, 4.06 and 4.07
shall not apply to Losses, or to indemnification obligations or proceedings in
respect thereof, to which Article IX of the Purchase Agreement is applicable.
Section 4.09. Conflicts. In the event of any conflict between the
terms and provisions of Sections 4.05, 4.06 or 4.07 and the Purchase
Agreement, the terms and provisions of the Purchase Agreement shall prevail;
provided, however, that, subject to Section 4.08, the foregoing shall not
result in the application to the provisions of this Agreement of any provision
of the Purchase Agreement that is not expressly contained herein.
ARTICLE V
Termination
Section 5.01. Termination. This Agreement shall continue in effect
until the earlier of: (a) the execution by the parties of a writing providing
for such termination; (b) the time as of which (i) GEV and its Subsidiaries
cease to own any of the Subject Parcels or any of the Subject Interests or any
Non-Cash Revenues and (ii) the balance of the Contingent Payment Account is
zero; and (c) the expiration of twenty (20) years from the date of this
Agreement.
<PAGE>28
Section 5.02. Effect of Termination. Upon any termination of this
Agreement: (a) any of the Subject Parcels, any of the Subject Interests and
any Non-Cash Revenues owned by GEV or any of its Subsidiaries on the date of
such termination shall thereafter be free from the terms and provisions of
this Agreement and (i) GEV and its Subsidiaries shall thereafter be entitled
to any and all Revenues thereafter arising out of or resulting from such
Subject Parcels, Subject Interests and Non-Cash Revenues, and (ii) the Sellers
shall not be responsible or otherwise accountable for any Expenses thereafter
arising out of or resulting from such Subject Parcels, Subject Interests and
Non-Cash Revenues; (b) the indemnification provisions of this Agreement shall
expire; and (c) any funds in the Contingent Payment Account shall be disbursed
as provided in the Purchase Agreement; provided, however, that such
termination shall not terminate or otherwise affect the obligations of any
Indemnifying Person with respect to any Losses for which an Indemnified Person
has delivered a notice to the Indemnifying Person of any claim or action prior
to the time of termination in accordance with the procedures set forth in
Section 4.07 hereof, which notice will preserve such claims as have accrued
and are set forth therein until such claims are liquidated or otherwise
finally resolved. The termination of this Agreement shall not in any way
terminate, limit or restrict the rights and remedies of any party hereto
against any other party which has violated, breached or failed to satisfy any
of the representations, warranties, covenants or agreements of this Agreement
prior to the termination hereof.
ARTICLE VI
Miscellaneous
Section 6.01. Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
given or made if in writing and delivered personally or sent by registered or
certified mail (postage prepaid, return receipt requested) or by facsimile
transmission or overnight courier service to the parties at the following
addresses or facsimile numbers:
If to GEV or the Purchaser:
GEV Corporation
165 Main Street
Greenwich, Connecticut 06830
Attention: Chairman of the Board
Fax: (203) 629-8554
<PAGE>29
With copies to:
Interlaken Capital, Inc.
165 Mason Street Greenwich, Connecticut 06830
Attention: William L. Mahone, Esq.
Fax: (203) 629-8554
and
Willkie Farr and Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Attention: Cornelius T. Finnegan, III, Esq.
Fax: (212) 821-8111
If to any Seller or Sellers Representative, to the addresses set
forth on Schedule 1;
With copies to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: John T. Cabaniss
Fax: (713) 220-4285
or to such other persons or at such other addresses as shall be furnished by
any party by like notice to the other parties, and such notice or
communication shall be deemed to have been given or made as of the date so
delivered or three (3) Business Days after mailing. No change in any of such
addresses shall be effective insofar as notices under this Section 6.01 are
concerned unless such changed address is located in the United States of
America and notice of such change shall have been given to the other party
hereto as provided in this Section 6.01.
Section 6.02. Expenses. Notwithstanding anything contained in this
Agreement or the Purchase Agreement to the contrary, if any party hereto
commences an action against any other party or parties to enforce any of the
terms, covenants, conditions or provisions of this Agreement, or because of a
breach by a party of its obligations under this Agreement, the prevailing
party in any such action shall be entitled to recover its costs, expenses and
losses, including reasonable attorneys fees, incurred in connection with the
prosecution or defense of such action, from the losing party. In the case of
matters that are submitted to arbitration pursuant to Section 6.08, a party
shall be entitled to recover its
<PAGE>30
costs, expenses or losses incurred in connection with such arbitration to the
extent, if any, determined by the arbitrator or arbitrators.
Section 6.03. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors; provided, however, that (i) except as
permitted by Section 3.10, neither GEV nor the Purchaser may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Sellers holding a Majority Interest and (ii) none of the Sellers
may transfer any of its rights or obligations hereunder except as provided in
the following sentence. A Seller may:
(A) assign its rights to receive payments hereunder (but no other
rights hereunder) to any Person, provided that (x) such Seller shall have
given the Purchaser at least ten (10) days prior notice of such
assignment, specifying the name, address and taxpayer identification
number of such Person, and (y) to the extent reasonably requested by an
Authorized Officer of the Purchaser, such Seller shall have delivered to
the Purchaser a Transfer Opinion with respect to such assignment; and
(B) a Seller may Transfer all (but not less than all) of its rights
hereunder to any Person that is not a competitor of the Purchaser or any
of its Subsidiaries, or an Affiliate of such competitor;
provided, however, that (1) the provisions of clauses (A) and (B) above shall
not be deemed to restrict a Transfer by will or pursuant to the laws of
descent or distribution and (2) no Transfer made pursuant to clause (A) or (B)
above shall relieve the Transferring Seller from any of its obligations under
this Agreement or the Purchase Agreement.
Section 6.04. Remedies. The parties hereto shall have such rights
and remedies as shall be available at law or in equity in respect of this
Agreement; provided, however, that each of the parties hereto hereby waives
any right to seek termination or rescission of this Agreement, provided that
such waiver shall not limit the ability of any party to seek damages for any
breach by any other party of its obligations under this Agreement or to seek
to enforce specifically the obligations of any other party.
Section 6.05. No Waiver. No failure or delay on the part of any
party hereto in exercising any right, power or privilege hereunder and no
course of dealing between or among any of the parties hereto shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. No notice to or
demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any party to any other or further action in any
circumstances without notice or demand.
<PAGE>31
Section 6.06. Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the internal Laws of the State of Delaware without giving
effect to the conflict of law principles thereof.
Section 6.07. Submission to Jurisdiction. Each of the parties
hereby : (a) irrevocably submits to the non-exclusive personal jurisdiction
of any Delaware state or federal court sitting in Wilmington, Delaware over
any action or proceeding arising out of or relating to this Agreement, and
each of the parties hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such state or federal
court; and (b) irrevocably waives, to the fullest extent permitted by
applicable law, any objection it may now or hereafter have to the laying of
venue in any proceeding brought in a Delaware state or federal court sitting
in Wilmington, Delaware and any claim that any such proceeding brought in such
state or federal court has been brought in an inconvenient forum; provided,
however, that nothing in this Section 6.07 is intended to waive the right of
any party hereto to remove any such action or proceeding commenced in any such
Delaware state court to federal court sitting in Wilmington, Delaware to the
extent the basis for such removal exists under applicable Law. Service of
copies of the summons and complaint and any other process which may be served
in any such action or proceeding may be made by mailing by certified mail a
copy of such process to the applicable party at the address for notices
provided for herein. Each of the parties agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
Nothing in this Section 6.07 shall affect the right of any party to serve
legal process in any other manner permitted by Law or affect the right of any
party to bring any action or proceeding against another party or any of its
assets or properties in the courts of any other jurisdiction.
Section 6.08. Arbitration. Upon the demand of any party, whether
made before or after the institution of any judicial proceeding, any Dispute
(as defined below) shall be resolved by binding arbitration in accordance with
the terms of the arbitration provisions contained on Exhibit D attached
hereto and incorporated herein for all purposes. A Dispute shall include
any dispute, claim or controversy relating to the nature or amount of any
Revenue or Expense (except an Expense referred to in paragraph (b) or (h) of
the definition of Expenses herein), any question as to whether any item
constitutes a Revenue or Expense (except as aforesaid) or any matter arising
under Section 2.02 hereof; provided, however, that notwithstanding the
foregoing, Disputes relating to environmental matters shall be resolved in
accordance with the provisions of the Purchase Agreement. Any party to this
Agreement may, by summary proceedings (e.g., a plea in abatement or motion to
stay further proceedings), bring any action in court to compel arbitration of
any Dispute. Any party who fails or refuses to submit to binding arbitration
following a lawful demand by the opposing party shall bear all costs and
expenses incurred by the opposing party in compelling arbitration of any
Dispute.
<PAGE>32
Section 6.09. Sellers Representative. Except as otherwise
expressly provided herein, all actions required or permitted to be taken by
the Sellers hereunder shall be deemed taken for all purposes hereof if taken
by the Sellers Representative, provided that the forgoing provision is not
intended to relieve any Seller from it obligations under Section 4.05 or 4.07.
Any agreement, instrument, certification or notice executed by the Sellers
Representative shall constitute conclusive evidence of actions by the Sellers
hereunder, and each Seller hereby irrevocably agrees that neither GEV nor any
of its Subsidiaries shall have any obligation to make any inquiry in respect
of any such agreement, instrument, certification or notice or of the actions
provided for therein or shall have any liability to any Seller in respect of
actions taken or not taken by GEV or any of its Subsidiaries in respect of
matters that are the subject of such agreement, instrument, certification or
notice.
Section 6.10. No Third Party Rights. Except as otherwise
specifically provided herein, nothing in this Agreement shall be deemed to
create any right in any creditor or other Person not a party hereto, and this
Agreement shall not be construed in any respect to be a contract in whole or
in part for the benefit of any third party.
Section 6.11. Further Documents. All parties agree to execute any
and all documents, and to perform any and all other acts, reasonably necessary
to accomplish the purposes of this Agreement, including the furnishing of
releases and evidence of payment.
Section 6.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument.
Section 6.13. Headings Descriptive. The headings of the several
Articles, Sections and subsections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction
of any provision of this Agreement.
Section 6.14. Amendment and Waiver. No amendment or waiver of any
provision of this Agreement, or consent to any departure by a party herefrom,
shall in any event be effective unless the same shall be in writing and signed
by GEV, the Purchaser, the Sellers Representative and Sellers holding a
Majority Interest, and then, in any case, such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 6.15. Separability. Should any clause, sentence,
paragraph, subsection, Section or Article of this Agreement be judicially
declared to be invalid, unenforceable or void, this Agreement shall be
construed in a manner so as to effect the purposes hereof and, to the extent
consistent with such purposes, to the end that such declaration will not have
the effect of invalidating or voiding the remainder of this Agreement.
<PAGE>33
Section 6.16. Final Agreement. This Agreement and the Purchase
Agreement contain the entire understanding between the parties hereto with
respect to the subject matter hereof and supersede any and all prior
agreements, arrangements and understandings between the parties hereto,
whether written, oral or otherwise.
Section 6.17. Certain Beneficial Owners. In recognition of the fact
that, for estate planning and other personal reasons, the equity interests in
Pioneer owned of record by the Kiowa Estate Trust, the Senora Trust, the
Huckabay 1987 Trust and the April 26, 1988 Clawson Living Trust were
transferred thereto by or at the direction of Richard C. Kellogg, Jr., Frans
J.G. Speets, D.A. Huckabay and Carl F. Clawson, respectively (each, a
Grantor ), each Grantor agrees to be jointly and severally liable with the
trust established by or at the direction of such Grantor for all purposes for
which a Seller may be liable pursuant to the terms of this Agreement,
including without limitation, Section 4.05 and Section 4.07 hereof.
<PAGE>34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first stated herein.
GEV CORPORATION PIONEER AMERICAS
ACQUISITION COMPANY
By: /s/ Joshua A. Polan By: /s/ Joshua A. Polan
Printed Name: Joshua A. Polan Printed Name: Joshua A. Polan
Title: Title:
/s/ Richard C. Kellogg, Jr. /s/ Frans G.J. Speets
Richard C. Kellogg, Jr., as Frans G. J. Speets, as provided
provided in Section 6.17 and in Section 6.17 and individually
individually
/s/ D.A. Huckabay /s/ Carl F. Clawson
D. A. Huckabay, as Carl F. Clawson, as
provided in Section 6.17 provided in Section 6.17
HUCKABAY 1987 TRUST 1988 CLAWSON LIVING TRUST
By: /s/ Durward Huckabay By: /s/ Carl F. Clawson
Durward Huckabay, as Trustee Carl F. Clawson, as
Trustee
KIOWA ESTATE TRUST SONORA TRUST
By: Southpac Trust International By: Southpac Trust International,
Inc., as Trustee Inc., as Trustee
By: /s/ L.M. Corvette By: /s/ Simon Weil
Printed Name: L.M. Corvette Printed Name: Simon Weil
Title: Authorized Signatory Title: Authorized Signatory
<PAGE>35
R. J. SHOPF KEOGH PLAN
By: /s/ R.J. Shopf /s/ Paul J. Kienholz
Printed Name: R.J. Shopf Paul J. Kienholz, individually
/s/ Benny L. Bennett /s/ James E. Glattly
Benny L. Bennett, individually James E. Glattly, individually
/s/ Deborah N. Adams /s/ George T. Henning, Jr.
Deborah N. Adams, individually George T. Henning, Jr., individually
/s/ Verrill Norwood /s/ Raymond Bart
Verrill Norwood, individually Raymond Bart, individually
/s/ Julie Johnson /s/ Kennith C. Hewitt
Julie Johnson, individually Kennith C. Hewitt, individually
/s/ William M. Ashman /s/ Joan Gaines
William M. Ashman, individually Joan Gaines, individually
THE BOARD OF REGENTS OF
THE UNIVERSITY OF
WASHINGTON
By: /s/ Tallman Trask III
Printed Name: Tallman Trask III
Title:
<PAGE>36
Exhibits A, B and C provided separately.
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EXHIBIT D
Arbitration Provisions
(a) All Disputes between the parties submitted to arbitration shall
be resolved by binding arbitration administered by the American Arbitration
Association (the AAA ) in accordance with, and in the following order of
priority: (i) the terms of these arbitration provisions; (ii) the Commercial
Arbitration Rules of the AAA; (iii) the Federal Arbitration Act (Title 9 of
the United States Code); and (iv) to the extent the foregoing are
inapplicable, unenforceable or invalid, the laws of the State of Delaware.
The validity and enforceability of these arbitration provisions shall be
determined in accordance with this same order of priority. In the event of
any inconsistency between these arbitration provisions and such rules and
statutes, these arbitration provisions shall control. Judgment upon any award
rendered hereunder shall be entered in any court having jurisdiction.
(b) In Disputes involving indebtedness or other monetary obligations,
each party agrees that the other party may proceed against all liable Persons,
jointly or severally, or against one or more of them, less than all, without
impairing rights against other liable Persons. Nor shall a party be required
to join the principal obligor or any other liable Persons (e.g., sureties or
guarantors) in any proceeding against a particular Person. A party may
release or settle with one or more liable Persons as the party deems fit
without releasing or impairing rights to proceed against any Persons not so
released.
(c) All statutes of limitation applicable to any Dispute shall apply
to any proceeding in accordance with these arbitration provisions.
(d) Arbitrators are empowered to resolve Disputes by summary rulings
substantially similar to summary judgments and motions to dismiss.
Arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any arbitrator selected shall be required to be experienced
and knowledgeable in the substantive laws applicable to the subject matter of
the Dispute. With respect to a Dispute in which the claims or amounts in
controversy do not exceed $1,000,000, a single arbitrator shall be chosen and
shall resolve the Dispute. In such case, the arbitrator shall be required to
make specific, written findings of fact, and shall have authority to render an
award up to but not to exceed $1,000,000, including all damages of any kind
whatsoever, including costs, fees and expenses. A Dispute involving claims or
amounts in controversy exceeding $1,000,000, shall be decided by a majority
vote of a panel of three (3) arbitrators (an Arbitration Panel ), the
determination of any two (2) of the three (3) arbitrators constituting the
determination of the Arbitration Panel; provided, however, that all three (3)
arbitrators on the Arbitration Panel must actively participate in all hearings
and deliberations. Arbitrators, including any Arbitration Panel, may grant
any remedy or relief deemed just and equitable and within the scope of these
arbitration provisions and may also grant such ancillary relief as is
necessary to make effective any award. Arbitration Panels
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shall be required to make specific, written findings of fact and conclusions
of law, and in such proceedings before an Arbitration Panel only, the parties
shall have the additional right to seek vacation or modification of any award
of an Arbitration Panel that is based in whole, or in part, on an incorrect or
erroneous ruling of law by appeal to a Federal or State Court of Appeals,
following the entry of judgment on the award in Federal or State District
Court, as appropriate. For these purposes, the award and judgment entered by
the Federal or State District Court shall be considered to be the same as the
award and judgment of the Arbitration Panel. All requirements applicable to
appeals from any Federal or State District Court judgment shall be applicable
to appeals from judgments entered on decisions rendered by Arbitration Panels.
The Appellate Courts shall have the power and authority to vacate or modify an
award based upon a determination that there has been an incorrect or erroneous
ruling of law. The Appellate Court shall also have the power to reverse
and/or remand the decision of an Arbitration Panel. Subject to the foregoing,
the determination of an arbitrator or Arbitration Panel shall be binding on
all parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law.
(e) To the maximum extent practicable, the AAA, the arbitrator (or
the Arbitration Panel, as appropriate) and the parties shall take any action
necessary to require that an arbitration proceeding hereunder shall be
concluded within one hundred eighty (180) days of the filing of the Dispute
with the AAA. Arbitration proceedings hereunder shall be conducted at one of
the following locations in the State of Delaware agreed to in writing by the
parties or, in the absence of such agreement, selected by the AAA: (i)
Wilmington; or (ii) Dover. Arbitrators shall be empowered to impose sanctions
and to take such other actions as they deem necessary to the same extent a
judge could pursuant to the Federal Rules of Civil Procedure and applicable
law. With respect to any Dispute, each party agrees that all discovery
activities shall be expressly limited to matters directly relevant to the
Dispute and any arbitrator, Arbitration Panel and the AAA shall be required to
fully enforce this requirement. The provisions of these arbitration
provisions shall survive any termination, amendment or expiration of this
Agreement, unless the parties otherwise expressly agree in writing. To the
extent permitted by applicable law, arbitrators, including any Arbitration
Panel, shall have the power to award recovery of all costs and fees (including
attorneys fees, administrative fees and arbitrators fees) to the prevailing
party or, if no clear prevailing party, as the arbitrator (or Arbitration
Panel, if applicable) shall deem just and equitable. Each party agrees to
keep all Disputes and arbitration proceedings strictly confidential, except
for disclosures of information required by applicable law.
